Brookdale Laser Focusing On The Future
With fewer distractions and increasing stability, a renewed focus on increasing cash flow and value. So, management at Brookdale Senior Living has got some religion. It has been on the road trying to sell their story to investors. And it appears that selling the bulk of their owned real estate is off the table, which I agree with. They will continue with selective dispositions, although not as many as I think they should, and they have basically put their landlords on notice that as leases come up for renewal, they want to negotiate the lease rates down for the underperformers, or they will walk. Also good news. In addition, they are under-promising with the expectation that they will over... Read More »
A weightier fall
In our quest to try to determine the truest “market cap rate” for the seniors housing market, for the first time in 2014 we decided to weight each transaction’s cap rate based on its number of units. For the seniors housing market (including both assisted living and independent living), whereas the average un-weighted cap rate in the last four years fell in two descending plateaus, the weighted average had a steadier decrease. In reality, it was a slightly steeper fall, with the unweighted average decreasing by 100 basis points from 2012 to 2015 and the weighted average decreasing by 110 basis points. As in all previous years, the weighted average cap rate in 2015 was lower than the... Read More »IL cap rates follow prices down
As prices rise, we would expect cap rates to depress accordingly to reflect the increasing values. However, even though the average price per unit for independent living properties fell 22% from $246,800 in 2014 to $192,900 in 2015, the average IL cap rate dropped by 40 basis points from 7.4% in 2014 to 7.0% in 2015. What contributed to this anomaly? First, independent living prices reached unsustainable heights in 2014, propped up by a number of sales of high-quality properties by owners drawn into the frothy market. So, it is not surprising that the average IL price fell to a still-respectable value (the second-highest average price, in fact). Second, there were simply fewer high-cap... Read More »
Medicaid and Assisted Living
As Managed Care expands into Medicaid, we may see more Medicaid-funded assisted living, and the jury is still out on what that means. Let’s face it, there will be a growing number of people over age 80 who will not be able to afford to live in assisted living and memory care communities, at least not the ones being built today. Even fewer can afford skilled nursing, with monthly private pay rates two and three times higher than assisted living. So what’s going to happen? Some people say home- and community-based care will fill the void, but that is not always cheaper nor the best option. Some states have done a good job with Medicaid waivers to financially support lower-income seniors who... Read More »
AL cap rates sink even deeper
We have spent the last few weeks discussing the skilled nursing market, focusing particularly on the average cap rate falling to near-record lows. But what about the assisted living M&A market? We saw the average price per unit for assisted living communities rise slightly (from $188,700 in 2014 to $189,200 in 2015), and in turn the average cap rate fell by five basis points from 7.75% to 7.7%. Despite the slight decrease, this is still a continuation of the “new normal” AL market. Since the Great Recession, the average cap rate has steadily been declining, and seemed to rest at around 8.7% in 2012 and 2013. But since then, the current market has settled to an average cap rate around... Read More »Schedule a demo
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