84 H. A Collaborative Approach to Repositioning

Transcription

1 84 H. A Collaborative Approach to Repositioning Karen Christiansen Executive Vice President, CFO Lori Woodward Senior Vice President, Sales, Marketing, Corporate Communications Jonathan Grant Vice President, Operations Mid Atlantic Region Objectives Learn how one organization successfully repositioned several communities while maintaining financial health and credit ratings. Hear how members of various departments worked together to support sales and marketing initiatives. Discuss the pricing strategies and contract options used to improve occupancy in competitive markets. 1

2 Agenda Overview of the ACTS organization The challenges and opportunities of the Great Recession Review of three repositioning projects Operations perspective Sales & Marketing influence Financial implications OVERVIEW OF THE ACTS ORGANIZATION 2

3 NON PROFIT Multi Site Senior Living Organization Profile 2015 LZ 150: ACTS Retirement Life Communities, Inc. LZ 150 #: 3 Headquarters Location: Pennsylvania, West Point Year Founded: 1971 Total Units (as of 12/31/14): 7,993 5,652 ILUs 904 ALUs 1,437 NCBs 1 st Community opened in nd Community opened in rd Community opened in 1977 Classification: Primary: National Secondary: Across States Total # of Communities: 23 # of CCRCs: 23 # of Accredited Organizations: 22 Affordable Housing: N/A Debt Rating: Yes Fitch: A S&P: BBB+ Practices: While past growth was primarily through new campus development, current growth has been through acquisition and/or expansion. Non denominational background has led to acquisitions of others without religious ties. Most recent acquisition was in 2010: Peninsula United Methodist Homes and Heron Point of Chestertown. Managed Housing: N/A 5 Source: 2015 LeadingAge Ziegler 150 Publication (data as of 12/31/14) ORGANIZATIONAL OVERVIEW Regional Clusters Northeast Mid-Atlantic Mid-South Southeast Total Assets Annual Operating Revenue $1.264B $390.0M # of Residents 8,569 # of Employees (ft & pt) 5,

4 1970s 1980s 1990s 2000s 2010s PA Ft.Washington Estates Gwynedd Estates Spring House Estates Southampton Estates Lima Estates Normandy Farms Estates Granite Farms Estates Brittany Pointe Estates FL St. Andrews Estates Edgewater Pointe Estates Indian River Estates Azalea Trace* NC Plantation Estates Tryon Estates SC GA AL DE MD The Evolution of ACTS 40+ Years and Counting Park Pointe Village* Lanier Village Estates Magnolia Trace* *Denotes year of Affiliation Cokesbury Village* Country House* Manor House* Heron Point* THE CHALLENGES AND OPPORTUNITIES OF THE GREAT RECESSION 4

5 Independent Living Occupancy 5,000 Average Occupancy 4,500 4,000 3, Available 4,241 4,228 4,224 4,222 4,368 4,567 4,580 4,726 4,728 4,706 4,701 Occupied 4,000 4,032 4,023 4,028 4,163 4,371 4,374 4,443 4,474 4,435 4,320 Occupancy 94% 95% 95% 95% 95% 96% 96% 94% 95% 94% 92% Sales & Occupancy Results % % % 86.6% 90% % 85% % % % # of Resales Apt. Turnover Occupancy % 5

6 Independent Living Occupancy Communities below 85% 2010 Occupancy Granite Farms Estates (Media, PA) Manor House* (Seaford, DE) Heron Point* (Chestertown, MD) Magnolia Trace* (Huntsville, AL) St. Andrews Estates North (Boca Raton, FL) St. Andrews Estates South (Boca Raton, FL) Edgewater Pointe Estates (Boca Raton, FL) Indian River Estates (Vero Beach, FL) Below 85% % % % 4 * Affiliate communities Strategies during the Recovery Created CORT Committee (Community Occupancy Recovery Team) Multi discipline team Finance, Operations, Sales & Marketing, Real Estate Review every aspect of each community Leadership, staffing, culture, physical plant, competition, contract offering, pricing strategies Created COPS Committee (Contract Options & Pricing Strategies) Transferred contract offering & pricing strategies from CORT 6

7 COPS Committee Modified refund provisions within Type A resident contract to eliminate death penalty Added certain services that are provided within the monthly fee Home Health, Cable, Internet Per unit pricing based on attributes of every unit Discount programs weighted by unit rating and days vacant Added various pricing options/contracts High entrance fee / low monthly fee (and vice versa) Modified health care contract provides for a LTC carve out Rental contracts CORT Committee The Physical Plant Repositioning Opportunities Add Residential Amenities Remote clubhouses Create Larger Independent Living Units Unit combinations Adjust Healthcare Unit Mix Increase Assisted Living and Early Dementia Enhance Privacy in Skilled Care Center True average age of the CORT communities was almost 30 years 7

