Mainstay Cio: ‘middle Market Senior Living Is A Math Problem, Not A Brand’

Middle-market senior living rates are still achievable through disciplined, math-driven operating models to meet rising acuity and affordability needs of older adults.

That’s according to Mainstay Financial Services Chief Investment Officer Tod Petty, who rejoined the organization in June of 2025 and is now helping to expand the Lakeland, Florida-based senior living provider in the middle-market sector as demographic demand fuels senior living growth opportunities.

Mainstay’s focus on middle-market affordability and secondary and tertiary markets across the Southeast comes as the private-pay senior living industry grapples with the affordability perception of its offerings in 2026. Petty sees middle-market senior living as a structural math problem, not a branding exercise, and says success hinges on aligning cost basis, operations and capital expectations.

“For us, the middle market really isn’t a branding category. It’s a math problem, and we’ve structured the platform, the capital, the operations and our geography to solve that,” Petty said on the most recent episode of the SHN Transform podcast.

Over the next 24 months, Mainstay is targeting an acquisition pace of two to four properties per year, primarily in the Southeast. The company plans to build clusters in markets where it already operates – such as Lakeland, Florida and larger metropolitan areas like Atlanta – to share resources and operate more efficiently.

A key part of the company’s growth strategy is focused on secondary and tertiary markets to expand middle-market options with less competition than primary markets. These markets often have an “exploding” healthcare presence from regional hospitals, post-acute and urgent care providers that are all chasing the same demographic-driven demand.

“We’re going to those markets because there’s not a lot of people going there, and it provides us an opportunity to go there,” Petty said during the podcast.

Mainstay operates 46 communities in five states.

Listen to the full podcast here. The following transcript has been edited for length and clarity.

On Mainstay Senior Living’s growth:

I’m back home here at Mainstay again because of the growth trajectory that the founder and our CEO wants to pursue. We’ve talked about reaching 40 to 80 communities over time, but we’re not trying to do that quickly. For us, the middle market isn’t a branding category; it’s a math problem, and we’ve structured our platform, capital, operations and geography to solve it.

Over the next 24 months, we anticipate a range of two to four acquisitions per year, depending on market conditions. Most of that focus is in the Southeast. We are going to expand and build clusters within markets where we already have a presence—whether in similar cities like Lakeland or larger places like Atlanta—so we can share resources and operate more efficiently. We’re not limited to a specific product type. It’s really about the opportunity, whether it’s independent living, assisted living or memory care, as long as it integrates into our broader platform, which now includes 47 communities. What tells us we’re on track with acquisition volume is whether these communities integrate well, stabilize and strengthen our existing overall platform.

On how Mainstay Senior Living structures its middle-market model:

Much of this comes back to underwriting. Secondary and tertiary markets have been overlooked for various reasons, yet they have reached a point where they now have dense populations. These areas have aging populations that require our product due to comorbidities and healthcare needs.

Our strategy is very similar to that of a regional hospital. You have to ask: can hospitals compete in secondary and tertiary markets? Generally, no, so they go to MSA markets. However, can a regional hospital established in a specific market attract patients from a 25- to 30-mile radius rather than just a five- or 10-mile radius? I would say the answer is a resounding yes.

If you look at tertiary markets, the population is not just growing; it is exploding with healthcare growth. Hospitals, post-acute care and prompt care providers are moving into these markets because they see the opportunity to serve the aging population. These same individuals are going to need senior housing. We are entering these markets because there is less competition, which provides us with a significant opportunity.

We have built the infrastructure over the years from both an operational and a capital standpoint. Now, our focus is on stabilizing what we’ve acquired and continuing to build density in these markets. While we are pursuing these areas, we remain very selective. Each asset must integrate into our operating model and contribute to our overall stability. We have to stay disciplined; we can only achieve a cost structure that supports middle-market pricing if we remain focused. If an opportunity doesn’t support that structure, we won’t pursue it.

On 2026 operational priorities:

I think our biggest focus is really margin through execution, not pricing, because pricing has been addressed year after year. We are really looking at margin because we’re not in an environment where you can simply push rates to solve your problems.

For us, it’s about operational discipline. It involves asking: how do you reduce move-outs? How do you improve length of stay? How do you build efficient staffing models within our clusters? A big part of that is integrating care services, whether through rehab, home health or other partners. We work with physicians so residents can access what they need without leaving the community.

