The “Big Three” REIT owners of senior housing properties may be scaling back on their skilled nursing acquisitions, but others are maintaining interest in the space and say nothing has changed in terms of demand for the properties. In some cases, there may be more interest brewing for SNFs given the current attention placed on driving efficiencies in health care overall.
“The largest three REITs as far as we know an’t actively acquiring SNFs, but they own a lot of them and they’re not actively selling, so they are indirectly supportive of the SNF sector,” says Craig Bernfield, CEO of Aviv REIT.
Aviv REIT recently filed an IPO and has continued on its acquisition path since.
Despite heightened attention to the risks associated with Medicare and Medicaid uncertainty and investors shying from that risk in favor of private-pay investment opportunities in the senior housing space, Aviv has long targeted skilled nursing properties and says it is not scaling back.
This is in light of Ventas REIT and Health Care REIT stating publicly they were halting their purchase the properties due to reimbursement uncertainties stemming from changes under Centers for Medicare and Medicaid Services.
“We do not see the opportunity set differently today from where we saw it two, five or 10 years ago,” Bernfield says. “It’s a big playing field. It’s very fragmented and it’s very relationship-driven.”
Aviv counts 30 years as a senior housing investor, with a steady strategy all along: focus on the operator rather than the real estate. The company currently owns 263 properties nationwide, at least 214 of which are skilled nursing centers. Among the portfolio, 17 properties are assisted living facilities.
And some of the qualities of the market—namely that fragmentation, concentration on operators and relationships—is leading to more opportunity in the space for those who specialize in it. Sabra REIT and National Health Investors Inc. have also focused strongly in the space, with Sabra REIT calling it one of the best asset classes available.
The competition is different from that of the CCRC or assisted living markets, however.
“To aggregate or consolidate, you have to have the capability and operator relationships to be able to take advantage of the opportunity sets,” Bernfield says. “We have infrastructure in markets in which we own properties. That helps lead us to those transactions that other people don’t find.”
The market counts about 16,000 properties owned by roughly 2,000 investors, Bernfield says. This eliminates a level of competition.
“We’re not bumping into the small handful of other companies that are larger players and owners of skilled nursing real estate,” he says.
And in spite of reimbursements having suffered of late, opportunities are growing due to a push for more efficiencies among all health care providers.
“I think the skilled nursing sector is going to continue to improve, and people will continue to see it as a necessary ingredient to the evolution of health care policy on the ground. That will become more evident over the next five to 10 years,” he says. “In a health care environment where everybody is looking to save money, skilled nursing facilities are really doing that.”
Written by Elizabeth Ecker