Health Care and Nonprofits

Porter Hills considers merger

Senior living center’s alliance with United Methodist Retirement Communities would create shore-to-shore footprint.

September 7, 2018
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Two Michigan senior living organizations are considering becoming one, creating a new organization that would stretch shore to shore.

Porter Hills, which has nine communities in Grand Rapids, is exploring joining forces with United Methodist Retirement Communities, which has seven communities from Jackson to Detroit, as well as a home-based independent living program in Lansing.

The nonprofits are going through a due diligence process for the remainder of the year, with the hope of formally joining under a single leadership body by the start of 2019, said Kim Hoppe, Porter Hills senior vice president of financial and corporate services.

According to the 2017 Ziegler LeadingAge 150, a report that ranks senior living organizations based on the quantity of housing units, the merged organization would be the fifth largest in Michigan, among the 75 largest in the U.S. and among the 25 largest in the U.S. based on affordable housing units.

Hoppe and John Thorhauer, UMRC president and CEO, said the potential joining would be an “affiliation” but did not specify what that means, though they compared it to the way similar organizations are joining across the country.

They agreed the potential collaboration would be better classified as a merger than as an acquisition.

Porter Hills has reported consistent overall deficits in net income and net assets, according to 2013-15 IRS forms. In 2015, $34.8 million in total revenue and $35.5 million in total expenses created a net income loss of $735,000, while $73.8 million in total assets and $102 million in total liabilities created a net asset deficiency of $28.2 million.

UMRC has reported consistent overall positive net income and net assets. In 2016, the organization reported $33.5 million in total revenue and $31.8 million in total expenses, creating a net income of $1.7 million. Total assets were $73 million, and total liabilities were $44.7 million, leaving $28.3 million in net assets.

Hoppe said since 2017, Porter Hills has been considering how its future will look and the path to get there. She said the organization reviewed 20 potential partner organizations throughout the country and decided UMRC would be the best match.

Thorhauer said UMRC has grown from three to nine locations in the past decade, continuously seeking growth opportunities to keep up with the growing senior population.

“We know we can’t grow organically fast enough to meet the needs that are out there,” Thorhauer said.

He noted that today, there are more than 30 counties in Michigan with more adults over age 65 than there are school-aged children, according to state statistics. Ten years ago, that was not the case.

“Just as the schools are downsizing and repurposing buildings they no longer need, we’re actually having the opposite experience,” Thorhauer said.

He said there are many senior living organizations that are beginning to join each other, similar to the health care industry.

“It’s about taking care of our residents long term,” Hoppe said.

She said partnering is meant to leverage each other’s strengths to enhance and expand services, including plans for new construction and renovation projects, but clients shouldn’t see significant price changes.

“As we both have a focus on the future, part of that focus, with any type of affiliation, is to be stronger in the future,” Thorhauer said.

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