Low-Profile Buyers Seize Moment in Skilled Nursing Sector

As larger chains and real estate investment trusts (REITs) downsize, smaller buyers have taken center stage in the skilled nursing acquisitions arena.

In particular, there’s been an uptick in smaller buyers of skilled nursing facilities who keep a lower profile, at least as defined by their web presence. It’s not uncommon for these individuals or groups of these individuals to be revealed only as LLCs and to have little to no online presence — whether on their own website or the website of a facility they own, according to Dan Revie, a director at Ziegler Investment Banking.

In addition to being wealthy enough to make real estate purchases, there’s another thing these individuals have in common: first-hand experience of skilled nursing.

“A common profile that I’ve seen is high-net-worth individuals that have experience in skilled nursing in one form or another,” Revie told Skilled Nursing News. “Oftentmes they were administrators at buildings; sometimes they have owned buildings in the past and sold them and done well and are looking to do it again.”

Jeffrey Davis, president at Cambridge Realty Capital Companies, painted a similar picture.

“What’s happened is that in certain regions, there’s been a lot of trained people in the nursing home business who worked in buildings — be it as a administrator in training, a marketing director, or what have you — who formed these different relationships with different people in different disciplines,” he said. “And they felt this was their time to strike out for a lot of reasons, inlcuding that they didn’t have a lot to lose.”

Small buyers’ market

The timing for anyone looking to move into the skilled nursing space as a buyer is in some ways ideal; larger REITs are downsizing and the viability of major chains in skilled nursing is increasingly in doubt.

Operators with 400 to 500 locations are no longer viable in the current marketplace, Rick Matros, CEO of Sabra Health Care REIT (Nasdaq: SBRA), said in a recent earnings call. That REIT is in the midst of its so-called “Genesis Exodus,” with 22 facilities operated by Genesis Healthcare, Inc. (NYSE: GEN) already sold and another 29 of 54 facilities set for disposition.

It’s not a new trend, as the large national chains have been selling off underperforming assets in various markets over the past several years, Revie noted. Individual investors have purchased those facilities, and in some cases have been quite successful in turning them around, he said.

Still, the past two years have been notable for these buyers, as the sell-off trend began to catch up to the larger REITs and national companies that held nursing homes, Davis explained. In a difficult skilled nursing environment, rife with regulation and financial pressure, smaller owners and operators are more nimble at navigating the potential minefields. In this situation, an individual with skilled nursing experience and high net worth could see an opportunity.

“These buyers have been around for a while, but I’d say that they really have come to the forefront over the past 36 months, and especially over the last 18 months,” Davis said.

It’s important to note that buyers, real estate or operational, who keep a low profile in their purchases, are often still able to comply with the law, said Hedy Rubinger, who chairs the national health care practice at the law firm Arnall Golden Gregory.

“As long as the buyers provide the disclosures required by the states they are operating in — as well as applicable federal requirements, typically stemming from Medicare participation — smaller investors who see opportunities in purchasing SNFs can move forward, with or without a web presence,” she said.

Written by Maggie Flynn