After dropping 17% in 2008 from an all-time high set in 2007, the
average price paid per bed for skilled nursing facilities increased
slightly in 2009, according to a new report on the seniors housing and
care M&A market to be published by Irving Levin Associates, Inc., a
research and publishing firm that tracks mergers and acquisitions in the
seniors housing and health care markets. The skilled nursing industry
has been resilient in the recent economic downturn, and despite
uncertainty with regard to Medicaid and Medicare reimbursement, buyers
were still finding opportunities in a relatively slow acquisition
market. In the 2006 to 2007 period, prices were pushed up as Medicare
and its higher rates became a more important part of the skilled nursing
business, drawing more investors into the market. With the credit crunch
and market uncertainty, this started to unravel, but not nearly to the
extent as in other real estate-oriented sectors.
“In addition, the overall
quality of communities sold continued to decline as owners of the newer,
higher-quality properties mostly waited on the sidelines for a better
market. Many of the sales in 2009 were either distressed properties or
from distressed sellers who had to sell.”
The average sales price for skilled nursing facilities increased by 4%
in 2009 to $47,500 per bed, according to Levin’s report, The
Senior Care Acquisition Report, Fifteenth Edition. This was
after an 18% decline in the average price per bed in 2008. Despite the
horrific economic environment, this still represents the third highest
average price of the decade. “The increase in 2009 was so small that we
believe it represents more of a market stabilization than a sign of
renewed strength in the skilled nursing sector,” stated Stephen M.
Monroe, editor of the Report. “In addition, skilled nursing is so health
care-oriented that changes in the real estate market have a much less
significant impact these days.” Average capitalization rates in 2009 for
skilled nursing facilities essentially remained flat with 2008 at 12.8%.