Taken as a snapshot in time, 2023 has had the early markings of a healthy rebound for most senior living sectors, including skilled nursing, emphasized by occupancy gains.
But on the flip side has been a devastating spate of nursing home closures and an administration dead set on a staffing rule, prompting the Iowa Health Care Association to admonish the government for “mandating the hiring of people who do not exist to care for people who do.”
While some investors believe that has taken the shine off the current SNF environment, some silver linings remain.
“The nursing home market is still dominated by sales of moderately to severely distressed facilities, both of which are very difficult to finance,” said Jeff Binder, managing director at Senior Living Brokerage.
Yet, many experts are bullish on the fate of this shell-shocked industry.
“I would characterize the skilled nursing housing climate as slowly continuing to improve,” said Michael Gehl, chief investment officer, FHA Lending for Newpoint Real Estate Capital, LLC.
While occupancy is still 9% below pre-pandemic levels, the industry has rebounded by more than 100,000 new residents since its nadir in January 2021.
But Gehl warned of more closures and reductions of capacity if current industry trends continue into 2024.
“On the seller side, the current period is generally characterized by those that have to sell rather than those who want to sell,” added Brian Jurutka, vice president, senior housing for IMA Financial Group.
“Buyers in this market are likely thinking of skilled nursing as a beachhead to a broader suite of services offered to the residents of the property or portfolio being acquired, rather than thinking of SNFs as a stand-alone investment,” he continued. “This last dynamic likely makes traditional financing more challenging.”
The wild card to many observers will be the fallout from any administration staffing mandate eventually finalized. In the meantime, Gehl predicted the skilled care industry will continue a slow and steady recovery and return to pre-pandemic occupancy and staffing levels by the end of 2025.
From the November 2023 Issue of McKnight's Long-Term Care News
