Tips for Selling your Nursing Home During the COVID-19 Pandemic

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Jessie

Fix your Property to Care for COVID-19 Patients Safely

The one way that selling a nursing home actually does resemble selling a private residence is that there will be an inspection, but not just a private inspection, a state inspection as well. The buyer will be alerted to items that may require repair or replacement. Problems in the infrastructure WILL be found by the buyer, slowing down the transaction and forcing you to make repairs under a cost-ineffective schedule. The property will appear more attractive and desirable if the report doesn’t come back with a lot of problems. It will be easier to find a buyer and it will fetch a better price.

Of course, while this is the best advice, it might not be realistic. It could be that your main reason for selling your nursing home is that you are unable to make important changes to your property that could keep people in this and later pandemics safe. Some of these changes include: adequate rooms to prevent overcrowding and the spread of the COVID virus, rooms that allow for isolation of COVID patients, and mechanical ventilation systems that prevent the airborne COVID virus from spreading.

If these repairs can’t be made in advance, you have to be aware that you may lose buyers.

How to get a valuation for your nursing home during COVID

Specific appraisers for nursing homes exist because nursing homes are not simply multifamily housing. Extensive regulation of nursing homes means you need someone experienced in understanding fiduciary obligations, operations, reimbursements, etc.

Some experts say nursing homes should not be appraised as real estate, but as business loans to the buyer.

There are some ways in which it is valued like real estate, however. You’ve heard the term location, location, location, and nursing homes actually are no different. Typically, nursing home residents are from 10 miles of the nursing home facility. The appraiser will look at demographics of the surrounding area according to the Census to evaluate its future profitability.

The appraisal will also take into account desirable amenities like gardens and transportation.

It seems likely in the time of COVID that the facility’s preparedness to deal with ill patients will also be considered.

The HCFA will have an OSCAR that considers operational status and history of the property.

Target Potential Buyers for your Nursing Home

As discussed above, because of the specialized and regulated nature of nursing homes, you may want to have someone specialized in nursing homes sales help you with this process. If you are doing it alone there are two primary places you may want to look for potential buyers

Other nursing homes (State Health and Human Services can provide a list);
National Investment Center for Seniors, Housing & Care. Their website states that they “provid[e] the data and analytics that investors and operators need to make informed decisions, and by facilitating the connections between these groups to benefit America’s elders.” You may find buyers at their conferences, held twice a year.

Avoid or Disclosure Poor COVID-Related Inspections

Ideally, if the nursing home were not set up to safely care for COVID-19 patients, the nursing home could have refused them. An appropriate time for the sale would have been before the nursing home was levied with fines or sued for wrongful death. However, if you were unable to anticipate the effects of the pandemic, and you are facing a sale now, it is important that you disclose early any bad survey results, which will be available to the buyer at any rate in the due diligence period. This builds trust and confidence in the buyer. Having a plan for turning things around is important too.

Compile paperwork for buyers

A consulting firm can help you to identify the paperwork that will help smooth over the process so that there isn’t a lot of back and forth.

Examples of these documents includes:

Three years of census reports, broken down by payer type and month;

Three years of cost reports;

Three years of income statements by month;

Demographic information for market area for your nursing home;
Information about the physical facilities, including an ALTA survey, floor plan, and property tax record.

Unlike selling a simple piece of commercial real estate, you are selling a going concern. The buyer needs a clear picture of the financials.

What kind of seller/professionals are ideal

You will want to avoid having someone market and sell your property who is entirely new to nursing homes. Ask a lot of questions about their experience and results in selling long term care facilities. Remember, selling a home or a commercial building is not the same as a going concern. Nursing homes are highly regulated. The documentation an experienced title company will need to deal with is different from other commercial transactions as well.

Likewise, choose your bank carefully. A bank that is inexperienced with skilled nursing might be wary of nursing homes because of the lack of certainty. Obstacles in closing can kill a deal.

All other professionals involved, from inspectors to brokers, should have experience.

Keep the Nursing Home Sale Quiet

Because of COVID, your residents and your staff are facing uncertainty and fear right now. Neither needs the stress of a sale, and common knowledge of the impending sale might lead to a furor. You face the risk of a mass exodus of staff, who will be worried about the future and the future of their jobs if they know you are selling the facility. You will face difficulties in operating during the sale and discourage buyers with an understaffed facility.