Brad Clousing, Jeff Binder and Ryan Saul Sell Florida ALF Portfolio

Senior Living Investment Brokerage, Inc. sold 4 Assisted Living Facilities in Florida.  Three of the facilities were located near each other offering complementary services.  The fourth facility is located in an area where there is a high demand for assisted living services.  The overall census was 89% for the 165 units.  The facilities were built in 1984, 1991, 1993 & 1996.  The Buyer was a REIT who entered into a long term lease with a regional operator.  The portfolio sold for $14,100,000 which translated into a 9.67% capitalization rate.  For additional information, please contact Brad at clousing@slibinc.com, Jeff at binder@slibinc.com or Ryan at ryansaul@slibinc.com    

Congratulations

Congratulations to Senior Living Investment Brokerage's Top Brokers of 2012 and to another record setting year.
Ryan Saul, Jeff Binder, Matt Alley, Bradley Clousing, Patrick Byrne and Toby Siefert.  Congrats and good luck in 2013.

2013 Seniors Housing Market Outlook

The seniors housing market finished 2012 in robust fashion in part driven by investors looking to harvest profits prior to capital gain rates increasing (15.0% to 20.0%).  The Medicare payroll tax on investment income also began on Jan 1, 2013 which layers another tax (3.8%) on most if not all seniors housing transaction proceeds. 

Despite an increasing tax environment, for a group looking to explore a sale, timing is ideal as pricing has reached historic levels for existing facilities.  Also, with the significant amount of transactions that took place in 2012, buyers are now looking to focus on 2013 acquisitions opportunities and have fewer opportunities to focus on.

This market also provides a good opportunity for groups looking to expand as capital is affordable and readily available. 

Skilled Nursing Summary

Overall we anticipate the continuation of aggressive pricing for skilled nursing assets given the lack of supply available.  However, a number of factors have the potential to curb pricing in the near future.  The primary risks are reimbursement pressure and increased labor costs.

Positive Factors

-       Pricing for existing facilities to remain aggressive given the lack of supply of product available in the market.  Most aggressive pricing for states that have a moratorium on new CON’s.

-        Cost of debt remains historically low.  Also, availability of debt for acquisitions readily accessible

-        More equity and capital looking to deploy in the sector.

-        Limited New Construction

Negative Factors

-        Likely increase in labor costs due to Affordable Care Act.

-        2012 Report on Shortfalls in Medicaid Funding shows largest deficit since inception of the report.   Link to report:  http://www.ahcancal.org/research_data/funding/Pages/2012-Medicaid-Shortfall-Report.aspx

-        Budget Sequestration could reduce Medicare Payments again in March 2013.

-        Increased regulatory burdens by state survey teams.

Assisted and Independent Living Summary

Overall we anticipate the continuation of aggressive pricing for assisted as well as independent living assets given the lack of supply available.  However, new construction has started to significantly increase over the past 12 months.  Assets that have once been dominant in the market could find new competition on the horizon.  In addition, the availability of capital has driven capitalization rates to record low levels.

Positive Factors

-        Pricing for existing facilities to remain aggressive given the lack of product available in the market. 

-        Cost of debt remains historically low.  Also, availability of debt for acquisitions readily accessible

-        More equity and capital ready to deploy in the sector driving capitalization rates to record lows

Negative Factors

-        Likely increasing labor costs due to Affordable Care Act.

-        Increased activity in the construction pipeline could affect the performance and pricing for once dominant facilities in the markets.  This is more of a concern in the major metro markets, not secondary markets.

 -       Increased regulatory burdens by state survey teams – assisted living only.


With these factors in mind, there may never be a better time to explore a sale. Please contact Bradley Clousing at (630) 858-2501 or clousing@slibinc.com for a no cost, no obligation pricing proposal on your facility.  

 

 

 

 

Ring in the New Year

Now that the excitement of year end closings is over and we have turned the calendar to 2013, it is time to start thinking about what's next.  Buyer demand continues to outpace supply.  The Senior Living Investment Brokerage team has been inundated with proposals over the past two weeks.  This is great news for the market as we expect new inventory to become available over the next couple of months.

If you have thought about selling your Seniors Housing or Long-Term Facility, now is an ideal time to take advantage of record pricing and strong buyer demand.  Buyers are constantly calling looking for properties to acquire.  Please contact Ryan Saul for a confidential proposal to determine the market value for your asset. 

Impact of Tax Hikes on Senior Housing M&A Market

After the American public spent much of 2012 contemplating the uncertainty in Washington, President Obama and Congress were able to engineer a last-minute deal that addressed the President's campaign to raise tax rates on wealthy Americans and avoided the revenue side of the Fiscal Cliff.

Tax rates were raised on incomes above $400,000 for single earners and $450,000 for married couples, which I will define as the "top tax bracket".  It also blocks spending cuts, also known as "the sequester" for two months, which sets up a whole new negotiation at the end of February.  How that might affect Medicare and Medicaid reimbursement is a topic for another time.

What does this mean to the senior housing M&A market? For earners in the top tax bracket, capital gains tax rates will increase from 15% to 20%.  As of now, there will also be a 3.8% tax on capital gains for the Affordable Care Act, which is more commonly known as "Obamacare". These increases in capital gains tax rates led to a flurry of transactions being completed in the fourth quarter of 2012.

This uptick in activity has led to very little senior housing inventory being on the market currently, with many sellers opting to list their properties in the latter half of 2012, as opposed to wait until 2013 in order to lock in more favorable tax treatment.

How can this help sellers of senior housing facilities? The change in tax treatment for sellers has not affected buyers' appetite for acquisitions, as there is still a great deal of equity and debt financing available for strong operators throughout the country.  With many aggressive buyers at the table and little inventory available, simple supply & demand economics would suggest that the first half of 2013 will see an increase in pricing for senior housing facilities.

As a potential seller, what should I do? While there is still a lack of quality inventory on the market, it might make sense to pull the trigger on selling your senior housing asset.  I believe that as the year goes on, more owners will try to take advantage of strong pricing multiples, which will lead to a greater supply and less attention to each specific listing.

If you are interested in selling or are just curious of your facility's value, Senior Living Investment Brokerage, Inc. provides non-binding marketing proposals.

We sold over $260 million in senior housing facilities in 2012.  We would be privileged to work with you in the sale of your facility.

Contact me via email at alley@slibinc.com or phone at (630) 858-2501.

Matthew Alley
Managing Director

Matthew Alley and Patrick Burke Sell 2 Texas Assisted Living Facilities

Pat Burke and Matt Alley have sold a 38 unit ALF (licensed for 60) and a 30 unit ALF (also licensed for 60) in Southeastern Texas. Located next to each other, one of the facilities focused on Alzheimer care.  The Seller is a local independent owner/operator.  The Buyer is headquartered on the East Coast and owns several facilities in Texas.  The facilities sold for $6.750,000 ($99,250/unit).  The census at the time of sale was 77% and the transaction sold at a 10.3% cap rate.  The new owner expects to take advantage of increased marketing and expense management to further improve the financial performance.  For additional information, please contact Matt Alley or Patrick Burke at 630/858-2501.