True Connection Communities CEO Jim Pusateri’s career in senior living has spanned three decades — and he believes not much has changed, until now.
“I was just talking to our teams at our meeting saying, ‘Honestly, I’ll have been in the industry for 31 years in May, and I don’t think it’s changed very much in 31 years.’ I think we’re on the cusp of what change is going to look like for the industry,” he said during a recent SHN+ TALKS appearance.
Pusateri is helping to lead this change at True Connections, the senior living operating company affiliated with private equity firm Green Courte Partners. The True Connections portfolio includes 13 independent living and active adult communities.
Having been a top executive at Horizon Bay, Brookdale Senior Living (NYSE: BKD) and Senior Lifestyle Corp., Pusateri is translating his experience with large-scale providers to foster innovation in an expanding platform.
We are pleased to share the recording and this transcript of the SHN+ TALKS conversation with SHN+ members. Read on to learn about:
— True Connections’ push to elevate customer service and earn net promoter scores to rival top performing companies like USAA
— Changes that True Connection is pursuing, including unbundling independent living pricing
— Pusateri’s take on active adult versus independent living
— Why he sees technology as the “greatest gift” a senior living community can give to older adults
— His expectations for occupancy and margin recovery
— How True Connection is responding to the labor crunch
The following has been edited for clarity.
[00:01:56] Tim: Can you briefly describe the company in terms of how many communities, levels of care, relationship to Green Courte?
[00:02:07] Jim: Sure. Let’s go backwards from those questions. Green Courte is a private equity company, and they actually own the real estate, and then they own the management company, True Connection Communities. We currently have 13 communities. We have both active adult and independent living. We have 3 active adult, 10 independent living. One of the 13 communities, we’re finalizing construction in Columbus, Ohio. We really have a platform of very independent-focused communities, and that’s really our focus as we move forward as well.
[00:02:43] Tim: I was just at NIC, and staffing was a hot topic in every panel, every conversation I had. How intensely are you feeling the staffing pressures, and how are you addressing recruitment and retention?
[00:03:12] Jim: It is tough out there for sure, and we feel that.
Being independent living and active adult, where we really feel that the pinch is in our independent living dining program, where we struggle to get servers and housekeepers. Obviously, the one thing that we’ve done is try to help with the wages and be a little bit more competitive with the big boxes out there, McDonald’s, Target, Walmart, Amazon. There, you’ve got signs everywhere for $15 an hour.
We’re certainly working on some retention programs that reward our employees for staying with us for longer periods of time, giving them more access to some of the services that we offer, lower cost meals that they can take home with them in independent living, specifically.
Then also just really trying to get them more introduced into the atmosphere of where they work. As a new employee joins us, we often will introduce the managers to a town hall meeting that’s going on for our residents, but sometimes you don’t do a housekeeper or a dishwasher. We started introducing all of the employee levels at those [meetings], so that they feel more connected to what it is that they do every day and the residents have a greater appreciation for them.
The pinch is definitely real. I’m at our annual meeting right now as we speak, and we’ve had a lot of conversations about some of the things that we can do differently. In fact, when I left the meeting to come join this call, our executive directors were in a session where they were whiteboarding some of the things that they have done successfully to retain employees and what they’d like to see.
We’re working with our teams in the field to really come up with better programs, develop things. I’m a firm believer that I can sit in our office in Clearwater and come up with ideas, but they may not be the ideas that are going to be well-executed at the community. We’re also relying very heavily on the people that see what works and doesn’t work at the community level, and using that information to create programs with them right now to make it better.
[00:00:26] Tim: Great. Related to the labor crunch, expenses are rising. Do you see an ability to raise rates to compensate?
[00:00:42] Jim: We are raising rates more than we have in recent years, and in 2022, I can’t honestly tell you that that will cover the costs of varying things.
It’s not just the increase in pay that is a struggle for us. All things are increasing, raw food, utilities, all of the same things that normally increase are increasing at a little bit higher rate.
I would expect we’ll probably see a little lower margin in 2022, and so we start to see some things adjust for us. We are definitely increasing the in-place rates and market rates at our communities higher than we have in the recent past, that I can really go back and recall.
[00:01:29] Tim: In terms of the in-place increases versus the off-the-street increases, do you see a greater ability to drive one versus the other? Welltower’s CEO made some interesting comments on their earnings call. He suggested that maybe the new residents rate could be pushed even more aggressively than in-place?
