Commonwealth Senior Living CEO: We Expect to Meet and Exceed Pre-Pandemic Margins

As Commonwealth Senior Living CEO Earl Parker looks ahead to the future, he is not worried about occupancy or demand.

With the company’s average occupancy back at pre-pandemic levels, Parker believes “that we will get back to those numbers and exceed them, frankly.”

“We have a product that people want and need, and more people want it now than they did 10 years ago,” Parker said during a recent appearance on SHN+ TALKS.

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While he is optimistic about occupancy and demand, Parker’s also holds the view that there is a real risk operators might find themselves inundated with demand but unable to meet it down the road due to staffing shortages.

“Our ability to meet the demand, and with the right people on our teams, that is going to be the limiter of our success,” he said.

It’s no that executives across the industry see staffing as the biggest challenge ahead, and Parker is by no means the only leader to hold these views.

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But Commonwealth is unique in the way it is aggressively tackling its workforce challenges through a variety of retention strategies, including $50,000 five-year bonuses for certain management positions. The company is also expanding its reach to people who might otherwise not have worked in the industry.

“I do believe it’ll ease up a little bit. Frankly, it’s eased up a little bit in the last six months,” he said. “But I think we’ve got to keep working at it and working at it hard.”

Commonwealth manages 34 communities; the majority of which are with Invesque, which is a majority owner in the Charlottesville, Virginia-based operator.

We are pleased to share the recording and this transcript of the SHN+ TALKS conversation with SHN+ members. Read on to learn about:

– What Parker thinks operators have to do to attract workers in 2022

– How and where Commonwealth Senior Living is expanding

– How Commonwealth uses technology, including indoor “micro-farms”

Tim Regan: Good afternoon, everyone. I’m Tim Regan with Senior Housing News. Welcome back to SHN+ Talks.

I am thrilled to be joined today by Earl Parker. Earl is CEO of Commonwealth Senior Living. Commonwealth is a Charlottesville Virginia-based senior living operator. It manages 28 communities for its parent company Invesque, and it also manages six communities for one of its co-founders, Municipal Capital Appreciation Partners. That brings the total community count up to 34 today.

Earl, thanks again for joining us today.

Earl Parker: Sure.

Tim: I want to start with just setting the stage for our conversation. I actually did a little bit of homework, I tuned into the Invesque second quarter earnings calls last week. They talked a little bit about the Commonwealth, it sounds like things are moving in the right direction. How has demand on occupancy been over the last few months? Tell us about the highlights.

Earl: Well, April through July of 2022 have been the best four months in occupancy growth for us in the last two years. We saw move-ins and occupancy start to rebound in March of 21, with I think 14 over the last 17 months having positive growth. The last four months have been our highest growth months, actually escalating each month, July was our highest growth month in the last two years. Really happy for that, obviously, and proud of our team.

Tim: What do you think it is about your operations that led to that result? What do you think’s moving the needle?

Earl: We’ve had a significant increase in leads and community experiences. We’ve added a couple of sales specialist positions to our team that I think are helping to fill in certainly where we have blanks or to help support some communities that are challenged. I’ll be the first to admit, certainly, not every community has experienced the same level of growth. What we’ve seen over the last few months is we’ve had a much higher percentage of communities experiencing growth, we still have a few out there that are struggling for sure, but it’s been much more evenly spread across the portfolio.

I believe some of its pent-up demand still, some of it is maybe time of year and things. Again, we did not have a great February and March. February, March fell off, and then April to now has just continued to move very solidly.

Tim: I know there were a lot of thoughts about whether this would change the seasonality of the industry, whether a pandemic would influence people to this time of year versus this time of year. I’ve talked to the operators over the last year or so that have said we feel like seasonality is coming back, we can predict trends a little bit easier. Is that what you’re finding as you look at your markets?

Earl: I haven’t been able to see that yet. Again, maybe with a little more time. I think our issue in February and beginning of March really was we pulled a lot of move-ins into December and early January with a program that we offered to lock rates in if you got in before a certain time. I think we pulled a lot of the move-ins that would have maybe happened later in January and beginning of February into December and beginning of January. That’s what I think, anyway. Again, I think I’d need a few more data points to be able to say I’m confident of any trend, but we’re just happy to see the numbers where they are. We think some of our strategies have helped with that by adding a few more positions at the home office support level.

