We are pleased to present the Q4 2024 update for Violet Meadows (formerly Sage Meadow). The transaction closed on November 19th, 2024 so there is limited financial data to report, but this will give you an idea of what reports look like for some of our properties. We have an incredible partner managing day-to-day operations in Wisconsin and this is our second acquisition with them.
This first quarterly update will provide you with an in-depth overview of the Communities we have invested in and what we are doing to maximize both our investment, and the potential success of all the Residents and staff for whom we now have responsibility.
Violet Meadows consists of two facilities, Fond du Lac and De Pere:
Fond du Lac is a 40 room RCAC facility in Fond du Lac, WI. RCAC stands for Residential Care Apartment Complex. It is a specific type of assisted living facility regulated in states like Wisconsin. RCACs are designed to provide housing, supportive care, and personal services to elderly individuals who can live relatively independently but require some assistance with daily activities.
De Pere is a 44 bed CBRF in De Pere, WI. Existing investors are familiar with CBRFs. For new investors, CBRF stands for Community-Based Residential Facility, which is a type of assisted living facility regulated in Wisconsin. CBRFs provide housing, care, and support for individuals who may require more assistance than is offered in independent living settings like RCACs, but less than what is provided in nursing homes.
Our Lead General Partner (GP) team has visited both facilities twice since closing and our local leadership team is there every week. Transition has gone extremely well and within the first week, we completed the roll out of our governance, technology systems, processes, and controls.
Staff have responded very positively to the change in leadership and there has been no undesirable turnover. We are particularly pleased with our technology platforms as these transform traditional paper-based environments into fully digital ones with integrated workflows and shared resources. Implementing a new culture is a slow process, but the positive transformation is evident by the level of engagement on Connecteam and ECP.
Connecteam is all in one Human Resource and Operations platform that we have customized for all of our communities. It facilitates not only inter-communication communications in an environment that can be controlled and monitored but also establishes inter-community communications. For example, Human Resource Professionals across all of our communities have access to shared resources and chat groups where they can communicate with each other, share ideas, and solve problems. This creates a broader sense of community as opposed to each community’s HR professionals feeling disconnected and isolated.
Staffing schedules, timeclocks, personnel files, training, and communications are included in one simple, intuitive platform. With a single platform, we are able to encourage positive communications and recognition, control negative communications, and actively manage the development of a new culture.
The ECP platform (Extended Care Professional) is a comprehensive cloud-based software system designed specifically for use in assisted living facilities, memory care communities, and other long-term care settings. Its primary purpose is to streamline clinical operations, enhance resident care, and ensure compliance with regulatory requirements. ECP is already used in all our communities and has been customized to enforce our high standards and nurse-driven care model.
In ECP, our care workers create and track personalized care plans tailored to each resident. It monitors care delivery to ensure alignment with residents’ needs and regulatory requirements, while automated reminders help staff manage tasks and schedules efficiently. Its electronic medication management system (eMAR) ensures accurate tracking and recording of medication administration, with alerts to minimize errors and ensure timely delivery of medications. We are fully integrated with our pharmacy, which streamlines prescription management.
ECP simplifies documentation through its electronic charting feature, making it easy to document daily activities, health observations, and care tasks. Comprehensive digital records of residents’ health and care history, reduces reliance on paper records and enables quick access during audits or inspections.
The platform also incorporates regulatory compliance tools to meet state and federal requirements, and generates reports necessary for licensing and inspections, such as those required by the Wisconsin Department of Health Services (DHS). Additionally, it simplifies incident reporting by streamlining the documentation and tracking events such as falls or health concerns. This ensures compliance with incident reporting requirements, contributing to the overall safety and quality of care provided by the facility.
Billing and financial management is our most recent module implemented in ECP. It now generates invoices and collects and tracks payment (via ACH) for Private Pay residents. It will also generate the reports needed to support Public Pay (i.e. Medicaid) billing on MCO platforms, previously an arduous manual and time-consuming task. ECP is fully integrated with accounting systems to streamline financial operations and reporting.
Performance Scorecard
During Q4 2024, Violet Meadows demonstrated strong performance in key performance metrics right out of the gate, demonstrating positive cash flow on day 1!
Below is the quarterly Performance Scorecard that will be included in all future updates to provide and trend asset performance. Since we only have one month and 11 days of financial data for 2024, this Performance Scorecard is limited and shows quarterly/monthly budget metrics for 2025, and December actuals.
