One topic on the minds of senior living executives everywhere is how long the ongoing recovery will take, and when the industry will return to pre-pandemic conditions.
But to American House Senior Living Communities CEO Dale Watchowski, the recovery hinges on the people who work in the industry, and “how much they have left in the tank.”
“If … we could just wave that magic wand, and we could all say, ‘Okay, it’s over. Let’s start anew,’ and we could re-energize our team members, then I’d say the recovery is coming much sooner,” Watchowski said during a recent appearance on SHN+ TALKS. “As long as we have the staffing issues … I think the recovery is going to be protracted, [and] I’d say maybe two to three years for a full recovery.”
Although American House is not immune to staffing pressures, the company is recovering at a steady clip. The Southfield, Michigan-based operator regained 8.5% occupancy in 2021, and currently has an average occupancy of just over 86%.
In addition to growing occupancy, American House is also growing beyond its 70-community portfolio. In January, the operator entered Tennessee with more than a dozen former Eclipse Senior Living communities as part of a transaction with Ventas (NYSE: VTR).
Watchowski also leads American House’s affiliated development company, Redico, and in 2022, he is looking for more opportunities to grow through development. Currently, American House has nine communities in various stages of development.
We are pleased to share the recording and this transcript of the SHN+ TALKS conversation with SHN+ members. Read on to learn about:
— Watchowski’s philosophy on the ongoing senior housing recovery
— How having in-house development experience helps American House operate as a “contrarian player”
— Why American House launched its own in-house marketing company
— The middle market, and how American House plans to meet it
The following has been edited for clarity.
[00:01:05] Tim Regan: Where is American House right now with regard to its operations and its occupancy recovery efforts?
[00:02:12] Dale Watchowski: We’re in a great place. I’m really proud of the team. I’m proud to say that we are very close to our pre-pandemic occupancy levels. That’s something to be proud of. Pre-pandemic, we were at 89%, and today we’re at just over 86%. We’ve grown occupancy in ’21 by about 8.5%.
More importantly, we often think of occupancy in the industry, but I like to think of revenue versus occupancy. I’m a little more focused on revenue. More important than occupancy growth, our revenue growth has been about 17%. I’m pleased to say that through rent increases, through some valiant efforts to reduce concessions and continue to build on our revenue generation business, we’ve been able to increase revenues by 17%. I’m really proud of that.
[00:03:25] Tim: What’s working right now to secure move-ins and grow occupancy? On the flip side, is there anything that you’ve tried that hasn’t worked as well in the markets where you are?
[00:03:44] Dale: I’d say probably the best thing that we did was to build our own marketing company. While a number of other companies — including us — in the beginning, hired advertising and marketing firms, we have built our own. You mentioned when you introduced me that I’m responsible for Redico, which is a commercial real estate acquisition and development company. We’re also an operating platform. [Being] combined gives us the bandwidth to build and engage a marketing and advertising team.
We built our own company; we call it GO Plus, which stands for Great Outcomes Plus. What that company is doing is working toward branding initiatives that benefit us at American House. They’re working on design initiatives, marketing initiatives, advertising initiatives, website design and optimization. We’re continually upgrading the website. Most important is that we have a team of digital marketing experts who are able to stay on top of the trends in specific markets and act quickly when needed. By bringing this team on, we have been able to generate leads well in excess of where we were at before this time.
We’ve built great relationships with our partners, and by partners I mean those outside of American House, those places of lead generation. We’ve created new programs, we call them partner perks, to assist with leads from nontraditional referral sources, and oftentimes what that means was money. It’s enabled us to improve our success in terms of revenue generation. We have also evolved our training programs. That’s not just for sales, that’s also for operations, because we want them to work in lockstep.
[00:06:02] Tim: You mentioned the marketing company. Did you start this during Covid or was that an effort that you had in place before this pandemic?
[00:06:12] Dale: No. It’s interesting, we started it well before Covid. By way of background, we bought this company 13 years ago. I’ve been in the real estate industry for 40 years now, and what I found is that when you hire an advertising company, oftentimes you’re getting the best upfront. Then what happens is you lose those contacts over time, and it was happening time and time again. It was a short while into our business that I came to the conclusion that among the companies that we control — and that’s American House, Redico, Continuum, and Aquis — we had the ability and the resources to build our own company, and that we did.
