Deal pricing in the skilled nursing industry has remained fairly stable so far in 2017, according to newly released data from the National Investment Center for Seniors Housing & Care (NIC).
The average price per bed of skilled nursing properties totaled $97,400 in the second quarter of 2017, compared with $97,200 in the first quarter of the year. The price per bed rose 5.5% from the second quarter of 2016, when it clocked in at $92,300.
The number of senior housing and skilled nursing deals closed fell by just 10% during the second quarter of 2017 from the first quarter of 2017, though transaction dollar volume fell by 58%. Of the 113 closings in the quarter, 89 were single-property deals and 24 were portfolios.
What’s more, approximately 95% of the senior housing and skilled nursing deals in the second quarter of 2017 closed for $50 million or less, representing the biggest share of deals in that price range since the fourth quarter of 2010.
Several of the skilled nursing facilities currently that recently sold are newer properties that are meant for higher-acuity patients and, consequently, could potentially bring in more cash flow per bed, NIC Senior Principal Bill Kauffman wrote in a blog post summarizing the data.
Additionally, value-add buyers are entering the skilled nursing market and paying elevated prices for the potential cash flow, Kauffman said.
“The price paid is a bet on the future of better operations and/or gaining market share and therefore better cash flow,” he explained. “Not to mention, many investors continue to look for higher yields and income returns in today’s relatively low interest rate environment.”
Written by Mary Kate Nelson