Cogir Management USA is in growth mode, undertaking its first ground-up development project and also acquiring new buildings, all while enhancing and highlighting its approach to care.
In fact, CEO David Eskenazy believes that one positive legacy of the Covid-19 pandemic is that providers are no longer trying to hide their health care capabilities from consumers.
“I think we can celebrate both a great social environment and also the fact that we have assistance for our residents when they need it in the area of their health, without feeling like we have to hide that,” he said. “We can celebrate that or maybe even lead with that. I think that’s a positive thing for the industry, quite frankly.”
Specifically, Cogir USA is developing a company-wide approach to memory care and is leveraging building design features and partnerships to bring more services into communities.
We are pleased to share this transcript of the SHN+ TALKS conversation with SHN+ members. Read on to learn about:
- Why Eskenazy’s plans at retirement “failed” after he exited as president of Merrill Gardens
- How Cogir USA is growing through a mix of development and acquisition
- Eskenazy’s take on current labor challenges and longer-term workforce solutions
- Drawing inspiration from Cogir’s Canadian portfolio
- The pace of occupancy and margin recovery and Eskenazy’s expectations for the future
Sacramento, California-based Cogir USA launched in 2020, with a portfolio of 12 former Brookdale Senior Living properties, totaling about 1,800 units. Today, Cogir operates a portfolio of 17 communities, and Eskenazy anticipates the company will reach 3,300 units under management by the summer of 2022.
The following has been edited for clarity.
Tim: I’m excited to chat, so we can jump right in. I think to start with, for anyone who isn’t familiar with Cogir USA, can you just briefly describe the company in a little greater detail in terms of levels of care served, geographies? What do you consider are the company’s hallmarks or strengths?
David: Sure, happy to do that. Well, Cogir really is a Canadian real estate company. In Canada, their foundation is a management company to begin with, but they operate quite a large number of properties in Canada. It was founded in 1995. They got about 270 buildings now and (are) expanding rapidly in a lot of different asset classes, not just senior (living). They have 17,000 multifamily units. They have three hotels. They built a very, very interesting project in Canada called Humaniti, which is a condo, multi-family, hotel, office, retail, mixed-use project right in the heart of Montreal.
In late ’18, early ’19, Cogir partnered with Welltower. Welltower and Cogir partner in Canada on quite a number of things, but here they really took their first jump into the US with a purchase of 12 communities along with Welltower, and with the intention of growing the US operation similarly, not just in the area of senior, but in many asset classes. That was 2019. I don’t think they expected, like anybody, the two-year hiatus that we all had to take for the pandemic. We’re basically now at a point of growth where we, I think, intended to be in that 2019/2020-era. That’s where we’re picking up from here.
Those original 12 buildings were purchased from Brookdale, but those came through Emeritus, which came through Merrill Gardens, so I think they were mostly original Merrill Gardens buildings. They’re a mixed community of IL, AL, and a little bit of memory care. Then in this last year, we’ve added five more communities, some of which are all memory care. It’s a pretty mixed acuity range between IL, AL, and memory care at this point.
Tim: Great. Can you just maybe share a little bit about your own journey? Because I think that’s interesting. I think when you left Merrill Gardens, you weren’t envisioning that this is where you’d be sitting two years later, right?
David: No, I really thought my golf game would come around. The problem I have is two years after I semi-retired– When (Cogir CEO) Mathieu (Duguay) came into the U.S., he really needed somebody to help him just guide him through how to really develop an operating company. I was happy to do that a couple of days a week, but two months into that we got the pandemic, so I became the COVID czar, I suppose, as well. The company built their back office and management team. Then all of a sudden, everybody decided golf was the only thing to do, so the golf courses got crowded. Even that changed. I don’t know. I suppose it was a colossal failure in terms of my retirement plan.
Now that we’re back into a scenario where we can really grow the company, I was asked to jump in and help that growth initiative so that Wally Jossart, who is president of the company, can really focus on the operations. Because we have a rapidly growing platform of operations as well. For him it was to be able to focus with his team on the operations, and I’ll take the focus of the growth initiatives. That’s really my primary role from a day-to-day standpoint.
Tim: Got it, great. Can you share a little bit about how 2022 has gone? Obviously, we had the two pandemic years, which everyone just had to get through. I think 2022 has been interesting because we had the Omicron challenge to start, and now I think we’re seeing maybe organizations coming out of that, but curious what your trajectory has been this year.
David: Sure. It’s interesting. We just came out of our executive director meetings, first ever, two years delayed. It was wonderful to get everybody in the room. I can tell you, the energy in the room and the difference of having people all together as a management team versus doing these Zoom calls is really night and day.
