Stephen M. Monroe, Partner
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Skilled Nursing Facility Prices Hit Record In 2007, Assisted And Independent Living Facility Prices Also Hit Record Levels In 2007, According to New Report From Irving Levin Associates, Inc.
NORWALK, CT – March 10, 2008 – After hitting a 10-year low in 2003, the average price paid per bed for skilled nursing facilities has been steadily rising, hitting new records in both 2006 and 2007, according to a new report 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. The skilled nursing industry began its recovery four years ago from the deep financial problems originating at the end of the 1990s that resulted in many corporate bankruptcies. Reimbursement levels stabilized, especially with regard to Medicare, the litigation environment began to improve, quality of care improved and investors were attracted to a renewed industry.

The average sales price for skilled nursing facilities reached an all-time high of $55,200 per bed in 2007, according to Levin’s report, The Senior Care Acquisition Report, Thirteenth Edition. This represents an increase of just over 6% compared with 2006, but is about 75% higher than in 2003. The median price per bed increased in 2007 by more than 15%. With increasing demand from more traditional real estate investors, the skilled nursing market entered a new era from an investment perspective these past few years, as institutional investors have become attracted to the high yield these investments provide over traditional real estate properties. “In the last two years we have seen more investors interested in the skilled nursing sector than in previous years, and with returns considered to be relatively high, especially for a real estate-oriented business, both strategic and financial investors sought new opportunities,” stated Stephen M. Monroe, editor of the Report. “Two of the largest nursing facility companies, Manor Care and Genesis Healthcare Corporation, were taken private in 2007 at high market multiples, demonstrating the strong investor demand for this asset class. Capital was still plentiful through most of 2007, but it is unclear what the impact of last summer’s credit market problems will have on acquisition values in 2008,” continued Mr. Monroe.

Over the past three years, the average price paid per unit for assisted living facilities has been close to double the average in 2003 when the industry was bottoming out after a period of overbuilding and several corporate bankruptcies and restructurings. In 2007, the average price paid hit another record of $159,100 per unit, or nearly 20% higher than in 2006, a year that saw fewer high-end facility sales in the market. “The large increase in the average price per unit is a reflection of the quality of the facilities that were sold in 2007 as well as a strong investment market that saw cap rates decline to historic lows,” stated Mr. Monroe.

Independent living community prices also rose to a record high of $174,500 per unit in 2007, increasing by 20% from the average price paid in 2006. High quality communities impacted the national market, as owners were taking advantage of a strong market with both domestic and international demand. “With a weak dollar, foreign investors have been attracted to what appear to be bargains in their local currency, and when this is combined with declining cap rates, high prices will be paid and records will be set,” Mr. Monroe stated. “While investor demand remains strong, lenders are becoming more conservative and we have already seen some high-end deals pulled from the market at the end of 2007 because the sellers could not get their price. The seller’s market of the past three years has turned into a buyer’s market,” continued Mr. Monroe.

Mr. Monroe will be moderating an audio conference discussing the key results from the report on Thursday, March 13th from 1:00 to 2:30 PM Eastern Time. The price to attend the audio conference is $347. For more information or to register, call 1-800-247-1668.

The Senior Care Acquisition Report, Thirteenth 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 180 pages. The statistics are based on more than $3.7 billion of seniors housing and care asset sales in 2007, or almost the same dollar volume as in 2006. It also includes transaction information on each of the publicly announced senior care, home health care and hospice acquisitions in 2007. The Senior Care Acquisition Report, Thirteenth 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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