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

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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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Should I sell or lease my Senior Living Facility?

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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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What is the optimum and/or minimum size for a Seniors Housing Community sale?

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When considering a sale, there is no minimum size for an assisted living facility (or independent living facility).   Different room counts will attract different types of buyers.  A REIT or large private equity company will not have an interest in a single, 16 unit assisted living facility.  Likewise, a local nurse typically will not  have the financial ability to buy a 100 unit assisted living facility.

As a company, we have found that most larger Buyers have a minimum threshold of 40 units for an assisted or independent living facility, with a preference of over 60 units.    However, there are exceptions to every rule.   If there are multiple smaller facilities (15-25) units on the same parcel, or nearby, often times larger Buyers are still interested.   We have also had a lot of success selling smaller communities (25-30+ units) that are in favorable locations in larger cities, newer, and specialize in higher end private pay residents who prefer a smaller setting.  Recently, we closed on a newer 25 unit assisted living community in the Portland area that sold for over $220,000/unit.   It was 100% private pay with high occupancy and excellent quality finishes.   Since there are so many variables that factor into a purchase decision by any Buyer, it is important to work with an expert in valuing and selling a senior living community to ensure the optimal pricing and terms.

For more information on what your senior living community could be worth, please contact Jason Punzel at [email protected] or 630-858-2501 x 233.

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How to Sell Assisted Living Facilities Faster (part 2 of 2)

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Deciding when to sell your assisted living facility (Independent Living Community or skilled nursing facility) can be a daunting task and there are many factors to consider.   However, once an owner decides to sell, typically they want to close as quick as possible.   As a company, Senior Living Investment Brokerage, Inc has sold more senior living and skilled nursing facilities than any other brokerage company over the past seven years.  Over the years, we have found a number of things an owner can do to help sell their senior housing community faster, below is the second half of our top six things to do to sell your facility faster:

4. Have your attorney get a preliminary title report when you list the property – After an offer has been accepted and the buyer is going through their due diligence period, title issues can often cause delays in closing. If a property has been owned for a long time, and no recent debt has been placed on the property, the title probably has not been reviewed by an attorney for years.  Old liens, mortgages, improper zoning are just a few issues that could come up.   By having an attorney review a title policy early on in the process, many of these issues can be resolved prior to the buyer’s attorney examining the title policy.

5. Have an ALTA survey completed ahead of time – An Alta survey, in conjunction with an attorney review of the title policy can help reduce possible delays in closing. A survey can reveal encroachments, easements and other issues on the site that a buyer may or may not have an issue with.   Having a survey that is already completed that a seller can show to a potential buyer will save time and make the closing process go smoother.

6. Fix any major capital items – All buyer’s will perform some type of building inspection and expect that the roof, foundation, mechanicals, etc are in good working order. As a seller, if you know there is something that needs to be fixed, it makes sense to do it ahead of time and not wait and hope a buyer won’t find it.

Many of the above suggestions will cost the seller both time and money ahead of time.  The seller must weigh the risk of spending their time and money with helping the closing go quicker.  Ultimately, if the seller is committed to selling, these expenses will be a good investment to ensure the smoothest closing possible.

For more information on selling your seniors housing property, please contact Jason Punzel at 630-858-2501 x 233 or [email protected].

The post How to Sell Assisted Living Facilities Faster (part 2 of 2) appeared first on Senior Living Investment Brokerage.