21
st
CENTURY
representative of the post-pandemic M&A market. Nevertheless, the sector has maintained that consistency amid more volatile interest rate changes, global economic trends and, evidently, even during a pandemic that targets the elderly, frail and medically complex. During the Great Recession, the sector saw a moderate increase in cap rate, rising from 12.1% in 2007 to 12.9% in 2008 and peaking at 13.1% in 2010. Other real estate classes were not so lucky. In the years afterward, the consistently high yields that skilled nursing offered drew investors to the sector, helping compress the average cap rate to around 12.0%. Incredibly low interest rates and abundant capital also contributed to the cap rate compression, but not nearly as much as on the seniors housing side. Then, the risk of owning and operating a skilled nursing facility shot up as COVID-19 cases and deaths rose across the country, unfortunately all too often in the facilities themselves. And the average cap rate followed, increasing 50 basis points from 12.2%
PARTNER WITH THE MARKET LEADER Through up markets and down, Marcus & Millichap closes transactions. Our business model was designed to make a market and help our clients create and preserve wealth through a culture of interconnection and collaboration. This gives us unique insights, and our expertise helps our clients make better investing decisions.
in 2019 to 12.7% in 2020 and then to 13.1% based on the trailing-12 months ended June 2021. The average cap rate reflects the SNFs sold during the year, but because non-market cap rates are not included in the average, 2020 deserves a little more explanation. There were many struggling SNFs that sold in 2020 with negative trailing EBITDA, and thus negative cap rates not included in the average. Facilities with little positive cash flow that yield very small cap rates would also not be included in our calculations, since they were not “cap rate” deals but rather “per-bed” deals. This happens every year but has only exaggerated since the pandemic.
Independent/Assisted Living Market After the average price per unit for seniors housing communities (including independent living, assisted living and memory care) rose 20% from 2018 to an all-time peak of $244,200 per unit in 2019, the market readjusted, dropping the average price per
$22.4B
3,918
TOTAL SALE S VOLUME *
TOTAL CLOSE D TR ANSACTIONS
$4.5B
1,178
TOTAL FINANCING VOLUME
TOTAL FINANCING TR ANSACTIONS
2,000+
80+
AGE NTS AND OR IGINATOR S
OFFICE S IN NORTH AME R ICA
Real Estate Investment Sales | Financing | Research | Advisory Services | MarcusMillichap.com
NYSE: MMI
Source: *YTD June 2021, Internal Reports
@SeniorCare_Inv
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