05/24/2021

Senior Housing Investors Podcast Transcripts


Bringing you the innovators, investors, and leaders across the full spectrum of assisted living and senior housing, all of whom provide for the betterment of our senior population.


Merging Asset Classes into Senior Living

SPEAKERS

John Hauber, Paul Griffin, Pam Pyms

John Hauber 

Welcome to the senior housing investor podcast. If you are an investor or want to be an investor in senior housing, then you’re in the right place. Hi, I’m John Hauber of haven senior investments. We are pleased to present our newest episode where we bring you the innovators and leaders across the full spectrum of assisted living in senior housing, all of whom provide for the betterment of our senior population. The host of our show, Pamela Pyms has a background in the industry. And she will be interviewing our honored guests. Hi, Pam.

Pam Pyms 

Hi, john. Thanks very much. It’s great to be here. Today, we’re with Paul Griffin, the third who is the founder and chief executive officer president of Griffin Living a fifth generation builder, with 40 years of expertise in real estate development. Paul was inducted into the Forbes real estate Council in 2020. We’re delighted to have you on the program today, Paul, how are you? Oh, I’m Thanks for having me. Oh, well, I’m delighted. I understand you’re in a family business. But you alone have already created over four and a half a billion in assets over nearly a 40 year career. So I look forward to hearing about your background. And as a developer of large masterplanned multifamily office and retail communities. I’m, I’m curious to know when you expanded into senior living and many questions for you, but but let’s start with your background. Tell me a little bit about it.

Paul Griffin 

Thank you. Well, I started it, family has been in business for five generations. So since 1903, so you know, the opportunity to be in real estate development was natural enough as I was in college, knowing that that was a great opportunity, but it never was any pressure on part of my grandfather, my dad then to to go into real estate developments just an opportunity in a California which was, you know, really a growing population and wealth at the time and it’s really been lovely, but you pay I started it was set out to work on projects while I was in high school, and it was hot and I worked hard summers that weekend. A guy is I was got into college, I was still you know, headed in and out of projects. Every time I do debit paid well, so I like that. But I knew there had to be a better way. And maybe that was my dad’s plan. Because I tied up what was back at school, I tied up some land and just talk to family that owned you know, big olive grove into tying it up. And then it would go down to City Hall and talk to the city engineers and the planners into subdividing it and making it you know, creating a better value. And time I got all of that part done. I use my dad’s connections to go to submit with Thomas Bank of America actually, when they they made a very favorable loan to me on the property which I used to pay for the land, develop the houses and made a lot of money and I never got too hot. It’s never too hot and sweaty. But you know, it really was the entrepreneurial bug get in a really got bed, you know, I’ve enjoyed the heck out of it ever

Pam Pyms 

say definitely in your DNA? I don’t know, maybe it was my dad’s plan a log, file it but that would tell me tell me about how you’ve gone from the portfolio you’ve had and other asset classes to the portfolio you now have of senior living projects? And where are they? How do they compare? Would you recommend I’m asking you a bunch of questions at once, obviously, what would you recommend to investors? Or why would you recommend to investors that senior living is a great asset class compared to the others?

Yes. So the the assets that we hold in our investment portfolio, which is a different company than our than my real estate development company. So we develop assets, we’ve always developed assets, some of them you know, we sell for cash to, to come back and do new projects. So we want something we want the ability to have growth. But always the first thing we do first thing I will do in my companies and I have always done is offer them to my family’s investment portfolio first and you know, when they like this asset and and move it over to that portfolio, it’s good for me I, you know, I have ownership. I’m 100% on the development side, and, you know, with my brothers and sisters on the investment side, so it’s happy either way. We did one project. It was a family apartment project that I assumed we would sell because the value at the completion and stabilization was so great, but our family investment company really wanted the asset and we moved it over to their side. And it turned out to be pretty smart. It was only about three years ago that We finished it in the port, we had to reappraise it for estate planning purposes this summer. And even during COVID, it had gone up by $15 million last three years, it was already, you know, valuable site. So that was probably a 30% increase in the in the net, and the net value of that asset what so, that is family that with his family apartments, they are millennials, which is just overtook the baby boomers, boomers is the largest generation, most populous generation in their country, both at about 72 million at in 2019. And now boomers will continue. They are the size they are sorry, Millennials are the size they are about 72 million boomers will start to decline as as you know, as the generation starts to pass away. But family apartments, that asset class, you know, shopping all it all use, coming back to that population is is going to be great right now, because we have a lot of population, the value of real estate really is is the demand itself. So are we employed, is there income to the generation and how many people are there. boomers are now the largest. So family apartments, I think are great. for seniors, the boomers, the baby boomer generation are just turning 76 right now 76 years old, so they’re just starting into the needs for true senior housing. Over the last seven years, I had been focusing in a real estate development business on seniors, but we really were servicing serving the silent generation, the Korean War generation, and their needs and their their, you know, psychographics baby boomers now are moving in, it’s a huge cohort 10,000 people a day turning 76 now, and it’ll continue through for you know, another 20 years as his generation moves through and gets older. So the demand for senior housing is coming at us like a tidal wave. And the stability of the asset class was already very good for senior housing of all kinds. And so I like the investment, the properties that we have, we want to we do want to hold in, in, in certain locations, we want to really hold on to those because we think they’ll go up in value, just as family apartments have, because of the population and the demand, so that we could get into talking about the psychology of baby boomers versus the silent generation and you know, what, what it is they’re really looking for and housing and what the alternatives for senior housing are, including the kind of asset class of conduct and care, the independent living, assisted living all of that, versus, you know, home health care’s and other solutions, which are all out there.

Pam Pyms 

Right, right, which I’d like to I do notice that something a little bit different about Griffin living, is that you have seen your communities on both California and it looks like you have some in Georgia that you’re on both coasts. Is there a reason you divided it up like that?

Paul Griffin 

That was I I took over the my dad retired from active, actually retired, retired, he was tired when he was done. He was done in the early 90s. And when I took over I My vision is different than my dad’s was he really focused his career in Northern and Southern California. They were great. They did. I think dad did about $10 billion in real estate development. So they were you know, large Board of Directors you know, really well managed company met not it wasn’t so much of a venture group. Although his ventures were the were the assets themselves, but they ran it is it is a going business and balance sheet and the income statements to a business rather than project by project. I looked at it I am more entrepreneurial. And I looked at it and thought, you know, I really want to have our investments in our time spent in other employment areas. Thought about Texas pretty hard as it was growing, but there wasn’t really a need for real estate developer in Texas, they really Texas, the return because there’s so much land and there’s not real big barriers to entry to the land, unless he’s supposed to be doing something, you know, super large, but the kind of thing that we were doing, I didn’t see really value for real estate versus real estate development versus merchant homebuilding, which is strong. In Florida. on the coast, you get the ocean, you have impediments, barriers to entry. We thought we had value there in Atlanta. We got into and started buying land and develop it because it was so centrally located we could get anywhere, whether it was back in Texas or whether it’s out of Florida or North in Northern Virginia, or into the New York markets, where we picked White Plains and Connecticut, Dan Berry and working our way down. So our idea was to get into the employment centers, we could, we could do it out of Atlanta, but we did some developments in Atlanta. But it was really, that was really me and in my view of it following population growth, job growth in wealth creation, and that, that what we develop really is a utility to population and, and the the incomes that they have

Pam Pyms 

very strategically thought out, I can see,

Paul Griffin 

you know, it was drilled into me for so, as I as I finished college and graduate school, and I started working, you know, dad had McKenzie and their management here, helping him to structure and think strategically. So those guys were smart, they’re my mentors. And they really taught because they came from all kinds of businesses, not just real estate development. You don’t really smart guys, top guys, expensive as heck, I think we paid them $2 million bash, I think we paid him $2 million for the for the effort back in the early not in the early 80s. But I learned a lot and it really was strategic thinking and management of balance sheet rather than venture by venture. So anyway, that that is why why I’ve moved and follow population and thought we know that it’s just investment and how we’re going to make these returns.

Pam Pyms 

Yeah. Tell me about the current project portfolio if your senior living projects we’re

Paul Griffin 

too today we’ve got a project that’s in Georgia, in this kind of southeast side of Georgia, and it’s leasing up it’s 180 units about and it’s got some it’s got independent living and it’s got assisted living memory care, it’s doing very well leasing up even during the pandemic. It is well managed. I like to project a lot we are in in the East I’ve got another one just getting ready to break down in also in Atlanta. It Acworth which is just a little bit north and west of downtown Atlanta. I think it’s an excellent, excellent site, good demographics. We’re really excited about it. We’re just thinking about the other side of the country. We’ve got a property in Boca Raton that we’re trying to push forward. It’s a little further behind but I like Boca Raton quite a bit like the demographics I like the barriers to entry took us forever to get the approval here. We are working on another large one in Danbury, Connecticut that I’m very happy to be happy with. It’ll have family apartments and senior housing, assisted living memory care as well as quite a bit of retail alone their major Boulevard in the in the city. As we come West, we’ve got a property just breaking ground down in Temecula, which is sad, South Orange County and east to great family market that’s grown through the 1980s 1990s stablish wealth and no real good community sense. I think about 250,000 people live out there. very mature great market. We’re down in San Juan Capistrano for people, other parts of the country. It’s San Juan Capistrano and also at Laguna Niguel. Those are coastal South Orange County, very high barriers to entry great projects. were real happy to be there work hard on getting the entitlements. The Laguna Niguel property will break ground this year San Juan Capistrano break ground in 2021. Coming north, we have a project in Westlake Village, which is a great suburban market, upper middle class, kind of a market very well established in then right on the border of Ventura and Los Angeles counties. That one is being leased right now they’ve been completed we should have CMOS and then the license in March and then April people moving in. It’s already filled in you know, in terms of I actually had was thinking about one possibly for my mother because my sister lives nearby and I had a grab it real fast last week because they’re going out of his way, way, way way. Just hold on to one because I can’t get it back if you guys leased it so that when the demand is overwhelming, and it’s really just barriers to entry out there and then up in Simi Valley as a middle class community, lovely community, police and firemen kind of a community 100,000 people in it. We’re in the middle with a shopping center that we’ve owned forever and our family portfolio. We could develop some of the unused land into senior housing and then redevelop the shopping center into more of an experiential shopping center with the Oh the restaurants, the outdoor seating the fountains, you know the enhanced with the landscaping, so it feels like you’re in a park even even when you’re outside. So I think a really good set. I’m excited about that one that should have its CFO later this month and people moving in in in February. It’s leasing through COVID right on proformance not ahead or behind. Out of 95 units we’re in the low 40s in terms of our pre leasing so we’re you know that that that is right at pro forma was like just so good. You hold everything else by comparison. It’s probably isn’t fair. We’re up in Santa Clarita is another great community north of Los Angeles work traditionally a lot of a lot of people that worked in the in the entertainment industry that were out of Burbank and all of those studios would live up in Santa Clarita is beautiful, but actually a lot of movie ranches up their way. So a lot of what you see on television movies are actually the hillsides around Santa Clarita. But in any event, it’s an it’s a good community. It’s got a great urban downtown center, with good good wealth, and in an aging community. So that project should break ground later in 2020, real excited about it. And they can forgetting anybody working on one that I think will come together, it’s approved up in Marin County in just north as you come off the Golden Gate Bridge north of San Francisco is a area of Marin County. And so you’ve Tiburon, and all of those coasters, and just inland would be the property that we’re pretty excited about and is improved now. So I think that one should also come about, you know,

Pam Pyms 

I’m gonna say I’m not alone in listening to everything you’ve been able to accomplish in California, which I know is one of the most difficult markets to get anything done in. I want to know your secret and which one was the biggest challenge and which one is are you the most proud of?

Paul Griffin 

You know, it’s a funny, funny anecdote, but my dad had a good friend was a great developer and homebuilder was lorwyn, Holmes had in my cast and wonderful guy, he said to me one time, oh, as I was taking the business over in running it in the in the early 90s, Mike says, you know, kid, this is a great business, it’s hard. I said, What’s great about that bike, he said, you’re gonna make a lot of money. It was, what do you bet was whether, you know whether that works, but what he meant is, you know, the more barriers to entry that are put in front of you, as real estate development for success, there’s profit, we know, we create value, by getting our approvals when other people cannot. And you know, as to whether that’s the best, you got to decide where your talent and your effort are best spent, you know, the idea of all businesses, how much how much, you know, how much money am I investing, where’s my time invested in what’s my return, it’s perfectly reasonable for me to go into communities that are in real estate development that will lower barrier to entry, but I’m gonna go in and cash to asset to cash faster, and manage my margins are going to be tighter, but I’m going to manage them. And so you know, Paul, if you’re going to turn your, if you’re going to turn your asset, you all of your investment one time for three years, I can turn mine one time per year into so that, you know, I’m on a tighter margin, I I see more danger. And that tighter margin, something goes wrong, you can hit you hit zero pretty quickly. But it’s a reasonable investment. And then you manage your your risk by diversifying your portfolio into a number of other projects that you’re doing. So I’ve been more comfortable going where they you know, where they were, when I go, my team shows up for a public hearing, you know, you can smell the tar out back in the feathers get ready for us. These are our kind of guys. I remember what I would add, was doing a hearing so as well, still dad’s company that was working and talking community and to doubling the density and the balance of the community because we were in a recession and one lady stood up at the and everybody’s kind of enterprise head nod and up and down to the sounds reasonable. This is actually good for all of us. It was reasonable. One lady said, She’s got a baby at our arms and she looks good. She’s cut tears in her eyes, Mr. Griffin, you’re not going to come in and build smaller houses near us are you it’s just it’s so human it is you know, I love those, you know. And that’s that was really how straight to the business to when you go to the communities remember, I like these guys, you know, the the neighborhoods that we’ve built, generally they’re you know, the last phases of our of our projects have got off forever and think about what it’s like to be them and what it is we’re proposing and what we’re going to do and what we want to do and work with them but care about and you know, it’s it’s worked well for us in California through the years. A lot to start all the way around the bar, though a lot of barriers dead, right. It’s getting worse every year here. Absolutely. Yeah.

Pam Pyms 

Well, obviously you’re doing something right.

Paul Griffin 

Most octogenarians, California has New York has the most octogenarians in the country than California than Florida. So also if you’re looking for senior housing, we know where’s the wealth and where’s the population of 80 people in their 80s California in New York.

Pam Pyms 

Yeah, yeah. But you’ve been lucky enough to get in and get the property and get it zoned and have it approved. And that’s no easy feat. Let me ask you about your the structure of your business model. I mean, do you develop and sell? Do you want to hold them and manage them? What what’s your strategy there?

Paul Griffin 

For for Griffin living, we want to develop them and sell them. And the question for Griffin living is, is is the, you know, ultimate, purchase the land made by our family investment company? Or are we selling it to third parties, and I would guess it in my my guess if, if history, you know, serves, it’ll be about a third of my family investment company to keep about a third of them. And about two thirds of them will sell for one thing, because I need to turn the asset back to cash, to continue to develop it if in fact, that’s what I want to do. As long as I you know, want to as long as I as long as I want to be interested in being a part of the conversation and senior housing, which I do, I’m very passionate about it. And you know, I have no desire to slow down at this point. So about a third about two thirds to cash back to me for reinvestment, and about a third to my family, because someday I’m gonna get tired. And that’s a good retire. Family investment companies a great asset for all of us. I’m happy it’s not being managed by me. They’re smarter than I am.

Pam Pyms 

Tell me, tell me what differentiates Griffin livings projects from say other senior developers are

Paul Griffin 

always over viewed the maybe back from McKinsey’s actually might be from graduate school days thing about marketing. You start with, you know, your consumer, who do you think you’re selling this product to whatever it is, in our case, it’s, you know, it’s housing and, you know, now it’s senior housing or Bentley apartments, but, you know, think about who the consumer is, and what is it that they really want to find? What are their hopes and dreams, and then what other supply might meet those hopes and dreams, and where’s there a gap in the marketplace that we could fit in, that other people aren’t serving? And, you know, price would be one of the hopes and dreams clearly, I remember when I bought my first house, and, you know, my wife and I, we we sort of knew what we wanted, we knew we could afford. So the you know, the first biggest asset, first biggest attribute to, you know, to our home purchase was the price. The second was the you know, the location, what neighborhood where were we in proximity to work, and, you know, what was what was the environment around where house was, and then the third got into, you know, how many, how big was the house, how fancy was the house, all of that stuff. In senior housing, we have really noticed that, you know, seniors want to be so we’re talking about, you know, seniors that are moving out of the houses that they’ve lived in, raise their families and, and now they’re looking for something that really just serves their needs as senior housing. And they first want location, it seems, seems to us and this seems to be proving to one location, nearby where their kids are and their grandkids, so their kids are in their 50s and 60s, their grandkids are in their teens and 20s. And you know, they’re moving into a senior community, and they want to know they’re not going to be lonely in their family is the first thing. Plus, the decision to make to any community, it statistically is absolutely about 1/3 or more by this by the generally the oldest daughter, there’s somebody who’s in probably her early, late 50s, early 60s, and she’s really seeing to the needs of her parents, and then the parents themselves, and it’s a joint decision. And from there, which community we’re in where what price, what price attribute to want to have. And then qualitatively at that price, what we can we deliver, in our view of it is that they’re really looking for, you know, first location and then lifestyle and coming to the lifestyle what, what makes, you know, somebody who is in the last five years of their life, you know, where do we put a less value on that person and their that part of their life than someone say in their 20s? No, the grandchildren? Why is the one more valuable than the other? And when you back up and think about it, it’s really not it’s not less valuable to the the senior citizen, it’s not their life isn’t less valuable. You ask the you know, the child, their their children that are in their 50s and 60s, do they think their parents are less lives or less fabula? They really don’t. They see it at the end of their life and they’re worried but they don’t say well, they know that they’re not really looking to warehouse them to send them away on an ice floe somewhere to die. They really want them to have The most vigorous, active, vivacious life they can have. And as a society as a real estate development company, you know, I think that that’s going to be something that we all come about in that our company has come about, you know, for several years now, how can we serve that lifestyle? Better? What are they really looking for? And how can we really offer a product that isn’t warehousing people? But and this is important, Ben, but still has the reality of how much per month? Are we charging them? What is our how do we manage our costs, so that we’re beating our schedules and our budgets. At the end of the day, we serve my we serve my own investment and our investments vestment community that invests with us in our projects, our debt and our equity stack that we put in with us, they want to know, qualitatively that we’re meeting our demand or population, that’s important, that’s my passion. But, you know, they’re not about feel good, you know, the investment community, including my own money is about asset to cash, you know, in an absolutely well managed way, and then back to cash again, or cash to asset back to cash again, so you have to manage schedules and budgets, for senior citizens, we have to manage the cost that we’re going to charge them, and we have to manage to that we our income and the cost to manage the buildings.

Pam Pyms  

Okay, so you manage your own buildings,

Paul Griffin 

we use third parties, I, we have as a board of our senior staff members, master’s level Rn, she’s managed several communities herself, she’s very qualified, is a really good calm approach to senior citizens needs. She’s because she’s been in the business for as long as she has, she understands the realities of schedules and budgets. And she’s been a she’s a key member of our real estate development team. So she came over from operations to us. At this point, we’ve had 1234, outside management companies for projects on purpose. Specifically, we’re using different companies to understand the strengths and weaknesses and learn more about it. I always thought that we would develop a management company as part of a real estate development company. However, I’ve found that it’s really we’re doing very well with outside companies. And and I know a few more that I’d like to work with over time, I think they all have something to tell us. And I think that we have quite a bit to push each of our operators in, in our projects, in terms of how we look at it. In, you know, our dedication to what we expect, I think is a good hard push both ways. Anecdotally, I have one of the acts, I think they were the largest assisted living company in Canada, I was talking to one of the the principals of that company and talking about operations. And was that meeting with him in Toronto, we’re saying, well, I, you know, we’ll start into managing our own projects. And he said, you know, Paul, I think that’s the smartest thing if we could go backwards, it’s a lot of questions, you don’t get a lot of return out of it. You’re making your money by doing developments by getting them to happen up and stabilized and well managed and I don’t know that we would make the same decision to manage our projects. And I’m not sure that we’re going to do it in the future we’re debating that so I thought that at least from somebody that was bigger than us had been doing it for longer was was interesting advice and in terms of our projects that we’re managing now we’re really not having problems with our outside operators are going pretty well.

Pam Pyms 

That’s good to hear because you know, there’s a world of difference between the management side and the real estate side.

Paul Griffin 

Yes, it well and also you want to be sure the managers are hiring there’s there’s of course the you want to try to hire the manager that at least shares in the vision of where we want the projects to go. Rather than you know, because there is a there’s a product so I thinking in terms of of retail sales that you know there’s a place for a Walmart and there’s a place for a Neiman Marcus you know they’re very different. Yes, you know, we don’t want to be the you know, the corner fashion house we want to be Neiman Marcus, we’ve got you know, locations everywhere, and but yet we’re upscale, that we want to make sure that our operators have that the psychology of you know, of the way that they’re going to manage a residence to just be that step up, but allow for the fact that in the industry that you know there’s a great place for the Walmarts of assisted living. There’s some great companies that do it it’s just and they could charge less so family say that their amount per month that they want to spend on their or that they can afford to spend for their for their parents or the grandparents is less is still might be a great option for him to go into one of those communities ours are in a little better locations and we just want to sell a little But more upscale services.

Pam Pyms 

So your private pay and do you offer independent assisted and memory care and all of your communities?

Paul Griffin 

We do. We are really trying to focus in terms of the backbone of our communities more into assisted living and memory care because it’s needs based. And for my family portfolio, they want to also make defensive kinds of purchases so that they have a product that isn’t really a, you know, an arbitrary decision or luxury decision is something that people have to have independent livings great, it’s got a great return, they’re easy to develop the communities like the Independent Living segment of our communities feeds into our assisted living very well. So we always have a component. The one project we have in Georgia has a largest 50% independent living. But generally speaking, we would be about maybe 215 to 20% independent living, that would be really nice, the apartments would be really nice. The what we offer them the activities, the dining zoo, they’re pretty darn nice, and that they feed well into our assisted living. I’m actually excited in the industry talking to some of the, you know, really leaders in the industry about what we’re referring to, at this point anyway, as transitional care. And this is assisted living, residents that start to have memory issues, but they don’t really need to be in a lockdown, formal Memory Care wing, but they do need extra eyes on them all the time. So they’re sort of talking to my sister who’s managing my mother, she’s got round the clock care now and you know, it’s great, but that’s still is 30 $35,000 a month around the clock care for us. Actually, my my CFO is managing his mother in law, she’s almost $40,000 my business, you know, really in these are coastal California, you know, but it’s expensive, it’s true around the clock care, assisted living, or our centers can be really nice, and a lot less money. So definitely, as we’re thinking about, think about my mother, just to get her closer to my sister and my brother, where they can visit or more often we’re thinking about our West Lake project, and our West Lake project, we could put her in a park, a two bedroom apartment that’s in that it’s independent living, she really doesn’t need much I don’t think we really want are driving a load, you know, she’s, she’s telling her car. Fortunately, we have another person that’s there that drives around so we’re not worried about the residents around or too much. But you know, in assisted living, you really have the freedom if you know, you could drive if you have a card if your family and you allow the state of California will let anybody drive so there’s no protection there. Anyways, to go into transitional care, my sister was asked about that, he said, Well, in transitional care, we start to recognize that, you know, we don’t just let a resident take off and drive even if they could or take off and get an Uber and take off somewhere you know, we really watched them a lot of times in Transitional Care people’s you know, get to be a little afraid, they don’t quite sure where they are, you know, where is everybody today and they just sort of forget and they have lapses and just calm them, get them engaged in you know, the next activity make sure you get gauging they’re really enjoying and eating their meals and you know, getting some exercise all that stuff, but they don’t need to be locked down. And I think that’s a fabulous area of the the industry, I think it’s really recognizing, especially as the in the silent generation, it exists in the boomer generation, as they move into this. There’ll be more and more demand for it, memory care is not going away. And Memory Care doesn’t just like a light switch go on one day and slowly transitions in so right.

