The Ensign Group Expands

Skilled Nursing News had an interesting article on the nursing home industry bankruptcies and mergers. The market is unstable because interest rates, Medicaid cuts, and workers getting deported. The national for-profit chains are being selective on which facilities to purchase. Several industry players have announced that they will be moving forward with acquisitions, indicating that now may be a favorable time for the chains to create shell companies and related entities to increase profits and grow larger nursing home chains.

Ensign and CareTrust partnered up to acquire a California-based campus with skilled nursing and residential units, while Ensign also bought a Skilled Nursing Facility (SNF) in Washington.

The two facilities that CareTrust REIT acquired totaled approximately $55 million in value. CareTrust used a separate transaction to purchase these two facilities, totaling a greater undisclosed amount. One acquisition was an SNF and ALF facility in Los Alamitos, California, in partnership with The Ensign Group. The campus includes 150 skilled nursing beds and 140 residential care beds. Additionally, CareTrust’s purchase of the campus facility was made through a joint venture between CareTrust and an unnamed third-party healthcare real estate owner.

CareTrust invested approximately $34 million in preferred and common equity, expecting a 9.7% yield. The joint venture has leased the facility to Ensign affiliates under a 15-year triple-net lease with two 5-year extension options and an annual CPI-based rent increase.

The Chief Investment Officer of CareTrust, James Callister, said

“We are excited to add two additional, solidly-performing facilities to our portfolio” and “We are always excited to expand our relationship with affiliates of The Ensign Group as they bring their outstanding operating expertise to the employees, residents, and patients of this Los Alamitos community.”

These investments were funded using cash on hand indicating the profitability of the nursing home business.

Ensign Group announced its acquisition of both the real estate and operations of Pacific Haven Subacute and Healthcare Center, a 99-bed skilled nursing facility in Garden Grove, California. This real estate was purchased by Ensign’s captive real estate company, Standard Bearer Healthcare REIT, and will be operated by an Ensign-affiliated tenant.

These acquisitions take effect on April 1st and will expand Ensign’s portfolio to 343 healthcare operations, which include 44 senior living facilities across 17 states. Its subsidiaries, including Standard Bearer, own 143 real estate assets. Ensign is “actively seeking opportunities” to not only acquire real estate, but also to lease both well-performing and struggling skilled nursing, senior living, and other various health care related facilities/businesses throughout the United States.