Green Courte Partners hit paydirt four years ago with a massive sale of mostly age-restricted mobile home communities. Now, the Chicago-based real estate private equity firm has its sights set on senior housing.
Last year, Green Courte founded True Connection Communities, an in-house operator, and hired former Senior Lifestyle Corporation co-COO Jim Pusateri as its CEO in December 2018. True Connection has a portfolio of nine independent living communities in nine states, totaling over 1,400 units.
The properties were acquired through Green Courte’s fourth investment fund, which raised $503.2 million in 2016. Green Courte’s portfolio also includes The Parking Spot, a portfolio of parking garages and lots near airports; and is launching a second manufactured housing portfolio.
Pusateri is tasked with building an operating platform from scratch for a company that until recently left management of its senior housing investments to third-party managers. He is also in constant communication with Green Courte’s C-Suite on ways to build a pipeline of communities, scale operations and identify efficiencies that will save costs.
Pusateri is building this platform as the senior housing industry is feeling pressure from investors seeking opportunities in the red-hot active adult sector, even as industry experts struggle to identify what active adult encompasses, he said during an interview with SHN.
But Green Courte recognizes the long-term upside of senior housing as an investment type, and is willing to put in the equity — both financial and sweat — to make that happen.
“Senior housing has the potential to be the largest product type Green Courte has ever operated,” Pusateri said.
A 28-year industry veteran, Pusateri has the requisite experience to build True Connection.
In addition to his time at Senior Lifestyle, he served as SVP of sales at Brentwood, Tennessee-based Brookdale (NYSE: BKD), the nation’s largest senior housing owner and operator, where he was responsible for strategic oversight of the sales teams at over 1,000 communities and developed large-scale sales and training programs for the company. He was SVP of sales and marketing at Horizon Bay when that company was acquired by Brookdale in 2011, and was also chief senior housing officer at Elderlife Financial Services, where he helped grow their business with the nation’s largest senior living organizations.
He is tapping into that range and depth of experience in building True Connection.
“Those experiences formed an opportunity for me to see the great things those companies did, as well as all the things we could have done differently. The list of what we could have done at all my previous stops is long,” he said.
It all starts with communication. True Connection assumed operations of its ninth community last March, and has opened up the organizational culture so that everyone from executive directors and staff to residents can offer feedback on a community’s shortcomings, and what they believe could be implemented to improve operations and satisfaction.
One thing Pusateri immediately identified is that residents at True Connection Communities want choice in how they live. The company has implemented unbundled dining packages in its three Dallas communities. Residents have the option of having a standard dining package, or an a la carte package where they can order higher-priced menu items.
The high-end meal program has become a popular option. It allows True Connection to increase revenues, while knowing that residents will eventually subscribe to a standard dining package as they age in place.
True Connection is also looking at other ways to generate revenue through dining, such as multiple dining venues and different concepts for each major meal of the day.
“It isn’t about the venue as much as it is about variety,” Pusateri said.
Pusateri and True Connection Vice President of Hospitality Gottfried Ernst have to balance increasing revenues with keeping costs down. The company is exploring possible third-party outsourcing of dining and housekeeping options, as those entail the majority of costs in independent living.
Ernst is also working on synergies with other Green Courte platforms. For example, he has been in frequent talks with The Parking Spot, Green Courte’s operator of parking garages and lots, to arrange transportation and parking for vehicles so as not to interfere with peak airport hours as well as keep spots filled during non-peak usage.
All of these steps have allowed True Connection executive directors to focus on increasing occupancy, now that the operational transitions are complete. Occupancy across True Connection’s portfolio will be at around 91% by the end of September, and has increased by two percentage points since taking a dip in late June, Pusateri said.
Green Courte has big plans for True Connection and it has recent history as a precedent.
In 2015, Green Courte sold its American Land Lease portfolio of 59 manufactured housing communities to Sun Communities (NYSE: SUI) for $1.32 billion. The communities totaled over 19,000 sites — 73% of which were age restricted.
