January 28, 2019, Alex Spanko, Skilled Nursing News - After an intense period of restructuring at the publicly traded real estate investment trusts (REITs), skilled nursing operators and owners believe private buyers are likely to pick up the slack in 2019. Private equity firms topped the list of likely buyers in the 2019 Skilled Nursing Outlook Report from SNN, with 38% predicting the companies would be the primary purchaser of skilled nursing assets over the coming year.
A further 25% predicted that privately held REITs would drive mergers-and-acquisitions activity in 2019, with their public counterparts garnering just 17% of the total vote.
During the month of December, SNN asked its readership base — which includes executives, directors, and managers at nursing home operators and investors — to weigh in on several key questions about the future of the industry over the next 12 months. The more than 400 responses revealed cautious optimism about the Patient-Driven Payment Model (PDPM), which takes effect in the fall, as well as a landscape dominated by private dollars.
When asked about the top source of financing in 2019, SNN readers dropped private equity into second place, with 36% of the vote. Traditional banks and financing companies topped the list with nearly 50%, while institutional and agency lending fell far behind.
Private equity has emerged as a key player in the space over the last few years, with voices from both inside and outside the industry positioning the firms as flexible, nimble partners moving forward. While large, international private equity investors such as The Carlyle Group have come under fire for their role in the marketplace, operators under the ownership of smaller PE companies have praised their ability to respond quickly to changing market conditions — helping one provider roll out new clinical programming in a matter of weeks and not months, for instance.
In addition, Big Four audit and accounting firm PwC recently predicted that private equity ownership will drive innovation in the skilled nursing space in 2019, while also suggesting that the companies will emerge as frequent buyers as vertically integrated health systems look to prune non-core assets.
But at least according to SNN’s readers, they may not find many assets available for sale: Among those respondents who felt in a position to respond, 55% said their companies would maintain a status quo of SNF ownership in 2019, and 41% predicted that their firms would be buyers in the new year.
Download the full outlook report for free to see more insights into the future of the skilled nursing industry in 2019, including the biggest challenges facing operators and whether or not PDPM will boost reimbursements.