As the skilled nursing industry moves away from large national operators, smaller regional providers are stepping up to fill the void — often in markets that fly under the radar of other investors.
One of those players in recent years has been Eduro Healthcare, a Salt Lake City-based operator that launched in 2008 with a pair of facilities in Utah. Since then, the provider has grown into a nine-building chain — including skilled nursing, transitional care, and assisted living services — with more than 800 beds across the West and Upper Midwest.
Most recently, landlord CareTrust REIT (Nasdaq: CTRE) installed Eduro as the operator of a former HCR ManorCare facility in Aberdeen S.D., which the real estate investment trust (REIT) had purchased for $9.7 million.
“Early signs indicate the transition is going very well,” CareTrust chief investment officer Mark Lamb said on the company’s most recent earnings call earlier this month. “This is the third near-seamless transition that Eduro has executed with us this year.”
Part of that success has been built on a track record of strong turnarounds, according to Eduro managing partner Michael Bewsey. He pointed to a facility in Albuquerque, N.M. that Eduro took over for CareTrust on May 1: When the new operator arrived at the Rio at Cabezon, the facility had just received a survey with around 38 deficiencies and was on the verge of being decertified.
Bewsey and 18 members of the Eduro corporate team traveled to the facility on the first day, bringing in a taco truck and having in-depth discussions with staff. After replacing the upper management team and working to improve relationships with other health care providers in the area, Eduro secured an easy reevaluation for the building within 90 days and resumed admissions from key hospital partners.
“The facility now looks and feels like a new building,” Bewsey told SNN. “Because of our success in difficult turnarounds like this one, we have been a proven partner to CTRE and plan to continue growing with them.”
The Aberdeen facility represents one part of that growth, as Eduro eyes “secondary” markets outside of main metropolitan areas in their target regions of the Mountain West and Upper Midwest.
“There’s just not a ton of competition for buildings,” Bewsey said of those mid-level markets. “We’ve found a pretty good market to get in there and find buildings where we can be successful.”
Eduro’s model also closely mirrors the model that CareTrust’s primary skilled nursing tenant, the Ensign Group (Nasdaq: ENSG) has ridden to similar success in the industry: pairing a strong corporate backbone with local autonomy. Eduro brings all of its building administrators to its Salt Lake City headquarters every month for an all-hands operations meeting as a way to enforce a shared corporate culture, but administrators on the ground are given wide leeway to operate their buildings as they see fit.
“They feel a ton of support from our office, but they’re completely autonomous, and they feel empowered to make their own decisions,” Bewsey said. “As the owner, I can walk through the building … but I’m not there interfering in the daily operations.”
Ensign has similarly extolled the virtues of that strategy, with a network of largely independent operators reporting to a back office that provides payroll, compliance, and other support.
“They don’t put their name on anything,” CareTrust chief operating officer Dave Sedgwick said earlier this year. “They don’t brand [as] Ensign Group. Many of the staff at the facilities don’t know the term Ensign Group. It’s that local of an approach to it.”
Eduro plans to build on its early success with CareTrust as well, with multiple properties in the pipeline with the REIT.
“I do feel like we have a solid and proven model, and think we will continue to get more and more opportunities to grow as this proves out,” Bewsey said.
Written by Alex Spanko