Are We Headed Toward the Next Down Cycle in Pricing?

Over the past few years, the senior housing industry has experienced some dramatic changes. Impressive financial performance and returns have attracted an influx of new players, prompting high transaction volume and a significant amount of new construction. Investors either plan to buy healthcare properties at staggering prices or choose to capitalize on the wealth of current values and list their senior housing for sale.

With such high price tags and new variables entering the senior housing business, many investors have questions regarding business and real estate valuations and whether or not we are headed toward a down cycle in pricing.

Signs of the Times for Senior Housing:
Interest Rates, Cap Rates and Stabilization

Though each deal for senior living investments comes with its own set of variables, there is one major external factor that affects the entire senior housing industry, interest rates.

We expect another federal interest rate hike later this April 2016. How much and how quickly this rate will affect the senior housing industry depends on the hike itself and the trajectory of the curve going forward.

A higher interest rate typically means when investors choose to buy senior housing facilities they will have to underwrite at higher cap rates to absorb the increase in the mortgage payment. While the individual well being of senior housing facilities is strong, increased interest rates may cause valuations to fluctuate.

There also has been a small disconnect between sellers and buyers in regards to capitalization rates. For example, sellers may calculate a cap rate of 7 percent while buyers expect 7.25 to 7.5 percent. Though it is not a large discrepancy, it does place additional stress in consummating deals.

More recently, appraisers have been playing a significant role in mediating pricing for lenders, pushing for more conservative cap rates. In many of these situations, even though the buyer and seller may agree upon an aggressive cap rate, appraisers may come in at a lower number.

In the past, senior housing facilities pushed for high prices with multiple bidders. This trend is fading; we are still seeing multiple bidder situations, but pricing is stabilizing in the senior housing industry.

General Forecast for the Next Cycle:
Senior Housing Pricing Correction

Because we are stabilizing on an up cycle, the worry is that a fall is inevitable. Fortunately, the anticipated down cycle will be nothing like the recession in 2009. At most, we think it will be a small pricing correction, compensating for the novice players who paid far too much for senior living property investments and could not keep up with payments, incomplete construction and other similar situations.

The JCH Consulting Group for Your Housing Investments

As the leading senior housing brokerage, we offer a multitude of services for your wealth management. Our specialists work to provide the most accurate and important information so that your senior housing investment is an intelligent and informed decision.

The JCH Consulting Group regularly closes high profile transactions by creating a unique and personalized approach to each deal. For your free business valuation or guidance on your senior living investment, contact our team at your convenience.

Real Estate Investment Trust

The senior housing industry has recently attracted a new wave of sellers, real estate investment trusts or REIT’s. As the need and demand for healthcare properties grows, there is more construction, general interest and changes in the way transactions take place. People are searching not just for senior homes for sale but for solid senior housing investments strategies with the assistance of experienced senior housing brokers.

With new interest comes an even newer perspective. Traditional profiles of sellers, buyers and brokers are starting to change, making unprecedented decisions and opening up new avenues for profitability.

Prepare for Dynamic Moves and Profile Shifts

There has always been and will be operators and investors who only buy assisted living facilities or buy healthcare properties. However, in recent months, the senior housing industry has been experiencing significant changes. Many operators are taking advantage of the current high senior housing valuations by choosing to dispose of their assets.

Historically REITs are buyers that account for a significant amount of real estate ownership within the skilled nursing sector. Typically, REIT’s are a one way street for properties; very rarely do they sell assets. However, recently there has been an unusual number of REITs listing their healthcare properties for sale to their current tenants or outside buyers.

There are two main reasons for this shift.

Since REIT stock prices have recently taken a harsh beating, it has become increasingly difficult for them to raise capital through the stock market in order to purchase new properties. Some REIT’s are choosing to sell existing assets with high valuations, using the profit to raise necessary capital.

Others are simply trying to build leaner portfolios by identifying low performance assets and finding operators to buy healthcare properties through senior housing brokers. Typically this strategy is also used to prepare for the next down cycle.

