Ensign: The Skilled Nursing Business Isn’t As Hard As It Seems

The Ensign Group (NASDAQ: ENSG) announced solid earnings for the fourth quarter of 2017 — and took a not-too-subtle shot at some of its competitors.

The Mission Viejo, Calif.-based post-acute provider saw a 40.2% increase in revenues related to transitional and skilled nursing care from the fourth quarter of 2016, along with gains in occupancy of 289 basis points for all properties, and 109 basis points on a same-store basis.

Ensign has acquired a total of 116 SNFs and assisted living facilities over the last several quarters, and the company has plans to make more acquisitions in the next year — with a focus on underperforming properties owned by smaller operators looking to exit the business, as well as SNFs owned by larger firms looking to shed a few properties at a time.

Large portfolio deals, meanwhile, aren’t part of Ensign’s long-term plans.

“In our view, several of the recently announced transactions have traded at overly aggressive cap rates and lease coverages,” executive vice president Chad Keetch said on the company’s earnings call. “All of this in the face of news reports indicating that large, historically strong operators are defaulting on rents as a result of poorly structured capital-market transactions, onerous leases, and unhealthy leverage.”

Though he didn’t name any providers, major operator HCR ManorCare remains locked in a receivership battle with its landlord over a master lease default, and Genesis HealthCare (NYSE: GEN) is the subject of a long-term disposition plan from landlord Sabra Health Care REIT (NASDAQ: SBRA).

“We continue to believe that the dynamics in our industry, while sometimes challenging, are not nearly as difficult as many are led to believe as a result of these self-imposed challenges that follow creative financial engineering,” Keetch continued.

The company has several acquisitions in the works that will close within the first two quarters of 2018, according to Keetch.

Ensign’s stock rose in late-afternoon trading Friday, gaining $1.43 or 6.05% as of about 2 p.m. Central time.

Written by Alex Spanko

Alex Spanko on Twitter
Alex Spanko
Alex covers the skilled nursing and reverse mortgage industries for Aging Media. Outside of work, he reads nonfiction, yells at Mets games from his couch, and enjoys pretty much any type of whiskey or scotch — often all at once.

Leave a Reply

By continuing to use the site, you agree to the use of cookies. More Information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this. For more information, see our cookie policy.

Close