The average sales price per bed at skilled nursing facilities fell 18 percent, to $81,350 in 2017, after five straight years of record prices, according to data from Norwalk’s Irving Levin Associates.
Cuts in Medicare Advantage reimbursement and lengths of stay, rising labor costs and declining occupancy all weighed on a market that became overvalued, according to Irvin Levin, which publishes research reports and maintains databases on healthcare and senior housing mergers and acquisitions.
Though prices decreases at skilled nursing facilities, they remain high overall.
“Despite all the headwinds facing skilled nursing providers and owners, the average price last year was the third highest on record,” said Stephen Monroe, editor of The Senior Care Acquisition Report. “But given the problems facing the sector, we do not see an improvement in 2018.”
In the assisted living market, the average price per unit paid increased by 14 percent to a new record of $221,250 per unit, despite too much new development in certain markets, occupancy declines and rising labor costs.
“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. “The combination of excess liquidity and a relatively low cost of debt has fueled the pricing to new records.”
Communities with a majority of independent living units also increased in value, but not to the records achieved in 2014. The average price per unit for independent living communities, a smaller market than assisted living, increased by 1 percent in 2017, to $230,100.
Most independent living communities now have assisted living units, blurring the market difference. Demand remains strong for high-end communities, but not many come on the market for sale,the publisher said.
The number of publicly announced transactions in the senior housing and care market dropped for the second year in a row, to 302 from 338 in 2016, likely due to the market’s headwinds, it said. That is still the third highest number on record. However, the dollar value of those transactions increased from $14.5 billion in 2016 to $15.9 billion in 2017, the fifth highest ever.
