Stephen M. Monroe, Partner
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NORWALK, CT – March 3, 2011 – Following on the heels of a small increase in price in 2009, the average price paid per bed for skilled nursing facilities surged in 2010, according to a new report on the seniors housing and care M&A market to be published by Irving Levin Associates, Inc., a research and publishing firm that tracks mergers and acquisitions in the seniors housing and health care markets. Despite inherent risks associated with changes in Medicare and Medicaid reimbursement, the skilled nursing industry has been very resilient in the past several years, and there is still strong demand for well-run skilled nursing facilities that are able to attract a higher level of acuity in its various sub-acute and rehab programs. After peaking in 2007 at $55,200 per bed, the average acquisition price paid per skilled nursing bed declined significantly to $45,500 per bed in 2008. Just two years later, however, the average sales price for skilled nursing facilities increased to $62,500 per bed in 2010, setting a new record, according to Irving Levin Associates’ report, The Senior Care Acquisition Report, Sixteenth Edition. 

“The increase in 2010 came as a bit of a surprise because there was so much uncertainty regarding Medicare and the impact that the various state budget deficits would have on Medicaid funding,” stated Stephen M. Monroe, editor of the acquisition report. “After dissecting the data, however, the sharp increase in the average price per bed makes sense because there was a substantial increase in the quality of the skilled nursing facilities sold in 2010 compared with both 2008 and 2009.  In particular, the average operating margin, the average cash flow per bed and the average occupancy for the properties sold in 2010 all increased over the previous year,” continued Mr. Monroe. The new RUGs IV Medicare rates that went into effect on October 1, 2010 did not have time to make an impact on values, since almost all of the sales had closed before that date or were already under contract. Average capitalization rates in 2010 for skilled nursing facilities increased only slightly to 13.1%.

In the assisted living market, the average price per unit fell for the third year in a row after record prices paid in 2007. “The assisted living acquisition market continued to be burdened by underperforming and non-stabilized assisted living facilities during 2010, which resulted in relatively low prices compared with three years ago,” commented Mr. Monroe. The high-quality assisted living facilities that did come onto the market fared well and sold for prices much higher than the $103,300 average price per unit that was paid in 2010.  “Once again, there is strong acquisition demand for quality in this sector, but the supply was not there in 2010,” according to Mr. Monroe.  The average assisted living cap rate declined by 40 basis points to 9.6%, even though for higher quality assisted living facilities many buyers are in the 7.5% to 8.5% range.      
With the two multi-billion dollar acquisitions by health care REITs in the fourth quarter of 2010, followed by several additional REIT acquisition announcements in early 2011, it is apparent that the seniors housing and care acquisition market continues to strengthen.                             
The Senior Care Acquisition Report, Sixteenth 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 150 pages. It also includes transaction information on each of the publicly announced seniors housing and care, home health care and hospice acquisitions in 2010. The Senior Care Acquisition Report, Sixteenth 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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