8 REPOSITIONING OPPORTUNITIES St. Andrews Estates (North & South) Boca Raton, FL St. Andrews Estates (North & South) Repositioning The Situation 8

9 ACTS Southeast Region (Boca Raton, Florida) Turnover Move ins Vacancies , % 91.6% 88.1% 85.3% 80.1% 76.4% 3 ACTS Communities St. Andrews Estates (North & South) and Edgewater Pointe Estates Available Occupied St. Andrews Estates The Situation Large number of units in saturated market Unit mix heavily weighted towards smaller apartments Traditional health care center, heavily weighted towards skilled nursing beds Unit Type Sq. Footage # of Units 10 yr Avg. # Vacancies Units Vacant Studio One Bedroom Two Bedroom Three Bedroom Total Assisted Living Skilled Nursing Number of Units

10 St. Andrews Estates The Resolution Reduce number of Independent Living Units Unit combinations to create larger units Create remote clubhouses to bring certain amenities to each apartment building Increase number of assisted living units Increase number of private rooms in skilled nursing To accomplish all the above, the decision was made to take an entire ILU building out of service F Building St. Andrews Estates Repositioning Operations Implementation 10

11 Why the F Building? Site Plan 11

12 Enhancements Enhance the Delivery of Health Services Consolidating the Health Center (WillowBrooke and OakBridge Terrace) at St. Andrews North Replacing the existing OakBridge Terrace currently located at St. Andrews South Creating Assisted Living Apartments & Suites Adding Specialty Care Memory Support within OakBridge Terrace Creating more privacy by adding private rooms and enhancing semi-private rooms in WillowBrooke Court Effect on St. Andrews Estates Residents All Residents residing in Building F apartments will need to be transitioned by December 31, Residents will be given a choice of available apartments at any ACTS community. Major Construction throughout campus. 12

13 The Message We need you to move The Promise We will duplicate what you have and make it better 13

14 How can we do this? Provided for within Resident Agreement Relocation From Residential Unit to Another as Required by Company Company reserves the right to make all necessary arrangements and adjustments regarding residence not otherwise specifically provided in this Resident Contract. Company may relocate Resident to a different residential unit in the Retirement Community, substantially similar to that selected by Resident, if it determines that such a move should be made for the benefit of Resident or for the proper operation of Retirement Community, as determined by Company. In the event Resident is directed to relocate, no additional Entrance Fee payment will be required and Company shall be responsible for all reasonable moving and relocation expenses. Resident shall execute an addendum which shall reflect all changes in the Monthly Rate. Legal right was less important than Resident buy in and excitement Relocation Accommodations ACTS will provide: A comparable sized, newly renovated apartment unit, including: Choice of carpet, paint & cabinets Replicating all original upgrades $2,500 upgrade voucher A Monthly Fee credit for first 3 months after relocation Professional packing, moving, unpacking and placement services 14

15 Coming Together We are all in this together The Next Steps Executive Director will schedule an appointment with each Resident to discuss specifics of the transition. Relocation Coordinator will schedule an appointment to review available apartments and plan the relocation process. Appointments and unit selections will be based on Residents original move-in date (earliest move-in date will select first) Upon selection of available unit and apartment upgrades, the dates for renovation and relocation will be established. 15

16 Implementing the Plan Implementation team created RVP, Corp Real-estate, Community ED Move-in-coordinator Planning room selected in F-building Planning boards Dedicated hot-line Weekly ops meetings held Team updates Lessons learned Weekly resident events planned Cheese and crackers Constant communication updates Re Design of F Building 16

17 CONCEPTUAL FLOOR PLAN ACTIVITIES RESTROOM GAME LOUNGE EXISTING BUILDING E SERVICE ENTRANCE COUNTRY KITCHEN EXISTING CONNECTOR TO BUILDING E TV LOUNGE ENTRANCE COUNTRY KITCHEN 17

18 DINING OakBridge Terrace Private Suite includes: Private bedroom, kitchenette, parlor, bath & walk in closet; some with 11 x7 patio 18

19 Private Suite New (approx 25 x 20) Blue shading is current OBT room size New Entry into OBT Private Room 19

20 New Bedroom in OBT Private Room Construction 20

21 Construction ST. ANDREWS ESTATES WILLOWBROOKE COURT 21

22 TYPE A PRIVATE RESIDENT ROOM Outcome 72 ILUs Closed 34 Households Relocated 42 Apartments Renovated 60+ Residents Impacted Before After Change ILU OBT WBC Total Conversion of independent living building to new Assisted Living Opened in 2013 Renovation of existing WillowBrooke Court Opened in

23 St. Andrews Estates Repositioning A Sales & Marketing Perspective St. Andrews Estates: Sales Impacts Sales closing put on hold until residents chose new apartments One salesperson assigned to move in coordination to facilitate efficient process 23