The sheer volume of the American Land Lease portfolio sent Green Courte executives studying the senior housing space for years before it made its first senior housing investments. Pusateri was impressed by the level of knowledge his colleagues had about senior housing when talks first started for him to join Green Courte. And he hopes his experience gives the company the confidence to see they are moving the senior housing arm in the right direction.
It is also forcing Pusateri to reconsider much of what he knows about senior housing.
“To come to a company that hasn’t been immersed in senior housing but has been on the sidelines studying it, the conversation that I get to have with my knowledge and hearing a viewpoint from someone else has sometimes caused me to pivot on my thinking and look at things from a different lens. It allows us to drive the business in a direction I hadn’t thought of before because I was locked into what an industry norm has been,” he said.
Green Courte is looking for value-add acquisition opportunities, but will be patient with deploying capital, Pusateri told SHN. Pricing disconnects make it difficult to buy good properties at today’s cap rates and turn those acquisitions into something that will make money later.
The company is also looking at possible development opportunities. One community in True Connection’s portfolio, Parc Place in Bedford, Texas, consists of a mid-rise tower and cottages, the latter of which are regularly fully occupied. Pusateri indicated that Green Courte may look at other properties with undeveloped parcels to build similar cottages.
“It’s like searching for a unicorn,” he said.
And True Connection has one eye on active adult, a product type that Pusateri indicated Green Courte may consider in the future. He has toured active adult communities across the country and discovered some are offering meal plans, which to him is not what active adult is about.
What True Connection is working toward is tracking the future independent living residents that will eventually extricate themselves from their homes, and what True Connection can offer that will encourage them to make the move.
It will not be easy. Seniors want to stay in their homes longer, and Pusateri estimates the oldest boomers are five to seven years away from needing independent living, in his rosiest estimation.
He also believes the industry is still living with the fears from the Great Recession. Over the past 10 to 12 years, providers have worked hard to keep people in independent living and support them with services, essentially creating a de facto unlicensed assisted living with home health services, because they feared losing residents to higher levels of care.
Pusateri believes the industry needs to think outside the box in order to court the next wave of residents now.
“The goal is: How do we take them earlier, while meeting them at a price point that serves their needs? Because that group will not have the savings level of the groups we’re accustomed to working with,” he said.
‘Senior living’ vs. ‘living senior’
Pusateri identified technology as a way to enhance both the resident and employee living experience, and VR will play a role in both.
VR headsets can be used for educational purposes, to foster connections between residents who do not normally socialize, and to do things they have either never been able to do, or used to do.
One True Connection resident used to fly his family to Mackinac Island, Michigan every summer. True Connection’s VR partner, Rendever, happened to have tours of Mackinac Island in its system. This allowed the resident experience the island all over again.
VR can also be used to record greetings that can be played at weddings and social functions across the globe and vice versa, allowing residents to participate and reduce their levels of isolation.
The level of engagement among residents improved dramatically, and the VR pilot is now in all three of True Connection’s Michigan communities. Pusateri believes this is only the tip of the iceberg for how VR can be utilized in independent living.
“We can ask the resident what they want to do and we can find a way to make it happen. To me, that’s the difference between ‘senior living’ and ‘living senior.’ We’re flipping [independent living] on its ear and showing people that there’s a way to do things they never got to do,” he said.
Pusateri also believes VR can be used to improve employee training, and is working with VR companies to develop training programs that can be loaded directly into headsets. This will allow employees to focus directly on what is being projected, instead of sitting in front of a computer screen.
True Connection is discussing implementing Apple-style “Genius Bar” concepts with its concierge programs, as a way to assist residents with their smartphone, tablet and IoT knowledge.
Pusateri believes that if True Connection residents can learn how to use tech, they will be more engaged within and outside the community.
“We’re believers in technology and how we can make that accentuate the lives of our residents, versus keeping them fearful of it,” he said.