The live-in managers of Lake Oswego, OR-based Holiday Retirement senior living communities are moving out as the company changes its management model to a more traditional one, National Health Investors executives told shareholders, analysts and others participating in the company’s most recent earnings call.
The Murfreesboro, TN, healthcare real estate investment trust’s partnership with Holiday represents 15% of its cash revenue, Kevin Pascoe, NHI’s executive vice president of investments and chief investment officer, said Feb. 17.
A Department of Labor rule that originally was to go into effect Dec. 1, 2016, was the catalyst behind the change, Pascoe said. The rule, opposed by several senior living groups but finalized in May 2016, called for doubling the salary threshold under which most salaried workers would be guaranteed overtime pay when they work more than 40 hours per week. A court injunction put the rule on hold, however.
“With the live-in manager, it’s nearly impossible to be on the salary and then have that profile that they had before, without going off the clock, if you will,” Pascoe said. “So to some degree, it was something they had been talking about, but their hand was, in essence, forced to comply with the Department of Labor ruling for how they were going to treat overtime. And it just made sense for them to go to a traditional model.”
The live-in managers were “great people,” Pascoe said, adding that Holiday had done well with the uncommon management model. “That said, I think there’s an opportunity for them — and I think they would agree — that to get somebody who is a sophisticated sales person, seasoned in selling and managing a business unit, is a potential upgrade for them,” he said. “And that’s something they are really looking forward to as they make this transition going forward.”
The majority of Holiday buildings in NHI’s portfolio have undergone the transition, the REIT’s EVP said. Holiday is renting most of the units to residents as they become available.
“They have been able to release the majority of those units,” Pascoe said. “So again, just looking solely at our portfolio, we feel good about the progress that they’ve made. There are clearly challenges in the marketplace, just not even specific to Holiday, in terms of attracting and retaining labor and continuing to build your culture. But so far, they’re doing everything they said they were going to do, and they’re on plan.”
Holiday Retirement also was a topic during New Senior Investment Group’s earnings call on Tuesday. The publicly traded REIT’s CEO, Susan Givens, said that the model-change decision appears to be a good one and creates “the right kind of leadership structure within the properties.”
Holiday operated 118 of the 154 managed or triple net lease senior living properties in NSIG’s portfolio as of Sept. 30, according to information on NSIG’s website.
Givens also noted that the company’s management model change means that more units are or will be available for rent at Holiday communities, which should benefit the properties.
“The transition has not been completed, so I think it’s too early to say whether it’s going to ultimately be a near-term success,” she said, “but we certainly think over the long-term, it’ll be a good thing.”
Holiday Retirement opened its first independent living community in 1971 and later expanded to manage assisted living and memory care communities. The company now operates more than 300 senior living communities, according to its website.