After $1.8B Deal To Stay at Company Helm, Le Groupe Maurice Founder Charts Future with Ventas

About six months ago, Le Groupe Maurice (LGM) founder and CEO Luc Maurice received an offer he could not refuse — however much he wanted to.

The private equity investors in Le Groupe Maurice were going to buy Maurice out, to the tune of nearly $1 billion. He had no choice but to take the money and lose ownership of the Canadian senior living company he had built over the course of two decades — unless he could secure $1 billion himself and buy the investors out within 60 days.

Such were the conditions of a “shotgun clause” in the limited partnership agreement between Maurice and the PE entity, Ipso Facto. Ipso Facto resorted to the shotgun after deciding that disagreements with Maurice had become intractable.

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This was not the first time in his senior living career that Maurice found himself locked in battle with a business partner, and the previous experience had not ended well for him.

Prior to forming Le Groupe Maurice in 1998, Maurice got his start in senior housing by creating a small, high-end senior living community in Canada’s capital city of Ottawa. But Maurice had not paid enough attention to details of the business arrangement, and his partner found a way to kick Maurice out of the venture.

“I lost everything,” Maurice told Senior Housing News during a recent interview in Montreal. “I went bankrupt professionally, personally.”

But he gained something as well: the track record of creating a successful building, and hard-won lessons.

“When you’re 29 years old, you’re good at school, good at sport, you’re good at what you do, you tend to be overconfident, but that experience taught me about risk, taught me about the outside environment, the banking environment,” Maurice told SHN. “So, it was very helpful, and it helped me later in my career.”

With the metaphorical shotgun to his head earlier this year, Maurice managed to strike a deal with Chicago-based real estate investment trust Ventas (NYSE: VTR). That transaction involved Ventas investing $1.8 billion to acquire an 85% stake in LGM’s real estate portfolio under a RIDEA structure, including a bridge loan of nearly $1 billion to buy out the existing private equity partner. LGM will continue to manage the portfolio.

That transaction provided Ventas with another platform for growth north of the U.S. border, and also deprived rival Welltower (NYSE: WELL) of a chance to expand its footprint in Canada. Toledo, Ohio-based Welltower was working with Ipso Facto on the potential buy-out, sources with knowledge of the deal told SHN. Ipso Facto did not respond to a request for comment for this article, and Welltower declined to comment.

As for Maurice, he is eager to now work with a long-term capital partner to expand within Canada and perhaps even bring the company’s model — which boasts consistently high occupancy and impressive length-of-stay — into the United States.

Risk and service

From the age of 12, Maurice wanted to be an entrepreneur.

“That was in my skin, deep in my skin,” he said.

Despite this early conviction that he wanted to start a business, his path to forming a successful senior living company was not straightforward. He first left home to become a pilot in the military, wanting to learn English and expand his horizons.

However, Maurice realized that he is a pacifist by nature and did not like using firearms. So, he ended up specializing in search-and-rescue missions, which was a good fit and had parallels to his future entrepreneurial endeavors, he noted: Flying was a way to help people, and it involved risk.

Luc Maurice, courtesy Le Groupe Maurice

While still flying search-and-rescue, Maurice pursued an MBA. One day, he was walking down the street in Edmonton, Alberta, and saw a senior housing complex under construction. He was appalled. The building, he said, resembled “poultry houses.” He decided to create a statistical model for measuring happiness among seniors as his thesis project, which won a prize and led to consulting work in senior housing.

The leader of his squadron knew of Maurice’s ambitions to start a senior housing company of his own, but encouraged him to first apply for a position in Ottawa, as aide-de-camp to the Governor General Jeanne Sauvé. By taking this position, Maurice would be able to form valuable connections with influential people who could help in starting his company, the squadron leader advised.

“That’s exactly what happened,” Maurice said.

It was through these connections that he created his first senior housing project — the one that became a successful operation but resulted in his own personal bankruptcy.

Maurice went on to work for CN Rail, but chafed in the corporate world and ended up spending 18 months in a log cabin in Northern Canada, again blending risk and service to others by doing winter survival and acting as a guide for French and German groups.

“After a while, I said, ‘Well, it’s time to go back to reality,” he said. “And I wanted to go back into what I love the most, seniors housing.”

Senior living à la Maurice

Le Groupe Maurice got off the ground with a project on a lot that was formerly occupied by a municipal garage in the Montreal suburb of Sainte-Thérèse.

That first community took a lot of hands-on toil from Maurice and a small team he assembled. There were sleepless nights — in fact, Maurice himself spent some nights in the community, because residents started moving in before locks had been installed on the doors.

Although he had secured the backing of a Canadian university pension fund, he did not have the money to even hire a security guard, Maurice told SHN.

But, he was also eager to spend time at the community and play an active role in operations. He pitched in on everything from housekeeping and janitorial work to caregiving, and had 24/7 insight into how staff responded to clientele.

The first community reached full occupancy, and Maurice began to expand the company with an even clearer vision and operating model, which has been refined over time.

Le Groupe Maurice has built its entire portfolio through ground-up development, with the goal of creating appealing properties that seniors want to live in — an alternative to the “poultry houses” which older adults tried to avoid until health needs prompted a move.

The Le Groupe Maurice model consists of large communities of roughly 300 to 400 units, on sites that provide easy access to retail, restaurants, transport and other amenities. The buildings themselves are also highly amenitized, with features such as golf simulators, bowling alleys, full-service pharmacies and convenience stores, pools large enough for lap swimming, and indoor and outdoor gardens. One of the newest additions to the portfolio, the Sevä community outside Montreal, features a boardwalk through wetlands behind the building.

