Senior Living Investment Brokerage, Inc. Sells Skilled Nursing Facility

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Toby Siefert, Nick Cacciabando and Pat Byrne of Senior Living Investment Brokerage, Inc. closed on the second skilled nursing facility of a four facility sale. This community was located in Massachusetts with the New Jersey transaction already closed and sales in Vermont and Connecticut pending. The entire portfolio consisted of 436 beds at $27,000,000. The Buyer and Seller agreed to close on each individual facility as the change of ownership for each location was approved. This 1976 constructed skilled nursing facility consists of 73 beds in a one story, 18,541 square foot property. The census at the time of sale was 76% with a 20.8% quality mix. of the 73 beds, there are 13 semi-private resident rooms, 1 three-bed ward and 11 four-bed wards. At the time of sale, the EBITDA was ($41,489). Despite these challenges, Senior Living Investment Brokerage was able to procure multiple offers for the portfolio as a whole. For additional information, contact Senior Living Investment Brokerage, Inc. Toby Siefert at 630/858-2501. Pat Byrne or Nick Cacciabando at 314/961-0070

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Matthew Alley Represents Skilled Nursing Facility Sale

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Matthew Alley of Senior Living Investment Brokerage, Inc. procured a 62 Bed Skilled Nursing Facility Sale in Texas. Of the 62 Skilled Beds, 49 are dually certified. The building, originally built in 1964, is approximately 13,043 square feet on approximately 3.31 acres of land. Located 40 miles from San Antonio, the census at the time of sale was 48%. Despite this obstacle, Matt was able to procure multiple offers on the Seller’s behalf. The Seller was a private owner operator and the Buyer is also a private owner operator seeking to expand their existing portfolio in South Texas. For additional information on this Skilled Nursing Facility sale or to request a confidential proposal to determine the value of your seniors housing community, contact Matthew Alley of Senior Living Investment Brokerage, Inc. at 630/858-2501 or [email protected]

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Senior Living Investment Brokerage Sells Two Eastern Pennsylvania Communities

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Toby Siefert and Matthew Alley of Senior Living Investment Brokerage, Inc. recently sold two Seniors Housing Communities in Eastern Pennsylvania. The first property consisted of 118 Personal Care units and 12 Independent Living units consisting of 58,800 square feet on 4 acres. Originally constructed in the 1960’s with updates and additions through 2004. Census was 85% all of which is private pay. The other community, in the same city, has 98 Personal Care units and 13 secured Memory Care units consisting of 44,525 square feet originally constructed, expanded and renovated between 1987 and 2000. Census was 66% and all the residents are private pay. The cap rate at the time of sale was 6.8%. The Seller is a private owner exiting the business. This was their only seniors housing communities. This is the first acquisition by the Buyer. The principal is creating a new company but has significant experience as an operator of seniors housing. The new owner will focus on marketing to drive census and increase margins with plans to re-finance to a HUD mortgage after stabilizing census. For additional information on this transaction or how Senior Living Investment Brokerage can assist you, contact Matthew Alley or Toby Siefert at 610/858-2501 www.slibinc.com

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How Do Rising Interest Rates Impact the Value of my Senior Living Community?

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Over the past several years, interest rates have remained extremely low.  The 10 year US Treasury rate (a common benchmark for financial instruments) reached an all-time low in July, 2012, at 1.53% and today is around 1.8%, the Federal Funds Rate has been close to 0% for years and the Fed made its first rate increase this past December.   The 10 Yr Treasury hit an all-time high in August, 1981, at 15.32% and has averaged 4.64% since 1870.   Thus, there is a high likelihood that interest rates will increase as they revert back to the historic mean.

Interest rates are a measure of an investor’s desired rate of return.   An interest rate, or a rate of return, is made up of three components, risk, inflation, and time value of money (allowing someone else to use your money).   The theoretical risk free investment is a US Treasury or FDIC insured savings account/CD.   Thus, all other investments can be benchmarked by these indexes.  The greater the perceived risk of an investment, the greater the spread, or “risk premium”, will be for that investment over the US Treasury.   Today, average capitalization rates (rates of return/risk premium) for assisted living facilities are around 7.5%, or about 500 basis points above the 10 US Treasury.   This is the risk premium investors place on assisted living versus the alternative of investing in a “risk free” US Treasury bond.   When the rates increase on US Treasury bonds, typically cap rates increase on senior living communities (or any investment), assuming the risk premium stays the same.

To determine the value of a senior living community, the Net Operating Income (NOI) is divided by the Cap Rate.

Net Operating Income (NOI) /Cap Rate = Value  – (the higher the cap rate, the lower the value).

Thus, as interest rates, and cap rates increase, values go down.  Below are several examples:

NOI = $600,000, Cap Rate = 7%, Value = $8,571,429

NOI = $600,000, Cap Rate = 8%, Value = $7,500,000

NOI = $600,000, Cap Rate = 9%, Value = $6,667,000

As you can see, for every 1% increase in the cap rate, the value drops by over 11%.   Thus, if interest rates continue to rise over the next several years, it could dramatically affect pricing.   If an owner has a desire to sell their community anytime in the next several years, now might be an opportune time.

For a complete analysis on how interest rates can affect your community’s value, both now and in the future, contact Jason Punzel, Senior Living Investment Brokerage, INC, at 630-858-2501 x 233 or [email protected]

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