AL cap rates sink even deeper
We have spent the last few weeks discussing the skilled nursing market, focusing particularly on the average cap rate falling to near-record lows. But what about the assisted living M&A market? We saw the average price per unit for assisted living communities rise slightly (from $188,700 in 2014 to $189,200 in 2015), and in turn the average cap rate fell by five basis points from 7.75% to 7.7%. Despite the slight decrease, this is still a continuation of the “new normal” AL market. Since the Great Recession, the average cap rate has steadily been declining, and seemed to rest at around 8.7% in 2012 and 2013. But since then, the current market has settled to an average cap rate around... Read More »
Buyers’ SNF opportunity
The recent trends of the 10-year Treasury Rate and the average skilled nursing facility cap rates have provided a lot of flexibility for buyers in how they price their acquisitions and negotiate with lenders. After rising from its low in 2012, the average 10-year rate was slowing increasing through 2014 and then dropped a bit in 2015 to a three-year low. But, for the past four years, the 10-year Treasury rate, which has long been thought of as “risk-free,” has averaged 2.5% or lower, or more than 200 basis points lower than during the last market peak of 2006 to 2007. What is interesting to follow is the spread between the 10-year rate and the average skilled nursing cap rate. Nearly 10... Read More »
Age before location
Highlighting a growing issue for the country’s aging skilled nursing facility inventory, a facility’s regional advantage may not matter much for owners of facilities in high barrier-to-entry markets looking to maximize value. Surprisingly, the Northeast region, because of its higher average income, property values and barriers to entry, saw the highest average cap rate of any region in 2015, at 13.3%. This is up 70 basis points from the average in 2014 of 12.6%, and up 90 basis points from 2013, when the region averaged the lowest cap rate in the country. Conversely, the North Central region, which has seen tremendous growth in skilled nursing development (buoyed by Mainstreet’s pipeline),... Read More »
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 »Schedule a demo
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