The total price per bed for nursing homes rose almost 22% year over year for the first quarter of 2021, reaching the second-highest price point for the sector ever recorded, according to the JLL Senior Housing & CARE Investor Survey and Trends Outlook report released Wednesday.
The average price per bed for nursing homes hit $90,700 in the first quarter, largely attributed to the stimulus funds from the government, the report noted. The Department of Health and Human Services (HHS) distributed an estimated $4.9 billion to nursing homes, with an additional $100 billion to qualified providers through the CARES Act, “essentially helping operators maintain cash flows, though questions loom on the long-term impact on valuations,” JLL, a professional services firm specializing in real estate and investment management, said.
In addition, the nursing care sector had a higher proportion of private capital investment, which accounted for 91% of total investment volume, the report said.
Nursing care volume came in at $3.5 billion in 2020, which was down 35% year-over-year – while the senior housing sector saw an almost 46% drop at $6.5 billion. This “is largely attributed to government support being targeted at nursing care, helping maintain investor confidence,” JLL said in the report.
Buyer interest in SNFs was described as “voracious” by Walker & Dunlop real estate broker Mark Myers in a recent interview with SNN, with a range of sellers and significant interest in buying by large private companies.
“The buying community for skilled has a healthy appetite, I daresay maybe even voracious in some cases, depending on the types of facilities in the marketplaces,” he told SNN. “There’s no question that the buying community wants to build platforms. Many of them have ancillary businesses and management platforms they want to grow. We believe that they will still grow on a thoughtful basis, they’ll try to grow, try to bolt on regionally.”
The JLL Investor Survey had more than 60 respondents, “encompassing some of the most influential leaders in the sector,” who weighed in on capitalization rates, unleveraged yield rates, and other measures.
Among those was rating the opportunity for investment in the senior housing and care space, and nursing care actually saw an increase in this metric year-over-year. In fact, skilled nursing tied with the active adult segment on investor interest, with 15% of respondents identifying it as an opportunity for investment. Assisted living was the most-sought-after investment, with 37% of respondents identifying it as their target for investment.
“Investors remain bullish on seniors housing and care investments,” JLL managing director Zach Bowyer, head of alternatives asset sectors, said in a press release announcing the report. “We anticipate market fundamentals to steadily improve and the market to re-stabilize between two and four years, depending on the location.”
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