Irving Levin Associates: Assisted Living and Skilled Nursing Facility Prices Hit New Record

by Jeff Shaw

NORWALK, Conn. — A combination of growing investment demand, abundant capital and low interest rates resulted in many records set in the seniors housing and care acquisition market in 2014, according to a soon-to-be-published study from Irving Levin Associates.

The report — The Senior Care Acquisition Report, Twentieth Edition, 2015 —says the average price per unit in the assisted living market jumped by 25 percent in 2014 to a record $188,700 per unit. The average price per unit for independent living communities also set a new record of $246,800 per unit, more than 28 percent higher than in 2013.

The skilled nursing market set a record for the second year in a row, reaching $76,500 per bed, or 4 percent higher than in 2013.

“We were tracking the acquisition market all year, and while we knew some records were going to be set, we were still surprised that record average prices were set across the seniors housing and care spectrum,” says Stephen Monroe, editor of the report. “Investment demand has been very strong, and as prices go up, more owners are enticed to put their properties on the market to take advantage of this peak demand for seniors housing and care properties.”

Average assisted living cap rates dropped to a record low of 7.75 percent while average independent living cap rates also hit a low of 7.4 percent. In the skilled nursing market, while the average cap rate fell 60 basis points to 12.4 percent, it did not set a record, which was last set in 2007.

“The combination of lower cap rates, plus the higher cash flow per unit and bed sold, all contributed to the record-setting average prices in 2014,” says Monroe.

Other records were set in 2014 as well. There were a total of 294 publicly announced mergers and acquisitions across the seniors housing and care spectrum in 2014, representing a 26 percent increase over the transaction volume in 2013, which itself had been a record year. In addition, the dollar value of these transactions set a record of approximately $25.5 billion, or more than double the dollar value in 2013.

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