No matter the reason, traditional methods in the senior housing industry are changing and eager operators are jumping at unique opportunities. These fluctuations are allowing for smarter and more efficient senior living property investments with senior housing facilities.

The JCH Group Takes New Sellers in the Senior Housing Industry

As the trusted investments specialists, our team is ahead of the curve. We currently have multiple portfolios in escrow for REIT players and close lucrative transactions monthly.

We know all there is to the senior housing industry, collaborate with experts nationwide and offer free business valuations to determine what a facility is worth. To build your portfolio, our team members combine specialized experience, thorough research and empirical metrics to find the perfect senior housing investment. We also provide:

• Portfolio management
• Complimentary business valuations
• Estate planning
• Sale-leasebacks

To learn more about how the JCH Consulting Group can assist you with your next assisted living or skilled nursing investment or to view our recent closings, visit us online or contact us at your convenience.

To stay informed about the current market trends and receive exclusive insight from the top investments specialists, sign up for the JCH Group investments newsletter.

Nursing Home Investments

With our current robust nursing home market, and with more and more people getting involved in the nursing home business, making the right match between investor and facility can give the transaction the head start it needs to succeed.

It is crucial that in the acquisition process the operator and investors involved are clear on what they are looking for in a nursing home facility or other healthcare properties that are available in the market place.

The two most important questions to ask yourself are:

1. What kind of returns do we want?
2. How risks adverse are we?

Gathering as much information as possible to help narrow down the choices is of utmost importance. Doing so in the beginning of the process results in a refined list of available assets that will save time, money and headaches.

Product Types in the Nursing Home Industry

Independent Living (IL)

Independent living facilities are perceived to be the lowest risk investment in senior housing investments. However, history has shown that IL is the first to experience setbacks in down cycles and the last to recover. Because independent living facilities are not need-driven, in hard times, this is the first expense to go, resulting in an ever-fluctuating resident census and profitability.

Assisted Living (AL)

Assisted living facilities derive their income from private pay and government reimbursement, although it is rare to find both payment models present in the same facility. These facilities require more operational skills as they provide a greater degree of medical assistance than an IL. Because assisted living facilities provide services that are more need driven, they do not experience the same type of turbulence in down cycles as independent living facilities. They typically provide greater profitability on a per unit basis than IL.

Memory Care

Memory care facilities make up a small but growing portion of the senior housing industry. Due to the higher level of care required for residents, the income rates are excellent, making it a favorite among investment specialists. However, because the pool from which residents are drawn is smaller, there can be challenges in over bedded markets.

This particular type of assisted living investment is perfect for the investor who wants a larger healthcare component with a smaller interest in real estate.

Nursing Home

Nursing home for sale require the highest level of medical care for patients and operational experience. These nursing home investments rely on government reimbursement with little to no private pay. Because of this, investment specialists regard nursing home facilities as higher risk senior housing investments. Simply put, there is no guarantee that reimbursements will be made or at what level.  Reimbursement is regulated by politicians, which can change with the stroke of a pen. However, cash flow can be very attractive in nursing home, so the investor who is willing to take the risk most likely also will experience a high return.

Your Next Housing Investment at the JCH Group

The JCH Consulting Group is responsible for some of the most lucrative senior housing investments in the nation and our team offers expert insight in making the right match between investor and facility which gives the transaction the head start it needs to succeed. Call us today for a free business valuation so that your next investment in the senior housing industry is all that you expect and more.

To learn more about how to buy healthcare properties from the preferred investment specialists, contact us at your convenience.

Are you considering developing Senior Housing?

The need for senior housing facilities is greater than ever before, investment specialists are seeing a massive increase in development and construction of assisted living and memory care facilities.

Inexperienced or new investors getting involved in the senior housing business should be aware of the amount of work and qualified people necessary for a successful development project. Assisted living properties require a team of highly trained specialists to get them out of the ground and make them profitable senior housing investments.

Find a Talented Architect

With so many senior housing sales occurring and the large number of investors seeking to buy assisted living facilities, having a building that is both functional and attractive is necessary to compete going forward. It becomes a priority to find an architect and design team with ample experience building senior housing facilities.

