The senior living industry can support more ultra-luxury senior living communities — a lot more, according to Galerie Living Founder and CEO Tim Gary.
“I promise you, there is a market for ultra-luxury in every major city in this country,” Gary said during a recent appearance on SHN+ TALKS. “We should be developing as fast as we can go.”
The company is meeting demand for those communities with its growing Corso brand, which focuses on luxurious wellness, independence and flexibility for residents and carries monthly resident rates of as much as $12,000. Currently, Galerie has four communities.
Galerie currently has Corso projects underway in a handful of markets, including near Atlanta and in Washington, D.C. And looking ahead, Gary sees a long runway to continue to develop those kind of communities — provided operators can handle the challenges of delivering Ritz Carlton-caliber services.
“ I would love for people to build more ultra-luxury products in the market, but I will say this: You have to build the appropriate amount of common space to do it. You have to have the front-of-house customer service to do it,” he said.
We are pleased to share the recording and this transcript of the SHN+ TALKS conversation with SHN+ members. Read on to learn about:
— Galerie Living’s growth plans for its ultra-luxe Corso brand
— Why Gary sees promise for ultra-luxury in every major U.S. market
— How active adult and health care partnerships could usher in a new senior living model
[00:00:04] Tim Regan: Morning, everyone. I’m Tim Regan, the editor of Senior Housing News. Welcome to SHN+ Talks. Today, I’m excited to be joined by Tim Gary, the founder and CEO of Galerie Living. Tim, let’s jump into it. Thanks again for joining me today.
[00:01:32] Tim Gary: Thank you for having me, Tim. I look forward to it.
[00:01:35] Regan: Let’s start with just a state of play to help get our audience up to speed. Galerie Living — what are things like at the company these days, and generally, as we look ahead to 2023, what is on your mind?
[00:01:51] Gary: We’re seeing occupancy grow.
I think that’s going to continue to be the case for a lot of operators. A lot of our competitors who I communicate with, we’re definitely seeing occupancy improving drastically. Our mind is on creating efficiencies in senior living. Being much smarter about how we operate communities is our focus. The one thing that’s obvious about our company is we create really high end environments and we go outside the box when it comes to creating the spaces.
The thing that we’re focused on the most is taking data from our technology platform and looking at efficiencies around providing care to our residents. That’s how we’re going to really grow NOI. We’re excited about all those things. We’re keeping our foot on the gas pedal with the development. I’m very excited about the development pipeline.
[00:03:31] Regan: There’s one thing that I want to get started with and that is your Corso brand. Can you describe the Corso brand as from some of the other communities that you’ve done, and just generally go over what that brand is and what it means and what you’re trying to do with it?
[00:03:58] Gary: Yes. The Corso brand is a very exciting brand, because what we’ve typically built in the past was for the upper middle-class market, which is still a higher-end product. Typically, that model has been built in the suburbs. Because Corso is a new model, we’ve gone to more of an urban environment and we have been very strategic about finding enough land, which takes quite a bit of time to build that type of product.
Corso is focused on a population of seniors that have not considered senior living in the past. The only way they’ve considered it in the past is if they were considering more of a CCRC model. The Corso model really speaks to that adult child in the urban market who wants to keep flexibility. There’s a lot more uncertainty around high-paying jobs these days, there’s a lot more uncertainty around family; there’s also a lot more flexibility about where people can work. The Corso brand allows that ultra luxury customer to find the same quality of — or even nicer quality — than what they’ll find pretty much anywhere else.
[00:06:00] Regan: Can you flesh out what the experience is like in a Corso community? I understand you have concierge services for your residents. Tell me we’re about those as well.
[00:06:20] Gary: The first main difference that a resident will notice when they come to a Corso brand is you’re going to be touched by some front of house staff around four to five times by the time you get into the lobby, versus our Village Park model, where you’re going to be touched maybe one time by staff. It’s the same principles that you see in hospitality, for example, at the Four Seasons or the Ritz-Carlton. It’s that same theory of customer service. We put a lot of emphasis around the hospitality side of this. The challenge to that is your typical experienced operators — for example, your executive directors, your activities people — they’re having to learn a new role in coordinating with a hospitality team.
