Post-recession, senior living has been called “recession resistant,” due to undeniable demographics and a growing, needs-based clientele.
But all companies struggled during the recession, and entry-fee continuing care retirement communities came into the spotlight in particular as older homeowners opted to remain in their homes through the real estate downturn rather than sell them to fund the entrance fee for a CCRC.
One nonprofit CCRC system has fared particularly well following the downturn. While its occupancy is not fully recovered, it has surpassed 90% and counting. A strong rating from Fitch gives the company access to ongoing capital for community improvements and repositionings.
SHN caught up with the new CEO of ACTS Retirement-Life Communities, J. Mark Vanderbeck, on development opportunities, financial strength and why bigger isn’t always better. He shares his thoughts on the future of ACTS, the largest not-for-profit owner, operator and developer of CCRCs.
Senior Housing News: Many CCRCs struggled during the recession and really took a hit. ACTS has remained relatively stable despite having all entrance fee communities. What positions you as a stable player in this market?
Mark Vanderbeck: A lot of organizations might have struggled a little bit during the economic challenge period, from 2007 to 2012. We have investment grade rating as an organization, so financially we’re very strong. From a growth standpoint, when opportunities come to us, they come in two forms:
1. The type of new development or, over the last 10 years, we’ve done a number of affiliations. 2. Expansion of existing communities. That is sort of an ongoing process.
SHN: Where do you see growth potential for ACTS?
MV: Another thing we’ve done the last few years — in Florida, Pennsylvania and others locations — is repositioning: modernize the communities and actually, in some cases, we have changed the mix of the organization. We may take a residential area and then reposition that and have more assisted living suites, more skilled nursing suites. And certainly the direction has been to [create more] private spaces in both assisted living and skilled nursing.
SHN: Is the goal to develop, acquire/affiliate or both? Where do you see the most efficiency?
MV: In the early years — the start of the company, from 1972 to the late ’90s — [ACTS focused on] very traditional development from the ground up, handling the entire development process, usually a phased project development. In many cases, that was driven by the financing for the project.
Then we hit 2000 and all the sudden we started getting contacted quite a bit. The industry, to an extent, started to change; some single-site communities might have been struggling. Since 2000, we’ve had a number of opportunities that have really come to fruition that are in the acquisition/affiliation mode. What happens is people in the industry become aware that you do both acquisitions and affiliation and new development, and then those opportunities come to you.
We certainly have both as part of our toolkit from a development standpoint. The advantage of the acquisition/affiliation is that once you go through a very comprehensive due diligence process, it’s a much quicker process.
For example, our largest affiliation was in 2010 with Peninsula United Methodist Homes, which have four communities in Delaware and Maryland. You can do [that whole process] in less than a year, whereas in traditional development you may be looking at three to five years and $150 million.
[But] if you look at the history of ACTS, what you’re seeing is we’re adding a community about every couple years. I would imagine that’s still going to be the case in the future.
SHN: You’re very rooted in the East Coast. Any plans of venturing outside of that market, whether through acquisitions/affiliations or new development?
MV: We feel strongly that we have to be able to support the communities from a regional management structure. We don’t want to be so far away that you don’t have staff that can respond to issues. We have regional staff in each of those markets.
Do I see us all the sudden having the perfect opportunity in Arizona or California? Most likely not. I think we want to be able to stay in our niche. There’s still a lot of opportunity and there continues to be growth in the mid-South arena — the Carolinas, Virginia, Georgia.
SHN: ACTS has an A- rating from Fitch and a BBB+ rating from Standard and Poor’s. What earns ACTS these high ratings?
MV: Periodically we are reviewed by S&P and Fitch and one of the things that is always in their commentary is our commitment to regular and routine capital enhancement, and also the expertise and longevity of the senior management group.
SHN: There is a lot of movement in the senior housing space in terms of bigger players entering the market or merging to become dominant providers. What does ACTS view as its biggest threat?
MV: Candidly, it’s people staying at home, because even in the best of markets, the majority of economically eligible and age-eligible individuals are staying at home and looking to see what kinds of services they can get [there]. It’s really upon us to show what the advantages are of living in a CCRC.
We’re not as focused on some of those organizations [such as Brookdale]. In many cases, they have a different product. They are groups that have very large communities — 600 units, 1,000-plus units. That’s not our niche.
Vanderbeck joined ACTS in 1998 and has more than 30 years of executive management experience in the senior living industry. Before assuming his role as ACTS chief on Aug. 1, Vanderbeck served as executive vice president of operations, overseeing the organization’s 23 CCRCs, all based on the East Coast.
Written by Emily Study