Nursing Home Sales lead to poor quality – I think not

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I ran across this article that attempted to draw the conclusion that nursing home sales are bad for the industry and results in poor quality. I think not.

Repeated nursing home sales linked to poor quality

nursing home sales

We often sell nursing homes that are in trouble and need a new owner. The residents need a nursing home to sell and a new owner. There are many more success stories of nursing homes that sell resulting in better care moving forward. There are a lot of holes in this article and I am confident that the previous history, prior to a sale, is being captured in the results. Also, it takes time to turn a property around and change the culture from providing questionable care to improving quality and the reputation. If you have a troubled nursing home it just might be time to sell. If you specialize in providing quality care, you might be the ideal candidate to buy a nursing home and turn it around. Contact Ryan Saul from Senior Living Investment Brokerage, Inc. for more information.

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

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According to the Senior Care Acquisition Report 2016, the average price per unit for Assisted Living Facilities in 2015 was $189,200 and for Independent Living Facilities it was $192,900.   However, is this really a good metric for valuing a senior living community?

In 2015 the average price per unit for Class A Independent Living Facilities was $248,500 and Class B wa $138,300.   We currently have a Class C, 110-unit Independent Living Community under contract in the Pacific Northwest that will sell for less than $40,000/unit.  As a company, last year we sold Skilled Nursing Facilities from $10,000-$130,000+/bed and Assisted Living Communities from $20,000-$300,000+.  There are some older facilities in rural areas that have negative EBITDA which may not have any interested buyers and thus have little, if any value.  Additionally, there are facilities in downtown areas of San Francisco, Seattle and New York for example that would sell for $500,000+/unit if they were actively marketed by Senior Living Investment Brokerage, INC today.

Because of the wide range in prices, we strongly recommend that owners focus more on cap rates and internal rates of return when valuing their properties.   Ultimately, buyers are interested in a return on their investment and they will use these metrics to determine the price they will pay.   The price per unit then becomes the result of and not the cause of the price.

To discuss the value of your Senior Living or Skilled Nursing Facility please contact Jason Punzel at 630-858-2501 x 233 or [email protected]  or Joy Goebbert at 630-858-2501 x 230 or [email protected].

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REITs slowing down – Is the Seniors Housing Market?

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We all read the reports that REITs slowing down their investment in Seniors Housing and nursing homes but Is the Seniors Housing market? Clearly they have been driving the market for the past few years with billion dollar and multi-million dollar transactions . However, is the overall Seniors Housing market slowing down? I don’t think so.

The dollar volume and mega portfolio transactions might be off from the record years, but the overall market is thriving.

The Real Estate Investment Trusts (REIT) heavy in nursing homes and assisted living have been met with record pricing.  In addition, their cost of capital has increased.  Both these factors have led to the REITs slowing down their activity.  Consequently, we have seen an adjustment in pricing.  Pricing might have adjusted slightly down, but it still remains near record levels. The average price-per-unit for Seniors Housing in the first quarter stood just under $170,000 per unit. That is a 5% quarterly decline and approximately 1% lower than the average price-per-unit of 2015.  This adjustment in pricing has created opportunity for buyers, not using REITs, to acquire communities.  If you have been trying to buy nursing home or buy assisted living, now is your time.  Interest rates are still at historic lows.  Lenders have capital and are aggressively looking to place it, especially in long-term care and Seniors Housing.  So, if you have thought about sell assisted living or selling nursing home, contact Senior Living Investment Brokerage to match you up with the thousands of active buyers we are in contact with on a regular basis.

I believe 2016 is going to be the year of the nursing home and individual sales of assisted living.  Nursing homes are still trading between 12%-13% capitalization rates and the cost of capital is in the 3%-5% range.  This offers significant opportunity.  Over $100 billion of nursing home assets across the United States are still privately owned, prime for acquisition.

If you have thought about buy or sell assisted living or buy or sell nursing home, contact Ryan Saul to discuss your options.

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Minimum Wage Increase to Hurt Seniors Housing Investment?

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Increasing the minimum wage will obviously have an impact on the overall economy. Senior Living Investment Brokerage, Inc. is concerned with how such an increase will change the nursing home and senior living market. It is competitive for quality staff. If minimum wage increases will workers making the same money choose a job in the restaurant or retail industry with very little stress or will they choose to care for the most frail people with extreme responsibility, stress and demands?

Owners will need to increase expenses to take care of residents while the rents and reimbursement have been slow to increase.  The increase in minimum wage is one thing, the shortage of quality workers is another.  Owners will need to find the right mix between paying a living wage and remaining affordable to residents.  Applying this strategy will help keep quality staff and a good reputation.  If you take care of employees and you take care of residents, the bottom line should take care of itself.

If you are fed up with the constant changes in the assisted living, memory care and nursing home business and want to sell, please contact Ryan Saul for a confidential discussion about how to sell nursing home or sell assisted living.

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