We learned last week of the financial woes of Groupe Sélection, a giant in the industry of private residences for seniors (RPA) which owns nearly fifty buildings housing approximately 15,000 seniors. This case highlights the risks of entrusting a private industry with the responsibility of providing care and services that are often essential for seniors.
She reminds us that when these services are commodified, their sustainability depends on the business decisions of the managers of for-profit companies, who are accountable only to their shareholders and creditors.
In a research report published last year, we expressed concerns about the business model which, under the impetus of large residence chains such as Sélection, tends to impose itself within the Quebec industry. RPAs.
A careful reconstruction of the multilevel ownership structures of the main “Quebec flagships” of the sector has revealed that behind several of them are in fact large financialized multinationals.
In many cases, these multinationals are real estate investment funds which, by nature, are structurally constrained to guarantee their investors a rapid and ever-increasing return.
The research also revealed striking similarities with the chains of residences present in the United States and Great Britain, which are in some cases owned by the same multinationals as those active in Quebec. Researchers analyzing the financial reports of UK residences have shown that the ultra-complex ownership structures of these large chains are associated with practices of intensive profit extraction at the expense of resident services, aggressive tax avoidance strategies and meteoric asset growth financed by risky debt strategies which, in some cases, led to spectacular bankruptcies.
It is difficult to know to what extent the large chains of Quebec residences implement this type of practice. Indeed, despite the significant public funds invested in them through the tax credit for home-support services for seniors (more than half a billion dollars a year) and although RPAs fulfill a mission of In the public interest, residences in Quebec are not forced, as in Great Britain, to make their financial reports public.
We do know, however, that in Quebec, the housing industry for the elderly is generally very profitable. Statistics Canada data show that, from one year to the next, it is in Quebec that the lion’s share of the profits generated in this sector in Canada is pocketed. During the pandemic year, while the elderly died en masse in Quebec’s RPAs, companies in the sector earned 40% of the operating profits made in the country, and the province is one of the few where these profits have experienced an increase despite the health crisis (they jumped by 11% between 2019 and 2020). Quebec is also the province with the highest operating profit margins in the industry (13.6% in 2020), far ahead of second place (occupied by British Columbia, at 10.1%) and Canada as a whole (9.2%).
This general portrait, which could give the impression of a very vigorous Quebec industry, nevertheless masks major weaknesses. On the one hand, the market has been characterized for several years by a marked decline in small residences which, with the regulatory changes and changes in the competitive environment imposed by the development of large residence chains, no longer seem to be in able to pull out of the game.
On the other hand, this decline is to the benefit of these large chains, which concentrate a growing share of the accommodation offered on the market (35% are in the hands of the five main players in the industry).
The extremely rapid growth of groups like Sélection, whose assets have quintupled since 2014, rising from 1 to 5 billion dollars, could be seen as a sign of financial health. However, the American and British cases, and now that of Selection, raise fears that these companies are in fact giants with feet of clay.
For several decades, successive governments have relied heavily on the RPA industry, which they have generously financed, to provide Quebec seniors with essential home and accommodation services. As during the pandemic, it is likely that the State will be called upon by the industry to remedy the shortcomings of Groupe Sélection. In this, this case reveals to us the need at the same time as it constitutes an opportunity to review in depth the Quebec model of services for the elderly.