Not once, not twice, but now several times Priority Life Care has been brought in by an institutional owner of underperforming senior living assets and turned them around in less than a year. The company’s track record is attracting even more institutional interest.
In the most recent example, American Healthcare REIT (NYSE: AHR), which just closed its IPO, hired Priority Life last May to manage six senior living communities in Indiana (5) and Michigan (1) that were losing money on 78% combined occupancy. The communities have a combined 652 units, with assisted living comprising 389 units, independent living 188 units and memory care 75 units. The licensed bed count is higher, and the memory care unit count is expected to grow because at one of the IL/AL communities they will be converting 20 units to memory care.
In just nine months, occupancy has surged by 700 basis points to 85%, and management believes it can continue to grow occupancy in the near term. That kind of census pickup was seen in the first 18 to 24 months during the recovery from the pandemic, not three years after the bottom was hit. Now, the portfolio is generating significant positive NOI. Let’s just say, the REIT’s new shareholders must be quite pleased with that extra cash flow coming in.
A large part of the turnaround came from two communities. One, with 116 units across the care spectrum, was at 76% occupancy last May 1 and is now 95%, for an increase of 1800 basis points. In addition, agency use dropped from $35,000 a month to zero. A second community with 124 units has increased from 52% occupancy in May to 74% today, or a 2200 basis point increase. Agency use at this community dropped from $48,000 a month to zero as well. The combination of increased census, increased revenues and lower costs can do it all.
This portfolio is made up of middle-market communities with average IL rates of $1,500 to $2,500, average AL rates between $3,000 and $5,000, and memory care up to $6,500 per month. While they have historically attracted a mostly private pay clientele, with Indiana’s recent 33% increase in the Medicaid waiver rate, with smaller annual increases in the future expected, they will smartly expand in this payer market when it makes sense.
American Healthcare REIT likes what they have seen so far and has rewarded Priority Life Care with the management of an additional six communities in Michigan. This brings their total to 63 managed communities in 15 states. So, what do they bring to the table? A family-owned company with a management style that is employee centric in practice, not just in talk, and a growing track record of success in improving census and cash flow for their capital partners. And employees can just smell success. That is certainly what a lot of capital partners want, and need, in today’s market.
