Following several years of strong growth after its initial launch in 2016, Mozart Healthcare took what was supposed to be a temporary year-long pause on the acquisition market in 2019 but like many companies had to change plans in 2020 due to COVID-19.
Now heading into 2022, the Skokie, Ill.-based long-term care provider plans to get more aggressive in the skilled nursing market.
“As the stimulus money starts running dry people are going to start listing their facilities and we expect that it’s going to … it’s already happening now … but it’s really gonna happen a lot more in the beginning of 2022,” Mozart CEO and co-founder Archie Shkop told Skilled Nursing News.
Operators continue to report liquidity and workforce shortage issues as some real estate investment trusts like Omega Healthcare Investors (NYSE: OHI) have reported issuing rent deferrals to multiple tenants.
Delinquent loans for nursing care also saw an increase in the second quarter of 2021, reaching 1.6% of the total loans, according to NIC MAP® Data, released by NIC MAP Vision, while bridge loans for the sector were down from its recent recorded high in the fourth quarter of 2020 but remained elevated compared to years prior.
Still, the second financial quarter 2021 NIC lending trends report shows that construction loans saw notable increases for nursing care, indicating renewed optimism about the sector’s recovery path as SNF prices are reported to be $17,000 more per bed compared to 2020 in terms of evaluation
As some smaller operators may face a crossroads to either grow or leave the industry all together, Mozart is taking the path toward expansion.
“It’s been relatively calm throughout the pandemic, we were not very active and were just trying to support our team,” Shkop said. “In early 2021, we went into full blown building mode and quadrupled the size of our team.”
Shkop said the company is slated to close on a $40 million transaction before the year is over.
“Not major growth, but we’re getting back into that phase,” he said. “We’re being very patient and trying to find deals that we feel can still make sense. We have a lot of letters of intent out there right now.”
While Shkop admitted that some of the prices in the skilled space are “completely unreasonable”, he still thinks there are deals out there for Mozart.
“We’re in Texas, Ohio, Michigan, Arkansas and Montana right now and we’re looking to have a deal out of Oregon,” he said. “We’re definitely looking to diversify into different states and into different product lines.”
When making deals, less important than census levels, which continue to be below pre-COVID levels, Mozart Healthcare looks for ways it can shore up deficiencies in operations before closing, such as streamlining vendor relationships. Shkop said the company can come in and provide support operators didn’t need five to 10 years ago, such as adding a full-time corporate recruiter and implementing purchasing software.
“We’re very much in growth mode but I’m not a deal junkie,” he said. “It’s about finding the right deal and as you can see from my prior two years, doing one deal in two years, I’m more than happy with that.”
Mozart launched in December 2016 and in the first few years the company bought about $250 million worth of real estate, which included around 35 nursing homes.
“In hindsight I wouldn’t have taken that pause in 2019 because I didn’t intend to take two and a half years off,” Shkop said.