HHS and CMS Appointments
It could be a turbulent year for SNF valuations in 2017. After the election….that one….we thought we might be in for a wild ride with the unpredictable Donald Trump taking over. Healthcare M&A, which had slowed down a bit this year, seemed to be picking up, and interest in our products spiked after the election, which is always a telltale sign. But with yesterday’s announcements of the new heads of HHS and CMS, the ride could get a little wilder. By naming Tom Price to run Health and Human Services, one of the more anti-ObamaCare members of Congress and a physician to boot, you know what is going to happen. And apparently, he has been opposed to the rush to value-based Medicare... Read More »
Cap Rates and Interest Rates
With the recent jump in interest rates, cap rates have no where to go but up. Since the end of September, the 10-year Treasury note has increased by 60 basis points, or 38%, to 2.22% yesterday. More than half of that increase occurred after the results of the presidential election. It seems that Trump’s pro-business reputation is making investors believe that increased infrastructure spending and economic growth will soon be upon us, followed by inflation. It doesn’t usually happen that fast. That said, with the recent jump in rates, it is almost a certainty that the Fed will increase short-term rates within a month. And there is now talk of further rate increases next year. So what does... Read More »When a Deal Is Not a Sale
Kindred Healthcare (NYSE: KND) and Ventas (NYSE: VTR) have agreed on a plan that allows Kindred to exit the skilled nursing business, or at least mostly. Of the 90 or so SNFs that Kindred still operates, Ventas owns 36 of them and leases them to Kindred. The two companies have agreed that Kindred can purchase the 36 properties for $700 million (current rent is $49 million), or renew the current lease on all unpurchased SNFs through 2015 at the current rent level. If they all get purchased (and then re-sold at different prices) for $700 million, that would come to $160,000 per bed, which strikes us as above market for the Kindred SNFs. Most likely, the price represents a premium that KND... Read More »
Kindred Healthcare Plunges
Exiting the SNF business, Kindred’s decision is just part of a national transformation of the sector that started a year ago. And I thought last week was a tough one. When Kindred Healthcare released its third quarter earnings on Monday night, I knew it would open significantly down, but 33% down? The company has decided to exit the skilled nursing sector – sound familiar? This was a bit surprising because even though they had already gone from 300 SNFs to around 92 today, I assumed the remaining facilities were the best ones, and in the markets close to its LTACs, rehab hospitals and home health services. That was the entire theory around being the post-acute provider of choice in... Read More »
Brookdale Senior Living Disappoints Again
Brookdale Senior Living’s stock price plunged 20% on disappointing third quarter news….and forecasts. My, my, my. Brookdale Senior Living just doesn’t seem to be able to get a break. Despite having a 40 basis point increase in same-community occupancy from the second quarter, which beat the market as a whole, problems continue. They are seeing new properties having a big impact on their secondary market properties, they revised downward full year 2016 forecasts, former employees are soliciting staff and customer leads, and Dan Decker has decided to become even more involved, becoming Executive Chairman as opposed to Chairman of the Board. On top of all of this, they are forming... Read More »Schedule a demo
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