That is going to be the challenge until we get more experienced people in the industry from that side. The amenity side is very critical. If the team doesn’t have the amenity to actually create the experience, then no matter how many people you have at the front door, it’s not going to work. It’s a combination of the two. We have a product called a City Home. They’re very, very successful. They’re the first things to rent, they’re the highest rates — but to rent that, you’ve got to have two things: A really high-end amenity package and memory care in your building.
I know that’s the other extreme, but when a couple is moving into senior housing, they don’t want to talk about it, but they’re thinking about the care side and they’re thinking about the longevity of it. They’re thinking about memory care, they’re thinking about acuity levels. That’s more of a subconscious conversation they are having. On the amenity side, we’ve brought in food and beverage directors from the hospitality world. That doesn’t mean that you don’t also bring in outside restaurants. What we’ve done is we’ve created spaces where we could, in essence, lease to a sandwich shop. If you want to create a bistro, there’s nothing better than having the local sandwich shop owner be a part of your community.
We have a flower shop. We have the best flower shop in Atlanta, but we have it because we literally just give away the space as free rent. We could never recreate that. It’s the same with the spa services. We find brands that are already adopted in the community and we go to those operators. A lot of them have a connection to senior housing. They have family in that arena, they have friends in that arena. They’re excited about the prospects of it. I will tell you our retailers have been very successful. Their businesses have doubled. They’re very excited about the new projects, so that’s a good sign. They’re talking about, “Hey, when’s your next project? We want to be in all your projects.”
It gives our residents a sense of dignity that they didn’t really give up anything. We still have our own restaurant that we provide our food service from. We have a corporate chef who comes from the Ritz-Carlton and restaurant world and the other thing that we’ve done is you have to bring in restaurant designers. One designer can’t design it all and so you need a restaurant designer. Also in our retailers they’re also very creative people, because they’ve been successful with their businesses, they’ve created a brand.
They need to come in and be a part of that design process as well and design their space out. Then it’s about the connectivity of that. You have to connect all these spaces in an appropriate way so that you’re transitioning from space to space and you’re having a different experience as you go through each one of those spaces. That experience is what entertains our residents. I could hire four activities instructors and they couldn’t do what that experience did for the seniors.
I even think what we’re doing today is going to get improved on. I think we’re going to continue to include more retailers. It doesn’t have to be large spaces, but it has to be manned and it has to be part of that overall environment. That’s what brings in a couple, that’s what brings in an active senior who may be 85 or 90 years old really have very, very little health problems and they’re very active. We’re engaging that customer today with that ultra luxury brand. At the end of the day, for this group it’s not about money.
My dessert shop, which can be a third-party vendor — is that a dessert shop that my grandchildren will eat at? A winning solution for us is when the family visits mom, and then on the way out they pick up a dessert. That’s when you know you have the brand that you want. That’s a little bit of how we do the branding side, how we do the amenities space side and then obviously in any community it’s keeping that healthcare model behind the curtain with appropriate technology.
[00:13:12] Regan: You mentioned a little bit ago this is an ultra-luxury brand, but that you started in the upper-middle market space. I’m curious, why go after the ultra-luxury space?
[00:13:50] Gary: It’s not anything new, but there is a whole group of seniors out there where I would continuously ask them, “Why aren’t you considering senior living?” The answer I constantly got was, “It’s not nice enough. It doesn’t offer enough. My lifestyle is still very active. It doesn’t offer what I really want.” And when you really look at what they want, they want the black-car service.
They don’t need the name of the building written all over the car. They want the outside retailers in there, they want to be able to have a travel agency. They want to have the true spa experience. They don’t want a hybrid experience. They want the real restaurant experience. That senior is losing their ability and their mobility, and their mobility really is what drove them to say, “Hey, I will consider senior housing if it has all the right amenities there.” As I continued to talk to them, I just realized, hey, there’s a whole group of seniors out there that really want something.
Now the other side of that is, I was talking to a lot of the adult children. They say, “Well, if I want something I could use to sell mom [on senior living].”
