Senior living providers that are waiting for an influx of aging baby boomers to solve current industry headwinds and operational challenges are setting themselves up for failure.
Instead, providers need to be pushing to innovate and create “unique and differentiated” housing options that will appeal to future consumers, according to Robb Chapin, partner and CEO, Bridge Seniors Housing & Medical Properties.
In particular, Chapin believes that senior living providers should be focused on how to elevate the socialization offered in their communities, he said on the Senior Housing News podcast Transform, sponsored by PointClickCare.
Bridge is driving innovation across its platform following an eventful 2019. As a fund manager, the Orlando-based company is a well-established investor in the sector, and deployed more than $300 million in equity last year, translating to more than $1 billion in transactions. Bridge also became an operator last year by acquiring Somerby Senior Living, which has been rebranded as Bridge Senior Living.
With a more robust C-suite and a “heels down the hallway” approach to management, Bridge Senior Living has been driving occupancy and NOI, and best operational practices are being shared with Bridge’s third-party operators as well. In total, the company has a portfolio of about 99 properties, including 25 operated under the Bridge Senior Living banner.
On 2019 accomplishments:
We really jumped into 2019. We had a lot of headwinds as an overall sector from a macro perspective, but certainly [also] in the context of our own company and how we were approaching the year in terms of some of the big goals we had, both from performance in our own assets as well as getting capital out the door in new investments in quality opportunities.
… I’m really thrilled that 2019 was really the best year to date since the inception of our fund management business here at Bridge Seniors Housing, and I couldn’t be more proud of our team and all the efforts they put into it.
On becoming an operator through the Somerby acquisition:
I think in a lot of ways, it’s exceeded our expectations in terms of the impact it’s starting to have … I think one of the things first and foremost that differentiates Bridge Investment Group is our product specializations, our vertical integrations of our different asset categories that we’re involved in across Bridge, like in our multifamily group. We manage all our multifamily assets and our commercial office.
The world of seniors housing is different in the context that it’s harder to manage all your assets when you’re a national owner of seniors housing real estate, given the local nature of the sector. What we have really tried to do is look at where we believe our operating company can have the greatest impact, given the resources and the tremendous assets and skills that they have from a geographic standpoint and across all the different lines of our business to drive value.
We’ve been able to do that, I think, relatively successfully. We exceeded the number of properties that we added to the Bridge Senior Living operating portfolio by more than double what our initial projections for 2019 were, so a lot of transitions for that team. But I’m pleased to say that we’re starting to get on the other side of those transitions and see traction within the context of a new operator. We’re seeing some tremendous results on the backside of that.
On the other side of it, as well, Bridge Senior Living is engaging well with our third-party operators. It’s critically important to our ongoing business … Our third-party operators and partners that we work with across the country are helping Bridge Senior Living in many areas as well. The opportunity … is lifting the performance and best practices across what we do and delivering a high-quality living environment for our residents.
On timing of the Somerby re-brand to Bridge Senior Living:
That happened in the first part of the year. We felt it was very important to have the Bridge brand associated with our operating platform, as we have in other our verticals in multifamily and office.
We’ve also relocated the core operating function of the operating company from Birmingham, Alabama to Orlando, Florida, where Bridge Seniors is headquartered, and expanded the space there. What we really have is truly a vertically integrated model with our fund management [and] asset management investment teams working side-by-side here in Orlando with our operating platform team, and we’re really seeing some tremendous benefits as a result of that.
Currently Bridge Senior Living operates  Bridge-owned properties across 15 states. And from the prior transaction and activities of Somerby Senior Living, [we’re] operating on a third-party basis three additional communities as well, for a total of  today.*
On new hires for Somerby’s management team:
We have expanded and are very excited about a lot of new talent that we have brought on board over the course of 2019 to really drive the leadership across our communities that we directly manage. We’ve probably tripled the size of the management team. We’ve added a chief operating officer … we’re in the midst of final interview stages of hiring a chief talent officer. We moved one of the key strategic sales people on the Bridge Senior Living side into a role where this person’s title is now chief sales officer. So, this person is working between both Bridge Senior Living and our third-party operators on the fund management side, overseeing a lot of the strategies for our sales and marketing initiatives and collaborating directly with our third-party operators, which is working really well.
On how owning an operating company changes asset management:
That’s really the benefit of having our own operations platform now. We have a more direct appreciation for how operators go about doing their business. I think that has helped us as a fund manager think about how we approach challenges within our business — how we think about selecting new operators, [and] in the acquisition of properties, where we want to add new third-party operators and partners with us.
We feel we don’t need to have a lot of involvement with our third-party operators … we want to be involved to help come alongside them to make them successful, where we feel like we might be able to provide value without telling them what to do or how to do it, but enhancing the things where we might be having challenges, whether it be in recruiting/labor/staffing issues, whether it be in culinary or care or activities, sales and marketing obviously — wherever we can bring some ideas and thoughts and direct input for them to be successful. That’s really where we see ourselves providing that value-added benefit as not only an owner but also the perspective of an operator.
We are very much … committed to the space and will continue to grow with our current operating partners and seek new operating relationships throughout the country. I think that was really evident in 2019. We talked about having our best year ever. We deployed over $300 million of equity in seniors housing, which translated into over a billion dollars of transactions.
We added four new operating partners … so we are very much engaged in growing our business through our third-party operator relationships, and where it makes sense to bring Bridge Senior Living in to either enhance or help in a challenging situation, we’re in a very unique position as an owner and fund manager to be able to do that with our own integrated operating platform.