24 St. Andrews Estates: Marketing Impacts ACTS brand: experience and innovation focus not only on independent living environments Marketing lifestyle continues rather than higher level of care Campus wide quality of service and amenities ability to continue consolidation of north & south St. Andrews Estates Repositioning Financial Considerations 24

25 Funding the Project This costs how much? Most Challenging Economic Conditions Real Estate Market Slowdown in Apartment Resales (New Move-ins) Resulting in a Reduction in Occupancy Financial Market Decline in Investment Returns Volatility in Variable Interest Rates Limited Access to Capital 25

26 Timing is Everything ACTS completed its first affiliation with another system in May, 2010 Provided additional revenue to ACTS management fees Organizational Structure 2010 ACTS Obligated Group ACTS Management Services, Inc. ACTS Retirement Services,Inc. (Parent Company) ACTS Signature Community Services, Inc. Village Nursing Care ACTS Retirement Life Communities, Inc. ACTS Mission Foundation ACTS Acquisition Company, LLC Lanier Village Estates Azalea Trace Park Pointe Village Magnolia Trace PUMH (3 CCRCs) Heron Point of Chestertown PUMH Foundation 26

27 Key Financial Indicators ACTS Obligated Group Liquidity Unrestricted Cash & Reserves $148.1M $149.4M $167.2M $168.3M Days Cash on Hand Capital Structure Debt Service Coverage 1.8x 1.8x 1.9x 1.9x Profitability Debt to Assets 40% 43% 39% 42% Operating Ratio 99.2% 97.7% 98.7% 97.1% Operating Margin 2.2% 2.3% 2.2% 2.6% Without Azalea Trace With Azalea Trace ACTS Obligated Group Financing 2010 Tax Exempt Bond Issue Funding planned capital improvements and repositioning efforts St. Andrews Estates (North & South), Edgewater Pointe, Indian River Estates (East & West) $54 million of fixed rate bonds Principal is wrapped around existing debt service, thus only increasing maximum annual debt service by the amount of interest on the Series 2010 Bonds. Debt service payments funded largely by management fees provided through PUMH & HP affiliation. 27

28 Granite Farms Estates Repositioning The Situation ACTS Mid Atlantic Region (Delaware County) Turnover Move ins Vacancies % 96.7% 96.1% 92.4% 88.0% 85.1% ACTS Communities Lima & Granite Farms Estates Significant competition Available Occupied

29 The Repositioning Plan Clubhouse renovation and pool addition Reduce apartment inventory Combining Smaller Apartment Residences Creating Remote Clubhouses and Common Area Spaces Renovation / reconfiguration of existing assisted living and skilled care center Converting an Existing Apartment Building into OakBridge Terrace Suites Replacing the existing OakBridge Terrace E Building Before After Change ILU OBT WBC Total Granite Farms Estates Repositioning Operations Implementation 29

30 Agenda Presented To Residents Understanding the Need for the Repositioning of Granite Farms Estates Inconvenience of major clubhouse renovations How it affects Residents of the Elm Building Review of Resident Accommodations The Next Steps Club House Enhancements Project Overview: Convert Existing 4 Story IL Building of 72 Apartments Creating a New Product Create New Assisted Living/ OBT Households Reposition 3 rd & 4 th Floors 30

31 Project Configuration Existing IL Building: 4 floors, 22,225 sf per floor, total of 88,900 SF 72 Apartments Proposed Conversion to AL/OBT: New entry & elevator lobby 1st and 2nd floors New, Specialized approach to Assisted Living; 20 units per floor GRANITE FARMS ESTATES Elm Building Proposed IL renovation: Private entry & elevator lobby Renovated public spaces 3rd and 4 th floor premium IL apartments How it affects Elm Building Residents All Residents residing in Elm Building apartments will need to be transitioned Residents will be given a choice of available apartments at Granite Farms Alternative arrangements can be made to relocate to any other ACTS community. Impact on entire campus 31

32 Relocation Accommodations ACTS will provide: A comparable sized, newly renovated apartment unit, including: Choice of carpet, paint & cabinets Replicating original upgrades $2,500 upgrade voucher A Monthly Fee credit for first 3 months after relocation Professional packing, moving, unpacking and placement services Elm Building Existing Hallway Existing corridor 32

33 Conceptual Remodeled Corridor Envisioned New OBT unit N e w Pri v 33

34 The Next Steps Executive Director will schedule an appointment with each Resident to discuss specifics of the transition. Relocation Coordinator will schedule an appointment to review available apartments and plan the relocation process. Appointments and unit selections will be based on Residents original move in date(earliest move in date will select first) Upon selection of available unit and apartment upgrades, the dates for renovation and relocation will be established. Granite Farms Estates Repositioning Sales & Marketing Influences 34