We have an Internet lead specialist who’s helping in certain communities where we get a high number of digital leads to help make sure we get speed to lead. We haven’t gone so far as several other companies I know of outsourcing that initial response to a contact center, but we do have an internal person who’s helping with about ten of our communities to support those digital leads, and that certainly paid good returns for us.

Tim: As people were starting to add occupancy again in early 2021, I remember we would hear a lot about operators doing anything they could to get a resident through the door, crazy concessions, discounts, that kind of stuff. It created a lot of, I think, hardship for salespeople in certain markets. Has some of that stuff gone away or are you still seeing that?

Earl: We’re still seeing it in certain markets. We’re trying to focus on any concessions being one-time concessions as opposed to market rate discounts. We do still see in most cases it’s smaller providers, not national or larger providers, but there’s a few of those too, where basically it’s, tell me if you went and looked at Commonwealth, tell me what they offered you and we’ll beat it kind of a thing.

We still have several markets where we’ve got competitors offering all-inclusive rates at some pretty staggeringly low numbers that I just wonder how they’re going to be able to deliver the care down the road. It’s not everywhere. I do think most of our competitors have felt, as we have, the need to be able to try to hold rate and or increase rate in order to pay for the increase in expenses, which I know we’ll probably talk about.

Tim: Yes, absolutely. Obviously, you’ve already set your strategic goals, you’re already executing on them. As you look to the second half of the year, first off, what are those goals? How are you executing them? Why are you pursuing them?

Earl: We knew Covid was obviously still very active at that time, and frankly, we still have a number of Covid issues going on. Although, thankfully, the impact is much less now than it was previously — workforce challenges, rebuilding occupancy, NOI. We really tried to keep it simple.

One, we wanted to regain our pre-pandemic occupancy and continue to grow. Thankfully, knock on wood, we achieved that in July. We’re now at our pre-pandemic occupancy and slightly above it and expecting to continue to grow. Again, to be entirely candid, not every community for sure. Some of them are knocked out of the water and are 100% occupancy, and we’ve still got communities that are still struggling. That was number one.

Then two simple ones that we try to keep it simple out there are continuing to focus on being a Great Place to Work. I’ve always believed in a simple formula. If you have happy associates, which is what we call employees, you’re likely to have happy residents.

We’ve been pleased to be a Great Place to Work the last four years, but we know we have to keep after it, especially with the changing and more competitive work environment out there. Again, part of it is pay, part of it is supervisors, and part of it is people enjoying coming to work. That was really our number one. Then continue to be a great place to live and focus on that.

One of our key focus areas underneath that goal was to make sure that all of our. signature programs are back to what I’ll call pre-pandemic standards. Our dining program, our activities program, in some areas, housekeeping and maintenance. kind of fell off during Covid, I would imagine they did for most folks.

Some of it you couldn’t bring people to the dining room, you couldn’t have things on the tables like you used to, programming, obviously, you couldn’t do a lot of things. We were delivering meals all throughout the communities, and carpets got stained and didn’t get cleaned as quickly as they should have, because people were worried about disinfecting, and all those things.

Each of our departments, we said, “Let’s just focus on getting back to standards where they were pre-Covid, and let’s not introduce a bunch of new things this year. Let’s just say we know those were really good, so let’s just get back to standard.” I think we’ve made good progress on that so far, but we’re not 100% there yet, and we need to keep focused on it.

Then the last one really ties into being a great place to work but is rebuilding our workforce and trying to make sure we focus on that internally and externally, developing folks from within but also bringing new people onto the team.

Tim: I think this is something that the industry has always focused on, but now I think it takes on new importance, is the need to educate prospective residents and their families on what senior living is, why they need it, when they need it.

How do you think the industry should be working to do that right now?

Earl: Yes. I think the education of consumers needs to focus on the living piece of senior living. I think our teams do a tremendous number of things to make sure our residents have the opportunity to live and thrive in our communities. I think we do a good job.

