September saw many deals that featured older, struggling skilled nursing facilities. This comes at a time of record-high SNF prices, on a per-bed basis, although maybe not for long if the fourth quarter follows September’s performance. The truth is that despite the record high prices we have seen (reaching nearly $100,000 per bed in the four quarters ended March 31, 2017), the SNF industry probably faces more headwinds than tailwinds, ranging from aging facilities and shorter patient days to reimbursement risks and poor lease coverage, to name a few. Another truth is that the industry is becoming more and more bifurcated by the older, traditional nursing facilities on one end to the brand new, high-Medicare census transitional care facilities on the other, prices for which can easily reach $200,000 per bed or higher. We saw mostly deals involving the former this past month.
In one of those deals, Matthew Alley of Senior Living Investment Brokerage represented a Texas-based owner/operator in their disposition of a 155-bed facility in Ennis, Texas (about 40 miles southeast of Dallas). Built in 1964, the facility includes 46 Medicare and 109 dually-certified beds but was just 51% occupied. It was operating above breakeven on approximately $6.5 million of revenues but nowhere near a healthy margin. Taking on the task is a new operator making its first purchase in the skilled nursing market. It should help that the buyer’s principal has experience in the SNF business, but there is a long road ahead of them. The property sold for $4.9 million, or $31,250 per bed.