6 Senior Living Providers to Watch in 2020

Chess champion Garry Kasparov once said, “Many people think that if something worked yesterday and is still working today, it will work tomorrow. That’s wrong.”

Kasparov’s take on this mindset applies to senior living, which finds itself at a historic, pivotal moment.

Baby boomers will come to the space demanding variety in care and amenities, but many may not be able to afford the existing, dominant private pay model of senior housing. Technology has made it easier for seniors to age in their homes longer, putting further pressure on providers to create attractive alternatives. Capital is flowing into the sector at unprecedented levels, creating opportunity but also pitfalls. And operational headwinds have been blowing fiercely and might — or might not — ease in 2020

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Senior living is not lacking for companies pushing themselves — and the industry — forward in order to meet the growing and changing needs of its current and future crops of residents. Still others are working overtime to surmount current challenges, and might increasingly be realizing that to do so, they can’t go back to what worked yesterday but must create new ways of doing business. The Senior Housing News newsroom is paying close attention to six operators representing different aspects of the industry as we put January in the rearview mirror and head deeper into 2020.

Seasons Living: Private equity-backed innovator

Private equity has been investing in senior housing at a rapid rate, and with huge funds ready to deploy, these firms are poised to bring even more capital to the space in 2020 and beyond. While some in the industry are concerned about operators aligning with undisciplined capital that is rushing to senior housing based on demographics, aligning with the right private equity partner could also allow hungry providers to scale up and innovate. Lake Oswego, Oregon-based Seasons Living exemplifies this trend, making it a company to watch in 2020.

Seasons secured significant private equity backing in 2019. The company is not publicly disclosing the initial investment amount or the identity of its PE partner, but it is a firm with “deep pockets” that has also invested in senior living operators in other parts of the country, Seasons President and COO Dan Williams told SHN last fall.

With its new capital partner, Seasons wasted no time in making moves. The company rebranded and made a handful of acquisitions, while also pursuing a pipeline of new development. From five communities in 2018, Seasons now has 16 operational or soon to open. Its plan is to create a footprint west of the Mississippi, adding four to eight acquisitions and two or three developments per year for the next several years.

One particularly interesting Seasons project slated to open in 2020 is Hale O Meleana. This is an assisted living community being built in St. Francis Kupuna Village, a “one-stop health and wellness center” affiliated with St. Francis Healthcare System in Honolulu. There is a growing trend of senior living communities aligned with health systems and co-located with medical and wellness facilities, blending a hospitality-driven lifestyle model with robust health care capabilities to prolong residents’ well being, extend length of stay, and lower costs for providers, payers and consumers. This value proposition will be tested as projects like Hale O Meleana start to open their doors

Seasons Living
Westwind Memory Care, a Seasons Living community in Santa Cruz, California.

Also tantalizing in 2020: Look for Seasons to reveal a middle-market senior living model that is in the process of getting off the ground. So far, the company is tight-lipped about what is in the works, but Williams hinted that the approach is inspired by student housing.

While Seasons is putting PE capital to work on some innovative projects that could help create the senior housing of tomorrow, eyes should also be on the company to see how it handles rapid growth. Williams and Seasons CEO Eric Jacobsen are industry veterans who can draw on significant know-how as their company scales. Still, rapid growth can test even the savviest operators, and with capital so abundant, 2020 will bring some examples of providers getting out too far ahead of their skis.

Pegasus Senior Living: The turnaround specialists

As competition remains red hot in many U.S. markets, it’s fair to assume that some operators will continue to fall short of the mark and struggle with finances, operations and census. For REITs and other owners, the question becomes whether to work with your operating partner to help them improve or bring in another company that can — they hope — make the changes necessary to right the ship.

Pegasus Senior Living
Ridgeland Place, a Pegasus Senior Living community in Ridgeland, Missisippi.

This situation should make 2020 a fruitful year for operators that are turnaround specialists, and Pegasus Senior Living is one such company to watch. Industry veterans Steven Vick and Chris Hollister formed the Dallas-based provider in 2018 after Welltower asked them to take over leases for 36 former Brookdale Senior Living (NYSE: BKD) communities.

As of December, Pegasus managed 37 communities, with two more Omega Communities projects in Florida and one more Welltower property in New York slated to come online.

Though assisted living may have reached an “inflection point” in 2019, with supply and demand starting to even out, there is still likely an uphill climb for companies emerging from the trough. And, Pegasus is led by experienced operators, has a platform in place with the potential to quickly scale up and is actively seeking out more opportunities in the turnaround space.

“I think we’re poised to become, hopefully, very good at turning [communities] around and having the expertise to do that,” Hollister told SHN in December.

In short: Watch for Pegasus to gain more business this year, as part of an ongoing trend of business challenges and operator shakeups.

Affinity Living Group: Breaking ground in middle-market assisted living

It’s clear that reaching the middle market of older adults is among the greatest challenges the industry faces. What isn’t clear is how to achieve it.