I think a lot of our competitors do a very good job of promoting through their Facebook pages and other social media, those messages, obviously, those don’t seem to be the messages that get picked up by the mainstream media regularly. I think trying to get more of that coverage out there. I think the Where You Live Matters campaign, and then some of the other things that Argentum has done have been valuable and beneficial.

I see in a lot of our markets we see more and more customers coming in today. Again, customers are mostly adult children who have gone through this before. They’re on the second round of it, maybe they went through it with their grandparents. I see our consumers being much more educated today than they were 10 years ago, and much more comfortable with the concept of senior living.

I think that makes our job easier going forward. I think we’ve got to continue to spread the message and make sure that people are hearing about the good things and not just the bad things that show up occasionally. Again, I think you take that increased education of the consumer and couple it with the demographics that are coming. I just think it’s a very, very bright picture from a demand perspective and the ability to increase penetration.

Tim: Yes, absolutely. We have a question from our audience: What are the top reasons people are choosing your communities and how important is the strength of the community and the ability to socialize in that decision?

Earl: Well, the top reason that people are choosing our community? We’re predominantly assisted living and memory care. Again, I think there is some difference between independent living. It is I think mostly a needs-based decision for what we have to offer, certainly for memory care it is. There’s why people choose assisted living and memory care as the first part and then why do they choose us over the competitors.

Choosing us over a competitor has a lot to do about community reputation and longevity of the team. Again, I’d love to say that we didn’t have any turnover, but we’ve been very focused on turnover and retention of our leadership teams, the executive director, resident care director, and sales and marketing director.

In our communities, we’ve got a loyalty and longevity program where they get a $50,000 bonus when they achieve a 5-year mark with us, which has been something that we’ve been fortunate to pay out a lot of. We’re looking to pay out more because we think it really adds value to our operation to maintain that consistency of the group. I think it has a big impact on the overall reputation in the market, but I do think word-of-mouth and reputation in the market.

Again, we’re not in a lot of big, gigantic metro markets where, again, I don’t know, I’ve not really operated in a lot of these markets where maybe it is less about you. There’s less knowledge, and where we operate, usually people in a three to five-mile radius, they know all the players. They’re talking amongst each other and getting referrals. Having a good reputation. Again, I mentioned our signature programs. We do farm-to-table dining. We do a fresh fish program in dining. We’ve got indoor micro farms where we grow our produce right in our communities. We’ve got a lot of signature activity and memory care programs.

I think those couples where their overall good reputation in the market are why people choose us, and again, we’re never the newest community in the market because we don’t build. All of our communities are acquisitions. That’s what I think. There was a final component to that.

Tim: How important is the strength of the community and the ability to socialize in that decision?

Earl: I think for a lot of people that’s really important. There’s three groups I would say or maybe three decision-making factors or buckets I would put people in. Some people, again, adult children, the most important thing is location or proximity to their home or office, wherever they’re going to have the easiest to be able to get in and get out to visit. Some people it’s really all about the programming and the activities and the food and the socialization.

There’s another bucket of people that it’s really all about the care, and it’s probably based on the degree of frailty when needed at the time of moving. Some folks are really all about wanting to know who the medical director is. Let me look at the care, let me read your licensing reports, and see the history. If I was going to generalize, I’d probably put it into those three buckets and say for that one bucket of people I think socialization is really important.

Tim: You talked about indoor micro-farms. This is a good segue into a question about technology. I know that the way you work with Babylon Farms that provider is very tech-forward, but I want to back up for a second. Just generally, at this juncture in the third quarter of 2022, what technology are you seeing out there that’s catching your attention? Anything that’s worth mentioning?

Earl: There’s several things that we’re looking at and keeping an eye on for future technology. There’s nothing that we’re really hot after at the moment. Again, as I said, our strategy for this year is stick to our knitting and get back to where we were. It doesn’t mean we’re not looking or keeping our eye out there, but a couple of technology things that we use that I think are really exciting.

Then we’ve been using virtual reality from MindVR for, I guess, about a year and a half or two years now and we really love that to see the impact it makes on residents. It was great during Covid for folks to be able to get out of the community and travel through virtual reality. They’re doing some really interesting upgrades to their system I just learned about last week where family members are going to be able to actually engage directly and do virtual visits over the VR headsets. I’m interested to see how that goes.

