Indiana Record Price Per Bed

What a way to celebrate the New Year.  On New Year's Eve, Senior Living Investment Brokerage, Inc. set the record price per bed in Indiana.  I received a number of inquires about how/why the price per bed in Indiana went from $25,000 ten years ago to achieving over $100,000 today.  Here are a few of the reasons:

1) A full moratorium is in the works.  This is a simple supply and demand issue.  Once a full moratorium is in place, less supply of beds increases the value of each individual bed.

2)  Premier communities with a high quality mix (over 50%) achieve a premium.

3) The presence of IGT (Inter Governmental Transfers) / UPL (Upper Payment Limit) in Indiana has enhanced revenue and returns for many of the facilites, translating to more overall value.

4) Interest rates are still at historic lows.

We are seeing record setting prices across the country, not only in Indiana.  If you have thought about selling, please contact Ryan Saul to learn more about the value of your facility.

Ryan Saul Sells Another Indiana Skilled Nursing Facility

Ryan Saul has sold a 43 Bed Skilled Nursing Facility in Indiana. The 18,097 square foot property was built in 1960. This facility is unique in that it is one of only three facilities in the country that serves those afflicted with an advanced neurological disorder called Huntington's Disease. This is the only facility in the Midwest that focuses on residents with Huntington's disease and it attracts residents from throughout the Midwest and is supported by Huntington's Disease specialty doctors. The Seller is a non-profit organization based on the East Coast which is strategically divesting of the property to concentrate on their operations in the East. The Buyer is based in Indiana and will continue to cater to HD residents while at the same time improving expenses through economies of scale and will also be enrolled in the IGT (Inter Governmental Transfer) program which will positively impact the cash flow moving forward. At the time of the sale the facility had negative cash flow yet Ryan was able to secure multiple offers. For additional information, please contact Ryan at 630/858-2501 or ryansaul@slibinc.com

Cap Rates

How Cap Rates Are Determined

A cap rate is calculated by dividing the net operating income of a property by the purchase price.   The cap rate would equal the rate of return on equity if a property was bought with all cash and the net operating income stayed the same for the next twelve months.    As cap rates increase, the purchase price decreases, and vice versa.  

The cap rate is a measure of risk.  Typically, the higher the cap rate, the riskier the asset is.  Cap rates for skilled nursing facilities typically range between 11-15%, where-as assisted living facilities typically range from 7-10%.  However, why does one assisted living facility sell for a 7% cap rate and another one sells for a 10% cap rate?

Typically, newer, larger facilities located in larger, growing,  metropolitan  areas sell at lower cap rates than older, rural facilities.   Other determinates are the income/occupancy history of a property.  Those properties that have a history of high occupancy and consistent earnings sell for lower cap rates than properties that have struggled in the past.   

Outside factors also determine cap rates such as interest rates, availability of debt and equity capital and general economic conditions. 

The first step in determining value is to engage an experienced professional to assist in the valuation and analysis of your property/properties.  Please contact us if you would like a no-obligation market analysis.   

Jason Punzel, Senior Associate.  punzel@slibinc.com

Nick Cacciabando Brokers Iowa SNF

Nick Cacciabando has sold a 75 bed Skilled Nursing Facility in Iowa. The facility was owned and operated by the same family since it was developed in 1966. This was their only long term care/seniors housing facility and they are retiring from the business. The Buyer utilized a 1031 Exchange in purchasing the facility. This was a strategic acquisition for the Buyer as they have over 10 facilities in Iowa. Census at the time of sale was 85% and the sale resulted in an 8.9% capitalization rate. For additional information, please contact Nick Cacciabando at 314/961-0070 or nbando@slibinc.com