Pandemic Causes Average Assisted Living Price Per Unit to Plunge, Skilled Nursing Values Also Dip, According to New Acquisition Report From Irving Levin Associates, LLC

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According to a new report from Irving Levin Associates, the average assisted living price per unit dropped by 30%, while beleaguered skilled nursing market also sees valuation decline.

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As census and cash flow plummeted at senior care facilities across the country throughout 2020, many owners of struggling properties decided that now was the time to divest.

The COVID-19 pandemic severely impacted the seniors housing and care industry in 2020, causing average values to drop across each sector, year over year. The average price per unit for seniors housing communities, which comprise both assisted living and independent living, fell to $196,200 per unit in 2020, a 20% decrease over 2019’s average, according to new acquisition data from Irving Levin Associates. That market was driven by a large number of sales of lower quality assisted living communities, which led to the average assisted living price plunging by 30% from $248,400 per unit in 2019 to $174,700 per unit in 2020. Meanwhile, independent living saw a more modest decrease in average price from $233,600 per unit to $232,500 per unit, year over year. “As census and cash flow plummeted at senior care facilities across the country throughout 2020, many owners of struggling properties decided that now was the time to divest,” stated Ben Swett, Editor of The Senior Care Acquisition Report, 26th Edition. “But compared with independent living, the assisted living sector was generally in worse shape going into the pandemic, with existing census, rent discounting and labor issues stemming from overdevelopment only getting worse.”

The average seniors housing cap rate in 2020 rose 40 basis points from a record-low of 7.4% in 2019 to 7.8%. This further explains the decrease in average price and was a result of the lower quality properties that sold in 2020. Separating out the assisted living and independent living markets, both sectors reported jumps in their average cap rates, with the assisted living market gaining 30 basis points to an average of 7.9% and the independent living market increasing by 90 basis points to average 7.6%.

Skilled nursing values fell in 2020, with the average price per bed dropping by 14% from $93,000 in 2019 to $79,700 in 2020. Accordingly, the average cap rate rose by 60 basis points to 12.7% in 2020. “The skilled nursing industry arguably bore the brunt of the pandemic, particularly when it came to the media glare,” added Ben Swett. “These facilities care for a frail, medically complex population, which was very susceptible to COVID-19, but the industry will still be an important part of the acute care and post-acute care continuum going forward.”

Numerous headwinds faced the seniors housing and care market in 2020 and were only made worse by the pandemic, so deal volume fell from a record-high level of 453 publicly announced transactions in 2019 to 352 deals in 2020, for a 22% drop. Based on publicly disclosed prices, dollar volume also declined by more than 50% year over year, from $16.95 billion in 2019 to just $7.9 billion in 2020. All of the market statistics will appear in the soon-to-be-published report from Irving Levin Associates, The Senior Care Acquisition Report, 26th Edition, 2021.

The Senior Care Acquisition Report, 26th Edition, 2021 contains statistics on the skilled nursing facility, assisted living, independent living and CCRC merger and acquisition markets in more than 70 charts and graphs, including prices per bed or unit, capitalization rates and income multiples, in more than 250 pages. The Report also includes transaction information on each of the 352 publicly announced seniors housing and care acquisitions in 2020. The Senior Care Acquisition Report, 26th Edition, 2021 may be purchased for $795. For more information, or to order the report, call 800-248-1668. Irving Levin Associates, LLC was established in 1948 and has headquarters in New Canaan, Connecticut. The company publishes research reports and newsletters, and maintains databases on the health care and senior housing M&A markets.

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Ben Swett
@HealthCareMandA
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