There may be a new publicly traded senior care company on the horizon, as PACS Group, a Utah-based skilled nursing operator with more than 200 facilities in its current portfolio, filed for an initial public offering with the SEC on March 13. It plans to list on the NYSE under the symbol PACS.
The company is barely 10 years old but has grown its reach to nine states, serves more than 20,000 patients daily and reported $3.1 billion of total revenue in 2023. NOI in 2023 reached $112.9 million, while adjusted EBITDA was $276.5 million. It also has about $732 million of debt on its books. As recently as 2020, the company only had 65 facilities in its portfolio, so the bulk of its acquisitions took place in the last several years. Explaining that quick growth in its S-1 filing, PACS says “our significant historical growth has been primarily driven by our expertise in acquiring underperforming long-term custodial care skilled nursing facilities and transforming them into higher acuity, high value-add short-term transitional care skilled nursing facilities.” There have certainly been plenty of those opportunities in the last five years as smaller owner/operators dealt with the pandemic, labor scarcity, inflation and an increasingly complex business model.
PACS also mentioned in its S-1, “We believe our success is driven in significant part by our decentralized, local operating model, through which we empower local leaders at each facility to operate their facility autonomously and deliver excellence in clinical quality and a superior experience for our patients.” That model of empowering the administrators to be pseudo-CEOs of their SNFs is similar to the Ensign model, and it clearly works for Ensign.
PACS’ portfolio is located mostly in California (109 facilities), but also in Arizona, Colorado, Kentucky, Missouri, Nevada, Ohio, South Carolina and Texas. As of December 31, 2023, the company leased 165 facilities, directly owned the real estate at 29 facilities, and owned partial interests in an additional 14 facilities through joint ventures managed by third parties. Altogether, that is 208 facilities under its umbrella. As of December 31, 2023, the average Quality Measures Star rating and occupancy rate for its “mature” facilities (not new acquisitions or “ramping up”) was 4.2 and 93%, respectively. The “new” facilities were not bad, at 3.9 and 87%, respectively.
The company will look to new acquisitions too, including real estate assets, through purchase options or right-of-first refusals in existing leases, as well as de novo construction of purpose-built facilities. PACS is highly experienced growing through each method, over the course of its 10-year history. With such scale, the company also acknowledges the opportunity to grow through ancillary services, such as pharmacy services, laboratory services, transportation, and imaging. And it is not ruling out home health and hospice and senior living acquisitions in the future.
To the structure of the business, PACS Group, Inc. is a holding company with various operating subsidiaries. Each facility is structured as an operating subsidiary under one of its two subsidiary holding companies: Providence Group, Inc. and Providence Group NH, LLC. Subsidiaries of Providence Group, Inc. are currently operating facilities with mortgage loans insured by HUD, while subsidiaries of Providence Group NH, LLC are operating facilities without such mortgage loans.
Citi, J.P. Morgan, Truist Securities, and RBC Capital Markets are the joint bookrunners on the IPO. According to Renaissance Capital, PACS has filed to raise up to $100 million, but Renaissance estimated that it could raise up to $500 million.