Pam Pyms 

I’ve heard some statistics like after the age of 80, or 85, one in three people will suffer from some sort of dementia. Have you heard that?

Paul Griffin 

Yeah, I have. There’s a doctor breeding out here who is maybe one of the leaders in in Alzheimer’s which is just you start Alzheimer’s is a blanket definition we think of Alzheimer’s as somebody that really can’t remember what day it is but the issue is a blanket issue that may start in your 20s you start to start to develop a little bit of plaques and may never be a problem for your may turn into a real problem. You know faster and faster as you get older, but yet it is a third of people that it turns into actual you know, functional problems and I’m gonna bet Pam, that it’s more like 50 or 60% just don’t want to admit it but they absolutely are having memory lapses that get in their way. During the during the day and a third of people are really have true functional issues. This my hope in getting involved in this area just as a passion for me. You know, talking to In being involved with, you know, some of the top resources and doctors that we have, is to see, you know, what can be done over time to, to see if we can’t get, you know, a little bit of better management of plaques in the brain that build up and you know, cause the dementia, there’s a lot of different causes, you know, there doesn’t seem to be a silver bullet in it according to the medical community. But it is something that we might be like heart disease or cancer, we can manage it and get better at it. And you know, get it a little bit more under control. What if my investors who will to be on a project Well, what happens if what happens if we find the cure for Alzheimer’s? You know, what are you going to do with your memory care when it said, you know, that’s just gonna be a great problem to have exactly here to you, we will fill that with other kinds of uses. But please, gotta love it. If we could have a whole area go away for a sec good

Pam Pyms 

problem to have. Well, speaking of problems, this leads me of course, to COVID-19 Oh, goodness, and let’s, let’s, let’s touch on that I know that a lot of people are seeing the senior housing industry very hard hit. How have you been managing that? And where do you see the industry going? Now because of that?

Paul Griffin 

That’s a great question. And, you know, that is we’re going through COVID, and the transitions in of issues and lifestyles. Leave a lot of questions for all of us. I think Pam has it statistically, if you look at the senior living community in the greater senior living community, it it seems to be affecting in ways that you would expect older, you know, more dingy centers might not be as clean have a little bit more virus challenge, it seems you had some real horrific problems where people with COVID were sent to senior centers to live rather than hospitals are worried about hospital space and ventilators. So they figured they could use this like skill to use skilled nursing centers and some senior centers and cause your huge outbreaks of COVID among staff, and then they just they weren’t really set up to manage that kind of a challenge and virus outbreak. So those were some tragedies that happen, but I don’t think we see those happening again, they were a mistake. And they don’t, that doesn’t seem to be the challenge. Now the question is for newer, better centers that are cleaner don’t seem to be so you gotta you know, really look into the numbers inside the, you know, senior asset, the all senior assets and see which ones seem to be having problems. And it looks to us pretty clearly that there there’s, you know, different parts of the senior at senior housing communities and, you know, the newer nicer ones that have more resources, they’re cleaner aren’t really struggling, although the struggle that they are having is the loneliness from our residents who can’t see family. And the loneliness is it you know, does create a health issue for them over time, and this has gone on a long time. So we’re, what nine months into this 10 months into it. And that’s a long time and a seniors life, if you say they’ve got, you know, five years, you know, you’ve just spent, you know, I we’re going to it’s 20% of their of their years, and being really lonely family can’t really visit, you know, the staff is trying to keep them occupied, they have all kinds of activities that they’re trying to have and keep the staff safe from each other. Keep the people that are bringing resources in food that you know, all the materials that get brought in and make sure those aren’t bringing virus in and not having visitors come in and doctors, you know it taking going out to a doctor’s office or having them come in and not bring you know, a virus in or out it’s it’s huge challenge there. We’re doing very well we’re not getting outbreaks, that we’re looking around asking or other you know, colleagues in the industry, we’re not seeing a lot of outbreaks, but we’re struggling to to keep everybody apart. And you know that that’s really sad for our residents. I think him over time, the challenge of this virus is really bringing our you know, our focus on what’s always been a challenge for seniors, which is they’re old and they’re more frail, and any virus is a bigger challenge to them. And there always has been so this I think that this particular virus is having the community focus on what are we going to do to control this virus and in the future, all viruses very good point.

Pam Pyms 

Very good point.

Paul Griffin 

So we’re, you know, we’re we’re work what what we’re trying to do is, first of all, it just seems pretty obvious anybody coming into one of our buildings is always be the case we register their face, it’ll tell you, you know, on our computer screen, who you buy by registering your face, who you are, you know, what’s your relationship? Are you cleared by the family to come in? Are you cleared by our staff to come in? What’s your temperature right now when you’re coming in? Is there any issue? You know, all of that and they they’re They’re registered and logged in our computer so we know who’s coming in. We’ll stop you at the front if you’re you know are just a casual person coming through won’t allow that. And now it sounds like not in the future but but of course will will open up to family that are approved. But catching your temperatures the first and easiest having all of our equipment in you know gowns and all of that that our gloves masks everything hats that our own staff would wear. We have lockers now going in that you have blue light that you lock the equipment away and in the lockers in the blue that’ll kill any virus out inside the each of our apartments a locker inside each apartment smaller where we will have all of our residents you know cell phones and keys any any I guess probably not keys but any kind of personal items that they have get you know cleanse and viruses killed off of them at least at night. Inside the inside the community the we fog with a with a material that will kill virus and that gets fog not not you actually could fog with somebody in the room but we but we don’t fog in places in in times of day when when people aren’t around so the fog could go and kill all the viruses. And that way we know it goes into the crevices and ever in all parts of the of the building and will kill off any virus that might be coming around. We also are heating and air systems fresh air, you know you hear this from from people that are in the senior business all the time, frankly, we always done it in our office to just to get the carbon dioxide out of here so people can think at the end of the day. But for having it fresh air is just the best thing you could always do fresh air communities for in apartments, we have four complete air turnovers inside each apartment per hour, 10 per hour in the bathrooms we have four per hour in the in the main common rooms and more not positive how many in the in the dining areas, but more want to smell out in the clean in that case, the dining rooms are separate than the than the common room. So we want the smells and the all of the sounds kind of away from where people are having activities and people are coming and going. It sounds

Pam Pyms 

like you have a tremendous handle, you know, on how to ensure the safety of the residents and the staff while this is going on? Have you heard anything as an owner of senior living communities about access to the vaccine? Or when that will happen in your communities? Do you get any word about that?

Paul Griffin 

Yeah, not really, more than not, not really more than probably all of you have been all of us here. We would like our caregivers to get the vaccine early as they’re coming out right now they seem to be focused in hospitals than though nursing, you know, skilled nursing or are again, more acute kinds of needs, and people that are coming out of hospitals with with more acute issues, surgeries or what have you heart attacks, then back to assisted living, would think we’d be next in line in terms of our caregivers and our senior citizens. So I’ve got I’m hoping that, you know, you sort of see the first vaccines come through and you know, we’re kind of thinking February, they come into our centers and and start to make the rounds. Yeah. But I don’t have an information. I mean, it’s it’s clear as mud from, from the way the vaccines rolling out how many other than who’s getting them, but I would I would think we’d be, you know, sort of towards the top. And then, of course, you know, each caregiver that we have has to make a personal decision. Do they want the vaccine? I would think they would have it. But that’s, you know, each person has to make their decision and each of our residents, between their, you know, their family that’s looking after him and the resident themselves. Do you know, do they want the vaccine? And I would think they would want it but they you know, those are questions as to assess from the information that’s available.

Pam Pyms 

Yeah. Well, we only have time for one more question. So I might say to you, is there anything you’d like to talk about that we haven’t,

Paul Griffin 

you know, I think in terms of investment into senior housing, or to multifamily or to you know, our shopping centers, or office buildings, all of them, we will always want to think in terms of, you know, where, where is, what is the population seeking today? What are they likely to be seeking in five years or 10 years out, you know, in terms of multifamily. We’re talking millennials and then the generation behind them coming up and where they want to live. They were wanting to live in more urban environments. It’s fun, it’s you know, fast moving. The COVID came through and push people out. I think all of this civil unrest is had also a lot of people in the millennial generation thinking maybe, maybe it is time to move out to the suburbs. And you’re seeing an absolute boom in family housing and and apartments in the suburban community, so multifamily in term and I think that that’s going to continue. So a great investment in that area. And I’m really very pleased with with our family’s investments in those, I think in the shopping centers are kind of interesting, because that brick and mortar are shifting as people are buying on line, I know I don’t go to the store anymore, I don’t actually have an assistant to go to the store and where’s that donated, want something I go to Amazon I get it shows up a couple days later. And then my wife gets mad at me because she sees everything I buy. It’s a good thing. But anyway, the shopping centers have to become an experience kind of a you know, an investment. So who is there what food you know, dining experience of all so it could be pizza, or it could be Chinese food or sushi bars or steak houses or, you know, out in California we’ve got you know, Mexican restaurants or a lot of fun and they lend themselves to patio how the you know, water features make make the environment so fountains and and, you know, Koi ponds, turtle ponds, you know, that kind of thing and landscaping but make it come alive rather than just be a place to drive your car in California. And I think that this has been true in Atlanta in the south gate or drive up to the front door, you get out of your car, you want to walk no more than 10 feet to the cash register with your bike, that’s not so much it. Now it’s more of an experience, you’re going to drive and park a little bit walk through kind of some Park areas and fountains and whatnot, and then go in and probably sit down and get take a service a hairdresser, a nail salon, something that you can’t really buy, you know, on Amazon, at least at this point. And so the shopping centers are growing again in life, but they have to be transitioned. So what shopping center, and how does it look, you know, and who the tenant mix. And I like this senior housing along with so the mixed use, I guess I would like it with with apartments, if you had, you know, a larger shopping center, with family apartments, that kind of mixed use for the big shopping malls. I love that family apartments, not so much of a senior center thing. But senior centers want to move to the suburbs where the you know, or the more local, smaller shopping centers were because they want to be near the six year old daughters and their families. It just felt like we’re thinking about with my mother, and how, you know, so I think, you know, always in terms of who’s the user and what are they looking for. And so I think shopping can is, is very viable, but you have to transition stay in front of you know what the demand really is. And then seniors and the boomers are moving in. I mean, we are not nearly set up to manage the needs of boomers moving in if they’re do just at 76 years old at 10,000 people a day, we have nothing like the kind of services that are needed. It isn’t even if you even if we’ve always assumed that only about 12% of seniors in the silent generation looked for some kind of a senior centers meaning 88% found some other solution living with daughters some kind of care sometimes or you know, something was kind of messy maybe that you use you know, we all notice more during the holidays when we’re closer to our you know, our grandparents or parents that still even a 12%. And I think the number i think that that number transitions as people get more used to it, this becomes a better solution along the lines, the lifestyle that ourselves and other some other developers are really creating that 12% may grow. But even if it doesn’t, we don’t have anything like 12% of baby boomers needs in, in senior housing community, this is going to grow. And there’s 20 years in front of us. We’re just the, you know, the camels nose is just starting to snoop around the edge of the tent here. So you know, great investment, where and how well managed, you know, budgets and schedules, always, you know, be hard nosed about that. But the demand is great, and it’s growing in. And it’s a much cheaper solution than homecare. No matter how you slice it. It’s actually a defensive cheaper way to go.

Pam Pyms 

Definitely. I mean, and I can hear the passion you have for the industry, you’re clearly the voice of experience. You’ve got great insight. I’m sure that our listeners just may want to find you Paul. So what’s the best way for them to do that?

Paul Griffin 

If you pop an email to media at Griffinliving.com

Pam Pyms 

Okay, that’s your email and your website is Griffinliving.com

Paul Griffin 

Griffinliving.com which also probably has contact you know, right in it also but media at Griffin living my trusty my trusty marketing assistant Sean is he He’s nodding his head up and up. Don’t worry reads him every day, all week. And I love to engage if anybody’s listening and have questions or just want to talk pitch ideas or say, Gosh, well, I think you’re wrong about this point at that point. Absolutely love to have that conversation. Please do drop me an email or note, and I will, you know, respond to you. I like the conversation.

Pam Pyms 

Well, I’ve certainly enjoyed our conversation. I want to thank you very, very much for your time today. Thank you, Pam. Thank you for having me. Okay. Well, let’s talk again soon. Thanks. All right. Bye. Bye. Thanks for joining us today at the senior housing investors podcast. Brought to you by Haven Senior Investments. Please find them on the web at havenseniorinvestments.com


Senior Living Innovator Zeros In On 16-Bed Developments

SPEAKERS

John Hauber, David Lewis, Pam Pyms

John Hauber 

Welcome to the senior housing investor podcast. If you are an investor or want to be an investor in senior housing, then you’re in the right place. Hi, I’m John Hauber of haven senior investments. We are pleased to present our newest episode where we bring you the innovators and leaders across the full spectrum of assisted living in senior housing, all of whom provide for the betterment of our senior population. The host of our show, Pamela Pimm’s has background in the industry. And she will be interviewing our honored guests.

Pam Pyms 

Hi, Pam. Hi, john. Thanks very much. It’s great to be here. Today, we’re with Dave Lewis, from Rocky Mountain assisted living. And I’ve had the pleasure of knowing Dave, since before he even started this business. And I’m delighted to interview him today. Hi, Dave. Hi, Pam, how are you doing? I’m good. How are you? I’m very good. Thanks for having me on the show. I’m delighted to talk to you because I know you and I know you’ve got a fun story. So why don’t we start with your background and tell me a little bit about how you decided to get into and develop assisted living communities?

David Lewis 

Sure. I, my story actually goes back to about the year 2000 when I started in home health care, non medical homecare, working for my friend’s dad in Southern California. And I did that for about three years, and really enjoyed working with the older adults and the staff, learning all the aspects of the business. And as a backdrop sort of happening behind the scenes that I didn’t really think much about at the time was my dad’s mother, my grandmother, Jessie, she lived in a small care home in Westlake Village area of California. And she needed a lot of care. She had advanced dementia. And it was I just remember going there visiting her and, you know, didn’t think much of it at that, at that point. Flash forward, I got married, moved to Denver, and decided after I finished school, I wanted to get back into the home healthcare scene. But after a couple years of doing that, I realized that so many of our homecare clients were moving on to care facilities assisted living, and I was brought back to my memories visiting my grandmother and that smaller care home. And that was the start.

Pam Pyms 

Wow. All right. So well, you had an idea about home health. But did you have an idea about assisted living communities and whether to buy existing or to build and how many units you wanted? how did how did all that take shape.

David Lewis 

So as we as I looked at the opportunity, and what I really liked about the homecare model was just that personalized one on one care. So as I looked at all the different options for senior housing, I really was drawn to the smaller care home model, call it you know, eight to 20 beds. And our first one we did was a house, we renovated. And we felt like we did a lot of market research. And we’re bringing something new to the market and the other. You know, there was an out there, at least in Denver, as far as care homes, you know, nicer homes, more bat, private bathrooms, things like that. And it evolved. After the first two, we decided we need to start building these things. And we start with our smaller home model. But we said we really want to build these from the ground up purpose built so that every bedroom has their own private bathroom, the layout is better, the hallways are wider. There’s it just has a better flow and feel and it’s better for the staff and the residents. And we really just sort of adapted as time went on.

Pam Pyms 

I can attest to how beautiful they are. From my days in the business with you. You also keep saying we So did you have a partner in this?

David Lewis 

Yes, I had a partner, I saw a partner that helps on the real estate side with he’s a developer, family member. And we’ve been doing this from the beginning. And it’s worked well. He’s not really into the operations. That’s more of my, my, my bailiwick. But he’s super helpful and helping us acquire sites and the construction phase of it and the financing.

Pam Pyms 

Do you have to have a special permit because I know you’re you’re pretty much in residential neighborhoods as you drive by one might not even realize that this is a home with eight to maybe even 20 units. So how do you get around that in a nice residential neighborhood?

David Lewis 

Yeah, so our first couple of projects that we did were like a 10, or a 12. Bed home, call it four to 5000 square feet on one level, exactly in a residential neighborhood where we just got lucky and found these lots and this is back like 2008 2009 dozen 10. So there was a lot more opportunities because the housing recession, but then we decided want to do a bigger deal like a 16 bed. And so that first 16 bed we did was like the perfect had a little bit of drive by traffic, but it like, tucked up against residential neighborhoods. So we got lucky, we found something that had already been zoned correctly for this medical assisted living use. So we didn’t have to do a rezone. And then from there, it was a fairly straightforward process to get approvals to get a building permit, call it three to six months.

Pam Pyms 

Very good. And I imagine the more you do, and the better your track record, the easier it may be to acquire going down the line.

David Lewis 

Yes, absolutely. Just like with any business, you tend to figure out what works and what doesn’t, and you kind of narrow down your, your pipeline and your process. And you’re like, no, that’s not gonna work. And it’s got to be this size land, and it’s got to have this type of neighborhood and still take into account competitors nearby and market supply and market demand and staffing, being able to access the location, all those things.

Pam Pyms 

Is it hard to finance? How do you finance them.

David Lewis 

So we currently finance it with local banks, we either put in our own money or we raise money, typically, the banks want to see, you know, 25% of the total cost and cash equity. So either us investors are on money, depending on the deal. And the banks will give us, you know, 10 year 20 year type money, fixed rate. So we’ve been fortunate to develop those relationships over time as well.

Pam Pyms 

Wonderful. Well, how many homes do you have now? And what are your total number of units.

David Lewis 

So we currently have 10 locations, I’m sorry, we have 11 locations. And we have 14 buildings, we have a few locations where we have two buildings on a site. And that is where we really see our path going forward, is we really like doing the 32 beds and the 24 beds where we’ll have 116 bed next door to another 16 bed or a 12 and a 12. And one will be assisted living and one will be memory care. I really liked that model for staffing efficiency. And we feel that the families who are touring us really love the idea of knowing that if they needed more care or memory care, it was right next door. Mm hmm. And so that’s been that’s been a hit for us, actually.

Pam Pyms 

I’ll bet. Do you plan to build more?

David Lewis 

Yeah, so currently, we just are wrapping up our latest project in Lakewood. It’s a 24. bed. We’ll be opening up the first building here next week.

Pam Pyms 

Congratulations.

David Lewis 

We’re excited about that. Yeah, thank you. And then we, and that was something that we bought pre pandemic. And we’re kind of unsure if this was gonna how this is gonna shake out. But we’re, we’re locked in now. So there’s no turning back. So we’re, we think it’ll do well and may take a longer lease up. But we’re prepared for that. We have one more deal that we are working on that will break ground on in the summer. It’s a 32 bed. It’s more Northwest, Mr. Jordan area. And we have a couple different floor plans we’ve done with 32 beds. So we’re most excited about this, because we feel like we have really polished this floor plan and we think it will be the best of all of our projects.

Pam Pyms 

Well, I know you’re only getting better and better. Do you? Do you have sort of a long term strategy? Do you plan to hold them or sell them? Or do you want to even talk about that right now?

David Lewis 

Yeah, so we we definitely are always talking my partner I about where the markets going and what we want to do. And we always tend to come back to we want to keep these and run these as long as we can imagine there will be an exit at some point, but currently, with demographics and how things are going and how we feel our model is evolving. This is something we want to stay in for a while. I don’t know the answer to your question.

Pam Pyms 

Yeah, no, it does, because you’re a wonderful management company, as well as an owner. And and we need you Dave. So talk about talk about your management style and, and what makes for a well run community.

David Lewis 

So that is something also that has been bumpy, obviously with COVID. But we’re just we’re trying to keep it So as we’ve grown, it has so many properties. We still wanted Keep that small feel, and truly that home like feel, and that is what we’ve been selling day one. So we’re really focusing on our customer service trying to help our families feel comfortable with us, our staff, we recognize they’re making a huge leap of faith placing their level and during COVID. But even before COVID to, and so earning that trust, and being available for them, and to answer their questions and their fears and their concerns, and just being very transparent. So as far as management goes, I really feel that we just keep focused on the resident residents first, and our staff as well. Just getting them aligned in the same in the same goal, our staff have to be happy for residents to be happy. And as far as real estate and management, sometimes I know with senior living companies, those are can get fractured relationships. But for us being owner operators, we’re all in the same boat. And if the operating company makes money, the real estate company makes money. And it’s not one or the other.

Pam Pyms 

So what do you look for in staff?

David Lewis 

For our staff, we feel like this is where I probably spend most of my time is developing my staff, we’re trying to find the right staff. And they’ve you know, they’ve had to deal with the challenging last year with all the new things that had to do with COVID. But so many of them are just caregivers at heart, they care for a family member at home, or they grew up caring for a family member. And they’re just true and true. That in the world, they are caregivers. And so that’s what I’m looking for people that are just really want to do what’s right at the end of the day for these residents, and they create a connection with them a bond, I was told about this one story last week where one of our staff really connected with one of the residents, that they have this little thing they do at night where she kind of does this tapping routine on her door. And that indicates that she’s ready to be put to bed. And the staff really looks forward to that just little thing they have between us. You know, it’s those kind of little moments that are what we’re all about

Pam Pyms 

Absolutely. Sure, yeah. Oh, that’s, that’s great to hear. Was your community’s hard hit by COVID.

David Lewis 

We had three communities have outbreaks. And one of them I think was like false testing because nothing happened. But two of them, we have people get sick. And it was challenging. But we have since recovered. In Colorado, there was like three waves early on, and then summer and then in the late fall like November, because that’s winter. And we didn’t have any outbreaks until right around Thanksgiving. So we felt lucky that we didn’t have to deal with any of that until late in the game and that we were more prepared. But then experienced it for the first time was brutal. And to be totally honest, and you can’t really prepare for that.

Pam Pyms 

I was going to say Where’s your Where’s your staff hit as well as the residents in terms of who got sick?

David Lewis 

in those locations? Yes, yeah. So we we try to keep our staff and just those locations, in case there is an outbreak. I feel like we’ve been very lucky with our staff not getting it from home or wherever they were. And that’s why we did get it in the communities. So that was huge. My team has been amazing and just educating and being available and just going the extra mile, like so many people have in this last year, dealing with all the extras that have come up because of this. So our staff, yeah, they’ve done they’ve done well, and we haven’t had a lot of staff get sick, thankfully, they’ve been careful. And we have we just feel grateful that we’re only a couple of our homes have hit we’ve know other communities have not fared as well and my heart goes out to them.

Pam Pyms 

Yeah, especially in the beginning. I know. And and I know that in the larger communities in particular, some of the caregivers bounced around, you know, from home to home or nursing home to assisted living. And I guess one of the perks of being in a smaller home such as yours is you probably have staff stay within the home. They’re in is that correct? And what’s the ratio of staff to your residents?

David Lewis 

Yes, so we we definitely have like our full time staff, they’re just at the one location. It’s harder with the part time staff they’re going to sometimes work in other spots. So at the beginning of COVID, we made a list of everyone that has second jobs, right, and just wanted to know what’s our true exposure level? And just and then really spend some time with those staff educating them. We couldn’t make them not have second jobs, but we tried to either get them more hours with us, or maybe if they got more hours with their other company, you know, just kind of be smart and work together, you know, do what’s best for the residents. And so we, we had success with that.

Pam Pyms 

Good, good. So how did you find your niche and figure out your message then to the consumers?

David Lewis 

That’s a great question, Pam. That’s something that I think in the beginning, a lot of a lot of people struggle with, right. And you can have some bad days where maybe you have an upset customer, and you’re like, wow, maybe I’m not doing this, right. But there’s definitely more good than bad. And so I feel that we found our niche. When we, for me, it always comes back to I really loved homecare, whereas like one on one care. And that individuals able to anticipate that seniors needs like how they like their coffee, and you know what what their favorite clothes are and where they like to do you know how they like the paper setup, or just all these little things. And so, but homecare is very expensive, and people need the opportunity to go to a place where they can still have that individualized attention, but also be able to afford it long term. And also the benefits of a social setting. So with these smaller care homes, I feel like this is the best option for them. And so that is really our message is you will not get lost in the cracks, you will not get lost in the long hallway, because it doesn’t exist here. So we’ll have a 16 bed home, we’ll have three staff on during the day, and in memory care will have four. So there’s just a lot of staff available to get to know the residents. And that’s what we’re telling the staff to try to sell them on why a smaller setting working for us is better than a larger setting is you got into senior care now for the grade PE you got to think because you love these older adults. And so come work for us, we get to spend more time with them. build those relationships.