It started as a company called Elevate, and then we evolved into a company that included more options around marketing and advertising, and we changed the name to GO Plus. We’ve been in it for a while, and it’s worked well for us, actually.
[00:07:16] Tim: Do you see anywhere else as it relates to senior living operations or real estate where you can both create a business that can help you in your markets but also potentially be a new service line for you?
[00:07:46] Dale: We are hyper-focused on finding opportunities to create companies or business units that would enable us to improve our position. I’ll tell you one that has worked out quite well for us — and we built this company about 12 years ago around Redico because I wasn’t happy with the level of service I was getting at our properties — is a company called Continuum Services. It started as Redico Facility Services.
We compete for Beaumont awards and the like. We’ve often had the judges walk into our buildings and say, “Hey, you’re doing a great job in these buildings, who are you hiring for facilities?” We say, “Well, it’s Redico Facility Services.” They say, “Well, if you change the name on the truck, we’d be happy to hire you.” We did change the name, and the company is now called Continuum Services. What we do is we offer facility services, exterior services, engineering services to our properties at Redico, but also to our communities within American House.
The other thing that we did is we moved those services, our maintenance directors, into Continuum. They actually are Continuum employees. What it enables us to do is to focus on the main thing, and the main thing is actually maintaining our buildings for Continuum. Oftentimes an executive director or a CRD, they might be focused on the care of the building, the bricks and the mortar, rather than the main thing, which is the resident. We pulled that out.
There are some other areas of business that we’re looking at currently, certainly. Most of them include clinical and wellness initiatives, pharmacy and life enrichment, and also home health care.
[00:10:03] Tim: What do you see in 2022 in terms of the development landscape? I remember you were very bullish on it before. Do you still feel that way now that we’re in 2022?
[00:10:56] Dale: The threat of interest rate increases and continuing inflation hasn’t done any of us any favors. We certainly continue to remain concerned about inflationary pressure and building costs. What we’re doing, however, is continue to develop. We’ve always been a contrarian player, and if right now development is more difficult, what we’re going to do is find a way in which to do development, and that’s exactly what we’re doing.
If we’re speaking specifically to American House, we currently have nine communities in various stages of development right now — we have one community that was just recently completed. We’re pretty bullish despite some of the inflationary pressure. We’re finding a way to make it happen. Certainly, as inflation continues to plague us, we also have the ability to increase rental rates. That’s been one of the benefits. What we’re finding is that we’re able to get those rents as we put the units on the market.
My read is that development is still important to the industry. I do believe that this aging boomer population is going to continue to create demand. It will come a bit down the road, so we’ll all be prepared for it. I think development has slowed because only the best of operators right now are getting capitalized. We consider ourselves to be one of them and we’re not having trouble raising capital, fortunately, for that. Our focus has been on operations and doing a really wonderful job. Our focus has been on taking advantage of the economies because we oftentimes have not only senior development in the pipeline but we have a great deal of commercial development in the pipeline. I’m bullish in that regard.
[00:13:18] Tim: We’ve talked a little bit in the past about how you feel like you’ve got some advantages with all the in-house development experience. I think that’s clear. Can you elaborate on some of what those advantages might be?
[00:13:45] Dale: We generally have about $250 million to $500 million of development in the pipeline. Certainly, the economies of scale would help us out. We’re keeping both our contractors busy and our trades busy, and we’re keeping our suppliers warm. We also field an amazing development team, so I’d say that there’s a lot to be said for that. And, we’re continuing to grow our development team, primarily to meet the demand of ’22 and beyond. Having an in-house development level of development expertise allows our team to be involved with daily operations.
We hear in real-time what works in what doesn’t work from a bricks-and-mortar perspective. I put that in terms of design. The resident experience is delivered through programming and through buildings themselves. Our goal is to enrich the lives of those we serve. We can only do that by having the appropriate foundation, and that’s the bricks and mortar.
What happens is that our operations team, our sales team, our design team, and our construction team interact to a great degree. I think that would be difficult if you were to try to do this through a third-party provider outside of the company. Certainly, that enables us to, I would suggest, perform a bit better than maybe those that are third-party outer service.
[00:15:35] Tim: How do you expect development to play out this year? Do you think that we might see development deals roaring back?
