Monthly Archives: December 2019

December 23, 2019
Matt Alley

CCRC vs Non-CCRC Performance 2019

CCRC vs Non-CCRC Performance 2019 – by Matthew Alley

This week, NIC released an extensive data report detailing CCRC vs Non-CCRC performance as of Q3 2019. View the full report by NIC Senior Principal Lana Peck here, or read a condensed summary of the data below:

How Did CCRCs and Non-CCRCs Compare as of Q3 2019?

Essentially, CCRCs had higher occupancy, higher rent growth and lower inventory growth than non-CCRCs as of Q3 2019.

Higher Occupancy at CCRCs

Why was CCRC occupancy higher? Potential reasons could be the higher inventory growth at non-CCRCs, lower turnover at CCRCs, characteristics of CCRC customers / new residents, and relative performance of the majority unit mix.

How exactly did inventory growth and occupancy at CCRCs and non-CCRCs compare over a three year period?

CCRC vs Non-CCRC Performance: Units, Occupancy and Rent Comparison

Memory care at CCRCs showed the strongest occupancy gain (2.3%), followed by independent living (0.7%), assisted living (0.3%) and nursing care (0.1%).

Independent living at non-CCRCs showed the strongest occupancy change (which was -3.0%), followed by assisted living (-2.6%), memory care (-1.1%) and nursing care (-0.3%).

How exactly does the unit mix compare among CCRCs and non-CCRCs?

CCRC vs Non-CCRC Performance: Unit Mix Comparison

Higher Rent Growth at CCRCs

CCRCs showed higher year-over-year average rent growth in total and by care type than non-CCRCs.

Independent Living at CCRCs had the highest year-over-year rent growth over a three year period (3.4%), followed by assisted living (3.3%), nursing care (3.0%) and the memory care segment (2.9%).

Assisted living at non-CCRCs had the highest year-over-year rent growth over a three year period (2.6%), followed by memory care (2.5%), nursing care (also 2.5%) and independent living (2.1%).


Lower Inventory Growth at CCRCs

Non-CCRCs showed a higher inventory growth in total and by care type than CCRCs (5.6% vs. 1.6%, respectively).

Memory care at CCRCs had the highest inventory growth (12.4% or 1,507 units), followed by independent living (2.9% or 5,867 units) and assisted living (1.8% or 895 units). Nursing care inventory declined by 2.3% or 2,377 beds.

Memory care at non-CCRCs also had the highest inventory growth (24.9% or 24,752 units), followed by assisted living (12.1% or 38,904 units), and independent living (10.8% or 20,562 units). Nursing care inventory declined by 1.1% or 8,443 beds.

Full data report on CCRC vs non-CCRC performance originally published by NIC here.


If you have any questions on the topics of this post or would like a confidential valuation of part or all of your seniors housing portfolio, please contact Matthew Alley at 630-858-2501 ext. 225 or

December 18, 2019
Jason Punzel

Should I sell or lease my Senior Living Community?


Should I sell or lease my Senior Living Community?  – By Jason Punzel

When considering options of disposing of a senior living community, many owners ask us, “Should I sell or lease my Senior Living Community?”  There are advantages and disadvantages of each option.


The biggest advantage of selling an assisted living community (or independent living community) is that an owner receives all of their cash up front and has no future financial liabilities or risk (other than the reps and warranties agreed to in the Purchase Agreement).  The owner no longer has the risk of the market going down in the future, new government regulations, overbuilding, etc.   Additionally, the owner no longer has the time commitment in owner and managing the community.  The biggest disadvantage of selling is paying the capital gains tax.  This can be substantial for those owners who have owned their communities for a number of years and/or did a 1031 exchange when purchasing the community.   One alternative to paying the capital gains tax, is doing a 1031 exchange into a replacement property.  However, this requires finding a suitable replacement property that the owner wants acquire.


Leasing, on the other hand, has the advantage of not having to pay capital gains tax and the advantage of receiving monthly rent.  For those owners who do not have a need for the cash upfront, leasing can provide a great residual income for years.    However, the disadvantages of leasing are many.  An owner must find a quality tenant that has the operational and financial ability to run the community for the length of the lease.   If the operator defaults on the lease, the owner could be in the position to have to take over the operations of the facility, which most likely will be in poor condition.  Additionally, at the end of the lease, the owner still has to make a decision on what to do with the facility.  If the market is worse, and/or if there are new competitors in the area, the community could be worth substantially less than at the beginning of the lease.


