There are several approaches to value, as we’ve written about in the past. One approach that can be dangerous is simply multiplying the number of units times the price per unit that you saw for another property. The price per bed or unit won’t determine the facility’s value, it’s just one of the measures that results from the valuation.
While the price per unit or price per bed isn’t a good way to determine value, it can be a useful benchmark when comparing similar properties. But that raises another question: is it better to look at price per licensed bed or the price per unit? The answer is: it depends.
Private units are much more common than shared units in most assisted-living facilities. However, some newer facilities have larger apartment units that may be occupied by a married couple or two unrelated residents, and some older facilities continue to have a large percentage of shared units.
With the trend leaning more towards private instead of shared units, the number of units is often a better measure than licensed capacity. But when a facility has a track record of shared occupancy units—and the additional revenue that this higher occupancy provides—the price per licensed bed is more meaningful. Just remember – a buyer won’t pay much, if anything, for licensed capacity that is never used.
Be sure to understand a property before comparing its value to another, and make sure that you are comparing apples to apples when using any type of pricing as a benchmark.