Amid a prolonged economic downturn, seniors housing operators and owners are exploring new ways to generate more revenue. Take, for example, Aegis Living, an assisted living company with 35 properties on the West Coast. The Redmond, Wash.-based concern recently formed Aegis Performance Management, a new division that will manage properties for other owners. In a twist, Aegis will take less than the typical 5% to 6% property management fee, but will share in any future increase in property valuations.
“If a property owner is looking for a caretaker manager, then we are not the right guys,” declares David Ford, vice chairman of Aegis Living, speaking from his office in Washington, D.C. “We are interested in working with facilities where there is a real opportunity to improve performance.”
Properties that are prime candidates for the service include those with low occupancies or other operating problems where the owner wants to sell or refinance the property within the next few years. “We are looking at situations where we only make money off our management services if our client makes money off those services,” says Ford.
Aegis Living has a strong track record of property management. “We are always changing our systems and coming up with innovative ideas," explains Ford. The company has been asked over the years to act as a third-party property manager, but Aegis never aimed to be only a fee-for-service operator.
Lately, a lot of building owners and lenders have been seeking help, so the executives at Aegis figured it was an opportune time for a new approach to property management. “This is a way to expand our revenue without diluting the value of our management team,” says Ford.
The property management fee will be based on the actual costs to Aegis. The share of increased building valuations to be paid to Aegis will be negotiated with each property owner. A liquidity event, such as a refinance or property sale, will more than likely trigger the payment to Aegis.
Aegis is currently in negotiations with several property owners. But the company won’t take just any assignment, Ford emphasizes. “We will only do transactions where we feel we can add value to the property.”
Alternative profit generators
Another strategy to boost revenues is to sell more services to residents. Many nursing homes, for example, are beefing up their rehab services for short-term stay residents.
Meanwhile, Brookdale Senior Living offers medical services to its residents through a division called Innovative Senior Care. It has 37 home health agencies in 18 states.
The division broadened its mission about two years ago to offer services to seniors not living in Brookdale buildings.
Today about 30% of the division’s business comes from non-Brookdale residents. “It’s a way to expand our mission,” says Sheri Easton-Garrrett, regional vice president of the home health product line at Brookdale’s headquarters office in Nashville.
The stock price of Brookdale (NYSE:BKD) closed at $16.79 per share on Oct. 20, down from $19.59 a year ago. Brookdale’s revenue from outpatient therapy and home health agencies totals approximately $180 million year-to-date in 2010.
Innovative Senior Care serves about 3,500 customers a month who require nursing care or medical services after an illness or surgery. Medicare or private insurance pays for the cost.
The program helps heighten recognition of the Brookdale name in the broader community, which in turn helps boost building occupancies, Easton-Garrett says. Another plus is that Brookdale is able to offer continuity of care if a senior receiving services at home eventually moves to a Brookdale building.
Live Well Properties in Littleton, Colo., is trying a different business expansion strategy. The company plans to build a $40 million, 70-unit condominium project in the Littleton neighborhood of Roxborough. Residents of the age-restricted community will receive services from Live Well, which is an outgrowth of Aurora Community Services based in Menomonie, Wisc.
Aurora Community Services is one of the largest home health providers in the state of Wisconsin. Live Well and Aurora Community Services are both owned by David Barnard, who founded Aurora about 25 years ago. “We are a company that allows people to stay in their own homes,” says Chad Barnard president of GrandView of Roxborough, the new Colorado project.
The concept at GrandView of Roxborough is to provide any type of service a resident may want on an a la carte basis. The property will be similar to a continuing care community because residents will be able to obtain the services they need as they age, Chad Barnard says.
But instead of paying an entry fee, residents will buy their units outright. Unlike a continuing care community that may require a resident to move if he or she needs more care, residents at Grandview will remain in their own condominiums.
Condos range in price from approximately $350,000 to $800,000. GrandView of Roxborough will include a wellness and fitness facility, several dining rooms, as well as a schedule of activities.
Live Well has plans to build other similar condominium buildings, but for now is focused only on the Littleton project, says Chad Barnard. “So many people we’ve talked to say homeownership is what they want in order to keep that feeling of control.”