[00:01:49] Jim: Yes, I would 100% agree with that. It’s something that, when we look at what we’re forecasting for our market rates, we’ll run our numbers. Then there’s the magic of what Walmart has always done, where you add that 99 [cents] or 69, or 89 … If you looked at something that’s $3,125, can you get $3,195? It’s optics, that keeping it under that $3,200 mark, perhaps. We play a lot in that arena, but definitely bringing more rate from newcomers is easier.
The people that have been living with us for a period of time are the customers having a lower rent increase over the past several years. Driving too hard also causes the risk of some move-outs, and it doesn’t take very many move-outs to offset whatever rate increase you’re passing through to everybody at $3,000 or $3,300, or $5,000, or whatever your base rate is. You can damage that pretty quickly.
[00:02:57] Tim: With occupancy still in recovery mode from the pandemic, I think in a more typical environment, we might see rate concessions more than pushing rates. Are there situations where you’re still looking at concessions, are you seeing competitors discounting still? What’s going on on that side?
[00:03:34] Jim: Well, we see everything under the sun when it comes to rate out there. One thing I can tell you for sure is that we had some concessions in place and our salespeople have been working — we’ve been really teaching them the business of the business and the impact of that compared to the overall platform. They have started to see people come in and pay right off the street at our market rates, or even better than market rates, and not at a discounted rate.
One other thing that we did in a number of markets was, while we had some concessions in place, we did some pretty high upgrades in some units and pushed those unit prices up above the existing market with the discounts. We’re certainly seeing some traction and activity on that as well. We’re really trying a number of things to give the customer some options from a rate perspective, to understand how we can widen the net. We’ve even looked at completely unbundling independent living, which we’re testing in some markets.
What we typically have found is people will look at a completely unbundled independent-living product, but then say, “I would really like this.” Maybe it’s housekeeping, maybe it’s X meals a day, but that testing will again cause us to put a wider net out there and get people in and give them a better understanding of what that service cost is when they come to the community.
[00:10:08] Tim: I want to talk a little bit about the resident experience as well. What kind of experience do you want to deliver and what are some of the key elements to doing that?
[00:10:19] Jim: One of the things that was exciting to me in stepping into the role of a CEO was really bringing a high customer service mentality back. And, stepping into independent living and active adult after having been involved with assisted living memory care, independent living, skilled nursing, I mean the whole gamut, I think there’s a lot more leeway to really focus on that hospitality quotient.
Not that we’re all not doing that, but we live and breathe by meals, housekeeping, and we’re not providing care. Those are the high score things that we need to focus on, and then the engagement with our employees.
Right before COVID, we started measuring net promoter score at our communities. For those that aren’t familiar with net promoter score, it’s a simple question that really measures the loyalty of your customer. The question is how likely are you to refer or recommend a friend or a colleague to the community … You have scores that are 9 and 10 that are promoters, and then you have passives that are 7 to 8, and then anything below that is somebody that’s a detractor.
What we’ve learned through running the scoring is how to address what the issues are through our executive directors, with families or with residents.
We started out with a net promoter score on our first round of a 46, which isn’t great, but it’s definitely considered okay, and we really worked hard to address those things. We did that through addressing dining programs. We brought more technology into the buildings.
The most important thing that we learned through all of it was simple communication was the major factor in helping people understand what was going on in a community. Sometimes somebody didn’t realize that we’ve resolved something that they scored us poorly on, especially maybe an adult child, and we’d go back and have those conversations with those individuals.
Really what the net promoter score process has done for us has caused us to really take a deep look at what we do every single day, how we communicate with people, both employees and residents, and family members and referral sources.
The score is internal, but we use it as we would apply it to anybody that we’re engaged with. It’s really changed the way our sales team looks at a customer when they come in the front door, or a prospective resident. It’s changed the way our employees are dealing with our residents; let’s use an example of poor dining scores. We have our chefs knock on the door of the residents and talk to them about, “Hey, you gave us a low score on dining. Help us understand why.”
That feedback is really what they’re looking for, the opportunity to provide that. I’ll be honest, the chefs don’t like knocking on doors and asking why that meal was poor or that you’re rating us poorly. That is changing the way we see customer service in our buildings.
