At the start of 2022, I argued that senior living industry giants were facing a defining year.
As we enter the fourth quarter, I anticipate that there are some big moves still to come from some of the largest operators in the sector — driven by new leaders at some companies, and driven at other organizations by existing CEOs who gained strength or confidence over the last 12 months.
In particular, these recent news items and events have drawn my attention to four providers:
- Brookdale CEO Cindy Baier spoke at NIC
- Atria CEO John Moore announced on LinkedIn that the effort to renovate the Holiday portfolio is underway
- AlerisLife hired a CFO
- Sonida Senior Living’s new CEO, Brandon Ribar, sat down for an SHN+ TALKS appearance
In this week’s exclusive, members-only SHN+ update, I analyze how 2022 has unfolded so far for these providers — particularly with regard to their top executive leadership — and offer key takeaways, including:
- Baier has gained visibility, building momentum as a leader of greater stature
- With the Holiday rebrand and exit of former CEO Donohue, Moore is leading an increasingly integrated — and still growing — company
- AlerisLife changed out CEOs and recently named a CFO, but bigger changes might be necessary for the long-struggling provider
- Sonida is eyeing expansion and innovation under a new CEO, after a methodical turnaround effort
Brookdale: $500M Upside, CEO in Spotlight
When Cindy Baier became CEO of Brookdale in 2018, she seemed more confident about turning around the company’s performance than she did about being the public face of the nation’s largest senior living provider.
“I will say that I’m an introvert, and so there are parts of this job that are hard for me,” she said in an interview for our Leadership Series. “In a CEO’s role, people need to see you … you need to connect with them, and it takes a lot of energy for me … I’m very private, and people want to know a lot about you.”
I thought that if Baier got Brookdale on a firmer footing, she might quickly make way for someone more comfortable in the public eye. Cindy Kent seemed a possible candidate when she joined the company as president of senior living operations; when Kent exited about a year ago, I wondered if Baier would emerge as a stronger and more visible leader, or if someone else would come forward as a likely successor.
In 2022, Baier answered that question by stepping into the spotlight.
She did that in part by writing a book about how Brookdale responded to the Covid-19 crisis. That book, published in May, provided recognition for workers across the Brookdale enterprise but also included details about Baier’s childhood and family — a big step for someone who in the past was uncomfortable “telling her story,” as she said in her Leadership Series interview.
The book also served as positive PR for the senior living industry; at the time, many leaders were bemoaning the negative press that the sector got during the height of the pandemic and were arguing that industry leaders need to do a better job of “telling our stories.” Baier did that.
More recently, she was on stage at the NIC conference, speaking confidently and assertively across a range of topics. She again seemed to embrace the role of industry leader, in particular when she pushed back on the notion that investors should be “starving their losers and feeding their winners.”
“Our industry is only as good as the weakest competitor,” she said. “And if you think about some regulation that has been well intentioned but has had adverse consequences for our industry overall, it’s because someone didn’t put the resources into a community, there was a bad outcome, people got hurt or died, and so the entire industry paid for it … And so you have to be really careful in this industry starving your losers, because if service suffers and someone has an adverse outcome, the whole industry pays for it.”
Baier’s confidence in 2023 surely was bolstered by her success in changing the narrative for Brookdale. While the company is still trying to rebuild occupancy and margin, and the share price has dipped over the last six months, analysts have consistently expressed confidence in the management team.
“While we acknowledge BKD equity value is highly dependable on pace of occupancy gain and margin, hence the heightened price volatility, our conclusion is that current sentiment is too bearish compared to likely outcomes,” Stifel analysts wrote earlier this month. “If the company maintains growth momentum and cost discipline, we think equity investors can reap significant gains in the next two years with limited downside.”
Specifically, Baier and her leadership team have identified $500 million in revenue upside, should they achieve 89% occupancy. Stifel analysts believe that Brookdale can realize $300 million of that just by hitting 84% occupancy, and the analysts peg Brookdale as halfway through its occupancy recovery.
Margin is another story, given elevated operating expenses, and Stifel pegs that recovery as only 30% complete.
Still, they calculate at least $240 million in adjusted EBITDA upside until reaching pre-pandemic occupancy levels, with another $140 million in upside until the prior peak occupancy is reached.
Based on her comments at NIC, Baier seems focused on the blocking-and-tackling necessary to increase occupancy while driving rate. But she also spoke pointedly about the need for the senior living sector to catch up with other industries’ technological advancements, as well as the major growth potential presented by value-based care.
She alluded to innovations that Brookdale is pursuing to enhance resident wellness and keep health care spending down, and I assume some of these are being pursued through the joint ownership of the home health business, with hospital giant HCA.
I hope and expect that as Brookdale makes further progress on its recovery toward pre-pandemic occupancy and margins, Baier will continue to share more details about how the largest provider in the country is trying to also be a pacesetter in innovations.
Atria: Realizing big ambitions
When Atria’s acquisition of Holiday was announced last year, one aspect that gave me pause was the plan for shared leadership. Lilly Donohue stayed on and maintained her title as CEO of Holiday, and spoke about working closely with Atria CEO John Moore to create “Holiday 3.0.”
Some analysts praised the decision to share leadership as a way to minimize disruption. But I wondered how Moore and Donohue would handle differences of opinion, and wrote that 2022 would test their ability to collaborate.
Ultimately, Donohue exited the combined company this year, as the platform officially rebranded to “Holiday by Atria.”
Her departure did not surprise me. Moore was the top-ranking executive of the combined company, and I think it makes sense to have an Atria veteran — Mike Mejia — helming the Holiday business. Having risen in the ranks from an executive director, Mejia knows the Atria culture and operating model, and is leading a team of other long-tenured Atria leaders who are now overseeing the Holiday portfolio. In other words, Moore now has a team of his own lieutenants in charge of Holiday by Atria.
