John O'Connor

Sabra Health Care REIT chairman and CEO Rick Matros recently tweaked more than a few noses when he made some rather disparaging remarks about the benefits of investing in large skilled-care companies. As he sees it, there pretty much are none.

Not that being noticeably contrarian is a new posture for Mr. Matros. With his spiked hair, tattooed arms and well-worn jeans, he did not exactly blend in with the dark-suit crowd attending the National Investment Center for Seniors Housing & Care meeting in Chicago.

“We think the national groups can’t do it anymore. There are no advantages, just disadvantages. Not long ago, the REITs aggregated assets. I don’t think they can anymore,” Matros declared.

Sabra’s new mantra seems to be smaller is better, as evidenced by its latest plan to pick up two dozen smaller skilled-care operators.

According to Matros, the new sweet spot for acquisitions is an operator with two to five properties. He urged other investors to look for similarly sized investment opportunities.

Why are smaller operators so attractive to Sabra?

“They don’t necessarily own the market, but they know it well. They’re always in the buildings. There’s not these layers of management with hired hands on the ground. Markets are changing. Referral sources are changing. You need to be nimble,” he noted.

“I see no dis-economies of scale,” he added.

It was a very different message than the one delivered less than 24 hours later on the benefits of upsizing.

The message at the scaling session was that there are distinct advantages to getting bigger, mostly of the economies-of-scale variety.

So is getting bigger a good idea or not? As is so often the case, the answer depends.

Size that allows you to do things more efficiently is a good thing. Size that undermines how well you do things is not.

In the final analysis, what matters most is not how big you are, but how good you are.