Evrett Benton, former president, CEO and co-founder of Five Star Quality Care, Inc. (NYSE: FVE), has always been an acquisitions guy.
That’s how he helped one senior care company grow to more than 33 times its original size. That’s how he and existing real estate investment trust Senior Housing Properties Trust (NYSE: SNH) formed Five Star in 1999. And that’s how he started Salt Lake City, Utah-based Stellar Senior Living, which currently has seven properties under its belt.
But 66-year-old Benton has been forced to take the newly formed independent, assisted living and memory care provider’s growth strategy in a different direction — at least for the time being.
And despite his success in helping to take two senior care companies public, there isn’t a chance Benton will do the same with Stellar.
After two decades of experience in the industry, he has learned the risks — and rewards — of making certain business decisions, how to successfully build a company from the ground up, and the biggest challenges in doing so.
‘Wooed’ Into Senior Living
Benton began his career as a lawyer, which, perhaps serendipitously, led him to the senior housing industry.
While working for Houston, Texas-based law firm Andrews & Kurth, one of Benton’s clients was a nursing home company called GranCare, Inc. As managing partner of the Los Angeles office of the firm, Benton helped take the long-term care provider public, and later worked there in multiple capacities.
It was during his tenure at GranCare that Benton was “wooed” into senior living.
“I was [GranCare’s] general counsel and in charge of all their acquisitions,” he says. “When I first met them, they had 12 buildings and when I left, we had 400 buildings and 40,000 patients — and it was great. I was wooed away. Getting involved with this was an epiphany of sorts: I realized that I could have the joy of being involved in helping people as well as [the joy] from a corporate standpoint.”
This enthusiasm was carried over to his next venture — a colossal undertaking that led to the formation of Five Star Quality Care, Inc.
How Bankruptcies Led to Five Star’s Founding
As the government-funded nursing home industry was falling apart in the late-’90s, Benton left GranCare to pursue other projects.
But it wasn’t long after leaving that he got a phone call from Newton, Massachusetts-based Senior Housing Properties Trust, asking if he could help pull the REIT’s 70 skilled nursing properties out of bankruptcy.
“I went around and visited all 70 properties — we sold some, closed some, leased some back and ended up with about 50,” says Benton, who served for a number of years at the Assisted Living Federation of America (ALFA), including as chairman of the Board of Directors. “I helped pull all their properties out of four different bankruptcies and they said, ‘Look, let’s start a company.’”
And so began Five Star Quality Care, now known as Five Star Senior Living, whose growth strategy would differ greatly from the REIT’s as well as GranCare’s.
“From that day forth in 1999, we never bought another skilled nursing facility,” Benton says. “We started looking at and acquiring assisted living and independent living facilities that were private pay. Why? Because you couldn’t count on the government. That’s my belief to this day.”
A Rocky Start
Although Five Star now ranks as the nation’s fourth-largest senior living provider, the company didn’t start off as a profitable enterprise.
“When I first started, we were losing $50,000 a day on these  properties,” Benton says. “It wouldn’t have stuck around long if we hadn’t made it profitable, so that became a big deal for us. We looked at every way we possibly could. We worked night and day; we unfortunately had to cut staff. For me, that was tremendous training.”
After about a year and a half, the properties finally began making enough money to sustain the business, Benton says, noting that the feat was one of his biggest challenges at Five Star.
Then, Benton turned to what he knew best: acquisitions. To do so, however, he had to shift his focus from the skilled nursing side of the business to targeting growth through the independent and assisted living models.
“From 1999 until 2008 when I left, we had acquired about 180 buildings [for a total of] about 200 properties,” Benton says. Currently, the provider has 228 properties.
But investing in private-pay communities meant Five Star would need to take the company public, Benton says, which soon proved to be yet another challenge for the growing enterprise.
“We went public [in January 2002], because we’d come out of bankruptcy and we needed to grow, so we needed the access to capital that being a public company provides,” he says. “That was really hard. As soon as you’re public, you’re a different type of operation.”
Going Public — Worth the Headache?
Despite having a hand in taking two senior care companies public, Benton doesn’t intend to do the same with Stellar Senior Living, which he founded in 2012 with the help of his three sons and son-in-law.
“I would never do that again,” he says. “If access to capital is what you’re after, there’s so much capital right now that there’s no need to go public. And you’re not quite as regulated.”
Taking Five Star public was difficult in many ways and ultimately changed the leadership structure of the organization, he says.
“The CEO is responsible to the Board — he’s no longer just the CEO. You have to make the Board directors happy, and that means you’ve got to go out and find a couple of investment banks who can help you raise money. The problem is that those guys become your bosses as well.”
Thus, a CEO’s autonomy becomes lost in the mix.
“You’re not just running the buildings; you have to go out regularly and be a part of raising money and also raising the flag for your company and the stock,” Benton says. “And that’s an entirely different [responsibility].”
Cheap Money and Stellar’s Future Growth Strategy
Stellar Senior Living grew out of a handful of acquisitions, the initial properties of which were funded by Senior Housing Properties Trust.
Now, the provider has seven communities located in Washington state, Idaho, Colorado, Arizona and Utah. Benton says he would also like to have properties in Oregon.
“We decided that we would start here in the West, because we have all our family here,” he says. “And we would pick markets, not including California, which were close enough to take one flight of no more than about an hour and a half.”
But Stellar’s origins, and the foundation for Benton’s career strategy in senior housing, are shifting as the industry gains easier access to capital.
Because there is an overabundance of capital available for some players, it allows them to spend more money and push up properties’ prices during bidding, which is forcing some smaller providers, including Stellar, to look at other options, including building rather than buying.
“From my own perspective, we are being forced to move into development. I don’t like that because it’s higher risk and is such a long-term process,” Benton says. “It’s our money and my guarantee.”
Stellar is currently working on two development projects, one of which is a 110-unit building with a $20 million price tag that will break ground during the summer. In the second, Stellar is a general partner in the 130-unit project, which he hopes will break ground later in the year.
The provider is working with a developer and a few different construction companies on the projects. In terms of its pipeline, Benton says he will reassess Stellar’s growth strategy when the portfolio reaches 25 properties.
But Benton doesn’t expect Stellar’s growth through development to last forever.
“There will be some dumb decisions either on how much you pay for something or on where and how you build it,” he says. “Five Star would go through the cycle and all of a sudden an area of the country [would crash] or a company would do some stupid things and we were able to go in and buy the properties.”
And thus the market — and the players — may inevitably satisfy Benton’s appetite for acquisitions, which wooed him into senior living decades ago.
Written by Emily Study