Senior living operators exploring active adult have openly wondered whether the product type could supplant independent living on the care continuum. The answer to that question is yes — at least in some circumstances, according to Liberty Senior Living President Will Purvis.

To Purvis, residents at certain active adult communities may choose to age in place so long that they have no need for independent living by the time they move out, and instead require a higher level of care.

Liberty Senior Living is seeing these trends play out firsthand as the company expands in the active adult segment. The company’s senior living portfolio spans 18 communities, including CCRCs and three open active adult communities — two of which the company converted from IL in 2022 — and another on the way soon.

What Purvis has noticed is that active adult communities can attract a crowd that is as young as 70 years old on average. With rates sometimes as much as half of what a typical IL community provides, he believes that residents will stay in these settings as long as possible, only moving when they need more help.

“It’s still very early to be able to tell how much longer they will stay there, but we’re seeing turnover at a rate less than what we’re seeing in our ILs, which are typically way below industry average,” Purvis said in a recent SHN+ TALKS interview. “So, I don’t think you’re going to see residents go to IL, I think you’re going to see them go to assisted living when they need care.”

He also believes that active adult communities could act as a downward price pressure on IL communities in the same market that offer similar or slightly different services.

The caveat, according to Purvis, is that this is a trend that will likely only play out in suburban markets. In urban markets where residents have plenty of support and things to do, he believes that multifamily properties will play essentially the same role as active adult communities do now.

“We debate this — and I know others do as well — on whether or not we will compete or have an active adult next to one of our CCRCs, or even within miles of it,” Purvis said. “For us, active adult is going to be in a more suburban location.”

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

— How Liberty is growing in active adult

— When Purvis believes staffing and occupancy woes could let up

— What the boomers may want out of senior living, and why

[00:00:00] Tim Regan: Let’s start with a state of play at Liberty Senior Living in 2023. Where are you at right now with regard to operations?

[00:01:35] Will Purvis: Thanks, Tim.

We have 18 communities. In 2022, we opened two buildings, we bought one and we opened two large CCRCs in the prior year. We are seeing occupancies increase really across the board, but certainly, it is a challenging time to open new buildings. But we’re thankful we’re seeing occupancies come back right now.

[00:02:15] Tim: That’s good. One of our reporters just wrote a story which you probably saw this morning talking about occupancy returning, but how margins are the real story right now. I’m sure we’ll talk about margins in a little bit.

Things are still challenging and it feels to me like the industry is still at this crossroads between challenges and opportunities. Obviously, staffing is hard, but I want to hear from you. Where in operations are you still feeling the most pressure?

[00:02:50] Will: It is certainly staffing. The issues are worse on the healthcare side than the independent living side. Staffing is our biggest challenge. There are several that we’ll get into later. We don’t have much agency usage, we’ve done a good job of getting rid of it. But even when you don’t have agency, when you have a position available, it’s harder to fill today and certainly affects the expense side as well.

[00:03:31] Tim: What positions are hardest to hire for right now? I remember I was talking with an operator only a month or two ago and they were saying, on the caregiver side they feel like they are a little bit in a better place than we were last year. Culinary, still very hard. Where are you still seeing the hardest parts of staffing?

[00:03:56] Will: I think it’s still the CNA, then nursing, then dietary, and then housekeeping, and probably in that order in a healthcare building. In an IL building, it would be dietary and housekeeping.

[00:04:19] Tim: Got it. I talked with another operator who said we feel like the wage growth may have hit a ceiling in 2022. But there are still deep-pocketed competitors out there hiring people. Are you feeling as much wage pressure these days as maybe you were in 2021 and 2022? Has that at least slowed down a little bit?

[00:04:46] Will: I think that’s slowed down some. Now, it’s just the people that want to go work with an agency. It seems like it’s more about flexibility and potentially lack of accountability, but I think we’ve increased wages a great deal. And then I think you’re going to see some of these staffing companies come under pressure too. And they may have to lower their wages, which would be helpful for us as operators.

