In the relative absence of new construction, the senior housing industry is left to work with what’s already around, but in some cases, those existing facilities might not be performing well. That’s where turnarounds come into play, and while there’s already opportunity in this field, the potential is likely to grow.
Senior housing construction is at the “slowest pace in the history of the industry,” according to Stephanie Harris, president and CEO of Turnaround Solutions, and it’s affording ample “rescue” opportunities.
Because such few new facilities are entering the market, now is the ideal time to take advantage of capacity opportunities by erasing vacancy, Harris says.
At one point, occupancy levels rose to as much as 92%, but they currently are hovering at about 88%. While many facilities are performing well, the overall occupancy rate has been dragged down by struggling facilities, where rates have dipped into the 50% or 60% range, she says. That’s the kind of opportunity her company seeks out to “fix.”
Currently, the places in need of fixing are in dire straights, because operators of the ones that are faring slightly better can usually work something out with banks to help get their facilities on an upward track.
For those who can’t, though, there are companies like Harris’s, who says there are three basic roles for companies that deal with turnaround situations: function as a consultant to the owner/operator; buy the property and become the operator; or work in a joint venture and partner with the operator.
“There’s a lot of relevance to this niche of fixing these “hairier” buildings to help address the capacity,” said Harris.
A little less than 10% of projects in the metro areas that Harris primarily operates in are considered “distressed,” but that can rise as high as 15% in markets that are over-saturated, and it’s usually the smaller operators, the “mom-and-pop” facilities, that her company works with.
When people think of turning around a struggling facility, they often envision launching a brand new marketing campaign, Harris says, but most of the time, that’s not what’s necessary. Instead, it’s usually enough to work with what’s already there.
“What blows most peoples’ minds is that in our company, we don’t spend time on outreach marketing,” she says. “We will go into a building that’s distressed, and just work the leads that have been sitting in their database for the past couple years.”
By focusing on underworked or poorly managed leads, it’s possible to get residents that may have been on the fence, but just needed that extra effort, she says.
The most important part of effecting a turnaround is getting the right leadership and the right staff dynamic, she says.
“If the culture isn’t right, the building will never sell. Sales and money solve a lot of problems, but when you get the teams in motion, and every different department head understands their role in supporting, it has a part in the process of sales. That’s the most critical formula to success.”
And while opportunities can already be easily found, the turnaround niche is bound to grow once senior housing construction picks up again, says Harris.
“It will be a fresh, new product offering when these new construction projects open in a year or two,” she says. “It’s only going to exacerbate the problems within this group that is in distress.”
She said she wouldn’t be shocked if the number of distressed properties nearly doubles as it’s facing competition from home care along with other alternatives within the market.
Written by Alyssa Gerace