If you look at different industries, USAA has probably the highest net promoter score, or one of the highest net promoter scores in the country, which is somewhere in the 80s. Really aspiring to have some score like that is something that we challenged our executive directors and our teams and our communities with in delivering that service.
[00:14:10] Tim: That’s really interesting. I want to talk about sales too. Obviously, you’ve got experience in sales. Can you just talk about how True Connection approaches the sales process, and what trends are you seeing in terms of things like lead volume, conversion, close rates, whatever metrics you think are key?
[00:14:29] Jim: Lead volume is definitely — obviously, I think everybody in the industry’s been tracking that — it’s picked up quite a bit since the spring.
We’re seeing a huge impact to lead volume in digital and social media … Instagram, Twitter, Facebook, and we’re even using other social media outlets that we can find in different markets that are maybe smaller.
From a recruitment standpoint, we’re working on that as well. We’re seeing actually really great conversion rates and low, low cost of lead in social media, and the ability to put video [out] and have people engage in social media is important. We do Testimonial Tuesdays, where we take the testimonies from people that have given us great scores in Google or on our website, or with Listen360 [net promoter score partner], and we post those on social media every Tuesday, different ones.
Today, as a matter of fact, our sales team is working on videos for social media in our meeting that we can use. Also, we’re working with a company to come in and film our residents for those social media videos as well, and continue to drive activity to them.
I think, conversely, we’ve had some really great success with some of the old standards like direct mail and freestanding inserts in the newspaper.
I think there’s been so much pent up energy on wanting to see something fresh and new, we’ve really worked both sides of the old school and new school. I think the combination … your typical marketing standard is actually doing a great job when you tie it into social media. We’re really trying everything, and we’re seeing good success from a lot of things that we probably gave up on practically before COVID, like direct mail, and it’s just coming back.
[00:16:37] Tim: Can you talk a little bit about the messaging that seems to be resonating with consumers?
[00:16:55] Jim: … We’re hearing from prospects that they want to be engaged in different activities. I think coming out of what we’ve been through over the past nearly two years has really emphasized that people get isolated in these situations and they’re not providing themselves with much beyond television.
We’ve really catered our event strategy from a lead generation standpoint and giving people multiple reasons to come back to the community, but we’re hearing a lot about the need and want and desire to be more social. What can you do to help me become engaged in, not only the community that I live in, but the community that I was coming from outside the building. That’s been a big primary comment from prospects.
The other one has just been, from time to time, you hear, “I don’t want to be in a situation where I can’t get myself to the grocery store and get food.” Being able to have the ability to get dining delivered to your apartment or coming down to the dining room is a huge deal for some people. That’s been common as well.
[00:18:09] Tim: Are you more bullish on active adult or independent living right now?
[00:18:23] Jim: I like both quite a bit. I think the whole country is bullish, including the investment community, on active adult, and I love active adult. I think it’s a great product. We’re focused on both right now.
I think if I were to really be honest, independent living is becoming more of that “active adult moderate,” where maybe we have a better opportunity to look at not including as many services, to keep a more pure, independent living look and feel to a community.
I think I’ve said this before. When we came out of the economic recession in 2008, ’09, ’10, ’11, we kept people in place in independent living quite a while, and I think we inadvertently created a different level of assisted living.
I think the only way to get back toward independent living is probably pull back on some of the services in independent living so that we can attract a more active person, and we’re doing that right now, that’s what we’re focused on, and then the acquisition of active adults as well.
Honestly, you asked the question earlier about what are people asking for, but we hear a lot that, look, I don’t want a meal every day. I don’t need housekeeping every other week. I still do some of these things myself. We’re trying to adapt to that.
We’re going to have to run some numbers, and make these things work well, but we’re really wanting to meet the customer for a point of need, because the more we can do that, again, the wider net we cast. We do find that, when people come and they see that lower price point, they come in and see what value you can get for adding those services, most people take some of those services. We see that in our active adult communities where we offer a chef, that prepared meal. They start out with not taking meals and then they end up taking meal packages, maybe not 30 meals a month, but maybe 15.
Being flexible and offering choice, I think, is really what is going to be important to keep independent living and separate it from active adult.
[00:20:38] Tim: Just in terms of how you are defining your active adult model versus your independent living model, how are you doing that? What are the key differentiators that you have in one place and not the other?
