With a portfolio of four senior living communities and more to come soon, Trustwell Living is starting to put the pieces together on a long-term growth strategy.
The New York City-based company, founded in 2021 by several executives who previously worked for the operator formerly known as Capital Senior Living, now owns and operates four communities in the Midwest — one in Springfield, Illinois, and another three in the Kansas City Metro area. The company also is either in diligence or negotiations on another dozen projects.
And that is just the start of what CEO Larry Cohen hopes to achieve.
“It’s been a lot of work over the last 18 months, a lot of it was really building the foundation and the infrastructure,” Cohen told Senior Housing News. “Now we’re starting to implement it, and it’s going very well.”
As he has previously outlined, Cohen’s strategy for growth at Trustwell is based on acquiring senior living communities in need of an overhaul. That may include adding new systems to better organize operations or physically renovating buildings — anything to help boost quality and bring up occupancy, revenue and ultimately margins, Cohen said.
“My vision for Trustwell is to be a highly successful senior living platform that will continue to attract great talent, acquire fine-quality assets in good markets … and provide the best quality of care,” he said.
Growth strategy comes together
Trustwell’s most recent acquisition of three communities in the Kansas City metro area show the company’s growth strategy at work.
In June, the operator acquired three communities encompassing 235 assisted living and memory care units in Mission and Overland Park, Kansas; and Raytown, Missouri. Already, the company has outlined a plan to renovate those communities and implement operational improvements.
Since picking up ownership and operation of the buildings last month, Trustwell has begun retraining staff there with a focus on autonomy and accountability; and bringing in its various systems, which include everything from the CRM used in the community to human resources. The company also is planning to undertake significant capital improvements at those communities, including a refresh of the communities’ common areas and resident apartments.
In addition to operational and physical improvements, the operator is taking time to listen to residents and staff on what those communities could do better. Trustwell has also partnered with a technology company to develop an app residents’ families can use to stay connected to their loved ones and monitor their health from afar.
Already, Cohen sees signs that the strategy he has honed over his 36-year career is bearing fruit at Trustwell. For example, the operator is finding success cutting down on agency staffing by rehiring former associates who left their communities in the past.
“People who have worked at some of these communities and who left over the last few years are hearing really good things from their friends, and they’re coming back,” he said.
The company also connects newly onboarded communities with a group purchasing organization (GPO) to help reduce the cost of goods and services and support their bottom line.
All of those efforts are ultimately aimed at improving community occupancy and margins, and in boosting the quality of care for residents. Cohen, who believes that margins are a more important metric for operator success than occupancy, takes the view that leaders should have more control over their communities’ budgets.
“We provide the resources and the information to the leadership to understand what their monthly budgets are, what their expenses are supposed to be, and really try to manage to that level,” he said.
While he sees many operators in the industry that can deliver high-quality services and care, he sees fewer that truly understand the fundamentals of business itself.
“We are using budget tally sheets, for example, so that everyone understands what their monthly targets are, and they can measure that,” he said. “Very few operators do that.”
With a portfolio centered in the middle of the country, the operator’s leaders are now focused on building scale in that region. While Cohen said that will likely mean more communities in the geographic areas where the company already operates, he said there is room for larger-scale acquisitions, too.
The company is, for example, currently examining portfolio deals in various regions across the country, including the Rocky Mountain region, the Southeast and the Northeast. And looking ahead, that will be a central piece of Trustwell’s operational structure.
For now, Trustwell is focusing on growing through acquisitions, not development. Although the company doesn’t do any third-party management, Cohen said the company may do in the future if the opportunity is right. He also sees some opportunities to redevelop properties in some instances, and that the company is already weighing those options for the future.
“I’ve always felt it’s been very helpful to have that infrastructure, regional oversight and knowledge to create some economies of scale,” he said. “We’re not looking to be all over the place.”
As the former executive of Capital Senior Living — now known as Sonida Senior Living (NYSE: SNDA) — he has accumulated a wealth of experience and industry knowledge. And at the helm of Trustwell, Cohen still sees a highly fragmented landscape full of opportunities for growth.
Although interest and cap rates have increased this year, he still sees a large number of potential deals on the horizon as operators big and small look to pare down their portfolios and improve operational performance.
He also said he is continually surprised by the lack of sophisticated operations in the industry, including some that Cohen said he has “known for a very long time, and have a good reputation.”
“They don’t really have systems, they’re doing things by paper,” he said. “I think that this industry still lags other industries in the use of systems and technology.”
As was the case early on in the pandemic, Cohen said some operators are still filling beds at their communities without regard for the rates those residents are paying. While that may have been enough for them to subsist on in calmer times, the headwinds of the Covid-19 era often tip the scales into the red.
“With the pricing, wage pressures and inflation, all of a sudden you start to see buildings just lose money,” Cohen added.
Those kinds of communities represent an opportunity for operators like Trustwell to acquire them on an attractive basis. In fact, Cohen said he has seen a “slew” of buildings that opened in the past decade going back onto the market — although he stressed the company turns down most of the opportunities it sees.
In the last 30 days, he has seen cap rates move upward for more “stable, institution-quality” communities.
“You see many buildings that are coming to market and either aren’t selling, because the cash flows when they’re stabilized may not achieve the cost to build,” he said. “So, you have that kind of gap, and we’ll see what happens.”
Looking to the rest of 2022, Cohen sees many more potential acquisition targets on the horizon as these conditions continue to pressure some operators. As interest rates rise, that will pressure companies’ ability to borrow — and there, too, Cohen believes Trustwell has a competitive advantage, given its deep industry knowledge and connections.
“While some motivations may change, I do think that we’ll continue to see quite a bit of activity, at least of transactions coming to market,” Cohen said. “The question is whether they can be executed or not.”