Senior living operators Cogir and Cadence Living are joining forces.
Cogir, the U.S. based subsidiary of Montreal-based real estate company Cogir Services, is buying out Cadence Living’s shareholders, the two companies announced on Tuesday. Terms of the deal were not disclosed.
The move will create a new company that has a combined 60 communities totaling 8,000 units in nine states and almost a dozen more projects on the way.
Current Cogir CEO David Eskenazy is remaining CEO of the new company, with Cadence co-founder founders Rob Leinbach and Eric Gruber moving to senior vice president roles.
Both companies’ communities will continue to operate under the same brand names as before the transaction. Cogir will keep its Sacramento-area headquarters, with additional offices in Scottsdale, Arizona and Seattle.
While the transaction is technically an acquisition, both companies have already combined operations as a single company. And Eskenazy sees it more as a merger due to those synergies.
“This is a merger where we can put two and two together and we believe we can get five out of it,” he told Senior Housing News. “Together we’re stronger than we were individually.”
Born from a chance meeting
Like some business deals, the combination of Cogir and Cadence came about in a somewhat serendipitous way. he deal to combine Cogir and Cadence might not have happened were it not for Leinbach running late to a function for a regional senior living conference earlier this year.
“I was late to dinner,” Leinbach told SHN, of how discussions initially got started. “There was one seat open, and it was next to Dave.”
Eskenazy said he was already aware of Cadence through his former work as president of senior living operator Merrill Gardens. The company had a reputation for being a quality operator, he added. Leinbach also knew of Eskenazy, but the two had never met personally before.
As they talked over the course of three hours, they quickly realized they had more potential synergies than differences.
“It was sort of an interesting dialogue, because every time we brought something up, it seemed like that was where they were trying to go,” Eskenazy said. “And where we were trying to go, they had that.
Both also bring to the deal close relationships with a wide range of growing partners in ownership and development, from relationships with Welltower (NYSE: WELL) to Ryan Cos. and Flournoy Development Group.
‘Two plus two equals five’
At the heart of the acquisition is a belief that both senior living companies are stronger together than they are apart — “two plus two equals five,” as Eskenazy and Leinbach put it.
Both companies have a portfolio that is a mixture of joint-owned and third party-managed communities, and both offer independent living, assisted living and memory care services.
But the companies also synergize in ways that fill each others’ operational “gaps,” and most of the companies’ communities were located in markets where the other didn’t have a presence. For example, Cadence brought to the table a strong presence in Southern California and other states in the region, while Cogir had a concentration of communities in Northern California and in the state of Washington.
Cadence also is bringing to the newly combined company a robust memory care program. That had been a focus of growth for Cogir prior to the deal, according to Eskenazy. Similarly, Cogir brought development experience and a strategy for clusters of growth that complimented what Cadence was already trying to achieve.
“[Cogir’s] next period of growth was in programming … and our next step was to invest in systems, margin performance, data analytics, and Dave is the most experienced operator in the country in that regard,” Leinbach said. “Putting those two things together, I think we can truly create the model operator in the industry.”
One particular focus for the combined company will be in staffing efficiencies. Wage increases enacted during the pandemic have resulted in compressed margins across the industry, and Eskenazy believes they cannot be easily expanded again without more efficient workforce planning.
“We have to do a great job delivering services to residents,” he said. “But we also have to do a great job of assessing their needs and then bringing the appropriate amount of staff — not too many, and not too few — to service those needs.”
Helping to power those efforts to be more efficient is a slate of technology tools that includes remote monitoring and AI-driven fall detection and a host of others relating to point of sales, electronic health records and assessments.
Eskenazy takes a similar philosophy on dining.
“How to measure that and how to get that right is really important for the overall financial and resident success of the operation,” he said. “And those are things that we’ve spent a lot of time trying to master.”
The new company is also working on some ideas to boost efficiency in the future. For example, Eskenazy said Cogir had worked on a way to create a cashierless store similar to Amazon Go.
“People have gotten used to self-service, and that may become a little more prevalent inside assisted living,” he said.
The company’s growth will be based on clustering communities in specific markets to build local scale and leverage those efficiencies.
“Rob’s team has gone into Denver, for example, and there would be no reason not to look within the markets where we are already in,” Eskenazy said.
Both Leinbach and Eskenazy are bracing for a potentially bumpy year in 2023 with more cost pressure and staffing challenges ahead.
They are also heartened by a looming construction slowdown, which could help with occupancy recovery; and that there is a potential glimmer of relief in 2023 for senior living staffing.
Even so, they see occupancy recovery and cost inflation as two potential pain points for the industry in 2023. They also believe that will lead to opportunities to take on new management contracts as owners swap out troubled operators.
“When you have occupancy challenges at the same time you have inflation in your costs, that’s a hard equilibrium to find,” Eskenazy said.
Looking even further down the road, one area the new company may one day venture into is the active adult sector. That is a product type that Cadence was already interested in exploring.
“Collectively, there is opportunity in moving the property management of those asset classes, and I don’t think historically that it has been done with a resident-focused, engagement thought process,” Leinbach said. “But we also have to be cognizant of the economic times and what pencils and what doesn’t.”
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