[00:05:17] Tim: I want to talk with you about active adult. That is obviously just one of the senior living sectors that Liberty operates in. It’s been a fairly hot sector as of late, although I know Liberty got in a little bit sooner than some other folks. Take us back to why that was a product type that was attractive to you, and then also, do you think that’s going to be a bigger focus of your operations moving forward?

[00:05:46] Will: Yes. We got into active adult really on a fee-management community with some friends that I developed some market-rate multifamily with. They asked me to develop it, and I didn’t do that. I wish I would have, but I told them I’d manage. We were involved in a pre-development. We got into it, we were having a good experience and then we started developing our own. We have delivered one active adult project in Charlotte, and we are about to finish another one outside of Wilmington.

We converted an IL that we bought in January of ’22 to two active adult communities and that’s been an interesting process. We got into it thinking that we were going to cast a wider net and get a greater segment of the 77-plus population because it is more affordable. What we noticed quickly, and that you’re aware of, is that we really were able to capture a much younger resident. Our average age and what we’re running now is in the low 70s versus being 79 average age of a new entrant into one of our independent living communities.

They’re making a decision. It’s not just about that they can afford $2,500 in active adult versus $5,000 in IL. They can afford to stay there twice as long, so they can afford to make a decision sooner. That’s been great for us. I think it’s still very early to be able to tell how much longer they will stay there but we’re seeing turnover at a rate less than what we’re seeing in our ILs, which are typically way below industry average. So, I don’t think you’re going to see residents go to IL. I think you’re going to see them go to assisted living when they need care.

[00:08:28] Tim: Active adult to IL, that’s really interesting. I want to ask you about that in a moment. Before we get too down the road into that, can you tell me about the typical active adult community that you like in your portfolio? What do you feel is the right slate of services and amenities to offer at one of these?

[00:08:51] Will: In most cases, we’re trying to build these where we have or intend to build other care buildings. We have a separate division that’s a skilled nursing division. Right now, that’s 35 properties throughout North Carolina. We’re in the process of growing in South Carolina there. In many cases — like in the case of the one in Charlotte where we just finished the active adult community it’s adjacent to 179 beds in a skilled nursing facility we built about nine or 10 years ago.

We have a pad there for assisted living. The one that we’re about to deliver here in Wilmington, we led with the active adult and we have a pad for assisted living and one for skilled nursing. We are about to start one in Chapel Hill that we’re closing the GMP on that’ll be adjacent to a skilled nursing pad. That’s the way we’re looking at that. Then as far as the services that are being offered there, it’s not any less different than anyone else is doing in the active adult space.

They know who our company is in most of these markets. We’re well-known for providing good care. In some cases, we will be providing home care and hospice services. That’s just another division that we have. We look at it as more than just active adult. It is a much, much lower price point than what someone’s paying in our independent living buildings. It has fewer services, mainly food. But we’re trying to get the same level of socialization that they would experience in a full-service campus.

[00:10:57] Tim:. What did you do when you made that switch from IL to active adult? I’m very curious to hear what your priorities were there.

[00:11:23] Will: I’m comparing our active adult model to what our independent living model is. In most cases, the IL communities are full-continuum campuses, even with skilled services there. They have multiple dining venues in independent living. There are multipurpose rooms, a lot of transportation and wellness programs. It’s not just your run-of-the-mill independent living.

Our model is not to build these in urban infill locations. It’s more suburban; 12,000 square feet of common space versus one of our other full continuum IL CCRCs with as much as 50,000 or 60,000 square feet of common space.

The active adult communities, we’re averaging between 1,000 and 1,100 square feet per unit depending on the market. We also have built cottage products and plan that in most locations where we have the land to do it. Those are over 1,500 square feet.

The independent living communities in our CCRCs that we’ve developed, our average square footage in some of them is 1,200. But the one that we just broke ground on is I think near 1,450 square feet, on average. They are really big units and just different price points.

We debate this, and I know others do as well, on whether or not we will compete or have an active adult next to one of our CCRCs or even within miles of it. But for us, active adult is going to be in a more suburban location or a market.

I think that’s what you’re going to see active adult impact the part of the independent living market. Our focus going forward on the independent living side is really more urban infill locations. That’s where we’re focused.