When the market to sell a senior living community is good, like it is today, it typically makes more sense to sell and eliminate the risk of an operator defaulting and/or the community being worth a lot less at the end of the lease.    However, when the market to sell is not as good (like it was in 2009-2010) it might make more sense to lease the facility to a quality operator.

For more information on different exit strategies, contact Jason Punzel at or (630) 858-2501 x 233.

December 18, 2019
Matt Alley

2020 SNF Market Outlook


2020 SNF Market Outlook – by Matthew Alley

This week, I presented on the 2020 SNF market outlook with industry publication Skilled Nursing News. In case you missed it, a full copy of the presentation slides and audio is available here.

The Webinar, “Beyond PDPM: Top Challenges and Opportunities in 2020” featured the following speakers:

  • Bill Kauffman of NIC (0:00 – 16:40) on “Transaction, Occupancy and Revenue Trends.”
  • Fred Bentley of Avalere (16:41 – 32:43) on “Trends Reshaping the Skilled Nursing Landscape”
  • Matthew Alley of SLIB (32:44 – 47:43) on “Analyzing and Valuing Skilled Nursing Communities for Sale and Purchase.”
  • Alex Spanko of Skilled Nursing News (47:44 – 1:00:33) Moderating Q&A

Access the presentation slides and audio here, or read on for an adapted summary of SLIB’s portion of the Webinar:


Analyzing and Valuing Skilled Nursing Communities in 2020 (32:44 – 33:57)

When valuing Skilled Nursing Facilities, first identify the key variables that will impact value for the specific facility or portfolio. Second, decide which methodology would make sense to value the community or portfolio. Put yourself in the buyer’s shoes – what is important to them? Third, run the facility through the chosen valuation method and review. Finally, compare the property/portfolio against recent sales as available. There are no “perfect” comparables in this industry, but recent sales are a helpful additional filter for determining value.

Key Variables in Determining Value (33:58 – 39:29)

Location – What are the reimbursement rates in this location? Is the SNF located in a CON state? What barriers to entry exist for buyers in this market? Demographics also vary by location. Is the SNF located in a younger market? Are there many seniors or adult children in the area? Is the senior population in this location projected to grow or decline? Is the SNF in an urban, suburban, tertiary or rural market? Primary market SNFs typically sell for a higher price per bed than rural SNFs.

Operational performance – What is the facility’s Net Operating Income (NOI)? Is the community earning or losing money? What is the Medicare and Private Pay Quality Mix? Do the rates at this facility provide upside to a Buyer? How does the community census compare to local competitors? Operating margin is also important to consider, as a Buyer reviews where potential expense cuts could be made.

Physical plant – How many nurses’ stations are there? One nurses’ station is preferable to multiple. Is the facility older or newer construction? How many beds are at the community? In our experience, smaller communities do not garner as much attention as 100+ bed communities. How many stories are in the facility? Single-story facilities tend to gain much more interest than multi-story facilities. We recently marketed a four-story community in Texas that was passed over by qualified buyers largely because it had multiple stories.

Approach / Methodology Used for Valuation (39:30 – 42:10)

There are three traditional approaches used for valuation. Income Approach (capitalization rate and EBITDAR), GIM (Gross Income Multiplier) and Sold Comparables. The last approach should be considered with caution, as there are not many perfectly comparable sales.

Additional factors should also be considered when valuing SNFs in the 2020 SNF market. Is this a standalone community or larger institutional portfolio? How do current rates and occupancy compare to the market? Is the community performing well, or is it a value-add community? How do the historical financials and pro forma compare? Would a Buyer be able to easily finance the community? A poor facility reputation or survey history may not show up in the financials but will be considered by a potential Buyer.

Biggest Concerns with Skilled Nursing Valuation (42:11 – 44:13)

Several concerns face SNF owners and operators ahead in 2020.

-The uncertainty of future Medicare reimbursement and shorter length of stays may impact SNF groups in 2020.

-The tightening of state budgets can affect each state individually.  Medicaid is a large line item for each state, and states that have tighter budgets might see Medicaid cuts or a lack of future increases.

-Overbuilding, especially with the “transitional care” model, can cause concern and take Medicare residents from traditional nursing homes.

-Occupancy, as well as the Medicare / Private Pay mix has dropped nationwide.

-PDPM could also force smaller operators to sell. While this may not lead to a rush of sales January 1st, smaller operators may struggle to keep up with technological improvements. This will lead to additional supply on the market in later 2020 and 2021.

