In an era of tight financial constraints for skilled nursing facilities, one owner-operator turned to a unique funding source to offset construction costs — and set up savings for the future.
Premier Health Care Management, which owns and operates nine skilled nursing facilities with 961 beds in southwestern Ohio, is using the state’s Commercial Property Assessed Clean Energy (PACE) program to reduce some of the upfront construction costs for new buildings and renovations. Specifically, the program finances upgrades for energy efficiency, renewable energy, and water conservation.
So far, Premier has used the financing to install solar panels, insulation, LED lighting, HVAC system, kitchen equipment, and thermostats, among other energy-efficient upgrades at multiple facilities.
“You end up saving money in the long run as an operator because you’re using higher-efficiency products,” Greg Lazaroff, director of business development at PHCM Construction, Premier’s architectural department, told Skilled Nursing News. “It’s cheaper to maintain and operate.”
Though part of a federal initiative, PACE funding is established by state-level legislation that authorizes municipalities to set up programs, according to materials from PACE’s website. The financing is paid back by the building owner through real estate taxes, and the PACE assessments transfer if the building changes owners.
Upgrades in Ohio
Premier first used the PACE program for its Social Row Transitional Care Center in Washington Township, Ohio, a 100-bed, 98,000-square-foot SNF that was completed in January, Lazaroff said.
The lender for that project was the Dayton Port Authority, while Energy Optimizers, USA, served as the energy savings company facilitating coordination between the building owner, the lender, and the municipality. The PACE financing for that project was $3.1 million.
In addition to Social Row, Premier has other SNF projects that utilize the PACE program. The provider is currently adding 25 beds to Kenwood Terrace Care Center, while also converting several semi-private rooms to private and adding a therapy gym. For the upgrades, Premier secured $2.1 million in PACE funding, provided by private capital provider Greenworks Lending.
Harold Sosna, president of Premier, estimated the efficiency measures would save the organization more than $400,000 over the course of their operation in a release announcing the Greenworks financing.
Premier also recently acquired the 239-bed Wexford Care Center and plans about $3 million to $4 million in upgrades; Greenworks Lending is serving as the lender for the PACE financing, while PlugSmart is the energy savings company.
Other additions include an 86,000-square-foot addition to the Forest Hills Care Center that will include 30 skilled nursing beds and 24 assisted living beds. Premier also plans to start construction later this year to add 113 beds to its Amelia, Ohio, facility. The company intends to use PACE financing for these projects, Lazaroff said, though it has not yet selected partners on them.
With skilled nursing margins well-known to be thin and construction costs trending upward, using the financing for renewable energy features could be a boost to facilities looking to upgrade. But there are some limitations.
“This type of financing — I don’t think it exists in all states across the country, but it is starting to pick up steam,” Lazaroff noted.
In addition, some of the mandates could vary on a case-by-case basis.
“It all depends on who’s providing the financing for you,” he said. “You have to work with them to make sure that you’re selecting the products and the type of products that they deem as eligible… Frankly, different lenders might have different barometers for deciding whether or not something’s considered high-efficiency.”
Written by Maggie Flynn