Although Covid-19 made the process longer and more complicated than anticipated, a new senior living operator — Prosper Life Care — has now acquired its first two communities.
Both communities are located in Massachusetts and were previously owned and operated by Landmark Senior Living, which is exiting the sector to focus on addiction treatment. Landmark at Monastery Heights, which will now be known as Prosper at Monastery Heights, was originally a Catholic monastery and occupies 18 acres in West Springfield, offering assisted living and memory care. The other community, which will now be known as Prosper at Fall River, is located in the town of Fall River and offers assisted living.
The communities are stabilized, have weathered Covid-19 well, and are the starting point for a portfolio that will be focused on serving a middle-market consumer, Prosper Co-Founder and President Russell Papia told Senior Housing News.
From vision to reality
A 34-year-old native of Buffalo, New York, Papia began his career working in the consulting division of an accounting firm, then started his own consulting company.
“Buffalo is a big health care town — half my family are nurses, physical therapists, just a lot of people involved in that space — so I gravitated toward health care,” he said.
Based on his consulting experiences and his research on market opportunities, he determined that he wanted to forge a career in assisted living and memory care.
“I’m working on the culture and staffing of all these different companies, and it’s really difficult for a business owner to get their staff to buy into whatever the company is doing … it’s hard to develop that passion,” Papia said, referring to his days as a consultant. “And every time I worked in senior housing … they’re all there to serve the residents. It’s so much easier to form a bond and create an amazing culture in a setting where people are there for somebody besides themselves.”
Papia discussed his senior living ambitions with Scot Sandel, who at the time was working in ancillary health care services but had a dream of starting an operating company. The two men sat down and put their vision on paper, based on their core personal values.
“We try to make things fun in everything we do, to make the communities home, and deliver purpose to each individual,” he said.
The founders determined that acquisition rather than ground-up development was the best path forward, and set out to find the right opportunities. The two Landmark communities fit the bill.
The culture of Western Massachusetts is similar to that of Western New York, Papia said, and he was also impressed by the longevity of the staff.
“These people are a family here, and we are very much a family-oriented business,” he said.
Prosper submitted its offer on the properties in February 2020, and then Covid-19 hit. Given the impossibility of visiting the communities, Landmark agreed to extend the due diligence period. By the summer, the deal was again proceeding, but challenges remained. Working with a broker, Prosper approached “probably 20 different lenders” but only received two responses. Terms also reflected the new pandemic reality, with a lower loan-to-value ratio and higher interest, and more overall scrutiny from lenders.
Helping Prosper’s cause was the fact that Papia and Sandel brought on a joint venture partner in Regal Care, an experienced operator. While Papia is on the ground working operations day to day, Regal serves essentially as an “overseer and consultant” to help maximize efficiencies, source vendors and the like.
The new year started out with a bang for Prosper when, on Jan. 1, the deal closed. Papia declined to share the acquisition price.
Middle-market growth
Papia and Sandel want to serve the so-called “forgotten middle” — that is, the huge cohort of aging baby boomers who cannot afford today’s market rate senior living but do not qualify for affordable housing.
Rental rates at the former Landmark properties range from about $2,500 to $4,000 a month, depending on unit size, and there are low-income units as well. The buildings have maintained occupancy above 90% through the pandemic, which Papia takes as evidence that rates at the right price point for the middle-market demographic of the surrounding area.
“I come from a middle-class family … I want to be serving the same people we are,” he said. “Class B communities, suburban or rural or right on the outside of a city limit, all fit that mold.”
But real estate that can support lower rental rates does not mean that communities have to sacrifice character, which is particularly proven by the Monastery Heights campus. The converted monastery consists of 120 beds on a 90,000-square-foot property.
“Obviously, if you were to build a facility now, you would not need 90,000 square feet to accommodate that,” Papia said.
In addition to expansive outdoor spaces, the community features archways and stained glass and a dining hall with a high ceiling.
Maintaining a middle-market price point also depends on carefully controlling expenses, and rising wages make that challenging. But the resident base at the two communities is pretty active and healthy, which has helped keep health care-related costs down even in the midst of Covid-19; Monastery Heights had a few cases of Covid-19 early in the pandemic, but Fall River did not have its first case until two months ago.
While the immediate focus is on smoothly transitioning the management of these two communities, Papia and Sandel are targeting growth.
“The vision for Prosper is to grow a portfolio of 20 to 30 communities,” Papia said. “That is a vision but not a necessity — if we get to 10 and love everything we’re doing, we can stop there.”
The company is mainly focused on opportunities on the East Coast, with an eye toward stabilized communities until the operating platform is more well-established. At that time, they are open to evaluating turnarounds.
The pandemic is motivating some senior living owners and operators to sell, Papia said, but he has also seen some properties pulled off the market to wait for more favorable conditions.
“We’re really trying to pick and choose the right opportunities,” he said.
And, he is in no rush, taking a long-term view.
“This is not an industry that you just decide one day, ‘Oh, I’m going to go and do this,’” he said. “It took a good two years to really make it all come to fruition, but we’re really proud of what we were able to do and just really excited to be in the industry for a long time.”
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