2014 senior housing prices hit record highs

Average per-unit prices in the assisted living market soared 25% in 2014
Average per-unit prices in the assisted living market soared 25% in 2014

Average per-unit prices in the assisted living market soared 25% in 2014 in the midst of a record-setting favorable combination of vigorous investment activity, abundant capital and low interest rates, a leading market intelligence firm announced Monday.

Assisted living average unit prices hit a record $188,700 per unit last year. Average per bed prices for nursing homes jumped 4% to $76,500, which set records in that industry for the second straight year, Irving Levin Associates announced in its 20th annual version of “The Senior Care Acquisition Report.” Meanwhile, the average price for independent living communities set a new record of $246,800 per unit, or more than 28% higher than in 2013.

The record-busting prices came in a year that also saw record levels of mergers and acquisitions. Close to 300 mergers and acquisitions, representing about $26 billion, were publicly announced in the senior housing market in 2014, That's up 26% from 2013 transaction volume, according to the firm, which provides market information to long-term care industry operators and owners and Wall Street investors. The 2014 value of those properties was more than double than M&A volume in 2013.

As prices skyrocketed, cap rates, or the ratio of net operating income to property asset value, plunged last year, providing more abundant cash flow for investments. Rates for assisted living properties hit a record low of 7.75% (a bit higher than independent living), while rates for nursing homes fell 60 basis points to 12.4%.

“Investment demand has been very strong, and as prices go up, more owners are enticed to put their properties on the market to take advantage of this peak demand for seniors housing and care properties,” noted report editor Stephen Monroe. Willing investors included public and private REITs, private equity firms, pension funds and foreign investors.

Monroe downplayed concerns about a possible impending market bubble, even as 2015 is looking just as positive as 2014, if not more so. This, he explained, is provided as long as interest rates remain low and plentiful investment cash is still available. The full Levin report can be obtained for a fee by calling (800) 248-1668.