This is the question that I am asked most often in my conversations with owners and operators of senior housing communities. The answer is never simple and depends on several factors. What are some of these factors?
- Is it a strong market? The answer is a resounding yes. There is more debt and equity to be placed now than in recent memory and not enough inventory on the market to keep up. Simple supply and demand theory leads to higher pricing.
- How is my facility performing? While that answer is different for every community, it is likely that as the summer is almost over and the fall is beginning, your community is operating at its peak levels for the year.
- When do I want to close? Many potential sellers want to sell before the beginning of a new year in order to reduce partial year paperwork, i.e. cost report, prorations, capital gains tax treatment. It typically takes 3-4 months to close, so if you want to close by year end, now is an ideal time to list your facility.
- Is the cost of capital low? When the cost of debt (interest rates) and equity (internal rates of return) is low, buyers can afford to pay a higher price for obvious reasons. Interest rates are near historical lows and with the economy improving, there is risk in those rates increasing. Equity internal rates of return are also very competitive right now. All of this leads to low costs of funds for buyers and lower cap rates for sellers!
Although I don’t have a crystal ball, there may never be a better time to consider a sale of your long-term care or senior housing community. For a complete analysis of what your community is worth, contact Matthew Alley – firstname.lastname@example.org or (630) 858-2501