Real estate investment services firm Marcus & Millichap is currently brokering the sale of three not-for-profit nursing homes, all located in New York, for a total expected sale price of approximately $40 million.
Horace Nye Nursing Home, located in Elizabethtown, N.Y., is a 100-bed facility that’s about 98% occupied and has an approximately 93% Medicaid census. Despite generating revenues of about $6.5 million annually, it’s losing about $3 million a year.
That’s because of union contracts that are “extremely onerous” and cuts to Medicare and Medicaid reimbursements, says Marcus & Millichap’s Joshua Jandris, the lead broker for the property. The contracts’ terms, which feature high wages, rising health insurance premiums, and expensive legacy pensions, are draining profit from a facility that could quickly become accretive to earnings, he says.
“Revenue is shrinking right before not-for-profit operators’ eyes; it’s really hard to operate a business when you have rising costs and smaller revenues,” he adds.
The Horace Nye nursing home has already gotten three offers and has undergone a second round of bids, which are currently under review; Marcus & Millichap expects it will sell for more than $4 million.
Another not-for-profit nursing home, located near Dunkirk, N.Y., has 216 beds with a Medicaid census of about 82%. Despite being approximately 97% occupied and generating revenues of about $20 million a year, this facility is losing $4 million to $5 million a year, for the same reasons as the Elizabethtown facility.
Marcus & Millichap will be getting offers on this nursing home in the next few days, and expects them to exceed $16 million.
The third not-for-profit nursing home, about an hour and a half north of Manhattan in Gosha, N.Y., has 360 beds with a Medicaid census of approximately 85%. It’s 96% occupied and generates about $35 million of revenue a year, but it’s losing a lot of money—about $21 million a year. Again, the high annual losses can be attributed to union contracts and reimbursement cuts.
Despite this, it’s an attractive facility and Jandris says they’ve had more than 65 people express interest in it. The call for offers is on May 7, with an expected sale price of more than $20 million.
“There’s a lot of interest on all of these facilities,” says Jandris. “They’re all generating a lot of revenue, and if they’re taken over by a private operator, they’ll be accretive almost immediately.”
Marcus & Millichap has previously facilitated the sale of two other not-for-profit facilities in New Jersey that were under similar circumstances. The firm is also under contract to close the sale of a third New Jersey property this July for a contracted purchase price of $15 million.
Jandris is the lead broker on these deals and is working alongside seniors housing specialists Mark Myers and Charles Hilding, all out of Marcus & Millichap’s Chicago office.
Written by Alyssa Gerace