[00:16:01] Dale: I don’t see a lot of changes in ’22, and I say that in part because of rising interest rates. When we were discussing development, I started by saying that we’ve been able to get rate increases given inflation, and it’s easy to explain. But I think that with rising interest rates, they’re going to create another component, and it’s going to be more difficult to make these projects work. We’ve had historically low interest rates and so I would suggest that the rising interest rates may counteract the confidence that may have come through, maybe less impact as it relates to Covid or the pandemic.
[00:16:49] Tim: You mentioned earlier that you’re not having a lot of problems sourcing capital, which I think speaks to the strength of American House and Redico as companies. I’m curious, is your phone ringing off the hook? Are people, capital providers, or owners calling you up and saying, “Hey, let’s work together. Let’s do a deal,” something like that?
[00:17:11] Dale: I wouldn’t say the phone’s ringing off the hook, but I would tell you that we have some really great capital sources. We’ve been with the same providers for many, many years. In fact, we’ve added one to our stable recently, Monarch. But we’ve been with the same three capital providers throughout our history, and that’s 13 years in American House. We’re loyal. In turn, they’re loyal to us. I’d say that they have confidence in us as well because we’ve delivered on the developments and acquisitions that we’ve put together.
[00:18:01] Tim: You mentioned Monarch Alternative Capital. I understand that Monarch is a relatively new entrant to the space. Take me back to how that deal came together, how did that get executed? Did they say what made them want to get into senior living now?
[00:18:45] Dale: Actually, it’s interesting, the Monarch relationship is not a new relationship to us. This is certainly a situation where being in the commercial real estate space and being in the senior housing space at the same time might benefit you. We met Monarch; they were a partner of ours on a high-rise office acquisition and redevelopment play, and we both were very pleased with the outcome. We both exited the transaction and made superior returns.
With that, we met Monarch. Interestingly, it was several years later they called us and said they were interested in getting into the space. They asked if we could help them with some thoughts as to how we might do that, and if we had any opportunities that we might preview with them. It was interesting because of the size of Monarch, and the capital that they traditionally like to put out. We didn’t have much in the way of an initial investment, if you will. I think we had two or three properties.
What we did based on their interest in the space and getting into it in a significant way was, we put together about just under a half-billion dollars in transactions that included properties that we owned in a recapitalization, properties that we were acquiring, and then some development properties, as well. Monarch has a very deep history in health care and a high level of expertise in that regard. I would suggest that is what brought them to the space initially.
Like us, they’re a bit of a contrarian player, and we’re at this inflection point due to the juxtaposition between a growing elderly population against the backdrop of a recent significant slowdown in construction activity. They felt as though the time was right to come in. This joint venture really is focused on opportunistic opportunities, maybe a bit more opportunistic than the other investors that we’ve historically dealt with.
[00:21:24] Tim: We have our first question from the audience. This is about your process with development. The question is, do you utilize regional builders or is all new construction done with Redico in-house general contractors?
[00:21:38] Dale: Yes, that’s a great question. We are not a general contractor. We do our own tenant improvement work. We do our own unit turns, and that’s the extent of the construction that we do. We did own a general contractor, and we were a large contractor in Florida, but we sold that business. What we’re doing now is we are using outside general contractors. They range from regional to international, actually. Our most recent development actually nearing completion right now is in Oak Park, Illinois. We’re using Clark Construction, and they’ve done a wonderful job for us.
[00:22:23] Tim: I also wanted to ask you about the recent deal with Ventas, where you are basically coming into 13 former Eclipse buildings in Tennessee. What led to that deal? Who called who? I know that Ventas obviously was looking to transfer all of these communities to other operators and figure out how that’s going to work. How did American House get involved in all this?
[00:22:57] Dale: Well, I’ll start by answering the last question that you asked. Ventas actually came to us and asked if we’d be interested. We’ve known the company for a long time, although we haven’t done anything with them. I know some of the key players there and we established some nice relationships over time. We were of a like mind and thought about the business in many of the same ways.
It was interesting because they targeted us, even though we didn’t have a presence in Tennessee, which is the location of the 13 communities that we just brought on, January 1. For us, I think the decision was a strategic decision based on our interest to become affiliated in some way with Ventas, a great company we have a tremendous amount of respect for. It was the opportunity to align ourselves with the people that we really liked, and those are the executives within Ventas that I had mentioned earlier. It was also very strategic for us because when you look at the markets that we’re in, we’re very strategic about our growth.