What I realized is, wait a minute, the adult child is really part of my sales team. They’re really the best salesperson I have on my sales team. I need to give them what they really need to go sell mom, who’s in Florida, in New York, in Ohio, in Michigan — because 50% of our population is coming from out of state. I started asking the adult child, “Hey, what if I give mom this retailer inside my community?” “Oh, Mom would love that restaurant. Mom would love that spa service, because I am going to that spa service today.”
When you look at your market study today, you’re pretty much getting credit for about 1% of the adult child market, and that’s because historically that’s what it has been in most communities. What we were seeing is we were getting about 1.8% of the adult child market, and we were basing that off of the number of residents moving into our community from outside the market.
If you have a million people living in that market space and you double it from 1% to almost 2%, you’ve drastically increased your probability of leasing up that building, and you’ve drastically increased the probability of what rates you can charge.
They told me the market is there. I promise you, there is a market for ultra-luxury in every major city in this country. We should be developing as fast as we can go. Without a doubt, it’s about giving them the right product types.
I’ll tell you, when I first got in the business, we used to have a line item for uniforms, and it was a decent line item for uniforms. We reduced that way, way down across the board, but really that should come back in because that’s part of the hospitality world. It’s not like it’s new stuff, it’s just embracing the things that we know and making a run for it, because the customer exists. We take pride in being the innovator for that and being willing to go out there and take the risk to do that, but it’s very successful.
I can’t build in every market in the country. I would love for people to build more ultra-luxury products in the market, but I will say this: You have to build the appropriate amount of common space to do it. You have to have the front of house customer service to do it. You can’t be the one providing all those services. You’ve got to reach out to these third-party vendors to do it, and then you’ve got to be willing to make the investment into the infrastructure so that you can change that.
We had a bistro we built 10 years ago. It was successful in the beginning. In the past year, we rebuilt that same bistro. As soon as we rebuilt it, we went from 80% to 90% occupied. The other thing, too, is you have to have infrastructure that will allow you to change these spaces. Restaurants don’t stay the same design for 30 years. They evolve completely. We have to reserve for that and we have to continue to push forward, and make sure you build a building that’s flexible enough to do it.
[00:19:04] Regan: I have a couple more questions about the Corso brand, then I want to move on to a few more topics here. I’m going to try to smush together a couple things I was curious about. I want to actually pull out two projects that I found most interesting about this brand. The first was, there’s a cool project, it’s called Corso Druid Hills. It’s set on land shared by a mansion built by a Coca-Cola heir in the 1920s.
I think I remember reading it was in an episode of “Stranger Things,” which was very interesting to me. There’s that project and then I also read about something that you have planned in the affluent Chevy Chase market in Maryland, which is in the Washington, DC area. I used to live close to there. I know that market well. Obviously, two different projects. But can you talk about how they exemplify what you’re trying to do with Corso and maybe flesh out some of the details?
[00:20:01] Gary: Both of those projects allow us to expand on this integration with the community. What people have seen from the Corso Atlanta, the first version, is they’ve seen a model. They said, “Okay, we approve of this model. This is a high-end model.” We approve of this being on our front streets and being on Main Street. That’s important when you start talking about adopting third-party vendors to come in and be part of your sandwich shop, your ice cream shop, all these types of things. Specifically on the Druid Hills one with Emory, having the mansion is just a unique opportunity.
I don’t know if I can get that kind of an opportunity to happen again, but that mansion in itself will ultimately just end up being more of an event space. We’re not going to have any seniors living in the mansion, but it will be a space where the seniors can go and have continuing education classes. They can have events there themselves, family events. We expect a lot of outside event venues to come in there. Also in this community, it’s large. We’re able to add cottages and bungalows to the overall project of a Corso project. No Corso project’s ever had cottages and bungalows in the past.
The other thing we’re going to have the opportunity of is a couple more restaurants that are open to the public. We look forward to that. The other thing we’re working with Emory on is bringing in geriatric clinics, bringing in a lot of their students with training programs, wellness programs. This particular model is going to have a little more of an organic-type feel, and it’s really fitting into that community.
