Regional Operators Perform Better Than National Operators - Myth?
During these unprecedented times since the start of the pandemic, all operators have dealt with tremendous challenges. From resident and associate safety and PPE during the pandemic, to financial performance given the impact on revenues and occupancy, labor pressures in recruiting, retaining and compensating talent to the current capital market challenges putting added pressure on performance. It seems that no one has been immune.
For smaller regional operators, it has always been challenging to be profitable as an operator alone and the focus has often been on gaining access to investment opportunities and a promote. With the current capital environment, promotes have been materially impacted, and not all operators are equipped to withstand that pressure. This can be seen with certain operators closing their doors as well as the number of mergers that have recently occurred between similarly sized operators and it is likely that trend will continue.
Watermark combines the best of both worlds having experienced the full evolution of growing from a small, largely regional operator to our current size as the 10th largest operator with 70+ communities across 19 states. We establish regional teams headed up by seasoned Managing Directors all backed by a 35+ year management company with unparalleled signature programs, robust systems, and dedicated leaders in all disciplines to support the communities.
This has not been without growing pains, lessons learned and a few lost contracts of late, but we are well-positioned to weather the storm and emerge even stronger as market conditions improve. Of note, Watermark has stepped in on a number of existing and new projects that closely align with our long-term strategy for the portfolio and position the company for success in 2024 and beyond.
Watermark a West Coast Operator – Myth?
In discussions with folks at ASHA and NIC, it became clear that the industry views Watermark as primarily a West Coast operator.
Given our size and Arizona headquarters, it might be surprising to learn that Watermark has a fairly even balance between East and West Coast properties with 42% of our communities on the West Coast, 15% that are central, and 43% on the East Coast. Also of note is that Watermark has more than double the number of stabilized communities (85%+ occupancy) on the East Coast as compared to the West … sure puts a damper on the West Coast operator story!
Moving forward, Watermark will continue to focus on a “U-shaped” portfolio footprint with a concentration on primary markets in the Pacific Northwest, California, Arizona, Texas, Florida, and up the East Coast.
At the core of this strategy is the Élan Collection brand where we focus on larger-scale projects (150-250 apartments) consisting of IL, AL, and MC, where we have the opportunity to overcome many of the expense pressures that are facing the industry. Utilizing this strategy, Watermark has been able to deliver break-even NOI at lower occupancy levels (often in the 30-40% range) which positions the communities with the potential to reach or exceed a 50% margin at stabilization.
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