Brookdale buys Emeritus. It is in the headlines of every Seniors Housing magazine, website and blog. As a broker, I think these deals are good for our business. It highlights the fact that our industry is doing very well. I also believe that they will examine their newly acquired portfolio and divest those assets that are not a good fit (geographic, age, financial performance). This gives local and regional operators the opportunity to acquire value-add deals.
I also believe these blockbuster deals help those that own communities think about selling and ponder the question of what their property is worth. So what is your assisted living community or nursing home worth in today’s market? The only way to know is to allow us to put together a confidential proposal. We all know the market is constantly changing. For more information about what your community is worth, please contact me at Ryan Saul.
Nick Cacciabando has sold a 75 bed Skilled Nursing Facility in Iowa. The facility was family owned and operated since it was developed in 1966. This was the Seller’s only seniors housing community and they are retiring from the business. The Buyer purchased this facility utilizing a 1031 Exchange. This was a strategic acquisition as they have an existing presence in Iowa and are planning on realizing operational efficiencies through economies of scale. The census at the time of sale was 85% and the property sold for a 8.9% capitalization rate/.72 GIM. For additional information on this transaction, contact Nick at 314/961-0070 or email@example.com
Overall Market Trends
- Pricing for existing facilities to remain aggressive given the lack of product available in the market. Most aggressive pricing in States that have a moratorium on CON’s. Some States, like Florida, are considering a partial lift of the CON, which could have significant pricing implications.
- Cost of debt remains historically low. Also, availability of debt for acquisitions is readily accessible, especially for well-located assets.
- More equity and capital looking to be deployed in the sector.
- Limited new construction. Click here to view NIC’s most recent report on new construction.
- Likely increase in labor costs due to the Affordable Care Act. The delay in the employer mandate has provided temporary reprieve.
- 2012 Report on Shortfalls in Medicaid Funding shows the largest deficit since inception of the report. Click here to read the full report. This is the most recent data available.
- Further pressure on Medicaid could come in the form of the reduction of federal subsidies over the long term after the Affordable Care Act expansion in many states. Click here to read the report on which States have participated.
- Increased regulatory burdens by state survey teams.
- Pricing for existing communities to remain aggressive given the lack of assets available in the market.
- Cost of debt remains historically low. Also, availability of debt for acquisitions is readily accessible.
- More equity and capital ready to deploy in the sector driving capitalization rates to historic lows.
- Continued investment return compression in other sectors within commercial real estate has driven additional asset allocation from institutional funds to the seniors housing industry.
- Strategic alignment of operators and institutional capital has created a much more efficient acquisition process for many buyers.
- Likely increasing labor costs due to the Affordable Care Act. The delay in the employer mandate has provided a temporary reprieve.
- Increased activity in the construction pipeline could affect the performance and pricing for once dominant facilities in specific markets. This is more of a concern in the major metro markets, not in the secondary markets. Click here to read NIC’s most recent report on new construction.
- Increased regulatory burdens by state survey teams – assisted living only.
Ryan Saul and Brad Clousing sold a Personal Care and Memory Care community in Oakwood, Georgia. Oakwood is located in the northern portion of the Atlanta MSA. It was built in 1998 and underwent an extensive renovation and additional units were added at this time bringing the total square footage to 36,766. Census at the time of sale was 92%. The Buyer is an institutional owner/operator. It was a cash purchase with the intent of placing FNMA debt on the asset. The Seller was a local owner that used a third party manager. The purchase price was $11,750,000. For additional information please contact Ryan at firstname.lastname@example.org or Brad at email@example.com 630/961-2501