Artis Senior Living has specialized in standalone memory care since its founding six years ago, but the company is about to branch out with a community set to open in 2019.
Located in a bustling neighborhood about five miles north of downtown Chicago, Artis Senior Living of Lakeview (pictured above) will be the company’s first building to offer both assisted living and memory care under one roof. But while this is a first for the Artis brand, its owners and executive leaders are very familiar with all the different aspects of senior housing and care.
Artis is owned by the Bainum family, which got into the nursing home business in 1959. That’s when Stewart Bainum Sr. started ManorCare, which would become the nation’s largest skilled nursing facility chain. ManorCare merged with Health Care and Retirement Corp. (HCR) in 1998, and the Bainums exited the company entirely a few years later. Subsequently, under the private equity ownership of The Carlyle Group, HCR ManorCare’s fortunes declined, culminating in the company’s bankruptcy and sale to health system ProMedica earlier this year.
After leaving HCR ManorCare, the Bainums continued to own other businesses, including hospitality giant Choice Hotels (NYSE: CHH). However, they also maintained a foothold in the senior housing and care world. In 2012, the family started Artis Senior Living, under the leadership of CEO and President Don Feltman. Feltman started working in a Bainum-owned nursing home 40 years ago as a sophomore in college. He rose to the senior leadership of ManorCare, and then went on to work for Marriott when the hotel company had a retirement community division.
Several other Artis leaders also have worked together in the past for Bainum family companies, and have decades of experience in senior care, Feltman told Senior Housing News. He recently spoke with SHN about Artis’ operational model, its growth trajectory, and current business challenges and opportunities in memory care.
The Artis Way
Stewart Bainum Sr. passed away in 2014, but his son—Stewart Bainum Jr.—is chairman of Choice Hotels. The family had an eye toward the future in deciding to start a new senior living company.
“They’d been comfortable with the space and saw it as an opportunity for multiple generations of their family going forward to be in service to those in need,” Feltman said. “I think, from their perspective, they thought we could assemble a team that could produce something they’re proud of and the community is proud to have.”
Today, the company has corporate offices in McLean, Virginia, and King of Prussia, Pennsylvania, and there are 13 Artis communities in operation and four under construction. In addition, there are 20-plus sites for future development that the company either owns or is pursuing. Artis’ footprint stretches across nine states, from Massachusetts to Illinois and down to Southeast Florida, but future development could happen nationwide, with some sites secured on the West Coast, Feltman said.
There are two communities that Artis manages and does not wholly own; however, the company is focused on ground-up development and in maintaining control over the portfolio.
“Artis finds sites and develops, finances, operates and owns [communities],” Feltman said.
This approach is one reason that he was comfortable in becoming CEO.
“We can deal with issues that arise efficiently,” he said. “We can make decisions on what’s in the best interest of the organization not only today but two, five, ten years from now.”
While declining to share how much it typically costs to develop an Artis community, the approach tends to be conservative, Feltman said.
“We have relationships with a number of lenders, and our financing model is conventional—agency debt—we’re old-fashioned that way,” he said.
The building going up in Chicago is slated to have five stories and 136 units; it will not only be the first Artis community to blend memory care with general assisted living, but will be the most urban community that the company has opened to date. It is located within walking distance of a commercial zone that includes a recently opened Whole Foods grocery store, and is about one mile west of Wrigley Field.
While this project is an outlier in the portfolio in some ways, its operating model will still be firmly rooted in “The Artis Way,” Feltman said, explaining that each letter of the word “Artis” stands for a component of this philosophy. “A,” for example, stands for the ability of staff and residents to have a voice. Respecting relationships, treasuring uniqueness, integrity, and success and recognition are the other cornerstones.
More broadly, Artis’ approach is rooted in lessons learned over decades, going back to joint efforts of ManorCare and Johns Hopkins University in the 1980s to develop some of the industry’s earliest memory care units.