Pam Pyms 

So the sweet spot then is really somewhere between 16 and 32 units. Yeah, it is. Okay. All right. Yeah, that sounds good. Is are your Are you know, are your rates say comparable to rates of the larger homes?

David Lewis 

So that’s good question, I think our rates are going to be a little lower, we have adopted the flat pricing rate system that is common, I think in larger Memory Care buildings. But I know most larger als will have like a low rent and then all the card services. And a lot of families and noodles like that. For us we feel that we don’t do you know rate increases for kit levels of care. And so I think that’s easier to determine. And they’ll get those surprise phone calls when mom needs a little more attention and help getting from a room to the dining room. So I feel that we are maybe not taking as heavy of acuity residents as others. And so therefore our pricing, I think it’s just a little bit lower, which families appreciate

Pam Pyms 

it, especially compared to home health. Can you give me sort of a ballpark say, what home health would cost compared to what you provide and what that cost is?

David Lewis 

Sure. So home health in Denver is right around, I’d say $30 an hour. So if you needed, you know, eight hours a day of care, you know, $250 or $40? You know, multiply that out by five to seven days a week. you’re approaching skilled nursing pricing. Yeah. or above. So you know, assisted living four to 5000 a month it’s gonna be you know, 150 to $180 a day.

Pam Pyms 

Yeah, much, much bigger break there, I guess. Yeah. What would you say? When you say you sometimes have outside investors do you look for individual investors? Or do you go to more than one bank? How How do you structure the financing say someone wanted to invest with you?

David Lewis 

So if someone wanted to invest with us, we would meet with them and explain what the expected you know, rate of returns would be most of our investors are all individuals, a lot of them are retired and they’re looking for a consistent you know, income stream. The banks, as you know, are not paying very much on your savings account. Nor treasury bills. The stock market is has been you know, really good for a while but I think are older individuals that might be a little scary. So we’re trying to get them anywhere from 10 to 15% cash on cash on their money. And I think what they love about it is they get a check every month. So I don’t know other companies do it, but that’s what we do. And so for them to know that some investors will put in an order from 50,000, all the way up to 500,000, depending on the deal, and they really like just knowing they get that check every month, pretty much.

Pam Pyms 

Do you have a minimum amount for an investor to be able to participate with you? Typically 50,000 Yes, that’s where they can buy chunks. Okay, that’s cool. Thanks. Since we’re doing a podcast for investors, perhaps you’ll be getting some calls? Sure. Absolutely. Yeah. Tell me, you know, I, what have I not asked you that you might like to talk about or, or tell me a story, tell me the story of your biggest challenge and how you overcame it. And I know this is coming at you from left field. So

David Lewis 

you know, just this past year has just been the biggest challenge of my career in my life. And I just wanted more than anything, Pam, that we didn’t have COVID come in our homes. And it seemed talking to the health department and other operators like it was an inevitable Sure. And I just there was moments where I just struggled, as the leader of my team, I’m like, you know, am I going to just give in and say, Oh, you know, it’s gonna happen, just brace for it, or am I going to take the path of look, we’re gonna keep this out, we can do this, we have these smaller homes, we can keep it out, we have less people to worry about that are coming in out of our buildings, let’s be smart. Let’s make that our goal. And that’s what we did. And we feel that we succeeded. Overall, considering what the odds were. We’ve had, there were days where we’d have four or five staff call in today and say I was exposed to COVID, I suppose code. schedule, you know, it was just really, really challenging and really had to make some tough decisions. But knowing it was way better than allowing people to come into work, that potentially could bring in the virus. just sticking with our guns, like we’re not running in like a lot of our managers had to work before. I had to work a lot of weekends, myself, supporting them, you know, buying PBE and groceries, and we couldn’t find groceries in the beginning is very, very stressful times.

Pam Pyms 

That toilet paper was something else, wasn’t it?

David Lewis 

That was something else. And yeah, so it was, I’d say that was and then just be able to, like, still have moments of just gratitude for when you have these special moments with your residents and your staff. And I just saw just so much humanity with my team so much love and everyone’s stepped up. It’s just been. It’s just sort of that like yin yang of like, it was really hard. But we saw just so many amazing things happen.

Pam Pyms 

Yeah, that’s that’s wonderful to hear. Where were your communities able to let your residents see their loved ones? Or did you have to stop that too?

David Lewis 

Yeah, so we followed to the best we could cdph she’s there Colorado departments guidance on visitation. And we were doing outdoor visits. We purchased a lot of tablets, for FaceTime, chats, window visits, we did as much as we possibly could to give them contact to give them peace of mind. The patio is is worth the best. The tablets are challenging. Our niche and resident population is a little older in the spectrum and not so communicating through a tablet because of either hearing issues or eyesight issues can be challenging for them.

Pam Pyms 

Sure. Are you? Are the vaccinations available for your residents yet?

David Lewis 

Yes. So we have already finished our first round and we’re starting our second round. We’ll be doing their second round shots here in the next week. So it’s going really well.

Pam Pyms 

Good and everyone’s not had any sort of terrible reaction or anything like that. No. Is it going well,

David Lewis 

it’s going well, I got my second shot on Friday and I was a little sluggish on Saturday, but I feel like I did find some staff have gotten sick. But the residents have all been done really well.

Pam Pyms 

Great, great advantage to being older. I heard that it hits the older population. And not as hard in terms of reactions. Yeah, I don’t know if that’s true, I’d like to think so. So Dave, what was one of the biggest struggles you’ve encountered?

David Lewis 

So in the past year, one of the biggest challenges we have seen is well, let me just give you a little background of our 10 locations, I’d say six of them offer memory care, and the rest are assisted livings were a little more assisted living and memory care currently. And during COVID, we noticed that we were getting just a lot more inquiries for memory care. And a lot of them started out as an assisted living inquiry. But once we got into the information and how the loved one was really doing, we realized they needed memory care. And part of that was because family members are like, like, I can’t, I can’t handle this anymore with this dementia level of dementia at home, and homecare is just not going to cut it. And other people were just in denial as well. So the demand for memory care was really high, also triggered by people trying to keep their parents at home and no one wants, they placed them in a care setting, be harder to visit them, because of COVID and the restrictions. So it’s sort of a perfect storm. So one of our locations, that only did really well. Really good visibility, beautiful building. Like it just struggled all of 2020. And it wasn’t for lack of inquiries, it was for the right kind of inquiries, because everyone calling was memory cares, we debated actually flipping it from assisted living memory care, which we ended up not doing. Because we were banking on this thing sort of, you know, slowing down and sort of winding down COVID. But that was a huge challenge where everyone that was the majority of the calls that were getting needed a secured setting, and we just didn’t have all the memory cares, we had were full with weightless. Wow. So that that was sort of an interesting, you know, dynamic to COVID is, but you know, it makes sense on many ways, right? Sure, if just, they can’t handle that level of care at home, and a lot of them waited too long. So then when they decided to move them and like you kind of missed your window, because if you move them in at the right time, you can keep them in assisted living for a little while before they need memory care. And then another thing that I think really helped us was because some of our buildings thrived during last year and other ones did not, was just grateful on the balance sheet perspective that we had buildings and all these different little sub markets of Denver, we weren’t just concentrated in this one area, because we’ve had thoughts of, hey, let’s build a 60 bed or 100 bed. And I’m grateful we haven’t, and that the biggest we have, and one little location is 32. So that we just have a little more diversity. And if one locations, maybe not doing so well, the other ones are. And that really helps us from a financial perspective.

Pam Pyms 

Yeah, like rental properties, you know, just offsetting that, which you know, and everything has an up and down. So that’s, that’s really good. You’re able to do that. And thank you for sharing that with me. Absolutely. All right. Well, we have time for maybe one more question. And I’m going to ask you, if you if you can flip through your memory to say, a highlight of your career. Can you think of one offhand? Um, there’s been a lot. I bet.

David Lewis 

I think, I think the highlight is when you have a moment, and you’re able to stop and look back and say, Wow, I can’t believe it’s been 10 years or 12 years. And we’ve built, you know, all these beds, we have 100 176 beds and the plus the 24 coming online look 200 beds. And we’ve we’ve built all these communities and implemented all these new policies and hired all these people. I mean, to look back at that and say, well, we we did that together as a team, and overcame a lot of challenges and a lot of failures. I would say those, that would be the highlight is to look back and see what we’ve done. And I’m always reminded of those moments when we have a family member that lets us know, they’re so grateful they found us. And we were able to take care of their mom or their dad until they passed away and they stay with us till the end. And to me that is like the ultimate gift is to be like yeah, you can move in and we’ll be here with you as your last show. Last stop. Yeah, and we’re gonna make it a good one.

Pam Pyms 

Well, I’m glad that’s what you chose, because it does bring me back to the very first time I met you. And I know that was over 10 years ago, 1214 years ago, and we met in a Starbucks and I remember you I was out Already in the business and you were in home health, and you said, you know, I’ve got this idea about building these smaller homes. What do you think? And I thought, wow, that’s an interesting idea. Yeah, I hope I told you do it if I had a clue but but I’m really glad you did Dave and and that you have done as well as you’ve done. And I thank you so much for your time today. And I hope we get to know to do another podcast again soon. And I’m also just want to congratulate you on how you’ve handled COVID and, and the closeness that your staff has because of it and your leadership. No doubt.

David Lewis 

You’re very kind. Thank you. Thanks for having on the show. It’s been a pleasure and I hope that we can talk again soon.

Pam Pyms 

Okay, talk soon. Bye. Thanks for joining us today at the senior housing investors podcast. Brought to you by Haven Senior Investments. Please find them on the web at havenseniorinvestments.com


Can Assisted Living Truly Serve the Middle Market?

SPEAKERS

Pilar Carvajal, John Hauber, Pam Pyms

John Hauber 

Welcome to the senior housing investors podcast. If you are an investor or want to be an investor in senior housing, then you’re in the right place. Hi, I’m John Hauber of haven senior investments. We are pleased to present our newest episode where we bring you the innovators and leaders across the full spectrum of assisted living in senior housing, all of whom provide for the betterment of our senior population. The host of our show, Pamela Pimm’s has background in the industry. And she will be interviewing our honored guests. Hi, Pam.

Pam Pyms 

Hi, john. Thanks very much. It’s great to be here. today. I’m with Pilar Carvajal, who is the CEO and founder of innovation senior living. Hi, peeler. Hi, Pam, how are you? I’m good. How are you? I’m Fantastic. Thank you so much. Well, I’m delighted to have you on the show today and can’t wait to talk to you about all kinds of things. I’ll start off with the usual so the listeners know who you are. And that question will be just to tell me about yourself and your company.

Pilar Carvajal 

Sure. So I am a Cuban American. My parents left Cuba when Fidel Castro took over power, and they came to this country. And, and we were raised here for a short period of time. And then, I guess, fortunately, we moved to Sydney, Australia, and Sydney, Australia was a really wonderful place to be a child. And it gave me a beautiful perspective on life. Because in Australia, there’s a very high quality of life. There’s great programs for education, and health care, and work life balance is very important there. And so those types of things that I learned in Australia, I think, have been very pivotal in my life, in terms of how I approach life, and the things that I do, and don’t do so, at the end of day, it’s a country that cares deeply for its citizens. And I think that that really became a big part of who I am today. Now, we moved to Miami from Sydney, Australia. Because my parents are Cuban, they wanted to come back to the town where a lot of Cubans live and, and it was quite a provincial town at that point. And I was here for a little bit. And then I decided to apply to Smith College up in Northampton, Massachusetts, and went to college, there was also another very pivotal point in my life going to a school that was there just to teach women and empower them. And I grew up with a very strong role model in my mother, and going kind of from that to a college that that really focused on women and educating women and empowering them to go out into the world to do great things. It really helps me kind of project me into what I do today. Oh, it’s a great college. Yep, it is. It absolutely is. Now, not to say it wasn’t a big change for me. I mean, New England and Miami are quite different. And I was extremely cold out there. You know, living in Australia, in Sydney. It’s very temperate weather, just like Miami, and going to North Hampton, Massachusetts for those four years was, was brutal, I bet but I learned by the last year I was wearing my wool sweaters versus my cotton sweaters. And I was wearing socks and and I learned how to deal with a gold. And, and from there, I moved back to Miami and I became a pharmaceutical rep and I did extremely well. And I decided that I really wanted to go and educate myself in London. And so I went to the London School of Economics. And from there I got a master’s in economics and I went to New York City and I was a management consultant doing mergers and acquisitions up through September 11. And September 11 really rocked me to my core and I decided I wanted to move out of New York and come back to Miami. And I joined forces with my mother in a family business and and we were doing something very innovative and novel at the time. We didn’t know it but we were licensing very large public housing and subsidized housing buildings across the country, into assisted living facilities. And so we were trailblazers in the sense that we were really doing true aging in place by bringing a license to where people lived and allowing them to age where they lived and had made their home. Wonderful. And so I I ended up doing I was in the family business for about 15 years. My last projects with the family business were Affordable Housing licensed as assisted living. So they were extremely complex projects that incorporated not just regulations on the assisted living side, but also Medicaid regulations. And then something new to me was tax regulation. Because these projects are low income housing tax credits, are credit projects. And so they utilize taxes and the IRS and then all the regulations that come with that. It’s a good thing.

Pam Pyms 

You had a background in economics, that’s all I gotta say.

Pilar Carvajal 

Yes, and they were wonderful projects, they were highly successful. We leased them up very, very quickly. But I realized at that point that I wanted to do something, something different I, I had learned a lot in the family business. And what I didn’t know at that point was that I was serving a population that my industry didn’t really serve in large part. And it wasn’t until I decided to leave the family business as a result of being accepted into a Goldman Sachs 10,000 Small Business program that helped me kind of pivot out of the family business into my own business. It was at that point, when I visited the the 2016 nit conference that I was like, wow, I am quite an anomaly in this industry, I have done. I’ve done projects that that are not the norm, but very much needed. And what was really interesting about my experience was, I saw in every one of the projects that we put together, a middle income senior coming to our doors, they really liked what we had to offer, the bells and whistles weren’t necessarily important to them, but they love the services, they love the fact that we created a home for them. And and it kind of got my brain ticking here that this was a population that was going to be the next one that I really wanted to tackle. And so shortly after, I guess separating myself from the family business and going out on my own. The Nick did a study on the Forgotten middle. And I said, you know what I could have told you about this because I saw it in real life out in the field. Sure, you could have written it, I could have written it exactly. And, and so that, that was kind of my direction. And, and that’s what we’re doing right now. And the reason why I called innovation, senior living, innovation, Senior Living is that I really wanted to continue to think innovatively, I had been taught that way in the family business, I didn’t realize that at the time. But I was constantly having to be creative about how we served people or where we serve them. I remember we converted a trailer park into an assisted living. For me, we just jumped in and did it. I didn’t think wow, this is innovative. And I have to think differently. And we’ve got to try this and that and see what works and what doesn’t work. And that has has been kind of at the at the core of everything that I do, it’s to think out of the box to see how you can serve people more, you know, not to see it as a barrier, but rather as an opportunity. And so that’s really the reason for for the company being called innovation, senior living, and specifically innovation, the fact that we’re going to be serving a population that the industry in large part has neglected to serve.

Pam Pyms 

This is so true. And it does my heart good to hear this because when you think of the you know, the lower or, or even the middle income, and you think of a Medicare building, only or Medicaid, you know, you get these visions in your mind of something that’s scary. And talking to you, I really get the feeling that when you walk into one of your senior living communities, you’re going to see something that’s not frightening, so, so tell me what what do you see that we don’t see in the other communities?

Pilar Carvajal 

I think every single project that we did in the family business was a conversion of home. So it was a place where people already lived. So they were apartments there were, you know, areas where where people would come together just had always come together and we just made them better places to come together. We created programming that would bring them the sorts of things that they wanted to do that they couldn’t necessarily coordinate alone, but with a program in place could you know put that together for them. What

Pam Pyms 

Excuse me for interrupting you. What’s the whole building converted or just the people who wanted to be a part of assisted living in their building?

Pilar Carvajal 

So what we typically did is that we would licensed the whole building, but we would only bring those people that wanted to or needed the services into the license. And then we will report to the regulatory agent, agency, okay. 101 is now an assisted living unit. And then our staff would be deployed, and go serve those individuals when they needed it. Mm hmm. We were really all about when you need us, we’re going to be here for you. And it’s just, I think, a different type of perspective on on what you were talking about before, when you walked into to our, and when you walk into our senior living communities, they’re vibrant places, they are not places where people go to die. There are places where people go to socialize, be together. I mean, I have a funny story about my aunt. She’s actually my great, my she was my great aunt, and I had a property in Tampa. And she lived with my aunt for many, many years. And one day I said, You know what, why don’t why don’t we try putting a we will call her at the at the back? Why don’t we put the data in in one of my properties and see how she, she, you know how she does. And amazingly, she moved in with us when she was 99 years old. Oh, she passed away at 107. And I had never seen her more happy in her life. Oh, she had a reason to get up every day, she would do her makeup, her hair, she come down to the community area, she made friends, she had a boyfriend, I mean, she created a life there that she did not have when she was cared for by my aunt. And it’s not to say that my aunt was doing anything wrong. But there wasn’t the socialization that is necessary for any human being to have. And to be able to socialize with people that are of interest to you. So we saw, you know, just using this as a as a case study, I mean, an amazing turning around an individual and a complete, she just thrived in these prop in this property that we had. And so we’ve seen over and over and over again, this type of turnaround for people and the properties that we that we manage that we own that we bring to market, we’re here to serve you in your home, it’s your home.

Pam Pyms 

So I’m trying to wrap my arms around how this works. Sure, there’s an apartment buildings owned by someone else. And you approach the owner of that building and say, let me bring in innovation senior living to your apartment building. Sure. Do the residents pay you? Or does the owner of the building pay you to manage? I mean, how does it work.

Pilar Carvajal 

So if we take over a building that that is converted into assisted living, it’s it’s what typically a property management company does, we will come in, take over what you normally do the maintenance and so forth, we will then look to convert areas to allow us to bring in our programming. So typically, we need more office space, we need an area to for dining. Now, this is part of our business, what we’re actually focused on today is acquiring properties that are assisted living facilities today and improving them. So we’re out there looking for products that are maybe just not doing great. Or maybe it’s a mom and pop operation that’s been operated for a long time and they need some fresh, a fresh perspective. You know, we we want to take advantage of properties that are maybe 20 or 30 years old, renovate them, and bring them back out and add them to our portfolio that caters specifically to a middle income senior. Okay, so just like you would see a courtyard Marriott and know that that is very different to a Ritz Carlton. This is the idea we would be the courtyard Marriott on out there for this working class, middle class American.

Pam Pyms 

Hmm, it’s just a great idea to thank you, do you have a certain number of units? Or can it be any size,

Pilar Carvajal 

we know we’ve tried all kinds of sizes, we own from 24 bed property all the way up through 125. So you can do these these types of projects in all sizes. Obviously, you get better economies of scale with larger properties and and I’m accustomed to the larger properties from my experience on the affordable side. So whenever you’re doing anything affordable, it has you have to deal in large numbers because your revenues are not going to be you know as much as say Somebody else’s property, so but your expenses could be very similar. So my properties I’ve done in the past have always been much larger, but these smaller properties are. They’re more niche properties. So they cater to a specific clientele perhaps, or they have a specific specialization. So we’ve had some success, actually, as a result of COVID. Our smaller properties have done extremely well, because families are looking for a safer environment and the they think that the smaller properties are safer. So we’ve had, you know, full, a full 24 bed property, for example, and then had, you know, some depressed occupancies and our larger properties. And it’s just, I guess, a perspective out there. And, and what I think we have learned from, you know, owning and operating all different sizes of properties is there’s all kinds of clients out there. And residents want a small property or a large property or you know it. So I think with having different sizes in your portfolio, you’re able to cater to a different type of resident population, right? And obviously, right now, we’re we’re trying on lots of different things. Or at least the last couple years, we’ve been trying on lots of different things. And what we really come to realize is, in terms of affordability, it’s really going to have to be more i l al. And the memory care is going to be something that we we probably can’t do in large scale, right, because those operations are just so much more costly to operate.

Pam Pyms 

Right. Right. Very interesting. And your background just lends itself to knowing these things, which is great. And as you say, to diversify your portfolio, especially something like COVID hits, yes, you know, then you’re, you’re protected. And tell me, where do you see yourself in five years from now.

Pilar Carvajal 

So in five years, we want to have a portfolio of 10 properties at least. And these would be rebranded properties that, that serve this population that we were just discussing before, you know, this working class, middle class resident. And this would be through acquisitions. So we’d be looking to potentially take advantage of some of the distress is going to be seen very soon now with COVID. Taking on these mom and pop operations, and putting them together and pivoting them to serve this population. So we are already looking at quite a bit of pipeline right now. We’re actively looking for equity, and debt partners, to help us put this together. But it’s very exciting. It’s as an entrepreneur, it’s always exciting to build things and to put things together. And so we’re right in the middle of, you know, rolling up the sleeves and, and making the capture.

Pam Pyms 

Do you want to stay primarily the state of Florida? I’m not sure if I mentioned you’re based in Miami Beach?

Pilar Carvajal 

Sure, yes. I always say Don’t cry for me, I live in Miami Beach. But Miami, Miami Beach has been my home since we moved to Miami. So I’ve been here for a long time and seeing the city transform into something that’s absolutely spectacular. I think that for now, we want to concentrate on Florida. And I think some of that decision has to do with the fact of my experience in the family business where wherever there was a need, we jumped in a plane and we took off, it was very mission oriented. So if Washington State had a property that needed to be converted, we jump in a plane and run over there, right? What I’m trying to do now is just build a portfolio and the building of the portfolio performs best when you’re clustering and putting things together in a certain region. True. So right now we’re going to focus on Florida, although Florida is is a tough state to operate in. But I’m not afraid of tough, you know, I’ve dealt with very, very complex projects, the more complex the more able I am to handle them. So we’re gonna we’re gonna focus on Florida and then absolutely move regionally once it makes sense. So be it, you know, a portfolio that we can acquire in a in a in a state nearby where we can build a team around it. What we’re absolutely open to that. Well, I wish you all the luck in the world on that spam.

Pam Pyms 

Tell me what you see as important future trends in the industry?

