Senior Housing Unit Prices Hit New Records In 2014

A voracious senior housing merger and acquisition market in 2014 that set a record of about $25.5 billion in transactions paved the way for senior housing products across the spectrum to hit new records in pricing.

In the assisted living market, the average price per unit increased by 25% in 2014 to a record $188,700 per unit, according to a soon-to-be-published study from Irving Levin Associates. In independent living communities, the average price per unit also set a new record of $246,800 — more than 28% 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% higher than in 2013.

“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,” said Stephen M. Monroe, editor of the report, in a statement.

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Average assisted living cap rates dropped to a record low of 7.75% while average independent living cap rates also hit a low of 7.4%, Irving Levin data show. The average cap rate in the skilled nursing market fell 60 basis points to 12.4%; however, 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,” Monroe said.      

In 2014 there were 294 publicly announced mergers and acquisitions across the senior housing and care spectrum — a 26% increase over the transaction volume in 2013, which itself had been a record year.  

“The breadth of demand was extremely wide in the seniors housing and care market, which resulted in a record number of deals and dollars spent in the market in 2014,” Monroe said. “We do not see that changing in 2015 as long as interest rates remain reasonably low. Public and private REITs, private equity firms, pension funds and foreign investors, not to mention the operating companies seeking to grow, all contributed to this record-setting year.” 

Access The 2015 Senior Care Acquisition Report, 20th Edition, here.

Written by Cassandra Dowell

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