“Johns Hopkins came in and helped us … [take] a wing of a nursing home and create an outdoor courtyard with two doors so there was a track system for residents to walk, and programmatic designs and training for staff to understand those populations,” he explained, noting that many people did not know about Alzheimer’s disease and other dementias at that time, and held the belief that seniors developed “senility.”
By his reckoning, if those early efforts were the first generation of memory care, the Lakeview community will offer “seventh generation” memory care, Feltman said.
Having access to the outdoors is still a key principle, as is instilling a sense of purpose in residents. For instance, residents who have the capabilities are named “ambassadors.” In that role, they greet new arrivals and their family members and show them around the building. At an Artis community in Maryland, the residents knitted blankets and delivered them in person to a women’s center that provides shelter to mothers recovering from addiction as well as their children.
And although Feltman does share ideas and best practices with colleagues in the Bainum-owned Choice Hotels, he said that Artis is not out to create a “five-star hotel” atmosphere.
“We’ve found through experience that residents with dementia like familiarity and a homelike atmosphere,” he said. “Our communities are designed to be like a home. The finishes, everything is very nice, but it’s not a situation where a resident would be afraid to put their feet up.”
Navigating frothy markets
Artis is in growth mode, but the influx of senior housing supply in recent years has constrained its expansion.
In fact, there are 45 markets or sub-markets that Artis has “put on ice” due to the concentration of senior living currently opened or in the pipeline, Feltman said.
Despite being cautious about site selection, Artis has not been totally immune to new competition. One community in particular is not filling as quickly as the company had hoped, after a competitor opened about three miles away.
“This company … was coming in, a memory care community, clearly the demographics are strained, and one of our guys called them and said, ‘Do you know we’re under construction?’ And they said, ‘Yeah,’” Feltman said. “We scratch our heads, because if the roles were reversed, we would’ve waited until they were absorbed, at least.”
Still, on the whole, Artis communities are at or better than projections for occupancy, he said. The company doesn’t project anything higher than 90% occupancy and typically on a timeline of 22 to 24 months.
“[Senior living] groups would come to the Bainums for investment capital, and their assumptions for stabilization are at 95% [occupancy] in 12 to 18 months,” he said. “I wouldn’t bet the farm on that.”
New supply has put pressure on senior living communities of all types, but standalone memory care has been a particularly embattled sector. Artis has been able to succeed in large part because its leadership is seasoned and knows what it takes to design and operate this service-intensive type of building, Feltman said.
“When assisted living was born and came into its own, in the early days, there were a lot of different models and [people] weren’t prepared for how to run and operate those,” he said. “It took a number of years before you had good operators out there that refined their focus and understood the business. We’ve seen the same with memory care.”
Too many memory care buildings have been poorly designed, he believes, with wasted space driving up costs and semi-private rooms deterring prospective residents.
Senior living communities that offer a continuum of care have a natural pathway to keep their memory care wings occupied, while standalone memory care buildings have to compete hard for residents. Artis promotes the dedicated focus that it brings to memory care. Some people have even transferred from another senior living community into an Artis building after seeing the difference.
“It’s not a stepchild of the core business,” Feltman said.
With supply still coming in, the current down-cycle is set to get worse before it gets better, in his view. This might create opportunities to grow through acquiring distressed properties, and in fact there are already opportunities on this front, but pricing is still too high for Artis’ liking.
Even if the company makes no acquisitions during this down-cycle, however, that would be fine—Artis does not aspire to be the largest operator in the country, and purpose-built communities tend to generate more value long-term than acquisitions, Feltman believes.
In the meantime, like the industry as a whole, Artis is looking toward the future boom in demand as the population ages.
“I do wish long-term that everyone in this sector will do an excellent job and learn from each other and best practices will improve, because I believe that creates more opportunity for all of us,” Feltman said. “When consumer confidence increases and people see the value of [senior living], utilization will increase as well.”
Written by Tim Mullaney