At the end of the business day, move-outs are the most expensive event in the building. If we can keep the residents stable and supported, we can improve both the experience and the economics, and that’s where we’re really focused.

On achieving middle market rates in 2026:

There has been a real move in the last decade or 15 years to turn senior housing into a luxury experience because of the pension generation and the existing model. We achieved all that, but now we do not build for luxury. We try to discount it and engineer affordability from the start.

This shows up in a few ways. We design more efficient unit layouts and are very intentional about common area spaces, focusing on fewer, more flexible spaces rather than multiple underutilized units. We also keep the amenities simple and purposeful.

If I had to compare it to something, it would be like a tour of the Ritz-Carlton for $1,500 a night. You will love it, but here is a beautiful bed and breakfast for $800 a night. It is smaller and quaint. It wraps its arms around you, and you still have a great experience. I want to be that more affordable bed and breakfast.

Our residents are looking for safety, quality care and a sense of strong community. The experience ends up feeling like a well-run, hospitality-driven environment that is comfortable, consistent and supportive without the cost structure of a high-end build. That is the key. We are able to hit that price point without compromising what actually matters to the resident. Residents know they need care, and if they know a class A building is beyond their reach, they need to know where to go. We want to be the option that is affordable but still returns the margins our investors need to make this work.

On how Mainstay selects markets to enter:

We found secondary markets to be very attractive, though probably not for the reasons most people think. What matters most is the real demand density within the drive radius of these markets. You can have a smaller city but still have a concentrated 65-plus population that actually needs services. At the same time, you have less new supply coming in, which creates a more stabilizing operating environment.

Operationally, we see more consistency in both staffing and resident behavior compared to large metro markets. Staff members like smaller venues, family businesses, longevity, stabilization and consistency. In an MSA, if things are not working out, they can simply go down the road.

Where operators sometimes misread the situation is assuming less competition makes it easier. It does not. You still have to execute. I would never pretend any of this is easy; it is difficult and not for the weak-hearted. If your cost structure is off, these markets will expose it quickly and they still will not work. For those reasons, we primarily like secondary markets.

On margin versus mission:

A lot of that comes down to how we operate. I like to say that Mainstay functions like a nonprofit in that we are very mission-based with a long-term strategy, but we operate in a for-profit world. Senior housing tends to be very polarized, either nonprofit and mission-based or highly for-profit and capital-driven. We try to blend those together.

Every deal we approach has a long-term ownership mindset. That changes everything. It changes the underwriting, the strategy and the investor attitude, and it attracts a certain type of investor. We are not underwriting a five-year exit. We are underwriting to see whether the asset can perform consistently over time. We are more focused on stability, operational fit and whether it strengthens our existing markets and provides synergy rather than chasing short-term upside.

That is important because many models have been built around short-term upside. It also influences how we think about capital. We are aligned around steady performance and capital preservation, not maximizing short-term returns. Because we operate what we own, we have flexibility in how we manage the business, and that autonomy is very important.

We can prioritize the health of the asset over extracting fees. We are not building a model around what fees we can extract. We can prioritize the health of the asset even if that means deferring or accruing fees so we can reinvest in the success of the asset, the residents and the investor. In a more volatile environment, that alignment becomes a real advantage for us.

On care delivery in Mainstay communities:

Our role in creating care-enabled housing environments is not becoming the healthcare provider ourselves. Our focus is making sure residents have access to the services they need—whether it is rehab, home health, hospice or physician support—and that those services are coordinated in a consistent way within the community.

In many ways, it is similar to how care is coordinated post-hospitalization. You have multiple providers involved, but the experience needs to feel seamless for the resident. That is really what allows aging in place to work in independent living, which is the new sanctuary for the older adult who does not want to go into assisted living and needs a lower rent.

When residents can receive services where they live, they stay longer, transitions are smoother and outcomes improve. Our role is to deliver the environment and the consistency, and then integrate the right care partners around it. Those partners provide the clinical oversight to help the resident age longer, stay in place and pay rent longer.

On implementing new technology in operations:

We are trying to stay very disciplined on technology. We are looking at a lot of different things, like so many people are. The goal is not to add more systems that can do other things; it is to reduce friction in the operation and improve visibility into what is happening with the resident.

What has changed recently in these newer products is that instead of just looking at historical or real-time data, we are starting to see tools that identify changes earlier to support better decisions. If we can be proactive and predict a resident’s decline, we can work with the third-party healthcare continuum to get ahead of it and help them age longer, rather than having them decline, suffer an episode and go to the hospital.

