Five Star Senior Living to Close or Transition All Skilled Nursing Assets in Industry Exit

Five Star Senior Living (NYSE: FVE) on Friday announced that it will exit the skilled nursing business as part of a wider plan to trim its footprint and shift its focus toward independent living and active adult properties.

The Newton, Mass.-based Five Star will close or transition the skilled nursing units at all of its continuing care retirement communities (CCRCs), for a total shed of 1,500 units, in a process expected to conclude by the end of 2021.

The nursing home exodus comes as the operator also looks to offload 108 “smaller senior living communities” owned by real estate investment trust (REIT) landlord Diversified Healthcare Trust (Nasdaq: DHC). That move will see Five Star offload 7,500 units to other operators, according to the company.


“The implementation of Five Star’s new strategic plan allows us to build on our operational strengths at larger senior living communities and stand-alone active adult and independent living communities while continuing to evolve our choice-based, financially flexible rehabilitation and wellness services offerings to meet the changing needs and preferences of older adults,” Five Star CEO Katherine Potter said in a statement.

Once the transactions are complete, Five Star will continue to operate a total of 144 senior living communities, including 120 for DHC, minus the skilled nursing units; the company also indicated a desire to expand its outpatient rehab services into the future.

“We believe that this shift in our focus is critical to the future success of Five Star and better positions us to expand our senior living management business and continue to diversify revenue sources in the future,” Potter said. “More specifically, the implementation of this new strategic plan will showcase the operational strengths of Five Star to current and potential partners and customers in the future.”


DHC, meanwhile, framed the move as a way to bolster the health of its senior housing operating (SHOP) portfolio, according to a statement from president and chief operating officer Jennifer Francis.

“More specifically, we believe the transition of management of our 108 smaller communities to a diverse group of best-in-class operators will enhance their performance and we have already initiated discussions with many potential new operators,” Francis said. “We also expect that the results for the 120 communities that Five Star will continue to manage for DHC will improve because these communities are larger and service lower acuity residents, which are areas of operational strength for Five Star and where it plans focus its business in the future.”

Five Star has telegraphed a partial or complete exit from the skilled nursing space for some time, with former CEO Bruce Mackey highlighting occupancy declines and reimbursement pressures back in the summer of 2018.

“We are in the process of evaluating all of our skilled nursing units within our CCRCs and examining the feasibility and profitability of repurposing some or all of these units,” Mackey said at the time. “We will determine if skilled units will be [as] profitable as other types of senior living operations where the demand is evident.”

At the same time, the operator’s rehab and wellness services — provided under the Ageility brand — have emerged as a bright spot, accounting for 38% of its annual revenues in 2020, or an increase of 5% from the year before. Buoyed by these results, Five Star intends to aggressively expand its Ageility offerings in the year ahead, with a goal of adding two to four new outpatient clinics per quarter, Potter said in February.

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