How do Cap Rates for Senior Living compare with Apartment Buildings?

How do Cap Rates for Senior Living compare with Apartment Buildings?

A Cap Rate is the most commonly used method in determining the value of a real estate asset.   A cap rate is derived by dividing the annual net operating income by the purchase price.   The higher the cap rate, the lower the price of the asset.   The greater the perceived risk is in an asset, the higher the cap rate, and thus, the lower the price.

According to Senior Care Investor, in 2013 the average cap rates for an independent living facility was 8.2%, the average cap rate for an assisted living facility was 8.7%, and the average cap rate for a skilled nursing facility was 13%.  According to Freddie Mac’s survey in February, 2014, the national average for apartment buildings in the US was 6.4%.

Why do senior living assets have a higher cap rate than apartment buildings?  Senior living assets are still considered riskier because an investor is buying the real estate and the operating business instead of just the real estate and leases as is the case for apartment buildings and commercial real estate.

However, this also presents an opportunity for those who are good at operating seniors housings communities to make a greater return on their investment than investing in lower cap rate real estate assets.

For more information on what your Seniors Housing Community may be worth, please contact Jason Punzel at punzel@slibinc.com or 630-858-2501.

Can Interest Rates Go Any Lower?

Over the past several years, interest rates have been extremely low.  The 10 year US Treasury rate (a common benchmark for financial instruments) reached an all-time low in July, 2012 at 1.53% and today is around 2.64%, the Federal Funds rate has been close to 0% for several years.   The 10 Yr Treasury hit an all-time high in August, 1981 at 15.32% and has averaged 4.64% since 1870.  Many people assume interest rates have to increase since they have been the lowest that most can remember.

However, it is possible that might not be the case.  Japan’s 10 Year Treasury rate has fluctuated between .5%-2% from 1998-present and is currently at .59%.  Japan had an incredible economic run for years that ended in a deep recession in the early 1990s, leading to historically low interest rates for almost two decades.  However, unlike the US, Japan has suffered a declining population, bouts of deflation and near constant recessions over the past 20 years. 

While Japan is an example that American interest rates COULD continue to stay low, or even decline, the odds are certainly greater that they will increase.   America has an increasing population, is the world’s technology leader, has the best University system in the world and is still the world’s largest economic and military power.  As long as America’s economy grows, interest rates will eventually raise back to the long term average.  Thus, now is a great time to consider selling.

For a complete analysis on how interest rates can affect your community’s value, both now and in the future, contact Jason Punzel – punzel@slibinc.com

Brad Clousing and Jeff Binder Sell Two Georgia Personal Care Homes

This transaction consisted of 2 personal care homes located approximately 40 miles from each other. The first community is comprised of 94 personal care units, 22 of which are memory care units, and it is licensed for 105 beds. The building was originally constructed in 1997 but underwent renovations in 2001, 2006 and 2008. The 48,905 square foot building offers a variety of unit options and amenities. The second community is a personal care home that features 59 units and is licensed for 70 beds. The building was constructed in 2008 and is 43,201 square feet. This community also offers a variety of unit options and common area amenities. It also benefits from limited competition in the area. The Seller is a local owner/operator that developed both of the assets. The Buying entity is a partnership between a publicly traded REIT and their affiliated national operator. Both facilities were trending towards 90-95% occupancy at the time of closing. The sales price was $19,000,000 ($124,837/unit) which was an 8.0% capitalization rate. For additional information please contact Jeff Binder at binder@slibinc.com 314/961-0070 or Brad Clousing at clousing@slibinc.com 630/858-2501.

Toby Siefert and Ryan Saul Handle Pennsylvania Personal Care Home Sale

Ryan Saul and Toby Siefert have sold a 65 Unit/68 Bed Personal Care Home. The facility census at the time of contract was 85% and was in the process of lowering the SSI residents. By the time the transaction closed, the census had returned to 100%. The facility sold for a 7.5% capitalization rate/1.48 GIM. This was the Seller's only facility and the partners are retiring from the business. The Buyer, based in Eastern Pennsylvania, was looking to expand beyond the few facilities they owned in the area. The transaction was financed by the same bank that held the Seller's mortgage. For additional information please contact Toby or Ryan at 630/858-2501 or siefert@slibinc.com ryansaul@slibinc.com

Jeff Binder and Matt Alley Broker Independent Living Facility

Matthew Alley and Jeff Binder sold an 131 unit independent living facility in Texas.  Senior Living Investment Brokerage was hired to confidentially market this attractive, three story independent living facility located in Longview, Texas.  The building, constructed in 1985 and 2010, is 102,350 square feet and offers a nice mix of studio, one and two bedroom apartments and offers ample amenities.  The property has a strong operating history, including several years at, or near, full census.  Additional care services are provided by a third party, unaffiliated home health agency.  The facility is on 4.52 acres with an additional 1.62 parcel of land included in the sale which could be used for future development.  The stable financial history, solid reputation and quality location helped secure multiple offers leading to a sale price of $13,000,000.  The buyer is a national owner/operator of seniors housing facilities.  Senior Living Investment Brokerage, Inc. was chosen to represent the seller for our reputation and ability to selectively market the facility in a confidential manner.  For additional information, please contact Jeff Binder at binder@slibinc.com or Matt Alley at alley@slibinc.com 

