After setting records for five straight years, the average price per-bed for skilled nursing facilities plunged 18% in 2017, according to acquisition data published by Irving Levin Associates.
The media company blamed the drop (to $81,350 per bed) on Medicare reimbursement cuts, reduced lengths of stay, rising labor costs and declines in occupancy.
“Given the problems facing the sector, we do not see an improvement in 2018,” said Stephen Monroe, editor of The Senior Care Acquisition Report, 23rd Edition.
Monroe’s comments came as the National Investment Center for Seniors Housing & Care kicked off its 2018 Spring Investment Forum in Dallas.
The assisted living market remains strong, despite pockets of over-development, Monroe said. The average price per-unit paid increased by 14%, to a new record of $221,250.
“The market was definitely dominated by higher-quality properties sold in 2017, as well as an abundance of private equity firms flush with new cash to invest,” Monroe said.
In skilled nursing, the 2017 average cap rate remained near historical norms at 12.3%, or just 10 basis points higher than in 2016. It wasn’t enough to sustain a bull market that nearly doubled prices over the last five years, but it cushioned the blow.