We are trying to simplify the environment. Rather than layering multiple solutions, we focus on having a strong infrastructure. We are beta testing pharmacy services to deliver medication inside the resident’s unit via the internet. We are using telehealth to get a doctor in front of residents twice a month. We also have devices that predict various factors that allow a doctor to determine decline and move more quickly while we continue to provide hospitality, security and services.

We are selective. If it does not improve outcomes or reduce the operational burden, we are not going to implement it. Those days are over.

On middle market changes in recent years:

In the past, senior housing has attracted certain investors with very aggressive growth funds because they want to make a lot of money. They are looking for the potential for upside and are willing to put money at risk for a greater outcome. The reality is that you cannot use that financial model in the middle market.

I believe it is less about lowering expectations and more about aligning expectations with the right investors. Middle-market senior housing is not designed to produce outsized margins; it is designed to produce stable, consistent performance, and that is how we position it. Our investors are more income-minded. They are looking for steady, reliable income more than they are for ownership and growth.

We can focus on income durability and capital preservation rather than a short-term growth story. This tends to resonate, especially in today’s environment where new development has slowed and there is more appreciation for basis discipline and existing assets that can perform. Because we focus on secondary and tertiary markets where supply is more limited, there is a level of scarcity.

The alignment really comes down to this: we are not chasing the highest return. We are building a model that can perform consistently over time, and that is the type of investor we are trying to attract to our base.

On middle market pricing dynamics in 2026:

The middle market takes a lot of work because you are trying to target a rent between $3,500 and $3,995 without compromising the experience. We do not build luxury; we try to discount it and engineer affordability. Engineering affordability requires multiple components.

It takes a vertically integrated platform that can perform a rehab, act as the general contractor, and handle interior design, architecture, drywall and more. I am fortunate to be with a company that has all these components. You have to be vertically integrated. You also need mission-minded investors who prefer income funds and stability.

You have to look at every opportunity individually. You cannot approach this with a rigid model of acquiring and repositioning a set amount of assets in MSAs. You must look at each opportunity and find out how to turn it around for a positive outcome. We have talked about repositioning hotels and have done that. We are even looking now at whether we can buy a campus for independent and assisted living that includes workforce housing to help the asset support senior services.

You have to be nimble. Private equity will not always allow for that, but having high-net-worth individuals on your team allows you to be more flexible.

On how middle market options will grow in 2026:

This requires discipline across the entire platform, not just one part of it. We are still refining it. Sometimes Medicaid diversion can help in states where they provide a stipend to the resident that can be added to the rent to get you up to market level.

Sometimes the solution is diversification of the model, adding more units or reducing common area space to add units because the middle-market expectation is lower. That is not a bad thing; it is a matter of survival. All these things must be brought together for each opportunity to broaden the middle market in a way that is sustainable and scalable. It has to be looked at very holistically.

It is not for the weak-hearted, but I believe for people inside or outside of senior housing, this could be the greatest opportunity of a lifetime. There are 30 million people who cannot afford the existing product and have no safety net, yet they need exactly what we are talking about today.

On outlook for middle market growth in senior living:

It is a very exciting time. Some people are exiting the senior housing space because they are deal fatigued. Many REITs are deciding it is time to move on and are disposing of assets, which creates great opportunities. Larger senior housing companies that want to concentrate on affluent brands are also disposing of assets, so there are deals to be had.

We always say that if you can get an asset for $30,000 to $60,000 a door, it is golden. It currently takes $250,000 to $300,000 per door to build Class A. The key is that it does you no good to get it for $10,000 a door if you cannot fill the building. Therein lies the opportunity. There are psychographic and demographic areas where you can buy an asset, reposition it and attract residents at a lower rent with more conservative services.

I believe there will be significant opportunities for acquisitions. From now until 2030, value-add is the name of the game, except for the few in the ultra-affluent sector who will do very well because some people can always write that check. Those who are struggling and do not have a long-term heart for this will go do something else. People who are mission-minded and love this industry will come to the forefront with solutions for the middle market.

I am going to do everything I can to share information about this opportunity. It is no threat to us; we will be out of housing by 2030. We need everyone involved to find a solution for the most vulnerable population: the over-85 senior with dementia who needs what we provide.

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