Life Care Services registered a pretty large blip on our radar back in April when it put some skin into the game by investing in luxury senior community the Clare along with Senior Care Development through their new joint venture, Chicago Senior Care.
We’ve previously spoken with David Reis, the CEO of Senior Care Development about his plans to improve the community’s operations and financials. Recently, we got a chance to sit down with Rick Exline, the executive vice president of operations management for the Des Moines, Iowa-based LCS, which is providing management services for the Clare.
In this interview, Exline talked about LCS’s portfolio expansion strategy and putting skin in the game; the dangers of overdevelopment; and the growing role residents have in the governance of continuing care retirement communities.
Senior Housing News: It sounds like in many CCRCs, residents are becoming more and more involved in their communities, whether they’re on the board or have some other organizational role. How will this play out in LCS communities?
Rick Exline: It’s going to have a significant impact. In some communities, it already has. Some communities don’t have traditional activities directors; instead, residents will be in charge of organizing recreational activity.
On the governance issue, residents are going to want to increase that role. Some states require residents to be on the board. You have to be careful about a conflict of interest, but I think it can be done successfully.
SHN: It also seems like residents are more educated about the financial aspects of CCRCs.
RE: We’ve seen that change happen for some time. A few publicized failures takes it to a whole new level.
Our standard disclosure for years has included a release of financial statements.
It used to be, you met with prospective residents. Now, you’re meeting with them, their family, their tax advisor, their lawyer… it’s a very informed set of residents. Some come in quoting state regulations for CCRCs. They’re very educated, and very aware.
The Clare’s a good example. People are very excited about [not having] debt on that property, but they’re still asking very tough questions—’What’s the length of the asset to be held? Is it just a real estate play?’ [by Senior Care Development, the majority owner of Chicago Senior Care].
SHN: We noted with interest that LCS took a stake in the Clare when Senior Care Development purchased it out of bankruptcy. Is this your first time on a deal like that?
RE: In our portfolio of 100+ communities, we own all or part of about 14. We do have other equity properties we’re involved with.
With David [Reis, the CEO of Senior Care Development], it was the first time we had invested in a property [with him] where he was a majority partner.
We’d look at other opportunities. We don’t mind putting skin in the game; we wanted to be an investor [with the Clare.] We have confidence in that property.
SHN: How much are you looking to invest?
RE: We want the right type of opportunity. With our equity fund, we look at things on a deal by deal basis. It’s our capital, and those of who we’re working with. We’re not interested in growth for growth’s sake; we’re not interested in overpriced assets.
SHN: What’s your involvement with new development? Is financing there? [Ed. Note: In May 2012, LCS announced a partnership with Mainstreet Property Group to own and operate the first of several skilled nursing, short-term rehabilitation, and assisted living communities to be developed by Mainstreet.]
RE: We’re increasingly encouraged about softness in the credit market. [Getting funding for] assisted living and memory care is much easier than it is on the entrance fee [CCRC] side.
We have a site in Minneapolis that we hope to finance in the next six to nine months. It will be a full-scale, moderately upscale CCRC that’s part of our equity group.
As for memory care, generally we are supportive of a designated dementia care unit within a CCRC.
SHN: Is there danger of overdevelopment?
RE: Any time you have a business where there’s ease of access, you’re going to get all types of folks in it who have a profit motive rather than a care motive. When you see Health Care REIT buying Sunrise, they’re not [buying it with] a heart for seniors.
There is a good pipeline of [new] folks, though. This is not an easy business to be in. From the sidelines, it looks a lot easier than it is. You need to have a high-level skill set, access to capital, and experience.
A lot of people come to us and say, ‘Hey, I’ve got a great site.’ But it’s not that easy. We like to tell people yes, but we’re not afraid to tell them no. It has to happen.
SHN: What’s your outlook for 2013? What does the industry have to watch out for?
RE: We’re encouraged. The capital markets are going to continue to soften. The [presidential] election’s going to settle in. After that, within a legislative role, there will probably be other efforts to try to derail President Obama’s healthcare reform. What does that mean to senior living providers? Not much, I don’t think.
There’s an ongoing change in the way healthcare is provided; it’s more than a particular piece of healthcare legislation. For example, we’re working on implementing electronic medical records (EMRs) in our facilities; we’re halfway there. It’s a great way—whether in an iPad or wall unit—to track costs, allowing us to get the right reimbursements from government sources. We’ve seen nice jumps in reimbursement levels because we’re documenting [the care we give] better.
Innovation and cost of care management are just good business, whether it’s part of the Affordable Care Act or something else. For LCS, we have plotted a course to bring value with ancillary services (such as home healthcare) to create the right type of synergies.