We did a lot of great things over the past couple of years in terms of establishing great back office support systems, accounting systems, operating systems and all of those things to be able to grow the company on a platform. That work was done quite well. In 2021, again, we started this growth path and those original 12 buildings had us with 1,800 units. We will probably have about 3,300 units under management by the time we get to the summer.
That’s a fairly steep growth curve. A lot of that is coming through acquisition or taking over management contracts that we’re being asked to consider, as well as starting a development pipeline that we’ve got a couple of projects in now.
For us, it’s really been about focusing on those growth initiatives and also dealing with everything everybody else has to deal with; coming out of the protocols. As the protocols for COVID were put in place, every week was a different step, and you didn’t quite know what the next week was going to be about. I think coming out of the protocols is similarly confusing, I suppose.
We now know that we have about six different layers of rule-setters, some of which say, “Follow the strictest guidance.” It’s a little bit like following the bouncing ball. I think that’ll end somewhere and it’ll land in a place that wherever it lands, it lands.
I’m a pretty optimistic person generally. I think the pandemic, as tough as it’s been for people, has offered us a few little nuggets. I think technology is more acceptable. Even albeit, sometimes it may be impersonal, I think touchless technology has come a long way.
I think in our society and probably as well as in senior housing, we’ve gotten used to being able to do some of these things now. It has probably advanced touchless technology five or 10 years. That kind of thing happens in a pandemic. A pandemic is a disruptive force like anything else could be, and I think sometimes out of that pops opportunities.
I think the other thing that’s happened is, as much as our industry has tried to prove the social model and create a great social environment for seniors, in a way may be trying to hide healthcare a little too much.
We don’t want to see people running around with stethoscopes and looking like this is a hospital. I think the industry has done a lot of work to try to make our environment look great, but at the same time, sweep healthcare under the rug because people don’t want to see that.
I think now we don’t have to do that. I think we can celebrate, both a great social environment and also the fact that we have assistance for our residents when they need it in the area of their health, without feeling like we have to hide that. We can celebrate that or maybe even lead with that. I think that’s a positive thing for the industry, quite frankly. We’re trying to move toward taking advantage of that and rolling out some things that are different there.
Tim: Right. Definitely, I want to delve into that a little bit. I’m curious about occupancy recovery. I think that’s top of mind for a lot of people. I don’t know if you can share your current occupancy rate or talk a little bit about lead volume. What are you seeing in terms of the cadence of the occupancy recovery?
David: I think the occupancy recovery has been pretty good. I think the last half of last year was a good start to recovery. I think omicron put the light from full green to yellow. I wouldn’t say it pushed it to red, but I think it certainly created a pause in what otherwise was good momentum. I think the holidays do the same thing, sometimes.
We typically look to the first quarter, generally, in the industry for a kind of coming-out period from the holidays. I think the unfortunate thing about Omicron is it hit right at that time, so it turned what would otherwise have been quite a terrific first quarter into something of a muted sideways-but-slightly-upward motion. I think most of us are back to right about pre-pandemic levels or close to it. I think it depends on the building and the acuity and that sort of thing.
Our occupancy is a little bit mixed. Like I said, we just took on some new communities. I think we’re a little just slightly less than pre-pandemic levels overall. Some buildings are quite a bit more than pre-pandemic levels, so I’d say we’re right about with the rest of the group.
Although, I have to say in the industry, a lot of companies have really struggled. Some have done much better than others. I think there’s a fairly wide dispersion in the answer to that question, even with our buildings and certain markets.
Counties are different. Different counties really clamped down on visitation and others not so much.
Tim: That makes sense. You mentioned at the top that your primary focus day-to-day is on driving the growth strategy, so I want to dig into that. Can you just describe what that growth strategy is, how you’re thinking about acquisitions versus development, pace of growth–things like that?
David: I think we’re in a little bit of an all-of-the-above.
We have a new team in place to find land and sites to develop for our future. We’re very actively shopping for sites for development for both senior and multi-family. The possibility of having a campus that would include all of those things is certainly in the works. The possibility of building Humaniti projects in the US is also in the works. That Humaniti project that I mentioned, in Canada, can be urban, in which case it’s quite vertical. It can be suburban, town center-ish, in which case it can be a little bit lower and wider. That’s something we’re looking actively for as well.
Our acquisition strategy: We have different capital partners that we embark on there, and there are opportunities in the marketplace. I wouldn’t say there’s discounts and bargain prices. That hasn’t really quite materialized.
I do think there’s a lot of consolidation. I think there are a lot of properties that are in good ZIP codes and in good places but have had difficulty, and I think those provide opportunities for growth.
