One of the consequences of the pandemic, one of many, is that the differentiation between the best operators and the not so good has been increasingly exposed. And of course, investors will seek out the best to manage their properties.
But as this happens, the operators who are doing a good or even great job today will start to be spread too thin. Managing 20 communities is a lot different than 50, 100 or more. You can have the procedures and policies in place for 100 properties, but you do start to lose that personal touch, especially if the CEO is very hands on.
With REITs and other investors doubling down on either their best operators, or finding others that they perceive to be top notch, they run the risk of over-burdening some of these providers, who often just can’t say no.
If you believe that 2024 will be a year of transition, with a record number of properties changing operators, then this problem will only grow. I remember arguing several years ago with the CEO of a larger seniors housing company, who told me that a large size is not negative if you are good, which he thought he was. But they weren’t so good leading up to the pandemic, with census and margins declining for a few years, and ran into some major issues during the pandemic. But who didn’t?
Many experienced operators I have spoken with believe that 50, or fewer, is about the top number of properties before they start losing efficiencies, especially with regard to company culture. Others top out at 100. But when between the two, I think some of the great ones slip into the good category, and some of the good become, well, not so good. This will be important to watch next year as consolidation may accelerate. Never a dull moment.