American House began as a Michigan-based company. Thirteen years ago we started with 13 communities in Southeast Michigan. From there, we made the decision to grow strategically throughout the State of Michigan into the Midwest, into Florida, specifically Southwest Florida, which is where a lot of Michiganders go on vacation. We’re very familiar with that location. Plus, we owned a construction company in Naples that gave us a good presence there. We really covered the state of Florida. When I was thinking about growth and when we looked at and created our business plan around new investment opportunities, we thought about moving up into adjacent markets.
The adjacent markets were in the Southeast, but we didn’t have anything yet. With Ventas, it was important for us because they had the confidence to bring us on board. Number two, it was important for us because it put us into a market that we wanted to establish a presence in. It was strategic to our growth, really. For those reasons, we were very pleased to announce the strategic partnership with Ventas.
[00:25:38] Tim: I know that Eclipse was trying to crack the middle market assisted living code with its Elmcroft brand. Now that you’re in these communities, is that a goal of yours or do you have something different in mind?
[00:25:51] Dale: Our focus has always been middle-market. That’s the fat end of the bell curve, if you will. If you were to look at any of our newer product, any of our new constructions, you would believe that they were pure luxury. What we do is we design, we cost the product out, and we market to the middle-market segment of the population.
I would say that the portfolio that we took on in Tennessee is very much like the original American House portfolio that goes back for over 45 years. Some of the original American House properties that you’ll see in Michigan are very similar in character to what we have in Tennessee. It was a product type that we were very familiar with.
[00:27:04] Tim: What are your thoughts generally on meeting the middle market? Are you optimistic the industry can really land on a model that’s going to work for people at a price point that they can really afford?
[00:27:30] Dale: It’s a challenge, really it is. We’re constantly looking at trying to find a product that fits really the lower-end segment of the population. It’s not easy, especially with construction costs and now with increasing interest rates. We’re endeavoring to get there, and we’re doing so also by focusing on operations and trying to offer an amazing experience to our residents, but also trying to do that at a cost that’s affordable. I’m not sure that anybody has a great answer just yet but we’re working hard to get there. We are also working hard at keeping our construction costs down through the means by which I’ve already discussed.
[00:28:24] Tim: We have an audience question about technology. The question is, how do you see technology playing a role in creating staff efficiency and enterprise metrics? Does it make sense for you to build your own tech platform?
[00:28:42] Dale: Well, it’s funny you’d ask because I do have a partner in the business. My partner in the business is our chief technology officer. My partner, Karen Sosnick Schoenberg, is always looking at ways in which to improve on technology. The pandemic has caused us to look certainly at ways in which to not only improve communications and connectivity between residents and families, but also on how we can operate these properties better and more efficiently.
I would tell you that, yes, we do spend a lot of time on technology. My partner is looking at ways in which we can efficiently and potentially building platforms ourselves. But when you’re on the bleeding edge, you often make mistakes, so I will tell you that we have made mistakes in that regard by being a bit maybe too progressive in certain areas.
[00:30:10] Tim: Is it hard to measure the success of a technology pilot? On the one hand, you can measure success in things like move-ins or resident outcomes or care quality. On the other hand, tech pilots are often designed on a pretty small scale, only a community or a few communities at a time. So how do you know when something works?
[00:30:34] Dale: Well, you have to use it, first of all. Some of the mistakes that we made is that we had some great tech platforms, but we had a hard time early on getting our team members to embrace them. The type of individual that you hire to run a senior community is a compassionate caring individual, but they might not be a tech expert. Yet what we’re doing is we’re putting something in front of them. It complicates their lives. We came to the conclusion that what we really need to do is manage our expectations while enabling them to manage the business.
What we want to do is we want to integrate the technology that we’re incorporating into our business in a way that will better enable the folks in the field to interact with our residents. I spoke about Continuum and facility services and maintenance of the communities, but it goes for technology as well, because if you build something that’s just too complicated, what you’re going to have is you’re going to have community employees focusing on the technology and not on the resident care. That’s what we’re really concerned with. What we continually do is look at and we continually roll out products that enhance our ability to deliver the best possible care to our residents. That’s what we’re focused on really.
[00:32:17] Tim: I remember back when the pandemic started in 2020, and then into part of 2021, there was some hesitation.
I think people were unsure when the inflection point was going to be. This was before we had an effective vaccine. There were a lot of questions, “Okay, what should we be doing right now? Is this the time to grow? Is this the time to circle the wagons?” that kind of stuff. Obviously, you made the choice that growth was something that was worth undertaking.