Pilar Carvajal 

Well, I think our biggest competition right now is the home. And I think that what we need to do as an industry is really focus on what we’ve learned from COVID, which is we provide socialization, we provide an opportunity for people to come and be together. I can’t imagine the suffering that has happened with residents that have been here. Home Alone during COVID. I mean, it’s been absolutely catastrophic for them. And of course, in our properties, yes, we are congregate settings and COVID. If it takes hold, it’s it’s been, you know, it’s been devastating. But we’ve learned a lot, we’ve learned how to deal with COVID. And now we’re turning this corner with vaccinations, and all of that is going to change for us. But I think we have to focus on what we offer a resident, which is that socialist socialization piece, but also, that we, and my properties have always been more healthcare oriented than hospitality oriented, some more clinical than then that hospitality, as I was saying before, so within our settings, we’re able to create healthcare partnerships. And this is something I’ve been very accustomed to doing on the affordable side, because what I’m always focused on is how do I control my costs. So on the affordable end, you’re always looking to do your business as efficiently as possible at the lowest cost that you can. So in partnering with others, which has been the focus of that business, how do I get the most services in here without it necessarily being something that I’m paying for on my payroll? So we have regularly partnered with health care systems, with physicians with home health companies with therapy, it’s been part of what we do, always. So I think that that’s going to be something that’s going to be a requisite for, for our industry, if you’re not doing that now, is really becoming more healthcare oriented than hospitality oriented. So I think those are going to be some of the big trends. And some of the other big trends are going to be, you know, adopting technology. I mean, we’ve talked about telehealth, you know, that’s now, you know, it’s not even a, you know, a nice to have, it’s, it’s, you’ve got to have it, you know, you’ve got to provide these types of benefits that someone is going to find valuable in order to move you in, and even what we’re doing and catering to the middle income, many, in my industry are always scratching their head saying, why is our penetration rates so low? Why do we get so few people to move into senior living? Think it’s like 10%? And I say, Well, I know the answer to that question. We’re only a 10%. Because we’re not serving the largest population out there, the largest demographic, that demographic is actually I wouldn’t say turned off by the industry, but maybe so they come, they see what we are offering right now. And it’s completely out of reach for them. So they just turn back around, they go home. And they, they try to make it on their own at home. And so I think there’s a lot of a lot of talk out there about people wanting to age at home. But I think some of that has been our fault as an industry that we really haven’t created the right types of places where people want to move into an age with us versus age at home. So I think there has to be some Yeah, a real good look at that.

Pam Pyms 

Right, right. So will you be able to accept Medicaid? Or will it be a private pay what what is the model look like?

Pilar Carvajal 

So I am very accustomed with dealing with Medicaid and actually, some might shun Medicaid for whatever reason, but it is secure money. A private pay individual will eventually if they live long enough run out of their money. Medicaid, at least for right now doesn’t run out. It is secure government money that gets paid to serve that individual. So it should be looked at as a beneficial revenue stream, then I think the industry has seen it be at least on the assisted living side. The nursing home side definitely sees Medicaid as a positive. And actually Medicaid is an entitlement program in nursing homes, which means that if you are low income and you end up in a nursing home, Medicaid will pay for you because it is an entitlement program in the nursing home setting. assisted living facilities, we actually have to fight to get that money for our resident population, those residents have to apply, and they have to d be deemed appropriate. And so it’s a bit more of a struggle. But that is that’s probably going to change in the future. I mean, this whole idea of community based you know, home based servicing, Medicaid can be positioned position to, to pay for services at home, assisted living is home. So that whole dynamic of it being mainly a program for nursing home I see there going to be a big shift, at least this administration is talking about that, that Medicaid be used more in the home setting in assisted livings at home, etc, etc. PLR I see a number of speaking engagements in your future. To educate, level of education that I see when when, when I listen to people, I’m like, they don’t see the benefits of the program. And there are many,

Pam Pyms 

yes, and we, and it’s a definite need. Tell me about the biggest obstacle you faced and how you overcame it.

Pilar Carvajal 

I think my biggest obstacle, I mean, I think there were there were two one was to leave a very comfortable family business, and strike out on my own. I think that there’s a lot of people dealing with that same dilemma. And I think COVID might have provided an opportunity for someone to maybe start a business. And it’s, it’s scary, but I think fear or being scared really has to do more with losing comfort, than it is really a true fear. And so I think once you make that decision to, to jump into something, or like my case, leave a family business and do something that’s scary. And I often say it’s like jumping into a swamp, and you get in that swamp and you’re swimming, and you’re swimming, you don’t see the end of the swamp. And then one day, you hit the end of the swamp and you pull yourself out and you look back and you go wow, that wasn’t that hard. So I want what you know, it was one of my obstacles was definitely leaving the family business. But I would say on a business perspective, the biggest obstacle for me is being this little fish in that big Senior Living pond, you know, being this anomaly that knows the opportunity out there. But yet, I don’t necessarily have you know, the, the parting of the sea to be able to go and do it.

Pam Pyms 

Only for now Pilar, only for now. Oh, yeah, no, I have the feeling this will come into fruition for you. Well, especially, you know, you talk about jumping into something and in another conversation I had with you earlier, you did tell me that you’ve just acquired your business, right, your first one, your first 24 unit where you will be owning it.

Pilar Carvajal 

Yeah, we did that in 2018. So we we did that in 2018. That’s where we made a shift from being a third party management company into being an owner operator. And that whole experience really changed my my brain in a sense, and I saw the value of owning the property versus just operating it. And so this year, actually 2020, we decided as a company to really pivot and start focusing more on acquisitions than management opportunities. And then obviously, COVID hit and it kind of like we went sideways a little bit. But now we’re back in the driving seat. And we’ve secured some, some, some very interested equity investors, some debt that wants to come and play with us in the sandbox, and develop this idea. So it’s it’s definitely the the direction that we’re going to take now. We’re going to obviously grow into having larger and larger parts of ownership right now. Yeah, sure. We own 100%, the 24 bed, assisted living, as we go and look to acquisitions will be a minority partner in these deals with the idea that one day, we’ll be able to be the majority owner and flip that, flip that switch.

Pam Pyms 

Oh, that’s great. So you’ll be able to prove it based on management and revenue and that sort of thing.

Pilar Carvajal 

Yes. And eventually, I think we want to probably, you know, own it manage to own if we do get our any management contracts out there. But even with these investors, having a clear understanding that we would like to purchase these properties, and potentially we’re looking at purchasing through a nonprofit. And that nonprofit will be the entity that owns these properties. Long term. Very,

Pam Pyms 

very good idea. I mean, there’s a whole podcast on that. So is there Well, I need to listen to that podcast. I know I’m talking about with you. How does that work? But you will save that one. Tell me how would you want to improve your own self in the next year?

Pilar Carvajal 

Well, I think that a big part of my success has been to try things to take the risk To learn from things that I that I do, and I mean I, I’m very, I’m a very lucky girl, I’ve got a very supportive husband and I jump into things. And he goes, go ahead, and he jumps in that swamp, and I’ll see you on the other end. And sure enough, he’s at the end of the other end of that swamp. But I think it’s, it’s, I definitely want to continue, and to be a lifelong learner. So I just just took some leadership courses with Kellogg. So that’s one of the things that I definitely want to improve on.

Pam Pyms 

I know you’ve won a ton of awards, I don’t have them in front of me, but I know you have and feel free to brag, here’s your opportunity.

Pilar Carvajal 

Yeah, I want a lot of awards. I mean, some of the awards are, I’m so thankful for them, but they they give me exposure, which is really at the heart of why they’re good for me, I have to make some noise out there and get some attention, right, so that I can get done when I need to get done. And I you know, we all have a certain amount of time here, and I have a certain amount of time to get done what I want to get done. So I’m gonna make a lot of noise and gets attention so that we can we can get this this portfolio put together and, and do something different. A legacy, I guess, for for, for me and for my, for my kids to see and and hopefully be an inspiration for them when when they want to start their own businesses, perhaps in the future.

Pam Pyms 

Well, there’ll be no doubt about that. And I’m going to look forward to following along because I know you’re going to be wildly successful. And other than marrying this wonderful husband of yours, what’s one thing in your life that you’re so happy you did?

Pilar Carvajal 

I think I would go back to what I said before, I think it was the departure from the family business doing something that was extremely uncomfortable, and starting my own business. And I think that that’s that has been such an incredible experience for me. So empowering, really has brought me full circle in terms of what I learned as a child from my from my role model mother and what I learned in college, and what my immigrant family taught me hard work would ultimately lead to so I think it’s all come full circle for me. And now as I look to develop this portfolio, I’m very focused, I have taken everything that I’ve learned. And now I know exactly what I want to do. And I think that that is very, very powerful, and that I can make into something

Pam Pyms 

well, from one woman entrepreneur to another, I’m very excited for you. And I understand exactly what you’re talking about with, you know, the challenges of starting one’s own business, and how difficult it is. And you know, my hat’s off to you for all that you’ve already accomplished. And therefore, I have one more question for you. Sure. This may be the most important question of this podcast. So I want you to think about it. Okay. All right, this is it.

Pilar Carvajal 

I’m ready. Cats or dogs? Oh, my goodness, that is such an easy question. Dogs, dogs, dogs, dogs, of course, I have two beautiful little rescue Chihuahuas at home. And the and I’m sure any dog lover will will definitely understand what I’m talking about it there was a very interesting documentary that I saw about how dogs are the only animals on this planet that will look at you in the eye and like connect with you. And there’s a special connection that you have with dogs that I think that you don’t have with any other animal. And, and the the love that they give you the unconditional love. It’s a very, very special thing to have a dog in your life. So dogs 100%

Pam Pyms 

you answered the question correctly. From my perspective and you’re giving me You’re giving me ideas of like puppies for residents, we could start a program.

Pilar Carvajal 

I love that you know and pets are such an important part of people’s lives. And I think in senior living we’ve done a great job of of taking pets away from people. Yeah, and we have to find a way to stop doing that and let pets be part of the equation just like I think you know mixing generations needs to be a part of the equation now we’ve separated populations for too long you know demographics for too long, you know the old are over there and the younger overhear, it’s weird. It’s very, very weird. It should we should all be together because we can all learn from one another. And I guess you know, one of one of the last things I want to say You know, I think important for me, too, is, as you were saying, being a woman entrepreneur out there, it’s, it’s important for, and I, especially for my daughter, you know, seeing mommy out there and, and finding a way and getting things done, I think it’s really important that we as women support each other, and I’m involved with a lot of women’s organizations to help us be successful. And I’m, I’m actually considering developing, I guess, a woman initiative, maybe getting a group of women together that are equity, investors that are debt investors that are interested in a different type of model of senior living that is going to serve an enormous population out there. Because we as women, were the ones finding places for our parents, for the most part, and this has nothing to I mean, sons, thank you, you’re wonderful, and you’re out there. But for the most part, it’s, it’s women that are looking for women. And I say this, I’m a woman’s business and a woman in a woman’s business. I’m a woman myself, I serve women for the most part, and I hire women for the most part. And so to come together with a group of all women to, to put something really special together would be would be truly amazing.

Pam Pyms 

It’s very exciting. It’s ended. And it’s been proven to what you say that it’s the eldest daughter in the family that chooses where mom will go, or dad. That’s right. We are the ones that take this on, and especially, you know, in this part of our lives, but I I’ve had a wonderful time having this podcast with you. And I look forward to talking with you more. And I’ll keep an eye out for your success. Now, if people want to reach you, what is the best way?

Pilar Carvajal 

So the best way I love email, so my email is my first initial P. And my last name, Carvajal. At islcommunities.com.  And then my phone number is 305-428-2480. And if you didn’t get the email, you can certainly contact me through my website, which is www.ISlcommunities.com. And my email is under my profile.

Pam Pyms 

Oh, well, and you have a great profile. I recommend that everyone go on and read. Thank you, Pam. Yeah, thank you, Pilar. Look, I look forward to talking to you again soon. Absolutely. Thank you. All right. Bye. Bye. Thanks for joining us today at the senior housing investors podcast. Brought to you by Haven Senior Investments. Please find them on the web at havenseniorinvestments.com


Using SBA and USDA loans for Senior Care


SPEAKERS
John Hauber, Shep Harris, Pam Pyms
 
John Hauber 
Welcome to the senior housing investor podcast. If you are an investor or want to be an investor in senior housing, then you’re in the right place. Hi, I’m John Hauber of Haven Senior Investments. We are pleased to present our newest episode where we bring you the innovators and leaders across the full spectrum of assisted living in senior housing, all of whom provide for the betterment of our senior population. The host of our show, Pamela Pyms has background in the industry. And she will be interviewing our honored guests.
 
Pam Pyms 
Hi, Pam. Hi, john. Thanks very much. It’s great to be here. Today, I’m with Shep Harris, Vice President and Senior loan officer at Live Oak Bank, located in Wilmington, North Carolina. Hi, Shep. How are you?
 
Shep Harris 
I’m doing just fine. Thanks. How about yourself?
 
Pam Pyms 
I’m doing well, too. So tell me about yourself Shep, career wise and and how you got into the senior housing space?
 
 
Absolutely. So I’ve been in banking for about 10 years. And the first five I spent in kind of a small business, normal bank like environment. And over the last five or six years, I’ve spent more time in working for live a bank in a capacity that is focused on the the senior care space. My experience, there’s really ranged from that always on the debt side, but specifically, kind of our government guaranteed lending side. So some of those things like SBA lending, USDA lending, things like that.
 
Pam Pyms 
Good. And we’re gonna get to that in just a minute. Can you give me a little bit more about your own background? And how you decided to get into the banking and that sort of thing?
 
Shep Harris 
Yeah, I always kind of had a passion for it. And I don’t have a real reason as to what stemmed from it other than just having an interest in money, quite frankly, whether man or someone else’s, right, right. Anyway, it kinda was neat to see how the capital that is invested, whether from the debt side or the equity side just kind of really makes the world go round and round, so to speak. I just had a passion for it and, and dove in and always kind of wanted to be in the business side of lending versus the consumer or sort of the residential mortgage space. And, and so I was fortunate enough to start off there. And it sort of evolved into a couple of different options, like I said earlier, a little bit in the DB and T track and conventional lending space. And then, you know, heard a little more and more about lab of bank and was intrigued by the model that they have that they offer and how they do things different. And so made the jump over and you know, it’s been an interesting and and a fun ride. And I kind of think we’re we’re still almost in the first inning with the with the banks. I think there’s a lot of opportunity.
 
Pam Pyms 
Yeah. Are you from North Carolina originally?
 
Shep Harris 
I am. So I’m from New Bern, North Carolina, kind of the middle part of the state towards the coast. And when I joined with Live Oak, I moved south down to Wilmington, North Carolina, where we’re headquartered. So sort of similar geographies. But great place to be. It’s a great place to live and can’t really argue with living at the beach, which is nice as well.
 
Pam Pyms 
Yeah, I agree. You know, I’m on the other side of the state. And I just think all of North Carolina is just wonderful. I didn’t think I’d hear myself say that coming from Colorado. But I think I like the climate here even better.
 
Shep Harris 
Well, yeah, it’s a it’s a nice, it’s nice, nice area. Great company. Yeah. So I’m definitely definitely a big, big fan of spate of the company and
 
Pam Pyms 
how did you hear about Live Oak?
 
Shep Harris 
You know, they actually heard about them when I was in college, the company’s been around since 2007 2008. And they were just a very new startup when I was getting close to graduating in 2010. And at that point in time, it kinda was a, I was looking for really a, a, an employer that had kind of a deep training program, and, you know, a relatively smaller younger company that that probably lacks to some extent. I did I don’t know to this to that exact level, but ultimately, I that was really my driver as to why or the direction I went. And I just kind of kept tabs on it. And I kind of just followed them with what was happening with them. And even when I was in college, it was definitely an intriguing model which we can talk about or get into a little bit. A little bit, but it was they really kind of started to grow exponentially. And I felt like it was something I wanted to be a part of. And, you know, a smaller organization, your voice tends to, to be heard more often than it does when you get with a much larger company. And so anyway, it was a, it was just felt like it was the right thing to do and the right time to do it.
 
Pam Pyms 
No, definitely. Is this the only location live? Oh, Cass right now?
 
Shep Harris 
It is it is yeah. So we’re, we’re, we’re really a bank that went to, you know, went to market 13-14 years ago. And, you know, our founders really believed that branches, brick and mortar are sort of a thing of the past. So we we basically said, Okay, well, let’s, let’s just build a headquarters. Let’s put everyone around everyone try to feed off each other. But let’s live nationwide. Oh, great. So that’s really what our model has been. We have a few offices here or there. But that’s really just because we have pockets of people in that population. I mean, I’d say 90% of our employee base is here in Wilmington, on our campus that’s continuing to expand.
 
Pam Pyms 
And have you been in the senior housing sector from the very beginning at Live Oak?
 
Shep Harris 
I have Yeah. So when I mentioned a unique bank, aside of the non brick and mortar presence that we do in, you know, in every city, state, town, etc. The real difference in my my eyes is that we offer we’re verticalized. And what I mean by that is, you know, there are other banks that have a seniors housing group, or, you know, Self Storage group, maybe. But that’s really the premise of the entire bank. So for the first three years live, land was lending to veterinarians and veterinarians only, wow, on a national basis. And so we sort of said, this makes sense, this works. Well, we understand it, we have a veterinarian on staff who’s owned and operated locations as well. Let’s do it in other sectors. So we sort of added a few industries here or there. And this senior housing one came together, I think, as the 17th or 18th. Vertical that we added. Wow. And we’re up to about 35. Now. So I did start when the vertical was created. So that’s been about four years, four years ago now.
 
Pam Pyms 
Yep. Very interesting. How, how does the product offering differ, compared to most lenders in the senior housing space?
 
Shep Harris 
Yeah, that is, that’s actually pretty neat. Also, you know, we have just like other banks, we have a word traditional bank that has, you know, a balance sheet lending program, where, you know, someone’s looking for conventional debt, whether it’s to build, buy, renovate, expand their existing assisted living facility. But we also are a big, big player in using some of the other government guaranteed programs in the space such as SBA, or USDA. In fact, from an SBA perspective, that’s really how we grew up from early days was we were we were really just a sold out the only product we had out of the gate was an SBA product. And, you know, for the last probably close to two years now, we’ve been the largest SBA lender, throughout the entire country.
 
Pam Pyms 
That’s impressive. Yeah,
 
Shep Harris 
yeah. And the vast majority that volumes in those 35 Industries, so we kind of pick our space we go into, and we we dive deep. It’s a interesting, interesting and unique bank. And we generally feel that by playing in only one space with each respective team, like myself focused on on the senior care side of things, you know, our clients are living and breathing, living and breathing that day in and day out. And so we sort of want to do that as their lending partner as well.
 
Pam Pyms 
So you are indeed an SBA specialist. Absolutely. Absolutely. And I bet you know about the various programs which which ones do you use in particular,
 
Shep Harris 
so the vast majority of the volume we do is really through the SBA seven eight program, and which is which is great, it offers extremely high leverage with respect to debt offerings. You know, a major benefit from a from a buyer’s perspective is you don’t have to have as strong of a personal balance sheet in those scenarios as well. Hmm. You know, they’re covenant friendly. And so all in all, the program is designed around borrower friendliness. The second program that we do within SBA is called the 504 program. This one really allows you to do larger projects really, probably up to the you know, $20 million or so. So total cost, and it’s still an attractive leverage product. It’s a it’s 80% financing on what they deem eligible proceeds, which is it’s a real estate product.
 
Pam Pyms 
So nice to hear they’ll finance that large of an asset. Yeah, yeah. Absolutely. For the SBA. Yeah, absolutely. It’s great to know.
 
Shep Harris 
And then the third program that we do add to make in is called the USDA program, what does that stand for? United States Department of Agriculture, okay, which doesn’t necessarily make you think of seniors housing lending. However, they have a, it’s not specific to that program, but they are not specific to the sector, but they do have just a real estate product offering. And that really works two ways. I mean, it can be a for profit, elf, or it can be a not for profit. And those projects can actually go upwards of 30 35 million. So, you know, there, you can have sizable, you know, larger opportunities, and take advantage of this program, whether it’s a ground up deal, renovation, whatever, it may be
 
Pam Pyms 
a ground up deal. Absolutely. Cuz SBA won’t do ground up? Well, they
 
Shep Harris 
actually will, it’s really the bank’s choice. And we’re aggressive in the space. I mean, we are a believer of the seniors housing space based on the demographics, based on services being, I mean, at the end of the day, that product being offered to seniors, it’s a needs based product. Right? Right. Unfortunately, as people age, they need more care. And so it’s, it’s really a less, less optional need in the market. And that’s kind of the way we look at it. And so we do a lot, I mean, a lot of ground up construction, or even, you know, repositioning, so buying one that needs a, you know, a nice facelift or renovation, maybe with an expansion as well. You know, the ones that have super stable cash flow. And, you know, those typically have more and more lending options, right. And SBA is really used more so in a scenario where there’s, you know, less conventional, or traditional lending opportunities for the buyer. So I’d probably say at least 50% of what we do is ground up construction.
 
Pam Pyms 
That’s amazing. Is there that much still going on?
 
Shep Harris 
We have been Yeah, absolutely. We did a, I would say we did probably 20 20% more in volume last year, even in the pandemic, Oh, my goodness. Yeah. I mean, it’s kind of crazy, even and we just really, you know, we, we took a month or two to kind of get our, our footing initially in the beginning of the pandemic, to, to understand where things were going. Plus, we were, you know, being the biggest SBA lender, you sort of had to focus on the PPP efforts across the country. So that took us out for a minute, but we jumped right back into it. And, you know, we pivoted a little bit, we didn’t do, you know, immediate value add opportunities, we kind of said, Hey, you know, we’d like ground up construction, because it takes a year, year and a half to build it. And by that time, we believe we’re going to be heading in the right direction. And, and so that’s kind of where we’re coming to probably now into the next couple of quarters where some of those ground up deals are coming to fruition and opening their doors from a pre leasing perspective. And all things generally feel pretty positive in those scenarios.
 
Pam Pyms 
Do you wait until they are pre leased to release the funds? Or how does that work? Um,
 
Shep Harris 
no, not really. I mean, really, they kind of put together a budget on what their need on what the buyer or the client’s need is from, from a lease up perspective, and they really tell you what we expect to need before we open. And then what we need on a on a pro from a pro forma perspective on a month by month basis. Okay. And we sort of released it along the way. And so if they need $50,000, or a couple $100,000, or whatever that figure is, depending on the projects as if it’s three, four months before they open, that’s fine. Absolutely.
 
Pam Pyms 
Good to know. I was also curious on that USDA product, does that have to be a certain in a certain geographic area? It does. So
 
Shep Harris 
that that is the one caveat for USDA? Yes.
 
Pam Pyms 
Tell me about that. Geography dependent.
 
Shep Harris 
So you sort of can think of it as a, you know, a non urban product, right, so it’s probably not a fit in the top 30 or 50 metro areas or MSA That being said, you’d be surprised in pockets that it does fit. We’ve done them, you know, in Destin, Florida. We’ve done them kind of in. Right, you know, there’s a line or boundary that USDA draws. And typically right on the other side of that line is still, you know, quality secondary market?
 
Pam Pyms 
Absolutely. I think sometimes it’s the rural areas that, you know, that need the help the most.
 
Shep Harris 
Yeah, so we’re doing some very rural rural markets, we’re doing some that are, you know, kind of just work their way right there on that line, which is super beneficial. Because the beauty of USDA as well as there’s less, you can typically get a little higher leverage on the loan to cost, you can typically have a, you know, slightly reduced strength in your personal balance sheet. So again, it’s it’s attractive product, particularly for a, you know, younger or earlier investor in the space.
 
Pam Pyms 
You mentioned that they’ll go as high as 35 million. What do they have a beginning number? Do they need to see at least 10? Or I mean, what what is that?
 
Shep Harris 
Yeah, so the debt allowance is about is 25, it kind of maxes out at 25. Now, that being said, the project cost maybe 35 or so. And then the debt minimum is the bank’s choice. So, you know, for us at Live Oak, we’ve done some in the app, I would say we’ve done no more, no larger than probably 20 million in debt on the USDA front in this sector. And the smallest ones have probably been, you know, I think it was a $2.8 million skilled nursing facility. So it’s really the bank’s choice. And, and so we’re typically in that, you probably see it in the five to 15 range.
 
Pam Pyms 
Okay. And when you say I’m going to ask you a bunch of questions, when you say it’s the bank’s choice, I imagine you’re looking pretty hard at the client themselves. Do they need to have had a track record? What if this is their first shot out of the gate? what’s what’s typical? And also, you know, when you talk about balance sheet lending, and would you explain what you mean by that, too?
 