Prepare yourself first by visiting other facilities. They should include assisted living facilities for sale, facilities under construction and those already well into their operational years. Make note of what you like and what you dislike, what works well and what you would rather do differently. All of these notes should be integrated into the final project you wish to develop.

Choose the Right Developer

The architect and developer work hand in hand. They are the two people who will either make or break the development. For this reason, you, the architect and the developer must have strong working relationships. Typically, your architect will know and recommend some developers with whom he or she works well with.

The developer you choose should have a strong track record of past successes. It is critical that both the developer and architect not only work symbiotically but also are experienced in this sector.

Interview your architect and developer extensively. Have questions ready beforehand and consult your architect on what he or she would also like from his or her developer.

The right developer should be confident, competent and organized. He or she should be able to handle any situation that may arise during the actual development process while staying within budget and within the timelines you’ve set.

Locate the Site for Development

Once you have found your ideal site for development, you can start the design process with your architect.

The entitlement process can be lengthy, dependent on the city. You can limit variables that slow down this process by having an architect who has done this before, avoiding easy caveats and pitfalls.

Each city has different codes and regulations. Your architect should be familiar with these codes and ensure that the facility you want to build complies.

Once the entitlement process is complete and loans are in place, the developer then begins the development.

The JCH Group for Senior Housing Investments

There is nothing simple about the senior housing industry or starting new construction.  To make your senior housing investment foolproof, we at the JCH Group have a team of investment specialists and resources available, helping make your decision to buy or develop healthcare properties an intelligent one.

For your free business valuation or answers to questions about senior housing facilities, contact us at the JCH Consulting Group.

Using Expense Ratio and PPD Analysis

The senior housing investment industry is accustomed to very complex financial statements. Understanding and analyzing these statements is crucial to the success of your skilled nursing or assisted living facility. Proper analysis can provide you with tools and metrics to maximize the profitability at your facility, which in turn maximizes the value. (Read Senior Housing Investment FAQs.)

For those looking to buy assisted living facilities or compare multiple skilled nursing facilities for sale, understanding expense ratios, margins and other methods of measuring expense control, such as per patient day or resident day (PPD/PRD), become important. These numbers tell you very quickly how a senior housing investment is performing.

Be Careful when Reviewing Expense Ratios

The Investment specialists and agents of the JCH Group, a skilled nursing and assisted living brokerage are familiar with how fluid expense ratios can be. Those whose senior living investments include assisted living facilities are most accustomed to expense ratios, which are expressed as a percentage of revue.

However, while these percentages may hold constant, the dollar amount can vary significantly. For example, 70 percent of 100 and 70 percent of 1000 are very different in value. As such, it is unwise to rely on expense ratios alone. For a more accurate view of facility expenses, collect data that ties directly to the revenue source of your facility, the residents or patients.

The PPD/PRD Method for Precise Measure
of a Senior Housing Investment

The per patient day analysis is an effective tool most popularly used in the skilled nursing facility sector of the senior housing industry. In assisted living, this analysis is called PRD, or per resident day. The number produced in these types of analysis focus on expenses for each day, so understanding the facility’s profitability through expense control is both tangible and simple to compare.

PPD divides a given expense line item by the number of patients or residents in a skilled nursing or assisted living facility for that same time period the expense is incurred. This method of measure ties expenses directly to the unit producing the revenue stream. Before you purchase any senior housing for sale, assess the PPD/PRD to identify areas of over and under spending.

In recent years, the PPD measure has spread from skilled nursing to assisted living facilities because of its ease of use, accuracy and efficiency. Calculating PPD is no different than analyzing a facility’s value on a per-unit or per-bed basis.

Your senior housing investment specialist at the JCH Group can calculate this number by collecting documents such as:

• Facility rent roll
• Census report
• Profit-Loss
• Expense Reports

When making a decision on your senior housing investment, PPD or PRD is a great tool to use when comparing side by side assisted living facilities for sale or skilled nursing facilities for sale. It is also a great check and balance system on your existing operations.

The senior housing investment business allows for many opportunities. The right investments specialist is the key to discovering the right facility for sale.

