The Valuation of Senior Care Properties.pdf
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This presentation describes the valuation of Senior Care Properties for assessment purposes. I weaved stories about my Mother in Law, Lily Berrier into the presentation. She suffered from Alzheimer's disease and eventually had to go into assisted living and then a nursing home. Those personal experiences helped me craft this presentation.
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The Valuation of Senior Care Properties.pdf
- 1. The Valuation of Senior Care Properties Tim Wilmath, MAI Hillsborough County Property Appraiser’s Office
- 3. • AC/DC (lead singer Brian Johnson, age 63) #2 (tied) music tour with $177 million worldwide • Roger Waters (age 67), #2 (tied) music tour with $90 million worldwide from a mid-year start • The Eagles (singer Glenn Frey, age 62) #6 with tour with $64.5 million • Pal McCartney (age 68) #7 music tour with $61.8 million • James Taylor (age 62): #8 music tour with $50.7 million
- 5. 2011 80 years 1900 47 years U.S. Life Expectancy
- 6. What do these 3 people have in common?
- 7. Baby Boomers
- 8. Were you born between 1946 – 1964?
- 9. First Boomer Kathleen Casey-Kirschling Born in Philadelphia on Jan. 1, 1946 at 12:00:01 a.m.
- 10. Beginning on January 1st, 2011, every single day more than 10,000 Baby Boomers reach the age of 65. That is going to keep happening for the next 19 years.
- 11. In 1860, the 65+ crowd was only 3% of the population By 2010, the number more than quadrupled.
- 12. Nursing Homes – A place of residence for people who require constant nursing care and have significant deficiencies with activities of daily living. Think of it as “hospital-lite”
- 14. 17,200 15,700
- 15. Medicare 12% Medicaid 49% Out of Pocket 25% Private Insurance 8% Other Govt. 6% Where do Nursing Homes get their money? Source AARP
- 16. Medicare Medicare does not pay rent for either nursing homes or assisted living facilities. It only covers medical expenses. Medicaid Pays rent in a nursing home, but only for the poor and you must be broke (there is a 5-year look-back for assets). You cannot be physically able and be in a nursing home. Neither Medicaid nor Medicare pay rent for assisted living!
- 18. Florida Senate President – Mike Haridopolos
- 20. President Obama George Washington University April 13, 2011
- 21. Medicare Reimbursement cuts are hurting nursing homes profitability.
- 22. There are only 8 states without nursing home moratoriums.
- 23. Despite a moratorium on new nursing homes, occupancy has been declining over the years.
- 24. Occupancy has steadily declined in nursing homes because of: 1. Declining disability rates 2. Increased use of home services 3. Bad reputation
- 25. Nursing homes get mostly bad press and have a negative reputation
- 29. “Nursing homes operate on a razor thin margin”
- 30. Steve Monroe President, Senior Care Investor October, 2011
- 31. Despite an aging population………… nursing homes suffer from government interference, decreasing Medicare and Medicaid reimbursement rates, and negative press & lawsuits. But they do sell! Nursing Home market Summary
- 32. Assisted Living Facility – Provides housing, support services, and health care for people who need help with daily activities, such as eating, bathing, dressing, mobility, and taking medicine.
- 34. There are no moratoriums on assisted living facilities like there are on nursing homes. 35,500 16,021
- 35. Approximately 85% of the cost of assisted living is paid by families out of pocket. Source: Kaiser Family Foundation
- 37. Assisted Living Facilities are mostly free from government influence and are enjoying popularity among residents and investors. Assisted Living Market Summary
- 38. Continuing Care Retirement Communities (CCRC’s)
- 39. Continuing Care Retirement Communities (CCRC’s)
- 40. Continuing Care Retirement Communities (CCRC’s) Havill v. Lake Port Properties & Daniel v. Canterbury Towers
- 41. CCRC Summary Continuing Care Retirement Facilities offer independent living, assisted living and skilled nursing under one roof. It’s expensive and the unorthodox income stream is makes the income approach difficult at best.
- 42. Gathering Data
- 43. Go to medicare.gov and select “Compare Nursing homes”
- 44. You can get extensive reports on individual nursing homes from state agencies such as the Fl Agency for Health Care Administration
- 45. Integra Realty Resources does an annual analysis of Senior Housing in their viewpoint publication
- 46. The National Investment Center for the Seniors Housing & Care Industry provides excellent data by Metro, including rates.
- 47. The best source of senior care data for valuation purposes
- 49. RealtyRates.com provides CAP rates for Senior Care Facilities, by type.
- 50. The insurance company Genworth does an annual survey of long-term care costs.
- 51. John Hancock also conducts an annual survey of housing costs
- 52. MetLife does a similar survey
- 54. Let’s talk value
- 55. Cost Approach
- 56. Even though Senior care facilities are not typically sold based on the cost approach, this approach is still helpful to determine if there is any business value.
- 57. Cost Approach
- 59. Sales Comparison Approach •Average price bed/unit by age •Median price bed/unit by age •Average price bed/unit by region •Average price bed/unit by size •Average price/sf of building area
- 61. Income Approach Room Revenue – Facility specific reports, Surveys Occupancy – NIC, Senior Care Acquisition Report Expenses – Senior Care Acquisition Report Cap Rates – NIC, RealtyRates.com, Sr. Care Acquisition Report GIM - Senior Care Acquisition Report
- 62. Continuing Care Retirement Communities (CCRC’s)
- 63. Business Value Real Estate Business Value Personal Property
- 64. What is Business Value? ...A value enhancement that results from items of intangible personal property such as marketing and management skill, an assembled workforce, working capital, trade names, franchises, patents, trademarks, contracts, leases, and operating agreements. Source: A Business Enterprise Value Anthology.
- 65. • Cost Approach • Rushmore Method • Start-Up Cost Method • Excess Profit Method • Proxy Method Ways to measure Business Value
- 66. Measuring Business Value via Cost Approach Example: Income Approach - $14,000,000 Cost Approach - 12,000,000 Business Value $ 2,000,000
- 67. Rushmore Method Capitalizing the management fee measures business value. Example: Business management fee (5% of revenue) $200,000 Capitalization Rate ÷ 12.50% Indicated Value of the Business $2,400,000 Measuring Business Value via Rushmore method
- 68. Conclusion – 5 Takeaways 1. Baby Boomers guarantee the need for senior care facilities long into the future. 2. Nursing homes are suffering from negative press, lawsuits, and Medicare and Medicaid cutbacks, but they still sell. 3. Medicare and Medicaid do not pay rent in an assisted living facility. 4. Assisted living facilities are thriving. They get the majority of their revenue from private pay. 5. Continuing Care Retirement Facilities are very expensive, but provide peace of mind.
- 75. Thank You! Tim Wilmath, MAI TimWilmath@hcpafl.org Tinyurl.com