Occupancy Gains, Resident Rate Growth Propel Senior Living Margins Higher in 2024

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Senior living operators are in 2024 notching the kind of gains they need to improve margins despite lingering operational headwinds.

Operators including 12 Oaks Senior Living, Atria Senior Living, Juniper Communities and Discovery Senior Living have all managed to find ways to boost their margins, and they believe more upside is ahead.

Chuck Hastings, president and chief financial officer at Bloomfield, New Jersey-based Juniper Communities, said 2024 has been the first year the company has exceeded its pre-pandemic margins, despite the additional pressures it faces from focusing services on higher acuity levels through assisted living, memory care and skilled nursing beds.

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“It’s been a good year for us,” Hastings told Senior Housing News.

12 Oaks Senior Living took on more than 10 properties in 2024, and today the company is managing many that until recently were undergoing levels of distress. While not quite at pre-Covid margins, 12 Oaks President Greg Puklicz noted the company has increased revenue per available room (RevPAR) about 10.4% in the second quarter, compared to the same period in 2023.

“We’ve been focused on rebuilding occupancy and dealing with staffing issues, so margins are starting to grow,” Puklicz told SHN.

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Another operator with consistent margin growth this year is Discovery Senior Living. The operator has grown its margins nearly every month since the beginning of 2024, according to Lou Maranto, senior vice president of sales. The company has focused on maintaining and growing resident rates this year,while reducing discounts and incentives.

“Barring any kind of craziness in the world, I believe that the second half of 2024 will be better than the first half,” Maranto told Senior Housing News. “And 2025 will be a really good financial year for the industry.”

‘Definitely heading in the right direction’

In recent years, many operators have focused on operating margins, which declined during the darkest days of the Covid-19 pandemic. In 2024, senior living companies have reported margin gains. That includes Brookdale Senior Living, (NYSE: BKD), which in May reported its highest operating margin rate since the pandemic began, 27.6%.

Median operating margins have varied in recent years. According to the 2023 State of Seniors Housing report from the American Seniors Housing Association (ASHA) the median operating margin for freestanding independent living communities was 32.5% last year.

Communities with an assisted living component carried median operating margins of 29.2% in 2023, while communities with independent living, assisted living and memory care carried median operating margins of 26.6%, according to the report. Freestanding assisted living communities without memory care services carried a median operating margin of 26.7%, while communities offering both assisted living and memory care had a median operating margin of 20.1%.

Consistent occupancy growth in 2024 has aided operators that have held steady on or grown resident rates. That, coupled with improvements in line items such as staffing, have led to margin increases for many operators.

Among the operators seeing strong margin growth is Louisville, Kentucky-based Atria Senior Living, which has 309 communities across the country. Like Brookdale, the company is currently seeing its highest operating margins since the start of the Covid pandemic, according to Mark Alexander, chief financial officer, head of development and senior executive vice president.

Occupancy growth and price discipline helped the operator achieve its “significant strides forward” in margins. The operator declined to share the exact percentage, citing its status as a “private company bound by confidentiality obligations.”

Dallas, Texas-based 12 Oaks has grown its operating margins in 2024 to a range of low 20% to the mid-30% range for stabilized properties. Aiding that process has been occupancy growth. The company’s occupancy ticked up 14 percentage points in 2024, compared with 2023.

“We have had tremendous growth, and very, very positive results,” Puklicz said. “We’re not all the way there yet … but I think we’re definitely heading in the right direction.”

Discovery has been able to raise resident rates by an average of about 6% in 2024. That has pushed the company’s margin rate up to a range from the teens up all the way up to around 40%, depending on the community, across its entire portfolio.

The company evaluates rates on a monthly basis and adjusts it depending on the demand for communities and floor plans.

“Typically, what we were able to do is hit all of our budget increases by the end of the second quarter,” Maranto said. “Now anything we do would kind of be above and beyond to try to grow overall revenue.”

As of last December, Juniper’s margins were still about 1.5% off from where they were pre-pandemic, Hastings said during a panel at the WTWH Media Capital + Strategy event in Washington, D.C.

The company invested in a Medicare Advantage program and provides in-house physician services as a way to boost quality. While the practice doesn’t directly factor into revenue, the benefits it provides for increasing length of stay for residents leads to improved margins, Hastings said.

12 Oaks has reevaluated its levels of care this year and what it is charging to match competitive market rates. Looking to 2025, is looking to implement a wider value based care approach, according to Puklicz. The company in May linked up with August Health to integrate care platforms and deliver “improved health outcomes, higher resident satisfaction and more efficient operations, according to a press release.

So far, the company is in the process of solidifying partnerships in order to implement the changes, with a timeline of picking partners in the third quarter and beginning to roll the changes out in the fourth.

Looking ahead, Hastings said he’s “cautiously optimistic” about margins. Giving him hope is the fact that staffing is becoming more stable as a whole and overall expenses have not been increasing, while revenue slowly climbs.

“Are we euphoric? No.” Hastings said. “But this is the first year in three years that we’ve got some optimism about the rest of the business.”

Balancing margins with growth

In 2024, senior living operators are grappling with the need to grow for a new incoming demographic of older adults and the need to keep margins in check.

With development still tough, many operators have looked to acquisitions to grow in the meantime. But keeping margins in place while also onboarding new communities, some of which are struggling with occupancy and other operational metrics, is not easy.

Puklicz said the new distressed communities under 12 Oaks management vary in terms of margin performance, depending on the state they were in. Some of those communities are still requiring more money to operate than they pull in.

The company has a “high touch” management model wherein one regional vice president acts as a “functional specialist” for five or six communities, leading to more “intimate” knowledge of the market and being able to adapt as needed. Using that approach, Puklicz said the company can turn a community around and back into positive margins in about 18 to 24 months.

Discovery has been on a rapid growth trajectory this year. In 2024 alone, the operator acquired 39 communities, with more growth potentially on the way this year.

Excluding new acquisitions, Discovery’s margins have increased 5% this year, compared with 2023.

Juniper has traditionally grown by acquiring underperforming properties. In 2024, it acquired three additional communities from Leisure Care, adding 397 assisted living and memory care units to its portfolio, bringing its total up to 28 communities. Some of those communities are still lagging behind occupancy targets, and Hastings said the company is taking a measured approach to turning them around. That’s due to the fact that the operator must put in new systems and programming in place before growing occupancy and revenue.

“That’s what Juniper has always done,” Hastings said.

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