Take me back to when you made that decision. When was this after the pandemic and what did you see in the market that made you think, it is time to grow?
[00:33:11] Dale: I will be completely honest and tell you that we had plans for growth well ahead of the pandemic. There were a few development opportunities that we were pursuing that we were too far into to back out of. But I will take all the credit for our growth through a very difficult time by saying that we stared the pandemic in the eyes and decided to grow. There’s a lot of long lead time on the projects that we build. At the same time, what we felt is that we are generally a contrarian player. We did feel as though only the best operators would be capitalized during this downturn.
We did feel as though development would slow. That’s when we thought it was best for us to continue to build our business. We did the same with acquisitions. It wasn’t just development, but it was acquisitions that we continue to pursue. What we do is we sit down every year as an executive team and we build a strategic plan. Really the benchmark for that strategic plan is the investment thesis. We start with an investment thesis. Our investment thesis called for growth, through acquisitions and development.
I’ll never forget it. It was a day after we closed our office and it was a forced closure because Michigan was tough. That next weekend, we were on the phone talking about opportunities and trying to find a way to capitalize on opportunities through the crisis. We put together a long list of opportunities very early on. It just so happened that acquisitions and development were two of them. We thought we would see a lot more distress and what we thought was that we would be able to capitalize on the distress. But, I will tell you that it didn’t happen to the extent that I had initially thought it might.
In the last two years, we haven’t really been engaged in any acquisitions or development or redevelopment opportunities that came as a result of the crisis. We certainly came into a portfolio of properties, and Tennessee is a good example of this. It had a bit lower occupancy and we thought we could improve on that. If we didn’t think that, we would’ve never taken the portfolio on, but we chose to capitalize early on. I think what we had believed is really playing out. Development had slowed a bit and thank goodness because I think we were all getting a bit too exuberant.
[00:36:27] Tim: You have plans to expand in the Southeast. Tell us more about just what that will look like, and what you’re seeing down the road in terms of your vision for American House.
[00:36:45] Dale: I mentioned that we began our business in Michigan. We spread through the Midwest, Florida and then recently into New England. Our plan is to continue our growth in New England. Our plan is to continue to grow in Florida. We will grow in the Midwest, certainly, but also, we plan to expand in Tennessee and we’re looking at the Carolinas now, as well. Two of the development opportunities that we’re currently embarking on are in South Carolina and then we’re looking at North Carolina as well.
[00:37:28] Tim: Staffing seems like the big challenge of the day right now, other than occupancy and the pandemic. I remember when we talked last summer, you were seeing pretty intense staffing headwinds. Are you still facing a lot of the same pressures, and how long do you anticipate this is going to last?
[00:38:22] Dale: Staffing is probably the biggest issue in the industry, as far as I’m concerned. I talked to many of my industry colleagues, and they would say the same. It’s always been a challenge. Ever since we came into the business 13 years ago, it has been a challenge for us. Certainly, the pandemic amplified the issue, but I think the bigger challenge right now is finding qualified staff. It’s why we’re looking at ways to build business units that enable us to better source labor.
What I found is that if you have a business unit that focuses on one thing, you’re going to find better employees, and you’re going to be able to train those employees. For example, our maintenance team, they focus on nothing but maintenance.
I don’t see staffing changing. I don’t know what’s going to cause the situation to change. I’m sorry, but I can’t give you an answer to that one.
[00:39:46] Tim: What do you think that does to the senior living business in general? Is this a sign that the industry needs to start getting used to higher cost of labor?
[00:40:03] Dale: For sure, higher costs of labor — and benefits, by the way, and everything that goes with it. If you bring people on, you have to train them. It’s important for retention. Costs are going to go up. What will happen is that we’re just going to have to find a way to operate more efficiently and build better staffing models. By the way, that’s also where technology comes into play, in building better staffing models.
We have a tremendous team. The executive team that I have today looks a lot different than it did two years ago. It was intentional. The team I’m building now is more responsive to a higher-acuity resident. They are better-enabled to be responsive to the technological needs that come with building a business today and the need to operate much more efficiently. Also, I’m building a team that is able to respond to what’s become a commonplace in the industry for good operators in terms of enriching the lives of residents. It’s going to continue to be a challenge and it’s going to continue to cost us more. We’re moving farther and farther away from that affordable product or that middle-market product, just because of the cost involved.
