Gary Puma outlines how, in addition to strengthening its business, this nonprofit senior living organization is improving lives.

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The difference between nonprofit and for-profit senior living organizations is what each does with its ROI. At nonprofit, New Jersey-based PHS Senior Living, the decision is clear-cut. It goes back into facilities, amenities, programs, and services that make it possible to provide residents great service in a welcoming environment.

Gary Puma, President and CEO

In the next few years, PHS also developed a CCRC near Princeton, NJ, which opened with much success in 2001, and divested three older skilled nursing homes. The money from the sale was redeployed into a combination skilled nursing and assisted living site opened in Wall Township and two new assisted living acquisitions. Puma believes the steps his organization have taken reflect a changing mentality of other nonprofit senior living organizations in the US.

Most nonprofits came through the social services track focused on providing good care and good services, he said, but as communities age, capital reinvestment is imperative to provide the care residents deserve. “In years past, nonprofits generally weren’t great at that, but it’s changing. We’ve invested $250 million in capital in the past 10 years in the form of acquisition, redevelopment, and repositioning by taking an old, tired product and refreshing it to include what now attracts our target market.”

The business
In 2006, PHS took that repositioning vision to a new level when it acquired a Red Bank, NJ-based 12-story high-rise built in the 1970s. At the time, the facility held no curb appeal, was somewhat institutional looking, and was losing roughly $150,000 a month. When they realized their infrastructure was not sufficient to support an expansion, the owners merged the facility into the PHS system.

“We wanted to make it viable for the future again, as well as serve the residents who were there and those coming in the future,” Puma said. “We acquired it over a year ago, and we’ve been substantially rehabilitating the interior of the existing tower ever since. We also intend to add 60 units on property adjacent to the existing site.”

PHS has revamped three floors and is beginning on a fourth. Because the original apartments were so small, much of the process has involved doubling and tripling the size of the units. The project is several years from completion, and PHS’s affiliate will lose money in the process, but in the next three to five years, Puma expects the property to generate positive bottom lines and rebuild capital reserves for a stable future.

“It was a mission-driven move for us,” he said. “We saw a CCRC in a good town. We saw the property failing, and we knew if it did fail residents would be displaced. We have the infrastructure and resources to turn it around, and within three to five years, we’ll be exactly where we want to be.”

In some respects though, PHS is already there. The 25-facility system, which includes 16 affordable housing communities, four assisted living facilities with dementia care and one with skilled nursing, and five CCRCs, gives the company the diversity and collective intelligence to understand the challenges of the industry as a whole. Coupled with the company’s inhouse general council to handle legal matters, development specialists, and construction specialists available to turn the location around, it made sense when, in 2007, the organization developed a PHS-affiliated management and development services company under the name Princeton Senior Living.

The point
Since 1997, Puma and his staff have focused on repositioning PHS’s communities, as well as helping communities having problems with their bottom lines and surveys. In a community in Central New Jersey, the team spent six months turning around a 47-page deficiency list and putting the community back in order. Today, it’s healthy and prospering.

With the company’s redevelopment and development experience, the staff believed these services could be provided for other nonprofits and put additional funds back into the PHS system. Recently, Princeton Senior Living began partnering with community-based hospitals wanting to add a senior component to their campuses. The team is currently evaluating developing CCRCs for two hospital systems. PSL is also developing CCRC’s in the UK. All fee-generated opportunities will go back into the PHS system, but that’s not entirely the point.

“I’ve worked with for-profit development companies that bring those resources to the nonprofit sector, but they’re primarily interested in collecting their development fee,” Puma said. “Often, after the operator gets in, s/he finds all the physical plant deficiencies left behind, but the developer is long gone with the money. As developers and operators ourselves, we intend to be sure the product we leave behind is viable for many years to come.”

Which goes back to the differentiating factor between for-profit and nonprofit senior living organizations. The desire to improve the industry rather than profit from it, said Puma, has been PHS’s vision since its founding in 1916. “The nonprofit sector throughout the US does for people what the government can’t do and what the private sector won’t do. Municipalities and governments need to pay more attention to that value rather than attempting to find reasons to tax these entities.”