A regional nonprofit is poised to spin off its senior-living operations to a larger peer based in Missouri.
- Topton-based Diakon, which has a finance and support center in Middletown, has agreed to merge its senior-living subsidiary into St. Louis-based Lutheran Senior Services.
- Terms of the transaction, expected to close this summer, were not disclosed.
- “This was a strategic decision made by both our organizations,” Scott Habecker, Diakon’s president and CEO, said in a statement. “This creates a larger senior-living business with an even greater competitive advantage, while also allowing Diakon to focus our resources on the growth of our diversified portfolio of affordable senior housing and children and family services.”
The players: Diakon subsidiary Diakon Lutheran Social Ministries employs 700 people and operates four retirement communities, including Cumberland Crossings in South Middleton Township, Cumberland County.
- Its other communities are in Allentown, Lewisburg and Topton.
- Diakon had operated more communities but sold off several, including Frey Village in Middletown, to pay down debt.
- The Lutheran-affiliated nonprofit also offers a variety of services for children and families, including specialized counseling and adoption services.
- Those services, as well as Diakon’s affordable senior-living units, are not part of the merger.
- Lutheran Senior Services employs more than 2,800 people and operates 18 locations in Missouri and Illinois.
- “We are two financially healthy, not-for-profit organizations coming together strategically in the interest of better serving older adults,” Adam Marles, president and CEO of Lutheran, said in a statement.
What are the numbers: Diakon had operating revenue of $202.7 million in 2023, down slightly from $204.4 million in 2022, according to financial disclosures to bondholders.
- The nonprofit’s operating profit was $5.4 million last year, down from nearly $8.4 million in 2022.
- In its disclosure, Diakon cited challenges in staffing but also from the sluggish residential real estate market, noting that many of its residents finance their entrance fees by selling a home.
- Lutheran Senior Services had revenue of $230.1 million in 2023 and an operating loss of $22.1 million, according to unaudited financial statements disclosed to bondholders.
Does scale matter: It is increasingly important in senior living as providers grapple with higher costs and staffing shortages.
- Numerous providers in the region have joined forces with others over the last several years.
- New Holland-based Garden Spot Communities affiliated last year with Frederick Living, a provider in Montgomery County.
- Also in 2023, Dillsburg-based Presbyterian Senior Living agreed to buy Pine Run Life Community in Doylestown from its owner, Doylestown Health.
- Willow Valley Communities, based in West Lampeter Township, Lancaster County, announced an alliance in 2021 with Acts Retirement Services, a Philadelphia-based provider.
What’s next: If the transaction goes through, the Diakon subsidiary would become part of Lutheran Senior Services but Diakon communities would retain their names, said Diakon spokesperson Melissa Kindall.
- “The two organizations will work collaboratively post-closing under the terms of a transition services agreement,” Kindall said.
- The two nonprofits are “likely” to maintain a presence in and around Middletown, where Diakon employs 10 people, Kindall added.