The JCH Consulting Group is a leader in senior housing industry, brokering some of the most high profile senior housing investments. Our experts can provide you with an accurate opinion of what a business is worth through our free business valuation service.

To find your next care home for sale or to discuss what move to you should make next with your senior housing portfolio, contact one of our experts at the JCH Group.

2016 Senior Housing

2015 was a tremendous year for the senior housing industry. Investors and people outside the industry attended conferences in astounding numbers. New players are ready for their senior housing investments. Seasoned experts and operators have reaped the benefits of a long-term presence and newfound energy has given secondhand assets another chance while plenty of construction takes place all over the country.

In the past year alone, the senior housing space provided a record number of assisted living facilities and other senior living property investments. Valuations have skyrocketed and more and more people are interested to buy healthcare properties.

With 2015 ending on a high note, people are split over what the next year holds.  Fortunately, the general prediction indicates consistency and overall growth.

Keep an Eye On These Key Metrics

Numbers and metrics in the senior housing industry were favorable for players all around. No one expects these valuations to dramatically change. Senior Housing valuations are predicted to hold steady, even with abundant construction in skilled nursing and assisted living facilities.

Increased Rates

The only variable to watch for is the potential for interest rates to rise. On December 16, 2015, there was a raise in the federal funds rate, which may reflect an increase in the cost of capital for buyers. This is already evident with REITS.

For conventional borrowers, this is a slight increase with little consequence. However, if the costs of labor and other expenses continue to rise, and or pick up pace, it is likely to contribute to a persistent and escalated increase in inflationary pressure. This forces federal funds rates to rise at a faster pace, affecting all parties of transaction on a grander scale.

Rental Rates

Rental rates for assisted living facilities should register the same amount of growth equivalent to rising labor costs. However, because the industry itself is need-driven, transactions to buy healthcare properties or list assisted living facilities for sale should remain high.

No announcements have been made for cuts in Medicaid or Medicare for skilled nursing facilities specifically, which should help stabilize projections for skilled nursing in 2016.

Apart from possible rise in interest rates, all other metrics point in favor for investors, buyers and sellers in the senior housing industry. With a high level of construction taking place nationwide, assisted living facilities and skilled nursing facilities should experience little turbulence with the coming year, however, it may be a different story when the new facilities begin to open for business.

Senior Housing Brokerage for 2016

The JCH Consulting Group leads in senior housing sales. Our team of investment specialists is your best resource for a successful transaction in the senior housing industry. No matter the state of your portfolio or your goals for the next year, we make your choice to buy assisted living or nursing homes intelligent and rewarding.

As your skilled nursing and assisted living brokerage, we provide free business valuations, industry insight and other investment services. We excel in skilled nursing sales, assisted living sales, independent living sales and all senior housing investments.

To meet your JCH Group investments specialist, contact one of our team members at your convenience.

Assisted Living Facility Investments

Those interested in the senior housing industry often ask this question, while trying to decide if an assisted living facility is indeed a good investment.  In general, the answer is yes.

With so many assisted living facilities for sale, well-performing assets and turnaround facilities alike can become great senior housing investments. However, simply acquiring senior living property investments is not in itself the vehicle that generates high cash flow.

The Key to Success: Boots on the Ground

Assisted Living facilities in the senior housing industry always come with a full staff in place, but it may not be the staff you want to keep.

If you an assisted living facility that is performing well, it is important to keep the operational team in place during the transition. The managers and staff who run the day-to-day operations are imperative to the success and livelihood of the facility; they are the ones who create the value in your assisted living facility.

However, once you have acquired an assisted living facility investment, there is no guarantee that the existing staff will assimilate into your corporate culture. For this reason, you may need to replace members as you see fit.

Your team quickly becomes more important than the building and the market itself, so choose wisely and seek the proper guidance needed in order to make the correct decisions.

New Investors, Greater Returns

The senior housing industry has room for players new and old.  As the industry has risen to the rank of an institutional asset class; greener investors have the advantage of a stable well documented senior housing business.

