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Seniors Housing Pricing Still Strong, Private Buyers Drive Activity

As challenges persist in both skilled nursing and seniors housing fundamentals, pricing trends have differed over the past couple years. We have seen a decrease in the price per bed in the skilled nursing sector.  But at the same time and even with today’s more challenging operating environment, seniors housing price per unit has been relatively steady which shows that buyers are bidding at relatively high pricing levels for seniors housing properties.

In the second quarter of 2018, seniors housing price per unit increased to $175,600, returning to the levels seen in the first quarter of 2017. The price per unit was up 4.3% from the first quarter of 2018 when it was $168,300, and up 1.7% from the same period last year in the second quarter of 2017 when it was $172,600. It is now up 200% from the time-series low, set in the second quarter of 2010, representing a 14.7% annual growth rate in price per unit since that time.  For seniors housing, it has been quite a good run in terms of price appreciation, not unlike the runup experienced with most asset classes since 2010.

Skilled nursing trends over the past couple of years (“nursing care” in chart below), have been different than the trends seen in seniors housing trend.  The price per bed for skilled nursing stood at $84,200 as of the second quarter 2018 which was a 8.7% drop from two years ago when the price per bed was $92,200 in the second quarter of 2016.  Over the past quarter, skilled nursing saw a slight uptick from $83,700, but when compared to a year ago in the second quarter of 2017, price per bed is down 12.1% when it was $95,800.  However, it is up 73% from the series low of $48,700 in the first quarter of 2009.

Switching gears and looking at the buyer composition through the second quarter of 2018, the total dollar volume closed across all buyers was $5.1 billion. The private buyer has been the most active participant so far, representing almost half of the closed volume (45%), at $2.3 billion through the second quarter of 2018 and averaging more than $1 billion a quarter. For comparison purposes, the private buyer represented 34% of total volume in 2017, registering $5.5 billion. However, the private buyer volume did decrease 42% from the first quarter to the second quarter of 2018 from $1.5 billion to $800 million.  Private volume for the second quarter of 2018 decreased 38% from the second quarter of 2017, when it totaled $1.4 billion.

For more information on transactions activity, please look at the September NIC Insider.

In addition, to hear more about valuations and the buyers in the market, please come to our NIC Fall Conference session “What’s It Really Worth?”.  To find out more please visit the NIC Fall Conference website.

About the Author

Bill Kauffman

Senior Principal Bill Kauffman works with the research team in providing research and analysis in various areas including sales transactions and skilled nursing. He has lead roles in creating new and enhanced products and implementation of new processes. Prior to joining NIC he worked at Shelter Development in investing/acquiring, financing, and asset management for over $1 billion in assets. He also had key roles in the value creation and strategic planning and analysis for over 65 entities. He received his Master of Science in Finance from Loyola College in Maryland. He also holds the Chartered Financial Analyst Designation (CFA).
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