[00:20:50] Jim: [In active adult], we [have] more self-directed activities with not having one or two FTEs for activities directors. A la carte meals in some cases, in some cases no meals, no housekeeping. They’re responsible for finding that on our own. Really, that’s it.
We’re not making available a space at the community for home health. If they want to bring in home health, that’s fine. I think once we start adding those care levels that are housed in a community, we start keeping people longer and we start looking more like assisted living.
I love aging in place but, if you’re going to keep active adult and independent living, those product types should have a good relationship with the other product types, where we can refer people and keep the product as active as we can.
[00:21:49] Tim: From what I’m hearing, you’ve got more flexibility in how you think about the role of dining in active adult than some other people who I have talked to, who would just say, “No dining, period.”
[00:22:07] Jim: In fairness, some of the communities that we have [as] active adult, they’re mature. Rather than moving to independent living, they do want some sort of service.
Look, everybody knows that one of the most social times anybody experiences, including you and me, is when we go out to dinner with our friends. Well, if we’re going to go out to dinner with our friends, we’re going to pay for that. We have the ability to create that environment in an active adult community. We can make a revenue stream work with providing meals for people that will buy them periodically. Why would we not do that?
We are doing that. We created a chef program. We have our corporate lead in dining help manage that with them. We’re experimenting with different things. We brought pizza ovens in. We’re working with CB Cooking so that we can have a broader menu. We don’t have to have as much cooking going on every single day in those communities because those sous chefs and cooks can prepare some of that ahead of time, store them in the refrigerator and then bring it back out, then we add it to the menu the next day.
We’re just looking at all of those different ways to give our active adult population choice. It’s amazing when you sit in an active adult community on a football night as an example. You’re going to see food delivery coming through constantly. We’re looking at ways to capture some revenue from that, but also find ways to keep people a little bit longer before they transition over to independent living, if that’s what they want.
[00:23:51] Tim: In terms of portfolio growth, how has the company been expanding and what does the pipeline look like right now in terms of acquisition opportunities, developments, et cetera?
[00:24:06] Jim: We typically don’t develop, but we are looking at a number of acquisitions right now.
We’re working through some diligence on some active adult locations and are working through some diligence on some independent living locations. It’s very competitive out there as everybody knows, and we’re seeing big blockbuster deals happening pretty regularly right now. We’re probably not buying at that level, but we are certainly looking to grow the portfolio and we’ve got our acquisitions team out hunting constantly.
Geographically, we’re really mostly concentrated on the east and in Texas; we have one building over in Arizona currently, but we’re Michigan, Ohio, Pennsylvania, Virginia, and then swing down into North Carolina and then Texas.
We’re looking for primarily value-add opportunities. As an example, some of the communities that we’ve acquired over the past couple of years, we’ll be renovating this year. We would have renovated them during COVID, but it was just too complicated to do that.
We’re endeavoring to get those renovations complete in 2022 and that’s part of the value-add strategy. That’s also an opportunity not only to look at your revenue, so we can be more competitive in a market and get a higher rate per unit, but also provide a little bit more satisfaction for the family members and also residents, when they see that we’re investing in the community and that we’re creating environments for them to enjoy.
[00:25:43] Tim: I’ve heard from some people that rental active adult is a relatively new type of asset, and so the pool of potential acquisitions is less than, say, independent living. Are you finding that? Are you looking at other building types to convert, whether it’s independent living or multifamily apartments or something else?
[00:26:09] Jim: Well, we’ve done the reverse actually.
I mentioned this on a call with you months before I think, but we acquired two active adult communities in marketplaces where there was a saturation of active adult that wasn’t leasing up. We converted those buildings to independent living. We added kitchens or expanded kitchens, commercial kitchens, and then added more dining space. They’re subsequently leasing up quite well in that scenario.
Now, I would be open to looking at, and I think we all would be open to looking at, independent living where there might be a saturation of that and breaking down services to active adult. The challenge is the revenue stream is a lot different, and so making that change, you’re buying something at the rates that things are selling today. That probably wouldn’t work very easily, but converting something else to that would. We haven’t seen anything so far, but we have looked at opportunities to convert some other structure to an active adult community.
Actually, all three of our communities in Texas, two were previously multifamily and one was actually previously a hospital and then added cottages to that. Those were converted before we acquired them, but that gives us some of the look at what somebody else has done in the past to go play in that arena and see if there’s some opportunities.
