Senior Housing Valuation by Jason Punzel
According to the Senior Care Acquisition Report 2016, the average price per unit for Assisted Living Facilities in 2015 was $189,200 and for Independent Living Facilities it was $192,900. However, is this really a good metric for senior housing valuation?
In 2015 the average price per unit for Class A Independent Living Facilities was $248,500 and Class B was $138,300. We currently have a Class C, 110-unit Independent Living Community under contract in the Pacific Northwest that will sell for less than $40,000/unit. As a company, last year we sold Skilled Nursing Facilities from $10,000-$130,000+/bed and Assisted Living Communities from $20,000-$300,000+. There are some older facilities in rural areas that have negative EBITDA which may not have any interested buyers and thus have little, if any value. Additionally, there are facilities in downtown areas of San Francisco, Seattle and New York for example that would sell for $500,000+/unit if they were actively marketed by Senior Living Investment Brokerage, INC today.
Because of the wide range in prices, we strongly recommend that owners focus more on cap rates and internal rates of return for senior housing valuation. Ultimately, buyers are interested in a return on their investment and they will use these metrics to determine the price they will pay. The price per unit then becomes the result of and not the cause of the price.