Supply-Side Constraints and Operational Headwinds in Skilled Nursing Valuation

Inflation, a shaky supply chain, and rate hikes have extended production schedules and increased the cost and risk associated with developing new skilled nursing facilities. While new supply is constrained, existing nursing facilities grapple with staffing shortages and weak reimbursements. Despite positive chatter about recovering occupancy, rent growth, and a looming “silver tsunami” of retirees, the industry sits in a precarious position. The inflated cost to build, buy, and operate skilled nursing facilities has led to a downward pressure on valuations. This affects the risk profile of the sector, both from a regulatory risk perspective (in the context of joint ventures or lease renewals, for instance) and from an underwriting or acquisition/disposition perspective (due to the elevated cost of debt combined with rising operating costs).

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Source: https://vmghealth.com/thought-leadership/blog/supply-side-constraints-and-operational-headwinds-in-skilled-nursing-valuation/

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