April 11, 2019, Steve Monroe, SeniorCare Investor - As we’ve mentioned several times, 2018 was a tough year for assisted living occupancy, as new development took its toll on a number of markets. Low occupancy often leads to lower operating margins and less cash flow, especially when operators feel the need to heavily discount their rates in order to fill beds, so it’s a serious issue for the industry. In our Seniors Housing Acquisition & Investment Report, “stabilized” means having an occupancy equal to or higher than 85%. And while there are some operators not pleased with their “stabilized” communities occupied in the 80s, it could be worse, and there was clearly a premium paid for existing census in 2018.
Stabilized communities sold for $233,150 per unit, down from $254,700 per unit in 2017, while non-stabilized communities fell 1% from $126,200 per unit to $124,700 per unit. The spread between the prices is less than in 2017, but that may have to do with a number of full communities with lower cash flow, either because of mismanagement, higher care costs or even discounting. If you’re interested in the price differential between stabilized and non-stabilized SNFs, check out our story here, or better yet, the entire recently-published Report.