[00:27:37] Tim: From an acquisition standpoint, are you looking for turnarounds, big value-add opportunities, more stabilized, open to anything?
[00:27:45] Jim: Well, we’d be open to anything. We always like to add some value because it allows you to get a stronger return at the back end, but right now, we’ve looked at things that are new and we’ve looked at things that are value-add.
We’re just working through the process to see what it is that we can add to the portfolio that makes sense for us. Bullish on the cottage, there’s cottage developments that are out there. We liked looking at those as well. The more that we have an opportunity to play in those arenas, we’re looking forward to doing something.
[00:28:23] Tim: Let’s talk about care delivery a little bit. This is something that’s already come up a few times in the conversation. Obviously, you’re managing lower acuity communities and it sounds like some residents do bring in home health.
Do you see opportunities to work with health systems or some of these primary care groups that are popping up, or Medicare Advantage plans?
[00:30:40] Jim: … We’re looking at a lot of options. The more that you can give somebody to have as an option … we look at that, and we’d like to be able to provide that as a pass over. If it’s an Oak Street like you had mentioned, having awareness of all of that and learning some of the opportunities that we can have to partner with those individuals, absolutely.
I also am big on really working on more of rehab and therapy, so that people that have knee, hip, elbow, shoulder replacements when they’re living with us, that we can help them get some of that and access to that, which then provides them more opportunities to use the gym equipment that we have in our buildings and keeps them healthier longer. We like to do that as well.
[00:31:43] Tim: Supply chain disruption is another big topic of conversation lately, how’s that impacted your operations?
[00:31:53] Jim: We have run into some [challenges]. Especially on food, there are certain things that from time to time we find aren’t available.
We haven’t had too much challenge. Our biggest challenge right now is actually computers, replacing some technology. In some of the buildings, it has been tough with the chip issue. We’re right now trying to replace some older laptops and it takes a little longer to get them.
If you have new employees coming on board, you want to really forecast how many you’re going to have. We’re really looking at turnover and where those computers are necessary for those that require a computer in the communities, and stockpile some of those as we can, so that we don’t have to run into some of these issues later. It hasn’t been terrible and, hopefully, it won’t become terrible.
[00:32:42] Tim: That’s good to hear. What are you thinking in terms of when True Connection could get back to pre-pandemic occupancy levels?
[00:32:58] Jim: We ended 2019 just a tick under 90%. We had moved occupancy from our low points in May of 77% to 82.5% at the end of October. We’re forecasting almost 85% through the end of the year with our backlog. I’m hoping that we can get to our pre-pandemic 2019 occupancy of 89% by the end of 2022. It’s a little bit aggressive, but it’s actually less aggressive than what we’ve built in this last six months of this year.
There was some pent-up demand in there, but I think we’ve gotten better at understanding how to communicate and market to our prospects and our referral sources and most specifically our family members, where they can provide more referral activity to us. We’re shooting for that. I’m pretty confident in our sales teams right now with what I’m hearing in our meeting, that they’re aggressively going to run for that.
[00:34:00] Tim: Fantastic. Then the other part of that question is always on the margin. With expenses having gone up, do you see margin also bouncing back to those pre-pandemic levels in concert with occupancy? Or is that going to take longer?
[00:34:18] Jim: Yes, it’s going to lag, I can see. I wish it wasn’t going to but we have too many headwinds I think with some of the challenges with inflation, all the costs of providing the services, even insurance, and property taxes, a lot of it.
The great thing about the trades is there’s great trades going on in the industry. The bad thing about the trades is that somebody traded in your neighborhood. Now, you’re starting to see property tax opportunities, and those are the things that we’re just going to have to work through.
We fight that and we work through it. As we said earlier, we’re going to try to push rate increases on street rate higher and also push rates to the residents a little bit higher. My guess is, sometime in … we may see [margins] picking up in 2022, [but] 2023 is probably really when we’re going to get those margins back to where they match the occupancy.
[00:35:21] Tim: I want to circle back and ask a couple of follow-up questions about some of the earlier topics. One is on the staffing. I’m hearing about an increased desire for more flexible scheduling. Is that something you’re pursuing?
[00:35:40] Jim: We’re doing that for sure. We don’t look at a normal 7 to 3, 3 to 11, 11 to 7. We’re also looking at how — because the majority of our labor in our communities is housekeepers and servers, are we able to get people that can do housekeeping one day and server the next, so that we can move them back and forth, so that they have more of experience with us in our communities?