When you start looking at a project like Druid Hills, you have to look at the land planners who created this community back in ’30s and ’40s, and embrace that and carry out those characteristics all the way through your community. A lot of park space, a lot of walking paths. The mansion will have a pub, a bar, that the whole community can walk to and enjoy. Families will be able to embrace it. Now, it took us a long time to find this land. The other, the Chevy Chase one, that was another opportunity that came to us, where we were able to take the 4-H conference center, which is a monument to the community. Just really going in and embracing that.
We’re able to pull that one up to Connecticut Ave, we’re able to get some nice retail spaces, which the neighbors want. They want walkability to retail space. I couldn’t be more fortunate to have two great, great sites to work with, and that’s what we’ll continue to look for. I know there are other locations that will work, but we like these. They’re big projects, they’re large projects, but we’re very excited about them because we’ve been very successful with them, they capture the rates we want to capture and the lease-up is great.
[00:23:46] Regan: I’ve seen some ultra-luxury operators run into this problem where they need to provide very high quality services, but they don’t want to break the bank. In the old senior living model of providing the same experience for everybody, it could be cost-prohibitive to offer lobster and steak dinner every week.
I’ve noticed over the last couple of years or so, some operators have embraced spend-down accounts as a way to try to address this issue, where, for example, every month you have $500 to spend that on whatever you want. If you want the filet mignon for dinner, you can have it; but when you run out of that $500, everything on top of that comes out of your own pocket. That’s a long wind-up there, but have you experimented with anything like that? What are your thoughts on models that help creatively pay for some of these high-quality services?
[00:25:17] Gary: We do not do that. Our customers, they’re already paying a lot of money. From our perspective, the family or the resident really don’t want to have to worry about a spend-down. It’s like a country club account. We offer filet mignon, but the reality is, you can’t eat filet mignon every night. We find people may start out with that and they may have those higher-end products when they have family or visitors, but typically, they want comfort foods.
We just budget in a much higher food expense from the labor side, and from the food side. Food is the winner. Look, the square footages of our units aren’t any larger than anybody else’s, and that’s not what it’s about. It’s about the experience once you leave your house.
[00:26:34] Regan: Along that same line, memberships, I’ve also seen some operators differentiate some of the things in their communities where it’s like, “Okay, if you’re on this membership, you get X, Y, and Z. If you’re on this, you get something else.” Any experimentation with that at all?
[00:26:48] Gary: The only area that we’re experimenting with is for residents who don’t live in the community, but want to participate in the activity programs. It’s a good feeder system. It keeps your name out in the marketplace, but as far as really creating these different tiers inside the community, my problem is I can’t tell anybody no. I can’t tell, “Hey, you can’t participate, because you’re not in that tier.”
We’re all about how the happiness of one resident feeds the happiness of another resident. That’s part of our whole thing. If you’re in a common space and you transition to a new common space; or something unexpected happens which creates happiness in your life; which is that moment that you remember? We want the family to remember that moment as well. We’ve shied away from that.
Really try to just keep the payer side as painless as possible. Where we want to really deal with that is on the care side, because that’s where we see the efficiencies, that’s where we see driving the NOI, not through memberships or things like that.
[00:28:18] Regan: Interesting. I have another question about technology here. We did get an audience question about this. I will defer to the audience member’s wording, but I’m also curious about this. The question is, what role do you see progressive technology playing in the Corso model, both with regard to utility such as things like Alexa, and for enhanced healthcare, such as things like fall prevention?
[00:28:50] Gary: The one thing about technology is, it can be frustrating to a resident if a resident has to interact. It can also be frustrating to a family. Really trying to separate and let the technology be more of a back of house assessment tool and allow you to really manage your staff workload. From our perspective, what we do with our technology platform, which is called Fin, what we do with it is we use a continuous assessment model.
It’s ultimately a mini-mental state assessment that’s happening continuously every day all day long. What that does is, it allows you to flag an at-risk resident. If one caregiver is dealing with three at-risk residents, then we need to do some load balancing. Otherwise we’re going to have burnout with that employee. Staff retention is very important to creating efficiencies. Also understanding hey, are we charging appropriately for an at risk resident? Is this a one-time-at-risk resident; or is this an at-risk resident continuously and we need to change their care model? We have to be able to change. We can’t wait 30 or 60 days, and then we sure can’t wait 90 days to bill for it.