Seasoned investors and operators reap the benefits of their long-term invested efforts. They already know the industry and what it takes to run a profitable business, their long term hold assets are experiencing historically high valuations,  along with healthy cash flows.

Assisted living facilities are different from skilled nursing facilities in many ways. However, those with experience in skilled nursing facilities are encouraged to diversify their portfolios and find assisted living facilities as a private pay revenue source.

Diversifying your portfolio is a necessary action as it allows for two different sources or revenue. While skilled nursing facilities rely on government reimbursed revenue, most of assisted living facilities receive their revenue from private pay sources.

Today’s Best is the New Norm

The fundamentals are as strong as ever and are expected to remain strong for a very long time. With the volume of seniors needing assisted living care, the demand for these healthcare properties overrules most uncertainties.

While high pricing may discourage people from making senior housing investments, there are too many opportunities to pass.  Senior housing cap rates and pricing are not only incredibly high but may also be the new status quo.

Anyone thinking seriously about buying healthcare properties should consult their preferred senior living brokerage for expert advice; The JCH Group is here to help.

The JCH Group is available as your healthcare brokerage for senior housing investments.  We offer a free business valuation to determine what an asset is worth. To meet your investment specialist, contact one of our experts for expert advice on your next step.

Are We In A Pricing Bubble
About To Burst?

JCH Consulting Group was once again asked to participate in the Senior Housing Business magazine’s Broker Q & A, “Are we in a pricing bubble about to burst?” Here is the full interview with Nick Stahler.

1. What has been the most compelling trend or biggest surprise so far this year in seniors housing property and portfolio sales?

The most surprising trend we have seen is who some of the Sellers are. We have seen pricing increase to the point that owners/operators that were traditionally never going to sell have become sellers. This trend developed as owners/operators were continually outbid on deals they felt they had submitted a competitive offer on. At some point if you have become priced out of the market as a buyer, maybe it’s time to take advantage of the pricing and become a seller.

2. The data shows that acquisition prices and volume have reached record highs during the last year or two. How does this change your approach to the market? What advice do you give buyers and sellers in today’s frothy market?

Our valuation approach is more aggressive in today’s market. The Seller’s market we are experiencing allows us to price aggressively, constantly testing the inelasticity of pricing. The new buyer pool we are exposed to has also allowed us to change and incorporate new methods in which we solicit offers.

Our advice to sellers is to capitalize on current pricing and take some chips off of the table. It is an excellent time to pull equity out of your portfolio or sell it outright. There are plenty of options available to owner operators that allow them to maintain the operations or management of the facility while extracting the equity out of the real estate. The end goal is to either exit the industry entirely or return to the equity investment side at later date.

Our advice to buyers in this frothy market is to stay consistent when hunting for deals, you may not win them all, but being at the negotiating table is half the battle, one will go your way eventually. We are also advising buyers to differentiate themselves wherever possible. Whether this is through the speed at which you can close or the premium pricing you can offer, standing out in the crowd of buyers is essential. In addition to this, we are advising to consider development as well. If existing asset pricing no longer makes sense for you, perhaps it’s time to consider the pros and cons of development. We have seen a huge increase in development deal volume and appetite for these deals.

3. How long do you think the market can sustain the feverish activity? Is there any concern that the market is creating a bubble that could burst?

We believe the market will sustain this level of activity as long as all of the current market conditions remain intact. The fundamentals of senior housing are continually improving, we believe the low interest rate environment and flood of equity investing into the sector is what we will have to watch closely. The equity infusion into senior housing will probably hold strong as long as the interest rates remain low and the returns are higher than those of other real estate asset classes. With that being said, we are absolutely in a pricing bubble that could sustain a pricing correction if the raising of interest rates or other economic issues coming into play.

4. In which segments of seniors housing are you seeing the most transactions — independent living, assisted living/memory care, skilled nursing, or CCRC? What geographic areas are most active?

The majority of the transactions we have recently completed are in AL/ALZ and skilled nursing. The major metro and coastal markets will always be the most attractive, that’s real estate 101. With that being said, recently we have seen a lot of attention turn to secondary and tertiary markets for several reasons. For one, typically there is less competition in the bidding process, two; there is much less competition once operating the asset. We work with buyers that specially seek out the rural markets with only one or two facilities in town, while the barriers to entry remain low and definitely a risk factor, it is much easier to beat out one or two competitors than 10 plus competitors.