[00:41:37] Tim: I was going to ask, does that mean the cost of labor is passed on to the resident?
[00:41:48] Dale: It does, actually. The downside to that is that somebody has to pay for it. It is being passed on to the resident. We’re serving that resident and they’re going to have to be able to pay for the service that we provide. By the way, our margins are thin in this industry. Very thin.
[00:42:20] Tim: I’ve talked with operators who say their residents and families were pretty understanding with rate increases. They understand that the cost of coffee at Starbucks costs more. Are you finding that with residents? Do they seem pretty understanding about this and do you think that patience will last?
[00:42:54] Dale: Yes, it’s very interesting. We were talking about it the other day in the office. We commented on how understanding our residents were when we sent around rate increase letters, how understanding the families were. Historically, we faced some tough times at this time of year when we sent out our rate increase letters. This year, our increases were higher than ever, but yet, we really didn’t face any headwinds in that regard. They did understand the need to increase our rental rates.
They did understand the need to price care levels at a point to where we could deliver the service that we’re proud of. They understood that.
What they don’t understand is, if you missed the mark on what you promised them. It’s interesting. We survey our residents and I will tell you that I’d say that we’re offering a better level of service than we’ve ever offered. What I’m hearing more of is what the residents want right now. They’re not shy. They’re going to pay for it, they want to understand the value equation.
[00:44:31] Tim: I’ve talked with some of these more multifamily and other companies looking at senior living. We talked a little bit earlier about how Monarch was interested in this sector. I’ve seen multifamily companies looking at things like active adult, just because it resembles the multifamily world. I know Redico does multifamily and you have experience in all these worlds. Do you think these other firms have what it takes to play in the senior housing and care space? Do you see these groups as a threat or maybe just a new opportunity to work with on the capital or development side?
[00:45:17] Dale: Both really. I would say that we’re a multifamily developer and we’re a multifamily acquirer. Yet, we bifurcate the business between senior living and commercial real estate. I put multifamily in the category of commercial real estate. We are not operating our multifamily platform as we are American House. What I failed to realize when we bought this company is how difficult it is to operate a senior housing company. It’s a very heavy operating platform.
Our first 13 communities — in fact, the majority of the communities that we started with — were independent living communities, and yet it was a challenge for us because the increasing acuity level has put us in a place where we’re providing health care, really. The residents that we have, they have needs that go well beyond what historically was life enrichment or activities and food. What I believe is that it’s going to be more difficult for those companies to operate in this space unless they decide to hire a good third-party manager.
I’m sure there are plenty of them out there. Maybe that’s where the opportunity exists. It’s certainly a model that works where you have some development expertise, real estate expertise, yet you partner with a good operator to deliver a product that takes into consideration what the operator has found to be important in the business. The benefit of our platform is that our development team is able to interact with the operations team at a level that third parties don’t often encounter. I’d say the same opportunity would exist here through the right relationship.
In fact, we’re looking at a relationship right now with a company where we will operate, we will co-develop, but our role is, for the most part, advising them through the development process on what’s worked and what hasn’t worked in terms of operations. Then when we take the product over, we’ll have a product that we feel as though suits the needs of our customers.
[00:48:28] Tim: What is your take on how the next 12 months or so is going to play out in terms of recovery, and when are you preparing for a wider recovery in the senior living industry?
[00:49:41] Dale: I think I already indicated that I don’t think ’22 is going to be a whole lot different than ‘21, but I do think the recovery will be a bit protracted. I think that we’ll have the lingering effects of Covid to deal with, and we’re getting better at it certainly. The other thing that we’re learning how to do is to care for our residents well, so they have a level of socialization that’s important to them, but it’s taking a toll on all of us, I believe, through labor and staffing.
Any recovery is going to have to take into consideration the people in the industry, and how much they have left in the tank. I think that will be a challenge, certainly. If we had a magic wand, and we could just wave that magic wand, and we could all say, “Okay, it’s over. Let’s start anew,” and we could re-energize our team members, then I’d say the recovery is coming much sooner. As long as we have the staffing issues, and there’s no response to how we deal with it, I think the recovery is going to be protracted. I’d say maybe two to three years for a full recovery.
[00:51:16] Tim: We have another audience question. This is going back to what we talked about with growth. The question is, I noticed your Southeast focus articulates Florida, Tennessee, and the Carolinas, but not Georgia. Can you comment on this as to why?