They also get a little bit more face time with the residents when they’re in their apartment, and also when they’re in the dining room, and it gives them a little bit more storytelling and satisfaction.
Then we’re also really looking at opportunities to hire people that are a little bit on the younger side, high school. We’ve also had some really good luck with some cognitively challenged individuals that we’ve been able to bring into the dining room and serve, as well as in housekeeping. We’re also working with wounded veterans. We’re doing everything we can to reach out to other avenues to find people that really do want to work versus people that are looking for the next $15, $15.50, $16 sign on the street.
We were talking in our HR meeting today that 83% of our turnover is voluntary right now. Those people that are turning over are leaving for higher salaries that we’re just not able — $17 an hour of Amazon, we’re not going to be able to meet that.
As we talked about earlier, we just have to find those other things that we can do that give people that mission-driven, “I love what I do, and I have some flexibility here,” and some engagement with people, [so] that it can be exciting. And really help provide career paths either inside our company or give them some of the things that they can learn from us that they can take somewhere else.
[00:37:50] Tim: Then also on workforce, on diversity, equity and inclusion. I was hearing a lot about that coming out of the summer of 2020. Now, it seems like the staffing conversation has turned into a mad scramble. I’m wondering if people are losing sight of DEI. Do you have any structured DEI initiatives? Or can you just share your thoughts generally on moving that forward?
[00:38:17] Jim: It’s critically important for us to recognize and pay attention to that. It is a mad rush out there. It’s unfortunate, but right now, you’re trying to hire who will take the job, and you’re trying to retain somebody after their first day.
There are a lot of people who walk off the job after that first day. We’re aware of it, we’re focused, but at the same time, we have to fill these roles. I have executive directors that are cleaning apartments every day right now, and we just need to hire at this point. It’s unfortunate, but it’s what it is today.
[00:38:57] Tim: On the renovation projects, any trends in terms of specific things that you’re seeking to do with those, or is it community by community, just trying to bring everything more fresh and up-to-date?
[00:39:31] Jim: This supply chain [issue] falls into that category most heavily … refrigerators, dishwashers … we’ve seen times where we can get them and times where we can’t. On the development project that we have in Ohio, we were fortunate enough to order very early, so that now we’re still installing certain things like dishwashers and refrigerators. We have them.
Yes, cost did go up. We had a guaranteed price on a particular development that we’re on, so it didn’t impact us from the cost of construction. Then, although in some of the renovation things, we’ve seen paint, some paints are difficult to get and paint is expensive now. Certainly, that has been a challenge.
We’re trying to do a little bit more than refresh. One of the things that we really feel important is that the adult children feel like they’re at their parents’ home and that they have the ability to hang out with the family member and not just come in and say hi, pick them up, take them away.
We’re really focused on the dining programs, to enhance them so that resident family members still want to come into the dining room. I mentioned the pizza ovens. We’re sending pizzas home with our prospects with messages on the box. Other people do that, but just trying to do things that are a little bit more memorable. Then, also, working on a few things from an activity standpoint for our family members to be a participant in.
The thing that we really saw during COVID was — I always felt like visiting mom and dad at a retirement community was a little bit of an obligation. Then when you couldn’t do it, it became a requirement, because you want to see them. In understanding that, how do we help that adult child really enjoy being at mom’s house and not just in the apartment, but in the common area of the building, things like appropriate WiFi and inviting them to the activities and events that we’re hosting, and developing apps for them to understand more about what it is that we’re doing in our communities?
So some of the learnings that we took away from COVID are things that we wanted to work on before, but we will more actively do now, and we’re excited about some of that.
I think — as we all know, I hope — adult children are our best referral source. Our residents aren’t always the best referral source. They come to us because they lost connection with people that have moved into our communities or passed away, and we need to focus on our adult children to make sure that they’re happy with services that we’re providing their parents.
Again, I’ll go back to NPS, that’s one of the things that we saw so clearly there, is communication about services that are going on between the adult child and the parents.
You have to meet the needs of both in the service delivery because they’re all talking about it once they’re there. We’re fortunate, our NPS is at 78 right now and we’re shooting to be in the 80s. We’re going to keep fighting the fight and communicate and put great programs in place that our residents and our family members can enjoy. I sound like a– [chuckles]
[00:42:54] Tim: What’s that?