Those are a couple of things that we’ve been using for a while, but I think are really helping us through Covid. The Eversound headsets, doing window visits, where you had a family member outside with the microphone and they can talk back and forth, just really improved a lot of lives and we’re so glad to have them.

This other thing I think is really cool — I know another program MindVR is adding is to be able to use it in conjunction with Google Earth. You can take a resident and they can travel back to where they met their spouse and see the corner or the hotel in Street View or the house that they raised their family in and go see what it looks like the last time Google drove by and took the pictures.

Tim: I know you and I have talked about robots before. What utility do you see robotics in senior living? What are you waiting for maybe in the future for when you might start to think about some of that stuff more seriously?

Earl: We tried one of the dining service robots out there and I think one or two of our communities. It was a novelty that the residents got a kick out of it, but, really, there wasn’t any, for us anyway, there wasn’t any real payback or value for the expense that we would have had to incur. We didn’t move that forward at this time, maybe at some point it would be effective.

I’ve heard of some folks using a commercial Roomba to vacuum the hallways at nighttime. That seems like it would make sense to me, I haven’t had the chance to dig into it, but certainly the hallways all have to get vacuumed and if there’s a way to do that, and not have to have staff time associated with it, I think that would be a payback.

There might be some other cleaning or sanitizing functions out there that would work, but those are the ones that I’ve seen or heard about so far. So much of what we do is about the actual personal touch.

Tim: I see Babylon Farms as this interesting medium place between technology and being high-touch. As I understand it, you have an app that you can actually use to schedule the harvesting and the planting. I know we’ve talked about this before, probably in front of an audience, but really quickly, just give us the primer on that. Then, as you look ahead, what are you doing with it and what place do you see that in senior living?

Earl: Sure. We’ve found they’ve been a really neat addition to both dining and programming. They cross both of those areas. As you said, they’re self-contained hydroponic gardens that, A, show really well from a marketing perspective, because they just look really cool and everyone wants to know what it is when they see it, but it’s really great for engaging the residents.

We grow a large percentage of our lettuces and leafy greens as well as herbs in them. We use them in the dining program in the community. The premise originally was that they’ll pay for themselves. You can grow as much produce as you would pay for. I wouldn’t say it’s done that, but it’s probably 50 to 60% pays for itself.

Then you’ve got the marketing component and the engagement component. Residents can be involved in choosing what we plant, helping with rotating the crops and then eventually harvesting the crops. Resident programming has taken those herbs and used them in making soaps and candles for aromatherapy.

As you said, our dining service director manages the overall program with an app that’s on their phone. Our VP of dining can check in and look at all the farms and make sure that they’re where they should be and if we have turnover in a dining service director, or somebody is out on sick leave or something, they can see, oh, red light comes up. It means somebody needs to go give that some attention. It is very, very cool and something that, again, our residents have really enjoyed and it’s a part of the dining and overall programming process.

Tim: You touched on cost there, so I want to talk with you about cost inflation. Where are you still seeing the most cost pressure in your operations and what are you doing right now to reduce those expenses?

Earl: The number one inflation area is labor cost. That’s certainly been the biggest one for us, anyway. In the areas outside of labor, we’re seeing increases. I think we’ve added, it was two or three years ago, an internal procurement specialist position who really helps to just make sure we’re getting our contract pricing through our group purchasing organization, make sure that we’re buying the right products at the right prices.

If prices go up in a certain area, she can quickly dig in and see if there’s other products that might meet the specifications at a better price. That’s helped, but again, the largest area for us has been labor. Our focus has really been on building a pipeline of talent and growing our own talent internally as a way to mitigate the cost pressures, so that’s been our big focus.

Tim: Where’s your thinking on the resident rates, and do you expect 2023 to be another big year for resident rate growth?

Earl: First off, again, in my opinion, in reality, increases in costs need to be paid for by the consumers or customers. We all operate with an overall game plan and as cost goes up, that’s been our philosophy every year that I’ve been in this business is we look and project what’s going to happen next year and then we use that to determine what the rate increases need to be. In every company I’ve worked with, we’ve always been very transparent to prospective customers that rates are going to go up every year.

