NORWALK, Conn., March 23, 2020 /PRNewswire-PRWeb/ -- Before the Covid-19 pandemic began affecting all aspects of the United States economy, the state of the seniors housing and care acquisition market was as strong as ever. The average price per unit for seniors housing communities, which comprise both assisted living and independent living, surged to $244,200 per unit in 2019, a 20% increase over 2018's average, according to new acquisition data from Irving Levin Associates. That market was driven by a high number of high-quality assisted living sales, including more properties selling above $350,000 per unit than ever recorded. The average assisted living price rose to a record $248,400 per unit in 2019, 12% higher than the previous high of $221,250 per unit in 2017. "Operational headwinds like labor costs and stagnant occupancy, both made worse by overdevelopment in many markets, did not seem to dampen investor interest in these new, high-quality communities catering to higher-income populations," stated Ben Swett, Editor of The Senior Care Acquisition Report, 25th Edition. "Those communities are better able to offset an increase in operating costs with a corresponding rent increase."
The average seniors housing cap rate in 2019 fell to a record low of 7.4%, or 60 basis points lower than 2018's average of 8.0%. This further explains the increase in average price and was a result of both lower capital costs and higher quality properties that sold. Separating out the assisted living and independent living markets, both sectors reported drops in their average cap rates, with the assisted living market falling 80 basis points to an average of 7.6% and the independent living market dropping by 50 basis points to average 6.7%. The average for assisted living matches the previous record-low in 2017, but the independent living average cap rate was 30 basis points lower than the previous low recorded in 2015 and 2017 of 7.0%.
Skilled nursing values did not set a record in 2019, but the average price per bed did rise above $90,000 per bed for only the second time ever to $93,000 per bed. The average cap rate remained consistent, rising just 10 basis points to 12.1% in 2019. "Leading up to the implementation of the Patient Driven Payment Model on October 1, 2019, the skilled nursing M&A market was particularly active as buyers worked to build their portfolios to maximize what they saw as a revenue windfall from PDPM, "added Ben Swett. "Right now, these facilities are preoccupied with caring for a high-acuity, medically-complex and vulnerable population during the Covid-19 pandemic. Skilled nursing facilities may be called upon to take on a surplus of patients from overburdened hospitals, so we will see how they react to the crisis and fit into the acute care and post-acute care continuum going forward."
Despite the labor and occupancy headwinds facing the seniors housing and care market in 2019, deal volume rose to a record-high level of 450 publicly announced transactions, or 3.2% higher than 2018's total and 49% higher than 2017's activity. Based on publicly disclosed prices, dollar volume also rose by 23.5% to $16.8 billion, the third-highest total ever. All of the market statistics will appear in the just-published report from Irving Levin Associates, The Senior Care Acquisition Report, 25th Edition, 2020.
The Senior Care Acquisition Report, 25th Edition, 2020 contains statistics on the skilled nursing facility, assisted living, independent living and CCRC merger and acquisition markets in more than 70 charts and graphs, including prices per bed or unit, capitalization rates and income multiples, in more than 300 pages across two volumes. The Report also includes transaction information on each of the 450 publicly announced seniors housing and care acquisitions in 2019 (the highest number ever). The Senior Care Acquisition Report, 25th Edition, 2020 may be purchased for $795. 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 M&A markets.
SOURCE Irving Levin Associates
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