40-Year Old SNFs: Obsolete or an Opportunity?

The aging of the skilled nursing industry is becoming a growing concern for investors in that space. Facilities built 40 years ago and over comprise a significant portion of the skilled nursing beds in the country, and many believe they are outdated and would require too much capex to modernize and attract the Medicare and private pay populations. Nevertheless, plenty of buyers still see opportunity. But what do they see that others don’t?

That is the question we tried to answer in our webinar entitled, “The 40-Year Old SNF: Part II,” a sequel to our 2016 discussion. Our Editor, Steve Monroe, was the moderator, joined by Alan Plush of HealthTrust, Chad Buchanan of Tryko Partners and Andrew Sfreddo of Birchwood Health Care Properties. Over a 90-minute discussion, the panel covered the diverging values of older and newer properties, who is buying the older facilities (and why), and what are the real costs of sufficiently renovating a 40-year old SNF, among others. We also brought the audience in on the action and asked three questions. Here are the results:

 

  1. Do you think buyers should be paying more than $100,000 per bed for a 40-year old SNF?
    1. Yes 24%
    2. No 76%
  2. To properly maintain a 40-year old SNF, which amount of annual capex is required?
    1. $500 per bed 20%
    2. $1,000 per bed 60%
    3. $2,500 per bed 20%
  3. Which of the following is the best alternative use for a 40-year old SNF?
    1. Drug treatment center 36%
    2. Medicaid assisted living 45%
    3. Hospice facility 18%

 

 

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