Some years are going to be less, some years are going to be more, but it is going to happen every year because our costs go up, our staff expect to get increases in wages, it is just what happens. Obviously what’s happened this year has been significantly outside of the norm or last year into this year. We did a larger than normal increase for us at the beginning of this year, but we did not do anywhere near what I’ve heard from several other companies, large companies, regarding numbers they’ve thrown out.

Frankly, we probably underestimated a little bit and so we’re going to be a little more aggressive as we go forward. Based on our thoughts, let’s try to see if we can keep it as low as we can. Because we do know cost has an impact on our customers. The majority of them are on fixed incomes, have an asset base that they’re oftentimes spending down. We’ve got to be cognizant of that and have always felt like we’ve priced ourselves competitively in the markets. If we’re going up dramatically and somebody else doesn’t, then that could put us at a disadvantage.

We try to be pretty cautious, we probably undershot the mark a little bit based on what we’ve had to do mostly with labor. I think we’ll be a little bit more aggressive as we go forward. What’s going to happen next year? Gosh, I wish I knew. I don’t see any sense. My sense is that it’s going to mitigate a little bit, but I don’t think it’s going to drop dramatically. I would expect that we will be doing a larger than normal for us increase next year as well. I certainly hope it’s not in the 10% range, but I’m not sure yet.

Tim: How do you feel about the average margins in this business right now? Are you optimistic, like a lot of these public senior housing companies are, that they’re going to get back to where they were before the pandemic at some point in the next year?

Earl: Yes, I am. As I said, we’ve regained pre-pandemic occupancy and we’re pretty close to the margin. We’ve got a little bit of room to grow and like I said a couple of times that varies significantly across the portfolio, but when we look overall as a whole, we are pretty close. I believe that we will get back to those numbers and exceed them, frankly. We have a product that people want and need. More people want it now than they did 10 years ago, back to our discussion about educating consumers.

I know a lot of folks who are slightly older than me that are thinking about and this may be more independent living, but thinking about senior living as a desirable option in the future as opposed to, again, call it 10 or 20 years ago when no one really wanted to talk about senior living it seemed like so. Again, I’m confident that it will get there and there are going to be enough people who can afford the prices. Again, there’s going to be a variety of levels of communities. I think we’ll see more of that than we have today.

I think you’re going to see added levels into the market. We’re already starting to see more active adult and then a hybrid between active adult and independent living. I think you’ll see more of those options to meet the different income levels. I think the product that we’re offering today with some slight modifications will continue to be desirable in the future and necessary. There will be a market where they can afford to pay what the costs are in order to achieve a margin that investors need to achieve.

Tim: Great. We have a question from the audience. This one is about data. How important is data to managing your community, from wellness, to care, to staff retention? I’m just going to say probably data is very important to doing all of that stuff. Tell us more about how you use that data to track some of the things in your operations.

Earl: Sure. Well, we’re in the process of making a change. We’ve been using a Microsoft BI platform to track a lot of our metrics. We’re actually in the process of switching over to the Yardi Senior IQ. Each of our subject matter areas has a different dashboard that they use to track metrics on the HR side. We look very closely at time to hire number of applicants, number of hires, number of terms, overall net associate count. We dive in a little deeper as it relates to registered medication aides, or med techs, because those are in such a critical position.

Retention in the first 90 days. Obviously, there’s a wide range of metrics that we look at on a regular basis on the sales side. On the clinical side, we’ve got a clinical scorecard that has several metrics. I think each of our subject matter areas has got a very robust set of metrics that they look at to help manage and support their areas. Then we have a KPI scorecard for the company that we use that’s got six metrics that we think help to drive outcomes and performance. Occupancy is not one of our metrics.

We’ve got a couple of metrics we think that are leading indicators that will drive occupancy, same on profitability, same on overall satisfaction. We try to look at things that if we move them in the right direction we’ll achieve the occupancy profitability satisfaction metrics.

Tim: Great. Let’s talk about staffing. Before we get too deep into it, though, where are you still seeing the biggest pressure in staffing? Has anything gotten easier in the past few weeks?

We’re about, let’s see, probably about five months in of consecutively growing our headcount month over month. That’s a good thing. I won’t necessarily say it’s easier but we’ve I think turned the tide.

