Senior Living Operators Deploy New Models Aimed at Middle-Income Residents 

This story is part of your SHN+ subscription

Middle-market senior living operators face an uphill battle to make the model work. While the product type isn’t for the faint of heart, it carries huge opportunities for those that can unlock them.

That’s why operators such as Episcopal Retirement Services, Merill Gardens, Mainstay and Innovation Senior Living are trying new ideas for scalable middle-market senior living communities

Episcopal Retirement Services’ middle-market model is designed so residents spend no more than 38% to 42% of their income on housing, according to President and CEO Laura Lamb. The company achieves that through streamlining staffing and dining options and making smart decisions during the construction process.

“Our goal is to serve the full economic continuum, and since I have retirement communities and I have 32 affordable living campus, that really makes sense for us to round out our scope of elders we can serve from an economic perspective,” Lamb told Senior Housing News.

Leaders with Mainstay Senior Living, tackles the middle-market by rethinking capital and scale. The Lakeland, Florida-based operator is vertically integrated with investment, development and construction services through its parent company, which lowers the cost of capital on new projects. In turn, the company doesn’t need to set rents as high to make them pencil out.

Innovation Senior Living is taking a different approach to the middle-market by blurring the lines between at-home care and adult day care models. Pilar Carvajal, founder and CEO of Innovation Senior Living, is piloting the program in Florida, with plans to expand after the full launch in 2027 and sees it as an ideal target for secondary and tertiary markets.

“I know what [older adults] value and what they don’t value, and I can help my senior living provider colleagues and friends on developing the product that is going to attract the middle income senior to their portfolio,” Carvajal said.

Varied approaches for a varied clientele

The middle-market senior living demographic includes millions of older adults in a variety of financial situations.

The National Investment Center for Seniors Housing and Care “Forgotten Middle” study defined the middle market as individuals in the 41st to 80th percentile of individual income and annuitized assets in 2014, which ranged from $25,001 to $74,298.

That range can present a challenge for operators who can’t always serve everyone in demographic by replicating the same product over and over again.

Seattle-based Merrill Gardens offers middle-market rates via the company’s Truewood brand, which initially launched in 2021. Since then, the program has stabilized and is on the verge of expansion, according to Chief Operating Officer Jason Childers. By streamlining and reducing services like not offering a full breakfast for residents every day, the operator reduced labor costs by around 30%.

The Truewood model takes cues from business hotels like Hilton’s Homewood Suites with self-service options that need fewer staff to manage. To make the model work, Merrill Gardens employs resident experience partners, who perform duties in the community where needed in a concept similar to a universal worker.

Using streamlined services, the company can charge between $2,700 and $4,650 per month, which is between $500 and $1,000 lower than Merrill Gardens’ market-rate communities.

“We’re trying to create a price point that opens up to a broader audience,” Childers said.

Cincinnati-based Episcopal Retirement Services also limits services and offerings, but in a different way. The organization’s communities don’t include dining services. Because Ohio requires licensing to provide medical services in assisted living, the operator’s leadership opted to coordinate care through third-party partners. Not only does doing so reduce expenses by cutting licensing fees, but it reduces staffing requirements to fill nursing positions and director roles, according to Lamb.

While development is tough to notch, Episcopal’s leaders can still develop new middle-market communities by acquiring land outside of major metropolitan areas and carefully planning projects akin to affordable senior housing.

“That makes a very efficient product,” Lamb said. “We’re not redesigning with each community. These are our floor types. The challenge for the architect and the civil engineer is to put our puzzle pieces on the layout of the campus.”

Mainstay pencils development and completes acquisitions by sourcing capital at lower rates than other companies, which Chief Investment Officer Tod Petty said is attributable to its “preferred equity, non-participating” investors.

“Our investors like income funds. They like dividends that are stable [and] regular,” Petty told SHN.

As a result, Mainstay Senior Living targets acquisitions in secondary and tertiary markets with a range of about $125,000 to $150,000, per unit, which is below the industry average of $210,000 per unit. Leadership at the Lakeland, Florida-based operator tracks where new hospitals are being built to zero in on markets where unmet demand for senior living might be.

Because the all-in cost of development and acquisition is lower for Mainstay’s leaders, that translates directly to savings for residents, with rents for the operator ranging from $3,600 to $4,200 per month.

“That’s attainable,” Petty said. “I think attainable is the more correct word in the world we’re going into.”

Rethinking the model

The middle-market sector is not short on ideas for creating more affordable services.

Carvajal is piloting a new concept that blurs that lines between a senior center and an adult day care. The first Longevity Day Club location in Cape Canaveral, Florida, operates out of a retail space and only a handful run it. Club members have access to clinical services and technology services while there.

“When I first started looking at this, I was thinking of reimagining the adult daycare model, kind of moving it from a Dunkin’ Donuts model to a Starbucks model,” Carvajal told SHN.

Carvajal describes the product as “staff light, capital light,” and foresees future operators running similar programming out of nearby retail spaces or underutilized rooms within communities. She describes it as ideal for secondary and tertiary markets as well, as it offers socialization opportunities for people who may have less opportunities to meet others, or as more affordable option in urban markets.

St. Louis Park, Minnesota-based Lifespark is another company seeking to break the mold in senior living via its Complete model, which brings multiple pillars of service under one unified banner and uses ACOs, elderly waivers or Medicare Advantage plans to help cover resident costs so they remain more affordable.

The operator utilizes state funding through Medicaid waivers to lower the expenses for residents while maintaining revenue.

According to Lifespark CEO and Founder Joel Theisen, operators need to approach funding and capital in a new way to crack the middle-market nut. Lifespark “makes money on different verticals through the compounding of Medicare, Medicaid and private pay dollars,” which can be a bigger strategy for the industry as a whole to be able to lower costs for residents. Lifespark’s portfolio in Minnesota utilizes elderly waiver programs, which provided $891.2 million in assistance at an average of $2,555 per month, according to the Minnesota Department of Human Services.

“I think truly to crack the middle market nut, you can’t just rely on private pay dollars,” Thiesen said. “It’s government dollars … which creates middle market opportunities for people to live in senior housing.”

There won’t be any one silver bullet to solve the middle market issues facing the industry, but Carvajal is confident in the industry’s ability to make it work. The pilot concept, for example, is influenced from her personal experience with the prevalence of adult day care centers in Florida, along with personal ties about caring for her father.

“I think that different people are going to be looking through their lenses of how to solve the middle market, and ultimately, it’s going to be a lot of different solutions,” she said. “This is just mine.”