[00:51:30] Dale: I think it’s just the competitive landscape. When we developed our investment thesis, I wouldn’t say that we would pass over Georgia by any means, but we chose not to at this time invest in Georgia. For us and the way in which we develop and acquire, the markets that we would prefer to be in would be Tennessee, and also South Carolina and North Carolina. It has a lot to do with our way of doing business, what it is that we’re focused on, and not as much to do with the market.
[00:52:33] Tim: We have another audience question. The question is, would you ever consider offering services outside your campus walls, maybe with your maintenance arm to people that are aging in place? This almost sounds like it’s a direct-to-consumer service. Have you ever considered something like that?
[00:52:55] Dale: I think it’s a great idea. We’ve talked about it so many times, and we actually tried it at one of our communities. It’d be a wonderful way to serve people and fulfill some care needs that go beyond our walls. We have thought about it. I think it’s a wonderful idea. I would love to be able to do it. We just don’t have the bandwidth to offer it right now. That’s what we found when we offered it through the community that we did. It happened to be in an area close by The Villages, which is where we initiated that in Florida.
[00:53:39] Tim: Tell me more about how that worked. I know that you said that it didn’t really get off the ground, but what was this basically where you were sending maintenance people out when folks had something they needed to be fixed as they aged in place?
[00:53:51] Dale: Well, we would do that regardless, and that’s more a charitable endeavor, if you will. We were providing meal services. We were also interacting with residents that had health needs, primarily memory loss concerns, and we were bringing them into our communities, almost an adult daycare situation in certain circumstances. That was actually done through a memory care wing that we had recently opened up that wasn’t quite yet populated.
We’ve tried to offer services. We invite community members, if the opportunity presents itself, to stay in our community for respite. But we haven’t yet developed our home health care business to the extent that we could go outside our four walls with that business. Right now, we’re using a third party, and we’re exploring the potential to do that in-house.
[00:55:21] Tim: I will jump in for another audience question. I’m going to try to ask it as it’s written. The question is, is your company equipped to offer services internationally? I’m assuming they mean, do you see any outside-of-the-U.S. expansions, maybe in Mexico, Canada, or somewhere else?
[00:55:43] Dale: Another great question. I was probably a bit too exuberant initially when I came into the business 13 years ago, and we had a business relationship with the Catholic Church in Poland. The Catholic Church asked us to come into Poland and the reason being is that families there really took care of their own, but yet the family structure was changing.
It was frowned upon to put your family member into a senior facility. In fact, they refer to them as institutions. So, we were asked by the church to go in, and we explored that alternative. It was well beyond our ability to do so. I would say that we’re very strategic in our growth and it took a lot for us to move north from Florida into the adjacent markets of Tennessee and in the Carolinas.
Moving from the Midwest into New England, that was a difficult move. The reason that we pursue a concentration in areas is that we find that if we need people — boots on the ground quickly — our adjacent team members can help to serve those needs. Also, we want to live there before we actually make a move into trying to accommodate the needs of another location, especially in other countries. Long way of saying, we’d love to, but no.
[00:57:34] Tim: The question-asker wrote in while you were talking and they said that they were talking about the Caribbean, to be more specific. But I think we know the answer to that.
[00:57:43] Dale: Yes, not right now. Thank you.
[00:57:46] Tim: We have a few minutes left here. What are you most excited about in 2022 and what are you most worried about in the year ahead?
[00:58:05] Dale: Well, I think we talked an awful lot about staffing, and I’d say my biggest concern is finding the right people to deliver the right level of care to the residents that we have. They so much deserve that care. What I’m most excited about is the business that I’m in. It’s much to the chagrin of my team members at Redico, but I spend probably a disproportionate share of my time at American House.
It’s for a number of reasons that, at this point in my life, I look at what I’m doing as almost philanthropic. I’m just tremendously excited each and every day, whether I walk into the office and have an opportunity to interact with my colleagues, or when I walk into a community — and I spend a lot of time in our communities. I’m really excited about the opportunity to serve the generation that’s coming up, which happens to be my generation. I’m on the tail end of that, but I think that as we continue to look for ways to better serve our residents, and as our residents continue to change, that presents an entirely new challenge and that’s what keeps me up at night, but it also keeps me energized and excited about the business.
Companies featured in this article:
American House Senior Living Communities, Monarch Communities, REDICO, Ventas