5. In addition to the high acquisition volume, a lot of new development is also underway. Will all the new deliveries over the next year or two balance out supply and demand?

We don’t believe we are building fast enough to balance supply and demand long term. While we are starting to see some over development in certain markets, we think this will only be an issue over the next 3-5 years. The IRR driven investor that is looking for a quick turn on their capital will likely cause the greatest problems for development. Calculated, tempered, long term investment into development will pay the highest dividends to the industry as a whole. The age wave we are beginning to see in our facilities will undoubtedly demand a newer product, but oversaturation of new units, especially not well thought out units, is our greatest concern for the industry short term.

6. Seniors housing performed well during the Great Recession relative to other property types in terms of total returns, according to the National Council of Real Estate Investment Fiduciaries, which has led to more capital flowing into the sector. From a historical perspective, is there more capital coming into the sector now than in previous up cycles for seniors housing? Please explain.

Absolutely, we are seeing more outside investment in this up cycle than previous cycles. While we have experienced robust up cycles in the past, the abundant amount of attention from outsider and foreign equity is relatively new. Not only are our long term, industry veteran, clients bringing new capital sources to the table, we have a large increase in first time buyers entering the market place. We believe the attraction occurs for several reasons, one of the largest being the historically higher cap rates in senior housing than other real estate asset classes. Although, this is now debatable as increased outsider investment has compressed our cap rates to the ranges of other asset classes.  Secondly, the “need” driven consumer of the product is what really drives our fundamentals and allows us to essentially be recession proof in the eyes of investors.

7. Which classes of investors (REITs, life companies, pension funds, private entities, etc.) are the most active in seniors housing right now?

REIT’s have been and continue to be the largest driving force in the market place. Foreign investment, China in particular, has become a player in the market place as well. In addition to these investors we are still seeing a lot of activity from private equity groups, new and existing alike. We have also seen investment directly from operators who have cash on the books to get deals done in house.

8. Do “wildcard” factors like the economic problems in Greece have any impact on the sector, or is this part of the industry somehow insulated from those outside influences?

This is an excellent question that comes up often. While these “wildcard” factors generally do not directly impact the fundamentals of senior housing, they can have a ripple affect into our industry. They can affect financial markets which will hurt transaction volume and operators access to capital. Wildcard factors can also affect our consumer’s personal net worth, which may impede their ability to pay the rental rates we want to achieve in our facilities. To answer the question, senior housing is fairly well insulated from “wildcard” factors compared to other real estate asset classes, but we will always be subject to the ripple effect of external markets since we need to access these markets on a daily basis.

Source: This Article Is from Senior Housing Business
Contact Nick Stahler, Senior Vice President – The JCH

CAHF Conference 2015

The California Association of Healthcare Facilities held their annual conference in Palm Springs, California from November 16 to 18. The CAHF Conference is a unique gathering of healthcare professionals, which is not limited to just skilled nursing operators, but open to medical equipment vendors, food service providers, facility level employees and even those who were searching for a way to buy assisted living facilities.

High Traffic Results
in New Connections

A diverse blend of healthcare facility owners and facility-level employees based in the California healthcare industry participated in the conference, offering their individual areas of expertise. Continuing education classes and opportunities for discussions were scheduled to address relevant subjects of interest circulating the assisted living industry.

An exhibit hall allowed for different industry service providers to set up booths and display their services. Medical equipment vendors, IT specialists, assisted living brokerages, billing specialists, real estate investment trusts and other contributors made their services and products available to hundreds of healthcare operators, opening up an abundance of new opportunities. Vendors also hosted dinners and cocktail hours for select groups.

The JCH Group had a booth in the exhibit hall and hosted an amazing dinner; we were very pleased with the attendance to our dinner. Many attendees were planning to buy assisted living and skilled nursing facilities as well as list senior housing facilities. The offer for free business valuations and in depth industry news was a huge attraction, as the JCH Group became the healthcare brokerage at the conference to consult as the investments specialists.