We’ve done a really good job in the past with technology to perform tasks. There are a lot of great platforms out there where you can input all the tasks and you can record all the text and you can get all the right reports you want from that perspective.
What you’ve got to be able to do going forward to create efficiencies is you’ve got to be able to understand the acuity level of your resident every day continuously and it’s going to be paramount going forward. You are going to see erosions in your margins if you are not creating efficiencies with your staffing model and your residents. That’s how we’ve been able to retain it and we’re continuing to start pushing those in a lot of benchmarks.
[00:31:16] Regan: Great. Well, that was a good audience question. If anyone else has other questions, please send them in. We have about a half hour left here. As you were talking, something I was curious about was it’s hard to implement technology, it’s also hard to budget for technology.
Obviously, it sounds like efficiency is one of your benchmarks, but I am curious, how do you plan on spending for technology? How do you budget for it? How do you benchmark it to tell it’s doing what you want it to do?
[00:31:51] Gary: It’s a really good question, because Fin is a platform that we use. Fin sells its platform out to other users. In talking with that team, the one thing that I have heard is there’s a lot of burnout in our industry about adopting new technology. Our industry has adopted probably anywhere from two to three rounds of technology in seeing marginal improvement in their NOI.
This is why I’ve become so hyper-focused on the continuous assessment model within Fin and really driving that. You have to see a greater margin of increase in your NOI to be willing to go tell your team, “Hey, we’re going to do another try at technology again.” It’s not fun to go tell your team, “Hey, we’re going to adopt a new technology.” But if we don’t adopt it, life’s going to get even harder.
You’re going to have to adopt something, but the trick is right now you are trying to manage anywhere from 15 to 20 different technology platforms in your building. That is causing a tremendous amount of workload. Reallocating that expense item to a more streamlined system that is actually doing the assessments for you and recommending and making suggestions to your team so that your team doesn’t have to sit down and look through every incident and look through every task completed, count and calculate and look and compare reports. You don’t need to do that anymore. We’re way past that.
Look, I’ll tell you, in the hotel world they know exactly what food you like. They know almost exactly when you’re going to leave the room. They know how long you sleep. They know the temperature of your room. In the multifamily world, they know your patterns left and right. They know exactly who they’re going to market that asset to. We have to step up to that level.
Look, a lot of the things that the hospitality world does and the multifamily world does, we’re just going to copy those and improve those and adopt those. We’re not going to reinvent those. The things that we do in our industry that they don’t do is we manage care, which is a hard thing to do. If it wasn’t hard, they’d all be in the business. Because it is hard, we need the right tools, we need the right algorithms out there to make this happen.
While it is going to cost money, it’s costing you money anyway today. So, it’s really just offsetting what you’re currently spending. The reality is the top leadership are going to be the only people who are going to go in and tell the chief technologist or the director of operations, “You’re going to have to make this change,” because in their mind that’s just more work on their plate. We’re short-staffed. There’s not enough labor in the market. We have to be really smart about the labor we do have, what their workload is and how much care they’re providing. We have to stop this turnover. We have too high of a turnover in our business.
[00:35:37] Regan: As you’re using technology, what do you say no to? I’m assuming if you can’t prove it out in your NOI or your margins, or if maybe if it’s just a novelty, that’s when you might say no. Are there any other factors that you’re like, no, this just isn’t for us?
[00:36:05] Gary: If it’s not making a recommendation, it’s not benefiting you. If it’s just feeding you piles of information, then it’s not benefiting you. Everybody’s stretched way too thin to absorb mountains of information. Your nurse needs to be able to very efficiently look through their list of at-risk residents and make assessment changes immediately. They don’t need to have to sit down and do a 30- or 45-minute assessment, write up another 15- to 20-minute report. You cannot be efficient doing that.
If you have an incident, you need those compiled with that resident, that resident needs a score behind them so that you know whether they’re inside their normal range or outside their normal range. You’ve got to have decision-making in your data. Your data has to help your nurse and your resident care coordinator or your executive director. What’s also important is, it has to have progressive disclosure.
