June 17, 2019
Jason Punzel

Is “Price Per Unit” a Good Valuation Metric for Senior Living?

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Is “Price Per Unit” a Good Valuation Metric for Senior Living? – by Jason Punzel

According to the Senior Care Acquisition Report 2019, the average price per unit for Assisted Living Facilities in 2018 was $186,400.  For Independent Living Facilities, it was $238,100.   However, Is “Price Per Unit” a Good Valuation Metric for Senior Living?

In 2018 the average price per unit for Class A, Assisted Living Facilities was $326,750.  For Class B facilities it was $119,000 per unit.   We currently have a Class C, 110-unit Independent Living Community under contract in the Pacific Northwest for less than $40,000/unit.

As a company, we have sold Skilled Nursing Facilities from $10,000-$130,000+/bed and Assisted Living Communities from $20,000-$450,000+.  There are some older communities in rural areas that have negative EBITDAR that may not have any interested buyers.  There are communities in downtown areas of San Francisco, Seattle and New York that have sold for $500,000+/unit.

Conclusion:

With such a wide range of prices, how can an owner determine the value of their community?

Buyers focus on Internal Rates of Return and will use current and expected future cash flow to develop their model which determines the price they are willing to pay.   Thus, price per unit becomes the result of and not the cause of the value which is determined by cash flow.

Contact Info:

To discuss the value of your Senior Living or Skilled Nursing Facility please contact Jason Punzel at 630-858-2501 x 233 or punzel@slibinc.com .