Greystone President: Nonprofits Chasing Deals with ‘Intense Effort’

On the heels of the merger between California-based nonprofit senior living providers American Baptist Homes of the West (ABHOW) and, Greystone Communities President Mark Andrews says he wouldn’t be surprised if there’s more such activity ahead as other nonprofits play catch-up after the recession.

Following this year’s The Greystone Event, the senior living advisor’s annual conference that brings together industry professionals, Andrews sat down with Senior Housing News to discuss M&A activity, expansion and what the future holds for nonprofit providers.

Q: What’s the current climate in the senior living space?


Simply, we see both on the not-for-profit and for-profit side of the business a renewed interest in making investments in senior living. During the recession, it almost came to a standstill. Now, we find everybody wanting to catch up. That’s leading to a lot of good activity. I expect it will continue and I hope that it will continue, but if there’s one thing among a lot of lessons we learned during the recession is, you can’t rely on anything to continue. You always have to be prepared for things to change.

Q: What are mergers looking like these days?

At The Event, Greystone invites a number of our clients and industry professionals and our own staff in order to create an environment for people to learn, share knowledge and network. And within that context, we heard discussion that we are seeing consolidation within the senior living industry as a whole on both the for-profit and not-for-profit side.


On the for-profit side, those investors are looking to build scale in order to be able to address better economies to scale and improve operating margins. On the not-for-profit side, we see affiliations and mergers occurring, but for a slightly different reason. Through the great economic recession, most not-for-profit providers came through quite well. A few today still bear some of the scars of the effects of that recession and are looking to affiliate or merge with stronger organizations. Perhaps it’s a single-site campus where the board has determined that they would be able to better serve their residents by affiliating with a stronger regional, or perhaps national, not-for-profit, and then there are those that quite frankly need a stronger asset or capital base in order to be able to continue to serve their residents needs, and are affiliating for that reason.

Q: Do you predict any big portfolio deals coming down anytime soon?

I’m not aware of any large, looming portfolio transactions, but certainly, at any given point in time, there is a handful of small mergers or acquisitions occurring among single-site providers. The most recent large news, which everybody knows well, is the merger between ABHOW and the [ABHOW CEO] Dave Ferguson spoke about that at our event. What he brought up was just the efficiency of bringing two large not-for-profit organizations together to be able to operate in a more strong fashion and more efficiently to better serve their residents. There may be other affiliations or agreements or mergers like that, but they tend to keep those very tightly under wraps until they make their public announcement.

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Q: What are the motivating factors behind expansions and redevelopment, particularly in the not-for-profit sector?

In the nonprofit sector, we are seeing a very intense and renewed effort and focus on nonprofit organizations to expand current campuses, to redevelop older assets and even look at growing into new market locations. I think the reasons for that are several-fold.

One, just simply because the economy is doing better, those organizations have more confidence in investing in their businesses, as opposed to staying on the sidelines. Everybody certainly sees and understands the age wave and the sheer magnitude of the growth of the senior population. And the third reason is perhaps defensive, in that we are seeing large capital investments being made by for-profit investors.

So simply, in order for the not-for-profit organizations to maintain their market share and remain competitive with new capital investment coming in for the for-profits, they must reinvest to make their product market-aligned, to make it of interest to today’s senior, whose consumer’s preferences are different than the senior of 10 years ago, and more importantly the senior that we’ll see coming through the door 10 years from today will be very different in terms of needs and wants than the current residents. Everybody realizes they must adapt, they must change, they must grow in order to remain market-aligned and market-relevant. So we’re seeing significant planning and expansion activity now on the not-for-profit side.

Q: What conventional wisdom is being challenged, and what does ‘the next big thing’ look like?

If we go back and survey how the nonprofit sector has approached senior living services over the last 30 years, look at the word choice that we use. We use the word retirement. We use the word care. We have said, ‘We know what’s best for you.’ It’s almost a paternalistic approach to serving seniors. We have to eliminate that vinacular. Take out the word retirement. Take out the word care. We have to provide a program that is very resident-centered, and this has already started. One that will recognize that seniors coming and looking at senior services will be more informed about their own health status. They’ll want to be proactively in charge of their own aging, as opposed to having somebody else tell them to do that.