There’s also assets that are getting older. I mentioned the 12 original buildings that were original Merrill Gardens buildings. Those are nice buildings, but when you get a building that’s 20-or-25-years-old, it’s time for a lot of refreshing. I think we’re seeing a lot of that in the industry. For me, it’s really about the ZIP codes, the markets.
No pandemic or financial cycle is going to change the aging of the baby boomers. That’s happening. I think sometimes when you get situations like we’ve had, you slow the growth down a little bit, and I think that’s not necessarily a bad thing. We had quite a massive amount of new growth hitting the industry after the last recession and over the last few years. I think that might have slowed down now.
We still have new openings because of projects that started before the pandemic. Those are all opening now.
Now, we have a new moment where I think the growth in new building is slowing a little bit; between inflation and the interest rates and costs, again, aren’t exactly bargain-basement prices. Inflation, uncertainty, nervousness in the lending markets, I think many of those things will help slow the growth a little bit and allow the industry to catch up and that’s not a bad thing.
Tim: I want to ask you about that last point you raised about the pace of development overall across the industry. Because I was just at the NIC Conference last week, and Beth Mace and her panel was sharing some data on construction starts. She was showing that it’s a very variable market to market right now. In some markets, actually, she was raising a little bit of an alarm of potential overbuilding, or at least saying people had to be really cautious in those markets that are coming back so strongly, despite all the challenges you just cited in terms of doing development.
I have a two-part question for you. One is: Are you seeing pockets of what you would consider very hot development markets, and how are you evaluating potential markets for development in terms of are you looking at factors more closely now than maybe you would have in the past? I’m thinking, for instance, of availability of staffing.
David: I don’t think I’m looking at availability of staffing as necessarily being a leading indicator of where we’re looking to develop. I also don’t think I would look at it a whole lot differently. Because the companies that I was with in the past, and my personal belief, is that you have to pick markets that you think are going to have an everlasting strength.
This industry is very expensive to operate. It just is, and I don’t think we can be apologetic about that. I think it’s just it is what it is. Unfortunately, that probably means that not everybody can afford what we do. When we pick markets, we have to be able to pick financially strong markets that are going to weather economic cycles.
These are marathons and not sprints. This is senior housing, and these assets are built to be there for 10, 20, 30, and 40 years, not 4 or 5 years. This isn’t a lease where you put a Jamba Juice in and hope you could have a good five-year run; if not, no big deal, you can change locations. It’s not like that.
I personally have always looked for markets that are going to be financially strong through thick and thin. That’s not all markets. When you find those markets, I think you then have to cross that up with, is there already too much supply there or not? In our industry, we look at 3-to-5 to maybe 10-mile rings where we’re going to be drawing from, and so I think you can pull those maps out, look inside those rings and see what you see.
Also, knowing that there will be growth. There still will be growth within those markets. If you play the long game and build the right product, it’s okay to compete. Just because somebody is there, doesn’t mean you’re not going to be successful. If you build a successful operation in a successful brand in a strong marketplace, I think that’s what we look for.
We certainly wouldn’t want to drop down in an already crowded marketplace. I don’t think that makes a lot of sense, but I do think you can use your imagination a little bit and play the long game and be just fine.
I think, like most real estate, it’s location, location, location, but that means strong demographics in our industry. Because these costs are mostly labor costs. Labor costs aren’t transitory. They move up into the right, and occasionally they accelerate and then occasionally they flatten out, but that’s what those charts look like. If we’re going to be able to keep up with those costs, we have to be able to charge what we need to charge to be successful.
Tim: In terms of those markets that are strongholds over the long term, do you think that that has changed at all as a result of the pandemic? I’m thinking that we’ve seen some population shifts out of big cities into some smaller markets as people have been able to work from home. For example, I’m hearing about developers now eyeing places in states like Idaho. Are you looking at any of those types of markets, and do you think that’s a real trend?
David: I do think there are population movements that are happening, and the question is whether or not those are temporary, and do people simply flock back to where they used to be. I don’t know.
I think those trends are probably semi-permanent. I think moving out of urban areas into suburban areas is something that’s probably going to be with us for a while, but I think we operate really well in suburban areas.
The walkability factor. It used to be that you’d put senior housing in the middle of a residential area or on the outskirts of a residential area, like a little island of its own in some peaceful place where everybody can be secluded from everything. I think that has changed.
I think putting something in the middle of a hustle-and-bustle of a suburban town center is as popular as ever, and I think being able to walk out the front door and be able to walk to some things and enjoy the vibrancy of suburban towns.