Shep Harris 
Sure, sure. So, a normal SBA seven a product or USDA product, the way that is structured is it’s a bank loan, with a government guarantee of 7580, maybe even more percentage, which means if we do a million dollar loan, the bank is on the hook for the non guaranteed portion. So on an SBA loan, we have $250,000 at risk, versus a balance sheet loan that has no government program attached to it, that same million dollar loan, if things go upside down, we have a million dollars at risk. Hmm. So. So by having that government guarantee, it really, really mitigates your risk? It does. Absolutely, it encourages the banks to lend to maybe a less a less sophisticated or a lesser, sophisticated sponsor, and things of that nature are in a or maybe in a secondary or even tertiary market. So we’re a big believer that small business is really sort of what drives the economy, right? And so that’s really why we’re a big player in the space, both both SBA and USDA. Well, I’m
 
Pam Pyms 
sure our listeners are going to be delighted to know that. So tell me what makes lending in this sector different from other asset classes of real estate?
 
Shep Harris 
Yeah, that’s good question. I think a big piece of it is understanding the operating side of business. If you think about it, in the Self Storage world, or even in an apartment world, it’s very much it’s a lot more. So. Less 24. Seven, care, so to speak, right? The operational component of these businesses is massive. And I think that’s often overlooked. And so you mentioned earlier, what about someone’s experience? And how do they handle that with an SBA or USDA loan. And when you have less experience, the key is arming yourself with a team that can fill in the gaps that you don’t have, which may include a professional operator, particularly if you’re doing a, you know, a $10 million $15 million project. It may make sense and likely does make sense to bring in someone to oversee and execute on the day to day operations. And then you can kind of sit back and not watch but sit back and learn. And that way you’re that much more ready for when you’re going to take on the next one.
 
Pam Pyms 
If someone comes to you and doesn’t have an operator, like you’re Talking about, do you have operators that you can recommend or suggest?
 
Shep Harris 
We do. And again, it’s project size dependent, right. So in the SBA space, we’re doing, you know, six bed, residential care facilities all the way up to 40, bed 5060 bed places like with some of the larger USDA, or SBA and USDA products. So there’s a point to where you may not need, and likely don’t need an outside or third party operator on a 15 bed facility. Right. But if you have no connection to the operating side of the business, that’s where we would say, you know, maybe you should arm yourself with a partner that does. Now, as it relates to those third party operators, we absolutely had relationships with those across the country, whether it’s, you know, a national operator, or even some of the smaller regional ones, and some even smaller ones that have, you know, three to five locations.
 
Pam Pyms 
Mm hmm. That’s good to know. Hope you get a lot of calls for this. So tell me about. So live oaks focus in the senior housing space, you know, like development or acquisitions, or refinance? And tell me about the different focuses that y’all look at? Sure, sure.
 
Shep Harris 
So on the SBA and USDA side, our focus is ground up construction, it’s acquisition. It’s refinance, and Canada, whether refinance and renovation or expansion or purchase with expansion, meaning maybe you’re adding a wing or something of that nature. So pretty much any any need within this space, we can do it through SBA, or USDA, for some of the, the, you know, I’m gonna say smaller, but less large outfits, so to speak. I mean, SBA, by definition means small business, so you can’t have 50 locations with 1000s of employees, right. Whereas on our balance sheet side, which is not my focus, but we’ve got a team that is dedicated to that they can do you know, it doesn’t matter how many locations you have, they can also do they have a bridge to putt or bridge to agency options. They have the ability to do earnouts, they have the ability, I mean, sort of name a structure, and it’s on the table on that side of our business, because we’re not held to certain rules that we can, or can’t, you know, there are certain rules that we have to follow, I guess,
 
Pam Pyms 
I was gonna say that’s also the pleasure of working for a smaller organization.
 
Shep Harris 
Absolutely, yeah. So while there’s a credit policy, everything’s negotiable. And so, you know, I think that’s an that’s advantageous as to why to work with, with a bank like us when when we know the space, right. And to we, because we’re living and breathing it, we know. And we’re agile enough, because we’re small to pivot, as the market has different needs.
 
Pam Pyms 
So do you look at everything from say independent living, assisted living memory care and nursing? Do you look at all of that entire spectrum?
 
Shep Harris 
Good question. So from an SBA perspective, and USDA, we do really assisted living, memory care, skilled nursing. From a balance sheet perspective, they also do independent living, okay, the only reason we don’t do independent in in our government guaranteed space, it’s just not allowed not to program, unfortunately.
 
Pam Pyms 
Right? What about active adult, which isn’t really sort of another category off of independent living? Will you all look at that on your balance sheet side?
 
Shep Harris 
We do? We do. Yes, yeah. We like that sort of as a, as a component, typically as a component of a, you know, of a project itself. But yeah, that’s definitely an offering in which we’re, we’re seeing more and more interest in, you kind of capture the senior resident much earlier. And, you know, in theory keeps your keeps that revenue stream with you, for that much longer down the line.
 
Pam Pyms 
Good to hear. And I guess that brings me to my next question, which is, what kind of trends have you seen in your portfolio, especially throughout the pandemic?
 
Shep Harris 
Yeah, well, early on, everything was in lockdown, no different than probably the rest of the country. And it you know, that really made sense from a trying to keep anything from getting in to the facility. So the underlying issue was, how long can you hold that up? Because there is natural attrition, whether people move on to a different stage, or a different facility. But inevitably, you have to replace seniors within your place in order to say profit stay profitable, particularly when you’ve got higher expenses like and things of that nature. So, early on, there was a little bit of a panic, I would say, in our, in the space that I play, which is our SBA, primarily SBA space, most of our projects are, you know, 10 million in less than debt, with a lot of them being 5 million or less in debt. And believe it or not allow the small ones didn’t have a ton of attrition, or they even had people wanting to move in that were in sort of the large institutional places, they were just kind of thinking, hey, well, if I move somewhere that doesn’t have 100 residents, and 100 employees make sense? I’m better off. Yeah. Um, so we’ve actually done pretty well. And today, I think we have in our portfolio, one issue in our SBA portfolio, that’s arised. Since COVID, otherwise, nothing.
 
Pam Pyms 
That’s amazing.
 
Shep Harris 
Yeah. Yeah. It’s Jami, were your knock on wood. But can you
 
Pam Pyms 
talk about what the issue is?
 
Shep Harris 
Yeah. And it’s not even that person’s fault. To be honest. They, they just came to, they opened in March. And right, so they finished construction in December or January, 60 days later, the Department of Aging and Disability was to step in and issue their license, they delayed it because it was on lockdown. And so now you have an empty building that is not being licensed, because no one’s leaving right now in the in the very early onset of lockdown. And, you know, so they’ve just sort of had to stick it out until people have confidence to move back into a place and, and they’re seeing some of that they’re seeing some of that they’re starting to pick up a few residents here and there, which is good, because, you know, it’s tough for six or eight months to have little to no residents. I mean, that’s, uh,
 
Pam Pyms 
well, especially when you have no control over the government agencies issuing you that license. Exactly. Exactly. Just I mean, that’s, that’s hard.
 
Shep Harris 
I mean, everything was working against him. And yeah, so as far as someone that in our portfolio that that is that is failing or moving in the wrong direction? Because of COVID. It doesn’t exist.
 
Pam Pyms 
Oh, that’s so good to hear. Absolutely. Tell me what live oaks outlook is in the sector, both short term and long term.
 
Shep Harris 
We are a fan. And if you look back, I mean, honestly, if you look back at some of the other recessions, this space has not dipped, like a lot of the other spaces, they were like, in the Oh, eight, crisis. You know, obviously, that was a housing issue. But in, but in as far as seniors housing, it did not dip anywhere close to it doesn’t have that volatility, anywhere close to some of the other sectors. Wow. And, and we’re really just, we kind of look at that. And we always lean back to it’s a needs based service. And so we are maybe a little more cautious on the active adult and independent living to make sure we’re with the right sponsor, and the right operators and the equity strength behind those are better. But again, that’s that’s really not my, my space on the SBA side. But anyway, the point being, when you get stepped into the assisted living space, I mean, you need care. And that’s why we’re a believer in long term.
 
Pam Pyms 
Well, that’s true. Getting back to SBA versus balance sheet for a minute. The equity that’s needed, but especially say for, you know, independent living versus an SBA assisted living, how much more needs to be on the equity side?
 
Shep Harris 
Yeah, so don’t quote me, this may change, but it’s somewhere in the 35% range on the conventional stuff. So the balance sheet stuff that, that my colleague, Adam Sherman, and his team are working on, is really probably in that 35% range.
 
Pam Pyms 
And that’s fairly typical.
 
Shep Harris 
Maybe, maybe they’re stretched 30 Yeah, they may be I think they were 30 they got to 30. You know, pre pandemic, they’ve may have retreated a little bit on the the equity, the equity front, but in the SBA front, I mean, technically, we can go as high as 90% financing. Oh, isn’t that nice? You know, so, reality, the market sort of drops more like 85. So, but still 15% down on a project is super attractive.
 
Pam Pyms 
Why wouldn’t everybody just go SBA?
 
Shep Harris 
You know, I mean, honestly, and if you think about it, it helps buyers or owners retain more ownership, I mean, equity. equity is way more expensive than debt. And so why not retain as much and retain as much ownership as you can. Sometimes it’s harder to get you know, Maybe you don’t have the team in place. You know, I don’t really know. I mean, maybe its size restriction. Maybe it’s, maybe you want to do a 20 million or $25 million, a lF. And SBA just doesn’t get that large. But to be honest, they fit I mean, a $20 million project or less fits a lot of profiles, particularly in your secondary or tertiary markets. Oh, absolutely.
 
Pam Pyms 
And I just wonder how many people actually realize that’s a route they can go.
 
Shep Harris 
Yeah, you know, and we’re also if you ask someone who’s going through an SBA loan process, occasionally, you’ll hear negative press about it from someone that’s experienced it. And the likely and the common theme is, they worked with a bank, that’s done, you know, one project in the senior space, it was probably there’s more than done when we’re three SBA loans all year. But when you do 1000s, and your bank was built off that model, you don’t run into those same issues. Very good point. Yeah,
 
Pam Pyms 
very good point.
 
Shep Harris 
When we went to market, we went to, basically to DC and hired the people that wrote the rules for SBA. And that’s kind of why we knew, you know, 12 years ago, we did our first SBA loan, and two years ago, no one does more than we do in volume in dollar volume.
 
Pam Pyms 
That is amazing to be sort of one bank and cover, you know, the nation and be the largest lender in that sector in that space. Congratulations.
 
Shep Harris 
Yeah, absolutely. Absolutely. Thank you. Exciting.
 
Pam Pyms 
Yeah. Well, you certainly know what you’re talking about. That’s for sure. So if someone comes to you, what’s needed in order to quickly gauge if it’s possible, if it’s a possible fit for Live Oak? Absolutely. So
 
Shep Harris 
a couple of key things, one, project information. So whether a development deal, whether an acquisition, you know, I guess I want to develop a deal, you need your costs figured out, you know, what’s the land price, what’s the construction application, you need to have some kind of market analysis, at some point, likely a feasibility study or market study. For the acquisition front, we need the seller financials, right. So not just, Hey, I like I like this space. I like this location, but we need to see the financial performance to justify that, you know, cash flow is what cash flow is. And then on the personal side, this is we do look at the equity as well. So again, you don’t have to be quite as strong as some of the other equity, or as as equity and like a conventional traditional lending platform. But we need to know where the downpayment is going to come from, we need to know who the partners are and what that structure is. The the key in SBA is 20%. owners, those are the ones that we have to kind of dig into the most. So anyone that owns 20% or more, that’s kind of the threshold that we need to dive into those to some extent. But basically, for personal financial statements, personal tax returns some of those things to gauge, you know, income streams and income levels.
 
Pam Pyms 
Okay, let’s very interesting. So if someone comes to you To be best prepared, they can, should they come in then say with a package, if it’s for ground up, you know, you want to know about, you know, where the land is, and what the construction costs are? And have they had the feasibility study done. And if it’s for acquisitions, you want to see their financials, you want to see a pro forma? You know, what, what do you like to see in a package someone brings to you and you go, yeah, this, this person has it together, they know what they’re doing.
 
Shep Harris 
Alright, great. So on the development Do we want the location, we want the market analysis, if you have it, we want your pro forma, if there’s an operator, we want to know who you’re working with or vetting right now, the pro forma, we do want to see and see if that ensure that that correlates to some extent with that market analysis.
 
Pam Pyms 
Well, well, let me stop you there for a second, when you say the pro forma and how it relates, what is it you kind of neat to see it do? Well?
 
Shep Harris 
Well, a lot of times if you’re looking at a market study, and you look at the supply and demand of seniors in that market, it typically would tell you, you can get an idea of how quickly or what to expect from the absorption of seniors in that market. With respect to the pro forma, your occupancies shouldn’t be aggressively different than the market study. And if it is, then give us the color around why you believe you know, you will outperform the market analysis or underperform for that matter.
 
Pam Pyms 
And do you like to see these market studies by third party independent people not not the people themselves who are trying to correct Yeah, yeah.
 
Shep Harris 
Yeah, but I mean, look, when people bring their own, because they’ve done some research, we still, we’re still excited to see that because it really just shows the, the due diligence that you’ve done, at least on your own side. Because quite frankly, if you’ve done the research yourself, and you can pretty much feel confident that when you order that third party market study, it will be attractive. And you know, probably hopefully not too far off your assumptions.
 
Pam Pyms 
Mm hmm. Well, all that makes sense. I’m trying to think if there’s anything else I would like to ask you, for the investors out there. Do you have anything you’d like to add that I haven’t asked you?
 
Shep Harris 
The only thing I’d add is, you know, we’ve talked about how large some of these programs can allow. And just don’t forget it, even when you’re starting out, not everyone has the capital to go do a five or $10 million project. So if it means doing a eight or 10, bed, residential, like assisted living facility, that’s okay, we do those as well. I mean, that’s a common theme that is a, that’s an SBA product, that we pair with that opportunity day in and day out. So wherever you are on that spectrum, whether it’s your first, you know, six or 10 bed place, or your first or fifth 40 bed place, the bank has an option for you. And, you know, we’ll figure out which product to bear with you, whether SBA, USDA, or our balance sheet.
 
Pam Pyms 
That’s so good to know, I would like to ask you, because you’ve probably talked to so many people, what’s the biggest piece of advice that you give to say, the smaller operator who hasn’t done this before, say it is going to be an eight to 15? bed? And they’re so excited, but they haven’t done it? What What do you advise them?
 
Shep Harris 
To Good question. Probably the biggest thing is, if you’re looking at an acquisition, don’t get hung up on just the first opportunity that comes to hand. Right? Because it’s easy to get excited and, and kind of make that see yourself making that leap into entrepreneurship. And, you know, I kind of a lean to, it sort of makes sense to pair yourself with with a partner to that has, whether they’re like an equity partner, or quite frankly, even a professional partner, maybe you work with a broker that helps you sift through opportunities for the one that makes sense to you or for you. And so that’s probably the biggest thing. Don’t don’t get hung up on the first thing you see.
 
Pam Pyms 
And I guess, no matter how small it is, to make sure you surround yourself with a really good team, that’s the key. So that yeah, that you know, you’ve you understand about operations, and you understand about finance, and you understand about staff and everything you’re going to need to know Yeah, absolutely. But it’s still it is such a great sector compared to all the other asset classes, I think.
 
Shep Harris 
Yeah. And and, you know, you mentioned earlier, we about our balance sheet program. To put it into perspective on how we feel about or how bullish we are on this space. of the 35 industries that we learned. There’s a team that does really, you know, an SBA loan, a USDA loan, they can do a balance sheet loan, but because our expectation in this sector is to grow, you know, exponential, we have actually bifurcated to where there is a balance sheet team, and a government guarantee team just to further make things I guess, easier for the for the client. That way, you know, if I’m dealing with an SBA loan day in and day out, I’m not also working internally with our conventional stuff. So it’s just it just kind of bifurcates that with the intent that we know we’re going to grow and grow quickly in this sector. So that’s, I think, I’m pretty sure we’re the only sector or vertical that we’ve done that with, which just kind of goes to point to our expectation and our bullish feeling on the space.
 
Pam Pyms 
Well, it also sounds like not only do you advise your client to have a good team, it sounds like you guys have a good team exact surrounding you. And that’s, that’s terrific. Yeah, yeah. Well, I want to thank you so much for your time today. It’s been very, very informative. And if they want to find you sharp, what’s the best way is? Is it your email at Shep dot Harris at Live Oak dot bank? That is correct. That’s the best way of course, expand. Okay. Well, thank you very much, and hope to talk to you again soon. All right. Take care you too. Bye. Bye. Thanks for joining us today. This podcast is brought to you by Haven Senior Investments. Haven Senior Investments is the leading faith-based senior housing advisory firm focused on providing their clients with the knowledge and expertise necessary to support their goals of buying, selling, developing, investing, or operating in the senior housing market. They can be found at havenseniorinvestments.com


Taking the Temperature of Senior Housing Post-COVID

SPEAKERS

Robin Gestal, John Hauber, Pam Pyms

John Hauber 

Welcome to the senior housing investors podcast. If you are an investor or want to be an investor in senior housing, then you’re in the right place. Hi, I’m John Hauber of Haven Senior Investments. We are pleased to present our newest episode where we bring you the innovators and leaders across the full spectrum of assisted living and senior housing, all of whom provide for the betterment of our senior population. The host of our show, Pamela Pyms has background in the industry. And she will be interviewing our honored guests. Hi, Pam.

Pam Pyms 

Hi, John. Thanks very much. It’s great to be here. Today, we’re with Robin Gestal. She is the partner and Executive Vice President of Operations for Haven Senior Investments. And we’re excited to have her on the show today. Hi, Robin. Hey, Pam,

Robin Gestal 

I am thrilled to be here. Boy, it’s exciting to talk to you.

Pam Pyms 

Well, I’m glad. Same here. Can we start off with just telling the audience a little bit about you your background, what led you to senior living? And then in particular, what led you to Haven? Sure.

Robin Gestal 

Okay, it’s long story. How much time do you have lots of time you go. Okay, well, I lovingly call myself a patchwork quilt master of none, because I’ve got lots of colors and lots of stories to my history. Not sure how much depth but I’ll turn it to at the beginning, my my early career days were on Wall Street, lots of fun back then my focus was fixed income sales and trading mortgages, all of that capital markets. It was a really interesting time, they were just starting to get creative with cash flows and revenue streams. And so we started stripping things, you started to see the development of things like zero coupon bonds, mortgages, where their interest in their principal payments were being separate and sold. So we’re able to really craft investment vehicles for investors specific needs. So I think that those years were very formative for helping me today to help people put really creative deals together. It’s kind of funny, that was a long time ago. But it’s been a it’s been a great tool slash scale, I guess, for senior housing deals. So we’ll touch back on that later. But kind of funny how we all started. After the Wall Street years, I took some time off to stay home and raise my kids, which was awesome. And then when I got back to work, I went into real estate. I loved all things real estate and got involved in every aspect of it that you could, as an investor, I did, I restarted out rehabbing properties, I started with single family homes, I probably did 50 or 60 of them then moved into apartments. I got to be so that I was teaching coaching, speaking, investing, doing kind of everything I could with real estate really, really enjoyed it. Also, during that time, I lived in a small town in Connecticut, and we had a volunteer SMS system. And so our full ambulance program was run by volunteers and I joined them to be a volunteer EMT in my town. And I did that for about 10 years. It was really fun. I really loved serving our community that way. But the interesting thing about that is that 90% of our patients of the people that we worked with were seniors. They were elderly people living at home. Also in facilities, we went all over, but they just weren’t being cared for properly. I didn’t feel they were always, not always they fell often. They were lonely. I just kind of got my dander up for seniors during my 10 years volunteering as an EMT. That’s really cool. Yeah, so I developed a passion for them alongside my developing sort of skill and knowledge in the real estate world. And at one point, I just said, You know, I think I need to take a sidestep and do all seniors with relation to real estate. So I just kind of take a step over. I didn’t know anything about senior housing, but I, I felt it was calling me. So to get knowledgeable. I just dug into the internet and I read everything I could I called people I decided I didn’t know what that looked like for me, but I was going to learn everything that I could. And in my quest for knowledge and learning, I came across John Hauber, who founded haven SR investments, and we got to be talking one thing led to another and I asked if I could come on board. he gladly said yes, the company was very small back then just a couple of people. There was jobs for everybody that wanted to wanted them. Whether it was getting the coffee or running the show. We did it all. So I stepped into that role. years back and loved it, loved it loved it and john and i kind of tag teamed and grew together. And one thing led to another and john and i became equal partners, and we’ve been growing the company ever since. Wow. So it’s kind of a funny See ya, I’m not straight line story, but that no, I say here,

Pam Pyms 

I’d say you’re a very impressive patchwork. Okay, so congratulations on, you know, such a varied and wonderful career. And, and it’s, it’s really nice to hear that you’ve landed in a place that calls to you the way it does. Maybe we could remind our audience about haven senior investments, mission.

Robin Gestal 

Sure, absolutely. That’s kind of what got me going was the focus of our company is to support those who support and care for seniors. So there’s so many amazing people out there taking care of seniors right now. And they needed more help, frankly. So we’re set up to support them to give those non institutional owners and operators you know, the salt of the earth, people who are doing this job 24 seven, to give them the support that they need, both financially, from a consulting standpoint, advisory standpoint, whatever we need to help them, improve their businesses meet their investment goals and objectives. So we’re there to support them. So our the focus of our, our business really is that non institutional owner. So because of that, we tend to sort of focus more, I’d say, our sweet spot, or main highway lane is under 100, bed facilities that tend to be owned by families, Mom and Pop individuals, owner operators. So our mission really is to to support them in buying, selling, developing, investing, financing, whatever aspect they need to grow their businesses.

Pam Pyms 

Oh, that’s terrific. That’s such a wonderful niche to explore to those non institutional owners. Speaking of them, what are you seeing from them? Are they contemplating selling? What’s happened to their business throughout COVID? Talk to me about it?

Robin Gestal 

Ah, long answer, there are a lot, lots lots to talk about there. So COVID was hard. As I said earlier, these people are literally the salt of the earth, they really are doing the frontline work. And, and, honestly, they are also most of them baby boomers themselves. And so many of them are approaching retirement years themselves, which is, you know, perfect timing for us to be there to help them because they’re sort of starting to think about what next looks like, and trying to get their, you know, their affairs in order to sell their business and plant their retirement. But COVID caught them off guard. Boy, COVID was a tough year for everybody. Imagine being them, fighting to keep your residents safe, keep employees coming back to work. And, and at the same time, you know, deal with everything that we dealt with with COVID. So it was a really tough, tough year for them. So I would say that if they weren’t ready to retire, ignite in 2019. They’re really ready now. Yeah, that was a tough year. Yeah, yeah, it was. So most of them did very well. We know it’s it’s not the story you hear in the media of the doom and gloom that they keep reporting on skilled nursing facilities and stuff like that. That’s not across the board at all. Oh, that’s good to hear. Yeah, it’s really it really is not reality. So they did very well. Most of them kept COVID out of their facilities, they worked really hard. But what actually really did happen, though, is even though they may not have had any COVID in their facility, the world did shut down. And no one was allowed to move move about the country. So no one was allowed to move into a facility or out of a facility really, everyone was sort of stuck there for a while. So they had no move in they have normal attrition, because these elderly, elderly patients, you know, they are rolling towards the end of their lives. So there’s a normal attrition that goes on. But the the laws did not allow for any new movements. So all of their occupancy just naturally went down as they were unable to bring in a new residency. And despite the fact that residents needed and wanted to come in, it was just a lockdown. So their occupancy went down, which of course, you know, that’s their revenue numbers. So that affected their bottom line. And then the one other kind of additional component to that is their expenses did go up because they did have all that extra PP they had to deal with and lots of they had to buy all these all those extra features that were expensive at the beginning because there wasn’t enough for everybody. And also to try to keep their employees coming back as the employees were fearful as well. So they were paying lots and lots of extra pay bonus wages, Hero pay whatever they could do to keep the caregivers coming back. So they had really increased expenses. And then of course, decreased revenue due to the lack of new patients that could move in. So it was a downward pressure on their business even though they were So successful and keeping cohort COVID out, they still had these issues. So you know, 2021 is showing some recovery there. But they’ve got to get back to where they were so right, even if you did everything right, you’re still struggling. It’s true. And it’s sad, but I know they’re gonna get there. And we need them so desperately. And

Pam Pyms 

you know, we’re so thankful to them, too. Absolutely. But tell me about the buyers. So what are you seeing from them? Are they trying to go in? And I want to say, are they trying to take advantage of the lower occupancy? Or what what are they looking for? And who are they?

