assisted living sale – Page 2

What is the best list price for my Seniors Housing Community?

February 12, 2016/in assisted living, assisted living community, assisted living price, assisted living sale, cap rate, Capitalization Rate, independent living, interest rate, internal rate of return, IRR, Jason Punzel, prepare to sell assisted living, sell assisted living, sell long term care, sell memory care, sell nursing home, sell seniors housing, sell skilled nursing, senior housing brokerage, Senior Living Investment Brokerage, what is my property worth/by ryanmsaul

As a company, Senior Housing Investment Brokerage, Inc. represents many different types of buyers; REITS, Private Equity companies, Regional Operators, Non-Profits and small, privately owned operators. When it comes time to sell, typically the most, or one of the most important factors is obtain the best price possible.

As brokers, owners rely on us to provide them with an accurate assessment of the value of their Seniors Housing Community and suggest a list price to help them obtain the best terms possible in the market place. As a company, over 95% of the time the final sales price is within the price range from our original market analysis. After determining a market value range, the next step is deciding on a list price. Typically, we suggest a list price of about 10% above the market value range. Thus, if we expect a property to sell between $9,500,000-$10,000,000, an appropriate list price would be between $10,500,000-$11,000,000.

Often times, sellers believe that by listing the property at a much higher list price, that it will result in a higher final sales price because buyers will “meet them in the middle.” From our experience, this is rarely the case and a high list price usually results in a much longer process and sometimes even a lower final sales price.

Buyers who have the capital available to purchase a $5, $10, $20+ million property, are very experienced and tend to have tight underwriting guidelines to achieve the returns their investors require. Buyers are not going to be “tricked” into paying more for a property because of a high list price, pride of ownership, or because it is a nice, new building.

A high list price usually results in many buyers quickly passing over the deal because they don’t think the seller is realistic and they don’t want to pursue a property that they think there is very little chance of buying at a market price. When there is little activity at first, and sellers reduce their price to a market price, buyers start to wonder if the seller will continue to reduce their price or if the property has something wrong with it. Both which can cause more delays and decreased interest in the market place.

It is much more effective to have a list price that is realistic and creates a lot of activity from buyers quickly. This creates competition among buyers by getting several offers at once and has a much greater chance of driving the up the price than having a high list price that slowly gets reduced because of inactivity.

If would you like to get an accurate market price analysis, please contact Jason Punzel at [email protected] or 630-858-2501.

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Matthew Alley Speaks at InterFace Seniors Housing Texas Conference

November 20, 2015/in Alzheimer's, assisted living community, assisted living price, assisted living sale, buy assisted living, buy nursing home, cap rate, Capitalization Rate, CCRC, development, due diligence, exclusive listing, financing, independent living facility, internal rate of return, long term care, market, Matthew Alley, memory care, new construction, nursing home price, prepare to sell assisted living, prepare to sell nursing home, private equity, proposal, REIT, risk, sell assisted living, sell CCRC, sell long term care, sell memory care, sell nursing home, sell portfolio, sell retirement community, sell seniors housing, sell skilled nursing, sell to REIT, senior housing brokerage, senior housing sales, Senior Living Investment Brokerage, seniors housing brokerage, SLIB, Texas, valuation, what is my assisting living worth, what is my nursing home worth/by ryanmsaul

On November 19th, I participated in a panel entitled “Investment Market Update: Who’s Buying, Who’s Selling & Will Velocity Keep Going Up and Cap Rates Keep Going Down”. We had a lively discussion on the current market, and I wanted to share a few takeaways.

1. Who are the active buyers and sellers in today’s market? There is more variety in buyers now than in the past decade. REITs, private equity, owner-operators and even some “mom and pops” have been interested in purchasing properties and growing their portfolio. The sellers have been more diverse than normal as well. “Mom and pops” are still very active sellers, but we have seen more regional and national owners look to take advantage of the strong market and either sell their entire portfolio or divest of a couple of properties that don’t match their strategic vision.

2. Are there different buyers for different seniors housing asset classes? Yes, absolutely. Institutional groups typically chase larger, higher quality assets with consistent cash flow. Their low cost of funds has driven owner-operators down the acquisition spectrum to the smaller assets that may be underperforming.

3. What are the most important metrics that buyers are using in today’s market? Cap rates are the most important metric when valuing a cash flowing property. The difficulty comes in valuing a property that is underperforming. In those cases, a potential new operator will put together a pro forma and land on a rate of return that they’re comfortable with. Those deals typically see a wide range in offer prices.