This move to suburban towns has caused value to go up in those towns, so the economics of those towns fit really what I was just speaking of.
House values have increased substantially. That spurns new retail and spurns lots of good new development that is fun to walk to. I think inter-generational sites, where seniors can live in and amongst many others of varying ages, creates for a vibrant lifestyle, and can really help us attract what we’ve all been trying to do: Bring the average age down by attracting some folks into our communities that are not in their mid 80s, but perhaps lower than that. I think all of that, what I just described, can help with that vibrancy.
This movement into suburbia is really helping the cause for that narrative.
Tim: Got it. That Humaniti project you mentioned that you’re thinking of maybe doing a U.S. version, is there senior living in the one that they’ve already developed in Canada?
David: There’s not. That was really a mixed-use project that has nothing to do with senior housing. Not that it couldn’t be. In other words, there is, if you can imagine, a suburban version of that and where you might put that, it’s possible that senior could be a part of that, but it was really not the target, I think, trying to take that concept of mixed-use.
I think with that, the hotel is the key because the hotel really draws a lot of people actively. Finding a location where the hotel need is there and then surrounding that with retail and live areas, both rental and owned, I think is the key to that mixed-use development. If it happens to be in an area that you could work senior into, all the better.
Tim: Just based on conversations I was having at NIC, it occurred to me I was hearing a little bit about what you might call hidden supply in the market. Talking to one operator, the one and two in Idaho market, and I wasn’t aware of all of the small care homes that were there. Also, thinking about the growth of homecare. We just saw this $5 billion acquisition today of UnitedHealth and the LHC Group, so that part of the market seems to be really booming.
Can you talk a little bit about how you’re thinking about some of these other sources of competition? Do you see them becoming more prominent, more competitive than in the past? Are you looking at that more closely as you evaluate a market?
David: It is supply. If you think about the hospitality industry, Airbnb is its corollary. Does Marriott not build a hotel because there’s so much Airbnb around? I’m not sure they take that into consideration necessarily.
I think if you ignore that completely, that’s probably a mistake too, but I don’t think we worry about that too much. I think what you still have is not everybody can afford what we do. I think it’s not a bad thing that there are affordable options for people. Sometimes that comes in a small six-bed.
I think there are some moves afoot to make 6-beds more like 8-beds or 10-beds, but hopefully not 25-beds. I think it’s hard to operate in this business to operate. Operations matter, and so there’s probably a sweet spot there for a home to operate in a residential area that can hit the sweet spot of 6 or 8 or 10-beds and work out just fine.
I don’t think it really changes what we do and how we think about locational aspects.
Tim: Staffing, I think that’s obviously a huge challenge at the moment. Are you seeing any improvement in the labor market condition since the beginning of the year? How are you addressing recruitment and retention in this environment?
David: I can’t say we’re seeing a lot of improvement. I think it’s difficult. It takes a lot of effort. We’ve been quite successful in being able to hold down the use of outside labor. I think there’s not a lot of good about outside labor. The biggest problem with outside labor is it’s impersonal. These are not our employees, these are not the same friendly faces that our residents are going to see every day.
For us, it really is doubling down on the culture within our organization to make sure that a couple things. Number one, I focus a little more on retention than I do turnover. Retention to me means that the people that are really great team members that you really want to see stay, you focus on them and make sure that you’re keeping them happy so that they don’t feel the need to change employers.
I think that’s the primary thing we can do is double down our efforts to make sure we appreciate the people that need to be appreciated within our own organizations.
I think if you do that, I think the reputation that you build as an employer builds. In a market where people have choice, they’re going to make choices. If it’s a buyer’s market, an employee’s market, then they’re going to get three offers, and the question is where do they want to go to work?
I think you have to win that battle just like you do with prospects for residents to move in. We need to make sure that if we’re going to be competitive with prospects, we’re going to be competitive with prospects for employment as well.
We have good compensation programs. We’ve changed our executive director bonus programs for example. We don’t think a bonus is an entitlement, except maybe when it is. We’ve got a loyalty program bonus where if you’re with the company for more than two years, you’re going to get 5% of your base pay and a bonus just for being loyal to us. Five years, 10 years, has other marks for 10% and 15%.
We appreciate when people stick with us. Everybody’s getting offers. What we want to do is make sure they think hard about that and say, “You know what? My employer is a really good place to work, and they’re rewarding me adequately. They appreciate me. I feel heard and supported.” That to me is the best thing we can do.
It’s not unlike how we manage our prospects. When you’re trying to build occupancy, you try to close the back door, which is, don’t give people a good reason to be looking elsewhere, first and foremost.
