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It is always the calmest before the storm. And, the storm known as the “silver tsunami” — or the flood of Baby Boomers to the senior housing market — has long been predicted for the skilled nursing industry. There’s just one problem: we know it’s coming, but not what the impact will be when it makes landfall.

The way in which skilled nursing fits into the senior care puzzle is changing, and for skilled nursing operators, the uncertainty is stressful. Previously lauded for its strong demand fundamentals, the skilled nursing sector has gone through a rough patch lately due to increased long-term care options for the consumers and changes in healthcare and rehabilitation that are leading to shorter stays.

These headwinds have caused occupancy rates to decline to record lowsi, according to the National Investment Center for Seniors Housing & Care (NIC), and industry players to tighten their purse strings. While many expect demand will pick up when the flood of baby boomer seniors begins to require skilled nursing in greater numbers, that’s no consolation on current income statements. Savvy investors and operators understand they need to make waves sooner rather than later.  And that gets tricky when some experts predict that the cycle has already hit its troughii, as they did at the 2018 Senior Housing News Summit, and the expected flood of baby boomers is still a projected three to five years out.

Skilled Nursing Requires Skilled Capital Injection

When the senior housing and care business gathered for the 2018 National Investment Center (NIC) Fall Conference in Chicago, these challenges in the sector were a core discussion. Despite the market pressures and questionable market fundamentals, the sentiment of the conference was one of cautious optimism. Between the opportunity for operator consolidation, capital injection and private sources of financing flooding the market, there are opportunities. However, the market is moving slowly.

Lee Delaveris, VP, KeyBank Real Estate, participated on the “Thriving in Skilled Nursing” panel discussing the tactics owners and operators should use to position their portfolios for current market conditions. The consensus was that industry players need to make waves themselves, investing capital in property upgrades to meet the needs of a changing aging consumer and looking for opportunities to consolidate or draw private capital while they wait for the boomers to arrive.

Why Skilled Nursing?

In the senior housing hierarchy of care, skilled nursing offers a more hands-on level of senior care than assisted living, providing residents with housing, medically trained and licensed staff, and clinical spaces. Skilled nursing centers offer an essential service that caters to an important and growing community: seniors who cannot live independently and need specialized or acute care.

Many in the industry believe skilled nursing facilities provide the best venue for post-acute care in terms of cost-efficiency and quality control. Skilled nursing owners and operators must be able to communicate that value proposition to patients and their caregivers, especially with the emotional pull to age at home.

In terms of investment, the recent headwinds in the industry may have created opportunities for investors to buy underperforming facilities or to make improvements to existing ones to better position them.

Where are the Opportunities?

While the supply-and-demand fundamentals of skilled nursing are well-known and accepted, the opportunities this complex market currently holds for investors are less scrutinized. Three areas of opportunity in the skilled nursing sector for lenders include:

  • Consolidation: The silver tsunami will not only increase the number of potential senior care patients but, will also have the adverse effect of decreasing the number of individually owned and operated senior care facilities. The U.S. boasts a robust 15,000 nursing homes, including many “mom & pop shops.” Regional operators see an opportunity to consolidate by acquiring independent facilities and bringing them into larger, more efficiently operated portfolios.
  • Capital injections: Skilled nursing offers significant potential for investors who have capital to spare. As reviewed by NIC, over half of all skilled nursing facilities in the top 99 metro markets were built before 1980iii, driving a dire need to revamp, reposition and replace existing facilities. Demand for these updated facilities will balloon when the silver tsunami hits, so well-capitalized operators are using this time to prepare. Waiting to build new facilities in several years when the tidal wave hits the metaphorical shore could leave industry players ill-equipped or under water.
  • Private Equity: In addition to the general fragmentation in the market, a multitude of institutional investors and REITs are spinning off their skilled nursing portfolios—and private equity is noticing. As institutional investors and REITs are forced to sell their underperforming assets, private equity and investors are happy to take on the risk and opportunity that comes with these huge bargains.

Looking Ahead

When the silver tsunami of demand for skilled nursing facilities materializes, savvy, forward-looking industry players will have the proper infrastructure in place to be ready for the sudden uptick in demand. Owners and operators must make this case to investors who are wary of waiting for poor occupancy numbers to turn around. Investors with a ready flow of capital to place should recognize that a capital injection now should position properties to ride the wave of the future.

At KeyBank, we have a firm grasp on the senior housing, senior care and skilled nursing industries. Considering the heavy operational nature of the sector, we understand that the key for lenders in this market is to identify and build strong relationships with dependable skilled nursing facility operators and deliver financial products and services that help everyone navigate this tricky time before the wave hits the shore. To learn more, connect with your KeyBank Healthcare Finance Manager.


NIC. “Skilled Nursing Occupancy Dips to 81.7 Percent, A New Record Low.” September 2018,


Spanko, Alex. “Sabra, LTC: Skilled Nursing Market Has Hit ‘Trough,’ Slow Occupancy Growth Ahead.” Skilled Nursing News. September 2018,


NIC. “Valued Data for Skilled Nursing Investors and Operators.”

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