With development at a near-standstill, senior living companies have grown via acquisitions of existing properties in recent years, including distressed or underperforming assets.
The opportunity of such communities is that operators can manage them and deploy better operational practices in order to bring results up to snuff. Turnaround properties are also sometimes attractive to real estate investment trusts (REITs) such as Ventas (NYSE: VTR) and Welltower (NYSE: WELL), who can purchase them at an attractive price per unit compared to replacement costs and pair them with quality operators that can improve outcomes.
In 2025, an operational “perfect storm” of rising occupancy and revenue has investors seeking to deploy more of their capital and grow for demand in the not-too-distant future.
That said, operators have a challenge of improving results at these properties and making them profitable. Making that task challenging is the fact that distressed properties are often not one in the same, according to Randy Bloom, president and chief operating officer of Tutera Senior Living.
“When you’ve seen one distressed property, you’ve really only seen one,” Bloom told Senior Housing News. “Each of them are unique in their own way.”
That challenge necessitates flexibility and creativity on the part of operators including Vitality Living, Harbor Retirement Associates and Merrill Gardens, which are employing a variety of playbooks to turn around previously struggling senior living communities, including hiring and training sales staff, putting in needed renovations and changing marketing strategies to better fit the identity of a community.
‘Transitions are rough’
All turnaround efforts are aimed at making previously troubled communities more stable. Given the fact that every community is different, that is a feat often easier said than done.
Common problems afflicting turnaround communities include a community that is not physically attractive to the local market, marketing practices that don’t attract key demographics, unit types that don’t make the most of local demand and operational practices that leave revenue on the table or maintain a too high-level of general expenses.
Before they can turn a property around, operators must first diagnose their problems. Many operators begin refining their turnaround strategy even before they begin managing a property in need of operational help. Brentwood, Tennessee-based Vitality Living team members “shop themselves” and work to understand the market in which the community resides, according to Founder and CEO Chris Guay. The operator’s leaders also analyze whether the community struggles with poor digital marketing or outdated physical design.
Vitality dedicates the first 90 days after managing a new community to testing out new turnaround strategies, such as adding in home office support where it might have previously been lacking and establishing strong connections with local referrals to identify specific problems that arose with previous operators.
However, the important thing is to remain flexible and be willing to adapt as needed, Guay said.
Vitality used this strategy when it began managing Vitality Living Frederica in Georgia as part of a more than $14 million transaction with Winterpast Capital Partners and Broadview Real Estate Partners in 2021.
At the time of the community’s acquisition, it sat between 60% and 70% occupancy. Vitality converted most of the community’s rooms from studios to one-bedroom units with higher rates, and today the community sits at 92% occupancy with “great NOI and margins,” Guay said.
Seattle, Washington-based Merrill Gardens last year acquired a community in Tukwila, Washington. At the time, the community was struggling with occupancy that stalled out around 50%, according to Chief Operating Officer Jason Childers.
Merrill Gardens brought in sales talent from neighboring sister communities to train the community’s existing sales team and get them up to speed with its standards. Merrill Gardens also unbundled the community’s unit offerings and rates, such as removing certain levels of care into rate in independent living compared to the assisted living focus the previous operator had to expand the prospect pool. By doing so, the community was “opened up to a new customer base who may not have considered the community in the past,” he said.
Since then, the community has increased into the 70% range and is steadily continuing to grow.
“When we take over a community, we don’t go in looking to necessarily make changes to personnel. We want to spend time with them and really get to know them and understand talent and skill set and culture fit,” Childers told Senior Housing News. “A lot of times, what is happening is they’ll self-select whether this is someplace they want to be or not.”
While Childers notes the first 90 days are important in the turnaround process, a lot of the implemented processes, such as addressed sales and care issues by bringing in additional staff, those tend to see profits generated between the four and six months marks.
“Transitions are tough, no matter how much you plan for them and how prepared you are,” he said.
Harbor Retirement Associates (HRA) sets benchmarks to hit within a newly managed community’s first 30, 60 and 90 days. Like Merrill Gardens, HRA invests time and resources into retraining sales teams to conform with the company’s standards.
Once the company brings a new community on board, the top priority becomes training sales staff on everything there is to know about a community, such as the various dining venues and the differences between its branded programs like its memory care program called “The Cove” and its “Sound” program, which Chief Operating Officer Mark McBride describes as a bridge between assisted living and memory care for residents with mild to moderate dementia. The company typically undertakes renovations such as renovating a dining room into something more akin to a restaurant, cafe or bar to fit the wants and needs of the new baby boomer demographic.
HRA took this strategy at HarborChase of Madison, a community it acquired in June 2023. HRA focused on eliminating contract labor, bringing in its own staff and adjusting the sales and marketing plan to highlight the relaxed environments and dining venues available, taking occupancy from 56% to 100% and growing net operating income margins by 2,800 basis points. HRA’s focus on the community’s first 90 days was vital to the improvement, McBride said.
The company took a similar strategy within a community near Branford, Connecticut, to grow occupancy to 94%.
Trustwell Living is using a combination of business intelligence and data analytics to improve its operations by conducting surveys on caregiving, sales and marketing, staffing and scheduling to identify where changes need to be made.
Others, such as Brookdale and Sonida Senior Living, are calling in operational “SWAT” teams who focus on smoothing transitions in acquired communities with a particular emphasis on sales and clinical operational overhauls. The results are resulting in increasing occupancy and margins so far this year.
Rescuing a reputation
Oftentimes a struggling community has earned a poor reputation in the local market. New senior living operators must overcome reputational distress, but it is among the most challenging parts of a turnaround, according to Bloom.
Kansas City, Missouri-based Tutera Senior Living believes it takes between 90 days and six months to overcome reputational distress and advertise new management, according to Bloom. To overcome reputational challenges, Tutera deploys tools including rebranding a community and addressing what it sees as the “core issues,” such as staffing and care.
“Reputational issues are challenging in the sense that they take a while to develop, and they also then take a while to correct,” Bloom said.
Vitality advertises its new ownership halfway through renovations as part of its marketing strategy early to show local prospects that a previously troubled community is now in better hands, Guay said. Additionally, the marketing shifts to combat what caused the reputational issues in the first place, such as highlighting its new team and working on increasing its Google reviews to repair its digital reputation with internal and external encouragement.
HRA also markets new renovations to show change at the community level and how HRA is working to be in “tomorrow’s world” by bringing in elements its C-suite staff want in communities for when they retire with primary focuses on dining and drink offerings through branded entities within the community.
“It’s fun to sell this,” McBride said. “We’re focusing on the things that matter with people.”
