Diversified Healthcare Trust Transitioning 66 Communities

July 20, 2021, Ben Swett, The SeniorCare Investor - A few months ago, Diversified Healthcare Trust announced it would transition 108 of 228 senior living communities managed by Five Star Senior Living to new operators.  It has now found three operators to take over management of 66 of them with 4,084 units, or 62 units per community. 

The 108 communities have approximately 7,500 units, while the remaining 120 communities have about 18,000 units.  So, the communities being transitioned to new operators are much smaller (average of 69 units) compared to the retained communities, with an average of 150 units. 

Naperville, Illinois-based Charter Senior Living will be taking over management of communities in Florida, Maryland, Tennessee and Virginia.  The CEO of Charter, Kevin Bennema, was formerly the COO of Senior Lifestyle Corporation

Charter operates in 11 states, and Virginia will be a new state for them.  Before this transition, Charter’s major state was Illinois with seven communities. 

Oaks-Caravita Senior Care will take over management of communities in Georgia and South Carolina.  Last November, Georgia-based Oaks Senior Living announced a joint venture with Caravita Senior Care Management to create a continuum of care through in-home services and senior living. 

Both companies were founded in 1998.  Oaks had 10 assisted living and memory communities throughout Georgia and three additional communities scheduled to open over the next two years.  Caravita provided the home health component. 

Finally, Georgia-based Phoenix Senior Living is taking over management of Five Star communities located in Alabama, Arkansas, Kentucky, Missouri, North Carolina and South Carolina.  All but Alabama and South Carolina will be new states for Phoenix.  The company currently operates in seven southeastern states with its biggest concentrations in Georgia (17) and South Carolina (12).  

For all three companies, these new management contracts will represent significant expansions of their operations during a difficult environment, albeit one that is slowly improving.  Having more local management will certainly help the future performance, and while terms of the management contracts have not been disclosed, they will most likely contain attractive incentive agreements to help boost occupancy and cash flow.

DHC’s SHOP occupancy dropped from 80.7% in April 2020 to 69.2% in February 2021, so there is a long road ahead.  But they are not alone.