Commercial real estate investors are pouring millions of dollars into the development of skilled nursing facilities, according to a report on REIT.com. It’s no surprise that the aging baby boomer generation is a primary driving force behind the trend, coupled with changes in health care policy that are pushing demand for outpatient facilities and short-stay rehabilitation centers. Assisted living facilities and memory care centers are also attractive to investors. Acute care hospitals, on the other hand, are not.
In fact, Rick Matros, chairman and CEO of Sabra Health Care REIT, says that his company has invested in just one hospital in the Dallas area, dedicating the rest of the company’s $400 million investment pipeline to skilled nursing and assisted living homes. Sabra owns nearly 90 health care facilities in 19 states, a portfolio that consists of approximately 65 skilled nursing facilities. Matros says the demographic was already ideal, but continued growth and demand simply makes Sabra’s investment strategy more promising.
The senior housing industry is actually relatively young, according to a 2008 feature on Entrepreneur.com. In the 1980s, it was dominated primarily by mom-and-pop operators until the anticipated growth of the nation’s senior population caught the eye of investors who quickly realized the potential benefits. The U.S. Census Bureau indicates that the 65+ demographic has demonstrated continuous growth since 2000, and by 2030, this demographic will represent 20 percent of the U.S. population.
Today, mom-and-pop nursing home facilities are the exception, not the norm. Increased regulatory scrutiny and rising costs have led most privately-owned nursing homes to sell to larger corporations–or to hang up the business altogether. This trend towards corporate-run (and often for-profit) nursing home operations has been met with both enthusiasm and skepticism.
Critics say the financial goals of corporations are primary considerations, whether the care of residents suffers as a result or not. Proponents, however, say that corporate buyouts offer financial resources not otherwise available, resulting in better-trained staff, better adherence to regulations and improved living environments. It’s a debate likely to continue as the health care debate rages on, regulatory compliance is more strictly monitored and costs continue to rise. What are your thoughts on skilled nursing investors: friend or foe to those seeking care?
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