Founded in 2014, Roswell, Georgia-based Phoenix Senior Living today has grown to more than 20 properties operating under multiple brands.
One of these brands, The Retreat, is tailored for more rural areas of the Southeast, where company founder, CEO and President Jesse Marinko sees “sneaky growth” of a more affluent demographic and a lack of senior living options.
“We saw this opportunity where there was absolutely no supply,” Marinko said during a recent appearance on Senior Housing News’ Transform, a podcast sponsored by PointClickCare that highlights the people and ideas shaping the future of senior living.
Marinko elaborated on The Retreat’s operating model, the thinking behind Phoenix’s multi-brand strategy and regional focus, and its first foray into active adult with a “senior city” development.
Highlights from the interview are below, edited for length and clarity.
More senior living providers are creating multi-brand portfolios, can you describe Phoenix’s approach?
I think branding is such an important part of what you do when you’re going to become a regional operator.
When you look at multifamily and you look at hotel, you see that branding concept of tiers of products is very successful, and the consumers are able to identify and really connotate value, based upon what those brands are.
And so when I started the company, I knew we needed to head in that route. Typically, a Phoenix product would be one that we self-develop and build from the ground up. We have a Retreat brand that we typically label to acquisitions that we bring on board, or to smaller, more rural markets, like when we do our development in Hartsville or in Camden, South Carolina … [a] little bit more rural product, typically a smaller product. It’s still very high-end, but probably not to the same level of finish [as a Phoenix].
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And then The Pearl brand I just love, because standalone memory care is something we’re really passionate about. It’s definitely not our sole business line or our largest business line, but we’ve had a lot of success with it, and I think we’re really passionate about the way it’s designed and the specificity of care in our programming.
Could you co-locate different brands within the same market? It sounds like The Retreat may be targeted toward more unique locations?
That is another benefit of the branding concept, is we are able to … offer to the local customers and families the ability to choose a brand that fits their choice. Some people want the nice shiny penny with the highly decorative very modern finishes you would see in residential new construction architecture, and then some people just want a very home-like feel on a simpler program … We definitely have that, especially in the Atlanta market. I have, I think in the Alpharetta or North Fulton market alone, like five buildings … A few are called Phoenix. If we were to ever add anything we’d probably call it a Retreat.
When we have really special projects that are just super unique, like we have in Birmingham or Huntsville, we’ll give them their own names, like Madison Crossings or the Bluffs at Greystone. We definitely think about the local market that we’re within and try to connotate names and feelings along with the local market.
Our product’s very local; 70% of our move-ins have a loved one that live within a 10- to 15-minute drive time of our community.
How centralized is sales and marketing? Is it handled more at the community level to match the brand and local flair?
I would definitely say we do not centralize that kind of messaging or managing those sales strategies … I think that’s where the branding concept actually plays to that very well, because they all have their own unique feeling.
Phoenix at Roswell is different than the Phoenix in Milton. Even though they’re eight miles apart and [both] a Phoenix property, they just have a totally different feel, and even the team has a different feel. Because, the people in the buildings are what matter. That’s what the residents and the families are buying.
Where are you seeing efficiencies? Are there shared technology platforms?
Oh, of course, yes. The benefit is, you’ve got too have streamlined systems, so we are a paperless, keyless company … Our accounting, electronic health records are all on one platform. Our access control for door control and security cameras are on one platform … We create and utilize systems that allow us, from Phoenix Senior Living as a management company, to really have a good view into each building, on where their opportunity areas are, to train and coach and to help them avoid the pitfalls that might lead to some failed service delivery items.
The margin for a business travel hotel would be different than for a luxury hotel. On this senior living side, are margins are pretty similar across brands?
I don’t think we’re at a point yet where we’ll feel a difference in the brand. It’s really going be the cost of labor, the cost of fixed expenses, and then if you’re a good operator, whatever care that’s required.
Therefore, your margins are just … totally driven and derived off of whatever rate you’re going to be able to charge in that market. Which, as you know, many times has to do with either a lack of supply or extreme affluency within that market.
Can you describe The Retreat? I think it’s interesting that you’re going a little smaller. We’ve heard companies say they’re building bigger, because the boomers want larger units.
We do both. We’ve got our Bluffs and Madisons and the Phoenix at Braselton, the Phoenix at Union Hill, which are massive 150-unit IL/AL/memory care properties. They’ve got the whole continuum on really large suites, really good offerings.
