Senior Way of life is engaged in a interval of reinvention as the corporate pivots from the challenges of the final three years and into a brand new period for senior dwelling operations.
That’s based on Jon DeLuca, President and CEO of the Chicago-based operator, who thinks now’s the right time to look inward and “refocus the place we’re.”
On one hand, operators that hoped to have vaulted over their pandemic-related challenges by 2023 are nonetheless discovering themselves grappling with margins and staffing this yr. Although operators have made good progress rising occupancy nearer to pre-pandemic occupancy, present challenges and new price buildings imply that occupancy may should be even increased than up to now to attain related ranges of stabilization.
On the similar time, these challenges have led to a slowdown in development, with the fewest items at the moment below development in 2023 than at any level since 2015. Demand for current senior dwelling provide can also be excessive, and that’s associated to the extra muted fee of recent development in recent times.
These dynamics inform DeLuca’s perception that operators should do extra with much less in 2023. Merely put, he believes that what labored within the pre-Covid occasions is not going to work in 2023 and past.
“We’re trying on the approach we do enterprise throughout the board,” DeLuca informed Senior Housing Information on the current American Seniors Housing Affiliation (ASHA) convention in Scottsdale, Arizona. “It’s about doing issues otherwise.”
‘Refocus the place we’re’
DeLuca’s push for change in 2023 was preceded by a interval of slimming down for the senior dwelling firm. During the last couple of years, DeLuca estimates that the corporate has shed about 70 communities, now sitting at 113 throughout the U.S.
The rationale for that downsizing was to not do with operational challenges at Senior Way of life, based on DeLuca. And that interval of downsizing was useful and helped the corporate decide the place its true priorities have been, DeLuca mentioned.
“It gave us the chance to refocus the place we’re,” he added.
Today, Senior Way of life prefers to construct out employees infrastructure with the corporate’s investor companions in thoughts.
Senior Way of life hires vice presidents of operations devoted to managing its investor and proprietor companions’ communities. Within the org chart beneath them are numerous positions to assist their efforts, together with a regional director of operations, regional director of human assets, regional director of meals and beverage, regional director of medical and a vp of asset administration.
Though Senior Way of life is a leaner firm than up to now, DeLuca mentioned it nonetheless has the infrastructure and scale with which to climate operational hiccups.
The remaining communities in Senior Way of life’s portfolio run the gamut in sort and measurement, starting from inexpensive senior housing and unbiased dwelling to mid-market and high-end CCRCs.
Although Senior Way of life remains to be rising in a number of locations, DeLuca is concentrated extra on enhancing operations for a brand new period of senior dwelling in 2023. At present, the operator’s common occupancy fee is about 80% — together with some communities in lease-up — which is barely behind the trade common of 83% as of the fourth quarter of 2022.
On the similar time, he believes that what is taken into account stabilized occupancy for a senior dwelling neighborhood is now nearer to 90%.
However Senior Way of life’s occupancy fee remains to be transferring north. The corporate’s variety of common month-to-month move-ins is definitely better now than it was earlier than the pandemic.
The issue is that residents are transferring into senior housing in 2023 at a later stage of their growing old journey than earlier than, and thus want extra assist than residents earlier than the pandemic.
That has prompted a lower in size of keep throughout unbiased dwelling, assisted dwelling and reminiscence care. The truth is, DeLuca estimated that in 2023, a median unbiased dwelling neighborhood should add twice as many residents per thirty days as earlier than the pandemic to interrupt even on occupancy, given the brand new and better fee of move-outs.
“Now, you have got simply doubled your fee, you have got simply doubled the churn in your items; renovating the items between residents, you simply doubled that price — so it’s an issue,” DeLuca mentioned.
To assist increase size of keep, Senior Way of life is making an effort to maintain residents effectively for longer and enhance their well being outcomes. That’s the reason the corporate is exploring avenues together with bringing in third-party remedy suppliers, adopting expertise to alert employees of well being issues sooner and linking up with senior-focused pharmacies.
Senior Way of life additionally owns a greater than 30% possession stake in Residence Well being Options, a house well being firm additionally based mostly in Chicago.
On the similar time, it’s merely more difficult to be a senior dwelling operator from a value and income perspective, and DeLuca doesn’t see that altering any time quickly.
A number of the price pressures compressing margins — employees wages, for instance — won’t ever return to pre-pandemic ranges, he mentioned. Meals is one other space of operations the place prices are merely increased now, with no reduction in sight.
In response to these pressures, Senior Way of life is experimenting with the choices of the standard mannequin itself and exploring other ways to supply resident providers. For instance, DeLuca thinks there is a chance to alter the variety of meals IL residents get per day, going from three meals to 2 plus snacks.
On the staffing entrance, turnover remains to be a problem, and DeLuca mentioned the corporate is within the midst of exploring new coaching strategies and different methods to maintain staff engaged and motivated on the job.
For instance, Senior Way of life leaders are checking in with staff at extra common intervals to verify they’re heading in the right direction. Additionally they are choosing in-person conferences as an alternative of the Zoom calls that turned ubiquitous throughout the pandemic.
“I feel that’s made a giant distinction as a result of folks really feel like they’re a part of one thing,” DeLuca mentioned.
“We expect if we keep true to the mission, it would really enhance each retention for the resident in addition to our group members,” he added.
Like many different senior dwelling leaders, DeLuca believes the trade just isn’t out of the woods in 2023 with regard to its pandemic-related challenges. However he’s hopeful that that is the yr when the senior dwelling trade lastly turns a web page and begins a brand new chapter.
He believes the approaching yr will yield file ranges of resident move-ins, however that pre-pandemic margins will nonetheless be largely out of attain given the brand new baseline for staffing prices. A method Senior Way of life handled that in 2022 and 2023 was by elevating resident charges 8% to 9% and 10% and 12%, respectively.
With rates of interest increased, some traders will probably look to “minimize the bleeding” this yr, he mentioned. That ought to give sure traders, akin to new entrants to the area, pure openings to develop a platform.
“That will imply the brand new investor would most likely get a greater valuation as a result of cap charges observe rates of interest,” DeLuca mentioned.
Senior Way of life has in recent times developed 22 communities, and this yr, the operator will open a new-development neighborhood in Severna Park, Maryland, DeLuca mentioned. Past that, the corporate’s growth pipeline remains to be up within the air due to the excessive price of development in 2023.
Though the corporate is stepping again from growth in the interim, DeLuca mentioned there might be some acquisitions within the firm’s future — however provided that it finds the precise alternatives. For Senior Way of life, the precise alternative is a value-add neighborhood suitable with the corporate’s present slate of funding companions.
And whereas DeLuca mentioned he personally wish to scale the corporate as much as acquire extra funds to reinvest in its folks and processes, he additionally believes the corporate is in a superb place in that it doesn’t have to develop, both.
“We’re going to be very choosy about what we do,” he mentioned.