If they’re happy here, they will more than likely not move. I think that’s the same thing with employees. If we can score high on retention, then we have fewer openings that we’re trying to deal with in a scarce marketplace.
I think that’s really been our primary target, is taking care of the people we need to take care of and building a reputation for doing just that.
Tim: Is staffing the main thing that they’re concerned about right now in terms of what you were hearing from them?
David: I think it’s just been a little bit of everything. These folks are tired. They’ve had to deal with a lot, staffing one of many things.
Everybody’s excited, though. I think there’s a lot of optimism in the air. It’s interesting because I’ve gone to a couple conferences lately, and I haven’t felt a lot of optimism in the air. I feel a lot of confusion, I’d see a lot of exhausted faces but, yes, staffing is still at the forefront of everybody’s near-term concerns.
I do think that people think, as I do, that this too shall pass. It doesn’t make any logical sense to me that the Great Resignation is somehow permanent. I’m still not sure how the math of that works. Even if you’re one of those people that believe the reason that everybody’s gone is because they’re getting payments from some other place. If you even buy that argument, that’s coming to an end anyway. I think with high inflation, people had to go back to work at some point, wherever they’re going to go back to work.
Everybody can’t possibly have a staffing problem and wonder where everybody went. That just doesn’t make any logical sense to me. I think it’s really a matter of, again, sticking to things that we’ve said for years. Working in our industry has a lot of intrinsic value. It just does. I think the people that work in our industry that really want to be there are the people that we want to attract anyway. I think it’s really a matter of focusing on how to find those people, how to reward them for coming into our companies and coming into our industry.
I think also making sure we’re creating upward career mobility. These are career jobs. There are really ways that you can start as a caregiver and be a CEO and all the way through. That really can happen in our industry, and I think our industry is continuing to find ways to make that happen.
Tim: You mentioned earlier that labor expenses don’t really go down, they go up, they maybe flatten. Right now we’re seeing inflation across the board, I think, supplies, insurance costs, et cetera. I’m curious if you can share what you think that’s doing to margins. How much can you compensate by raising rates? Do you see the potential to get back to a pre-pandemic margin at some point?
David: I do. I think it depends on the markets you’re in, like I said before. I think people look for value and when they find it, they’re willing to pay for it. I hope the growth rates in inflation that we’re seeing now will mute over the next five years.
We’re seeing double-digit inflation in a lot of places. I’d say labor costs, when you add in all the benefits and everything that goes along with it, are probably closer to 10% up year-over-year because you’re also paying a lot of premium dollars. You’re paying overtime, and you’re paying outside labor.
When you mix that into a regular wage inflation, you’re seeing that 10%, not 6% or 7%, because it’s what I call bad hours; you’re paying a lot of premium hours. There’s a couple things there.
I think what we need to do is really double down on our efforts to maximize how we operate the hours, so minimize the hours in a way that’s strategic, and then eventually get out of premium pay. We can probably afford the wages that are coming our way, but we can’t really afford to pay premiums over the top of that.
I think maybe there’s some margin pressure in the near term, but I think, again, if you’re in the right markets and you’re bringing the right product, we should be able to have margins that are reasonably close to where they were before.
It takes a lot of effort. I think you have to look for ways to reduce hours, too. Again, are there technologies that might help reduce true hours? Can we take 5%, 6%, 7% of the hours away from the community and not go backwards in terms of what we’re providing for the residents? We have to look for ways to do that.
Tim: Are you thinking technology is a solution?
David: Technology can be a solution. In our project in Las Vegas, we’re looking at a lot of touchless technology for purchasing things. Whether it’s ordering, we have a country store that’s planned. We have beer and wine bars. I’m looking at all kinds of ways to make that a FOB-activated transaction. We’re going to try to crossover between something that’s being impersonal versus something that’s a perfectly acceptable way of ordering.
It’s interesting. Times change. Again, I think the pandemic has normalized a lot of these things for us. Who knew we’d be looking at a menu off a scan and not really object to it. Maybe some of us like that. We can make the words bigger, we can focus on what we want to.
Timing is everything when it comes to technology. Sometimes technology comes too early and it’s just not adopted, and other times later you look back and say, “Boy, I haven’t seen a parking lot attendant in years. We’re just dealing with these little machines.”
Before, that was really weird at first. You didn’t even want to put your credit card in the machine. It freaked you out. Now, we throw our credit cards all over the internet and think nothing of it. It’s really a matter of passage of time. I think we also have to remember that our residents are getting a little more used to this. I remind people that the Led Zeppelin IV album came out 50 years ago, and our residents were listening to that. They were 25, 35 years old.
