Skilled Nursing Facilities and Bankruptcy
For the past 24 to 36 months the skilled nursing marketplace has experienced unprecedented turbulence making the decision to buy skilled nursing facilities a difficult one to make. Profit margins for operators of skilled nursing facilities are spread thin with MediCare and Medicaid cuts. In California, MediCal withholds have further limited the budget with which operators have to work. Though these hold backs are typically repaid by the state, smaller skilled nursing operators experience tighter cash flows while trying to make do without the necessary reserves.
As reimbursement shrinks and the marketplace enters a state of turmoil, lawsuits become even more prevalent forcing some operators to list their SNF for sale. Those looking to buy skilled nursing facilities are equally aware of these hardships and need to be very cautious when evaluating a potential purchase. In some cases the only plausible exit out of the skilled nursing industry is through bankruptcy.
Case Study: Country Villa
As a skilled nursing brokerage, The JCH Group keeps keen to the present volatility and marketplace trends with calculated information and analysis. Through experience and proven strategy, our team orchestrates deals to close quickly and maximize on profitability, in whatever form that takes.
Most recently, our team tackled the case of Country Villa, a company that operated 18 skilled nursing facilities and one assisted living facility in Southern California. Country Villa filed for bankruptcy in March 2014, relinquishing all 19 leasehold properties to a court run bankruptcy and auction. The JCH Group was retained by the court to run the marketing and auction process.
Over 50 qualified buyers reviewed the due diligence materials and at the end of the process, only one bidder, in addition to the stalking horse, was able to attend the auction. A requirement of $40 million on deposit in a trust account prior to attending the auction was a major hurdle for many potential bidders.
The stalking horse bid was $62 million. The bid opened at $64 million. Covenant Care and Kaiser Permanente collaborated to offer an opening bid of $70 million, which was rejected by the court. This occurred because the stalking horse bid carried a nonrefundable liquidated damages clause amounting to $40 million, ready to go non-refundable once the auction was complete. Though Covenant Care and Kaiser were able to place $40 million into a trust account and attend the auction, they were unable to match the liquidated damages clause and the guaranties offered for the leased assets.
The Country Villa sale closed at the end October 2014.
The JCH Group for Your Bankruptcy Deal
The JCH Group is proud to have successfully facilitated the Country Villa bankruptcy case as appointed by the court and the Reissman’s. The same team is available for your own bankruptcy deal. As the leading assisted living and skilled nursing brokerage, we pride ourselves in meeting and exceeding the needs and expectations of each and every client we represent.
Our team of established experts brings their acute insight into your specific situation, no matter how great or small. Whatever your vision, The JCH Group is prepared with the best advice on where to go next. For your complimentary business valuation, contact our team today.