[00:42:55] Jim: I sound like a commercial.
[00:42:59] Tim: [laughs] The sound of a good CEO. You did bring up some rental rates earlier when we were talking about rate increases, but do you consider True Connection a middle-market provider?
[00:43:11] Jim: Well, I think for the most part, we are. I think our development in Ohio will be a little bit more mid-high. I think the two buildings that we converted from active adult to independent living both in Arizona and North Carolina are more on the mid-high, but we’re certainly not high-end. Most of it is mid-ish market.
[00:43:36] Tim: I guess you answered this question already, but I think I’ve heard some concern in these conversations about being able to drive rate that a middle-market product is more constrained, because there’s less just flex in the ability of that demographic to pay, but it sounds like you aren’t encountering that?
[00:43:56] Jim: We’re lucky. Well, I’m wanting to say that we’re lucky. We have skilled sales people, who understand how to show one thing and sell up to the other, and they’re enjoying that. It’s the challenge of making sure that somebody gets what they want. I think we’re having some success with that.
[00:44:19] Tim: I want to talk to you a little bit about scale, too, because you’ve been with Brookdale. You went to Senior Lifestyle, which is another one of the biggest providers in the country. You have a lot of experience in the biggest platforms that are out there for senior living. Now, you’re at a more midsize provider. Can you talk a little bit about making that switch? Did you want to move to a smaller platform and can you talk about some of the trade-offs in terms of just having a bigger scale versus a smaller scale?
[00:44:56] Jim: The trade-offs are easy. You certainly have a depth of resources in a larger scale, something like Brookdale; a huge marketing machine, a lot more internal recruitment ability. You miss that.
Certainly, from a system standpoint, you are able to spread costs of some significant, powerful systems across a larger platform. For me, it was about being able to build something … with Green Courte, that they’ve had experience in doing. We’re really high on the NPS thing because Green Courte has done a great job of that with The Parking Spot, which is one of the platforms that’s owned by Green Courte.
It’s hard to deploy some of those great things that everybody wants to do at scale. It’s easier to do it at a small scale and let it grow with you. That was what was attractive to me to something smaller. Quite honestly, I’ve never worked in anything that was really all that small. Horizon, they grew into 100 communities. I was at Brookdale twice. First time I was there, we went from 7 to 67 [communities] while I was there, in three years, and then the second time I was there, I became part of 650 that went to 1,100.
I’m ready for something challenging on the small side, and I’m having fun with it. It’s definitely very different, to your point. I think what I have learned from all of that is the ability to know what scale can mean, and what scale can be as a tipping point, and how to manage that with growth and know what systems we need to have. I’m excited about trying to deploy that over time as we grow.
[00:46:56] Tim: Do you have a target size that you want to get to with True Connection?
[00:46:59] Jim: I’d say somewhere around 50 to 100, maybe a little less. We’re not going to go acquire just to get huge. We’re going to acquire for what makes sense for the business. Green Courte … we want to keep them happy as well from the private equity side. We’re going to do what makes sense and what’s right for the customer or for the employee. That’s what makes the most sense for us.
[00:47:30] Tim: I think Green Courte has invested in manufactured housing as well, including age-restricted, and we’re seeing a lot of investor interest in that sector and some chatter, I think, about whether manufactured housing can be an alternative to a rental, active adult type of community. Have you had any discussions with the manufactured housing folks at Green Courte about potential synergies, co-locations of True Connection buildings with the manufactured housing community? Or do you just have any thoughts on that topic you can share?
[00:48:06] Jim: We share our office space with them here in Clearwater, so we talk with them a lot. The platform that Green Courte had first was primarily active adult, 55-plus manufactured housing. The platform, Windward Communities, which is the manufactured housing division, does have an active adult community or two in the portfolio of 21 communities that they currently operate. We do have those conversations.
I don’t know what will come of those, eventually. That’s one of the reasons I was really intrigued by Green Courte, is that platform and mid-market make sense, and then we’re in the cottage market. There’s all kinds of things to play within that, and so those conversations go on quite a bit. Of course, we talked a lot about it during COVID, and now what we get to do is really think about our platforms and what we want to do to grow them.
Green Courte brought in a CEO to sit over the residential housing, and he’s relatively new with us. We’re really maturing those thoughts, and we’ll take those to the next steps in the coming years.