Robin Gestal 

Interesting, they are a wide variety of people. And yes, of course, you do see some of those I caught we call them bottom feeders, people that come in and are really looking to take advantage to be I guess, opportunists and really kind of grab what they can. And you’ll see those all the time. In general, though, buyers are this, this asset class senior housing in the time I’ve been in it as is been kind of the sexy new asset class. So we’ve had a real flock of new buyers into our market. So those new buyers are still there, along with the tried and true who’ve been in the industry for a while. And because they were put on hold for so long for the last 12 months. They’re they’re eager to get back to business. So we see an appetite that’s really strong in the buying world, not only the people who are always there, the new people, and then the people who have been sitting on their hands for the last 12 or 15 months.

Pam Pyms 

Mm hmm. And the lenders, what what about the lending environment? And were there any deals disrupted due to COVID?

Robin Gestal 

Yes, so as we know, the lenders are really the gatekeepers in this industry, they decide who buys and who sells because they decide they control the large debt component of the deal. And so lenders are very, very powerful when it comes to the transaction. When COVID first struck, lenders got quite nervous, no one knew what the world was going to look like. And so the lenders really did pull back. They just put a halt on all lending. So we actually even had a couple of deals that were scheduled to close it just Nope, stop. We’re not, we’re not going to do anything. We’re hitting pause. And they hit pause for several months, as things settle down. And then as the summer approaching, we got into the mid summer of last year, they they started to stick their head back out and some deals started to close, we were actually able to close for for sale transactions during the height of COVID, which was really great. So you know, they came back to the market and they’re back now, but they’re not back quite the way they were. They’re still a little bit tentative, particularly when it comes to some of their riskier loans like development loans and things like that. Some of the more tried and true loans like HUD SBA, things like that are pretty much back to where they used to be nice. Yeah, yeah, we’re really seeing if businesses back to usual, we’re as busy as can be. But so the lenders, the lenders are back in the game, which is great. And of course, you know, you remember the cares act, all the iterations of it that we’ve seen, have had some incentive programs for lenders. So HUD had an incentive program to get people to refi, SBA had an incentive program, encouraging loans and transactions by offering waivers on their application fees. And they were even offering at for some period of time, three months, and then six months of making the deferred payments, they literally made your interest in principle payment for you for the first three or six months of your loan. So there are lots of great incentive programs to try to encourage people back to the table. Are they still in place that as far as you know, some of them are? Yes, some of them are some of them are dribbling away, if you will. They’re sort of petering out. But some of them are still there, particularly the SBA. Parts of that incentive program are still there.

Pam Pyms 

Oh, terrific. That’s great. Yeah, that’s helped a lot. Yeah, I can imagine, I guess, you know, looking at say, just the general market, the general things you see sort of, you know, with the supply, for example, Talk Talk to me about that.

Robin Gestal 

Yes, I’d say as I touched on before that the owners, the owners are tired. The owners have had a rough year and the owners, as I mentioned, are baby boomers themselves many times. And so what we’re seeing right now is those tired, people are saying, Okay, I’m ready talk to me. And so we’re seeing a great deal of people getting ready to come to the market. Now some of them are waiting to get those numbers back where they want them to be, as I mentioned earlier, and some of them are ready to go right now. So we’re seeing a lot of people gearing up to hit the market. And then there’s as I said that that chunk that’s waiting for the six to nine months to get their their numbers right where they want it to be to get the sweet spot of a sale. But what I expect is I expect to see a big glut of inventory in like the next six to nine months. I mean, I’m just hearing it left and right people are people are getting ready to come to the market. When you say the sweet spot of a sale, yes, well, these properties are priced on a multiple generally of how much money they’re earning. So they look at the net operating income of the business and two that is applied a cap rate, which is determined by the market. And and that determines the price. So it’s it’s a, it’s an equation that determines the market value, if you will, and so that the better the noi net operating income, the higher the value of their, their business. And so it’s very, very much in their interest to get their noi as high as possible. So if they’ve been struggling, as I mentioned earlier, with lower revenues or higher expenses, if they can get those back where they were pre COVID, those, it evens out that their net operating income will go back up again, and hence the multiple and their, their property is worth more. So that’s their goal.

Pam Pyms 

That’s understandable. And and I guess when you talk about the formula more or less than I know, there, there are definitely cap rates that are applied to, to the formula. What have they been? Where did they go? And what are they doing?

Robin Gestal 

that’s a that’s a large question. I will. It’s a big industry, right? We talk about everybody there, there are six bed facilities and senior housing and there are probably 600, bed facilities and senior housing. So so we got a dizzy going on here, I will speak to kind of that sweet spot, that main driving lane that I talked about that we’re in at the beginning, were sort of like under 100 beds, is where we see so many of the owner operators that we talked about at the beginning. And so in that, in that area, I’d say that we saw cap rates prior to two COVID, I’d say in the range of probably eight to 10, maybe even as high as 12, cap rates dependent upon the location, the age of the building. I mean, all kinds all kinds of things. I mean, everything that would affect a piece of real estate honestly affects the cap rate. So so it’s a big variable. But in in that sort of owner operators size space, I’d say eight to 10. It’s very, very common in the in the clients that we’re working with. And then I’d say so post COVID, after that, there was a little bit of pressure on cap rates, so lower prices, a higher cap rate. So a little bit, again, because of that noi issue that I mentioned earlier, and some of those, those opportunistic buyers are looking for a higher cap rate. But in general, I’d say that we’re seeing a lot of this have the same slightly upward pressure. But we’ve closed as I said, several deals during this COVID year and, and the cap rates really were not affected. So it’s too soon to say but we’ve seen we’ve seen a pretty stable market. That’s great, what I was gonna say what about the attitudes toward it all attitudes of well, the the buyers see opportunity. Sellers seller’s attitudes are they’re tired, but and you know, our job is to take care of those sellers and make sure they get what they deserve, what they’ve earned, what their businesses are worth. So we spend a lot of time working with them, prior to coming to the market to help them even if we need to consult with them for a little while to help them get that noi where it needs to be. So that that’s our goal is to is to maximize their investment. And so we’ll we’ll work with them as long as it takes to get their numbers where they need to be. I know you you all work all over the country, don’t you? We do we do our company. Our company was founded in Colorado. But we’ve grown quickly and we now cover all 50 states. We’re certainly busier in certain states than others. It seems it between the regulatory environment and growth of population and just general investor interests. Some states are busier than others. But in general, we do business in all 50 states is East Coast selling more than West Coast. Are you seeing it more in rural areas? Are you seeing it more in urban areas? Yep, there’s definitely trends. I will tell you that the states where we are the busiest is probably Texas but Texas is a very popular state. We all know that the Texas cities have been growing probably some of the fastest in the country. Another area of the country that super popular is the southeast California. So the Midwest to all areas of the country have need there is need for senior housing in every single neighborhood in the country. Then, at some are just more densely populated than others. Some are wealthier than others but assisted living is a need not Bought a luxury and there’s a place for it everywhere?

Pam Pyms 

Yeah. Yeah. Well, that’s good to know, too. How did haven navigate during COVID?

Robin Gestal 

Well, we all were like deer in the headlights there for a minute or two. Weren’t we all? Yeah, right. But once we took a deep breath, we had, as I said, we had a couple of deals stop. And so we were there to support our clients, which of course, they were, they were right on the front lines. But what we actually in listening to our clients and what was going on, we took the opportunity to pivot a bit, we understood that transactions weren’t going to happen right now. But there are clients still had this cash on cash return and need for their bottom line to be healthy. We recognize we are in a very low interest rate environment. And we took advantage of that and plus with some of the incentives that were being offered by some of the government programs, to really reach out to our clients and see if we could talk to them and work with them to look at their debt and restructure their debt. And is this a time to refinance? Should we go and see what we can do about refinancing your loan? Is it going to qualify for HUD? Do we go back and look at SBA? So we did we spend most of a good chunk of the year when things were on hold, working with clients on debt restructuring, and seeing if we could help them take advantage of the lower interest rate environment?

Pam Pyms 

That’s great. Seems like you do a lot more than just broker. That that, especially with the financial help, is that something you absolutely have a way? Or is that a service for a fee, I’m trying to understand and help the audience understand how they can utilize haven senior investments sure, for for themselves, give me a little bit of a breakdown on how it works.

Robin Gestal 

Absolutely. So first and foremost, we are a consulting and advisory firm. So we are there to support our clients with whatever they need in their senior housing space. And so honestly, most often, they’re asking us for brokerage, we probably get asked for brokerage 80% of the time these days, so that is a strong, strong need. But we’re also there to support them, as I think I mentioned earlier with with consulting when if they need help with their operations, if they need help with the marketing, if they need help, getting your occupancy where it needs to be. Some of our clients are developers looking for help with getting their development project off the ground, their entitlements, all the many, many steps that need to be taken, you help with entitlement work. Absolutely, we have a whole consulting team that just works in the development space, as well as works in the operation space. So we bring wheat, we bring all of the talents and all of the experience to the table, it’s we just whatever they need. So we get asked to do brokerage most often. But we have the capability to do all of this. And the consulting part of our company, I have to say is growing very quickly, we started out doing all brokerage. And I think that’s what we’re known for most often. But as I as I mentioned, we are a consulting and advisory firm. And we bring all the services to the table. lending, as you mentioned, is one of them. We recognized early on that you can’t facilitate a transaction for your clients, if you can’t help the buyer with their financing. So we started to reach out and find lending sources. So we are often tasked with helping them find a lender helping them find capital to close the deal. So we have various lenders that we refer them to some some lenders do pay us referral fees, and some don’t. But our job is to get that deal closed for our owner seller client. And so we’ll send the buyer wherever they need to know go to get the get the capital that they need. So there are lots of resources there. And that’s an area of our company that’s always growing. Do you help them find equity sources too? Well, we have not up until now. But we are just starting to get involved in that. So we’re beginning in a an offshoot, if you will, of haven senior investments, another company called haven co capital, and that’s going to be focused 100% on structuring finance for buyers and sellers. So we will work on finding them equity sources as well as debt sources. So that company is we’ve been doing that in house but we realized there’s such a need for that that’s going to break off and have its own area of growth. And that’s coming down the line. There’ll be much more in that department.

Pam Pyms 

Well you guys are really a one stop shop. This is great.

Robin Gestal 

We are and then the other the other big component that just to round out that the transaction side of it, that they the buyers need a lender. And many times buyers are also looking for management company. They’re looking for someone to help them eat, whether they’re a first time in senior housing and they’re looking for some help, or they’re a larger investor and they just can’t be in all places and they’re looking for a management company to sort of oversee the the on site operations. So being able To provide management services is also a way to facilitate the transaction and help everybody get away, walk away from the deal with what they need. So we’ve learned that by doing, we’ve learned that that’s a missing piece. So we’ve been doing more and more of that. And I think that we’re moving in the direction of perhaps putting together a management company of our own, because there’s just such a need such a need, and we can’t find enough resources. That’s amazing. I

Pam Pyms 

was going to ask you, when you say you’ve been helping in management is that in finding other management companies primarily, and then just sort of putting them together? Or as you say that you will create an actual management company branch where you or haven will be the managers? Is that what I’m hearing?

Robin Gestal 

Yes. So up until now, whatever help we give on the management side is part of our consulting services. So we just consult with them on their own management practices, on their own operations, marketing, all of that, as we just sort of help them with it, we look at it from a professional viewpoint, we know what the margins should be, we know where to trim, things like that. So we’ll work with them on their p&l. But the next step, and what you’re referring to is actually starting a separate management company to to actually take over their operations if they need it. So it’s typical in the industry, that there are management companies that run the on site operations, and they charge a fee for that. And there just is not enough of them, particularly in the smaller space where we’re talking about those owner operator clients. that more and more needed. So we just discovered that by doing we’ve discovered that by working with our clients is just a need. And because we can’t seem to find enough companies out there to serve that need, we sort of said, Well, I guess we’ll have to be one. And the city’s the mother of invention, right? So we’re working in that direction right now to try to put that that’s an area of growth for us as well.

Pam Pyms 

Yeah. You may not know this, because it may be all over the board. But what types of fees, what percentage do management companies typically charge?

Robin Gestal 

what we see and in our space is usually around five to 7% of their gross revenue. And the management company does does a lot of their administrative stuff. They do their hiring, they do their payroll, bookkeeping, regs and practices, marketing, set the tone and the culture oversee operation. So that’s sort of higher level management stuff.

Pam Pyms 

When you look at it that way, and you realize the savings an owner will have on those other aspects that the management company can do, it doesn’t seem like it’s necessarily that high a fee.

Robin Gestal 

Right? I think that some people are aware, as I said, they’re clamoring to have it and we just can’t find enough of it for them. So right, yeah, it’s a very valuable thing, especially if someone’s moving into this asset class, that’s never done it before, they certainly don’t want to invent the wheel, they would like to move in with an experienced hand,

Pam Pyms 

I would also imagine lenders want to see the move in with an experienced hand.

Robin Gestal 

So true. So true. Lenders want to make sure that their investment is protected, they want to make sure that mortgage is coming back high. And so the more experience that goes with that, the happier they are, in fact, we have actually seen transactions where there’s a new buyer into the space, who’s got great equity, great credit, great, all that kind of stuff that that the lender likes, but the lender is a little nervous about their lack of experience. So if we can team them up with a manager makes it a lender so much happier, and it kind of closes the deal. So again, these, offering these services just helps everybody get what they need. The seller is able to walk, you know, sell his transit, sell his asset, get out of the out of his business and move on. The buyer gets what he needs, the lender is happy with a secure deal. Everybody seems to walk away happy when all the services are in place. So it’s it’s a win for everyone.

Pam Pyms 

And you helped make it so so that’s great. Gosh, I’m wondering, is there anything that I haven’t asked you that you’d like to talk about?

Robin Gestal 

Well, I one thing I’ll say is it, we just love what we do at Haven, there’s so much need for the services that we’re providing that we people are so grateful to get off the phone with, it just makes us feel good. So when you’re, you know, you’re doing good, you know, when you’re really helping somebody, it just gives you that great feeling on the inside. And so just knowing that our services are needed, that people are are moving forward with their objectives, getting what they need accomplished. And at the end of the day, we’re serving those who are serving seniors, and that we’re we’re getting those people who I was picking up off the floor with their broken hips into a safe environment. That just kind of makes us feel good. At the end of the day. We know that we’re Our job is to make sure those seniors are taken care of and this is the way we’ve found to do it.

Pam Pyms 

Right. Well, I thought of one more question. especially knowing that you you do work nationally. And that the company originated in Colorado, do you have boots on the ground and other states?

Robin Gestal 

We do we do. So we have kind of an unusual network of the ways that we work, we have our own in house team of employees, contractors, advisors, we’ve got a whole whole slew of ins in house team. But we also partner with sort of feet on the street, in states where we don’t have where we don’t have an in house person. And that works really, really well, because we bring the Haven brand knowledge, if you will, the depth of our market knowledge and all of the all of the traffic that our website brings us, we were able to bring that to the local knowledge about the person on the street, who, who really knows their local market, they know what’s going on, but they don’t have the the senior housing depth. So it’s a great partnership. So whenever we have somebody that comes to us, it needs something in a state where we’re not, we don’t have one of our own employee own team members actively working there. We’ve got these great partnerships set up. So it allows us to really kind of cover everywhere.

Pam Pyms 

I am so impressed with what Haven has done in a relatively short amount of time in this business. No, thanks. Yeah, congratulations, tell people again, I think it’s gonna be on our outro as well. But how do they find you?

Robin Gestal 

Okay, well, HavenSeniorInvestments.com is our website. And honestly, it is chock full of information, I highly recommend anybody who’s interested in this field to stop by there’s stuff there, about the lending situation, all the different loan products are there, the National inventory is up there. They there’s information on how to value your business how to how to work through a development concept, just about every aspect of what we do is addressed in there. There’s research articles, there’s so much it’s a great learning platform. There’s also BIOS on all of us and all of our team members so you can learn about the depth of knowledge that we have when you speak to us. It’s just a great one stop shopping for anybody in in the industry. And I can tell you, it’s been a little bit like a honeypot, because we get a tremendous amount of traffic there. And it brings us people, buyers and sellers every day. So that’s what enabled me to actually have a good pulse on what’s going on out there. Because I’m talking to buyers and sellers every day. So I just hear what they’re doing. And we’re just we’re really got our hand on the pulse of the market due to our website or website. It’s been a real blessing. It is where you look located. Well, I’m speaking to you today from Wilmington, North Carolina. Well, that makes two of us. I’m in Asheville. That’s right. That’s right. I went but we’re both recent relocators right. And that’s right. You hear Yeah,

Pam Pyms 

I’m from Colorado, too. Well, it’s too bad. You’re a little bit far away from Nashville. But maybe you and I can get together sometime. Nonetheless. You’ve got the mountains, and I’ve got the beach. What a perfect mirror. Oh, perfect, perfect marriage. I’m really happy to have talked to you today. And I hope that all our listeners find you.

Robin Gestal 

Well, well. Thank you so much for taking the time I we we love talking about what we do. As you can tell I probably rambled on and on. But I could not do love senior housing. We love what we’re doing. And we’d be happy to speak at length to anybody who wants to know more.

Pam Pyms 

Yeah, well, I’m sure you’re going to get calls because this has been just terrific. Thanks so much, and I’ll talk to you again soon. Thanks, Pam. Bye Bye. Thanks for joining us today. This podcast is brought to you by Haven Senior Investments. Haven Senior Investments is the leading faith-based senior housing advisory firm focused on providing their clients with the knowledge and expertise necessary to support their goals of buying, selling, developing, investing, or operating in the senior housing market. They can be found at havenseniorinvestments.com


An Environment where Senior Living Residents are Respected and Celebrated

SPEAKERS

John Hauber, Tom Hofmeister, Pam Pyms

John Hauber 

Welcome to the senior housing investor podcast. If you are an investor or want to be an investor in senior housing, then you’re in the right place. Hi, I’m John Hauber of Haven Senior Investments. We are pleased to present our newest episode where we bring you the innovators and leaders across the full spectrum of assisted living in senior housing, all of whom provide for the betterment of our senior population. The host of our show, Pamela Pyms has background in the industry and she will be interviewing our honored guests. Hi, Pam.

Pam Pyms 

Hi, john. Thanks very much. It’s great to be here. Today, I have the pleasure of being with Tom Hofmeister, who is the CEO of Elder Fire Lodges, and we’re gonna hear all about that. Hi, Tom. Hello, Pam, how are you? I am fantastic. Good. You sound fantastic. Yeah, and I’m glad to have you on the show today, would love to start off with as I usually do with our guests, having you tell us about your background?

Tom Hofmeister 

Sure. About 40 years ago, I came out of a Technical School of Architecture, I had building experience because my father was in the building business. And a little bit of architecture took me a long way very quickly, I came out of the class very early on, because I was one of the few people in the class that knew what I was drawing. I knew what footers were, I knew what roofs were, I knew what shingles were because my daddy made me do all that since I was 10 years old. So eventually started a construction company. It was a custom company, we designed everything we built, which was a real advantage for our for our team, because everything that we drew was about making it so it didn’t leak because we had done callbacks on those things before. So a lot of things were reverse design that eventually went into larger commercial projects. I did lots of doctor’s offices and a lot of things and I, I kind of fell backwards accidentally, into sitting with an entire before I would design their office, I’d sit with the entire office and the entire staff. And I’d ask them, What gets in your way. How do you want to serve your client? How do you how do you have competitive advantage here. And it really greatly sometimes changed what the Floor Plan was, what the look of the building was, and how the entire operation went. I didn’t realize at the time that I was really learning that you could backwards design buildings, products and culture to have competitive advantage in any type of business. Brilliant.

Pam Pyms 

I’m sure it is served you well here at elder fire lodges. So tell me about your mantra or the mission statement, which I know is elders changing the world? What What does that mean?

Tom Hofmeister 

Well, about 10 years ago, I was putting ideas in my idea folder, and my father had Alzheimer’s and I found myself visiting care homes, I found myself in the family challenges of of caring for dad helping mom care for Dad, what kind of care home would we put them in everybody feels guilty because of course, we always promised we’d never put you in one of these places, I discovered that I am going to these places, and I didn’t want to be there. They were usually clean. And I did like the employees but the elders didn’t really want to be there. There was a lot of depression. The employees didn’t necessarily want to be there in the video, the visitors seem to be visiting because they were guilty to come visit. They weren’t coming because it was the coolest visit they could ever do. It wasn’t an exciting, fun thing to do. And I started questioning the culture that I was seeing, and that it could be in reinvented, I questioned the floor plans and the style of the building that it could be reinvented mission statement, elder changing the world. They were playing a lot of games in these buildings. And I challenged that. We really don’t want to play games. I get in front of groups of people today. And I asked them how many of you dream of going out and playing bingo every day in your elder years. Nobody raises. Nobody raises their hand. No. And I’m like so if none of us are dreaming about this in our elder years, why are we developing it in the care homes? Why are we doing all these things that nobody dreams about? Nobody wants to do. I was confused. You know, kinda by the whole thing. It’s a very strong, powerful industry. That kind of just keeps repeating itself. Elders changing the world came from an idea that we’re happiest when, really, when we’re in our gifted area, everybody, all of us have a god given gift, no matter what age, it really starts to spark it about four years old, and it kind of shines all our life. And as I’m interviewing people in care homes, I’m discovering that my 89 year olds are absolutely brilliant. And they’re gifted, and they have positive energy. And well, how could I live a different lifestyle? They’re trying to discover these cycles. And I thought, what if we created an environment? What if we created a place and we didn’t even call it a care home? If I have 100 brilliant people in a single building? Could this be the cultural center? Could it be the mentoring center of every community, that we choose to build elders changing the world,

Pam Pyms 

your enthusiasm is infectious. And I love the way you’re thinking out of the box. I’m thinking about reserving my corner unit now. I take lots of reservations. So So obviously, you’re you’re reinventing the culture, you’re doing that through the activities director? How are you doing that?