While the idea of cross-pollinating Moore’s ideas with Donohue’s was nice in theory — and I’m sure occurred to some extent over their 12-month collaboration — I think bringing the Holiday platform more firmly under the vision of a single leader will create more clarity and efficiency.
And Moore is not short on vision, or ambition. A visit to the company’s highrise headquarters in downtown Louisville — complete with a full-service print shop and video production studio — makes that clear. Last year, Atria launched Glennis Solutions as a subsidiary company to bring its homegrown operating technology to market, and this year saw the opening of its first ultra-luxe Coterie community, with partners Related Cos. and Welltower.
Welltower also is working closely with Atria on upgrading the Holiday by Atria communities, with the REIT having acquired 86 of the properties last year. About a week ago, Moore announced via LinkedIn that the first capital improvement projects have started, with the goal of elevating these communities for a generation seeking a “social, active lifestyle.”
In addition to the ongoing work on Holiday by Atria, more Coterie projects are coming through the pipeline, including the Hudson Yards project in Manhattan and a more recently announced development in Santa Clara, California.
But despite all this activity, I would not be surprised by more significant announcements from Atria — Moore has teased greater integration with Medicare Advantage plans, as well as wellness initiatives with Related-owned Equinox, as possibilities. And he seems intent on seizing this moment of market dislocation, with inflation and rising interest rates constraining competition, to leverage Atria’s scale and capital partnerships for growth.
Sonida and AlerisLife: Similar paths, different outcomes
Pre-pandemic, Capital Senior Living and Five Star Senior Living both were struggling, forced to issue going concern warnings as their financial situations worsened.
Both providers brought in new CEOs and rebranded; and this year, both companies changed CEOs yet again.
But despite these similarities, the providers are in very different situations — as I write, Sonida Senior Living (formerly Capital) is trading at $19.94 a share, while AlerisLife (formerly Five Star) is trading at $0.95 a share.
At AlerisLife, it’s possible that former CEO Katie Potter focused too much on innovation by trying to transform the organization into a diversified “life services” company before shoring up the fundamentals of the senior housing portfolio — although she did oversee the transition of more than 100 properties to other operators. She resigned in May 2022, and Jeff Leer — formerly the company’s CFO — was named the new permanent CEO about two months later.
Leer now is working off strategic review recommendations of consulting group Alvarez & Marshal. As described in AlerisLife’s Q2 2022 earnings call, the strategy seems focused on getting the basics right:
“[They] include adjustments to the structure of operational support, meaningful reorganization of our sales and marketing programs, and continued investment in streamlining processes that will eliminate cost redundancies and enhance margins,” Leer said.
The company is also changing the labor model for its Ageility rehab clinics. The goal is to reduce startup costs and stabilization time for new locations while increasing utilization.
And last week, AlerisLife announced that a new CFO, Heather Pereira, has been hired. (I’m glad to see a woman take this role, after the industry lost four women from powerful leadership positions with Kent, Lody, Potter and Donohue leaving.)
Following the Alvarez & Marshal plan seems well and good, but with AlerisLife’s share price below $1.00, I expect more dramatic moves might need to be taken. That said, both AlerisLife and its major REIT partner, Diversified Healthcare Trust, are companies under the RMR Group. And RMR seems to have its own agenda for these enterprises.
The company in 2016 rebuffed offers from senior living industry veterans Bill and Bob Thomas to buy certain Five Star properties for $325 million and to increase their ownership stake in the company. At the time, the Thomas brothers lambasted RMR in a public letter, describing a “web of interrelated companies” run without proper governance, for the enrichment of RMR’s leaders. RMR’s leaders shot back, saying in part that the Thomases had sought to acquire Five Star properties at a “bargain basement price.”
Whatever the reality was in 2016, the subsequent years have not added luster to this portfolio, and investors seem to have all but written off the company — no analysts even tuned into its last earnings call, and the company’s fate remains an unanswered question as 2022 enters the home stretch.
Sonida is in a stronger position. After taking the helm in 2019, CEO Kim Lody pursued a methodical turnaround strategy dubbed SING, for stabilize, invest, nurture and grow. As part of this effort, she led the company through a contentious capital infusion involving Conversant and other firms, which was completed about a year ago. She also brought on Brandon Ribar as COO, and she handed the CEO reins to him earlier this month.
Lody made her exit having accomplished the first three stages of the SING plan, and Ribar is now focused on growth, he said during a recent SHN+ TALKS.
Really, this effort is more about “regrowth,” given that Sonida trimmed its portfolio significantly over the last three years. Regrowth has already started, with the acquisition of two independent living communities. Sonida also intends to strategically expand third-party management contracts with select ownership groups.
Even in the midst of the turnaround effort, Sonida was able to pursue a certain amount of innovation, notably in relaunching its memory care offering. But I’m heartened that Ribar seems intent on further innovation, both to deliver the value that consumers expect and to enable the profitable operation of senior living communities in the secondary and tertiary markets — and lower price point — that are Sonida’s bread and butter.
For instance, he spoke about the need for creativity in staffing, including through different shift models or sharing staff among communities. He said he is “thinking creatively not about how you get back to the old model and make that old model cheaper, but innovating around a newer model and a newer offering.”
I was hoping that 2022 would see even more dramatic examples of innovation from industry giants, but I think this was scuttled by ongoing labor disruption, worsening inflation and interest rate hikes, all of which are complicating the sectors’ recovery from Covid-19. But the year is not yet over, and comments like Ribar’s make me optimistic that more creative initiatives and bold moves might still be in store.