Recently, we have seen stories circulating about the connection between REIT ownership and the way skilled nursing facilities provide care, stemming from a study written by the nonprofit journalism outlet KFF Health News. We’ve seen this before, headlines like “real estate investors profit while patients suffer,” usually with graphic cases of mistreatment highlighted. Of course, patient abuse and bad actors are out there, but these “studies,” and more so the journalists that cover them, often lose sight of any other factors that could lead to a decline in quality of care, a change in staffing ratios, or the net income on an income statement. There has been a narrative that is usually being pushed and no consideration as to why REITs exist, why real estate owners have to make a profit, or how much private capital has gone towards real estate improvements that keep many facilities’ doors even open. And often times, assisted living is just lumped in there too.

The industry is used to this treatment, especially after the pandemic, but a recent event could scare off capital from the space and certainly raise insurance costs. That was a jury verdict in California which awarded the family of a 100-year-old memory care resident, who wandered from her community and died of hypothermia in 2019, $110 million in compensatory damages from the real estate owners, including DigitalBridge (which was a REIT at the time but not anymore) and Formation Capital. The judgement has not been finalized, and likely won’t be for some time, but that sent a slight chill through the industry.

I was asked at NIC what my greatest fear for the industry today was, given the numerous tailwinds blowing in our favor. With the recent snafu concerning daycares in Minnesota on my mind, I responded with a major PR shoe to drop that could lead to regulatory and reimbursement backlash and drive capital from the sector. It won’t help that a potential labor shortage could lead to more staffing strain, and unfortunately, mistakes being made. Perhaps LTC Properties and National Health Investors backing off from the skilled nursing space is already a sign of that worry, in combination with the attractive opportunities in the private pay seniors housing sector, of course. But it will be tough to predict who the spotlight will shine on next.