Frontline caregivers and med techs are probably the biggest pain point for us, with the biggest one being med techs, because if you don’t have med techs, then your nurses are covering the medication cart, because someone’s got to be there to give out the medications. Or you’re using agency, of course, which we don’t like to do. Then I would say talented executive directors are a real challenge to find, to hire, retain. Those would probably be the main pain points for us right now.

Tim: Have you overhauled any of your application process, and if so, what did you do to make things easier for applicants?

Earl: We were in a senior leadership team meeting, and someone asked the question, how long does it take to apply for one of our positions on your phone? The response from HR was that it takes four to five minutes. I took out my phone and I started trying to apply for a position, and in 10 minutes I gave up. I can’t say I know the answer, but I’m told now that they’ve made it significantly simpler, and it’s two to three minutes on the phone and I’ve had several people test it out and told me that. I have not looked back at it. I wish I could say I had. We have focused on trying to make it simpler.

People that applied on Friday didn’t get called till the next Thursday. We’ve tried to just coach and educate people on the need to, again, delegate those things that our concierge at the front desk can call and set up interviews for folks versus having the department head have to do it themselves. Just trying to, again, things that seem relatively simple, but as you get into the process and looking to see where the backlogs are coming from, we’re just trying to help people through those barriers.

Again, I know several companies have outsourced that component of having someone either hire people for them, even frontline positions and just send them in for their first day or at least do the screening process. We have not gone to that for frontline associates. We did hire a talent acquisition manager who’s helping with that process for all of our department head positions, screening and giving, hiring managers like two or three candidates. They’re trying to help decrease the burden on those hiring managers.

Tim: It’s been very interesting to me how many sales principles now apply also in recruiting.

Earl: I talked to somebody and they said they changed the name of their VP of sales to the VP of mar-cruiting, marketing and recruiting. They said they’re as much focused on the recruiting side as they are on the marketing side. That was interesting.

Tim: I’m sure you said some of this in there, but we have operators that watch our SHN+ Talks. Any creative solutions or strategies that’s really helping to recruit workers right now that you want to share?

Earl: Our biggest strategy really has been to try to build, create our own, bring people that are not in the senior living workforce into the workforce. We hired an internal nurse trainer to lead monthly direct care and med tech training virtually. They can do the majority of what needs to be done. We’ve always tried to train our own folks and bring people in and then allow them to grow.

It’s really hard for our nurses in each of the communities to be able to take that 40 hours to do the direct care training or the I think it’s 68 hours for the med tech training to be able to have that time dedicated as well as do all their other stuff. We found that people weren’t getting it done. We brought that position in, and they’re doing most of that training virtually.

We have at least two classes every month that we’re bringing and all of our communities can participate. I don’t have the results yet. We’ve only been doing it for about three months. My hope is that it will have an impact. I know that they’re having the classes and they’re getting participation. Hopefully, we’ll see an impact on that and be able to measure it within the next couple of months to see did it work and are those people staying.

I’ll say we believe that that also helps us to offset our cost pressures because if we’re bringing people in and starting them with us, they’re not coming in with five or six years of experience. You’re generally starting those folks off at a little bit of a lower rate. Then we can afford it. We’ve got a career laddering program where they know when they’re hired, after 90 days, I’m going to get this increase. After 180 days, I’m going to get this. They can see the vision of where they can get to, again, as long as they perform.

Tim: You mentioned a five-year incentive for workers earlier. Can you say that dollar amount again?

Earl: It was $50,000. These are executive directors, sales and marketing directors and resident care directors, nurses. It’s for those three positions. We believe that those three positions, really, if you can have consistency there, you’re going to say people work for people. They don’t work for the company, they work for their supervisor. Those three people are the most influential supervisors. People in each of our communities. If we can have consistency with them, and that means that they’re performing, then our community should be successful in overall turnover and engagement and everything should be better. We’ve actually had that program in place for about six and a half years now. We’ve paid out the first group of folks just a little over a year ago.

Tim: I want to go back to something that you just mentioned. You talked about the need to bring workers into the industry from the outside. Very important, also very hard to do. What are ways that you think the industry can do that?

