Snapshot vs. Trend
Pick a community headed in the right direction
The story of Air Force Village West (renamed Altavita Village) near Riverside, California and March Air Force Base is instructive for retirees considering a senior living community. SEE: Malingering Collapse, Air Force Village West — Part One
My Dad was a WWII Army Air Corps pilot. He trained in California. It’s too easy to see him in this crash and burn story. The author of “Malingering Collapse, Air Force Village West”, Steve Moran (from Senior Housing Forum), analyzes how an initially successful community ended up unable to service over $61M in bonds.
Extra points to Steve for using “malingering” in the headline.
As consumers, we don’t want to buy into blue sky – an investment with no real value or net worth.
What not to do (Lessons Learned from Altavita Village)
Moran summarized the underlying causes of this impending senior housing failure as:
- Myopic self-governance didn’t learn from a changing industry.
- Inexperienced leadership didn’t include experienced senior living professionals.
- Complacent leadership when there were resources to change strategy.
- Too trusting residents.
- Substituting hope for strategy and continuing to dig the hole deeper by just keeping doing what isn’t working.
What to do before you buy
Senior Housing News writes for people who work in the industry. For those of us who live in the housing built, owned, and managed by the senior housing industry? We can also learn from this “what not to do” example.
Keep in mind a lot can change over ten or twenty years of residency. It’s important to at least start out right. Communities want a big chunk of our nest eggs. We want a safe nest.
That means as consumers we have to look before we leap from our old nest. Look before signing on the dotted line for a senior living community.
Financial Statements (multiple years)
Review the most current financial statements.
- Are they in the black?
- Losing money?
- Or underwater (liabilities greater than assets)?
However; it’s not enough to just look at the most current financial statements. Last year’s financial report only gives you a snapshot in time. One data point. It doesn’t tell you anything about the trend. You really want to look at the balance sheet (assets and debts or liabilities) over several years. And line up the numbers. Is the trend line up, steady, or down?
- Are they improving (adding net assets)?
- Holding steady (operating at breakeven)?
- Losing ground (burning reserves)?
This community at one time had $50M in reserves. Think of reserves like airplane fuel. You can stay airborne so long as there’s fuel in the tank. $50M sounds like a lot of fuel. That seems like a reasonable assurance. But remember a single financial statement is just a snapshot in time. More important is to understand the trend. Year-after-year loss of reserves is a warning. Air Force Village West burned through $50M without changing the downward slope. They ran the fuel tank dry. The end of the glide slope is the ground. Crash and burn. Altavita Village (the new name) must rebuild.
Occupancy Rate (for each of the last several years)
Similarly, one year of a low occupancy rate isn’t cause to panic. But it is a cause to change. Change strategy, market position, and or marketing. If management won’t change. Wait for management to change. A downward trend in, or consistently low, occupancy rate is another warning sign for consumers to stay away.
Look for This Before You Buy
Far better to test for stable or strengthening retained earnings or reserves. Look for strong 90%+ occupancy rate. Look for an improving occupancy rate. Waiting lists are a good thing.
Look at our Aging with Freedom reviews for good examples. Aging with Freedom Community Reviews
What to do after you buy
So, what should residents do if either finances or occupancy rates turn south after you buy-in?
Ask questions. Demand changes when things start going wrong. Effective community governance is critical.
This is one reason we look for communities with strong resident accountability. This means an effective residents’ councils and or resident board representation. We avoid entrenched boards filled with insiders that never change over. We avoid boards that lack female representation. Why? Senior living residents are predominantly women.
No one cares more about your money than you do. One of my business management mantras.
You want management that spends money as if it were their own.
If that’s not what you’re getting. Demand change. Wake the pilot up. Sleepy management is bad. Before they crash the plane into the ground. You want your community to fly.
If you have an unresponsive pilot, bail out if you can.
Learn from Others
Make sure your management team is experienced and actively learning from industry involvement. There are plenty of consultants and peer groups available to management. Examples include the trade association LeadingAge.
Managers who don’t know what they don’t know are most dangerous.
Management must spend time on the business and not just in the business. Leadership is responsible not just for the day-to-day but the future. This requires spending time and effort on strategy. This is work in Stephen Covey’s second time management quadrant – important but not urgent. Planning addresses a problem before it becomes an urgent conflagration.
Air Force Village West is renamed Altavita Village. It’s struggling to turnaround. Doing so will likely require a bankruptcy reorganization, new management, and new investors, and new investment. All of which may be painful and disruptive. The story isn’t over.
As in relationships, senior living consumers should avoid drama if possible by being cautious before committing their financial future to a retirement community.
Financial transparency is an essential feature. Walk away if you can’t see the numbers and share them with advisers. Be sure you understand the numbers.
Once in the relationship, consumers must be willing to be dramatic and loud to demand change when things are going in the wrong direction. Hope is not a strategy. Complacency and blind trust yield disaster.
Bail out if you must. Save yourself.
Following the publishing of this article, written in April 2018:
On March 10, 2019, Air Force Village West, Inc. d/b/a Altavita Village filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”).
June 2019, Altavita Village was sold out of bankruptcy to Westmont Living, a La Jolla-based for-profit company that operates a dozen senior living communities in California and Oregon. Westmont Living emerged as the winning bidder in an auction administered by the U.S. Bankruptcy Court Central District of California.
On August 30, 2019, The finalized sale was announced by Cushman & Wakefield, a commercial real estate broker that represented Air Force Village West, the corporate owner of nonprofit Altavita Village. Westmont Living has created a corporate entity, Senior Living Riverside LP, that will be the nominal owner of the facility, according to Cushman & Wakefield and court records.
On September 6, 2019, The new owners of Altavita Village announced they are changing its name and converting the community to all-rental senior housing, discontinuing existing continuing care contracts made with residents who paid substantial entry fees to live out their retirement with stable housing.
See related articles: https://agingwithfreedom.com/senior-living-reviews/