A relatively new Senior Living operator is seeking to expand in the middle market segment, with a growth strategy centered around buying and renovating “fixer-upper” senior living communities. 

The company is Novellus Living, which is based in Roseville, California. The operator currently owns and operates six senior living communities across Arizona, California, Colorado and Texas.

The company is aiming to acquire five communities per year over the next five years. The company’s main strategy for growth is to buy communities — “fixer-upper properties to renovate and reinvigorate,” according to the Novellus website — at a low cost basis to keep rents lower for residents at the end of the day.

“If you can get in at a low enough basis you can make it work,” Novellus Principal Chris Coulter told Senior Housing News. “It’s just about margins. The number one thing is getting your building at a rate that you can pay for it.” 

Novellus is in the midst of onboarding an additional seventh community to its operating platform in the San Diego, California, area. The 109-unit assisted living community is slated to change hands on Oct. 1.Novellus also has a pending $5 million renovation planned at a community in Stockton, California, that is awaiting municipal approval. 

“The place to make an impact is in the middle market,” Coulter said. “Mostly because of the demographics. We don’t have to charge an arm and a leg to actually serve the community as well as we can.”

After some back-and-forth with third-party operators, the Novellus leadership team made the decision to branch out on their own and form their own management company last year, bringing the experience on the real estate side to bear in expanding the portfolio.

Growth driven by middle market demand

Senior living operators across the country are taking different paths to making middle market products work, with a demographic wave of middle-market consumers just down the road. Some older adults are going to need middle market senior living due to being priced out of high-end, luxury communities

Novellus is in the middle of onboarding new employees to support its growth, having brought the company’s bench strength up to 400 people.

“We’re all getting ready for this,” Coulter said. “The state of our operations is growing like crazy right now.”

After taking over a Denver, Colorado-based senior living property, Novellus began the tough switch of the community to private pay, having previously been a Medicaid-funded property. Those challenges included transitioning its resident base, while onboarding staff and transitioning operations.

“It’s an up-hill battle for us,” Coulter said. “It’s a heavy lift for us.”

Novellus is in the market for AL and memory care communities in the western U.S., Coulter said. He added that price-per-unit is the key decider as the company seeks whether to purchase a new community. 

Going forward, Coulter envisions a senior living middle market space that will get more competitive as demand increases. For 2024, Coulter said he expects a range of new starts, failed projects and a flurry of acquisitions across the senior living industry.

“It’s going to be less about the building and it’s going to be more about the operators who are willing,” Coulter said. “I think we’re going to be readjusting to the new normal.”

Coulter entered the senior living space after he was motivated by the death of his father within a senior living community. Not long after he came to the industry with an extensive career in real estate, including as principal of 3eDevelopments and also a general partner with Kircher Family Partners

Now, Coulter said he wants the Novellus team to embody values of: Human beings, not profit, matter; Promoting “above all kindness” in each community and “serving together on teams” to promote employee retention and productivity, with the final value encompassing all elements of creating a sense of home for residents.

“We’re going to identify [these values] and we’re going to work towards them and work together to make these things happen,” Coulter said.

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