Who, What, When, Where, Why. Those are the five basic questions vital to information gathering.
The so-called five “W’s” are also a good place for owners and operators to start as they consider how to reposition a property amid occupancy challenges, changing demographics and an aging building stock.
A panel of experts tackled the big questions on repositioning during an educational session at the 2022 NIC Fall Conference. The discussion, recapped below, was led by NIC Chief Economist Beth Mace.
WHO is the customer? The senior housing customer mix is changing, Mace pointed out. The huge baby boomer demographic is on the cusp of senior living. Some are already moving to active adult communities. Panelist Chris Guay, CEO, Vitality Living, noted that boomers have champagne tastes, but beer budgets. “We have to set up expectations for success,” he said. Guay added that baby boomers tend to have close relationships with their children, and grandchildren, and want to retire near them. He expects those adult children to have more influence over parental housing decisions.
Merrill Gardens purchased a portfolio of older assets to reposition for middle income seniors under the brand, Truewood by Merrill. “Focus groups helped us define the resident,” said panelist Tana Gall, president, Merrill Gardens. The Truewood customer is more practical than the high-end senior living resident. To create a workable operational model, the Truewood team picked a price point and then worked backwards to change the way services are delivered.
The panelists agreed that access to healthcare is a must. Intergenerational experiences are a nice plus. The new customer is also looking for a sense of purpose, according to Gall. She has changed her mindset in regard to wellness, shifting from physical fitness to purposeful engagement, such as volunteering to lead an activity at the community. One resident became the happy hour ambassador. “Find out what the resident can bring to the community,” said Gall.
WHAT is the market? Size up the competition, advised panelist Dennis Murphy, formerly with Benchmark and now chief investment officer, Aviva Senior Living. New communities may have bigger units and better amenities, but an existing property priced right can be competitive, he said. Murphy uses secret shoppers and talks to other operators and salespeople to get feedback.
Like other providers, Gall starts with data from NIC MAP Vision. It provides the market stats needed to make good decisions. She also likes to “kick the tires” and visit the location. “Find out who lives in the area,” she said. “Ask about wages and local buying habits.”
WHEN is the right time? Are margins shrinking? Does the physical plant need to be updated? What are the company’s growth plans? A lot of agency staff working in the building can be a red flag that change is needed. Timing will differ by market. Inflation, rising expenses and interest rates are also factors to consider.
“We can’t afford a misstep,” said Murphy. “Be patient, be thorough.” Guay agreed that today there’s less room for error. Don’t get comfortable. Vitality Living sticks to its rigid assessment and underwriting process. For example, Vitality bought a building and the previous owner had added on assisted living units that were poorly occupied. The market had new competition and new product, so Vitality closed down the assisted living portion of the building. “We had to change to be successful in that market,” said Guay.
Meanwhile, the panelists are carefully watching the residential housing market. Are homes selling at a reasonable pace? How is the local housing market performing? Older people often move to a senior living community after selling a residence. A slowdown in sales could impact plans to reposition.
WHERE are the workers? A market analysis should include an assessment of the local employee pool. “Understand where employees will come from,” suggested Guay. A building may seem like a great acquisition but if it can’t be staffed, the investment won’t work. “We have to start thinking of ourselves as staffing companies,” said Guay.
Gall highlighted ways to provide the same amount of service with fewer workers. Merrill Gardens introduced a resident experience partner or REP, a universal worker. The REPs are moved to different jobs during the day depending on where they are needed at the time. An added bonus is that employees are happier because their work offers a lot of variety. Merrill Gardens is also having success by using robots in the dining room to deliver meals and clear the dishes, freeing the dining staff to interact more with residents.
Look for workers outside of senior living. Great talent can be found in other industries, such as the retail sector, Gall said. Guay taps salespeople from the mortgage industry. The panelists agreed that it’s important to create career paths for workers. Also, the industry needs to work with more universities to build a pipeline of new leaders. Competitive wages and benefits are also key.
WHY reposition? A high percentage of senior living properties are more than 17 years old. Take a fresh look at the building, the panelists advised. Unused common areas can be repurposed. Perhaps there’s an opportunity to bring in new amenities or outside services.
The unit mix must match the market. Vitality acquired a high-end seaside community in Georgia. It had a high number of studio apartments that weren’t filling. The units were converted into one-bedroom apartments. “That’s what people wanted,” said Guay.
Benchmark faced a similar situation. The building featured assisted living and memory care. The assisted living portion, made up of studios, were not leasing well. Meanwhile, memory care had a waiting list. Six assisted living apartments were converted to memory care, creating additional net operating income.
The panelists were open to converting a property designed for a different use, but emphasized the difficulty of that process. They stressed that the local market really drives decision-making around repositioning. “Know your market,” said Guay. Gall added: “This is a market-by-market business.”