[00:49:20] Tim: We’ve got just a couple of minutes left. I want to zoom out. Looking ahead to 2022, what has you most worried from a business perspective, and what has you most excited?
[00:49:32] Jim: Getting employees, expenses and inflation are pretty significant concerns.
What I’m excited about is the response from people post-COVID, that they’re excited about coming to our communities, that we’re listening to our customer and our resident, and we’re creating some fun things to do in our communities and changing a little bit of the way we’re looking at independent living and active adult.
I think as an industry, we have this great opportunity … There’s a lot of investment coming into the industry. We’ve got some of the players that have been around for a long time that have been sitting at the edge waiting for opportunities.
We’re all going to be doing things differently to reposition ourselves in the industry. I think that’s extraordinarily exciting. I was just talking to our teams at our meeting saying, “Honestly, I’ll have been in the industry for 31 years in May, and I don’t think it’s changed very much in 31 years.” I think we’re on the cusp of what change is going to look like for the industry … There’s going to be some really cool things happening.
That competition and that road brings ingenuity. I think we’re going to make this industry better for those that want to come live with us in the future because of what we’ve gone through over the past 18, 24 months.
… I think it’s a really exciting time, and I think we’ve got some great years ahead of us. These are the kinds of things that we need to be talking about, probably need to be promoting to people that are getting out of school, so we can hire them.
[00:01:24] Tim: I love that thought that it’s been 30 years of relatively steady-as-she-goes in terms of the model and, now, there’s been this period of disruption … In terms of your role with True Connection, we’ve talked a lot about your plans already, so you don’t have to rehash, but is there anything that, looking back on this period, you really want to be a part of driving X innovation or Y innovation?
[00:02:15] Jim: Technology to me is enormous, and I think there won’t be anybody moving into communities in the near future that don’t have optionality on technology, whatever that might mean.
Look, I remember installing WiFi in buildings. I think that we haven’t probably done a good job of keeping up with that as an industry … I’ve said this before and I’ll say it again, my parents are the age group that need to be living in our communities but they won’t.
They’re very independent and they do a great job, but they know nothing about technology. If we don’t give the gift of technology to the people that are living with us in our communities, they’re going to be left behind. To me, the greatest gift we can give is really to help them with that. I’m excited about that alone, because we need everybody to step up and move forward with that. It’s an artificial intelligence world now, actually, so how do we continue to give people that gift? I just think that’s something that’ll be exciting to do.
[00:03:28] Tim: Are there specific things on the tech front that you have in mind? Is it smart apartments? Is it app-based things?
[00:03:36] Jim: Yes. There’s apps for stronger communication with family members, “heavy” smart apartments and “light” smart apartments. We’ve looked at all kinds of things that really activate a lot and a little.
There’s a lot of things that are utility-based that you can use from a technology standpoint, that can help the cost of a community. It’s all the way down to just simple things, like POS systems in the dining room. Those become really important in the future of people, especially in active adult [communities] that they do actually cook meals and make meals available for people. You want to have a way to capture that, and load it into the system.
All of that is coming, and it’s here in a lot of ways, but how do we continue to expand it, because it’s not everywhere. You can tour competition everywhere, and you don’t see it everywhere. That’s the next step. Maybe some would say that’s just getting caught up to technology and that’s probably true, but I think maybe we’re going to surpass it and be on the forefront of it, at least for our group of residents and employees.
[00:04:48] Tim: In a margin-challenged environment, like we’ll be in for the foreseeable near term at least, I’ve heard other leaders express some concern about being able to make those investments in innovation and technology. Do you feel like Green Courte is willing to put up the capital needed for that?
[00:55:22] Jim: We built out a five-year capital plan, and we continue to adjust that at all times. We just completed our capital budgets for 2022, and there’s technology in there. We worked with our CTO on looking at investigating things that we would like to play in an arena of. We’re piloting a couple of things in 2022 in some of our communities, so we expect to roll fully out 2023.
We are working on it, and I would agree with some of the others who have said with the challenge of expense and the occupancy deficits that we’ve experienced, that will not happen right away. They got to have a vision and a plan and build it out to chase it down. I don’t think we’re unique, I think everybody is working on that.
[00:56:11] Tim: All right, great. Well, I think that’s a great note to end on — innovation for the future. Jim, thanks so much for taking the time.
[00:56:21] Jim: I appreciate the opportunity.