[00:14:45] Tim: It’s really interesting that you say that because I’ve heard a range of opinions about whether or not active adult can supplant the IL leg of the continuum. It sounds like in your mind, and there are cases where it can and does.

I want to share with you maybe a vision that I have for the future, something that I see down the road, and I want to see if this is what you see as well. I’ve shared this on other talks as well, but I see active adult as, to your point earlier, the de-facto current middle market product. I feel like people that are baby boomers are going to be looking for something that is affordable. To me, this seems to check a lot of the boxes.

I wonder if people are just going to say, “Well, I’m comfortable here, I can afford the rates, maybe in 5 or 10 years this won’t be the best place for me, but I like it and it’s affordable, and I’m going to stay here until I go to AL.”

Do you have a similar vision of the future, or I guess, tell me, what do you see down the road in all of this in terms of how the different product types are playing with each other?

[00:16:06] Will: I think so.

I think part of the problem is a lot of folks that we have in IL depending on how you operate, that may be AL for us. Different operators have different opinions. I think in these suburban markets these people may not move. They would’ve already been there for 10 years. The average age of one of our active adult communities is 70.4, so who knows when they’re going to make that transition?

We have the samples for a lot of it. We’ve only been running this for two and a half years now, and they’re all new communities for the most part. Like I said, we bought one that was an IL that didn’t lease up and so we converted to active adult, which has worked out pretty well for us.

I think when you’re in an urban infill environment, there are options for market-rate multifamily that offer some services. So I don’t think there’s going to be a big demand for active adult in those markets.

In a downtown type of environment, and if you have a good market-rate multifamily, just from what we’ve seen, 70-year-olds don’t mind living with 35-year-old professionals so long as there’s a good sample of people their own age. That’s how I see it. If you’re not having that influx of active adult competition to put pressure on your rental CCRC prices in our case for the most part, then that’s where we want to build our CCRCs.

[00:18:34] Tim: Do you see active adult as having a place on the CCRC care continuum? Maybe this is not what you’re doing, but I’ve heard of some companies saying, “Maybe we don’t need this skilled nursing at the end of our continuum. Maybe instead we need active adult at the beginning of it, and we can offer some of these care services in our AL.

[00:19:05] Will: On CCRC side, we’re seeing that our residents, or potential residents, they want access to skilled care, and in most of the communities we operate, we’re leading the market on the short-term rehab side of it. So that becomes an amenity that they’ve come to expect in CCRCs. If you offer active adult, it’s not like you can just put it in the skilled building. I think it’s going to put pressure on the rents that you’d be able to generate on the IL side.

If you have that on the same campus, you’re just offering them the opportunity to get fee-for-service on the services that they want. It’d be an interesting experiment. We’ve discussed it or I’ve discussed it with some other operators. I don’t know anybody that’s done it yet, but I’m sure somebody’s going to try.

[00:20:24] Tim: Is what you’re saying that essentially you think that these active adult properties might act as a reverse cost pressure, where you’ll have to compete with lower rates on the IL side to compete with active adult?

[00:21:00] Will: Potentially, I think if you had an active adult competing and offering the level of quality that an independent living would, that it could have downward pressure on the price of the independent living.

[00:21:22] Tim: I’m glad that you mentioned that because this is a good segue into something else I was curious about. Cost inflation is obviously among the big challenges right now. I think this is a time when a lot of IL operators I know do not need a downward pressure on their rates, given cost inflation. If anything, they need rates to be higher next year. It’s interesting.

Where are you seeing the most cost inflation in your operations right now, and how are you dealing with it?

[00:22:13] Will: As I hit on earlier, it’s still staffing. We’ve done a good job of getting out of agency usage. We’re not all the way there yet on the healthcare side. We don’t really have any on the independent living side, zero on the active adult side. And then on the financing side, you’re certainly competing with higher interest rates than we were anticipating. That’s another serious concern that I think every operator’s faced with right now that has any debt.

[00:23:01] Tim: Is the answer to balance cutting costs with rate increases? That seems to be the medicine that you have to take to do this, but are there any other creative ways that you can help deal with some of this stuff where you’re not simply just increasing the amount that you charge, and trying to figure out where you can be more efficient? I guess that’s the game.