If there’s not a reaction to the recommendation given it’s got to go up the chain and it’s got to go up fairly quickly, and it’s not the fault of the person necessarily who didn’t respond to it. It may just mean that they’re overworked. As you go up the chain, you have to look and know if your nurse is overloaded. If your nurse is overloaded, you need your ED to step in and help them, or you need to add another part-time nurse that’s going to close your back door, that’s going to reduce your employee turnover and you’re going to not have residents leaving your building for major acute care events.
You’re going to reduce the major acute care events. These are all the efficiencies. It’s not just one efficiency, it’s a lot of efficiencies that are all coming together just by doing a continuous assessment.
[00:38:10] Regan: Well, that’s all very interesting. I’m sure we can fill many more discussions on this alone. I do want to talk with you about staffing. You mentioned some of this in there, but obviously, that seems to be one of the biggest challenges for senior living operators these days. How do you bring employees through your door? How do you keep them from leaving once they’re there?
[00:38:43] Gary: Well, the one thing we’ve done recently is — and should have been doing this a long time ago — we are definitely creating a better environment for the employees. We now in our employee areas, we have a full-on buffet line for food. What I want them to do is to eat. I want them to rest. When they come back on the floor, they’re back to their peak performance. That’s the first thing we’re doing. Also, embracing them is part of the brand, so that they’re proud of the brand.
Then obviously the things that I’ve been talking about in the past is letting them know their voice is heard. The number one thing I’ve heard from caregivers, nurses, anybody in the building is nobody knows how hard I work. That’s a big statement. That’s what we love about a really good technology platform. A really good technology platform will tell you how much an employee’s actually working, and if they’re overworked, it allows you to come step in and say, “Hey, I notice you’re overworked.” If one nurse ever says that to one caregiver, “I notice you’re overworked here, let me pull this resident off of your list,” that caregiver will love that nurse forever, and rarely will you ever hear that.
But the nurse can’t do it unless they have the information. We fill these buildings 150, 200, 250 times a year with caregivers. It’s not a matter of are there nurse caregivers out there, it’s a matter are we keeping the caregivers, are we really treating them well.
Another 50 cents an hour? Yes, it helps. But if they know that their voice is heard, they know you care about them, they’re proud of their brand, that’s how you keep them.
[00:41:27] Regan: I have heard more operators in the past year or so tell me how they’re remodeling break rooms and how they have all these perks. I’m glad to hear all of that.
We’ve talked a lot about margins today and NOI. Obviously, there’s a lot of cost pressures out there in the industry, so I am very curious, what are you planning for in 2023? Do you think the cost of doing business will remain elevated and it’s going to be about finding those efficiencies, or do you think you’ll find some relief perhaps somewhere in– some line item might go down next year?
[00:42:23] Gary: The reality is I don’t think any of the line items are going to go down necessarily. You might see a little bit of break in food here or there but you may see a little bit of break but truthfully, whatever we do see, I don’t see it lasting very long. Well, the one thing that I continue to remind myself of is, look, a great economy was where we are today, 20 years ago and we’re just– Look, we went through 9/11, we went through 08, we went through Covid.
We’ve gone through a lot in 20 years and I think we’re just now coming out on the other side of that and getting back to where we– like you need some inflation. Some inflation is good. I remember when I first got in the business, our residents actually earned money on a CD. They haven’t earned money on a CD in 20 years but we thought, “Oh my goodness, we were going to lose our rates back then because the residents weren’t earning money like they could.”
Now I think it is just a rebalancing and I think we’re getting into what is a normal economy again. Zero interest rates is not a normal economy. We’ve had an uptick and inflation that has spiked on us. I think that is going to stabilize and you’re going to get a normal inflation but you need a normal inflation. You need normal inflation and we’re just having to rebalance our expense growth with our revenue growth, and the market. What has been really good for us is to see that we didn’t get any pushback on rate increases. Moving market rates, we didn’t get pushback.
You’re probably not going to do the 10% and 12% and 15% rate increases, at least in the last half of 2023. I think in the first half of 2023, you’ll still have those rate increases. I also think your expenses will go back to normal. I think this is short-lived. .
