For the first time in five years, there wasn’t a perfect correlation between the average cap rate and the average price per unit in seniors housing (which includes independent living, assisted living and memory care), but it was close, according to the 21st Edition of The Senior Care Acquisition Report. This was an interesting year, however, where we saw a decrease in the average price paid per unit, and a decrease in the average cap rate. Accordingly, there were some interesting results. First, the two lowest cap rates both experienced decreases in their average price paid per unit (from $310,000 to $242,000 for 6% and $222,000 to $186,800 for 7%). Then there was an increase in the average price for 8% cap rate deals ($157,000 per unit to $177,500 per unit), a decrease for 9% cap rate deals ($132,500 per unit to $117,500 per unit), and finally, an increase for 10%-plus cap rate deals ($104,400 per unit to $139,400 per unit). The spread between the lowest and highest category fell to the lowest it has been in recent memory at just $103,400 per unit, compared to $215,000 per unit in 2014 and $189,000 per unit in 2013. In the end, we can ascertain that investors are not spending what they were on well-operating (mainly independent living) properties as in 2014, but will pay up for turn-around opportunities if they see a potential for profit.
Pay up for profit potential
