Average IL cap rate falls 80 basis points
The average cap rate largely depends on the properties that sold. Even in a year when valuations rise and cost of capital remains low, cap rates may actually rise because the communities sold were of lesser quality. That factor has played a key role in determining the average cap rate for independent living communities in the last two years. In 2013, there were more low-quality, small properties that sold, which drove the average cap rate for the year up 20 basis points to 8.2%. However, there were more quality independent living communities sold in 2014, which helped decrease the average cap rate by 80 basis points to 7.4%. What most likely happened is that owners of these prime... Read More »The Ventas Spin-off Has People Talking
Here are differing opinions as to what motivated Ventas to spin out most of its skilled nursing portfolio. There has been a lot of talk about the recent announcement by Ventas to spin out most of its skilled nursing properties into a new publicly traded REIT. In our April newsletter issue, we stated that it was a smart move for Ventas, and a great move for Ray Lewis, who will become CEO of the new spin out. But tongues have been wagging in terms of whether this was a defensive move on the part of Ventas, meaning that management has decided that the skilled nursing business is not something they want to focus on, at least not with small operators in their portfolio. Or, was it an offensive... Read More »Average skilled nursing facility cap rate falls
A couple of weeks ago, we discussed the fall in the average skilled nursing facility cap rate by 60 basis points to 12.4% (according to the 2015 Senior Care Acquisition Report, just recently published). For assisted living, we saw an even larger fall of roughly 90 basis points to 7.75%. The downward trend is not surprising, as AL cap rates have steadily declined since the Great Recession, but the extent of the fall was. In this market of higher and higher valuations plus abundant (and cheap) capital, buyers are looking to pay more for quality assisted living communities, even if that means pricing out operating risk somewhat, because margins aren’t changing all that much, at least not that... Read More »Why do skilled nursing values continue to soar?
In the last year, we have seen more skilled nursing deals valued above $100,000 per bed than ever before. That number of deals in turn drove up the average price per bed for SNF deals to a record high in 2014, to $76,500 per bed. But what was it about these facilities that drove up their valuations to new heights? For one, they were newer. Facilities built in the past 20 years sold for an average price of $111,900 per bed, compared to facilities built between 20 and 40 years ago ($72,400 per bed) and 40 years and older ($75,700), according to the just-published 2015 Senior Care Acquisition Report. We will see how SNFs evolve over time, and what will happen to those 1960s and 1970s... Read More »Cap Rates And Reality
There appears to be a feeding frenzy on where cap rates should be, and the frenzy is only taking them lower. Did you read about the fully stabilized assisted living community that sold for a 3.5% cap rate on first year numbers? You didn’t? April fools, neither did I. But don’t be surprised if it happens given the way the market is going. Two months ago, while attending a seniors housing conference, we heard a rather matter-of-fact statement that cap rates for “A” properties were in the range of 5.5% to 6.0%, and “B” properties were in the broad 6% range. While our annual statistics do not bear this out, we do know that there are transactions done with cap rates between 5% and 6%, with a... Read More »Schedule a demo
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