As investors favor ASCs & offices, major skilled nursing operator splits segments

Only 14 percent of investors surveyed in March 2018 said skilled nursing facilities met their acquisition requirements, compared to 72 percent for ASCs and 98 percent for medical office buildings, according to Skilled Nursing News.

Just 8 percent of respondents in a Lancaster Pollard survey predicted SNFs would see more growth in 2019 than any other healthcare space. In contrast, 40 percent chose home health and 50 percent chose memory care and affordable senior housing as areas with the most growth opportunities.

This investor skittishness about SNFs is causing one industry leader — The Ensign Group — to separate its SNF segment from its home health, hospice and senior housing business lines. Those are being spun off into a new company called The Pennant Group. Ensign hopes the change will help it raise capital from investors who would otherwise hold back because of their reservations about SNFs.

"Following the spin-off, we will be able to raise capital in ways and at times that Ensign may not," the company said in a presentation to shareholders. "Relatedly, the public market appetite for investments — both debt and equity — in the skilled nursing space stands in contrast to the appetite for similar investments in home health, hospice and senior living businesses, which may attract better equity valuations and more favorable debt financing via certain offerings."

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