Leaders with Bridge Senior Living believe that the Covid-19 pandemic is widening the gap between the best operators and the rest of the pack — and in the future, capital providers and consumers will flock to those top performers while avoiding the rest.
“We think that the distance between the top-tier operators and the non-top tier operators is going to widen, and that that will not only widen from a capital perspective and those who want to invest in the top-tier and the non, but also from a resident perspective, whereby resident and resident families will be much more discerning,” Blake Peeper, partner and co-chief investment officer, Bridge Seniors Housing & Medical Properties, told Senior Housing News.
Bridge’s leaders speak from the perspective of both investors and operators. In 2017, Bridge Investment Group closed its second senior housing fund, of more than $1 billion. The firm went on to become an operator by acquiring Somerby Senior Living in 2019, and subsequently rebranded as Bridge Senior Living. About 25 communities operate under that brand, while about 75 properties in the portfolio are operated by other partners. The model is to share best operational practices across the entire platform.
Bridge already is proving itself to be a top-tier operator and is being rewarded by the market, with move-ins now largely at pre-Covid levels across the entire portfolio, Robb Chapin, partner and CEO of Bridge Seniors Housing & Medical Properties, told SHN.
And growth is in the cards as well, with Chapin and Peeper anticipating opportunities arising due to dislocation caused by the pandemic.
On the frontlines of health care
Bridge is evolving operations in lasting ways as a result of a Covid-19, in a bid to continue to attract residents in the post-pandemic era.
One major area of focus is on the delivery of health care services, notably through telehealth and telemedicine. The pandemic demonstrated the vital role that senior living plays within the broader health care system, Peeper and Chapin said.
“This pandemic has really shaped our industry as being part of the health care continuum,” Chapin said. “For that high-risk cohort that is most susceptible to this pandemic, we’re the place that’s keeping that cohort from flooding the ERs and ICU beds of our hospitals.”
Bridge has done an “exceptional job” in playing frontline defense in this way, by keeping infection rates to less than 1% of the resident population, he noted.
Telehealth has been a key tool in achieving this outcome, and Bridge is focused on building out its infrastructure to offer best-in-class telehealth capabilities going forward. That involves investing in portable devices that can go from room to room; creating dedicated spaces in communities with lighting and sound to ensure high-quality telehealth visits; and investing in infrastructure to support telehealth, such as fast, reliable WiFi.
Bridge is supporting residents’ ability to interface with their usual health care providers while also exploring partnerships with telehealth providers that would offer their services at scale across the company.
“Telehealth and telemedicine is really one of the more transformational areas of our business,” Chapin said.
Other types of technology — from resident engagement tools to virtual tour platforms — are also key parts of Bridge’s go-forward strategy. Changes that might have taken two to four years to implement under normal circumstances, Bridge is now rolling out in a period of months, Chapin noted.
But other aspects of the business are also changing. Building design has been influenced, with features such as cohort suites where residents can live comfortably in relative isolation if needed. And supply chains have been strengthened to enable a greater inventory of personal protective equipment (PPE) to be stockpiled. Staffing levels are also being reevaluated and optimized to enable workers to focus more on the provision of care, while communication with residents and family members is another primary focus.
“Facing the adversity of this pandemic will make us better, and result in a better resident experience going forward as we’ve challenged ourselves to think through our processes and systems,” Peeper said.
The pandemic has slowed down transaction activity throughout 2020, but it has not dampened the longer-term investment outlook for senior housing, Chapin and Peeper said.
The demographic story in favor of senior living remains the same as before the pandemic, and certain other dynamics have now shifted in a favorable direction, they argued.
New supply started to become more constrained starting in late 2018, and the tight credit markets around development will further suppress new competition. Rent collections have remained largely steady throughout the pandemic, and the value proposition of senior living as a needs-based product is also playing out, they said.
They do anticipate that pandemic pressures will give rise to acquisition opportunities.
Mom-and-pop operators make up a significant proportion of the industry, and they already were facing new complexities and challenges prior to Covid-19, including an influx of well-capitalized new competitors, the need for greater technological sophistication, and closer integration with health care providers and payers. Now, some of these smaller businesses are looking to make an exit, and are being added to the portfolios of larger enterprises than can leverage efficiencies of scale.
“We’re already seeing that in our current pipeline, that we’re pursuing right now,” Chapin said.
Peeper considers these to be examples of “operational dislocation,” when an existing operator lacks the sophistication to cope with Covid-19 on top of other challenges. “Capital dislocation” is also at play and feeding the M&A market, he said — this type of dislocation involves ownership with liquidity issues or that cannot reinvest and hold a property through the impacts of the pandemic.
Some investors that entered the space over the last few years based on the coming wave of aging baby boomers now are having an eye-opening experience as they learn how operationally intensive the business is — and they realize they do not have the appetite for it, Chapin added.
Bridge intends to take a “rifle-shot” approach to all these different types of opportunities but fundamentally is sticking with its long-standing investment strategy and discipline, Chapin and Peeper stressed. That strategy most recently has focused on markets with high barriers to entry, including urban and mixed-use projects.
By hewing to this approach, Chapin believes that Bridge can continue to grow while keeping the focus on maintaining its quality, maintaining a position among the group of premium providers that will thrive as the pandemic fades.
“Our strategy allows us to lead the way in how we innovate and position ourselves as one of the leaders — as an owner and an operator now — in the senior living industry,” he said.
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