Assisted Living Dominates in 2011, Prices Up 57%

Seniors housing properties continue to be in demand, as assisted living facility prices rose dramatically in 2011, although skilled nursing prices fell somewhat, according to The SeniorCare Investor.

The nationwide average prices per unit for assisted living facilities increased to $161,700 in the 12 months ended Sept. 30, 2011, representing a 57% increase over calendar year 2010.

This is because higher quality properties and portfolios coming on the market experienced aggressive bidding and selling for higher prices, said Stephen Monroe, editor of The SeniorCare Investor, in a statement.

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“The institutional demand, combined with relatively low interest rates, even in this capital-starved environment, has resulted in a significant swing in average prices to the record levels of 2006 and 2007,” he said.

The average cap rate for assisted living transactions during the fiscal year dropped from the previous year’s 9.6% to 9%, with properties still being sought after.

“Transactions with cap rates of 7% to 8% for the “A” quality properties have become more common in the assisted living market purely because of strong demand,” said Monroe.

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On the skilled nursing side, the average price per bed in the past year declined slightly to $59,100 per bed from the record of $62,500 per bed set in 2010. Average prices may go down still further, said Monroe, after the high-priced transactions from the fourth quarter of 2010 are removed from the calculation.

The average cap rate dropped by 50 basis points to 12.6% for the 12 months ended Sept. 30, 2011, according to The SeniorCare Investor data.

“It is expected that prices for skilled nursing facilities will moderate as investors and operators digest the recent 11.1% cut in Medicare reimbursement to skilled nursing facilities,” said Monroe.

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With the possibility of further cuts to the sector, depending on Supercommittee debt deficit reductions, it’s possible transaction activity will slow.

Written by Alyssa Gerace