Earl: Education. Again, we’ve also brought on a director of career outreach to get into the local colleges, technical schools, community colleges, to try to, again, educate people about senior living. A lot of times the folks that are in nursing programs or general maintenance programs, dining, they’re not thinking about senior living. If they are, they’re thinking about a hospital or a nursing home.

A community college is doing, or a technical school has got a CNA or a med tech training class that they have, that people are going through, getting them to come to our communities to do their clinical portion that they have to do in the community, and then that gives us an opportunity to get in front of them and say, “Hey, wouldn’t you like to come work here?” and try to recruit them to come join us.

I think it’s a combination of those things. It’s been a challenge for a long time. I think we need more operators to do it. Again, maybe there’s an opportunity with some of our associations also to have more connections with schools to, again, bring people at all areas. Not just looking for people who want to be an ED the day they graduate. We started an internship program this summer, which I wasn’t sure how it was going to go. We ended up with nine of our communities bringing on an intern for the summer. These are folks who are in college who wanted to come learn about senior living. I think it’s a win. I think we need way more than that.

Hopefully next year we’ll have 18 or 20. I think we’ve got to continue to do things to introduce people to senior living. I had never heard of senior living until I happened upon it by chance. I think there’s still a lot of that. While our consumers may be a little more educated, those adult children, I think the younger folks coming out of schools are still pretty not very knowledgeable about senior living.

Tim: As you look ahead, do you foresee anything getting easier or harder over the next 6 to 12 months? What are you expecting ahead in staffing?

Earl: Expecting or hoping? I don’t know. I feel like it’s probably going to mitigate a little bit over the next 6 to 12 months.

Staffing has never been easy in this business. It’s always been a challenge. That’s what I think is so funny. If you had told me two years ago that we had it easy, I would’ve said, “No, man, you don’t know what you’re talking about,” but we did. If you look at it compared to now, we did. It’s interesting in perspective. Again, I do believe it’ll ease up a little bit. Frankly, it’s eased up a little bit in the last six months, but I think we’ve got to keep working at it and working at it hard.

Tim: Absolutely. All right, let’s talk about growth. This is a great time to say that I saw that Commonwealth today announced the addition of three new communities in Michigan, so congratulations.

Earl: Thank you.

Tim: I want to hear more about your strategy for growth this year, what we’ll see out of you guys next. Then the audience member is curious, are you looking to expand or acquire more facilities? Are there particular markets or areas across the country that you feel strongly about in terms of growth?

Earl: Sure. As I said earlier, our strategy for this year was really to focus on rebuilding occupancy and getting our signature programs back into place. One of our co-founders had bought a portfolio of communities in Michigan and reached out to us earlier this summer and asked us if we would take over the management of these three communities. It follows a very similar formula to what we’ve done with them in the past. These were communities that needed significant capital infusion and needed to be expanded in order to get economies of scale and fit the demands of the market. They’ve had a significant capital expenditure program going on in them. One of them’s about ready to wrap up this month, the other two later.

We said, yes, it fit our model with it being three communities. We’ve hired regional boots on the ground there. We believe that’s critically important to our formula, is to not have someone who has to get on an airplane to go visit their communities. Because we believe in having small, deep regions, where most of our regionals cover only five or six buildings, and they are in those communities a lot. Anyway, we’re taking over those three communities, starting September 1st. We work basically with two partners, Invesque, who owns the majority of our management company in 28 of our communities and then MCAP. I anticipate we will continue to grow.

MCAP is actively looking for new acquisitions in the markets that we’re currently in Virginia, Maryland, Tennessee, Pennsylvania, North Carolina, we’re not in North Carolina, but it’s obviously geographically close, as well as Michigan now. I would expect and anticipate that, at some point, Invesque will be back in the acquisition mode and be looking to acquire buildings that, if they are in our geographical area, that we will pick up management of those communities. We’re not looking to pick up a community in Florida or one in Ohio. We do believe in having that cluster focus and the ability to have our folks be very actively engaged in community support.

Tim: I know that Commonwealth is named obviously after the Commonwealth of Virginia, but if you expand to so many states, don’t you have to change your name to something else? That’s maybe a silly question.

