Assisted Living Concepts (ALC) operates more than 210 senior living centers in 20 states in the US. Altogether, its properties -- a significant number of which ALC owns -- house more than 9,300 units. ALC's communities enable elderly residents to maintain relatively independent lifestyles but provide assistance with daily activities, such as cooking, housekeeping, managing medication, and coordinating transportation. ALC also provides residents with physical therapy, hospice, pharmacy, and other services through third-party providers. The Jodrey family, of which chairman David Hennigar is a member, controls a majority of ALC's voting shares through Thornridge Holdings.
Revenue was relatively flat for ALC in 2011 vs. 2010 despite being boosted by high average daily revenue spurred by rate increases that generated $1 million and a $2.5 million increase in private pay occupancy. Gains that ALC saw in 2011 were offset by the planned reduction in the number of units occupied by Medicaid residents that cost the company $2.2 million. Net income increased some 48% during the same reporting period, thanks to declining residence operating costs, general and administrative costs, and residence lease expenses.
Mergers and Acquisitions
Of the centers run by ALC, about 75% of them are company-owned; the remainder are operated under long-term lease agreements. One of ALC's strategies is to acquire those facilities that it does not already fully own. To that end, it purchased nine previously leased residences for about $28 million from HCP. Seven of the senior living residences are located in Texas, ALC's largest market. Other strategies for growth include acquiring portfolios of assisted living facilities in middle-market suburban areas and adding on new units to its existing facilities to boost capacity.
An overwhelming majority of ALC's revenues comes from private payer sources. Residents paying through state Medicaid programs occupy fewer than 100 units. To increase its overall revenues, ALC's strategy is to move toward an all-private-pay client base. It has stopped taking new Medicaid recipients except at one residence and has terminated Medicaid contracts in some states, including Texas and Washington, where it says Medicaid payments do not cover the cost of care. To better attract and retain private-pay residents, ALC sometimes temporarily closes certain residences to refurbish and make capital improvements to them.
The transition to private-pay clients has reduced the total number of residents living in the company's facilities. The average occupancy of ALC's units for its continuing residences has been less than 65% since 2008, but ALC is banking on its ability to fill vacancies left by exiting Medicaid patients with higher-paying private clients to help it grow in the long run. The economic downturn and increased unemployment may factor in keeping ALC waiting longer to fill vacancies as its offerings become less affordable and family members step up to provide home-based residential care.
Morgan Stanley Investment Management holds a 16% stake in ACL. Jaffray Companies owns another 11% share. – less