The weight of the cap rate
In the last couple of years, we have started looking at cap rates based on the size of properties and portfolios acquired. In weighting cap rates by size, we avoid the issue of the cap rate for a 180-bed facility sale being weighted the same as the cap rate for a 60-bed facility sale. Some people believe that a weighted average cap rate is more reflective of a true cap rate average because the dollar value of the portfolios and larger facilities sold can dominate the overall market. But in the last 15 years (as long as we have been tracking it), there has largely been no significant difference between the weighted and un-weighted average cap rate, just that in peak value years, the... Read More »Breaking barriers
If skilled nursing facilities sold on average at an all-time record high price of $85,900 per bed, then how did the average 2015 cap rate hold up to history? Well, according to the 21st Edition of The Senior Care Acquisition Report, the average cap rate for skilled nursing transactions dropped 20 basis points to 12.2%, which is the second lowest average ever (12.1% was the lowest ever at the last market peak in 2007). Traditionally, the average skilled nursing cap rate has reliably ranged between 12.0% and 13.5% for most of the past 20 years, regardless of swings in interest rates and changes in financial markets. But with two consecutive years of sub-12.5% average cap rates (2014 was... Read More »Size matters
We all know that skilled nursing prices have hit an all-time high, averaging $85,900 per bed in 2015, according to the 21st Edition of The Senior Care Acquisition Report. So what was it about the facilities sold in 2015 that helped drive this price up? For one, the average facility was larger than it has ever been. At 130 beds, the average facility sold in 2015 was four beds larger than the previous record-high, shared in 2012 and 2014 at 126 beds per facility. Why does size matter when it comes to price? Unless it is highly specialized, either with rehab care or skilled Alzheimer’s care, most buyers do not like to invest in nursing facilities that are smaller than 60 beds, and some won’t... Read More »
Senior living communities age too
It should surprise no one that as a seniors housing (assisted living and independent living) community creeps farther away from the day it opened its doors, its value typically falls in turn (this assumes several things, like local competition/demand and the general seniors housing market keeping steady and no significant renovations or additions being made to the building). But did this hold true in 2015? Largely, yes. According to the 21st Senior Care Acquisition Report, Seniors housing communities built in the last five years sold on average for the highest price, at $320,500 per unit. Then came those properties built between six and 10 years ago, which sold on average for $225,100 per... Read More »Age before beauty
There was a complete flip-flop in the percentage of skilled nursing facilities sold by age, with the oldest category (greater than 40 years old) increasing to 52% of the properties sold in 2015, compared with just 22% in 2014 (according to the 21st Senior Care Acquisition Report, released last month). Several of these properties, however, sold for more than $100,000 per bed, indicating their location or profitability overcame the issue of their old age. But, if we saw a massive increase in the number of sales of 40-year old SNFs (or older), then what drove the market to its all-time record high average price of $85,900 per bed? It was an increase in the number of facilities sold that were... Read More »Schedule a demo
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