Like any startup business, growth is a primary goal for Solera Senior Living — but so is clearly defining the company’s value proposition and sticking to it closely.
“[Some large providers] are now in tertiary markets and secondary and primary, they’re doing affordable, they’re doing moderate [rate], they’re doing luxury, they’re doing ultra-luxury, they’re doing stand-alone memory care and full CCRCs, and my view is that it becomes very diluted,” Solera Founder and CEO Adam Kaplan said during a recent appearance on Transform, a Senior Housing News podcast sponsored by PointClickCare.
Solera specializes in high-end, highly amenitized, private-pay senior living. Kaplan is vigilant about sticking with this model while establishing the capability to take on projects of various stripes. In fact, Solera has already rolled out two distinct brands and could introduce others as well.
Founded in 2016, Denver-based Solera has grown to a portfolio of nine properties — three existing communities and six in development. The company owns and operates one of the existing properties and provides third-party management for the other two.
In his Transform interview, Kaplan discussed Solera’s approach to management versus development, what distinguishes its brands, and inspirations he’s drawing from the hospitality industry. Highlights of the interview are below, edited for length and clarity.
On Solera’s approach to development and acquisitions:
The core of our business has been the development strategy. The developments are geographically diversified, but the consistency is that they’re all in more urban locations; they’re all larger projects, 100-plus apartments; and they’re all targeting the higher end demographic.
We really select areas with higher incomes, higher home values, good density within a 10-minute drive time, which I describe 50,000-plus people within that radius, and markets where generally there are some kind of barriers to entry. It’s tough to find land, tough to get entitlements, and thus the existing product is to some degree obsolete.
Acquisitions and [third-party management] has been an opportunity for us. A way for us to build out our track record as an operator and also to generate income, reinvest in building out our infrastructure to hire great talent and to build out our systems.
On creating multiple brands:
The acquisitions, we either inherit the name that’s in place or, if there’s a reason that we want to pivot off of the existing strategy, then we’ll actually create a new sub-brand for those assets, but they’re not really our core strategy. So, we weave those under their existing names or we create unique brands for those deals.
In terms of the development strategy, we’ve kept them basically under two brands today. One has been the Solera brand and then the other one is Solera Reserve.
They’re pretty similar in many respects. The primary difference is the market and the level of how high-end the demographics are … I think for most companies, they would consider all of our assets to be the ultra-luxury for senior living, but for us … we can build a product and deliver a certain level of services but distinguish a little bit between our main brand, [which is] our Solera brand, and our Reserve brand.
I’ll give you two examples. One would be our front desk staff. In our Solera brand, we have front desk staff, concierge staff, 12 hours a day, seven days a week. In our Reserve brand, we staff the front desk 24/7.
Another example could be our culinary. We still have very, very good quality food service regardless, but in our Reserve brand, we elevate that even more. So we have more dollars for food and then … we could have an executive chef, a sous chef, and a pastry chef on staff as well as a front of house manager.
We also keep the optionality open for creating new brand strategies. We are pursuing an opportunity right now in Las Vegas where we would actually partner with a health care system. That would be something that would be a deviation from what we are doing with the Solera brand, and so in that case we would, very likely, create a new brand.
Where I’d say the Solera brand we really associate with hospitality and design, the brand that we might launch in Las Vegas with the health care system would be a little bit different in that it would be a little bit more focused on some of the things that would differentiate the market through health care.
We’ve also looked at some opportunities to build in a mix-use development. We’re pursuing one right now actively, and that would also be another opportunity where we create a new sub-brand and the brand would be something that would be specifically focused on projects where they’re a part of a larger mix-use development.
On the potential partnership with a Las Vegas health system:
We are still in early discussions about what that would look like. It’s going to be evolving over time and I think the way we would view it is that we would continue to focus on what we do best, which is understanding the seniors housing business. We would bring that expertise to the development projects in the way we look at design, and we would bring it to how we approach service and creating exceptional experiences for our residents and families.
What they would bring would be something a bit different. They would bring a focus on research, because we would have a captive audience of individuals that would live in the community that would have a dementia, Alzheimer’s diagnoses. So, it would allow them to expand their research efforts and then it would also allow them to extend their mission, and to provide services to people suffering with diseases of the brain.
Again, it’s something that’s kind of conceptual. There are some examples out there, such as Belmont Village. I think we’ll use those as a way to explore how the partnership looks, but I expect that it’s something that will be living and breathing and will evolve over time.
Really, truthfully, the way we envision it in Las Vegas would be a beta. We would see how that relationship works and, assuming that it’s successful and beneficial for all parties, then we would look to grow that partnership more on a national scale.
