With cheap and abundant capital in hand, and plenty of brand-new properties built during the recent construction boom hitting the M&A market in 2019, buyers pushed assisted living values to the highest per-unit average ever recorded. The average price for assisted living communities rose to $248,400 per unit, or 33% higher than 2018’s average of $186,400 per unit and 12% higher than the previous high of $221,250 per unit in 2017, according the the Senior Care Acquisition Report. The median price per unit also reached a new high of $233,183 per unit, or 54% higher than 2018’s median and 8% higher than 2017’s. So, what explains this significant jump?
First, investor interest in seniors housing, which has led to the record levels of M&A in the past couple of years, has disproportionately been trained on the assisted living sector, which is seen as more need-based and “recession-resistant,” since seniors are still in need of those services even in tough economic times. The growth and improvement of home health care as a service may diminish assisted living’s need in the coming decade, potentially tempering the favorable demographics, but buyers of new, high-quality communities did not seem bothered by that much in 2019, given the high prices they paid.
There were also a lot of high-quality portfolio sales that really drove the average price paid for assisted living communities in 2019. Of the 136 seniors housing properties (across 27 deals, portfolios and others) that sold above $350,000 per unit, 111 of them across 18 deals were for majority-assisted living communities.
But also, there were simply many more “A” level properties that sold for very-high prices. These communities should be better equipped to absorb the higher labor costs in this current market because of their ability to charge higher rents that can then cover the wages necessary to poach and keep the best staff.
There were several other factors that contributed to this record-high average assisted living price, from how the communities that sold were operating to their cap rates, which will be covered in the 25th Edition of our soon-to-be-published Senior Care Acquisition Report.