Colony Capital’s Barrack: Payment Variations Make Skilled Nursing a ‘Rubik’s Cube’

Colony Capital, Inc.’s (NYSE: CLNY) skilled nursing holdings don’t frequently factor into the real estate investment trust’s (REIT) quarterly conference calls, but CEO Thomas Barrack on Friday likened the industry to a specific children’s puzzle.

“Skilled nursing is a Rubik’s cube. Why? Because we’re so far removed from being able to fix anything,” Barrack said during his company’s fourth quarter 2018 earnings call.

The Los Angeles-based Colony Capital reported a net loss of $162.4 million for its health care real estate portfolio, which includes 99 skilled nursing facilities along with 14 hospitals, 192 senior living communities, and 108 medical office buildings.


Colony blamed $143 million in non-cash impairments associated with SNFs and the other health care facilities for the losses. Barrack pointed to wide variations in state-level reimbursement and regulatory landscapes as particular stressors for the skilled nursing portfolio.

“The REIT structure really doesn’t lend itself well to fixing this stuff,” he said.

Barrack also emphasized that the company has stabilized its overall health care portfolio in 2018, working to smooth out some unpredictable capital expenditures and cutting certain costs. But he also mused about the potential for skilled nursing services outside the traditional institutional setting.


“If you look at the future of what’s going to happen, outsourced delivery of medical services to homes is going to be a gigantic growth — just as strip malls and live industrial become the last-mile delivery for consumer goods,” Barrack said. “There’s a big movement under way thinking this could happen in skilled nursing, but it takes time.”

The CEO also acknowledged the overall bullish attitude in the health care investment space.

“Health care is kind of the darling of the new investment groups looking and saying: ‘Where is there growth?'” he said. “There’s growth in health care.”

Barrack also serves as Colony’s executive chairman, having taken over the CEO role from Richard Saltzman after announcing a net loss of $70 million in the third quarter of 2018. The company lost $397.2 million in the fourth quarter, bringing the full-year results to a loss of $632.7 million.

Colony has existed in its current form since 2016, when NorthStar Realty Finance, NorthStar Asset Management, and Colony Capital merged to form Colony NorthStar, Inc.; the company changed its name back to Colony Capital in June 2018.

CLNY stock closed the week’s trading down $0.30 or 5.4%, sliding to $5.26 per share.

Companies featured in this article: