12 Oaks CFO Puklicz: Senior Living Operations Need Better Data

Since Greg Puklicz joined 12 Oaks Senior Living in May 2018, he has helped lay the groundwork for a rapid expansion of scale.

The family-owned company operates a portfolio of 16 private-pay senior housing communities in Texas and Oklahoma, and is looking to expand to 25 communities over the next two years, he said in a recent interview at the National Investment Center for Seniors Housing & Care (NIC) 2019 Fall Conference in Chicago, for Senior Housing News’ “Bottom Line” series.

In this interview series, SHN is connecting with senior living CFOs to gain greater insight into today’s financial risks and opportunities, and to learn how these leaders are helping guide their companies into an exciting but sometimes uncertain future.


For 12 Oaks, that means focusing on its mission in order to give itself a competitive advantage in its markets. Puklicz, who came to 12 Oaks from private real estate development and investment firm Exxir Capital, also wants to have more “self-determination” in portfolio growth, rather than having to respond to owners’ decisions. And he’s highly focused on how financial metrics can translate into operational improvements.

“We have a saying at 12 Oaks: ‘Accounting exists to serve at the pleasure of operations.’ It’s important that we set up systems and processes that can provide the data to ops to measure performance,” he said.

This interview has been edited for clarity.


Would you say it’s true that senior living has gotten more operationally and financially complex over the last few years, and if so, how has that placed new demands on you as a CFO?

We’re living in a data-driven economy. The need for useful data is growing. Data for the sake of data doesn’t provide any benefit. We need to have targeted data that can that can help [operations].

We’ve set up some dashboard reporting for all of our properties. We data farm all of our operational KPIs [key performance indicators], and compare those to like properties. For example, we have three standalone memory care properties with about 60 units each. That becomes a database for that particular type of operation — we can look at performance, where the numbers are and where we think they should be.

The point of all that is to create that data farm and KPIs, so that the operations people can focus on the care.

What software platform does 12 Oaks use?

We’re using Yardi as our base accounting package. Additionally, I’ve customized some KPI reports over the course of the past year. This allows us to have a one-page report for each property measuring actual budget to census, month- and year-to-date actual budget performances, labor variances and the actual KPIs on the particular property.

I’ll then have monthly calls with the executive director and RPM [regional property manager] where we’ll review the performance indicators, give them guidance and answer any questions. 

When you started with 12 Oaks, where was the company and what were your main priorities?

12 Oaks is a third-generation company. It was started by [current CEO Richard Blaylock’s] father, and his son Jack is now in the company as our vice president of business development. It’s a company with a long and successful operating history.

My focus was to enhance the accounting function to provide a higher level of service to our operations people and our clients. I want the accounting and our reporting to be nimble and useful. If you give someone a report that is 8-10 pages long, they may not glean what’s relevant from that, which is why I identify the key metrics. We can turn our attention to those things and chip away at the issues as soon as they arise.

Can you talk about one or two or three moments during your time with 12 Oaks that were moments of particular challenge or change, and how you worked through or are working through those challenges or changes?

I believe it’s a process of continual improvement. 12 Oaks has been an extremely well-run organization, very employee and client-centered, and we have a good culture. For me, it’s more about tweaking the processes [to make them] easier and making them more effective, and targeted to what they’re intended to be.

How are you thinking about costs/expenses for 2019? Are there items on the balance sheet that are of concern, or areas where you expect to make significant investments, or achieve any cost reductions?

There’s a lot of pressure on wages. On the balance sheet side: capitalization of properties. We have a lot of lease-up and turnaround properties. We’ve built a reputation as a turnaround expert. The issue is sometimes we’ll come into those properties and capitalization may be an issue. There may be [a lack of] cash availability in order to implement all of the programs we want to.

In a lease-up project, the owners may have originally projected an 18- to 24-month lease-up, and they’re in month 22 and only at 60% occupancy when we come in, that impacts cash availability. So we have to help the owner decide where to place their resources and identify the priorities.

Are your margins under pressure this year, and were they under pressure in 2018?

We’re very mindful of our margins and achieving the budgets we set. We try to identify where margins can be improved on the top line in revenue. We’ll push rates in mature properties to optimize the revenue we’re receiving. Sometimes we’ll do concession-based selling in turnaround properties in lease-up, then turn and burn those concessions as fast as we can.

On the expense side, we’re always being diligent in our KPI management and our spend downs. And we’ll regularly review our results to determine if we’re operating as effectively as possible.

How is the availability/cost of capital at the moment, do you expect any tightening of the debt or equity markets in the near term?

Right now, capital availability is not an issue. We’re currently looking to acquire properties. We’d like to acquire a couple portfolios. So we’re forging relationships with people we talk to on the capital side. The issue right now is finding the right product, as well as the pricing of the product.

The product that is performing per expectations are receiving a premium on pricing, and we have to underwrite to what price we can [bid] in order to meet our targets.

Are you finding a wide pricing disconnect between what a seller is asking for a facility, and what 12 Oaks is willing to pay?

We are but not so much with stable properties. With those, we can value based on trailing [performance] numbers.

The real disconnect is coming from newer properties that are partway through their lease-up [plan]. Owners may be selling earlier than they want to because they’re running out of loan budget to carry them through, and you can’t value [a property] on the trailing six months. Their crystal ball might have a little more clarity than ours. When we go into a property, we’re forecasting [based on] full occupancy and rent bumps, and that they happen. Because in the first year of ownership, it’s really difficult to catch up, even though we’re on a five-year hold.

What’s your take on M&A and development at the moment? How is 12 Oaks thinking about growth in the next 3-5 years to reach your target goal of seniors served?

Our growth plan is to get to around 25 properties, and we’re looking to get there in the next 18-24 months. We want to get to a size where we can maintain our culture. We have a very high-touch service model. In our management structure, we have one RPM for every four to five properties, and we like to keep them within driving distance so they can spend the time they need at the properties, sleep at home at night and not be on a plane traveling across the country.

To our growth strategy, we want to expand the relationships with our existing clients. We have relationships with a lot of industry leaders, REITs, funds and private equity individuals that we manage for now. Those relationships are long-term and we want to continue to serve them. As a third-party operator, we want to realize more self-determination as far as our portfolio growth. Right now, our portfolio volatility is determined by what our clients want to do. If they decide they want to sell next quarter, then they’re going to sell, we’re going to help them do that and those priorities are aligned.

We’d like to invest in a core group of assets that we would hold long-term that would provide a basis of stability for our portfolio and make us less susceptible to [market fluctuations].

We may be seeing Medicare Advantage start to cover some senior living services. Is that on your radar, and do you have any plans to play in the MA space?

That’s not something we’re even looking at.

Mission vs. margin is a theme in senior living and may be a challenge. Do you ever feel like you’re fighting to protect margin while others in the organization are freer to focus on mission? How do you define a healthy margin in this business and ensure that you’re striking the right mission/margin balance?

I don’t see mission and margin as competing with each other. I see them as complementary goals. If we define mission and get everyone on board to achieve that mission, margin is the outfall.

We invest a lot in culture — leadership training, peer groups among executive directors and department heads so they can better communicate with each other. We have career development training for all of our executive directors. We developed a proprietary assessment strictly for executive directors to assess their strengths and weaknesses, and to assess future candidates.

Our mission is very much about our people and clients, having a full-service model. If we do that and everyone is focused on the mission, margins will occur. We don’t take the negative approach that we’re over budget on staffing. It needs to be a positive approach about reinforcing the mission.

We have target goals we establish for our properties and our owners. The EDs need to be fully invested in understanding that mission. If they do, [margin] takes care of itself.

Where does a living wage play into the mission vs. margin equation?

In terms of a raw wage, we’re very sensitive to wage levels and what a living wage is. We have to balance that against the budget expectations of the owners. We look to ensure that wages are rising to a level that is either market or slightly in advance of the market.

We don’t have a program to go to a $15 hourly wage. That’s something that would have to be phased in over time. To jump from $11 to $15 for line staff would have a big impact in the short term.

We’ll set our wages at above market rate to attract new employees and, once we have them in the fold, provide them with other benefits and resources that make us a desirable workplace. We were certified as a Great Place to Work, and we spent a lot of time studying our organizational culture at each property to ensure we have a high-quality and safe workplace, at a decent wage.

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