Investors keep buying into skilled nursing facilities

Investment in skilled nursing facilities hasn’t slowed down despite persistent dark clouds surrounding the industry’s outlook.

One of the overarching themes this past conference season — including at the summits held by the American Health Care Association (AHCA) and the National Investment Center for Seniors Housing & Care (NIC) — is that there’s an ongoing influx of capital into the long-term health care space, as demographic trends and new payment models tantalize flush investors.

“The aging demographic discussion has been talked about for decades, and you have that expectation built in,” Bill Kauffman, senior principal at NIC, said during his firm’s annual expo in Chicago last month. “But you also have higher acuity — higher cash flow per bed if higher acuity is coming into these properties. I think there’s a lot there to think about, and it’s a multitude of factors for sure.”

But that trend is happening while Kauffman’s employer calculates quarter after quarter of record-low occupancy rates, which most recently fell to 81.7% in the second quarter of this year.

Despite the seeming discrepancy, several mergers-and-acquisitions experts say that there are perfectly valid reasons for why cash keeps flowing into an industry that, at least by the measure of heads in beds, appears to be struggling.

“You have a lot of new capital coming into the space that doesn’t fully appreciate — and therefore doesn’t fully underwrite the risks — in this industry,” Isaac Dole, founder and CEO of the Chicago-based investment firm Birchwood Healthcare Partners, told Skilled Nursing News. “So while census is declining, price per bed could be increasing.”

Another panelist at the NIC conference, Charles Bissell of JLL Valuation & Advisory Services, hinted at investors’ lack of intimate knowledge of the skilled nursing space as well, saying that the banks his firm works with don’t want to hear that per-bed prices are too high given the anticipated wave of baby boom demand.

Read the full story at Skilled Nursing News.

Topics: Finance , Uncategorized