After branching off on its own from the Avamere Family of Companies about a year ago, Arete Living has spent the last 12 months preparing for more growth by stabilizing its portfolio.
The company’s occupancy and margins are improving, and in the last year Arete leadership has focused on building a new sales culture to meet the next generation of senior living customers while strengthening staffing. Now, thanks to those and other improvements, the stage is set for a period of new expansion in 2024 and beyond, according to President Sarah Silva.
But that growth won’t be at a break-neck pace, and that’s by design, Silva told SHN, noting that she expects growth via acquisition and new management agreements to be more attainable next year and into 2025 and 2026.
“Recovery is the right word,” Silva said. “We anticipated, and I think the industry in general did too, that 2022 was going to be a faster recovery and it turned out to be slower.”
Arete operates 26 communities across six western states.
Laying a foundation for growth
This year, Arete has made good progress preparing the company to grow down the line. Staffing was among the most crucial parts of that improvement.
Arete in 2023 has returned to pre-pandemic occupancy rates across its memory care portfolio as demand for the product type surged. The company has less than 5% occupancy left to recover in its assisted living segment, with an expectation to reach 90% average occupancy by year’s end. All the while, Independent living recovery has lagged, but made improvements, Silva said.
“If we continue on the pace that we’re on, the goal would be that we’re there by the end of the year and there’s a lot that goes into that,” Silva said of nearing pre-pandemic occupancy numbers across the company’s AL portfolio. .
Arete’s margins are improving after the company’s leaders offset expense pressures with measured rate increases. Adding to the company’s margin improvement was the fact that the company was able to reduce certain costs in the last year, particularly the use of agency labor.
The Tigrad, Oregon-based operator has taken steps to focus on employee hiring and retention, such as increasing wage rates for frontline staff, adding flexible scheduling and providing more on-the-job training.
“It’s our job to listen to our teams and to execute on what they want,” Silva said. “Those are the organizations that are winning on the people-front and understand that we can’t do any of this without them.”
Silva said the company’s “largest expense savings” came in the form of reducing agency staffing.
“I would say that the greatest recovery for us has come on labor,” Silva said. “There are logistics behind it from a home office perspective but it’s what helps the communities be successful, so it’s what we have to do.”
For context, Arete formed out of the Avamere Family of Companies and its portfolio includes the Ovation senior living brand that was launched by Avamere in 2018. Silva previously served as president of Avamere’s senior living division, with Avamere Health Services Founder Rick Miller serving as Arete Living’s board chairman.
One of Arete’s main operational goals in the spinoff was to be more agile in all aspects of operations. To do that, the company’s leaders have equipped themselves with more data and information. .
Arete’s use of Pinnacle Quality Insights’ Retain by Pinnacle and the Aline operating system are two tech enhancements that have improved and streamlined operations, Silva said.
“It’s about finding those pieces of technology that are aligned from a value perspective and that focus on person-centered care,” Silva said.
Arete still maintains relationships with ownership groups Ventas (NYSE: VTR), Chevalier Group and Colony Capital Inc. via management contracts. Silva said the partnerships with the REITs has been “very consistent” with future opportunities ahead.
The recovery seen by Arete would not have been possible without the leadership decisions made by Arete’s Chief Marketing Officer Thomas Cloutier, who fostered a sales climate aimed at meeting the wants and needs of tomorrow’s senior living prospects. That meant understanding what residents are going through, meeting them where they are and personalizing the journey for them, moving away from what Silva called a “transactional experience.”
“When I look at our recovery today, it’s directly the result of the decisions Thomas made in 2020,” Silva said. “It was the standardization of processes and setting expectations and creating a person-centered selling culture.”
Silva said that breaking down barriers between operations and sales teams helped improve the sales process and brought a more cohesive structure to the company, which led to the company’s ongoing recovery. To bring more synergy to operations and sales, Arete emphasized increased employee training.
Earlier this year, Silva was also recognized with the Jan Thayer Pioneer Award from the American Healthcare Association (AHCA) and National Center for Assisted Living (NCAL).
“I’m honored that anyone would consider me anywhere within the fringe of that circle,” Silva said of receiving the prestigious senior living award.
New growth on the horizon
Arete, like some other senior living operators and developers, is sitting on the sidelines waiting for calmer waters to begin projects or seek growth by acquisition. But Arete will grow when the time is right, Silva said.
That’s not to say the company isn’t undertaking certain projects to expand here and there. Arete started on a $7 million renovation to one of its communities and recently opened an AL and memory care community in Omaha, Nebraska.
“Taking this breath allows us to enter 2024 in growth mode,” Silva said. “We certainly have opportunities in front of us.”
Silva said Arete was seeing “a lot of acquisition” opportunities across the market despite still-anemic M&A markets.
While resident rates for the Arete portfolio haven’t been set yet for next year, Silva said she believes that most operators will make increases for the coming year, just not at the pace at which was seen in the last two years.
“I think there will be a larger delta for in-place rates versus market rate increases than what we’ve previously seen,” Silva said.
Silva said she sees future opportunities within the AL and residential care space for expanding services with speciality licenses as a way to increase revenue in the future.
“There’s so much opportunity out there, not just in the Pacific Northwest,” Silva said. “I think it’s a huge opportunity for anyone who’s willing to dip their toe in that space.”