The growing complexity of the senior living sector, particularly around healthcare and COVID-19-related activities and their expense, has put more organized, stronger senior living providers in a better position than their smaller, weaker counterparts.
“That alone is triggering the exploration of consolidation throughout the industry,” said Dan Hermann, president of CEO of specialty investment bank Ziegler, during a webinar last week exploring the firm’s outlook for 2021.
It’s a prediction many industry experts have been making throughout the pandemic, and Hermann noted that he’s already starting to see it come to fruition.
“We at Ziegler have 10 nonprofit providers’ assignments right now, and eight are seeking new partners,” he said. “Smaller operators are recognizing the complexity of running this business on their own when they’re faced with external factors such as a pandemic.”
The common theme among those pursuing affiliation has been occupancy numbers falling into the low 80 percentages and high 70s. At the same time, Hermann added, many of these organizations also are facing leadership burnout or leadership retirements.
“A few of the leaders that are into their 60s are not seeing a reason to keep going,” he said. “Instead, they’re saying, ‘Why don’t I use this at a time to step away?” In many cases, Hermann noted, boards of directors then are viewing this leadership departure as a time to consider joining a multi-site organization.
In addition to consolidations, Hermann also anticipates that the industry will see a substantial amount of independent living expansion and continued modernizations. Many nonprofit life plan communities have been acquiring adjacent parcels and using that space to build more cottages or independent living buildings, he added.
“That’s what so many of these nonprofit life plan communities are very good at — establishing a brand and then expanding it out in a single location,” Hermann explained.
