Northbridge Builds on Affordable Senior Living Model, Seeking Northward Expansion

Northbridge Builds on Affordable Senior Living Model, Seeking Northward Expansion

Northbridge Companies is continuing to build upon and tweak the company’s affordable senior living model, with an eye toward taking it farther north, according to CEO Jim Coughlin. 

So far this year for Burlington, Mass.-based provider has seen improvements in margin growth and continues to grow top-line revenue, Coughlin said, driven by an approximate 6% to 8% rental rate increase to rebuild margins.

But Coughlin and Northbridge leaders know that perpetually pushing forward rate increases is “not a sustainable model,” with the organization spending time looking at margin expansion through expense management, new third-party partnerships for services and procurement.

“That’s really born great results and that’s a positive,” Coughlin said. “As an industry, it’s about continuing to tweak the model and finding those efficiencies. Our big focus for us this year and beyond is our labor spend.”

While focusing internally on operations and solving staffing challenges, Northbridge is also in the midst of multiple development projects, including one in the Washington D.C. area in partnership with Amazon with a unique affordable rate structure for residents using Medicaid waivers.

Recently, the senior living industry has seen high demand that has led to strong occupancy gains for operators, but demand is outpacing new supply coming online in various markets nationwide. That’s due in-part to the high cost of construction and turbulence in capital markets that’s kept operators on the sidelines.

“It’s going to be an arms race to get caught up to meet the demand,” Coughlin said of the future of senior housing development.

Northbridge’s current portfolio includes 18 communities in three states.

Growing the affordable assisted living model

In November of last year, Northbridge outlined its Kensington property in Washington, D.C. as an affordable senior housing project. Fast-forward to today and over 100 residents of 175 units are occupied.

“This was an experiment and it was fascinating and it’s been successful,” Coughlin said.

In another affordable senior living project in which Amazon (NYSE: AMZ) invested equity, Amazon invested into the project as part of the company’s $2 billion commitment to preserve and create affordable housing in three markets: Arlington, Virginia; Nashville; and the Puget Sound area of Washington State.

Construction is now underway with another 14 months or so of work left to do prior to the community’s opening, according to Coughlin.

“We’re making progress there,” Coughlin said. “It’s a very tight site but the team is doing well.”

With one affordable senior housing project completed and another underway Coughlin said Northbridge is continuing its growth with three additional affordable senior living communities planned in the Northern Virginia and Washington D.C. areas.

Northbridge is continuing to build on what it has learned in D.C., including by taking that knowledge farther north..

But in 2024, the company has “furthered conversations” on affordable senior housing in Massachusetts based on the success of the model thus far, Coughlin said.

”We’re cautiously optimistic, with our learnings from D.C., that our pursuit of replicating this model in Massachusetts could be possible in the future,” Coughlin said.

Going forward, Coughlin added that the affordability issue in senior living “has to be solved” in order for the industry to continue to grow and reach more older adults. To get there, Coughlin said he believes affordable senior living models require “coordination of myriad programs.”

“There’s a recognition that this could be a more effective approach to providing services to seniors,” Coughlin said of affordable senior housing. “It’s difficult to change the current model but people are getting smarter.”

Northbridge is not alone in putting extreme effort into building middle market and affordable housing models for older adults. Perception issues of affordability and lack of accessibility for all have driven providers to get creative in building out affordable models, regardless of the margin challenges that come with them.

Coughlin added that mindsets are shifting with regard to the viability and attractiveness of affordable senior housing, and that might draw people with more experience in low-income housing tax credits or reimbursements deeper into the sector as a result.

To succeed in changing a traditional private-pay senior living model to an affordable housing model, Coughlin said providers must “stay open and get guidance and support” from experts outside of the space.

“I am getting in-bound calls from capital sources that have established dedicated impact funds with a social impact and they recognize that this is a niche and they should be playing a role in improving that,” Coughlin said.

Another barrier to middle-market and affordable projects is financing, and Coughlin said that operators should be “serial learners” and stay open-minded about building partnerships with new local developers and capital partners.

What lies ahead for Northbridge is further expansion. In Massachusetts, Northbridge is currently seeking permits for two projects in Cape Cod and the greater Boston area with the anticipation that capital markets will calm down by year’s end. At the same time, Coughlin said Northbridge would continue to review distressed property acquisitions.

The company is still playing wait-and-see regarding its current pipeline, but Coughlin said there are many opportunities worth reviewing.

“We’ve looked at over 60 potential acquisitions in 2023 of which we are pursuing a few,” he said. “We’re being very selective on that, and we’re valuing our operating equity as much as we are our invested capital equity—it’s that balancing act.”

Building a ‘pipeline of potential candidates’

In 2024, staffing remains front-and-center for many senior living operators. For companies that focus partly on residents with limited incomes like Northbridge, getting expenses as low as possible on that front remains an ever-present focus.

That is why Northbridge is working to build a “pipeline of potential candidates”of more than 15,000 applications in recent years,Coughlin said. The company so far has hired about 9% of those applicants.

The operator also has a certified nursing assistant (CNA) training program for licensed care positions, which to date has resulted in 135 staff moving up the career ladder. Nearly two-thirds of all executive directors at Northbridge communities previously held positions within the company.

“The career ladder as a focus has really been very successful for us,” Coughlin said.

Northbridge has a proprietary tool that tracks work hours of caregivers, which the company used to better manage employee working hours with the goal of reducing burnout. Knowing how many hours staff devote to residents also helps the company communicate the cost and value of senior living with residents and their families.

“It develops a partnership with families and it takes the guesswork out of it and we have data to support that,” Coughlin said. “We think that is going to be more important in our business as we go forward.”

The fight to improve staffing has also bled into some conversations leadership have with capital partners and future investors.

“Smart money is starting to talk about these things and there’s a real recognition of the cost of turnover and this is about supporting the long term success of our communities,” Coughlin said.

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