On the potential for health systems with Medicare Advantage plans to cover senior living services:
You’re absolutely right. There’s a lot of potential. I think that’s very exciting.
Because we’re a growing company … we want to be really careful not to try and be everything to everybody. Which is again one of the reasons why we really hyper-focus on newer assets in larger markets with higher incomes and higher home values where we can really differentiate through design and services. We’ve not gotten into any ancillary businesses like pharmacy or home health. We’ve tried to really stay focused on what we do best, and I think if we were, at this stage of our business, to expand beyond that, it runs the risk of diluting our core strategy. So, I think if we partner with companies, like a health care system, that already have that expertise, it allows us to leverage that and to explore those different vehicles for growing the business.
The reality is that there are a lot of trends right now. We’ve tried to stay focused on trends related to designing luxury projects and operating and providing services to seniors, and if it falls outside of that, our view is that it’s a distraction.
On the perils of scale:
I think a lot of the bigger companies that have hit stumbling blocks, what’s happened is, they’ve become too opportunistic and too diversified. So, they’re looking to scale up their management company, which is frankly in conflict sometimes to your objective of really being a best in class provider.
Those companies are now in tertiary markets and secondary and primary, they’re doing affordable, they’re doing moderate [rate], they’re doing luxury, they’re doing ultra-luxury, they’re doing stand-alone memory care and full CCRCs, and my view is that it becomes very diluted.
Now, you can parallel it to the hotel industry all you want, but the reality is that in the hotel industry, if you look at companies like Marriott and Hilton, they have enough scale within these sub-brands that they can really build infrastructure within each one. So, if you work on the Hampton Inn brand you’re working on the Hampton Inn brand. You’re not also working across Hampton Inn and Hilton Garden Inn and Hilton and Waldorf- Astoria.
In senior living, people can’t build up enough scale to deploy that same strategy. For us, the answer is that we want to be careful not to scale at the expense of being the best operator in a market.
Instead of saying, let’s have a few assets … maybe one is a tax credit deal and one is a middle market asset and another one is our core kind of luxury asset, the way we think about it is, let’s look at other ways to scale where we can leverage our core competencies.
So, for example, let’s align with a health care company and let’s create a joint venture and bring our expertise of design and customer service and customer experience to the table. Or, let’s look at building as part of mixed-use development and having a project where we’re adjacent to a multi-family development, a hotel development, entertainment development, retail development.
At the BUILD conference, I mentioned doing something as part of a college campus where we would align with the university. We’re trying to do that. We have project in Evanston, so it’s not on Northwestern’s campus, but [we’re] trying to find ways where it would be attractive for alumni or professors and where we could offer continuing education classes.
Don’t dilute yourself where you’re really not unique and different and specialized.
On adopting hospitality industry approaches to pricing, dining:
I think in terms of how we price senior living, historically you see a lot of operator/investors re-price units once a year, and that’s just not fluid enough. I think the good operators you are seeing are investing in certain kinds of systems where they have more real time intel on the market, which is also being enabled by some of the efforts of NIC and ASHA, where we’re seeing greater transparency into pricing and performance … You need to optimize your revenues and that shouldn’t be a once a year exercise. So, I don’t see it going exactly to the same degree as a hotel but it will move a lot closer towards that over time.
In terms of the [hotel] restaurant and aligning with celebrity chefs, I think that’s the way we’re moving. I look at it as like co-branding … We’re doing in Denver, for example, a project where we are actually partnering with local businesses that already have a brand. For example, instead of buying the ice cream from U.S. Food Service or from Sysco, one of the distributors, we’ll buy a specialty ice cream from Bonnie Brae which is a very well known ice cream brand in Denver. In our Kensington development we’ve got actually a coffee shop that was a historic building … We will open up to the public and with that, we’ve been in conversations with several local coffee purveyors, and we’re going to serve a really high-quality coffee there and leverage the brand and the following of that brand in that market.
We like the idea of bringing in chefs. Our thought would be more to do it on a Monday or a Tuesday when the restaurant business is a little bit quieter, because obviously we’re not seeing dips in participation in our food program on those days. And so to align with a local restaurateur or chef, have them come in, prepare a special menu and have residents be able to participate in that.
We have several dining venues in all of our projects. We have more of that casual concept and then more of your traditional, formal venue. We also really think about connection to the outdoor spaces, so we offer, in all of our projects, outdoor dining … We have full bars in every place.
On senior living’s evolving reputation:
People used to have such a negative association with senior living … Now, I think, people are much more educated, probably because the quality of the products evolved and also most people have been affected by it in some way. They’ve looked at senior living for a loved one in their family.
I think it’s becoming more accepted and because it’s becoming more accepted, you’re able to actually make headway if you reach out to businesses that already have brand equity and approach them about forming partnerships.
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