Most of those … are located relatively close to a major metro whether it’s Birmingham, Huntsville, Atlanta, whatever it may be. That Retreat brand was really the opportunity that I saw throughout the Southeast. That as the Southeast continues to grow as a region and people continue to move and migrate this way, some smaller satellite cities are really having sneaky growth and surprising wealth. Remote working is allowing a worker who used to have to stay close to the city [to] now work from home three days a week, and [they] can go further out and be in towns that might appeal to them a little bit more.
So, we saw this opportunity where there was absolutely no supply. We saw there was this kind of festering, growing demand that only a regional operator would be able to identify. But, when we looked at it, you know we said, man, we’re a little scared to drop our bread-and-butter, 80-90 unity AL/memory care out there. We’re just not sure. That’s a pretty risky move given a market that might not have the population and the density we thought.
So we looked for plots and acreage that had expandability, and started out with a good core. That was kind of the concept around the Retreat, is build something that we were pretty sure the demand and the market will fill. We had to build something 50-plus units that would still allow some efficiency and some margin. Then the goal is, as that market continues to mature and absorption continues to happen, if the need’s there, we can then add on very easily given our surrounding acreage or lots.
But, undoubtedly we have done far better on our lease-ups in our rural and tertiary markets than we’ve ever done in our major metros. Just, candidly. I don’t think it should be very surprising. It’s the law of supply and demand.
You’ve had experience in a lot of different types of operations, but there must be challenges with having standalone memory care and assisted and independent living?
I think it’s a natural need and evolution of what the consumer demands. The consumer wants to see that continuum, so they have that peace of mind and security.
But then we were looking at pent-up markets, we recognized the need of certain products. There are … somewhat saturated markets on the AL/memory care side or the IL side, but have absolutely no standalone memory care. So we saw that need and that application, and it’s a big reason why we stayed away from prototype development. When we look at every site in every market we kind of custom fit our project both from a size and a product offering, based on what we see the need is within that market.
Are you interested in creating an active adult product?
Oh, 100%. We’re currently doing an expansion. We did a 48-unit standalone memory care in Dallas, Georgia, which is a western suburb of the Atlanta market. Leased up very well. Leased up in 11 months.
So, we bought the surrounding 30 acres and are building a senior city. We are expanding an AL/IL under one roof and then we’re putting down about 30-plus cottages on the site that kind of fit exactly what you’re talking about, that demographic … They’re two-bed, two-bath, single-car garages. Call them 1,400- to 1,800-square-foot cottages that allow, that let’s call it a mid- to late-70s senior who wants the security of someone checking in and services available, but might not yet be ready to go into apartment-style living and still wants to feel like they can kind of stretch their elbows a little bit.
So, we too, see that demand and that need … we’re all seeing it, with not just the baby boomers but also the adult child who is a shopper. Their demands and their wants and their thoughts of future planning for their parent or grandparent or whoever they may be shopping for.
It sounds like that is an active adult type product that’s embedded close to or within this larger continuum?
I still think you have to be part of a continuum. I think they’re still going to want some — separation, probably, is the right word for it. I think the consumer’s going to want to feel like they still have their own pocket, but in the back of their mind, they still want to know that sense of security.
I think when you’re really looking at these potential truly just 55-plus active adult plays, I think what you’re going to find is a lot of seniors are lacking the security and the community involvement that they think they’re going to get. Because, at the end of the day, if you put a clubhouse with a bunch of cottage homes and nothing else but a lady who comes in twice a week to do bingo or cards, it’s really hard to get people out of their home into that clubhouse.
But if you’ve got a robust community with tons of offerings all under one roof, plus a restaurant to bring you in … at the end of the day, food’s the way to anybody’s soul and heart.
So I think that’d be hard to do with just a standalone 55-plus. But that’s my perspective. I’m sure there’s a lot of different theories and thoughts out there.
Acquisitions versus development? We’ve heard on the acquisition side prices are very high, and on the development side construction costs are really going up, so there’s pressure either way you go.
You nailed it right on the head. I mean those are just facts, right?
Acquisition prices are going up, so a lot of deals are either getting overpaid or just not getting done. Because they can’t paper and debt won’t get behind it.
Then on the development side, beyond just the amount of development that happened over the last six years, you’re just seeing those construction prices really put constraints on margins and abilities to hit the numbers you need in order to get the financing, and the cushions that you want.
So it is a tough market, and that’s where having really strong relationships that are more long-term versus transactional are going to allow you to stick to your strategy of continual manageable growth. That’s been a key we focused on with our capital partners and relationships, and another big reason why we put equity in deals.