Senior living may be on the cusp of an extremely interesting and critical era.
COVID-19 appears to have inflicted most of its damage. Now it’s time to clean up the mess and prep for the future. And what exactly will that future look like? As so often is the case when speculation is required, opinions vary.
We certainly are hearing more industry officials and pundits predict a robust recovery. The worst is over, they claim. Better days ahead are all but guaranteed.
Is this a wholly objective assessment? Well, not exactly. Truth be told, some of the biggest cheerleaders have skin in the game, one way or another.
Then there is the Sky-Is-Falling crowd. Their sentiment is represented in a recent survey sponsored by the American Health Care Association / National Center for Assisted Living. Only a fourth of the respondents are confident they’ll even stick around for another year. About half of the assisted living community respondents (49%) indicated they are operating in the red, whereas 54% of the skilled care participants said they, too, are losing money.
My best guess — and let’s face it, we’re all guessing here — is that things will not be as good or as bad as some are predicting.
Certainly, the dealmaking will intensify. And man, is it going to be a seller’s market. The money boys have had capital burning holes in their pockets for more than a year now. They are dying, dying for some action.
If you’ve been thinking about cashing in your chips, or simply divesting your operations of a skilled care and/or assisted living portfolio, now may be the best time ever to act. Prospective buyers will be lining up.
If you plan to stay put, then things might get a bit more uncertain. Let’s face it — the pandemic did this sector very little in the way of favors. That is, unless you think lower occupancy, higher costs and unprecedented hiring challenges are good things.
To be sure, infrastructure money and other new tax dollars will surely help (that is, assuming Congress approves more of both). But as to whether such support will be enough to save the death bed communities in our midst? Maybe not.
Warren Buffet famously offered two non-negotiable business rules. Rule No. 1 is to make money. Rule No. 2 is to remember Rule No. 1. That clearly applies to this sector as well. Or at least to the operators that want to stay in business.
As for how operators can comply? It starts with the basics: Good leadership and management, combined with and caring competent staff. It also helps if profits are reinvested rather than skimmed.
Simply put, senior living communities that do things well are likely to do well. As for the others? Well, there’s always rental housing.
The opinions expressed in each McKnight’s Senior Living column are those of the author and are not necessarily those of McKnight’s Senior Living.