Financial Performance
Revenue for December exceeded our monthly budget by 1%. Not a huge number, but it does serve to positively reinforce the quality of these assets. December’s Operating Expense (OpEx) Ratio was 71%, comfortably within our aspirational target range of < 75%. However, it is important to note that we are still in the process of gathering, categorizing, and normalizing expenses. Although G&A appears to be over budget, there is reclassification yet to be completed for purchases categorized as G&A but relate to operational supplies or repairs and maintenance.
Net operating income of $102,062 exceeded the budget by 10% and overall, the asset was cashflow positive.
Note: To simplify month-to-month reporting, the above does not include partial November income and expense data, which added an additional $24, 178 to NOI.
The transaction closed under a CBRE/JP Morgan bridge loan, similar to another investment we manage. The finance strategy for Violet Meadows is to work with CBRE to roll this loan into a HUD, which has already started.
HUD is a Government Program that refers to various initiatives and services offered by the U.S. Department of Housing and Urban Development (HUD). HUD was established in 1965 to create strong, sustainable, inclusive communities and provide affordable housing to Americans. It addresses housing needs, enhances community development, and ensures fair housing practices.
Operational Highlights
Ending 2024 Occupancy: 93.5%
Average Private Pay Rate: $5,590 per month / Target rate $6,500
Average Public Pay Rate: $147 per day / Target rate $155
Operational highlights for Q4 2024 demonstrate our success in maintaining high occupancy and favorable rate structures following closing. The average occupancy rate stood at 90%, consisting of 98% at Fond du Lac and 89% at De Pere, above the target of 90%.
Private Pay residents paid an average rate of $4,924 at Fond du Lac $6,256 per month and De Pere. This difference in rates is expected due to the lower expenses of operating an RCAC versus CBRF. Similarly, Public Pay residents funded through Managed Care Organizations (MCOs), paid an average rate of $139 per day at Fond du Lac and $155 per day at De Pere.
Occupancy and rate structures are crucial in sustaining our financial health and ensuring stable revenue streams and our team remains focused on building a resident solid pipeline.
Market Analysis and Forward Look
As we enter the first quarter of 2025, the assisted living industry in Wisconsin continues to experience significant developments. According to Wisconsin Public Radio news, the state’s aging population, particularly individuals aged 75 and older, is projected to increase by 41% by 2030, intensifying the demand for elder care services. This demographic shift underscores the necessity for expanding capacity and enhancing service delivery within the sector. WPR
Despite the growing demand, the industry faces persistent challenges, notably staffing shortages and financial constraints. In 2023, 148 assisted living communities in Wisconsin closed voluntarily, with approximately two-thirds attributing their closure to low Medicaid reimbursement rates and staffing difficulties. Wisconsin Watch
In response, Governor Tony Evers allocated over $250 million in federal pandemic relief funds to bolster Medicaid reimbursements for assisted living providers. This initiative is anticipated to increase reimbursement rates by about 40% for nearly two-thirds of providers.
The workforce shortage remains a critical concern. To maintain current care levels, Wisconsin needs an additional 9,900 registered nurses, certified nursing assistants, and home health aides by 2030. Given the competitive healthcare labor market, attracting and retaining qualified staff is imperative for sustaining service quality.
In light of these challenges, Violet Meadows is committed to proactive strategies to navigate the evolving landscape. Our focus remains on delivering high-quality care while ensuring the long-term sustainability of our operations. By leveraging technology and automation, we aim to enhance operational efficiency and service delivery. We will continue to monitor regulatory developments and advocate for policies that support the assisted living sector’s growth and stability.
Regulatory Updates and Direct Care Workforce Funding (DCWF) Changes
There have been no notable regulatory updates in Wisconsin’s assisted living industry in the last quarter. The Wisconsin Department of Health Services (DHS) has scheduled Assisted Living Forums for 2025, with the first meeting in February 2025. These forums serve as a platform for discussing regulatory changes, best practices, and industry trends.
Distributions
It is expected that Q1 2025 distributions will be sent in April, including partial payment for Q4 2024.
Please ensure your distribution information is up to date in the Investor Portal: https://tayloredinvestments.invportal.com/login. If you have any questions, feel free to contact us anytime.
Thank you for your continued support and investment in Violet Meadows. We remain committed to transparency and open communication.
