‘Recalibrating the Business Model’: MorningStar Refines Senior Living Operations for New Era

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MorningStar Senior Living is making slow but steady operational progress as conditions remain tough and uncertain for senior living companies this year.

The Denver-based company and its roughly 45 communities and projects have made headway regaining occupancy since the industry’s census low in 2021.

Now that the operator is no longer in triage mode, the pace of improvement has quickened from a standstill to a walk — but the company is not yet moving at a full run, according to MorningStar Senior Living Managing Partner Matthew Turner.


The cost of labor and certain goods and services has remained high after rising during the pandemic, and interest rates and a turbulent capital market have tossed a wrench in certain line items like debt service. For senior living operators like MorningStar, the bar to clear to achieve pre-pandemic margins is now simply higher.

The challenge for operators and their partners is to set expectations accordingly, taking into account both the need to keep up the momentum and the fact that operating teams are still recovering after three years and change of hardships and strife.

“It’s hard to reconcile those two things right now,” Turner told Senior Housing News. “But we’re going to have to, and people are going to need to collaborate and respect the challenges that each side is facing.”


To Turner and the other leaders at MorningStar, providers must get more comfortable with threading a needle between costs and revenue if they hope to be successful in the post-pandemic age.

“Now it’s time on the operating side for people to really understand how the business has changed,” Turner said. “That’s going to entail new pricing structures, and it’s going to entail really understanding how much it costs you to care for residents.”

Improvement and growth

MorningStar has rebounded from its darkest days during the pandemic, and all the while executed on its long-term ground-up development growth plans.

The operator’s occupancy has increased by more than 18 percentage points since the company’s low point in February 2021, and Turner said it now exceeds pre-pandemic occupancy by “several percentage points.”

MorningStar improved its turnover by 20 percentage points between 2021 to 2022, “and we’re continuing that positive trend in 2023,” Turner added.

MorningStar has in the recent past collaborated with companies including Hines, which was involved in communities including MorningStar’s River Oaks community in Houston.

The senior living company is continuing to grow through ground-up development and select acquisitions. Since the start of Covid-19 in 2020, Turner said MorningStar has closed on 14 projects, mostly ground-up or value-add opportunities.

While the company has for now slowed development due to the challenging nature of getting new deals done, there are still a handful of projects in MorningStar’s pipeline, including communities that will soon break ground.

On the value-add side, MorningStar has undertaken some renovations in certain communities. One recent example is MorningStar Senior Living of Pasadena, a 144-unit community that cut the ribbon on a facelift in March.

In addition to renovating the community, MorningStar added memory care units and has laid plans to further expand independent living. And the company has endeavored to improve infrastructure for a growing list of technology and devices that residents and staff are using in the community.

“That’s a perfect project for us — we were able to step in and improve operations, rebrand the community and add value by broadening the service offerings,” Turner said. “Our portfolio is new enough that it has not required substantial CapEx, but we have continued to renovate units and do light FF&E … to keep everything relevant and fresh.”

As MorningStar looks to future growth, Turner said the company will approach new opportunities selectively and with a focus on value.

“There are a lot of products that we don’t believe we can fix, and we certainly don’t have the proverbial magic wand to step in and cure a labor market or any of those sorts of things,” Turner said. “We try to be honest with ourselves: When any opportunity presents itself, [we ask], does this align with our strengths, and can we actually add value here?”

‘Recalibrating the business model’

MorningStar is grappling with a new operational landscape by focusing on both expenses as well as getting the best rate from residents where possible.

The cost of insurance, labor and other line items have pushed the company to “go back to the basics” with regard to operations, according to Turner. How that happens varies from one community to another, but the bottom line is finding new ways to appropriately price care and other services.

“What does it cost you to provide this environment just at the baseline, and how are you pricing any additional services and care so that you can maintain some acceptable margin on every resident?” Turner said. “Going back and recalibrating the business model for these new realities — we’re trying to do that.”

In recent years, senior living operators have primarily taken advantage of occupancy gains by raising rates to try and recoup margin. MorningStar is undertaking a similar strategy, but Turner believes any price increase must be adequately explained relative to what it would otherwise cost a resident to live elsewhere.

“When a resident is faced with, let’s say, a 10% increase, you should be able to point specifically to the things that are driving that increase,” Turner said. “We’re all dealing with the same inflationary environment, and that applies whether you’re living in a senior living community, or you’re living in your home.”

Turner is also thinking about affordability as it relates to senior living. He is keenly aware that the middle-market represents a sizable and looming opportunity for the industry, but he believes that operators of high-acuity communities have limited ways to affect rates, given the intensity of operating them.

Instead, he believes that senior living companies would be more successful to lower the basis in real estate by embracing adaptive reuse and other cost-saving development techniques. And like a growing segment of the industry, Turner believes that some government subsidies will be required to keep assisted living and memory care affordable for the masses.

“I say that appreciating that many people don’t want any subsidy from the government whatsoever because of all the regulatory pressure that comes along with that — it’s a complicated issue,” he said. “But there are only so many people that can pay $10,000 a month to be in a senior living community.”

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