Last Month, Irving Levin Associates, a research and publishing firm that tracks mergers and acquisitions in the seniors housing and health care markets, released the fourteenth edition of the The Senior Care Acquisition Report that showed the average price paid per bed for skilled nursing facilities dropped significantly in 2008 from 2007. The average sales price for skilled nursing facilities dropped by 18% in 2008 to $45,500 per bed. Despite this decline, the average price per bed in 2008 was still higher than the average price in both 2004 and 2005. Although some of the decline can be explained by the increase in the cost of capital and the shortage of lenders in the market as the year progressed, most of the decline was the result of less attractive and less profitable skilled nursing facilities available in the market for sale.
“As the economy and capital markets began to deteriorate, sellers of higher-quality properties were not willing to part with them at lower prices,” stated Stephen M. Monroe, editor of the Report.
In the assisted living market, after record prices paid in 2007, the average price paid fell by 21% in 2008 to $124,900 per unit. The volume of transactions declined significantly and, like the skilled nursing market, the overall quality of the communities sold was lower than in 2007, contributing to the decline in per-unit prices.
The dollar value of all publicly announced seniors housing and care mergers and acquisitions plummeted in 2008 to approximately $1.8 billion. This compares with $22.6 billion in 2006 and $16.6 billion in 2007. In both 2006 and 2007, there were several corporate mergers and take-private transactions valued at more than $1.0 billion each, while in 2008 the largest transaction was just $300.0 million. “The tone of the market has certainly changed, and much of the capital that fueled the bull market from 2005 through 2007 has disappeared, at least for now,” stated Mr. Monroe. “But it will return.”
For the more information on the report, click here.