[00:45:16] Regan: Obviously, there are many operators out there I think that would, in response to that, say, “Well, we can’t develop anything. We can’t get our construction loans. It’s just too hard.” Obviously, though there are companies like yours, like Galerie that are making it work. In your opinion, what are the keys to keeping your foot on the gas to use your words familiar during a time when it is hard to develop and to keep your foot on the gas?
[00:45:44] Gary: For us, we really see next year as a great time to price out new construction. The past year has not been a great time to price new construction, but we’ve been in a drawing phase. We really look at projects from a 5- to a 10-year development cycle. If you’re focused on a two-year max, a three-year window of drawing it, building it, filling it up; you probably need the time to market, and it’s probably a good idea to wait until mid-next year to go start a project.
If you’re in a larger project like we are — which is I think what’s allowed us to keep our foot on the gas pedal — we’re a year in entitlement, a year in design, you’re two and a half years before you can put a shovel in the ground if you’re lucky. It’s more about the 10-year horizon for us, and that allows us to keep our pedal on the gas. There is a little bit of time in the market, but I will tell you next year, I feel like it is your opportunity to price out new projects.
[00:46:56] Regan: As you’re looking to grow, do you foresee the company growing more in that ultra-luxury space? Or might you grow some of the other upper-middle market products that we’ve talked a little bit about today?
[00:47:09] Gary: I do see us getting into a blend of the product types. It’ll be just because we’re going to stay more regional and there’s only going to be so many markets within the region we’re at to do ultra-luxury. We see we’re in the DC market, we’ll continue to push forward some ultra-luxury there. We’re obviously continuing to expand it here in the Atlanta market but we’ll infill in between those markets with some of the village products.
For us, we have a lot on the drawing boards and a lot coming out of the ground next year, so that’s pretty much consumed us. As our cadence loosens up, I think it’ll take us another 18 to 24 months for that cadence to loosen up or we can start adding on other product types.
[00:48:05] Regan: I know that you’re growing heavily through development, but have you considered acquisitions, maybe buying a community that needs a little bit of work and turning it into something really spectacular?
[00:48:18] Gary: I’m not a good acquisition person. There’s a lot of other people that are better acquisitions than I am but I will tell you this, we are considering the right players doing some management. The reason we’re finally considering management is because we have the Fin platform that allows us to actually expand. I think once people adopt that, you’re going to see people be able to create more efficiencies in their management companies, and they’re going to be able to do more national platforms.
I think with newer modern technology, you’re going to see management companies grow and grow pretty rapidly because they’re going to have the tools and the reporting systems they need to be able to do it with. My hope is that we continue to grow on the management side as well as the development side. While that’s not our primary business, we’re going to do some more of that. It just makes us smarter, better just to give work in other communities and we’re excited about it.
[00:50:16] Regan: Would you consider creating a new brand for that?
[00:50:46] Gary: Our management is under Galerie, so it’d be Galerie Living as the brand.
[00:50:57] Regan: Lay out your strategic goals, if you would, for the year ahead and tell us why you’re focused on those things. I’m assuming staffing, margins, are somewhere in there but I want to hear it in your words.
[00:51:20] Gary: I’m focused on really refining the efficiencies inside of a senior living community, because that builds confidence from the operations team to what we’re actually developing to the banking finance side of things. When they see you’re building efficiencies inside of a community and it reveals itself through NOI, there’s nothing like that confidence that will really expand business.
In the past year, I have really started digging into that and really developing better efficiencies inside of platforms, because we’ve just now got the technology platforms. Then, going forward, we’re going to continue to develop. The market is huge, it’s way larger than anybody can imagine.
I think we’re at an inflection point in our industry where we’re forced to make those changes and make those capital investments to do it. I think there are some older communities on the market that are going to work their way out, it’s going to become what it is. I think the ultra-luxury market actually helps create those other markets. We’ve always thought we’re at a high end but there’s actually another component to that.
You look at New York, somebody’s going to pay $30,000 a month, believe it or not. There’s someone that I know that’s going to pay $25,000. The wealth is there, the market’s there and we’re going to go at it at our pace.
[00:53:38] Regan: I want you to look ahead to the next year. What’s on your worry list? Then, what is on your opportunity list or excited-about list?