Cacciabando, Alley and Binder Sell Kansas Facility

Jeff Binder, Matt Alley and Nick Cacciabando have sold a 56 bed skilled nursing/20 unit assisted living facility in Kansas.  The facility is located in Rose Hill, Approximately 18 miles outside of Wichita.  The one-story, 33,000 square foot facility was built in 1971 and 1978 and renovated in 2001-2002.  At the time of the sale, the census was 94% and the property sold at a 14% cap rate/.97x GIM for $55,900/bed/unit.  The Seller was a local owner/operator.  Senior Living was able to generate multiple offers and after a competitive bidding process, the successful Buyer was an owner/operator headquartered in the Dallas-Fort Worth area with an existing presence in Kansas.  For addisional information on this sale or to request a confidential proposal on your seniors housing facility, contact Senior Living Investment Brokerage, Inc.

Patrick Byrne and Ryan Saul Sell Alzheimer's Care Facility

Ryan Saul and Patrick Byrne sold an underperforming, 46 Bed Skilled Nursing Facility (offering assisted living services) located in a suburb of Kansas City, Missouri.  Originally built by a local hospital to service the MI population in 1990, it was sold and renovated to an alzheimer care facility in 2002.  The facility operates at or near capacity but has recently shifted to a heavy Medicaid/Hospice census mix.  The Buyer is a regional operator with a growing presence in the Kansas City market.  The property includes acreage for expansion and  a vacant building that the new owner plans to renovate to use as a corporate office.  For additional information on this facility or to inquire how Senior Living Investment Brokerage, Inc. can assist you in the sale or purchase of your seniors housing property, please contact Patrick at byrne@slibinc.com or Ryan at ryansaul@slibinc.com

Patrick Byrne and Nick Cacciabando Sell SNF Portfolio in Arkansas and Missouri

Nick Cacciabando and Patrick Byrne sold the 506 bed, 5 facility Pinnacle Healthcare portfolio. The transaction also included Pinnacle Healthcare's home office located in Arkansas. Four of the facilities are located in Arkansas and one is located in Missouri. The facilities were built between 1971 and 1988 and all have sound physical plants. The entire portfolio had struggled as recently as a few years ago but new management had improved the operations despite being relatively new to the seniors housing industry. This is the first purchase in Arkansas for the Buyer, Adcare Health Systems. They plan on using the home office to service current and future facilities in the region. The portfolio sold for $20,000,000 at a 12.1% capitalization rate. Adcare anticipates improved operations due to their management experience. Senior Living Investment Brokerage, Inc. was able to work with the sellers to implement and execute a marketing plan which in turn generated multiple offers on the portfolio. For additional information, please contact Pat Byrne or Nick Cacciabando at 314/961-0070.

George Pappas Sells 4 Facilities in South Dakota

George Pappas has sold a portfolio of four Assisted Living Facilities in South Dakota. Built between 1999 and 2003, the four facilities total 104 units/130 beds. At the time of sale, the overall occupancy was 85%. The Seller is looking to exit the seniors housing market. The Buyer is a regional operator looking for immediate savings with many of the larger cost centers. For additional information, please contact George at 630/858-2501 or pappas@seniorlivingbrokerage.com

Brad Clousing and Ryan Saul Sell Louisiana Assisted Living Facility

Ryan Saul and Brad Clousing have sold a 77 unit Assisted Living Facility north of New Orleans. Senior Living Investment Brokerage, Inc. fielded multiple offers and created a confidential, competitive market to achieve a top-of-the-market price. Constructed in 2009, the facility reached stabilization in 2010 and maintains a strong census. the 77 unit facility consists of 27 studio units and 50 one bedroom units. The Seller is a local real estate owner and this was his only Seniors Housing asset. The Seller made a strategic divestiture to take advantage of the strong market after following a number of completed transactions by Senior Living Investment Brokerage, Inc. The Buyer is an investor in Seniors Housing based in Kentucky with operations in Michigan. Through their marketing efforts, Ryan and Brad were able to negotiate a purchase price of $11,000,000 ($142,857/unit) at a 7.36% capitalization rate. For additional information, please contact Brad or Ryan at 630/858-2501.

Sanders, Alley and Saul Handle Iowa SNF Transaction

Matt Alley, Ryan Saul and Ross Sanders sold a 40 Bed Skilled Nursing Facility in Central Iowa. The facility was owned and operated by a multi-state owner/operator based in Minnesota. The Buyer is a regional owner/operator looking to expand his current operations in Iowa. The new owner seeks to improve on a number of operational inefficiencies. The census was 82% and the facility sold for 1 10% capitalization rate. Senior Living utilized it's brokerage team to locate an unique buyer for a smaller, rural facility and close quickly. Our individual brokers specialize in long term care facilities in specific markets yet work as a team to find the right buyer. Let us know if you would like to meet with one of our brokers to prepare a confidential proposal for your facility.