Tom Hofmeister 

You know, I had tons of consultants who were always telling me what to do, and what the elders were telling me how they wanted to live, how they wanted to feel, and how they wanted to participate was the opposite of what I was paying a lot of money for the industry to teach me, this was a, this was really confusing. And one of the fastest early changes that I discovered, was in the events, coordination, you know, if nobody wants to play bingo, why we play in bingo, I had to go in and look at all of our job descriptions. The job, the job description, in the industry is kind of like on a cruise ship. We’re going to play these games, we’re going to be active, we’re going to have fun as groups. And that’s all fine. But it wasn’t going to accomplish elders changing the world, it wasn’t recognizing their gift and turning it up. So one of our earliest examples came out of changing the job description for the events coordinator away from a person who does events to a person who’s an entrepreneur mindset. You see, an entrepreneur looks at its team constantly and goes, here’s what it’s good at, here’s what you’re good at, here’s where I’m gonna put you in the company, because that’s what’s gonna make us successful. So I need someone with a mindset that looks at all these elders and says, oh, wow, this is unbelievable, you’re really going to accomplish now. So we went into the art room, for instance. And they said, Well, what does this look like? We’re used to taking these little itty bitty birdhouses and we buy them at the store and we paint them and we give them to our daughter, we your daughter’s 60, she doesn’t want a little wooden birdhouse on her shelf. She doesn’t need it. You know, this isn’t daycare, this thing kept resembling daycare, and I’m like, oh, my goodness, these people are brilliant. Why? Why does the program represent a daycare cycle? Everything you do in the art room, I want it to change something in somebody’s life outside these walls. And nobody could quite grasp it. But I kept making that statement, these elders are not going to change anything, unless we are their assistance in helping them do that. And a little lady comes one day, my events coordinator had discovered that the hospital just down the road, had asked for Can you make us some thank you notes? Well, that’s cool. It was the head chaplain, who had asked, and one of our ladies starts making these thank you notes. And she made about 10 each, they were pressing these leaves into this thing. I mean, these were just really cool. They delivered them to the hospital, the head chaplain calls and says, so what’s up, he calls me personally, I didn’t even know this was going on. I like to take credit. But unfortunately, I’m not really in the storyline a lot of the time. He calls me up, and he says, So where’d you get these? thank you notes. I said, What do you mean, I’m trying to act like I know what he’s talking about. And I said, What do you mean? He goes, where’d you get these thank you notes. They made them in your art room. They’re just really cool. He said, he said, You know, I’ve never written a thank you note, and had the people call me back and say, you know, they weren’t talking about what I wrote in the thank you notes they’re talking about where’d you get these? thank you notes. These are really cool that it is, you know, yeah. And I went, I he said, Can you make me 100 ob Yeah, I’m just making this up. I’m on the phone. I said, Sure. We could make you 100 I’m like, I call back the logical oh my gosh, guys, I just committed you to 100 thank you notes. I don’t even know who’s creating them. And this little lady goes well, when do you want them? What can you give us 100 in a week, and she goes a while I’m gonna have to build a team, but I can make that happen. Oh, wow. waterfall he can. So she says here, Tom, do you want to deliver him to the hospital? I said, No, I delayed your delivery. I want your whole team. We’re getting on the bus, you’re gonna go meet this guy and his team, and I want you to deliver him and just say, Here you go, we’re pleased that we could help. So they have seven, seven of these associates working under him at the hospital. The elders now are winning, because I looked at my team. I said, Now guys, you’re focusing anytime I can call back to an elder and go, Oh, my gosh, you’re good. Oh, you’re so tough. I am. Oh, it is so unbelievable that you’re living here at the lodge, and you’re making such a big difference. Every time I can make that call your admission. Elders change and the way you get it. Well, you you get it. I I love. I’ve got chills listening to this. This is so

Pam Pyms 

cool. Just really it is it is and I obviously you know, you’re listening to what their talents and gifts are? How would you say maybe they’ve taught you? or what have they taught you that maybe changed even your advertising approach?

Tom Hofmeister 

Oh, my goodness. So I was crazy. We were We were going in the lodge. Every couple weeks, my my marketing team, my sales, we’d sit in the corner of the dining room and we you know, here’s the ads we’re going to work on. Here’s the marketing, here’s what we’re going to do. And I had this, you know, I think if these elders are so smart, and they’re the ones we’re supposed to be talking to, let’s bring three of them into the meeting. So I invited three of them in and there’s of course, Fred, he’s a little ordinary Tom, I don’t know nothing about no marketing wheel of fortune is coming on soon. I really. And he goes, he goes, I’ll come if you get me some chocolate chip cookie, Fred, you got it, man, I’ll call the chef. Get you some fresh chocolate chip cookies just show up. If you don’t say anything, I don’t care, Fred. I’m just working on a whim here. So we would get in this meeting. And they’re the elders set and, and I pass an ad around the table. And it goes around the table, it comes back and I said, Oh, nobody said anything about the ad. We’re gonna go ahead and put it in the newspaper and a couple weeks. And away we go, you know, and Fred looks up. And he goes, Hey, Tom, yeah, you want the truth about the ad? I said, What do you mean, Fred? He said, Do you want the truth about that ad? And I said, What What do you think? And he said, that ad stinks. I said, Well, what do you mean? He said, that’s the most or he said, What are you? Are you a used car salesman that adds a come on? That is not going to get me out of my lazy. Are you kidding me? Well, I Exactly. He took my whole team right to their knees instantly. And I said, Well, well, Fred, you know, the ad, the ad was what I had been taught in the industry. The ad was Come on in for a free lunch and and do a tour. He said that. He said, I’m not getting out of my lazy boy for your free peanut butter sandwich and do a tour and get caught by your sales people. And that’s stinky. I said, Fred, what? What kind of ad would we do? What do we need to be doing here? What do you see? And he says, I don’t know. And he used a little bit of sailor language because he was a sailor, and that was just more fun. He was so rowdy. He says I don’t know, I told you. I’m not a marketing guy. He grabbed four chocolate chip cookies, and he left the room. So what did you do? My team looked up and said, What do we do? I said, Oh, my I said, I’m not sure what Fred just saw. And he didn’t tell us what to do. But he told us what not to do. We’re 50% home. All we got to do guys is find out the other half. And and and as I dissected a little bit, here’s what Fred was really seeing that I’m not even sure his intuition told him this. Our mission, elders changing the world. We did not click to that mission in this ad. It was not focused on the mission. It was an ad I’ve been taught by the industry and we were just floating along, we still lacked focus. So what’s that ad going to be? And we concentrated we thought about it. So I had Boy Scouts in the building. I was doing Big Boy Scout events. I had a group that worked there. And they did all these things. I had a young man who, who wanted to do his Eagle badge. And he wants to do a fire pit to earn his badge behind the church. And I said, Well, have you ever designed a fire pit? Well, no. What do you know how to put the numbers to get will know? Or do the drawing will know Do you know how to raise money to do this? But well, no, I’m not gonna lie. I’ve got ladies in the lodge that have done events before they can come to the church and help you put on a dinner that you can raise funds. I have an accountant in the building. I have a cabinet guy who knows enough about construction that he can help me with the drawings and and you can put all these folks put their arms around this kid. Oh, Mike, they take him to the moon. What was that? That was elders changing the world. And it went, Oh my gosh, that’s the ad. They took a picture. She took a picture of one of the men and they took a picture of the boy And they put them they put them next to each other and said, and all the ad said was, thanks, Joey, thanks so much for being part of the lodge and making a big difference in this community is live. We love you.

Pam Pyms 

Oh, that’s a that’s a lovely story. It really is. I it sounds to me like maybe you were able to just take those elders? And do you have them help you with sales?

Tom Hofmeister 

Oh, my. Yeah. So I had this and I could see that I had people in the building who are good in sales. There were realtors, they are. they’ve sold a lot of things. And many people are very gifted salespeople. So the industry and my consultants said, No, Tom, you cannot put your elders in sales because they’re gonna say the wrong thing. And I was really surprised at the time. How I how I took that in. It made me hesitate at put them I mean, I was ready to put somebody in sales, and it made me hesitate right away. So I kind of put it off. And one afternoon, a gentleman approaches me his his, his name was john. Oh, no, it was George. I’m sorry. It was George. And George approached me. He was in an automatic wheelchair, he wheeled up Tom and he said, I’d like to help you with sales. And I’m you know, and I’ll be honest with you, I’m thinking, Oh, here we go. I was told not to do this. And how am I going to get out of this? He wants to help me change the world. This thing’s gonna bite me. And I said, so George. Um, what do you think? And he says, Tom, you’re methodical. When you do a tour. I said, Excuse me. He said, You started to her, you know exactly what to say you know exactly when to shut up. You change the energy of the tour all through the building. He said, I can see that you backwards design this building just for a tour. I said, Excuse me, john. He says I can see it. He says you were thinking about how a person was going to feel on a tour while you are designing the building. And I’m just taking back, because that’s exactly what I did. And I’m trying to teach my sales people this. And John’s just sitting back and watching and I’m going and this guy’s smart. Holy moly. I, once again, I’m guilty of leaving it on the table. What the heck. So I said, George, What’s your idea? He says, well, Tom, this is going to be a little bit of a secret. But here’s what I want to do. He said right in the middle of your tour, you stop at the elevator and say, okay, on the fourth floor, we’re gonna head on up and I’m going to show you a room. We’ve got decorated rooms, and they’re really cool. And he says it right, then the girl at the front desk calls you over. And she says, Tom, I just need you for 30 seconds, and she’s gonna pull you away. And he said, we’re all going to get in the elevator. Just tell him I’ll meet you on the fourth floor. I’ll be right up, I promise. We’ll write into the elevator. And I’ll have them sold by the time we hit the fourth floor. Amazing. Are you talking about? He said, Tom, he said, you own this place. You have everything to gain their antennas up that you’re just talking. Maybe you’re just a great sales guy. They’re not gonna fall for you hook line and sinker. He says I’m gonna wheel in there. They got mom, she’s 90. She’s in a wheelchair. I’m looking at her eye to eye and I’m gonna tell her. Oh my gosh, the first time I wrote up in this elevator, I was scared to death. Oh, my God, my family is going to sign a contract. They’re going to leave and I’m going to be stuck in this place. Are you kidding? And he says all I need to admit it. You said when you come up, I just need a minute to finish. He says because I’m gonna finish with her. I’m gonna say, just take a big breath. Because I learned when I moved in. This is the most fun, cool life I could have ever dreamed. It’s so far beyond my expectations. So put the fear aside and just start soaking it in to discover if this is the place you need to live the rest of your life.

Pam Pyms 

It sounds like you do have some amazing residence. Oh, my gosh. So that that’s a great story. I guess I’m curious too, about the people who came to your events at the lodge. I understand. Some of them would talk about you on Facebook. Is that sort of like free advertising?

Tom Hofmeister 

You know, I wish I was this smart to create these programs. For your listeners, Pam. I don’t care what your business is. If you get a little off focus if you’re if your directives and your culture and the direction of your mission isn’t quite on. Here’s how you spend the time you just keep doing the right thing because when you constantly do the right thing for others stuff comes that you never could ever see common. So I’ve got the Boy Scouts in the in the in the place where they’re doing bridging ceremonies. I’ve got 80 Boy Scouts in the room, I got their parents I’ve got who else. The grandparents who have never even been in this space, Holy smokes my client or my resident, my potential resident floating all over the for the room because I’m just thinking I’m doing the right thing for the Boy Scouts and I’m blowing this culture out. So we have this cool event ice cream machine go in there got an Indian dance in the back, just a great bridging family event. Well, I had set up at the front door, I have a big bear in the lodge, and I rolled the bear out to the front entrance. I put this big poster welcome Boy Scouts from this troop and this troop, I put the American flag I thought they’ll just feel welcome. It was a pain. I don’t have time to do all this. But I’m thinking, they’ll just still enjoy that at least when they come in. It looks high quality and kind of cool. And so they do the whole event. And people are starting to leave at seven 730 after the event and I noticed this big line of people in the living room. And I’m like, what do you what do you people doing? I made my way out to the foyer. And these people, every family stop and they’re taking pictures of the boys they’re bringing in grandma and take a picture here next to the bare next to the flag. What I had accidentally done is created the ultimate photo opportunity you should know. That’s that’s just kind of cool. That’s neat, you know, so So I go to church The next day, and I pass somebody in the hall. And they go at Tom great event at the lodge last night. I’m like Oh, thanks. That’s That’s cool. second person passes me man. You guys sure rocked it at the lodge last night way to go. Third person passes me all the way. I’m What? What? What? None of you guys were at the lodge. Howdy. Am I on the front page of the paper? What the heck. like Tom, the lodge is all over Facebook this morning. There’s hundreds of people post in pictures. And it was cold. And it was great. And it was stuff and I’m like, Oh my gosh, I wish I was smart enough to have come up with that idea.

Pam Pyms 

That’s fantastic. But you’re right, you’re doing the right thing. And it and it’s out there,

Tom Hofmeister 

it turned into a home run. So So after that every event we did, I told the team, here’s what we do, guys, I want you to create really good pitcher opportunities. And then I want you to put a little sign down in the corner that says take your Facebook picture here. So I was given them the idea and urging them of course, we’re going to take the picture, they’re going to go home on Facebook, and the free advertising just blew us away.

Pam Pyms 

Oh, that’s terrific. That is really terrific. And I know besides assisted living, you know, you also have memory care residents. And that’s a tough one. Did you create a program to encourage families of memory care residents to visit more often?

Tom Hofmeister 

Um, you know, I had been studying and attending lots of programs of families being mentored, you know, it is hard to take care of mom and dad with Alzheimer’s or in memory care. But what was being left behind consistently was the families. I saw brokenhearted families, I saw sons who didn’t want to come see dad because they don’t even know his name anymore. I saw daughter’s crying because I think mom knew my name yesterday. But she doesn’t know my name today. So sad. It was crazy. And I’m like, they didn’t want to come for these classes that we did well come do some classes. Well, I the men especially wouldn’t come I’m not going to come in. And I have no psychological problems. That’s what that sounds like, we’re not going to do that. And frankly, they weren’t fun classes. You know, they just they just weren’t exciting. And nobody wanted to be there. And I thought, you know, guys, we got to figure out here, how we help these families in a manner in which they’ll at least come in, participate and start being open to help. Why don’t we all get around food? Let’s feed them. What if every second Sunday of the month, from 11 to two, we feed anybody that wants to be fed, invite the grandchildren invite dad invite the neighbor, we don’t care Come on, and we’re gonna put the hot dogs and the stuff on the grill. Next month, we’re gonna put up spaghetti on the grill. So the first the first month, we probably had 20 people come Well, that was cool. And that was kind of fun. The next month, we probably had 40 the next month we had 60 you know and I got people going well, this is getting out of hand all these visitors and I’m thinking oh yeah, baby, this is coming from every direction. There were people coming like it was Thanksgiving dinner sitting around a table laughing goofing dad sits at the end of the table doesn’t know who anybody is. But I bet he’s having a good time though. She is and and as they participated, the hardest thing for the family was their guilt. As their guilt started to melt away. You know, their mind started to open they started to participate. So I I got this gentleman one afternoon he comes in now Tom, you don’t know me. I’m the son of so and so. Oh, yeah. Love dad. He says I’m in the nursery business. Can I come and plant some plants for butterflies? Because I think your garden would be cool with butterflies. I said Are you kidding me? Yeah. All right. And I and I don’t staff and I said you’re gonna hold him accountable to it. He’s gonna get these plants. And I said here’s what you’re gonna do. As soon as you see the first Butterfly, I want photos, I want smiles, I want stuff. And I want at least three thank yous coming to him from three different directions. You’re unbelievable. The fact that your dad lives here and you would come in and the family and make this difference for these people. Wow. Oh, yeah. And all of a sudden he wants to be there he wants to participate in, he’s open to the conversations of the challenges that will start to complement and change his life walk.

Pam Pyms 

Well, I just love how open you are and how receptive you are to your residents and the people that surround them. And I imagine you’re an amazing mentor. So how did you teach your team to say, turn their most challenging problems into their greatest successes? That’s a hard question. But go.

Tom Hofmeister 

So my past companies in construction companies, he just made a lot of mistakes. And I’m like, you know, I need the boys to tell me about the mistakes and we need to talk about how are we going to change that? And how are we going to turn that into homerun and as crazy as it sounds? I became the celebrator of big mistakes we would get in weekly meetings, I’d ask the team Okay, what’s the biggest mess up? We made? What’s the biggest bunch of money wasted? And how did we fix it and turn it into the biggest home run ever? And they would gone Jimmy mad. He lost your favorite wheelbarrow off the back of a truck last week. And he went back and it was already gone. You crazy. Jimmy. You know, Jimmy, come out. Go. Yeah, sorry about that. Boss. Man, you were given that wheelbarrow. And I didn’t want to tell you while I already knew the wheelbarrow was missing, I said, What do you do about it? He goes, Well, we went out bought some special rope and some bungees for every vehicle because we were losing lumber off the truck. He said, boss, man, we don’t lose any lumber, we don’t lose anything anymore. So what we were actually concentrating on is we’re not going to get mad or challenged about a mistake, I would only challenge them when they made the same mistake twice. I’m going to get all over your case, if I see you pleading mistakes, because our system and our mission, our directive is that we’re here to improve and we’re here to get better. So I had a I had a a fantastic chef at the lodge, you know and in the kitchen, you know, it ran like them stupid TV shows where everybody cusses everybody get angry in the kitchen just has to be a giant mess. I mean, the TV TV was kid teaching my culture that you could be idiots in the kitchen. They weren’t anywhere close to the culture in many aspects. But I had a fantastic chef and I asked him who makes you the craziest in this building? Who do you not like as a resident cuz she or he always complains about your food? He goes, Oh, that’s easy. It’s Sofia. You know that? I said the Italian lady. He goes, Yeah, he says Tom, I couldn’t cook a thing. And he was getting compliment a lot because he was doing a great job. But Sophia had prepared food for her life, all her family and there wasn’t anything you are going to do for so for for Sophia that satisfied her. And he says Tom, I can’t satisfy. I can’t put anything in forever she’s happy with. And I said, I want you to try something for me. I want you to bring Sophia into your kitchen. And I want you to have her teach you her favorite dish. And I want that favorite dish to go out on a Friday night. And I want a card on the table that says this is this is so fierce, customary lasagna that she learned from her grandmother and she came into the kitchen and she taught us and we are really excited that it’s on the menu tonight. And he they did they really reluctantly I don’t want Sophia in my kitchen. This is the dumbest idea. I said just try it. Please just try it. And they did it. And I looked at the chef after they did it. And he goes, Sophie is a different person. And I said what do you mean? She’s a really nice family smart. Oh, my goodness, you should see the cooking idea she’s blowing at us. I said that’s interesting. Have you heard her complain? He said No, I haven’t heard a complaint at all. I said, Why isn’t she complaining? Well, I don’t know. I guess it was her dish. I said I can tell you why she’s not complaining. Because you gave her ownership. She owns a piece your kitchen. She owns a piece of access into you do Do you know, when we have ownership of something, we can’t complain about it. We don’t complain about things. We have ownership. And it’s like I was addicted to this. It was like a light bulb went off on his head. And he goes, I said, Look, elders change in the world. Did she make a big difference? Yeah, you complimented that. Yeah, Chef, you’re the coolest ever way to go. You rock and he stopped in mid conversation. He goes, Tom, I got eight or 10 other people that make me crazy. Do you think I should call him into the kitchen and let them have ownership and I said you know, you know, Chef,

Pam Pyms 

I think you’re absolutely brilliant. And I’ll back you every way that I can to go ahead and pull that trigger as a brilliant idea really was terrific. What type of innovation are you working on now and your newest building for memory care? Residents,

Tom Hofmeister 

oh my goodness, memory care. I tried to get a lot of consulting and memory care, I hung out down there a lot. My learning curve really didn’t start until I opened my first building. And I watched, I watched for the inefficiency in my floor plan for my employees, I watched for, you know, I would talk to the family constantly to try to discover their expectations of how their loved one would be, you know, would would would be cared for. I looked at, you know, what’s the architecture? What’s the natural light? What are all these things? and I, we did pretty good our first go around, but the real education came when 40 people lived in a building who did who acted and did 100 different things, 100 different ways every day. Wow. You just you couldn’t dream up the things that these folks could get into and the crazy things that these people could do. So my fourth building is 100% redesign of what I’ve been learning. When I hung out with my team, you know, I was looking at sleeping disorders, I was looking at people waking up in the middle of the night I was eating this, why won’t they eat? What, what what gets it? And so I started studying the circadian rhythm. What gets us in a rhythm? How do we act and participate during the day in our daily lives? That’s very different. When we become instant, in an institution, or in a place or even a hospital when we’re in a large group area. What’s the difference of how we live, then how we live at home. And so I started concentrating on on our five senses. How is the site different How is if you get in the hospital and you get in the average care home, you’ll discover right away that all the hallways, the lights are on 24 hours a day. And it’s very bright white light, not quite as necessary today as it used to be because we used to have to do paperwork in the hall that was real small, we needed a good light for it. Today, it’s all done on the computer, that light is actually a little less important. But I started working with friends, I got all these connections in the industry. And I’d call them up and go, Hey, I have this problem. I got no money to fix it. But I need to but we need to do it better. Anyway, we’d innovate in these new ideas. So you can buy light bulbs today that you can hook to your to your phone off an app and change the temperature change the color of the light 1000 different colors in a bulb. And I thought oh my, what if in the conservatory up in the ceiling, it doesn’t really open to the sky. But it’s got all this light in it that’s designed to control light within the space. What if in the hallways, I put in these light bulbs, and I started to control the level of light. In the morning, we wake up to an amber light, our subconscious gets that at noon, you sort of know it’s noon, because the light is very white. And in the evening, it goes back to amber and of course you get into a low moonlight. What if I took all these lights, I programmed them to follow the sun, we pretend the roof isn’t even on the building. This is like we’re outside. But I have the interior colors mimicking the sun. So I start to keep my patients, my residents with all timers or dementia of some sort into this groove that when we go outside, we take for granted. But now they’re inside and they’re going to actually live within that cycle. Sound. When I looked at sound, I created a music system that nurses made me down in Alzheimer’s Tom, you got to separate the music system into three different places because different residents like different type of music, and we need some flexibility here is and that’s cool. That’s not hard. But what about other sounds that we’re used to in our life that keep our timing right? What if you know, early in the morning, the rooster starts crawling in the distance, you know, and the birds start to chirp built into the system. What about every day at noon, that noon whistle is in the background or every day at 10 o’clock, or at two o’clock or the train goes by you hear the distant train and that goes the same time every day. You know what if that seven in the evening the ice cream truck is in the distance and it’s coming by and it’s it’s getting us back into the timing that sort of says Oh, it’s breakfast. You know, here come the crickets. All the crickets mean what Oh, the crickets kind of start getting me into sleep mode. They start getting me moving toward bed, you know, and what about touch? How am I going to handle touch? You know what’s so adventurous about these people in Alzheimers? About 20% of them love to get into each other stuff makes the nurses crazy. Joe’s dentures Joe’s dentures are missing again. With his glasses, we don’t know where they are. Somebody’s got it in their pocket, you know, and I thought you know, how do I solve this. So I have this this real loop. The new design has no dead end hallways. And every time you walk a distance it loops you back around. So the whole thing is a very unique loop specifically concentrated on for my motion people. But I started putting work benches around. So as you’re making motion PLAs pace, you might, you might stop at a place that has a little bit of wood, a little bit of PVC, and you might stop at a place that has some groceries and as these things, well, if I’ve got people who kind of want to get into things, what if I give them things to get into? What if I start hiding things in the back of the drawers? What if I create a crate that looks like you shouldn’t be getting into, and Joey, who loves to get into things is going to kind of go well, I’m pretty sure I’m not supposed to be here. But I’m going to get into it. If I create enough circumstances for them to get into. Maybe I now I’m taking that job off my nurses of Northern getting into each other’s rooms. You know, can I minimize that huge challenge through better design? And better visibility?

Pam Pyms 

Yes, amazing. That’s fantastic. Oh, we’re crazy. We are. Yeah, that’s fantastic. You know, I usually ask this question at the end of the podcast, but which we’re getting to, unfortunately. But I do have to ask you right now, just with everything you’ve said, because I, I’ve been in this business for years and years or used to be, and I have never heard as many innovative ideas, as I’ve heard from you in the last 35 minutes. So I am curious. Let’s tell everybody where to find you. Let’s do that right now.

Tom Hofmeister 

Oh, I can be reached at elder fire lodges calm pretty easily. Or t hoffmeister. At elder fire lodges calm is my my personal email. Okay. And are you located only in Florida right now? Yeah, I was I was working in three different care homes, we exited those with particular partners under a particular cycle. And then I’ve taken on a fourth project myself, and looking for those new partners and those new relationships that really believe in all these things that we’re working on and really want to be part of earning money and making a huge difference in reinvent in this industry.

Pam Pyms 

I hope you get a ton of calls. I really do. And I know we are just about out of time. But I and I have so many other questions. I’d love to ask you. I think rather than me just picking one, I want to ask you if there’s anything you haven’t said that you would like to say.

