In concert with other positive data in seniors housing during the last year, according to the recently published 2014 Senior Care Acquisition Report, 19th Edition, senior housing asset values increased markedly in 2013 and have finally returned to pre-recession levels. Senior housing participants and others who are interested in investing in these assets prior to continued appreciation, should contact the senior housing financing firm Cambridge Realty Capital to learn more about the many different financing options they offer for acquisitions and other needs.
Reflecting the attractiveness of senior housing assets, the average price that was paid for skilled nursing communities hit a record $73,300 per bed in 2013. This figure represents a 21% increase from 2012 and a 17.3% increase from the previous record of $62,500 that was set in 2010. The increase is being attributed to a higher acuity mix in these facilities and purchases that were made in markets that have the potential to increase occupancy with higher acuity residents. Buyers are attracted to these assets because of the additional extra care fees and revenue that they generate. With respect to cap rates for skilled nursing facilities, these stayed within historical norms at 13%.
In the broader private pay senior housing market, which includes assisted living, memory care, and independent living communities, the average price that was paid per unit in 2013 was $164,000. This is just slightly below the record of $164,500 that was set in 2007. This segment was definitely a seller’s market as evidenced by reports that it wasn’t uncommon for sellers to receive a dozen bids for each property or portfolio they put on the market. Also, as the economy improved, additional debt and equity entered the market providing more capital for buyers to make purchases. Facilities that were primarily independent living also set a record in 2013 of $191,950 per unit. This figure is 38% higher than the average price per unit in 2012. There was wide variation in this sector of the market as some portfolios sold for more than $200,000 per unit, while some single property assets sold for more than $400,000 per unit. Meanwhile, the assisted living sector experienced more volume than independent living and the average price per unit there was $150,600. This is a decrease of 4.5% from the average price in 2012 and, because there were plenty of sales in excess of $200,000, the decrease is being attributed to the sale of a number of smaller and older facilities for much less than $200,000.
Lastly, further reflecting the attractiveness of senior housing assets, the number of publicly announced mergers and acquisitions in the space reached 225 last year. This is a new record and an increase of 20% from 2012. 2013 also saw the most buyers in the marketplace since 2007 and because of the extra capital that was available, not only was M&A activity strong, but non-healthcare REITs also experienced increased activity as well.
The report’s findings demonstrate the continued strength of the senior housing market and also suggests that high levels of M&A activity will continue in 2014 due to the growing economy, continued demand for seniors housing, and increased capital flowing into the market. Industry professionals and other parties that are interested in acquiring senior housing assets and obtaining the returns that come with them should continue to look to Cambridge Realty Capital as a source of financing for purchases and other needs as well.