NORWALK, CT – April 9, 2014 – Despite a changing health care market and continued uncertainty with government reimbursement programs, the average price paid for skilled nursing facilities rose to a record $73,300 per bed in 2013, according to the recently published study from Irving Levin Associates, The 2014 Senior Care Acquisition Report, Nineteenth Edition. The previous record, set in 2010, was $62,500 per bed, and the 2013 average price per bed represents a 21% increase over the prior year’s average price. “While we were surprised by the significant jump in the average skilled nursing facility price per bed, we had been seeing all year a higher number of skilled nursing facilities on the market that catered to a much higher acuity mix, or were in markets that had the potential for higher acuity, and that is what the buyers want,” according to Stephen M. Monroe, Editor of the Report. “The value of Medicare and Managed Care beds is much higher than Medicaid beds, so when they make up a larger proportion of a nursing facility’s census, demand and value increases,” Monroe continued. Average cap rates for skilled nursing facilities, the most common valuation metric, stayed within historical norms at 13.0%.
In the private pay seniors housing market, which includes independent living communities and assisted living/memory care communities, the average price paid was $164,000 per unit, which was just below the record set in 2007 at $164,500 per unit. “Demand was so great in this market that for many of the transactions, there were as many as a dozen bids made. It was truly a seller’s market,” stated Monroe. As the economy and housing markets recovered, more capital, both debt and equity, came back into the seniors housing market, providing buyers with the liquidity they needed. But more importantly, “it provided them with a wider range of capital sources, something that had almost disappeared during the Great Recession,” continued Monroe.
When breaking out the components of seniors housing, those communities that are mostly independent living set a record price of $191,950 per unit in 2013, which was 38% higher than the average price per unit in 2012. This sub-market had portfolios that sold for more than $200,000 per unit and single property assets that topped out at more than $400,000 per unit. In the assisted living market, which is much larger in terms of acquisition volume, the average price per unit declined by 4.5% in 2013 to $150,600 per unit. “Demand remained strong for assisted living and memory care communities, but in 2013 various small and older communities were in the market that nudged the average price down. There were plenty of sales above $200,000 per unit,” according to Monroe. Cap rates in the seniors housing market did not change much despite the mid-year jump in interest rates.
In another indication of the strong seniors housing and care M&A market, the number of publicly announced transactions increased by 20% to 225 individual seniors housing and care mergers or acquisitions in 2013, which broke the record set in 2012. “The market was liquid with the most buyers since the last market peak in 2007, accompanied by a major increase in transactions by the non-traded health care REITs,” stated Monroe. “Demand in 2014 is expected to be similar in 2014, if not even higher with more transaction volume.”
The 2014 Senior Care Acquisition Report, Nineteenth Edition, contains statistics on the skilled nursing facility, assisted living and retirement housing merger and acquisition market, including prices per bed or unit, capitalization rates and income multiples, in more than 200 pages. The report also includes transaction information on each of the 225 publicly announced seniors housing and care acquisitions in 2013 (a new record), plus the publicly announced home health care and hospice acquisitions in 2013. The 2014 Senior Care Acquisition Report, Nineteenth Edition, may be purchased for $595. For more information, or to order the report, call 800-248-1668. Irving Levin Associates, Inc. was established in 1948 and has headquarters in Norwalk, Connecticut. The company publishes research reports and newsletters, and maintains databases on the health care and senior housing markets.
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