These are people that can embrace and will embrace technology more and more over the next 10 years, so we need not be afraid to experiment with a few things within the building.
Look what Panera and McDonalds did. Panera and McDonalds were trying touchless technology before the pandemic. This pandemic simply accelerated that, and what they were trying is now nationwide. When that happens, it normalizes things for everybody. I think that gives us an opportunity, perhaps, if the technology can keep up.
Tim: We got an audience question about whether you’re exploring relationships to reduce or supplement staffing hours with regard to things like onsite primary care, therapy partnerships, wellness partnerships.
David: We used to think that differently, too. We thought, “Well, wait a minute. We provide care. Why should anybody come into our building to provide care? That’s like ordering a pizza in the middle of a restaurant. That just shouldn’t work.” In fact, in Las Vegas– And you recall a conversation I had with you a little while ago, where I saw some things they do in Canada that I thought were just super interesting and we were going to try to do here.
We actually have a service center that we’re building into our Las Vegas community, where we actually provide areas for outside home health companies to come and office and have a place to set down and manage their charts and whatnot. As they visit our independent residents, for example, we embrace that.
Whatever works for the residents. In that service center, physical therapy, massage therapy, doctors, dentists, outside homecare, lawyers, accountants, financial planners, a conference room for residents to use if they still want to conduct business for themselves; all of which is provided by outside providers.
We don’t need to feel like we need to do everything. I think what we need to do is provide the opportunity for our residents to do everything within our buildings, however we get there.
We don’t have to be great at everything. We have to be able to accommodate our residents, so that people that are great at doing some of these things have an ability to visit with our residents and try to continue to turnkey life for our residents.
This is how we compete with living at home. If you’re going to live at home, it’s a beautiful home, and you try to bring everybody you can into it to help you with your life, but the one thing you’re going to miss is the social scene. If we can bring you into our social scene but still enable you to visit with all your providers that you’re comfortable with, all the more better.
Tim: That’s very interesting. Got another audience question. This question specifically is about whether you’re doing any kind of farm-to-table or community supported agriculture-type initiatives.
David: Well, funny you should say that. We are currently in the process of rolling out herb gardens into every one of our dining rooms. Eldergrow is providing that. Eldergrow, they do a great job in memory care with their therapy gardens, but a number of years ago, I really worked with them on bringing herb gardens into the actual dining rooms. Sometimes when you go to a great restaurant, the chef comes out and talks to you. I think that’s always fun.
There was a restaurant in Seattle many years ago, it still exists, called the Herbfarm. At times, it would take you a year to get a reservation there and it’d just cost a fortune, but if you ever went there, the chef will come out and every single one of the seven courses has an herb associated with it. It may be pine sorbet, and they talk about it and it’s quite a conversation and it’s really fun, and I remember that experience.
Sometimes our chefs come out and talk, they’re very personable, and sometimes great chefs just are not like that. They’re introverted, they stay back in the kitchen, but dining is a big part of our atmosphere. Being able to have herbs, fresh herbs in the building and actually right there in the dining room with a herb of the month, and if it’s lemon thyme or something, it really gives that chef something to come out and talk about and get excited about.
Come talk to the residents about how they’re using lemon thyme in the iced tea, or how we’re going to make a dessert out of lemon thyme, and tomorrow night it’s going to be a chicken recipe and this and that.
I think it’s not just farm-to-table, but again it’s enhancing the social atmosphere and bringing our staff and our chefs and our residents together.
I just remember the smile on my face I had one time when I saw one of our chefs that I almost never saw come out of the kitchen, holding court with a bunch of ladies. I thought there was a problem. I thought, “Oh, there must be a problem of some sort.” They were having this vibrant conversation about recipes that they made in their youth and all this stuff, and it all had to do with that.
I just remember that moment. I think that’s a lot of fun, and so we’re rolling those things out, and we’ll have them out in all of our buildings by summertime.
Tim: Very cool. I want to talk a little bit about memory care. I think you mentioned you’ve got some standalone memory care in the portfolio, is that correct?
David: We do. Yes, we’ve just taken over management of a few buildings, a few of them are standalone memory care, so we’ll have about 250 units or so of memory care in our company at this point.
Tim: I think you mentioned that you’re thinking about rolling out a new memory care program. I don’t know if you can confirm that’s true or share where it is in the process, what you can share, but I want to check in on that.
David: Yes. I think when you have memory care, first of all, it’s very intensive care. I’ve seen good memory care, I’ve seen bad memory care. We’ve all gone into communities and seen residents just sitting around the table, around the television doing nothing, and that’s a very sad thing to see. It is difficult to provide a lot of great activities in a memory care program, and I think it takes a lot of work.
