The Consistency of Skilled Nursing Facility Expense Ratios
Just like the average cap rate, the average expense ratio in the skilled nursing market for facilities sold has been very consistent. For the past five years, it has had a low of 88.2% and a high of 88.7%, for a very small 50 basis point spread, according to the 2017 Senior Care Acquisition Report. It was 88.5% in 2015 and 88.6% in 2016, just to show the consistency. Obviously, this excludes expenses such as interest, depreciation, amortization, taxes and rent. When these are all included, it is clear to see why the skilled nursing industry complains to their elected representatives as well as CMS that it is difficult to make money. And future cuts to Medicaid (as promised by both the... Read More »Cash Flow Drives Record Skilled Nursing Prices
We have written several times in recent years that reports of the “death of the skilled nursing facility” have been greatly exaggerated. That is clearly evident in the record-high prices we have recorded in the sector, soaring to an average of $99,200 per bed in 2016 (up from the previous record of $85,900 per bed in 2015) and to a median of $94,660 per unit (from $66,500 per bed in 2015), according to the Senior Care Acquisition Report. But this pricing peak contradicts a normally reliable indicator of the market’s health. As we have always stated, it is the absolute level of net operating income (NOI, and interchangeable with EBITDA) that drives value in the market. From 2011 through... Read More »Gross Income Multiple Falls For Seniors Housing Deals
A popular multiple that investors use to measure the value of a seniors housing and care property is the Gross Income Multiple (GIM). So, as prices have stayed consistently near record-highs for seniors housing (independent living and assisted living) properties, how much were buyers paying with respect to the properties’ revenues? In 2016, according to the 22nd Edition of The Senior Care Acquisition Report, the average GIM fell 15 basis points to 3.75x from the 3.9x recorded in both 2014 and 2015, widely considered the height of the seniors housing bull market. The median fell by a larger degree (30 basis points) and to a level not seen since 2011, when it was also 3.2x. Understandably,... Read More »
The Future of Medicaid Block Grants
Our editor Steve Monroe moderated a webinar on June 8 called “Skilled Nursing Reimbursement Under Trump Care” with panelists Joshua Jandris of IPA Seniors Housing and Marc Zimmet of Zimmet Healthcare Services Group, where they discussed Medicare reimbursement changes, the future of Medicaid managed care plans and the next shoe to drop on the reimbursement front under a Trump administration. If you are interested in hearing the 90-minute discussion, you can purchase the webinar here. During the webinar, Mr. Monroe brought in the audience to voice their opinion too, and here are the results: Do you think Medicare SNF payments should basically fund the shortfall of Medicaid payments, such as... Read More »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 »Schedule a demo
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