Skilled nursing facility loans.

Skilled nursing sits at the far end of healthcare real estate. The building matters, but almost every variable that decides the loan lives in the operation. Who holds the license. How the census breaks down by payor. What the last three survey cycles found. Where the facility’s federal quality rating stands and which way it has been moving.

Nothing about that is unusual to the people who work in the sector. It is unusual to lenders, which is why so few of them participate. Skilled nursing is a specialty inside a specialty, and the practical consequence for a borrower is that lender selection carries unusual weight. The wrong one does not give you worse terms. It gives you six weeks and a decline.

Revenue that comes from programs, not tenants

In most commercial real estate the income comes from leases. Here it comes from reimbursement, and the mix between Medicare, Medicaid, managed care, and private pay varies facility by facility and state by state.

Underwriters spend real time on that mix. Not because one source is good and another is bad, but because each behaves differently and each carries a different rate and length of stay behind it. A facility with a high skilled census produces different revenue per occupied bed than one running mostly long-term custodial care, even at identical occupancy. Lenders want the census broken down, not summarized.

They also want to understand the state environment the facility operates in, since Medicaid rate setting is a state function and two identical buildings across a border can post very different results.

The public record is part of the file

Skilled nursing is one of the only property types where anyone, including your lender, can look up the quality record before the first conversation.

Survey findings, deficiency citations, and the federal star rating are all public, and healthcare lenders read them as a matter of course. What they are looking for is pattern and trajectory. An isolated finding that was corrected reads very differently from repeated citations across cycles, and a rating that has climbed under current management reads differently from one that has fallen.

If there is history in the file, put it in front of us at the beginning. We would rather build the story into how the deal is presented than have an underwriter discover it in week three.

Ownership structures and the capital that fits them

Most skilled nursing deals separate the property from the operating company, with a lease between them. Lenders are used to this and will underwrite both, including how much coverage the lease actually provides and how strong the operating entity is on its own.

The capital sources that work in this space are limited. A handful of banks, specialty healthcare lenders, and private capital do the bulk of it, and HUD-insured programs are worth pricing on some facilities. Change-of-ownership transactions often run through short-term capital first, because licensing transitions and reimbursement continuity take time to settle, then refinance into permanent debt once the facility is clearly performing under the new ownership.

Tell us the structure, the operator, and the record. We take the file to the lenders who actually underwrite this asset class rather than the many who say they do.