HOUSTON — Ancillary businesses that depend on access to nursing homes helped to sustain interest in the skilled nursing market throughout 2021, even as census labored below 2019 levels, according to a long-time sector lender.
“There have been families (who operate nursing homes), who said, ‘COVID just took the last out of us, and we’re going to sell,’” Jason Dopoulos, managing principal of White Oak Healthcare Partners, said Wednesday. “We’ve seen other operators say they want to build a regional footprint to support their ancillaries and get the scale where they can still make money with compressed margins.”
Those additional beds help offset the increased staffing and PPE costs that have so many providers operating at a loss nearly two years into the pandemic, Dopoulos said.
He joined speakers from Welltower, Watermark Communities, Bridge Seniors Housing Fund and Levin Associates for the final session of the NIC 2021 Fall Conference. The panel focused on property valuations for the senior housing and skilled nursing markets.
Occupancy is bouncing back in some markets, but factors including certificate-of-need permitting and the idea that some states may reduce bed counts also contributed to renewed investor interest, Dopoulos added.
He said buyers with ancillary companies, which can provide services ranging from management to therapy, helped “heat up” per-bed pricing in different states, even as options in assisted living and other private-pay settings failed to ignite high-dollar deals.
“I think there was pent-up demand,” said Dopoulos, who this summer joined White Oak, a subsidiary of the White Oak Global Advisors private equity fund, after more than a decade at Lancaster Pollard. White Oak announced in September that it had helped secure funding for a $185 million senior credit facility secured by 14 skilled nursing facilities with 1,400 beds in the Southeast.
“There’s a lot of institutional liquidity,” Dopoulos said Wednesday. “With the SNF market, it’s like you either play in it or you don’t. The buyers lately have been very aggressive in that market.”
Ancillary companies and related businesses have come under scrutiny from industry observers and Congress in recent years. Michael Wasserman, geriatrician and former CEO of California’s largest nursing home chain, has said such businesses are “primarily interested in turning short-term profits” and “can easily siphon off taxpayer money” because of a lack of oversight.
California lawmakers are seeking more oversight over ancillary businesses and related parties in the skilled nursing sector. Meanwhile, U.S. Senate hearing witnesses earlier this year highlighted private equity owners’ ability to hide profits through use of related parties and called for consolidated audits to make financial relationships more clear.
