Seniors Housing Weekly Update-- Cap Rates Down Slightly

November 27, 2012


November 27, 2012. 60 Seconds with Steve Monroe. Cap rates have trended downward slightly through September 30, 2012, but don't expect a big change with the year-end sales...

Cap Rates Down Slightly

As we approach the end of the year, with the rush to close as many deals as possible, all eyes will be on where cap rates are headed.  While we are still seeing sales, usually of the higher quality properties, with sub-7% and even sub-6% cap rates on in-place cash flow, the reality is that the overall market has held relatively steady.  In calendar year 2011, the average cap rate for assisted and independent living communities combined, and this includes both A and B properties, was 8.8%. For the 12 months ended September 30, 2012, the average dropped to 8.4%, which was expected given the cost of debt and strong demand in the market.  For skilled nursing, the average cap rate last year was 12.6%, one of the lowest averages on record for the sector, and for the 12 months ended September 30, the average was 12.5%.  Even with the expected increase in transaction volume in the waning weeks of the year, it is doubtful that we will see big changes in skilled nursing or seniors housing cap rates.



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