There are many companies trying to make senior housing more affordable by unbundling some services or offering active adult models with lower overhead and fewer employees. Although that can achieve the intended effect of lowering monthly rates for residents, it does so at the expense of care services, which are often cited as the most expensive component of senior living.

There are some companies trying to find a more affordable formula for higher-acuity senior living services, however. That includes Affinity Living Group, a Hickory, North Carolina-based senior living provider that offers assisted living services in the middle-market range.

Affinity Living Group CEO Charlie Trefzger; Nick Klein for Aging Media Network
Affinity Living Group CEO Charlie Trefzger

While other industry stakeholders ponder hypothetical ideas for reaching the middle market, Affinity is piloting innovative concepts on the ground in its nearly 160 communities. By leveraging the efficiencies of technology and its large footprint in the U.S. Southeast, Affinity is able to offer rates for assisted living between about $2,300 to $2,800 per bed in semi-private “companion rooms.” All the while, the company is building “innovation hubs” in communities throughout its markets to pilot a variety of new approaches at once.

“We don’t try to go over the top with the amenities,” Affinity CEO Charles Trefzger told SHN last year. “We try to fulfill the needs of the resident and give them nice, comfortable spaces to live in, but at the same time not build too much into the cost of the building, which makes it unaffordable.”

And 2020 may bring further moves, including progress on a Medicare Advantage strategy.

As other companies look to offer lower rates in their own communities, they will be looking to Affinity to gauge the company’s success, and determine whether its model is a blueprint for offering care at a price that more in the middle market can afford.

Capital Senior Living: A public turnaround with lessons for other providers

Eyes are on the few publicly traded senior living operating companies every year, as their earnings offer some insight into the state of the industry. In 2020, Dallas-based Capital Senior Living (NYSE: CSU) is worthy of special attention.

All the publicly traded providers suffered from industry headwinds over the last few years, but the other public operators also faced notable additional complications; for instance, Brookdale Senior Living (NYSE: BKD) was working furiously to right the ship after the Emeritus Corp. acquisition, and Five Star Senior Living (Nasdaq: FVE) has had to contend with investor unrest related to its ownership structure.

Even without such added drama, Capital Senior Living saw its performance suffer quarter after quarter as its operations could not rise to the challenges related to oversupply, tightening labor markets, aging product and other issues. With its share price in decline, private equity investors were rumored to be kicking the tires before Lody took the reins.

Given the fact that assisted living occupancy hit historically low levels last year on a nationwide basis, margins have been under pressure and labor expenses have continued to rise, other providers doubtless can relate to the plight of Capital Senior Living, and they too have been scrambling to up their game. In the case of Capital, the effort has been guided by Lody’s SING strategy to stabilize, invest, nurture and grow.

Capital Senior Living CEO Lody sitting on sofa Capital Senior Living CEO Kim Lody; Hank Henley for Aging Media Network

So far, results have been mixed and investors have only continued to sing the blues. In January 2019, CSU was trading at nearly $7.00 a share; that has fallen to about $2.80.

Still, Lody and her leadership team believe they’ve made the right moves and that industry fundamentals have improved, and they expect results to reflect this in the next 12 months. They’re not the only ones calling for a long-lasting turnaround to begin in 2020. Other industry leaders are pointing to a slowdown in construction, assisted living occupancy upticks and other promising signs that easier days are ahead. But contrarians argue that the market will not turn until 2021, at the earliest — and Chicago-based REIT Ventas (NYSE: VTR) already revised a positive 2020 outlook to something grimmer.

If Capital Senior Living is on the upswing in 2020, it will be a positive signal that with the right management practices in place, well-established operators with a bread-and-butter product can still rebound and enjoy success. If the company continues to struggle, Lody will have reach deeper into her bag of tricks, and it should be taken as a warning to other struggling providers that intensifying their management and waiting out the market is not a winning strategy. In fact, some once-solid companies may already have run out of time to adapt to the fast-evolving market.

Ecumen: Leading the way in nonprofit innovation

Although nonprofit senior living providers have shown an appetite for growth through affiliation in recent years, they have lost market share to their for-profit counterparts, who have greater willingness to assume risk for the sake of growth and innovation.

One exception to the rule is Ecumen, which has embraced several of the strategies for-profits have used to build scale. The Shoreview, Minnesota-based provider has a portfolio of 30 communities in eight states totaling 2,109 units, and ranked 33rd on the 2019 LZ 200 list of top nonprofit providers. More important, Ecumen has transformed its business over the past 16 years from traditional nursing care to a diverse mix of independent living, subsidized housing and campus-based offerings, and home health and hospice service lines — including an innovative co-op model.

