How Occupancy Impacted 2018 Assisted Living Values
As we’ve mentioned several times, 2018 was a tough year for assisted living occupancy, as new development took its toll on a number of markets. Low occupancy often leads to lower operating margins and less cash flow, especially when operators feel the need to heavily discount their rates in order to fill beds, so it’s a serious issue for the industry. In our Seniors Housing Acquisition & Investment Report, “stabilized” means having an occupancy equal to or higher than 85%. And while there are some operators not pleased with their “stabilized” communities occupied in the 80s, it could be worse, and there was clearly a premium paid for existing census in 2018. Stabilized communities sold... Read More »
Older, Struggling SNFs Had More Weight In 2018 Market
We have historically presented our cap rate analysis on an unweighted average basis, weighting the cap rate for a 60-bed skilled nursing facility and a portfolio of 20 facilities the same in our Skilled Nursing Acquisition & Investment Report (which you can still order here). Many buyers believe that a portfolio should command a lower cap rate than a single-asset sale, but that often depends on the quality of the portfolio and whether there are any stinkers in the portfolio. A weighted average cap rate thus removes this bias. What this has shown is that over time since we started separating out these two averages is that there has been very little difference between the two cap rate... Read More »
The ABCs of the Independent Living Market
For some years now, we have separated out the assisted living and independent living M&A markets into a couple of quality-based categories, classified as “A,” “B,” and “C” properties. The determination is made by the property’s age, location and size, and there are always going to be some properties that can fit into either category. But they should balance out in the end. Some owners of “A” properties do not believe it is an apples-to-apples comparison between the quality of their communities and “B” and “C” communities in general, and probably vice versa. That is because the rates that “A” communities can charge and the margins they can operate at often exceed those of “B” and “C”... Read More »
Does Size Matter in Seniors Housing?
Last week, we took a look at the relationship between the size of the skilled nursing facility and the price it sold at, according to statistics from our just-published Skilled Nursing Acquisition & Investment Report. And like skilled nursing facilities, the larger the seniors housing property, the higher price paid for it, generally. That is because larger institutional properties can take advantage of scale to boost cash flow and thus its value. In addition, the majority IL communities tend to be large and IL has commanded high prices in most years. There are indeed smaller “boutique” memory care communities that can command a high per-unit price because of the rents they can charge... Read More »
Did Skilled Nursing Investors Pay for Size in 2018?
The skilled nursing market has been going through many changes in recent years as it adapts to new reimbursement policies, shorter lengths of stay and more medically-complex patients. But did all of that affect what buyers will pay for size in 2018? Well, according to the 2019 Skilled Nursing Acquisition & Investment Report (available soon), there was a perfect correlation between size of nursing facility sold and the average price per bed for the second year in a row. Historically, larger facilities have commanded the higher prices because of their ability to scale, lower the per patient costs and fill beds with Medicaid patients at will. However, those advantages may soon backfire... Read More »Schedule a demo
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