June 8, 2011 Press Release

Senior Living Investment Brokerage, Inc., the nation's leading specialist in services for selling skilled nursing centers and seniors housing, announces it has brokered over the course of a one-month period the sale of 17 senior living properties in 13 separate transactions with a total value exceeding $71,500,000.

The seven skilled nursing centers and 10 retirement communities located in 10 states have accommodations for over 1,400 residents.

Grant Kief, President of Senior Living Investment Brokerage, says a number of factors are driving the growing interest among a wide range of investors in senior living properties.

"Buyers 12 to 18 months ago were cautious, because it wasn't clear where the market was headed and lending sources were on the sidelines. We've seen a lot more acquisition activity during the last several months, due mainly to favorable interest rates, a lack of new construction, the impending impact of demographics, and the fact that senior living held up so well compared to other real estate sectors during the recession," he reported.

Matthew Alley and Jeff Binder Sell Texas CCRC

Jeff Binder and Matthew Alley sold a 142 Unit/178 Bed Continuing Care Retirement Community in Southeast Texas. Constructed in 2001, the community consists of 40 Independent Living Units, 78 Assisted Living and Adult Day Care Beds and 60 Comprehensive Nursing Beds. The 132,487 square foot facility is on 12 acres and census at the time of sale was 94%. The Seller was a local regional medical center and the Buyer is a publicly traded REIT and will be operated by a local regional operator. Senior Living fielded 8 bona fide offers from owner/operators across the country. For additional information please contact Matt or Jeff.

Patrick Byrne and Jeff Binder Facilitate Missouri Sale

Jeff Binder and Patrick Byrne sold a 120 bed Skilled Nursing/99 bed Residential Care facility in Springfield, Missouri. The facility was constructed in three phases in 1961, 1986 and 2008 and comprises approximately 68,614 square feet on 6.41 acres. The facility encountered some regulatory issues during the sales process which led to numeroous delays. The Buyer is a regional owner based out of Missouri. The sales price was $11,500,000. For additional information please contact Patrick Byrne or Jeff Binder at 314/961-0070.

Brad Clousing Handles Georgia Skilled Nursing Sale

Brad Clousing has sold a 144 bed skilled nursing facility in an Atlanta suburb. The seller was a local owner/operator and the buyer is a large regional operator. The facility sold for over $83,000/bed at an 11.6% capitalization rate. The 45,347 foot facility was built in 1992 with an addition in 1998. For additional information please contact Brad at clousing@seniorlivingbrokerage.com or at 630/858-2501.

2010 Record Year for Senior Living Investment Brokerage

Senior Living had 7 transactions totaling 15 facilities in December ($140,000,000 in sales) to cap a record year. Sales for 2010 exceeded $300,000,000. We look forward to another successful year in 2011 and continued support of the senior housing industry.

Ryan Saul Brokers Sale of Las Vegas Memory Care Community

Ryan Saul handled the sale of a Class "A" Memory Care Facility in Las Vegas. The 46 unit (52 beds) facility sold for $2,850,000. Overall occupancy was 90% and the financial performance was close to break even due to 37% Medicaid residents paying below market rent of $2,400/month. The 31,727 square foot building was built in 1999. For additional information please contact Ryan Saul at 630/858-2501.

Patrick Byrne and Jeff Binder Sell Iowa CCRC

Jeff Binder and Patrick Byrne have sold a Continuing Care Retirement Community in Iowa for $10,000,000. The facility consists of 84 Skilled Nursing beds, 20 Alzheimer units, 34 Assisted Living units and 19 Independent Living cottages. Constructed in 1999, the community has approximately 72,276 square feet on 100 acres. For additional information, please contact Pat or Jeff at 314/961-0700.

Ross Sanders Closes Independent Living Facility Transaction in Iowa

Ross Sanders of Senior Living's St. Louis office has sold a 16 unit Independent Living Facility in Iowa. The facility is located in one of the largest cities in Southeast Iowa and was constructed in 2000. The Seller was a Texas based investment group that purchased the asset out of foreclosure in 2006. The Buyer is a local seniors housing owner/operator who hopes to increase census and cut operating costs. The new owner will also have the opportunity to almost double the size of the existing facility on the vacant 3 acres included in the purchase. For additional information please contact Ross at 314/961-0070.

Pappas and Clousing Sell Washington Independent Living Facility

George Pappas and Bradley Clousing sold a 40 unit Independent Living Facility in Washington. Built in 1983, all of the units are one bedroom and are subsidized through HUD with a HAP contract that guaranteed all the rents. The facility is age-restricted to reseidents 55 and older. The Seller was the original developer and is exiting the seniors housing market. The Buyer, a regional non-profit, plans on renovating the building and utilized state and public funding to finance the acquisition and renovation. The facility sold for a 9.25% capitalization rate. For additional information, contact George or Brad at 630/858-2501.