We have a memory care task force that we’re developing within our organization, bringing people in from the communities. We have a lot of experts in our company, but they’re dispersed. Rather than having one building that does a lot of great things in memory care and another community that doesn’t really know how to do those things or hasn’t been exposed to that, that makes no sense to us.
We want to be able to have certain standards and pillars that we stand on in terms of some curated programs that we can run out to each of our communities, and still at the same time allow those communities to have a license to make the building their own. I think being able to share best practices and ideas within our organization so that we can have an active memory program.
Again, back to Eldergrow, we are rolling those out in all of our communities. As well as SafelyYou, and I think you know much about SafelyYou. We’ll be rolling that out in all of our communities along with some other things.
When somebody says, “Why is your memory care better than somebody else’s memory care?” I don’t want to speak so much about somebody else’s memory care. I want to be able to speak to some things that we can point to that are quite tangible of things that we do to really bring the best care we know how to bring to our memory care communities by having thought and purpose and curating certain things that we call our standards within Cogir for memory care.
Tim: Memory care before the pandemic, standalone, especially, I think, was going through a tough time. Occupancy was down, we were seeing some bankruptcies in that space. Now, I’m hearing from some providers that memory care is coming back faster than any of their other levels of care, and they see a bright future and they’re very bullish on memory care.
I’m curious where you stand generally on whether demand is stronger than maybe in years past, or how are you seeing occupancy? How are you anticipating memory care being part of the portfolio in the coming years? Are you looking to grow it?
David: Well, memory care, I think, was always strong. I think if we go back to the recession, if you go back to 2007 when people had choice but finances got tough, choices had to be made; independent living is easier to extend and put off and defer than memory care. When mom is experiencing the things that she’s experiencing, that’s tough and that’s really hard for a family to deal with no matter what the economic environment. In my view, memory care was the strongest in the economic cyclical downturns. The pandemic was a little different because it was a healthcare problem and a virus-spreading problem.
Memory care average length of stay is short. It’s 14 months, plus or minus. The reality is move-outs happen in memory care mostly because you’re into an end-of-life situation or a higher level of care, meaning skilled nursing or something of that nature.
I think it was a difficult situation because we had a fear factor going on with some of the issues that were happening in skilled nursing, coupled with just a regular pace of move-outs that was not replaced by move-ins because of a variety of barriers around move-ins, from fear, to true healthcare factors and infection control issues that were real, to just a paralyzed community that just didn’t know what to do. If ever there was a time to defer memory care, it was just hold on a little longer, hold on a little longer.
It almost feels like the same thing with travel. There’s pent-up demand there that now it’s time and the go button is hit, so I think there will be, perhaps, an inordinate number of people moving in and demand that’s pent up.
On the other hand, I think it was always strong, and I think it’s one of those need-based things; when you have to have it, you have to have it. It’s very, very difficult to self-perform for a family, and I don’t think that’s really ever going to change.
I think it was always strong. I think it was simply interrupted by the forces of the pandemic in a more temporary way. Plus, I think for a lot of assisted living and independent living companies, they do find that it’s probably alongside the number one reason for move-out is higher levels of care. This could certainly extend your residents’ stay another 12-to-18 months by simply being able to provide that one more leg in the continuum of care.
Tim: In terms of standalone versus within a continuum, any philosophical preferences there?
David: My preference is more of a continuum of care. When we construct our new buildings, we look at broadening the continuum. We may broaden it the other direction. We may broaden it to active adult, and try to bring the continuum of care all the way through, but we will certainly build a memory care component into our new communities. I think that makes a lot of sense.
Tim: Got it. Do you see a difference in the price point in the developments that you’re doing versus some of those older buildings, and is that a way to close that gap with affordability?
David: In our new communities, we’ve got a new development partnership with a company called Contour, and they’re really terrific developers that we teamed up with in new things.
I think new development can be expensive. There are new communities that are opening up now, depending on where you’re building, that are costing $800,000 and up to build. If you’re going to spend that kind of money, you sure better be in a good ZIP code because you’re going to have to charge a lot of money to afford to make those returns work.
In existing communities, you can certainly purchase buildings that are $200,000 or $300,000. When you think about $800,000, if it’s in the right ZIP code, and you can purchase something for $250,000 or $350,000 or something of that magnitude, even if you’re putting in $20,000 or $30,000 a unit or even $50,000 a unit, if you’re all-in costs are in that $450,000-or-under range, everything’s relative depending on the ZIP Code that you’re operating in.
What I like to look at is really the home values in the areas that we’re targeting versus what we have to pay for senior housing, whether it’s purchasing an existing community or building something new.
