As pandemic challenges recede, American House Senior Living Communities has a revamped portfolio, new leadership talent and big plans for growth.
“Our motto here is that the comeback is greater than the setback,” CEO Dale Watchowski told Senior Housing News, referring to the recovery from pandemic-related challenges.
The Bloomfield Hills, Michigan-based company is in some ways entering a new era as it emerges from Covid-19. American House this year “right-sized” its portfolio by shedding 13 properties after it bought out the 50% ownership stake of the company’s other partners: American House Founder Bob Gillette; his son, Robert Gillette; and Joe Schwartz, who had previously worked as the company’s CFO and chief investment officer.
Bob Gillette owned six and partially owned four properties that were not acquired by the operator for “a variety of reasons,” Watchowski said. American House also transferred ownership of three other properties to former American House owners, who took the real estate in exchange for monetary compensation during the ownership change.
With those dispositions in the rear-view mirror, the company is in expansion mode, and in May named a new COO to support the “aggressive growth” strategy. Part of that growth comes through new development, and Watchowski believes that American House has a leg up, thanks to its affiliated development company, REDICO, which Watchowski also leads.
Watchowski also believes — like others in the industry do — that there are opportunities to acquire certain assets at a good price now. Already, the company has acquired a few such communities, including three in Florida.
At the same time, American House has worked to flatten the organization’s management structure by hiring and promoting employees into new roles that help support its operations in a more evenly distributed way. But — as is the case across the industry — staffing remains a major challenge, and American House recently participated in a job fair with 300 attendees but hired no one.
Still, while the senior living industry is still on the mend now, Watchowski and the other leaders at American House have set their sights on emerging from the pandemic in an even stronger position than when they entered it.
Progress and growth
No doubt, the pandemic was hard for American House, as it was for all operators. The company’s occupancy rate dipped down to 76% during the peak of the pandemic, which is much lower than the nearly 90% occupancy rate the operator had before the pandemic.
Like many others in the industry, some of the operator’s biggest challenges during the pandemic related to resident isolation and employee turnover, Watchowski said.
More recently, American House has begun a slow march back to pre-pandemic occupancy. Since the beginning of March, the operator has added about 100 basis points of occupancy per month, and now, census stands at about 80%, with expectations that it will tick up to 81% by July.
With headwinds gusting a little less hard than before, American House is embarking on a strategy of growth that will grow its current portfolio of 53 communities by about four projects annually. The company’s current partners include ReNew REIT, Harrison Street, Black Salmon and AEW Capital Management.
That includes on the development side, where record-high building material costs earlier this year complicated senior living development projects in many markets across the U.S. But those challenges don’t faze Watchowski — and in fact, he believes that those headwinds might have given American House a competitive edge, given the operator’s strong in-house development experience.
“We’re looking at … ways in which we can deliver at a cost that is probably less than what our competitors are able to deliver, because of our volume and because of the creativity of our development team,” Watchowski said. “My thought is that the challenges created by the costs of development have only helped us in the industry.”
Recent development projects include a newly built and opened 165-unit community in St. Petersburg, Florida; and a planned 177-unit, seven-story community in Oak Park, Illinois. American House is also slated to open a community in a REDICO “mixed-use development on steroids,” with retail, medical office and hotel space in Bloomfield Hills, Michigan.
“Think about the merits of bringing a senior community into this village-like setting, where the residents can subsist and live off of this synergistic relationship among all of the uses that are on that site,” Watchowski added.
American House is also working on development projects in Meridian Township and Ann Arbor, Michigan; Jacksonville, Florida; and Scarborough, Maine.
On the acquisition side, the company is also active. Already, American House has acquired a handful of communities to add to its portfolio, including three properties in Sarasota, Lutz and Orange City, Florida.
Overall, the company is focused on developing and acquiring sites and communities that may have seen their fair share of challenges during the past year.
“What we’ve been focused on is looking at properties and opportunities where other other operators might not have gone,” Watchowski said of the company’s growth strategy.
To support that growth, American House has bolstered and flattened its leadership structure.
The company has established two vice president roles located in the north and south, and added three other vice president roles to support the company’s three pillars: clinical wellness, life enrichment and hospitality.
American House also this year hired a senior vice president of marketing and leasing, Dina Kelly; and promoted former senior vice president of growth strategy Brianne Zitko to COO.
As COO, Zitko is focused on seven “key processes”: managing move-outs, controlling labor costs, recovering revenue, maintaining financial performance and accountability, benchmarking, culture and communication.
“We all know the comeback is not easy, and we’re always going to have some challenges that we didn’t foresee,” Zitko told SHN last month. “But we have to have that mental fortitude to make it through each challenge, and … to keep pushing to get where we need to get.”
What comes next
Although American House is on better footing now, Watchowski still sees some potential bumps in the road ahead.
One current hurdle is staffing, which has remained a top industry challenge throughout the pandemic. That was evident during a recent American House job fair that drew 300 attendees.
“We thought, wow, this is a really successful job fair — we didn’t hire one person,” Watchowski said. “What we heard at the end of the day was, I can get more paid more by staying home — and believe me, our minimum wage is well beyond what’s being contemplated in various markets.”
Watchowski believes that extended unemployment benefits and pandemic assistance have had a major impact on the company’s ability to hire workers. That is a view that other senior living executives have also shared with SHN in recent weeks and months, but one that most economists were still uncertain of in a May 25 survey from The University of Chicago’s Booth School of Business.
Regardless of the cause, American House is confronting those staffing challenges head on. The company earlier this year hired a chief human resources officer, Mary Anderson, who is developing more training and career paths for employees who want to grow within American House. The company also hired a compensation executive, who is “looking at everything from pay to benefits” to help stay competitive on the hiring front.
Still, these are seeds planted for the future, and Watchowski believes that, “in the near term, we’re going to continue to be challenged” with regard to hiring and staffing.
Looking ahead, American House still has communities in its portfolio that Watchowski believes will be slower to recover, particularly in markets that were hit hard with Covid-19 outbreaks.
“I would say that we are on the road to recovery,” Watchowski said. “But we still have a long way to go.”
One looming concern is the rate of new development within the senior living industry, and whether developers might return to the old days of overbuilding, as “us developers, we can’t help ourselves,” Watchowski said.
But he also believes that the pandemic’s challenges will cause some developers to think twice about jumping into the space, especially those that lack operational knowledge. And he is hopeful that new barriers to entry caused by high development costs and other pressures will help moderate the rate of new supply in the months ahead.
“I think we’ll be fine barring any [overbuilding],” Watchowski said. “I think it’s probably going to be another year to 18 months before we come out of this entirely.”
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