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While the end of the year is typically quiet for senior living industry news, one big move caught my eye as 2023 wound down.
On Dec. 20, Retirement Unlimited (RUI) announced it is acquiring Brandywine Living, a deal that is set to create an operator with 59 communities under management. It’s been a remarkable pace of growth for RUI, which numbered 12 open communities as of 2021.
Both Brandywine and RUI are partners of Welltower, and RUI’s journey from a relatively small operator to one with growing regional density is indicative of a larger industry shift that is being driven in part by the REITs.
Furthermore, the transaction is notable given that Brandywine has been a true senior living pioneer, with its Co-Founder and CEO Brenda Bacon among the most important leaders of the sector’s formative decades – as reflected by her induction in the ASHA Hall of Fame.
In this week’s exclusive, members-only SHN+ Update, I offer analysis of these deals and offer key takeaways, including:
- How RUI went from being a 12-community operator in 2021 to an operator with nearly 60 at the beginning of this year
- What the similarities – and differences – between Bacon and RUI President Doris-Ellie Sullivan might signify for the future
- How RUI’s ongoing expansion with Welltower’s backing demonstrates a larger trend
RUI’s fast growth since 2021
It’s no secret that RUI has been priming for growth – one only needs to trace the company’s history in recent years to learn how.
In 2021, the Roanoke, Virginia-based company’s portfolio numbered 12 open communities. At the time, the company was focused more on maintaining quality and operations than growth – but Sullivan said the company was also still seeking to build scale through acquisitions.
About a year later, RUI partnered with Welltower (NYSE: WELL) when it began managing a community the REIT owned in Alexandria, Virginia. In 2023, the companies deepened their partnership with the launch of a new luxury brand called Elance.
At the time, Welltower management said the two companies were planning a “significant expansion” in their relationship in the coming months and years, with CEO Shankh Mitra identifying RUI as among its top-performing operating partners.
“RUI is one of the best-performing senior housing operators on the East Coast, with the highest quality programming and care standards,” Mitra said during the company’s Q1 2023 earnings call. “RUI has consistently maintained occupancy levels north of 90%, with hardly any use of agency labor over the past few years.”
Less than a year later, RUI announced its acquisition of Brandywine Living, a New Jersey-based operator with a history of catering to luxury clientele. With the deal, RUI is adding communities in New Jersey, Connecticut, Delaware, Maryland, New York and Pennsylvania.
RUI CEO William Fralin and President Doris-Ellie Sullivan are keeping their respective titles in the new company, while Brandywine Living CEO Brenda Bacon is temporarily staying on as licensed operator of Brandywine’s two largest communities in New York.
Both Brandywine and RUI have over the years developed an expertise in luxury senior living, and Sullivan said in December she believed that would aid them as they sought to integrate. But similarities can also be seen between the leaders of Brandywine and RUI, Bacon and Sullivan.
Despite their shared focus on luxury senior living, each woman has roots in the skilled nursing world, as well as a background in public service. Bacon worked in government, including helping to transition Donna Shalala into the HHS Secretary role in the Clinton White House. Sullivan came to senior living from the military.
I think Sullivan’s military experience might serve her well as a partner for Welltower. The REIT is seeking partners that embrace the REIT’s data-driven approach to driving operations, and I think that this demands operator executives who are adept at a certain type of rigor and discipline.
This is not to say that Bacon is lacking in these qualities; using language evocative of the military, she told SHN in the past that she is “a bit of a command-and-control kind of person by nature.”
The similarities between Bacon and Sullivan extend further, as both leaders are women of color in an industry that continues to struggle to diversify, particularly within the top ranks of leadership. In this regard, the combined entity continues to be a beacon for the rest of the sector, and I hope that Sullivan continues to push forward on the DEI front. So far, while she has spoken about the need for greater diversity, she has kept the focus on leading by example, touting the diversity of RUI’s leadership.
“When people are talking about DEI, but then you see their leadership page and it doesn’t look like DEI, then it’s hard for the line staff or the regional staff to believe it,” she said during her interview for SHN’s Changemakers series. “I think that it’s almost like one of those old adages: ‘See what I do, not what I say.’”
Finally, one last point of similarity: Bacon led an ultimately unsuccessful “One Voice” effort to unite Argentum and ASHA. When we asked Sullivan what needs to change in senior living over the next five years, she immediately spoke about the need for greater industry unity, noting that the skilled nursing world has benefited from this.
“I think that we need to collaborate and unite to tell the senior living story as far as recruiting,” she said.
I think the similarities between Bacon and Sullivan are a good sign that the integration of RUI and Brandywine could be successful, but of course combinations are always difficult, and this one is sure to test Sullivan’s skills at managing change. In her Changemakers interview, she told SHN that her approach is to prioritize transparency.
“When we’re launching a new initiative, that’s going to have resistance to change, I think the first thing is having a very open and transparent conversation,” she said. “We actually start a lot of our initiative launches with, ‘Everybody, put your defensive shoulders down. Everybody, just take a deep breath.’”
The push for regional density
The combination of the two companies also fits into Welltower’s plan to develop regional density in markets across the country, as it has sought to do before with other companies it has touted before, including Oakmont Senior Living.
As SHN has noted previously, Welltower management included the word “density” seven times in the REIT’s November 2023 business update. According to that update, the company is taking a “granular approach … to acquire assets at deep discounts to replacement cost while complementing Welltower’s regional density strategy.”
It’s no secret it’s hard to develop scale alone as a senior living operator, especially with the lingering effects of 2023’s financing and development challenges, RUI’s plan to grow alongside one of the deepest-pocketed companies in the senior living space indicate a larger strategy, both for RUI and for other similar operators.
The challenge ahead for companies using these strategies will be to not grow so quickly that operations suffer. And there is always the possibility of having to perform the dreaded addition by subtraction that can occur during the combination of two companies.
Welltower is not the only REIT with its eye on growth with specific operating partners in the year ahead. Others, including LTC Properties (NYSE: LTC), NHI (NYSE: NHI) and Ventas (NYSE: VTR) all have talked about the prospect of more investment and growth in 2024 as a coming wave of debt maturities, among other economic conditions, puts them in the driver’s seat for the year ahead.
Welltower CEO Shankh Mitra has said those conditions represent “the best environment for investments that we have ever seen,” while Ventas CEO Deb Cafaro said it’s “the most favorable supply-demand fundamentals the industry has ever experienced.”
At the same time, senior living companies, particularly REITs, are keenly aware of the need to get margins higher for their investors. It would not surprise me to learn that, behind the scenes, there were talks for other operators in these companies’ senior housing ownership portfolios to find ways to join forces.
For a company like Welltower or Ventas, the strategy appears to be assembling a short list of regional all-stars that can drive operational results in pockets of density across the country, provided they can achieve close alignment on results.
“The historic model is giving way to a more aligned model, where the owner and the operator are really in it together and can rise and fall as one,” Cafaro told Senior Housing News last October. “Hopefully, if you pick the right operator and you’re in the right market, and they’re doing the right things, you’re going to rise together.”
The bottom line is that RUI’s combination with Brandywine likely won’t be the last deal of its kind in the coming months.
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