Plenty of Assisted Living Facilities for Sale

The high attendance rate of the CAHF Conference once again served as evidence of a robust senior housing industry. With the fundamentals of the market being stronger than ever, all players are interested in knowing what it takes to buy healthcare properties as well as learn when it is the best time to dispose of them. Though everyone expects a small pricing correction in the near future, the demand for care homes suggests that there will be little disruption in the upward growth. On the side of debt and REITs, there currently is a rise in the cost of capital, which may cause a slight increase in capitalization rates.

Overall, the findings at the CAHF Conference conclude that as the senior housing industry hits its peak, it is an excellent time to list healthcare properties through your elected senior living brokerage, JCH Consulting Group.

However, if you would rather wait to sell, the senior housing industry is expected to hold steady, allowing for future growth in operations and valuations.

The Assisted Living Business Experts for Assisted Living Investments

The JCH Consulting Group is one of the dominant assisted living and skilled nursing brokerages in the country, constructing and facilitating some of the most high profile and lucrative transactions. Our investment specialists use real-time information and in depth experience to track down every variable contributing to the success of your senior housing investment. Whether you are a seasoned operator or a new player looking for your first senior living property investment, the JCH Group is available to lead you through the process.

For your free business valuation or inquiries regarding the senior housing business, contact the JCH Group at your convenience.

Price Per Bed &
Price Per Unit Value

With the boom of the senior housing industry, investors, buyers and sellers are studying the valuation metrics causing senior housing investments to be measured more closely. These numbers have been growing, and continue to grow with great speed. No matter what senior living investment you look at, you will find two metrics essential in calculating value. Alongside the all-important income approach using a cap rate, senior housing valuations also includes a price per bed and price per unit value.

The Senior Housing Sector is Growing
and the Numbers Prove It  

Price per unit applies to independent living facilities, memory care facilities and assisted living facilities. (Read How To Calculate Senior Housing Investment, click here.)

Independent living facilities and assisted living facilities have been experiencing drastic increases in their valuations. Even distressed assets, those that cannot generate enough cash flow to derive an income approach valuation, are selling for much higher valuations. What previously sold between $45,000 and $55,000 per unit several years ago is now trading for up to $100,000 per unit, if not more.

This is even better news for senior living properties that perform well financially, particularly for performing assets in the assisted living space. Forty-year-old facilities, with the cash flow to support it, are trading at well over $250,000 per unit in California. That kind of pricing is equal to new construction in some cases. Newer assisted living facilities, under 15 years of age, with high cash flows are now exceeding $500,000 per unit. With these types of numbers, new players and veterans alike are eager to sell assisted living properties.

Those preparing to buy skilled nursing facilities for sale should look for the price per bed valuation, the metric by which skilled nursing properties are measured. SNFs are also experiencing the same skyrocketing rise in pricing, shattering glass ceilings on prices set previously by investors and operators.

Historically, most US skilled nursing markets topped off at about $100,000 per bed no matter the cash flow, however, this is no longer the case. Now, skilled nursing facilities for sale have been trading well above this number. Most recently, Sabra Health Care REIT, Inc. of Irvine purchased four skilled nursing facilities for sale in Maryland. Their purchase included 678 beds at a $234 million total valuation. That calculates to an astounding, and unprecedented, $345,000 per bed.

The prices per bed valuation on distressed assets are rising as well. What used to sell for $30,000 to $40,000 per bed is now being traded for $60,000 to $70,000 per bed in states like California with large barriers to entry for new construction.

The JCH Group is Your Investment Specialist

When the senior housing industry attracts new buyers and sellers with these incredible senior housing valuations, it becomes increasingly important to have the right guidance in choosing your senior housing or other assisted living investment.

As one of the most experienced healthcare brokerages, the JCH Consulting Group specializes in senior living investments, nursing home investments, assisted living investments and designing the best deal possible for your goals.

For your free business valuation or other complimentary information on how the JCH Group helps you with senior housing investments, contact one of our experienced agents today!