High quality facility doesn’t always mean high prices

A five-star rating from Medicare should normally translate to a higher per-bed valuation when a skilled nursing facility changes hands. When you also throw in a recent build (for SNFs) in 2003 and good location in the growing Raleigh-Durham MSA of North Carolina, one would again assume this facility would command a premium in price.

However, that was not (exactly) the case in the sale of Treyburn Rehabilitation & Nursing Center, a 132-bed skilled nursing facility. Owned by an in-state skilled nursing facility chain, the building is located on about 10 acres in the city of Durham. It features 50 semi-private and 30 private units, with a high quality mix of 60% (38% Medicare and 22% private pay). Yet, despite being under 15-years old and holding a five-star Medicare rating, the facility sold for $10.8 million, or $81,818 per bed, nearly $20,000 under the 2016 average of $99,200 per bed.

It is important to note that 2016’s average price per bed was a record-high and over $13,000 per bed higher than the previous highest-ever average recorded in 2015. But at a time of high prices paid for high-quality facilities, this below-average price for a high-quality facility seems a bit out of place. Negotiating a good price for its client was Healthcare Transactions Group, which represented the buyer, a Florida-based regional skilled nursing owner. A regional operator in the Southeast is taking over management of the facility under a lease.

 

 

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