CHICAGO — The U.S. economy may be stuck in low gear, but tactical and targeted growth strategies can produce outsized returns in the seniors housing space, according to a panel of property owners and operators who spoke during France Media’s InterFace Seniors Housing Midwest conference. The event, which took place June 21 at The Westin Chicago River North hotel, attracted 265 attendees from the seniors housing industry.
Close attention to rental rates and occupancies boosts top-line revenue growth, said panelist Joe Solari, vice president of corporate development at Capital Senior Living. The Dallas-based company owns and operates 126 independent and assisted living properties. “We focus on buildings that are less than 90 percent occupied,” said Solari.
Other successful growth strategies at Capital Senior Living include converting independent living units to those designed for a higher level of care, and the acquisition of stabilized communities in locales where the company already operates. “We can absorb these properties without almost any increase in corporate overhead,” said Solari.
Moderated by Adam Heavenrich, managing director of Chicago-based Heavenrich & Co., the panel shared other effective corporate growth strategies. Participants included Bob Karn, executive vice president and CFO, Allegro Senior Living; Isaac Scott, principal, Anthem Memory Care; Suzanne Koenig, president, SAK Management Services; and Solari.
Panelists agreed that new development brings the kind of quick growth that impresses capital providers and investors. “But we’re judged by consistent cash flow,” noted Karn of Allegro Senior Living, a Florida-based developer, owner and operator. A close examination of operations at each property provides insights into the basic issues that impact cash flow such as resident and employee turnover.
The operations team at Allegro also plays a key role in new project development by providing input on labor and costs, said Karn. “Having a solid management company that works with our development team has been a huge advantage.”
With eight memory care communities and four others in development, Anthem Memory Care has relied on new projects for growth. The company was originally positioned as a third-party owner, but then added operations as a way to grow. “We wanted to control our own destiny,” said Scott of Anthem Memory Care based in Lake Oswego, Ore. “We see a lot of opportunities with properties that are mismanaged.”
Strategies vary
Growth has taken a different path at Northfield, Ill.-based SAK Management Services, an owner and operator that handles troubled properties, often as a court-appointed receiver. “We have so many stories,” said Koenig.
For example, SAK was appointed to save a troubled skilled nursing facility with an owner that was not cooperating with the lender. Employees were shredding documents when Koenig and her team arrived to take over. Her team remained in the facility 24/7 for the first few days, and then operated the property for two years. “We turned things around,” noted Koenig, adding that workplace culture is a huge factor in success.
Other panelists agreed that workplace culture has a dramatic impact on operations and cash flow, and therefore the ability to grow. Employee incentives are an important motivator. Operational consistency is crucial and starts with a savvy executive director, they said.
Strategic property dispositions also factor into growth strategies. Capital Senior Living, for example, has sold five communities over the last several years. Three were located in states where the company had no other properties — a situation that didn’t fit the corporate goal of geographic concentration. The other two properties were older and needed big capital expenditures to bring them up to date. “Sometimes it’s not right for us to take that risk,” said Solari.
Barriers to entry are inhibiting growth strategies for new development, the panelists noted. Good sites are hard to find and some markets are saturated with new senior living communities. “We walk away from deals now,” said Scott at Anthem Memory Care. But the company is getting creative. It’s currently converting the site of an old warehouse in a prime location into a memory care community.
Located in secondary and tertiary markets, Capital Senior Living constantly faces the risk of new competition because of a lack of barriers to entry. The solution is to provide the best care, said Solari. “Another provider may come into those markets, but we feel we can sustain our reputation.”
— Jane Adler