Eskaton Exits Standalone Skilled Nursing Business with $35.6M Transaction

California nonprofit Eskaton, in line with other nonprofits and continuing care retirement communities (CCRCs) in the space, is divesting its skilled nursing facility assets for $35.6 million after inflationary pressures, staffing shortages and wage increases caused overbearing losses.

The three facilities – Eskaton Care Center Manzanita, Eskaton Care Center Greenhaven and Eskaton Care Center Fair Oaks – were sold to Los Angeles firm International Equity Partners Inc., with Cypress Healthcare Group to operate the properties, according to an article published in the Sacramento Business Journal.

The three California facilities have a total of 396 beds and 400 employees. The operators plan to retain all employees.

The deal follows national trends, as nonprofit and government entities lost significantly more beds than for-profit entities last year. This loss is expected to continue in 2023.

The Evangelical Lutheran Good Samaritan Society is perhaps the best example of this trend. The nonprofit giant earlier this year announced it would be exiting 15 states and trimming its capacity by 30% from its large portfolio of SNFs and other senior care communities.

Coupled with nonprofit data, almost half of CCRCs plan to downsize their skilled nursing services on campus, according to a report published by CliftonLarsonAllen (CLA).

“We have decided, through intense evaluation, that it is time to reposition Eskaton for the coming decade,” Todd Murch, Eskaton CEO, said in a statement. “The sale of our standalone skilled nursing communities will allow us to strengthen our residential living, affordable housing and home-based services, plus enable expansion across Northern California through management or affiliation with existing non-profit residential living providers.”

This isn’t the first nonprofit divestiture Cypress has been involved in. The California operator acquired three SNF properties from Retirement Housing Foundation earlier this year. The nonprofit sold a 16-facility portfolio across six states.

Cypress will operate 12 SNFs in California once the Eskaton deal closes, according to reports from the Sacramento Business Journal.

Eskaton is exiting stand-alone skilled nursing, with plans to focus only on residential living and senior services after more than 30 years of SNF ownership.

While this health care component has been a long-standing business line at Eskaton, CEO Todd Murch told the Sacramento Business Journal that recent headwinds tied to the pandemic, inflation, workforce shortages and rising wages proved to be too much.

About $14 million of Eskaton’s $16.4 million operational loss last year was from the stand-alone SNFs, Murch said.

Occupancy for the three facilities last year was close to 70%, a far cry from upwards of 90% pre-pandemic. Restricting admissions due to intermittent Covid cases, and a shortage of available staff were the main causes of floundering occupancy statistics, Murch noted.

“Eskaton has evolved considerably over our 55-year history and over that time we have offered just about everything imaginable across the spectrum of senior services and housing,” Murch said in a statement. “This action is in the best interest of the skilled nursing buildings, their employees, and their patients, and will strengthen Eskaton and our mission to serve older adults throughout Northern California.”