-Functional obsolescence is also important to consider. Many 40+ year old buildings may not meet resident demands. As a result, this will drive down value in the eyes of potential Buyers.

Valuation Detail (44:14 – 45:34)

Despite pressures on the Skilled Nursing industry, pricing over the last several years remains fairly constant. There was a bump in 2016 due to quality, larger portfolios going on the market. Furthermore, pricing seems to be trickling up in 2019 despite current industry pressures.

Price per bed has remained fairly constant since 2015 moving into the 2020 SNF market.
Source: Skilled Nursing Acquisition & Investment Report

Pricing for performing SNFs has not changed much in the past 4-5 years. Cap rates have hovered between 12-12.5%, and the previous 10 years has seen cap rates generally between 12.5 – 13.5%.

It is important to consider historical and recent trends in cap rates moving into the 2020 SNF market.
Source: Skilled Nursing Acquisition & Investment Report

Recent Comparables / SNF Sales (45:35 – 46:36)

Stabilized properties have been selling for around $80,000 per bed. Non stabilized properties have sold for about $45,000 per bed. SLIB’s properties under contract have continued with this trend.

For more details on recent SNF sales, please contact me or view the full presentation.

Valuation Variables Summarized (46:37 – 47:43)

Ultimately, variables that contribute to net operating income carry the most weight with respect to valuation in the 2020 SNF market.

Buyers will also pay for some upside potential but will not pay for all of it. Consider the resources and effort it will take to achieve.

Pricing ultimately varies greatly based on revenue, income, age, size and location, with Class A quality facilities selling for a much higher price per bed. SNFs also show a larger difference in price per bed than seniors housing buildings.

Access the full presentation slides and audio for the 2020 SNF market outlook Webinar here.

Questions? Comments? We’d be happy to expand on any topic in a future blog post. Contact Matt or the editorial team today.

For more information on any topic discussed in this post, or if you would like to know what your senior housing facility or portfolio is worth in today’s market, email Matt Alley or call (630)-858-2501.

December 5, 2019
Jeff Binder

Emerging Trends in Seniors Housing Transactions: What Buyers Need to Know


Emerging Trends in Seniors Housing Transactions: What Buyers Need to Know – by Jeff Binder

As we enter 2020, we are starting to focus on emerging trends related to the long-term care & seniors housing investment market.

One trend we are following is the movement to a higher level of scrutiny on prospective buyers, not only from the Seller’s perspective but also from lenders and regulatory agencies.

Increased Scrutiny on Prospective Buyers

In most instances, Sellers in the current investment market are still seeing multiple offers for their assets, particularly for those that are performing or have a clear path to stable, and profitable, operations. The level of familiarity a Seller has with the Buyer pool is different from deal to deal. However, it is the intermediary’s responsibility to educate the Seller on those groups at the table, profiling such things as operational experience and financial strength. The financial wherewithal of the Buyer could be exhibited via lender pre-approval/interest letters, balance sheet review, or a detailed source of equity sufficient to complete the transaction. However, it is the operational side that is experiencing a more rapidly evolving level of examination, and this is more evident when dealing with a SNF transaction. First, the challenges of the skilled nursing sector have been well chronicled in recent years and the impact of the October 1st kick off of PDPM has not yet fully been deciphered.

One quickly evolving area of focus when examining Buyer risk relates to regulatory approval. The much publicized demise of one operator who grew too quickly and ultimately left an operational mess on the hands of receivers across multiple states opened the door for several states to reexamine their change of ownership process. In Kansas, Senate Bill 15 brought requirements such as evidence of sufficient working capital with a detailed list and operational background of all licensed facilities operated by the prospective Buyer – in and outside of Kansas.  Similar regulations have also been passed in Ohio and other states are sure to follow.

The end result of this movement will be a higher level of scrutiny, particularly on operators new to a state.


The Seller needs to be aware that, in some states, there will be some regulatory approval risk for operators not presently in the state in question. Further, the level of examination will not only look at financial wherewithal but potential “skeletons in the closet” if the operator has had a poor regulatory history, i.e., significant deficiencies, placed on the CMS focus facility list, etc.

In reviewing submitted offers to purchase, Sellers will need to be aware of a deeper profile of the Buyers at the table.  The failure to fully understand the profile of the Buyer pool, and specifically the financial depth and likelihood of regulatory approval, could increase the risk of the transaction not closing.

For more information on the topic of this post, or what your senior living community could be worth, please contact Jeff Binder at or 314-961-0070 x 1001.