While I think we have perfected the physical plant of how to deliver services, we need to substantially increase the rate of innovation in the resident programming on the wellness, particularly on cognitive health. I think that’s where we need to really make great strides, at helping our seniors understand that we are there to help you age with dignity and maintain cognitive health in every way possible. That’s being driven by changes in technology, by changes in the continuum of care, by changes in the manner and method and location of how services are delivered to seniors.

So it’s actually an exciting time, because we will see some great innovation moving from an older model to a model where the seniors is in the middle of making the decisions, because they’re going to be more informed, and they’re going to be determining where, when and how they wish to receive senior services.

Q: How soon do you see vocabulary changing to reflect these innovations?

Certainly we know that, for example, LeadingAge is working hard to try to redefine terminology, and they’ve been doing a great deal of research into that. So I’m sure they’ll be providing suggestion and guidance on that very soon that perhaps the industry will be able to pick up and to follow and to adopt. I do believe that it will be a while before we see a complete change in attitudes and vernacular as to how we refer to the industry, just because old habits are hard to die, but we have to start somewhere.

I think if we use different words, it will be in recognition of a shift that’s already occurring. Otherwise, it just starts the conversation that all of the institutions in senior living recognize that change is occurring, and more importantly that the rate of change has to accelerate in order to be able to offer a lifestyle and product and program that will appeal to the upcoming generations of seniors who will be markedly different than previous generations.

Q: What’s the nonprofit difference?

I think both for-profit and nonprofit try to accomplish delivering a high-quality environment and service program. I think the difference is the methods through which they choose to do it and the absolute commitment to it. Certainly both have businesses to run and each must meet its own mission and definition of success relevant to a business. On the not-for-profit side, because they are not delivering a return on shareholder investment, perhaps they have a little more flexibility to focus on the service component and quality, because they are not-for-profit, and their sole purpose really is to serve seniors.

I think it’s also a commitment to the breadth of the nature of the resident that they serve. I think the not-for-profit side of the business, part of their mission is to serve as broad a segment of the population as possible and as their business model permits them to do that. We find that the not-for-profits serve a broader array of constituents or customers than perhaps you may see on the proprietary for-profit side.

I believe that is a key question that not-for-profits continue to explore, which is, how do we take terrific programs and deliver them in a cost-efficient and affordable way to our populations. I think that’s very important to them, and they’re always trying to push the envelope as to how do they do more of that.

Q: How can nonprofits solidify those differentiators?

I think that certainly the not-for-profit sector needs to act a little bit more quickly, with a little bit more of a sense of urgency to keep up with the faster decision-making character of the for-profit side of the business. Also, we talk a lot about the continuum of care in senior services. I think that there are going to be new delivery systems that the for-profit side chooses to execute a bit differently than perhaps some of the older, traditional platforms. We’ve heard a lot about home and community-based services coming more to the forefront. That certainly makes logical sense in that it’s really only a small percentage of the senior population that would ever actually move to a senior living community, be it for-profit or not-for-profit.

As an industry, finding a way to efficiently serve seniors in their own home only makes logical sense. The challenge is, how do you do that in a cost-effective manner? Is that a business that can sustain its own costs? Certainly, it makes intuitive sense to explore that. We certainly see a good number of larger not-for-profit institutions evaluating that. Some have determined that yes, it’s a business they want to be in. Some are still evaluating whether it’s something that is cost-effective. I think we’ll see continued focus on that.

I think it’s more driven by the recognition that they are actually operating a business, and any business has to be governed through good board governance, but also through proactive business planning. I think all the consulting firms that work in serving nonprofit senior living providers are helping more and more of them every day to go through strategic planning, to go through specific business planning initiatives, so those boards have the information with which to make good decisions to proceed. That is second-nature to for-profit businesses, to establish a business plan, aggregate the resources, go out and execute. The not-for-profit side is beginning to follow that, and needs to follow more of that business-line thinking.

Written by Kourtney Liepelt

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