The company strives to inspire a sense of “wonder” through design — for example, through creating poolside, indoor beaches with real sand and special lights that simulate the sun.

The unit mix heavily favors independent living, but also includes a small care component. In response to consumer demand, the company in 2006 began to offer a limited number of units for sale, leading to a mix of condos and rentals.

At one point, Le Groupe Maurice had seven different government contracts, but moved away from that to a pure private-pay model, Maurice said. Monthly rents average between $1,500 to $5,000 Canadian, which is equivalent to about $1,120 and $3,730 USD.

Each Le Groupe Maurice building has a distinctive architecture meant to integrate with the surrounding community, and bears a name with local significance. One of the key turning points for the company, Maurice said, was evolving beyond a collection of individual communities and into a unified brand. This recognition took place when the portfolio had grown to about eight properties, and it prompted a concerted effort to balance the unique nature of each community with more unified branding and a systemized approach to operations.

Among the systems in place today, there is a robust customer experience program. This involves a series surveys and other touchpoints that gather resident feedback and deliver the findings swiftly to leaders on the ground, who can take prompt action to maintain and improve customers’ “happiness index.” Le Groupe Maurice also went through a process to map the customer journey, from prospect to move-in to long-time resident, and identified pain points in that journey. This has helped the company focus on key moments to check in with residents and ensure that they have a continuously positive experience.

In addition, the company has created a number of proprietary technology platforms to manage various aspects of operations, including the REMI system for managing maintenance and upkeep, SOFI health records software, and THEIA interactive touchscreen terminals that provide information such as menus and activities.

The Le Groupe Maurice approach to development and operations has achieved sustained success, with occupancy hovering around 97% or higher over the course of 15 years, Maurice said. That reflects his success in motivating older adults to re-locate from their single-family homes voluntarily, and earlier in life. Le Groupe Maurice’s average move-in age is 78 and the average length of stay is 7.3 years.

Margins are around 41%, blended across apartment and health care units in a building, Maurice said. This is in line with U.S. senior living margins, which range between about 45% for independent living and 35% for assisted living.

The next chapter

Business success hinges on the ability to “be somewhere in the middle” of the triangle formed by investor, client and personal interests, Maurice believes, and this will involve some compromises.

However, there is one thing Maurice cannot abide: He “hates” short-term thinking. His long-term mindset began to create friction with LGM’s private equity investors, who were focused on a shorter time horizon. Every four years or so, the relationship had to be renegotiated, Maurice said.

This friction culminated in the shotgun situation earlier this year, according to Maurice. Determined to keep control of the company, he and his team quickly identified about 55 potential partners who could bring the needed capital to the table in short order. But only Ventas checked all the boxes that he was looking for.

“I realized quickly that we needed someone that knew the business, had the cash, could move quick, wanted a long-term relationship with a quality partner, and shared our values,” he said.

Ventas also perceived a good fit right away.

“We knew immediately that we wanted to pursue this transaction,” Ventas Senior Investment Officer Manisha Bathija told Senior Housing News. She pointed to LGM’s “stellar reputation and impressive portfolio,” as well as its presence in attractive markets and potential for growth.

That growth could involve Le Groupe Maurice expanding outside Quebec into other Canadian provinces, or even into the United States.

Maurice recently was in the Chicago area, and he took the opportunity to visit five best-in-class communities in and around the Windy City. His goal was to study the market, and his impression is that the United States is a promising prospect for Le Groupe Maurice.

Now, LGM is taking the next year to 18 months to do a deeper dive into the U.S. senior living landscape.

The timing could be auspicious. Maurice is eyeing the U.S. at the same time that active adult communities are gaining momentum in this country. With baby boomers starting to retire, but still too young for traditional independent living, alternative communities are being developed for this younger demographic. And this is the age cohort that Le Groupe Maurice already serves in Canada.

Ventas’ Bathija did not use the term “active adult” to describe Le Groupe Maurice, but she did acknowledge that the model is more “apartment-like” and in larger buildings than the typical U.S. senior living model.

Given that Le Groupe Maurice buildings do occupy a large footprint and are developed in close proximity to retail and other amenities, finding available sites likely would be one challenge for a U.S. expansion. Yet, the timing could be good on this front as well, given that the decline of retail and multifamily construction has opened the door for senior housing in mixed-use developments.

Finding and securing sites would be far from the only challenge should Le Groupe Maurice venture into the United States. Construction costs are another. These costs are high in Canada but even higher here — and LGM buildings are not cheap to build. Though hard to generalize given differences from location to location, it’s not unheard of for all-in costs to approach the $100 million mark, LGM Vice President of Marketing and Sales Rita Kataroyan told SHN.

And LGM’s operating model may need to be adapted in response to differences between the consumer base of Canada versus the United States. Some of these differences are quantifiable, such as how much seniors spend each year on medical expenses, given the health care systems in each country. But other differences are less tangible, involving cultural norms around aging and what people want and expect from this stage of their lives.

Zeroing in on these aspects of the consumer is a top priority for Maurice, whether he’s looking at the existing portfolio or new expansion markets.

“He’s got an obsession with knowing who his client is,” Kataroyan said. “Obviously, you can’t run a business if you don’t know your [customer]. But there’s a difference between saying it and then actually acting upon on it.”

This obsession is innate and longstanding — recall Maurice’s MBA project on measuring seniors’ happiness. But, he also emphasizes the business imperative, because the reputation of the Le Groupe Maurice brand and the occupancy of its buildings is rooted in its residents’ happiness.

“Our 10,500 clients are our sales agents,” he said. “We don’t have the credibility to say we are good. They have the credibility to say we are good, to say they’re happy … to me, it’s very key into what we do.”

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