Backer of $1 Billion Skilled Nursing Joint Venture Says Time is Right for Investment

Senior Care Development and Fundamental Advisors made a major skilled nursing play earlier this month with the announcement of a $1 billion joint venture aimed at nursing home acquisitions.

It’s a move that may have raised some eyebrows, given the general unease about the long-term care space among investors, but the CEO of Senior Care Development says this is precisely the time for capital to pour into skilled nursing.

“That’s the beauty of it. In the upheaval, that’s where the deals are to be found,” David Reis told Skilled Nursing News. “In my mind, buying on a market upswing, when everything is rosy and picture-perfect and wonderful, that’s not a great time to be a buyer.”


Fundamental chairman and CEO Laurence Gottlieb echoed that sentiment in a statement released when the deal was announced October 1.

“With the current dislocation in the skilled nursing space, enduring and committed capital is needed to stabilize nursing homes that would otherwise struggle without it,” Gottlieb said. “We look forward to continuing to work closely with the SCD team to build on our shared success in the skilled nursing arena by providing the resources these facilities need in order to supply comprehensive critical and resident care in their communities.”

Reis has spent about three decades in the senior housing and care space, first as a developer of continuing care retirement communities (CCRCs) and later as an investor in skilled nursing deals with private equity giant Formation Capital. His relationship with Fundamental Advisors, a New York City-based alternative investment firm, began about a decade ago, when the two firms teamed up to buy distressed CCRC assets.


But it was SDC and Fundamental’s restructuring efforts on the 41-facility Tandem Health Care skilled nursing chain earlier this year that got the two parties thinking about future investments, Reis said.

Despite announcing a plan to eventually acquire $1 billion in skilled nursing assets, Reis said the joint venture will take a measured approach in assessing potential acquisition targets.

“Our goal is really to be smart owners, and so I think private equity brings a regimen to the process of selection, [and] a lot of typical nursing home buyers don’t have that same discipline,” he said.

In an era that has seen increasing regionalization of the skilled nursing market — as accelerated by pressures at major national chains such as HCR ManorCare, now a part of the ProMedica health system, and Signature HealthCARE — Reis said SDC is still looking for a mixture of both nimble regional providers and nationwide players with scale and clout.

“If you can mix and match amongst a well-run national [chain] with really great processes in place, and with some regional operators who really know their market whole, and then look to kind of innovate within that, I think that this is actually a good time to be an investor in the skilled nursing space,” Reis said.

Part of that innovation has come from a partnership with Third Eye Health, a Chicago-based telemedicine provider that allows physicians to see skilled nursing residents remotely using tablet computers. While SDC doesn’t pay for the service, the company has referred Third Eye to the operators under its umbrella, with some of the providers seeing savings due to reduced hospitalizations, according to Reis.

“They aren’t scoping out what’s happening in various technologies to improve nursing home care,” he said of providers. “This one just happens to be an amazing company that literally is saving real dollars for operators.”

As for the Patient-Driven Payment Model, the new reimbursement scheme set to take effect next fall from the Centers for Medicare & Medicaid Advantage (CMS), Reis said the effect will likely be neutral for the industry as a whole — but that serious opportunities for gains exist in specific markets.

“[In] some states, PDPM may be a real plus, so the key is looking through and doing the modeling, literally on a state-by-state basis, of how one thinks PDPM will affect that state, and then you can dig in deeper to what operators are best able to deal with that,” he said. “And so that’s the kind of due diligence that we’re doing when well look to purchase something.”

Written by Alex Spanko

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