The last year was marked by sky-high prices and low cap rates as reported by senior housing real estate investment trusts (REITs) in quarterly earnings calls, and now the numbers prove that perhaps they’ve been holding off on deals with reason.
The average price for skilled nursing facilities soared to a new record of $85,900 per bed in 2015, according to recently released data from Irving Levin Associates, while the average price per unit in assisted living set records as well at $189,200. These prices represent 12% and 1% increases from 2014, respectively.
The only product type that experienced a decline in value was independent living, according to the data.
In terms of cap rates, those for skilled nursing dropped to 12.2%, or 10 basis points above their record low. Assisted living cap rates held steady from 2014 to 2015 at 7.7%, and cap rates for independent living reached a record low of 6.96%.
Meanwhile, the number of publicly announced transactions in the senior housing sector reached 357 in 2015, representing an 18% increase from 2014. However, those acquisitions totaled just $14.2 billion, which is 44% less than in 2014, the data reveals.
In fact, just one transaction topped the $1 billion mark in 2015—Griffin American Healthcare REIT III, Inc. acquired Louisville-based Trilogy Health Services LLC in a $1.125 billion joint venture with NorthStar Healthcare Income, Inc. in a deal that suggested implications for REITs across the sector. Five transactions crept above $1 billion in 2014 for a total of $9.7 billion.
Despite record-high prices, skilled nursing assets remained highly desired in the last few months of 2015, according to data from the National Investment Center for Seniors Housing & Care (NIC), and all signs point toward the asset class staying hot throughout 2016.
Written by Kourtney Liepelt