Tom Hofmeister 

Oh my Yeah, time, time is always the problem. Of course, I have 100 more stories. Yeah. Right. But you know, you know, probably Pam, one of my biggest surprises about this was that no matter what we did, we were fighting the industry, the industry, you know, we don’t change how we do things until we’re failing really bad at something. And the industry is still has lots of elders come into it, the industry continues to grow. So it is allowed to be average. And it is allowed to be a little bit lazy. I’m not you know, I’m not talking in particular about anybody. But people really don’t want to go to the next level to innovate. They don’t want to reinvent anything because they consider at risk. And quite frankly, it is very hard to do. But this industry is very stuck in the mud. There are some fantastic people. But I was easily discovered and 50% of people in these buildings don’t even like elders. I’m like, I don’t think I how you heck are you caring? Well, if you’ve got people here, who don’t even like the people that they work for 50% turnover? How are you creating consistent, you know, return for your investors, if you have 50% turnover, they wouldn’t train people because it’s really expensive thing to do. And they would say, well, they’re just going to be gone in a month Anyway, why would we do that? You know, we’re alright with burning them out and flipping them. And I just, I just was so surprised. You know, when I when I left one of my buildings, a company took it over within two weeks. Pam, I was so taken back. I thought we’re going to show you these ideas. This is the most unbelievable thing ever. These people love it. The employees love it. This thing’s running on all cylinders. The culture was gone in two weeks. Oh, that’s so sad. completely gone. So sad. So the fun of building a culture one of my really challenges is can I do this? And can it stick? You know, can I show that investors make more money because of unbelievable strong cultures? You know, can I show that you get the best employees and they stay around because you’re treating them right? Because they have all the tools and because you’re letting their gift, their gift show.

Pam Pyms 

Well, you do have tremendous ideas and I hope you’re a featured speaker at you know all the different senior conferences. No Nick and anywhere where you can go and spread this word. It’s been a real pleasure to talk to you today. And I want to thank you very, very much. Well, I thank you so much, Pam. It’s my pleasure. Okay. Well, good. We’ll talk to you again soon. And I’m going to be following your career and hoping that you build many, many, many more as the years go by. Have a fantastic day. Thanks for joining us today.


Passively Investing Into Small Residential Care Business Models

SPEAKERS

John Hauber, Brandon Schwab, Pam Pyms

John Hauber 

Welcome to the senior housing investor podcast. If you are an investor or want to be an investor in senior housing, then you’re in the right place. Hi, I’m John Hauber of Haven Senior Investments. We are pleased to present our newest episode where we bring you the innovators and leaders across the full spectrum of assisted living in senior housing, all of whom provide for the betterment of our senior population. The host of our show, Pamela Pyms has background in the industry. And she will be interviewing our honored guests.

Pam Pyms 

Hi, Pam. Hi, john. Thanks very much. It’s great to be here. Today, I’m delighted to be here with Brandon Schwab, who’s the CEO, and founder of Shepherd Premier Senior Living. Hi, Brandon, how are you? I am awesome. That’s what we like to hear. Thanks very much. How are you doing today? I’m good. Thanks. But tell me about yourself. And what got you interested in started Shepherd Premier Senior Living?

Brandon Schwab 

Well, that’s a very good question. I was actually I first got exposed to the bigger box buildings to care for the elderly. Back when I was about 28 years old, just my grandpa, he was in a bigger 200 bed building. And I didn’t have a very awesome experience. And I was able to push that down deep. But after I had the opportunity to get exposed to an avenue for homes that are five to 10 different beds each, I was able to come back to that first experience that I had, he had to have help, right. And our family pulled the pole cord button, and it took the caregivers time. And after 510 15 to about 20 minutes, I was getting pretty upset. And I ended up having to go get the care team to be able to help him because his face, it was able to change change colors. And he was able to get pretty upset that he didn’t have anyone to help them. So that experience plus the typical older piece that I don’t think you were able to get off of you in a typical bigger box building for time, right? All of those factors combined, I didn’t have a very good first experience in a bigger type building to offer care, right. And then to just fast forward, I was in church in 2014. And it was a one of those church type of times where the church pastors only able to talk to you. Back be for that I actually had a portfolio of homes. I had 23 homes. And I had tenants in all of them

Pam Pyms 

to not senior just normal homes. Uh huh.

Brandon Schwab 

Wow. And I thought I was doing good. I mean, I was taught to go build a portfolio of homes on them for 25 to 30 years, and all things are good. They didn’t tell me though, that tenants are very tough, right? I had a tenant just before this event for church, that her kid clog all three toilets in all of our in that whole home phone to the point that the finished basement backed up with poop. Oh my goodness. So I don’t know if you ever had to do that. But like that pretty much pushed me over the edge. Wow. It was a type of experience that this gal was into us for almost $8,000. And I did it all personally. And it took me all day long. And it was terrible. But afterwards, that opened up the eyes that there had to be a other option out there that I was able to help people but also to do it in a opportunity that I could earn the in calm that doesn’t always have to have me in each house every day. And after that I was at church and the church pastor was talking to us and and after I heard that I was down in down in Florida right down by Tampa. I pulled our boat down to Florida and and Kelly’s dad. So our father in law he played The piano at 328 homes per year. Wow, for $35 each. And at this point, I was like Kelly, is there anything that I can do that I don’t have to build a go in? Because typically down there in Florida, they typically are able to, to have them go up right 10 to 12, just floors of the elderly, and the odor was terrible. I hate it. And Kelly gave me all of her eyes that i i did i didn’t have any option, right? Yeah. So I ended up going, and I was able to go into a home that had about five people in there. And so I was like, Oh, my God. And I haven’t ever been exposed to a actual home that cared for the elderly. And it didn’t have the typical odor that is in all of these homes. And, and I just found the experience to be totally different than I’ve ever seen before. So I was able to ask that person to, to be able to tell me extra info on it. And I ended up going home, thinking that as I was able to get home that they that they probably had all of these types of homes all over the place, right. And I came home to find out that there was only about 55 of them through all of our area. And I said that’s an awesome opportunity. You bet. So I jumped in. I opened up our first house in 2014. I opted to have 10 beds in our first house.

Pam Pyms 

Hmm. Was that private rooms or two beds to a room? Or?

Brandon Schwab 

Well, I had four private bedrooms, and I had three bedrooms that had two people in it each. So 10 total beds, but I had four private bedrooms in three bedrooms for two people. Okay. Yeah. So that’s how I was able to get into it. It is a thing that I was able to get into it to be able to help because I felt that the other bigger box buildings aren’t the best platform to give awesome care. And particularly I think, I think today pose COVID everyone in this country is open to any other avenue to offer care. That isn’t in a very big building. I had found that through COVID, our our occupancy was able to go up. And quite a bit of the other bigger box buildings in the area, their occupancy was able to go down. I had found that during COVID people were taking their parents home, particularly because they didn’t have to be in the office. Right. Right. So but I found that all of our homes, they were a very good option. And I actually had occupancy up during 2020.

Pam Pyms 

That’s amazing. Were you able to I’m just curious. Are your rates the same? per person as they would charge in one of the bigger boxes for assisted living? I’m assuming you did assisted living, not memory care. Mm hmm. And how did your rates compare?

Brandon Schwab 

So a thing typically for all of ours is I charge a price that is going to include everything. I had always kind of felt that if you offered a person and upfront price and then added things to it each month I’ve I was felt that it was hard for the families to just figure out how they could plan for all of that. So our prices are basically charged per private in per double bed. Right?

Pam Pyms 

Right. So you do have a combination that of say private pay, and do you take Medicaid for the double rooms.

Brandon Schwab 

Well, all of our houses are typically private pay, but I do have private bedrooms that are anywhere from six to 8000 each month. And then I have got bedrooms that have two people per room that are about 5000 to about 6500 each. month, and then they can

Pam Pyms 

split that

Brandon Schwab 

No, no, that is per that’s per person I see are over all business is different. I mean, I have people that are in that are going to have their own place to be in the evening time, right. But I encourage people to be up and out, I am able to custom build tables. So everyone needs to gather, I feel it, that’s a key piece of our operation that puts us apart from everyone else. Because typically, if you go to these huge buildings, they have tables of you know, about four to about five people each. And they only talk to those people every day, over and over and over in it in it on fortunately, is going to create an atmosphere that they kind of only talk to those people in all of our homes, I I typically have homes that are 10 beds to about about 15 to about 20 beds, tops, that is able to purposely create an atmosphere of a very cozy place that they all eat, too. So So everyone’s gonna eat, and well, they’re gonna eat at a big table, right? Sounds like a sorority or fraternity. Kinda like going back to once you throw. Yeah, that’s great. That’s great. It sounds really, really cool. I want to ask you more about it. But But I really also want to know how you got the name or why you chose the name Shepherd Premier Senior Living. Shepherd Premier is, I think, a best term to describe the type of care that our business is able to offer. I, I feel that it is our job to help the everyone that is in our homes, have the best final, the final, the final chapter, per se, but then also help answer questions because a thing that I have found, and as I was at that first church, the pastor, he was gone, he is going through just Psalm 23. And I felt that that hit our heart properly, that it was our calling to to create an atmosphere, that the care that the caregivers get to hear everyone write. And they get to hear those questions that people are able to begin asking towards the end date. A person who is at 85 and isn’t doing great is going to be asking the places that they are able to go after Earth, right? Mm hmm. I purposely built a home that was able to hear those those questions, and is able to get the answer to help people be able to answer that tough question before they are able to pass.

Pam Pyms 

That’s really cool. I know. The first line is the Lord is my shepherd. Um, yeah, yeah. That’s I love that. That’s really cool. Well, what would you say then would be a besides what you’ve just said the most important say one or two things to know about the senior living market today.

Brandon Schwab 

I think people typically think of the industry as its it is very difficult to build a get into it. Both. If you are interested to invest, that it typically takes a big quantity of cash in order to invest. I would be able to help open their eyes, how things are going today, things are different. The typical bigger type building that has 200,000 plus feet, right. And I think the average cost of those buildings is a buck $58.2 million per building, right? I think people typically think that they can’t get involved if they don’t have you know, hi, just six to eight plus to invest, right? I would be able to challenge that things are gonna be different today. I feel that post COVID the bigger box buildings aren’t going to do as well. They aren’t going to do as well because people aren’t going to be as comfortable bringing their own parents to all of those bigger buildings and the other piece point out is that because of that, the business caring for the elderly isn’t going to be all of these huge buildings that are basically built for big corporations to earn tons and tons of dollars, because at the end of the day, they build a 200,000 foot building for the elderly themselves, or did they build the giant just hallways to put tons and tons of actual people in there, right? Mm hmm. But to think of it as the industry is going to be able to change. I mean, if you think about the taxi, the taxi in the taxi cab industry, didn’t have to do anything different for 1020 3040 years, right? They, they pretty much owned it. Okay, they did. And then came a company called Uber in turn the taxicab industry upside down. And if you think a bout a Pam, all they did is they had an eye, they had a good eye, dia and they also use technology. And they basically changed the whole taxi cab industry. Boom. Okay. I feel that the industry that all of us are in all these big, huge buildings, that 80% of all of these, all of these huge buildings are owned by 20% of the overall operators. Right? Right. They own a ton of them all of these big giant corporation. Do you know that the average, the average care, the coast to coast care, giver hassle care for 15 to about 20 people?

Pam Pyms 

Is that right?

Brandon Schwab 

How do you expect a caregiver that’s getting 12 to about $15 per hour to care for 15 to 20 people, particularly if the code is going to have you check and change them every two hours? How is that possible? Pam?

Pam Pyms 

Well, I think that’s why there’s such a problem with staff and some of these bigger buildings, especially when there’s a McDonald’s down the street that will pay $14 an hour. It is a real conundrum to think about how many people are, you know, just in one person, one person’s responsibility, as you say? Yeah. I think you asked a very good question. They’re very good question.

Brandon Schwab 

But don’t you think that is everything though? Because if the care giver cannot do her job, and the issue is that in the actual care giver, it’s the owner and operator that’s choosing to put the caregiver in a place that they just can’t do well in. And I don’t think that is fair. Mm hmm.

Pam Pyms 

Well, it’s certainly not fair to the resident. If they’re understaffed. That’s, that’s for sure. Mm hmm. Well, I noticed on your LinkedIn profile, that you’ve also started a fund called boutique Senior Living fund. Tell me what that’s all about?

Brandon Schwab 

Well, I will tell you I have opened up by pomes over the past over five homes since 2014. And I’ll tell you, it’s been very difficult. I found that banks haven’t been open to offer capital to us. And it’s been very, very difficult. I’m at the point now that our business is able to gain traction, I’m actually a, I’m at a point to close on a a group of homes by August 1 this year, that’s going to take us up to 12 homes and 100 in 125 beds. But our biggest challenge to date has been accessing capital. And I felt that I am able to use the the experience that I’ve had to bring investors in to an open Capital Fund. People who are interested in being able to help the elderly, right? I mean, if you’ve got capital to invest, the investors are going to be interested in finding a place to earn a good ROI, right? But also, they are interested in the M pack of their capital being being parked into a asset class that is able to be able to actually that is actually able to help, okay, and I feel that this is the ultimate build good investment, right because you’re able to earn a good ROI. But coupled you’re able to help the elderly, but I I opened up this fun because I feel that there are other people coast coast that are in this country who are interested in being able to help, but they don’t have access to capital, right? Or they don’t know how to purchase a home or to do everything. This capital fund is going to be a turnkey avenue for operators coast to coast. To get into this business, I’m basically targeting the healthcare Rn, who has been in the healthcare world for 25 plus years, who often comes up to us in and is able to go, Brandon, how did you ever How did you ever open up these homes like I have been thinking of available to do this for for 2530 plus years? I am, I am going to help investors place capital into 510-510-2080. Homes, right? Wow, that are going to help care for the elderly in an atmosphere that each caregiver only has to care for five to eight people. That’s it, I, I am only going to place capital into homes that are 10 1520, homes tops, I don’t do anything over 20. Because I feel that these big buildings, the bigger type buildings aren’t for everybody. And I feel like that the Uber of this industry is going to be who can build and operate and control the biggest quantity of homes in a actual house the care for the elderly in to be able to give awesome care. That’s the plan of our font. So I am so I am looking for our friends who are interested in opening up a home up to two homes or three homes, tops that they are able to own and operate in be an actual an actual partner of ours to actually operate homes coast to coast with us.

Pam Pyms 

I think that’s a brilliant idea. Thank you. Let me ask you about the homes themselves. Are they already existing homes that you sort of go in there and do a little rehab? Or do you build ground up?

Brandon Schwab 

That’s a good question. Um, I do I do all of them. Right. How I have opened is I have a very big experience to take homes that are up currently and turn them into this purpose. I also am able to, to be able to build homes, as well. And then I’m also purchasing properties that are in this particular business that are up and operational. In particular, the owner is older, they have they have been doing it for 510 20 years and they are interested to exit I am basically building a huge portfolio of homes coast to coast to basically put things together and then have a plan to go coast to coast to help change the industry caring for the elderly. today.

Pam Pyms 

I’m gonna call you disrupter. Brian, I mean, Brandon.

Brandon Schwab 

Yeah, yeah, it’s it’s, I was able to get into this because I, I have the overall all over all purpose, that I think there’s an opportunity to do things different. And I and I feel that our business is in a awesome asset class that’s going to get people who are interested to invest, particularly today, there are investors that are paying banks to be able to hold their cash, right, that tells you that people are interested in in, in having their capital into asset classes that are able to earn them a bit above average ROI.

Pam Pyms 

So what kind of give me a range of what type of return you’re able to offer these investors and, and maybe the minimum amount that they would have to invest with you.

Brandon Schwab 

Well, I would have to be careful doing that just because it isn’t for everyone. I’m targeting folks

The, the ROIs, I have got a fund that is both debt and also equity. And then I have a fund that’s going to be anywhere from eight to 12% typically and that is backed by the asset, I can typically hit IRR of 14 to about 15%. I mean, everything is up in the air, it depends on a each per each particular deal. But a thing is awesome on this particular fund is this fund is going to have a bunch of homes together. So, back before I saw as a open up homes, right, but in this particular bond, they are giving capital to open up to 2, 5, 10, 20 different homes. So across that whole portfolio, these properties are able to perform and earn dollars. Now, that’s good, because if anything, if anything ever happens, it has the overall portfolio to put it across. So it is best to to have to have people call me I have it all. I have it all online too.

Pam Pyms 

Hmm, I’m sure they can go there do you say you want to go from coast to coast? First of all, tell me and the fact that you’ve done five in the last like five or six years, that’s pretty incredible in and of itself. Tell me how you search for where you’ll put these homes, and how you’ll manage them across a large, large area.

Brandon Schwab 

So our plan by 2025 is to focus in our area, first I would targets so I would target our part of the country. And then I would go out a bout eight hours right? After I have 30 homes per MSA, totaling about about 300 homes, I am then going to go coast to coast after that. After 2025 I am targeting areas that the elderly are at currently. And it doesn’t always have to be areas that the elderly are typically that people think that they are typically at. So Arizona, California, all those areas have ton of these homes, right? I’m targeting areas that aren’t as as common for these homes to be at. And I am targeting the average household income of about 80 80,000. Plus, I am also targeting areas that the that the population older than 65, or over 10 to 12%. And I am targeting areas that that there has been a expansion by the other bigger box buildings and I’m fine the end the Burger King of the industry. So I don’t have to, I don’t have to be able to go there first. But I will find dirt in the area and our average time to go from dirt to diapers is about under two years. Right?

Pam Pyms 

Is that is that building from the ground up that you’re talking about? Mm hmm. Do you do you ever run into any code restrictions, like you have to have a certain number of bathrooms to meet a certain number of residential Is that why is easier to build than sometimes just buy a home unless it’s unless it’s a home that’s already been repurposed for this.

Brandon Schwab 

So I would tell you it is easier to build because you can build the absolute perfect asset However, it’s hard because that’s a very cash and that Avenue is very expensive. I typically like to put about 30 but 30% down, and it’s hard for people who are just getting in to put that type of capital down. I’ve got a current project that I’m building 120 beds total. It’s 20 beds per home. But before COVID our costs was 15.5 for the entire project and after COVID our past prices that I just quoted were 15 or it they are over they are 20 Wow. 20 almost 22 for the overall costs, it has it has gone up by 30 35%.

Pam Pyms 

What do you attribute that to?

Brandon Schwab 

Well costs for everything postcode It has been able to go up. I mean, our our cost just to build it off site has gone up. I mean, so like everything’s gone up 30 to about 50%.

Pam Pyms 

My goodness. Yeah. And are you? Are you currently sort of in the rural areas of Illinois? Where are you? Right now?

Brandon Schwab 

So I am, I’m about an hour from downtown. I am typically in towns that have, you know, 25 to about 80 80,000 people, I do have a handful of towns that are in, in towns of only about 18 1800 people.

Pam Pyms 

Well, they have elderly to, you know,

Brandon Schwab 

they, they do, and and the projects that I am going to build are typically 35,000 to about 42,000 people.

Pam Pyms 

Well, you have certainly done your homework. And I imagine if people want to find out more about you, I mean, is the best way to schedule an appointment with you at www Brandon schwab.com.

Brandon Schwab 

So it is actually I have, I have been able to just find that if a person is interested in and talking, they can go on there book a time to talk with me, there are times for us to talk on the phone free for anyone that’s interested to invest or for it for it. For anyone who is interested in opening up their own home, I do have a a ditional gift that I could give them, they have to book a time to talk with me, I did come up with an 85 page guide that I am able to offer out, I’ve got other guys in this industry that are charging $2,000 or like 1500 to $2,000 for but I would be able to give it to anyone who’s interested in opening up homes or are potentially interested to partner up with us to be our our actual operators.

Pam Pyms 

Wow, you know, the one thing I wanted to come back to that I don’t know that much about but I have heard about, you know, something called social impact investing. And I heard you use the word impact impact investing, and is there some kind of benefit to an investor to be able to invest stay under that category? Do you know

Brandon Schwab 

so so I think the overall best option out there for people doing it is that they are going to feel good, that the dollars that they have to invest are able to go towards an asset class, that’s going to have a good m packed going forward. I I typically talk to two bigger family offices. And these family offices, in average family office have about 300 plus of capital to put out into play, they are so looking to earn a top a top ROI on they are interested to earn dollars. But I think that their top cause is that the family can feel comfortable, particularly if their family has had any issues personally have in their own family of possibly they put a person in their own family into a place that didn’t get very good care. It is it is going to give them the opportunity to be part of changing how the elderly are cared for going forward. That’s the biggest poll for the impact is to for people to impact the overall change going forward. And our our overall our overall capital fund is is able to be geared towards giving back by offering awesome care. A thing that I didn’t tell you earlier is before COVID are our company’s top KPI. Was that everyone that did pass in any of our homes, they were able to answer how or the place that they were able to go to After Earth and also how they are able to get there. Everyone that ever passed did that during COVID. It is harder. I can’t tell you everyone that did pass during that time. He was able to answer that over all question just because I couldn’t go in there.

Pam Pyms 

Tell me the question again.

Brandon Schwab 

Our business is is able to help people that are in our homes as they are as they’re getting closer to the end, right. So they are going to begin asking a question of the place that they are going to go after Earth. Right. So after they are able to after they are able to actually pass? And that’s a tough question, because if that question doesn’t get answered, It has an E terminal in pack on that particular person. So our overall plan is to build homes that are able to hear those questions, and then answer those questions. I was able to partner up with Teresa back in 2015. And she’s done a great job at being able to answer that question for people in all of our homes. Are you saying that your homes are faith based, faith based they are. But if anyone’s ever come into our homes, and ask those questions, I will help connect them of the perfect pastor Hmm, to their own faith. Our thing that I think is key for us is to answer those questions. So they feel comfortable because oftentimes, the families kids have a hard time having

Pam Pyms 

that conversation. Yeah, one of the hardest you can have.

Brandon Schwab 

Yeah, but because our overall business is here, it’s easier for us and I and I can tell you all the times that afterwards, the kids were just busting into tears, because they didn’t have that part answered for their own parents. But the fact that our partner Teresa was able to go in there and to ask those kind of those tough questions, but then also help answer how they are able to, to be able to do that has been a big, that’s been a very big part of our overall operation.

Pam Pyms 

That’s something very unusual that you are offering, and no matter what their religion or faith that there is someone there to help guide them. Yeah, and answer and help them feel more comfortable about the transition that’s ultimately coming.

Brandon Schwab 

Well, if you were able to, if you were able to think on our whole country, right, our whole country doesn’t feel comfortable having that conversation, right. And till they get closer to the end. And oftentimes, that question that’s able to come up is it is easy to overlook it right? Because it is pretty quiet. But if the poor care team has to care for 15 to 20, people, they aren’t going to ever hear that question. But if you are going to have an atmosphere that the caregiver who only has to care for five people, they are able to have time to actually talk with people and have those conversations. Because as that question comes up, it often doesn’t come up often. But if it does, our care team is is able to go, I’ve got to talk to the church, the the I will have them call, they will call Theresa Right. Right. And then I had Theresa come in to have that tough talk, but that talk has to be done before they’re able to pass.

Pam Pyms 

Wow. So you let them age in place. And you let them continue to live out their lives with you. Yes. All the way to the end. That’s fabulous. Gosh, I wish we had more time. I feel like we’re really just getting started with understanding what, you know what Shepherd, premier Senior Living brings to the table? Sounds like a lot. And it sounds like one thing is for sure. You’re going to walk in and it’s going to smell good. Yeah, yeah, they’re cooking those brownies, or you’re gonna have the smell of the kitchen and not as you mentioned, those some of those bigger buildings are pretty rough with the smell. I’m I agree with you. But anyway, I want to thank you so much for your time today. And thank you, Pam, we’re gonna hang out, don’t you hang up right away. But we’re going to say goodbye. And I’m going to thank you and I look forward to talking to you again soon. All right, thanks. Thank you very much. Hi. Thanks for joining us today. This podcast is brought to you by haven senior investments. haven senior investments is the leading faith-based senior housing advisory firm focused on providing their clients With the knowledge and expertise necessary to support their goals of buying, selling, developing, investing, or operating in the senior housing market, they can be found at havenseniorinvestments.com