Question of the Month: Operator Replacements

Are owners replacing third-party operators at a faster rate than in the past and, if so, what’s driving the trend?

 

Consider multiple factors

By Wendy Nowokunski

Co-Founder, President

Northbridge Companies

There has been an uptick in replacing third-party management companies. The questions that need to be asked are: Why and at what cost?

Oftentimes, investors and owners attribute non-performance of an asset or assets solely to the operator without asking critical questions. Is it a market issue, the product itself, the labor market, or does the on-site management need training? It may appear to be an easy answer to replace the existing operator when in actuality it often comes with a great amount of cost related to downtime during transition, loss of leadership and staff, and potential reputational issues.

We work with owners/investors and third-party managers to determine what may be needed to turn around a non-performing asset through extensive operational audits and action plans. In our experience, the cause of non-
performance is often either the marketplace, product and/or proper hiring or training of the on-site staff.

 

Owners, operators collaborate

By Marco Vakili

Managing Director, Senior Living

Alliance Residential

Whether perception or reality, replacing a third-party operator has significant impacts.

I believe the drivers can be organized into three buckets. The first is owners are either too quick to select an operator or do not have enough choices to select the best operator for their specific market and positioning goals. Second, many owners either don’t know what they want or have unrealistic expectations. Third, operators can take a “this is how we do it” position, which frustrates and disappoints the hopes for a collaborative effort.

As senior living innovates, owners and operators need to collaborate. When that happens, we will get better as an industry and the “grass is greener” approach to operators will decrease.

 

A false perception

By Hugh Cobb

Principal

Asset Living

I recently went to a restaurant and commented that the live music was amazing, only to find out that there was no live band. It’s been said that perception is more important than reality. If someone perceives something to be true, it is more important than if it is true.

During the pandemic, it seems there was a slowdown in replacing managers, as we all assessed the impact. That said, at Asset Living, we notice that owners are looking for performance. And we are growing — our team grew to become the fifth largest in 2020.

 

Same pace as before

By Jason Stroiman

Founder, President

Evans Senior Investments

Operator transfers are not at any higher rate than in the past. Most ownership groups we know are trying to bring stability to their communities post-COVID, and switching operators typically comes with challenges both cultural and operational in nature. Most communities are striving for a sense of normalcy at this time.