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A majority of non-profit senior living operators are sticking to their growth plans, even as workforce shortages and construction pressures continue to make doing so complicated.

According to Ziegler's CFO Hotline report for August, 58% of non-profit senior living operators say they are moving forward with their growth pipelines as planned this year. The report, released Wednesday, includes responses from 220 not-for-profit senior living CFOs and financial professionals.

Also on Wednesday, Ziegler released new data showing that life plan communities saw higher occupancy rates but lower resident fee increases than their non-life plan community counterparts.

'Not the time to be timid'

While the majority of those surveyed in the latest CFO Hotline report said they planned to move forward with growth, 9% say they have scaled back their plans in the last year.

Another 7% say they have scaled back projects and put some on hold. Just a quarter of respondents said they put all of their growth projects on hold.

As for how those organizations plan to grow over the next two years, 58% said they planned to add new units to their communities, while 30% said they planned to expand through acquisitions or affiliations. Another 23% identified new community development as a growth target.

Respondents most often flagged workforce shortages, construction pressures such as the cost of building materials and the financial impact of growth as their biggest hurdles to expansion.

As in previous Hotline reports, Ziegler's latest from August includes some responses from survey-takers. And those responses paint a picture that, for many non-profit operators, now is not the time to slow down with growth plans. Or, as one respondent put it: "As the saying goes, grow or die."

"With rampant inflation, regulation, wage pressures and an economy on the edge of collapse now is not the time to be timid," the respondent wrote. "We are looking at 2030 and beyond, not just because it is strategically wise but we all have had just about enough of this decade."

Other respondents noted scaling back their growth plans in favor of unit additions or repositionings.

"Our immediate plans include converting vacated skilled nursing units into independent living apartments," another respondent wrote. "Beyond that, we're exploring new strategic partnerships to potentially develop new communities or be included in portions of multi-generational developments."

Those that reported putting growth on hold said they did so out of necessity.

"Reserves are covering cash losses, so growth is not on the radar," wrote one non-profit operator.

Another wrote: "Financial challenges preclude capital growth. We are actively trying to convert some of our IL to AL over time."

'Great stability'

Life plan community operators had higher occupancy but a lower growth of resident rates than other senior living sectors in the second quarter of 2022.

That's according to a separate report released Wednesday by the National Investment Center for Seniors Housing and Care (NIC) and Chicago-based investment bank Ziegler.

The report includes data from 1,173 not-for-profit and for-profit entrance fee and rental life plan communities across 140 different markets, in addition to the data NIC MAP Vision gleaned from the more than 15,000 senior housing communities it tracks across the country.

According to the report, life plan community occupancy jumped to 86% in 2Q22 for 99 NIC MAP Vision primary and secondary markets, which is up .5 percentage points from the first quarter of this year. For non-life plan communities, average occupancy for the second quarter of 2022 registered at 79.1%.

By comparison, average senior living occupancy for both life plan and non-life plan communities for NIC MAP Vision's 31 primary markets grew to 81.4% in the second quarter of 2022.

Among the report's top takeaways is that "there remains great stability in the life plan community model in terms of weathering the storm of the pandemic," according to Ziegler Director of Senior Living Research Lisa McCracken.

"Recovery will continue, but will be at a more rapid pace for those organizations who have invested in maintaining their communities and for those organizations who have the appropriate unit mix," McCracken told Senior Housing News. "LPCs/CCRCs who are largely nursing, with limited independent living options, will continue to feel the greatest pressures on the workforce front, with reimbursement, the increasing regulatory environment, et cetera."

The gap between life plan community and non-life plan occupancy rates has grown since the start of the pandemic.

According to the report, the gap between the two was 5.8 percentage points in 1Q20. But by the second quarter of this year, the gap between the two occupancy rates had increased to 7 percentage points. Still, that number is from the first quarter of 2021, when non-life plan and life plan community occupancy were 9.7 percentage points apart.

Occupancy also differed within the life plan community payment type. For instance, not-for-profit life plan communities logged an average occupancy rate of 87.3% in the second quarter, compared to 82.% for for-profit life plan communities.

The largest difference in second quarter occupancy between nonprofit and for-profit life plan communities across the country came in the West North Central (11.8 percentage points) followed by the Southwest (10 percentage points) and the Southeast (6.8 percentage points), the report showed.

Although life plan communities saw higher occupancy and reported higher average monthly fees for residents, those elsewhere on the continuum saw higher rate growth in the second quarter of 2022. Assisted living community operators saw the highest rate of growth in resident fees, with rates in the second quarter of 2022 registering 4.2% higher than in the same period a year prior.

Similarly, life plan community operators in 2Q22 set assisted living rates about 3.5% higher than a year earlier, also representing the highest rate of growth in resident fees for the product type.

Austin Montgomery contributed reporting for this article.

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Source: https://seniorhousingnews.com/2022/08/17/non-profit-operators-keep-grow-or-die-mindset-despite-construction-labor-hurdles/