4. What is the optimal size for acquisitions? Typically, the larger the offering, the better. Institutional groups have a lot of equity to deploy and if they can deploy it in 10 $30 million transactions as opposed to 25 $10 million transactions, groups will typically prefer fewer transactions. One-off or small portfolio transactions have a different pool of buyers, which tends to be less institutional and requires a broker to have a greater knowledge of the individual market and its individual buyers.

5. With pricing so strong in today’s market, why are some owners making a decision to hold? The current market conditions have hastened the timeframe for owners that had a planned exit strategy in the next 12-24 months. That being said, some owners are trying to increase their portfolio’s profitability and increase value in that way. Even if cap rates see a modest increase, a major increase in profitability will still see the owner come out ahead by waiting to sell.

6. Should we be concerned about overdevelopment in the seniors housing space? I think it is the biggest risk to the acquisition market moving forward. This is obviously a market-to-market (and sometimes, submarket-to-submarket) risk. If the area that an owner has a seniors housing facility becomes overdeveloped in the future, census levels will obviously suffer and valuations will go down.

7. What does the increase in development do to cap rates moving forward? It adds a level of risk moving forward. Anything that adds risk – whether it be development, reimbursement or labor risk among others – will naturally push cap rates up.

8. Where do you see the market headed over the next 12-24 months? In the near-term, it should be strong – cap rates are still higher than most other asset classes, interest rates are low and institutional equity needs to be placed. Further into the future, overdevelopment, government reimbursement changes, interest rate increases, increased regulation, increased tax rates and the housing market could cause a bit of a pullback in pricing. That being said, I still think the seniors housing space is better equipped to handle this uncertainty than other asset classes.

If you have any questions on the topic 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 [email protected].

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Should I sell or lease my Senior Living Facility?

October 22, 2015/in assisted living, assisted living sale, buy assisted living, cap rate, capital gains tax, Capitalization Rate, independent living, independent living facility, Jason Punzel, residential care facility, sell assisted living, seniors housing brokerage, what is my property worth/by ryanmsaul

When considering to exit the senior living industry, there are two main alternatives to consider, selling the facility fee simple, or leasing it to an operator. There are advantages and disadvantages of each option.

The biggest advantage of selling an assisted living facility (or independent living facility) is an owner receives all of their cash up front and has no future financial liabilities or risk. The owner no longer has the risk of the market going down in the future, new government regulations, overbuilding, etc. The biggest disadvantage of selling is paying the capital gains tax, which can be substantial for those owners who have owned their facilities for a number of years.

Leasing, on the other hand, has the advantage of not having to pay a large sum of capital gains tax and the advantage of receiving monthly rent. For those owners who do not need a large amount of cash upfront, leasing can provide a great residual income for years. However, the disadvantages of leasing are many. To begin with, an owner must find a quality tenant that has the operational and financial ability to run the facility 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 could 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 facility could be worth substantially less than at the beginning of the lease.

When the market to sell a senior living facility is good, like it is today, it typically makes more sense to sell and eliminate the risk of an operator defaulting and/or the facility 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 [email protected] or (630) 858-2501 x 233.

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Senior Living Investment Brokerage, Inc. Sells Portfolio

September 30, 2015/in assisted living, assisted living community, assisted living sale, Brad Clousing, Capitalization Rate, Florida, Jeff Binder, Ryan Saul, sell assisted living, Senior Living Brokerage, Senior Living Investment Brokerage, South Carolina/by ryanmsaul

Ryan Saul, Brad Clousing and Jeff Binder teamed up to sell a portfolio of 5 seniors housing communities. Four in South Carolina and one in Florida. The total portfolio included 282 assisted living units and average occupancy is 94%. Given the strong occupancy, there appears to be an opportunity to increase rents and further enhance margins and cash flow. The Buyer was a national REIT. This was a strategic acquisition that brought quality, cash flowing opportunities to markets where they have existing operations/holdings. The Seller, decided to sell to exit seniors housing and focus on rehab, LTACH and CCRC’s. In addition, Senior Living Investment Brokerage, Inc. sold 6 additional assets for the Seller which we will report on in a later blog. This portion of the portfolio sold at a 7.52% cap rate. for additional information, please contact Ryan Saul [email protected], Brad Clousing [email protected] or Jeff Binder [email protected]

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Ryan M Saul