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ISSUE 2 2017 / ARGENTUM.ORG 59


VOLUME 29 | ISSUE 1


Inside the World of Senior Care Mergers, Acquisitions and Finance Since 1948 JANUARY 2017


Most Senior Care Stocks Tumble In 2016 Despite Market Rally, Performance Was Almost As Bad As 2015


The so-called “Trump rally” extended the stock market’s gains for 2016, but seniors housing and care stocks are still mostly in the doldrums. This is despite real estate values remaining at record levels and activist shareholders pushing for managements to do something to enhance shareholder value. It is not working, and most companies ended down after a down year in 2015. If interest rates and labor costs rise, we could be in for another tough year.


See article at right The Highlights Of 2016


There were a few major events that shaped not only 2016 but the prospects for certain companies, as well as the entire sector, in 2017 and beyond. But headwinds are on the horizon.


See article at right


Seniors Housing Acquisitions ..........Page 4 Skilled Nursing Acquisitions ..........Page 12 Financing News ................................Page 18 Fighting Shareholder Activism.......Page 22 The REIT Market ..............................Page 24 People On The Move .......................Page 27


market was rallying, at least in the weeks after the presidential election, our sector did not seem to get enough of that benefit to counter the first 10 months of the year.


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In 2015, only one company posted a positive return, and that was The Ensign Group (NASDAQ: ENSG), with a whopping price increase of 2.0%. The others suffered declines ranging from 1.8% to 59.8% for a dismal showing. By 2016’s end, three companies had price increases while five had double-digit declines. And, for one of the few times since the senior care market meltdown of 2000-2002, nearly half the stocks in our universe are trading at single-digit levels, which is never a good sign. At this time last year, we made the case that the public equity markets had outlived continued on page 2


The Highlights of 2016 The Major Events And A 2017 Forecast Of Things To Come


while others thought the rally had come to an end. As it turns out, both were right....sort of. While we won’t have our final tallies for a few weeks, it does not look like we will surpass 2015’s record of publicly announced deals (358), although it will be the second-most active year with more than 335 separate transactions so far. Valuations, however, have held pretty stable with the 2015 records. So less activity, but continued high prices, including some record prices and near-record prices in certain sectors (see below).


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Perhaps the biggest stories of 2016 involve the repositioning of two of the three largest REITs. HCP, Inc. (NYSE: HCP) completed its spinout of the HCR ManorCare assets in a transaction that some thought was an


continued on page 15


fter record-setting prices in the acquisition market in 2015, com- bined with a record number of transactions, expectations for 2016 were mixed. Some people thought the bull would keep on running,


ll we can say about the public equity market for seniors housing and care stocks in 2016 is that at least it was better than 2015. Unfortunately, that doesn’t say too much. While the rest of the


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