[00:54:08] Gary: My worry list is just back to controlling the inflation cost through efficiencies, that’s 100% where my mind is, and I think I’ve made that point.
My wish list is we are working on a model for the middle market, I’d love to see the middle-market develop. We can’t just always develop for ultra-luxury people, so I’ll tell you, the active adult senior market has an opportunity. I can’t say I’m going to play a big role in it, I would love to help that sector develop itself out but it is going to come in a partnership with retailers. Active adult is a huge market and I think the Medicare Advantage program plays well with that active adult market. I think there’s a huge opportunity in partnerships with active adult companies and retailers, specifically retailers who have a Medicare Advantage policy and are embracing healthcare. My goal is to really develop that model out and hope that other developers run with it.
I know there are other developers working on it now and I know they’ve got some really cool stuff going. I just don’t know what they’re doing. That’s a huge opportunity. We are going to solve that problem. I think there’s a way to solve that problem, but it comes through government-private partnerships and those private partnerships have to include multiple industries. The ultra-luxury will do what it’s going to do, that’s going to drive itself. I think it’s going to be easy to understand, and then you’re going to have that upper middle-class model, which we all know pretty well.
[00:56:26] Regan: You mentioned middle-market in there. I probably should have asked you about this earlier in our discussion because I find that topic to be very interesting. Is there anything that you could share about what you might be doing in middle-market?
[00:56:43] Gary: It’s really about building active adult communities in partnerships with the other healthcare models out there. Whether it’s with pharmacies or with groceries are now getting into healthcare, it’s really about embracing that and working with those guys to develop and redevelop those retail centers. It’s all about proximity.
If that market actually develops itself it’s going to improve all the other markets as well. We have government-affordable senior housing and that can only go as fast as the government funds it, but there’s one step above that which is the active adult market. At the same time, do a Medicare Advantage policy and the collaboration and proximity with healthcare. Some of that’s going to be worked out with hospitals. It’s hard to imagine, but I could see a thousand-bed active adult community being built right on a hospital campus.
[00:58:12] Regan: Wow.
[00:58:13] Gary: The only reason you would go to the hospital is for an emergency. I think that’s the future. I’m excited to see that come on. I’m always excited to see new models being created. That’s what excited me about the ultra-luxury model. The good thing about the ultra-luxury model is that we can do a lot of research there to bring it into these other models to make them affordable. There is an affordable model out there for active adult that can receive, ultimately, assisted living services. It’s just that the payer has to flip to the other side because it flips to the other side, you’ve got to be in a partnership. You can’t do both.
[00:59:00] Regan: Basically it sounds like an active adult platform where residents would essentially be able to access healthcare services and age in place. That’s interesting because a lot of the active adult folks on that side I hear say, “We’re interested in the care side but we don’t want people to age in place. We want people to move to assisted living when they need it.”
It sounds like you think that maybe the future lies in finding a way to bridge that gap in a way that meets people where they are versus having them maybe have to go somewhere else if they need this care.
[00:59:30] Gary: If you’re partnered with the right healthcare partner, they can age in place. It’s almost impossible to move somebody out when they can’t afford to move out, but they need to be where they are. It’s a dilemma. Bring the healthcare to them, it’s home healthcare and it’s built through Medicare Advantage — it already exists. People go to people’s houses now. Let’s just put their house right next to the doctor’s office and the doctor can offer the services. There’s a model that works. I’m excited about it. The thing that excites me is how we can solve the real problems out there. That’s why we built a technology platform. Let’s solve the real problem of acuities on a daily basis. Let’s do a daily assessment continuously, and then feed that data to the families, feed it to all the stakeholders, and create efficiencies.
Now, let’s do the same thing with real estate. Locate the real estate in the proximity of where the healthcare is so it can be delivered. Every senior in this country can get the right healthcare. It’s just, we have got to build the models.
[01:00:43] Regan: Well, like I said, Tim, I wish I had asked this question earlier because we are out of time, unfortunately. Tim Gary, thank you, and thank you to Galerie Living for making this happen today. This was a great discussion.
[01:01:11] Gary: Thanks a lot,Tim.