A weightier fall
In our quest to try to determine the truest “market cap rate” for the seniors housing market, for the first time in 2014 we decided to weight each transaction’s cap rate based on its number of units. For the seniors housing market (including both assisted living and independent living), whereas the average un-weighted cap rate in the last four years fell in two descending plateaus, the weighted average had a steadier decrease. In reality, it was a slightly steeper fall, with the unweighted average decreasing by 100 basis points from 2012 to 2015 and the weighted average decreasing by 110 basis points. As in all previous years, the weighted average cap rate in 2015 was lower than the... Read More »IL cap rates follow prices down
As prices rise, we would expect cap rates to depress accordingly to reflect the increasing values. However, even though the average price per unit for independent living properties fell 22% from $246,800 in 2014 to $192,900 in 2015, the average IL cap rate dropped by 40 basis points from 7.4% in 2014 to 7.0% in 2015. What contributed to this anomaly? First, independent living prices reached unsustainable heights in 2014, propped up by a number of sales of high-quality properties by owners drawn into the frothy market. So, it is not surprising that the average IL price fell to a still-respectable value (the second-highest average price, in fact). Second, there were simply fewer high-cap... Read More »
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 »Schedule a demo
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