My retirement was a colossal failure, but when I’m 85-years-old, I really don’t want to have this giant income coming in. I just want to have assets that are built up to be able to spend down at the end of my life.
Most of those assets are coming from your home. Most people that are 75 years and older either don’t have a mortgage or have a very small one, say, 25% of the home value.
That is the majority of an asset, and so that’s what people are going to use to spend down. That home value, if you’re going into areas where the average home value is $750,000 or $850,000, I think if you can find communities, build or buy, that are significantly less than that, you’ve got economics that are working your way.
Tim: Makes sense. I’ve got about 10 minutes left, so I’ll ask some big-picture questions to wrap up. Top business goals for 2022?
David: We’re certainly going to continue our expansion. Like I said, by midyear we’ll be roughly 3,300 units. By the end of year, I would expect that to be higher. Why does that matter? It matters because we are hiring great people at the corporate level to support those communities. Building an operating company to a certain level enables us to be able to afford to hire the people and attract the people that we really need to build a great operating company.
Again, I mentioned Contour. We are looking with Contour to develop a number of new communities and find sites. I’d like to find three or four or five new building sites before the end of the year.
We’re renovating a community in Kirkland, Washington that is an older building and a vacated building that is 75 units. It is small. There, we’ll build a really nice boutique, a very nice community. It’ll be a nice alternative to some of the larger campuses. Finding growth opportunities that we can really take advantage of and launch ourselves into 2023.
I also think building that census back up, focusing on sales, and delivering resident and team member culture that attracts people to stay with us, and build loyalty amongst both our residents and our staff.
When people talk about culture, it’s kind of an overused word sometimes. We try to define that and really live it and mean it and not just talk about it. Because I think that’s what playing the long game really means, is having a culture where people can trust. That’s a word that we use a lot.
You need to trust me that if you tell me that you’re puzzled by something and you’re lost, you just don’t quite know what the answer is, that I’m not going to think you’re stupid when you tell me that.
We’re thought partners, and your boss is not somebody that you should be afraid of. You should be able to open up to that person. We’re all thought partners, and the residents are the same way. Allowing them to vent and tell us what we could do better and then delivering on that. We do that with our team members and our residents. If we can really accomplish that, then that’s what culture means.
I think building on that and making sure we live by that every day, that’s a significant objective for us for this year as well.
Tim: What’s keeping you up at night from a business perspective?
David: I think the next thing around the next corner. I think we pride ourselves on being able to handle any curveball. We get some knuckleballs every once in a while. You try to protect yourself, your company, your employees, your team members from the next thing that’s going to happen and try to see that. We’re trying to heal ourselves while we’re trying to fend off the next thing.
We really need to finish getting out of this pandemic. It hurts me to see us all still in masks. That’s a controversial thing to say, I think, but I can hardly hear people sometimes with a mask on, and our residents have a hard time hearing anyway. I think we’re caught between a balance of feelings. We have to protect them from a virus that’s real, but at the same time, we want them to enjoy life to its fullest. They really need to do that. That’s a very healthy thing to do, and so I think we all struggle with that balance.
We feel bad by taking away a mask or not requiring a vaccine. Sometimes we’re programmed into thinking that’s bad for people and it’s going to hurt people. At the same time, it’s a balance thing. I think what I enjoy about our communities and our industry, quite frankly, is we can have those debates and we can have those conversations without being adversarial. I think that gives me great pleasure, honestly.
Our industry is strong because we can talk about this stuff. We help each other when there are fires. We help each other when we need to help each other. We’re helping each other now through the pandemic, regardless of whether we’re competitors or not, and that feels really good. That’s what gives me good faith that the industry is very strong.
Tim: My last question is just about how you see the industry changing in the coming years. I think we see a lot of different experiments happening out there, a lot of different ideas thrown out about better ways to operate a community or a portfolio, things that need to change to meet the new consumer. Can you talk a little bit about the vision have for the senior living community or senior living operator of the future?
David: Some of the things I talked about; bringing innovation into the environment and continuing to work hard to do that. I think companies that are lazy and complacent and just think that we can operate like we used to, they won’t succeed.
That usually is a recipe for failure for all industries. I think it has proven again to be true. I think some companies are really struggling and have struggled through this. Other companies have pivoted and become stronger.
I think at the end of the day that innovation and trying new things, making sure we allow ourselves to fail a little bit will ultimately prove to be a better, more happy, vibrant place for our team members and our residents. Competing for talent will make ourselves better employers. It just will. The industry will change and it will change for the better as a result of disruptive things like this.
Tim: I think that is a great note to end on.