In 2018, Ecumen announced the launch of “Zvago,” a line of co-op housing targeting younger residents intended to expand its portfolio while escaping labor market pressures. Each new Zvago community will be designed for active adults 62 and older, cost between $15 million and $20 million to develop and have amenities such as outdoor common spaces, fitness and yoga studios, and spacious community kitchens and craft rooms. Ecumen expects Zvago to strengthen its portfolio and provide pipelines into higher levels of care. To date, three Zvago communities have been completed, and two more are in varying stages of development.

senior housing cooperatives Courtesy of Ecumen
A rendering of Ecumen’s Zvago at Central Village seniorhousing co-op in Apple Valley, Minnesota.

There are other reasons to keep an eye on Ecumen in the year ahead, as it has new C-suite leadership. Last January, Ecumen promoted Shelley Kendrick to the dual roles of CEO and president. Kendrick identified maintaining the high quality of Ecumen’s workforce and its services as her top priorities, dedicated the provider to ensuring all employees have the resources and training they need, and committed to exploring technology to provide further support.

As part of that commitment, Ecumen brought Melanie “Mel” Sullivan aboard as its chief people officer last March. An adjunct professor of health management and master of business administration–health care at the University of Minnesota and the University of St. Thomas, Sullivan has dual backgrounds in human resources and clinical health care. More importantly, she experienced first-hand the struggles to get young professionals to consider senior living as a career path.

Ecumen offers internships to college and high school students, showing them the many career paths available to them in senior living. Sullivan encourages interns and employees to develop diverse skill sets in order to prepare them for the shifting demands in the market.

“People aren’t sure what the industry involves,” she said. “But the possibilities are limitless.”

Solera Senior Living: The new breed of operator

When Adam Kaplan left Senior Lifestyle Corp. to form Solera Senior Living in mid-2016, he shared his view on the senior housing market with SHN:

“I firmly believe there is a compelling opportunity today in the senior living space to build a next-generation operating model focused on attracting and retaining the best talent, delivering superior levels of service and remaining disciplined and focused on a strategy for growth. I have been quickly building a strong development pipeline and am eager to put together an exceptional leadership team to join me on the journey.”

Solera CEO Adam Kaplan seated on stage at BUILD conference Solera CEO Adam Kaplan for AMN

Solera is far from the only new operator to launch in recent years, but it’s come out of the gate quickly — forging partnerships with big real estate players, adding to its leadership team and formulating a brand strategy. While Solera has been a company to watch ever since it launched, 2020 is shaping up to be a key year in which some of the provider’s concepts become reality. In this way, Solera represents a whole class of new operators that are starting to gain traction and could push the industry forward if they succeed in fulfilling their ambitions.

Solera currently has a portfolio of nine communities under management or in development, blending high-end hospitality with health care.

Last November, the Denver-based operator announced a litany of new hires who can contribute immediately, most notably Julie Heiberger as controller. She will be responsible for all accounting operations. Heiberger has extensive experience handling accounting operations for real estate firms, particularly with multifamily developers and operators.

Heiberger’s experience will come in handy as Solera brings on more partners with multifamily backgrounds. The company broke ground last October on Modena Reserve at Kensington, a $75 million, 135-unit community in Kensington, Maryland with independent living, assisted living and memory care, in a partnership with Chicago-based real estate developer, McCaffery Interests.

Modena Reserve is McCaffery’s first venture into senior living, and CEO Dan McCaffery told SHN it is only the beginning. The McCaffery-Solera JV is close to securing a second site in the Washington, D.C. market and is scouting other opportunities in what may eventually become a $500 million development pipeline.

Senior Housing Development Courtesy of McCaffery Interests and Antunovich Associates Architects
A rendering of Modena Reserve at Kensington, a senior housing development under construction in Kensington, Maryland by McCaffery Interests and Solera Senior Living.

Solera partnered with another Chicago-based developer, Condor Partners, to build Trulee, a 163-unit building in Evanston, Illinois that will be mainly assisted living with some independent living mixed in. The project positions Solera to take advantage of the popularity of “hipsturbias.” Solera also has partnerships with Philadelphia-based developer Alterra Group and Austin, Texas-based developer HPI.

Additionally, Solera is executing a multi-brand strategy with its core brand — which is high-end, private-pay — and the even more luxurious Solera Reserve. This allows the operator to cast a wider net where it is not located exclusively in high barrier to entry markets, thereby showing its development and capital partners that it has the flexibility to absorb a more diverse program.

The niche market focus will allow Solera to build in scale without diluting its portfolio — an issue some larger providers are currently grappling with, Kaplan said during an appearance on SHN’s Transform podcast last year.

Finally, Solera is exploring health system partnerships and is crafting a deal with a large health care system for a forthcoming 60-unit community in Las Vegas. That community will focus on higher levels of care for older adults, with an emphasis on memory care and possibly care for residents with multiple sclerosis and Parkinson’s disease.

Tim Regan and Tim Mullaney contributed to this story.

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