Earl: No. All of our communities in Michigan will be known as Commonwealth Senior Living at the town that they’re in. It did certainly start from the Commonwealth of Virginia, but we feel okay that it’ll translate effectively.

Tim: Absolutely. Actually, I want to ask you about another market in Virginia specifically. I’ve seen a lot of operators target the Washington, D.C. market, which as you know includes Northern Virginia, parts of Maryland — two states that you have just mentioned. It seems pretty hot for new development. Since Virginia is the state that you know best, what do you make of the DC market in general?

Earl: The D.C. market’s got a lot of people with a lot of money. That draws developers who say, “Boy, I see potential.” From everything I’ve heard, I think they’re all doing pretty well with the buildings that are actually open. There’s still a lot to come out of the ground. I think Invesque has done a few new development deals with partners, Commonwealth and MCAP have not done ground up development. It doesn’t mean that we never would. Our sweet spot has always been acquisition, expansion and capital improvement. My guess is we’ll probably stick with that strategy. I do believe a lot of times stick with what you know best and what you do well and you’ve been successful at.

Tim: Yes, absolutely. I want to work in another audience question. How do you plan for capital investments and where to invest capital dollars in those communities? When you come into a new community, how do you identify where that money needs to be spent?

Earl: Sure. I mean, for us, we try to look at the whole building. I get pretty actively involved when a partner wants to acquire a community, part of my role is to go in and say, okay, here’s what I think needs to be done. You go and look at the competitors and you see what their buildings look like. What do they have? What don’t they have? What’s in the apartments? How new are they? What’s been updated? Where do you want to position the community? What price point? Where do you believe the sweet spot is in the market or the unmet need or demand? Certainly, we get a market study done with a third-party group that gives us further depth in evaluating that, then we develop a game plan.

All right, this is what we think we need to do in the apartments, this is what common areas, furniture, exterior of the building, we have a PCNA report done, physical needs assessment that tells you the stuff you can’t see behind the walls and the systems and the roof and that. From all of that, we develop a budget, and that certainly plays into whether or not we do an acquisition. Because we’ll say, all right, if we think we need to spend this much money on capital improvements, and then they want this much money for the building, can we afford all that?

Looking at our projection model, and will there be a good return on investment? A lot of times the answer is no, and so we go back and either don’t bid or bid a lower price than what the seller is looking for. We don’t get a lot of deals for that reason, but the ones that we do get, usually, we do a good job with because we’ve allocated enough money up front to do everything that needs to be done. That’s our goal, anyway. Certainly, you always find things that you didn’t see, but hopefully, that answered the question.

Tim: Yes, I think you absolutely did. No one wants to think about a new disease circulating through senior living communities, but I’ve read more and more about Monkeypox over the last few weeks. Is this on your radar at all, or is this something that you’re just not really worried about right now?

Earl: No, it’s definitely on our radar. We have a webinar on Thursday of this week for all of our EDs and nurses to go through with our clinical partner and talk about the issue, things to be aware of. Frankly, I’m not super familiar with all the details, but it’s on our radar, our clinical team is briefing, educating our staff about it currently. Again, I don’t think they think that either at this point that it’s going to be a big deal, but I’ll tell you in February of 2020, I didn’t think Covid was going to be a big deal. Literally, three weeks before our world changed, I would have told you that it’s probably not going to happen to us.

Tim: As you look ahead, what’s on your worry list? What’s on your excited opportunity list? Then just generally, what do you see ahead with the ongoing recovery and all that?

Earl: Sure. What am I excited about, worried about? I think the answer to that question, both of those questions, is talent. I think I’m worried about finding it, and I’m excited to share the future success of the industry with those that we do find and bring into the business. I think that’s the biggest challenge we have before us. Again, I think I’ve said this before, maybe in an interview with you, but I don’t think the problem is going to be occupancy and demand for our product. I think it’s going to be our ability to meet the demand, and with the right people on our teams, that is going to be the limiter of our success.

Tim: Well, those are good words to finish out on. I just want to thank you again, Earl Parker, for coming on SHN+ Talks, and thank you as well to Commonwealth Senior Living. This was a great discussion.

Earl: All right. Thank you, Tim.

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