After 45 years, the nation’s largest independent living provider is abandoning the management model that has long set it apart.
Lake Oswego, Oregon-based Holiday Retirement has for decades employed “live-in managers” in each of its independent living communities. Different from traditional executive directors, these employees actually lived in Holiday communities, and, consequently, were ready to address residents’ needs any time of day.
Now, Holiday’s doing away with this management model and instead exclusively employing executive directors who live off-site. The change is being made to comply with a federal rule that may or may not actually go into effect, according to sources close to the situation—regardless, the mass exodus of live-in managers is nearing completion.
Holiday’s transition to off-site executive directors began in May 2016, Holiday COO Scott Shanaberger told Senior Housing News. The move was spurred by an overtime rule from the U.S. Department of Labor, Kevin Pascoe, NHI’s executive vice president, investments, revealed during the company’s fourth-quarter 2016 earnings call on Feb. 17.
NHI, a Murfreesboro, Tennessee-based real estate investment trust (REIT), was leasing 25 independent living communities to an affiliate of Holiday as of Dec. 31, 2016, according to a company filing with the U.S. Securities and Exchange Commission (SEC).
The DOL rule in question would have guaranteed overtime pay to salaried employees who make $47,476 per year or less.
“With live-in managers, it’s nearly impossible to be on a salary and have the profile that they had without going off the clock,” Pascoe said. “Their hand was, in essence, forced to comply with the DOL ruling.”
But the DOL ruling never actually went into effect. It was paused by a court order on Nov. 22, 2016, and its fate remains up in the air. That didn’t change Holiday’s plan, a Holiday spokesperson told SHN.
The change, while drastic, could ultimately open Holiday up to a new source of revenue through renting out the units previously occupied by the on-site managers, Pascoe said.
“The people that they had as live-in managers were great people,” Pascoe said on the call. “That said, I think there is an opportunity for them, and I think they would agree that… selling and managing a business unit is a potential upgrade for them.”
Most of the Holiday communities owned by NHI have moved their managers off-site, and many of the communities have had success in re-leasing their former units to new residents, Pascoe said.
New Senior Investment Group (NYSE: SNR)—a REIT with that owns 152 senior housing properties, 77% of which are managed by Holiday—has seen similar progress.
“By and large, we’re seeing the units … have become available to rent out,” New Senior CEO Susan Givens said during the company’s fourth-quarter 2016 earnings call on Tuesday. “There’s been some good success around leasing out those units.”
This is welcome news, as far as New Senior is concerned.
“The fact that there are two new available units in each of the properties is a good thing,” Givens added.
Holiday’s new executive directors are also seemingly more involved than their predecessors when it comes to their communities, Givens implied.
“Those individuals are taking more ownership and accountability within the assets, and we think that’s a good thing,” she said.
On the whole, Holiday’s transition to a more traditional community management model is progressing more quickly than the provider initially anticipated, Pascoe said.
“They’re on plan, and they’re actually probably slightly ahead in terms of what type of disruption they allowed for in their forecast,” he said.
‘Right kind of leadership structure’
The transition to the off-site model will be completed in all Holiday independent living communities by the end of March, Shanaberger told SHN, adding that the transition allows Holiday “to improve services, deliver better value and further enrich the lives of [its] residents.”
The change could come at a cost to Holiday, however. The tight labor market may complicate the provider’s search for new executive directors, Pascoe explained.
“There are clearly challenges in the marketplace, just not even specific to Holiday,” Pascoe said.
Although Holiday’s new model hasn’t been in effect for very long, New Senior is optimistic about its long-term potential.
“The good news is is that the model is the right model for the assets over kind of the medium- and long-term,” Givens said. “Having executive directors in place, we believe, creates the right kind of leadership structure within the properties.”
Written by Mary Kate Nelson