In 2020, there was yet again a perfect correlation between the average price per unit paid for seniors housing communities and their operating margins.
Throughout 2020, as occupancy and cash flow at senior care facilities dropped and costs of financing rose, we wondered exactly how the pandemic would affect the pricing of these assets. Would it have a disparate effect on skilled nursing versus seniors housing properties, older properties versus new ones, or on stabilized facilities versus non stabilized. We are almost done compiling all these statistics in the 26th Edition of The Senior Care Acquisition Report, but we wanted to highlight a historical trend that continued even through 2020.
In the seniors housing market, which includes independent living, assisted living and memory care communities, there was yet again a perfect correlation between the average operating margin of communities sold and the average price per unit paid for them, with communities operating the best at over 35% margins selling for more than $360,000 per unit, on average. The average price per unit descended as operating margins did, with the worst performing communities at under-20% operating margins selling on average for just $65,000 per unit.
Communities with strong existing operations should have the easier job recovering from the pandemic, and buyers either paid up for that security or demanded discounts for the risks of turning around a struggling property. Who can blame them?