35 Granite Farms Estates: Sales Impacts Sales closings put on hold until residents chose their new apartments Reduction in sales force Compensation program changed for remainder of sales staff during on hold period Pre sales type program implemented, including 30 th anniversary discounts Granite Farms Estates: Marketing Impacts Repositioning included renovation to main amenities brand new dining/clubhouse, addition of fitness & aquatics center Timing coincided with upcoming 30 th anniversary Timing also coincided with ACTS company wide focus on updated new floor plan and finish packages (including 3 professionally decorated and furnished models) Marketing Grand ReDedication 35

36 Granite Farms Estates: Sales Results 28 move ins in 2015 and 7 already scheduled for Q Increased new leads by 20% Presales of repositioned E building to be initiated January

37 Granite Farms Estates: Product Positioning Impact New Granite Farms Estates in same market as another ACTS campus creates need for differentiated marketing messaging Two great communities but for two different types of customer Granite Farms Estates Repositioning Financial Considerations 37

38 Leveraging Capital Structure Opportunities Series 2012 Plan of Finance Refinance Existing Indebtedness ($ million) Series 1998 PA Bonds $ % (2028) Series 1998 FL Bonds $ % (2029) Series 1999C GA Bonds $ % (2029) Refinanced as Series 2012 Expected Yield of: PA Bonds 4.1%; FL Bonds 3.8%; GA Bonds 3.3% Anticipates Bonds will be sold at premium Interest Rate Savings and Shorter Amortization produce Total Debt Service Savings of $34.4 million Summary of 2012 Financing Financing Achieves: Significant Aggregate Debt Savings New money issue to create $15 million project fund Long Term Debt Increases by only $4.9 million Maximum Annual Debt Service is reduced from $31.1 million to $30.6 million (while maintaining a level debt service platform) $35,000, $30,000, $25,000, $20,000, $15,000, $10,000, $5,000, $0.00 Series 2010 Interest Existing Interest Series 2010 Principal Existing Principal 38

39 Heron Point Repositioning The Situation Heron Point of Chestertown Became ACTS affiliate in May, 2010 ILU Occupancy Challenges FYE % FYE % FYE % FYE % Opened in Cottages 102 Apartments 45 AL Beds 38 Skilled Beds 39

40 Heron Point of Chestertown Additional Challenges Deferred maintenance Financial issues Received a going concern audit opinion FYE 2009 Debt covenant violation Large entrance fee refund liability Refundable contracts (90%) Heron Point of Chestertown Results of Affiliation Immediate financial statement improvement Elimination of going concern opinion April 30, 2010 May 1, 2010 Total Assets $28.6 million $61.5 million Long-term Debt $30.0 million $30.0 million Unrestricted Net Assets ($30.3 million) $0 Debt to Assets 104.9% 48.8% 40

41 Heron Point of Chestertown Results of Affiliation Introduced the ACTS like lifecare contract & pricing Offered existing resident contract conversion opportunity Restructured Debt Tender Offer that reduced debt outstanding Moratorium on Debt Service ACTS provided $3 million line of credit Satisfy debt payments, entrance fee refund obligations Address deferred maintenance Refinancing in 2013 ACTS line of credit increased to $5 million Established $5 million project fund Heron Point Repositioning Operations 41

42 Spending The Project Fund New Roofs for Cottages New Updated Deck Country Kitchen Main Dining Room Renovation New Lobby Wellness Center Expansion WBC Country Kitchen 42

43 Dining Room Dining Room 43

44 Heron Point Repositioning Sales & Marketing Influences Heron Point: Sales Impacts Hired new salesperson with outside industry sales experience to complement existing salesperson who had good relationships with prospects good balance New regional sales director provided another layer of focus New ACTS leadership increased customer confidence in future financial success and resident referral ACTS Life Care plan sells to Heron Point plan in place customers Investment in updating campus, new culinary, new leadership all helped sales efforts 44

45 Heron Point: Marketing Impacts Increased marketing budget and focused plan created long term gains in new leads Target marketing plan key geographic areas Promote unique advantages of Chestertown alongside advantages of ACTS Pre Affiliation Heron Point: Prospect targeting Post Affiliation 45

46 Heron Point: Marketing Post Affiliation REPOSITIONING OPPORTUNITIES THE RESULTS 46

47 Independent Living Occupancy The Progress and Continued Focus 2010 Occupancy Current Occupancy Below 85% % % 2 Below 85% % % % % 14 Thank You! Questions? 47

48 84 H. A Collaborative Approach to Repositioning Karen Christiansen Executive Vice President, CFO Lori Woodward Senior Vice President, Sales, Marketing, Corporate Communications Jonathan Grant Vice President, Operations Mid Atlantic Region 48