Cash Flow Is King
Many buyers prize a community’s cash flow over other factors. If a community is already making money, and avoids any major missteps, it is probably a safe bet for investors. Neither 2015 nor 2016 reached the record average NOI per unit set in 2014 of $14,200 per unit, but in a year when the average price per unit for seniors housing (including both independent and assisted living) increased, it makes sense that NOI per unit would increase in turn, by $500 per unit from 2015 (11,700 per unit) to 2016 ($12,200 per unit). Separating it out by sector, one would think that if independent living prices rose by $35,300 per unit, or 18%, one would see a corresponding increase in the NOI per unit... Read More »The REIT Price for Seniors Housing
Last week, we looked at the price REITs paid on average for skilled nursing facilities in 2016, according to the 22nd Edition of The Senior Care Acquisition Report, compared with other buyers in the industry. But what about in seniors housing? REITs have been far more active buyers in the space, with many of the private REITs getting involved in a sector with less stroke-of-the-pen risk (in fact, they bought five seniors housing properties to every one skilled nursing facility in 2016). Also, most of the revenue collected by assisted living or independent living communities comes from private payers, and REITs tend not to purchase those assisted living communities with significant, if any,... Read More »
Deals Down So Far in 2017
Long-term care has experienced a dip in M&A, but after nearly three straight years of 80+ transactions per quarter (starting in Q3:2014 with 83), with a couple exceptions, it is about time the M&A juggernaut slows down a bit. The first quarter’s volume fell to 76 deals, down from 93 in the previous quarter and from 84 in the year-ago quarter. And as of May 23, 2017, deal volume has so far not kept pace compared with the same period in 2016 with just 118 long-term care transactions recorded compared with 145 in 2016, a 19% difference. However, spending has nearly doubled (to $7.52 billion so far in 2017 from $4.37 billion in 2016), thanks to a few large deals that were announced in... Read More »
Expense Ratios: Independent Living Vs. Assisted Living
When comparing the independent living and assisted living markets, one would expect IL communities to operate at a higher margin than AL, given its lower services and thus, costs. And while that remained true in 2016, independent living and assisted living expense ratios came as close to equal as any time in the past, at 69.5% and 72.5%, respectively, according to the 22nd Edition of The Senior Care Acquisition Report. Only in 2011, when independent living had a higher expense ratio than assisted living, by just 10 basis points, did the two sectors operate more similarly. The shift has been steady, with the spread between IL and AL expense ratios of properties sold sharply decreasing from... Read More »Expensive Seniors Housing Sales With Low Expense Ratios
It’s no surprise that as a community’s expense ratio declines, its value increases. As such, there was a near-perfect correlation between the expense ratio and the average price per unit paid in the seniors housing market in 2016 (including independent living and assisted living communities), according to the The Senior Care Acquisition Report. The best-operating communities with expense ratios under 65% were valued on average at $298,100 per unit, way up from the $256,100 per unit recorded in 2015. Both years were still heavily influenced by high-quality independent living sales. Meanwhile, the grouping with a 65% to 69% expense ratio fell in value year over year, from $193,000 per unit... Read More »Schedule a demo
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