Assisted Living Costs Soar While Skilled Nursing Facility Prices Drop

NORWALK — Despite the sputtering economy and an uncertain investment climate, the average price paid per unit for assisted living communities soared by more than 45 percent over the 2010 average to $156,900 per unit. That according to a new report on the seniors housing and care published by Irving Levin Associates, Inc, a Connecticut-based research and publishing firm that tracks mergers and acquisitions in the seniors housing and health care markets.

The average price paid in 2011 was extremely close to the record set in 2007 at the previous market peak, according to the report.

The seniors housing market was so resilient during the Great Recession that investors were willing to pay higher prices for the higher quality assisted living communities that came on the market in the past year. These properties are typically in strong demographic areas, have occupancy levels of 95 percent or higher and monthly rates at the high end of the market.

“The fact that assisted living prices could have increased so substantially in a year of mixed economic signals certainly indicates the strength of this M&A market,” said report editor Stephen M. Monroe.

Even the independent living market, which is a smaller market and much less need-driven than the assisted living market, experienced a nearly 17 percent increase in the average price sold to $171,000 per unit, also very close to the record set in 2007.

“Even though the housing market has not improved much to help seniors sell their homes at reasonable prices, high quality seniors communities were in demand in the market, especially those with an assisted living or memory care component,” said Mr Monroe.

After a huge increase in the average price per bed paid for skilled nursing facilities in 2010, the average price paid per bed dropped by about 18 percent in 2011 to $51,100 per bed, according to the Irving Levin Associates’ The Senior Care Acquisition Report, Seventeenth Edition. “

While this decline looks significant, it is very much in line with the average prices paid in the four years from 2006 through 2009,” said Mr Monroe. “Last year was an unusual year for the skilled nursing industry because it had to deal with a short-term period of higher Medicare rates that were then drastically cut effective October 1, 2011. No one likes uncertainty, but skilled nursing providers are adapting well to the changes and there is no shortage of buyers or merger and acquisition (M&A) activity.”

In another indication of the strong seniors housing and care M&A market, the number of publicly announced transactions soared by 56 percent to 172 individual mergers or acquisitions in 2011. In terms of number of publicly announced seniors housing and care transactions, the volume in 2011 set a new record, even though the dollar amount was not a new record.

“The demand certainly accelerated in 2011, and we expect that to continue in 2012,” Mr Monroe said.

The Senior Care Acquisition Report, Seventeenth Edition, contains statistics on the skilled nursing facility, assisted living and retirement housing merger and acquisition market, including prices per bed or unit, capitalization rates and income multiples, in more than 200 pages.

This year’s report will also include new statistics with quartile pricing for 2011, as well as segregating higher quality properties from the rest of the market. The report also includes transaction information on each of the 172 publicly announced seniors housing and care acquisitions in 2011 (a new record), plus the publicly announced home health care and hospice acquisitions in 2011.

Irving Levin Associates, Inc was established in 1948 and publishes research reports and newsletters, and maintains databases on the health care and senior housing markets.