Senior Living Investment Brokerage – Page 3

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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New Year Same Market?

January 25, 2016/in Ryan Saul, sell assisted living, sell nursing home, Senior Living Investment Brokerage/by ryanmsaul

As we start the new year initial signs point to the fact that we are in the same market as 2015. For the past 4-5 years, a new year brings follow up from buyers looking to acquire long-term care or Seniors Housing communities. It also leads potential sellers to follow up and see what their community is worth. This year is no different. I’ve had a number of requests for proposals and receive daily calls from buyers aggressively looking to acquire facilities.

What does this mean for you? If you are a seller, the strong demand should be enough for you to have a proposal done to see what your community is worth. If you are a buyer, the spike in requests for proposals should lead to new inventory for you to purchase in the next few months.

Please contact Ryan Saul for more information about the current market. 630-858-2501.

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Interest Rates are Going Up

December 15, 2015/in Ryan Saul, sell assisted living, sell nursing home, Senior Living Investment Brokerage/by ryanmsaul

Everyone knows that interest rates are going up. All signs point to the fact that it will be this week. What does that mean for you? If you are a Seller, a rise in interest rates could affect the price that buyers can pay. Now may be the time to maximize your pricing and capitalize on the low cost of capital. If you are a Buyer, increased cost of capital will impact what you can pay for a nursing home or assisted living community.

With the changes in regulation centered around non traded REITs and public REITs cost of capital increasing, this has created an environment for private equity and conventional lenders to compete for acquisitions. After a period of time being forced to the bench and unable to compete for deals, they are now able to put money to work. Private equity, private owners and balance sheet lenders are aggressively looking to acquire Seniors Housing communities.

If you have thought about selling your nursing home or assisted living community, now is the time. Please contact Ryan Saul at 630-858-2501 to discuss your options in the current market.

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Is the Market at its Peak in Seniors Housing?

December 10, 2015/in assisted living, assisted living community, buy assisted living, cap rate, Capitalization Rate, cash flow, independent living, interest rate, internal rate of return, Jason Punzel, nursing home price, private equity, sell assisted living, sell nursing home, senior housing brokerage, Senior Housing community, senior housing sales, Senior Living Investment Brokerage, Washington, what is my assisting living worth/by ryanmsaul

For the first time in many years, we have started to hear buyers, lenders and operators start to question whether the market peaked. Commercial real estate in general, and Seniors Housing specifically, both have seen increases in value since the trough of the market in 2009-2010.

Cap rate trends are a good way to follow the market. Cap rates vary widely, but according to the latest report from Irving Levin & Associates, the average cap rate for the 12 months proceeding Oct 1, 2015 for Independent Living was 7.2%, Assisted Living was 7.8% and Skilled Nursing was 11.8%. Overall, the cap rates were steady, or had dropped slightly from the end of 2014.

Cap rates, and thus real estate values, tend to correlate closely to interest rates. This is not only because most buyers use some type of leverage on the properties, but even more so, interest rates are a base rate of return that all investors use to evaluate all types of investments. We have seen many new investors start to invest in the Seniors Housing market over the past several years because the cap rates were higher than in other types of income producing real estate. Many saw it as an opportunity to achieve better returns.

Couple this with short term interest rates near zero percent and the 10 year US Treasury around 2-2.3%, and there is little room for rates to go lower. Thus, there is little room for cap rates to go lower as far as being correlated with general interest rates. Currently, it does not appear that the Federal Reserve will be dramatically increasing interest rates anytime soon, there is certainly a lot more room for interest rates to go up than down.

However, cap rates remain higher in Seniors Housing than many other types of real estate and income producing assets. To the extent that investors continue to divert money from other investments into Seniors Housing. Cap rates could still go lower, pushing prices higher. Nonetheless, with the amount of new investors that have entered the industry in the past several years, it is doubtful that a significant amount more new investors will continue to enter this industry causing a further compression in cap rates.

If the net operating income of an asset goes up, or down, prices will likely also go up, or down, with cap rates staying the same. Given relatively low inflation and a surge in new construction, it is doubtful that net operating income will increase dramatically in Seniors Housing over the next several years.

Overall, we believe the main driver for increased values going forward will be an increase in net operating income, not a further compression in cap rates. While net operating income in Seniors Housing could continue to grow, it will probably be at a slower pace. Cap rates have more room to go up than down. Though given relatively low inflation and a slowdown in the global economy, it is doubtful that an increase in rates will happen at a fast pace anytime soon. The combination of these factors will mostly likely lead to Seniors Housing prices staying relatively stable, but with a risk of a decrease if interest rates increase faster than expected.

If you believe now might be a good time to sell your Seniors Housing Community, please contact Jason Punzel at [email protected] or 630-858-2501 for an in depth analysis of what your community might be worth.

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Ryan M Saul