Consolidation to Rise for Non-Profit Senior Living Operators in 2015

Senior care acquisitions shattered records last year. And now just two months into 2015, senior housing is leading the way when it comes to mergers, acquisitions and affiliations in both the for-profit and not-for-profit sectors.

Senior housing and care represented more than 280 transaction totaling $25.75 billion last year, propelling overall health care M&A activity to $387.4 billion in 2014 — way past its previous full-year record-high of $268.5 billion in 2006, according to data compiled by Irving Levin Associates released in January.

Thus far in January, the long-term care sector of aging services, which includes various types of senior housing, was the most active among health care providers with 19 deals representing 16% share of activity, according to data released last week by specialty investment bank Ziegler.

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Though the lion’s share of activity had mostly occurred in the for-profit sector, there has already been a similar pattern of consolidation among not-for-providers this year—and it’s largely in the form of new affiliations.

There were 54 total not-for-profit change of owner/sponsorship transactions in 2014, based on current tracking by Ziegler, which says this is likely to tick up slightly as it compiles survey results from the annual LeadingAge Ziegler 150. The L-Z 150 analyzes and ranks the largest not-for-profit senior living providers across the country.

To date in 2015, there have been 12 known not-for-profit transactions, Ziegler notes. Several of these have been nursing home dispositions sold to for-profit entities, as well as the change of ownership of the Sears Methodist Retirement System communities.

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“At the current pace, 2015 will very likely exceed year-end figures from last year,” Ziegler wrote in a recent newsletter.

The expectation is based on several patterns driving this kind of activity, Ziegler notes, including organizations’ ongoing strategies to recognize the power of scale and partnerships with others to increase power and stability.

“The environment is becoming a lot more complicated, especially in areas where there’s health care provided. Having access to that wider range of expertise is important,” said Steve Proctor, CEO of Presbyterian Senior Living (PSL) based in Dillsburg, Pennsylvania.

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In mid-February, PSL announced an affiliation with Cathedral Village, a Philadelphia-based continuing care retirement community (CCRC) that provides housing across 293 apartments and 133 newly renovated skilled nursing accommodations from its single-site campus.

Under the affiliation, Cathedral Village will become one of PSL’s subsidiary corporations, joining the provider’s network of 30 locations in the mid-Atlantic. The affiliation also grants PSL reach into the Philadelphia marketplace for the first time, adding to its presence in Chester County and Lehigh Valley.

“This fills a space that is complementary to the other locations that we have,” Proctor said. “For Presbyterian Senior Living, this is a great fit for us, and with a quality organization.”

One of the largest not-for-profit senior living providers in the U.S., PSL has been providing retirement and senior care services for more than 85 years since its founding in 1927. The organization serves approximately 6,000 seniors across its 30 locations in the mid-Atlantic region of Pennsylvania, Ohio, Maryland and Delaware.

“We are looking forward to sharing and expanding our expertise to better enable Cathedral Village to continue providing the highest quality of service and care,” said Cathedral Village President and CEO Dennis Koza. “This affiliation will allow us to preserve and enhance the mission of both organizations to serve future generations of seniors.”

From the perspective of a larger entity, affiliations can also be a chance to add services of an organization to supplement their own offerings, rather than build a new campus to accommodate those sought after services.

“We see the affiliation as a way to strengthen and preserve the historic mission of a faith-based group that has a great history. And by that, we can expand our mission instead of building an entirely new campus,” Proctor said. “If we think there’s a cultural fit, with the same values and goals, that is the defining difference for us.”

Editor’s note: A previous version of this story reported overall senior care M&A activity was $387.4 billion in 2014 when it was, in fact, overall health care M&A activity that totaled this amount. SHN regrets the error. 

Written by Jason Oliva

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