On where operational improvements were made to drive 2019 results:
We came into 2019 realizing that from 2016 through the end of 2018, we had an unprecedented amount of net new supply into the seniors housing market, which has caused tremendous headwinds for occupancy growth within our industry … So we knew we had our work cut out for us. We knew where our challenges were, and so we put a lot of focus and resources and energy around where we felt we needed to have the greatest impact as a company.
We work with a philosophy of we inspect what we expect. So, as a company and as an executive team, one of the foundational things we did that was very different was we got out in the buildings on a monthly basis. As the president of Bridge Senior Living and our Chief Asset Officer David Grady likes to say, it’s all about heels down the down the hallway for us … There’s no substitute for that, and talking with the teams there about the challenges they’re having in the communities.
So from that standpoint, we really think we’re in the field in a way that we never have been before, hands on, rolling up our sleeves with our teams in the field, our third party operators, the regionals, management teams with executive directors and their teams within the communities.
We got to know the rhythm of the community and where the challenges were and where the opportunities might be and just helping them as a resource in the areas that we really saw a significant impact.
I think on average, we experienced about 3% occupancy growth in, again, a flat to downish market overall. And then same-store sales growth from an NOI perspective, we saw strong double-digit NOI growth across the portfolio as well. And I think, again, it’s the direct impact of our team and their passion to really work with and understand the issues with the challenges that each one of these communities were having.
On the increasingly competitive M&A landscape:
First and foremost, over time the investor landscape has really diversified. It’s expanded by investor type over the last several years, so a lot of new capital has been raised. That’s contributed to the challenges in the marketplace today. The increasing number of funds. It’s just a deeper, more competitive field.
Transaction volume has been down, been pretty flat, over the last three years, which has contributed to, I think, challenges for a lot of new capital in the marketplace wanting to get invested into seniors housing.
So, I think all of those different issues certainly present challenges for companies like ourselves that are deeply committed to being a distinctive capital provider in the space. We really believe that at the end of the day, private equity in particular has a very distinct role in the capital inflows. It has and will fill the gap as it relates to the public equity markets. I think the balance between the public and private markets will continue to fluctuate over market cycles, which I think at the end of the day provides a very healthy capital markets environment overall for seniors housing going forward. When we look at the potential growth in our industry on a go-forward basis, we continue to be very excited about the opportunities presented.
… We’re on the back end of finalizing our deployment in our current fund. We had to look at over 1,400 deals over the last several years to get to a portfolio of about 54 properties. So, you have to look at a lot of opportunity.
On top priorities for 2020:
I think relying on the demographic imperative for the success of our business is a recipe for failure, ultimately.
Pushing the threshold of delivering the very best quality of life to our senior population is really at the core of how we think about success. We think that seniors housing has an opportunity to really thrive in 2020 and through this decade — we capitalize on the demographic imperative, of course, but the only way it’s going to thrive is we continue to evolve and challenge ourselves to be the very best at what we do.
I think what has always differentiated seniors housing, what we can’t lose focus on, is the socialization aspect. I heard my dear friend Larry Cohen talk about this a long time ago, and it resonated with me. Socialization is such a key part of any person’s quality of life. Certainly, as you get older, the dynamics of socialization become more and more challenging. And having an environment where that challenge is kind of broken down through being in a community with people that really are like-minded and care about you and and you can engage with … those are the real benefits of this industry, and for us, how we think about it.
So, we’re certainly focused on the blocking and tackling of performance as a company for 2020. I think beyond that, though, we’re, we’re really more focused on how can we reach out to a growing population of seniors that will need and do need some level care. How can our communities within a marketplace reach out to them to connect them with our communities and connect them with all the service and and culture of our communities that really allow our residents that live there to thrive.
And so we’re looking at a lot of those types of initiatives to be more connected in the markets that we have communities in, and reaching out to people that may not live there today but may benefit from some of the things that we provide.
On harnessing technology and design to drive socialization:
We have a prop tech committee here at Bridge, broadly speaking, and within the seniors housing group. So, we’re looking at a lot of technology opportunities to help continue to evolve and make our business better … I think you’ll continue to see more and more innovation within the four walls of our buildings. But, again, I can’t emphasize enough more the culture side, the socialization side. So, creating buildings with innovation that allows that human interaction and socialization, allowing residents to thrive in these environments. I think that’s going to be key … doing it through architectural elements as well as technology elements, but I think more importantly than all of that’s really the human element of it, and how do we continue to train and engage all of those that impact that side of the business.
On top concerns for 2020:
As I said before, if we are complacent … and only really relying on the demographic imperative and the growth of the baby boomer, 75-and-older population driving us out of any challenges and headwinds that we have today, I think we’re missing the bigger opportunity and I think this business gets left behind in a lot of ways.
So, I think the bigger concern is really, as an industry, what can we do to challenge ourselves to literally provide the best quality-of-life environment for our aging population, our seniors, that’s unique and differentiated from really any other form of care that’s out there today.
There’s a lot of things being done, a lot of people trying to bring in new ideas, new ways to engage the senior population. Disruptors, if you will. But I think, again, we have such a huge advantage given some of the things we’ve been talking about with our communities and those residents that live in them. That’s really the concern, is if we get complacent and don’t continue to challenge ourselves to be better.
Click below to hear the complete interview:[soundcloud url=”https://api.soundcloud.com/tracks/759533596″ params=”color=#ff5500&auto_play=false&hide_related=false&show_comments=true&show_user=true&show_reposts=false&show_teaser=true” width=”100%” height=’166′ iframe=”true” /]
Editor’s Note: In his podcast interview, Chapin says Bridge Senior Living operates 24 owned and two managed communities; this story updates that information based on numbers more recently provided by Bridge.