[00:23:21] Will: Everyone’s trying to be as efficient as possible. We had substantial increases that we announced at the end of the year for the following year. We had increases pretty substantially on AL and IL and smaller increases on active adult for the most part, but those communities are more in a lease-up. We didn’t have a ton of pushback from residents, frankly. They saw what the Medicare increase was going to be, and I just think for the most part, they know that they’re all paying more.

Our strategy was that I don’t think we would be able to get as big of an increase in 2023. I may be wrong. We have a waitlist in units for some of our communities. They understood where we were and where the world is on inflation. We got a pretty big increase or will for 2023 when those leases mature. I don’t know what we’re going to be able to increase at the end of this year. We’re seeing wage-increasing flow. I think we’re seeing some things flatten out, but who knows what the end of the year looks like.

[00:25:00] Tim: I want to ask you a question about staffing again. You just mentioned some of these costs flattening out. Earlier you’d mentioned maybe the wage pressures for staffing had leveled out as well.

As you look ahead to this year, how long are you preparing for these staffing challenges to last? I’m not asking you to have a firm prediction, but are you preparing for the rest of the year or maybe half of the year?

[00:25:40] Will: Yes. As far as agency usage in senior living, we’re hoping to be out of agency by the end of this quarter. Aside from, CNA, nursing, housekeeping, dietary, those have loosened up a little bit. We feel pretty good about that then our executives team, our development team, our corporate operations team. We’re very solid there on the staffing front. I’m hoping, but we’re not necessarily budgeting for that. We have to be realistic. It does appear we’re off to a good start for the year right now.

[00:26:33] Tim: That is good. Obviously, development is another big challenge. What is it like at Liberty for development? What challenges do you see and what opportunities do you see?

[00:27:17] Will: I think every deal is harder to get done now than it was with increases in interest rates and a lot of banks being on the sidelines. We were fortunate to close the largest deal we’ve ever done at the end of last year.

We’re able to negotiate a good GMT on that. That’s a rental continuing care retirement community and we had some banks participate in it in a large way that we had not done business with. We’re closing a loan right now for active adult with a bank that we’ve known for a long time but haven’t done business with yet. We have a big pipeline of active adult projects and we have a pretty large pipeline of CCRC projects.

They take a lot more time. They’re a lot more costly. We’ve tried not to have but so many of those going on at one time, but we were just meeting with one of our construction guys this morning and we’re feeling pretty good about where construction prices are coming in right now on these active adult communities. They’re easier to run, they’re easier to build. It’s a simpler construction process than going through all the licensing on a healthcare building.

Again, to me, the biggest issue with development and cost is the ability of capital, and I think that’s going to be what everybody’s seeing right now. There’s still capital out there for good deals.

[00:29:18] Tim: I want to talk with you about consumer trends. I think it does not need to be stated that the baby boomers are bringing a new vibe into the senior living industry. They have new things that they want, their adult children have new things that they want. As you are seeing more baby boomers come into things like active adult, what are you seeing that they want out of senior living? One person told me they don’t want senior living — or, maybe they don’t want what they think is senior living.

[00:30:35] Will: The main one is socialization, which is something that they weren’t getting in their home during Covid. I think you’re seeing the baby boomers really like that flexibility of not having to go buy a home in a 55-plus community. They like that they have the ability to go rent and determine if they want to live there. Where we operate is from Raleigh down to Florida and then over to Memphis and New Orleans. Our main businesses are in North Carolina and South Carolina, and we are growing in Florida.

People want to move here. That’s a trend that I don’t think you’re going to see change anytime soon. Before, they would be buying vacation homes on the coast, but now they’re moving to Raleigh or Charlotte or even in Wilmington. We don’t see anything that they’re going to be moving back. That’s one of the biggest trends we’re seeing and that was something that was created or at least accelerated with Covid.

[00:32:23] Tim: We just talked about some of the consumer trends you’re seeing. I could see all of that extending into dining specifically. Before I move on, I wanted to ask you about what you’re seeing in dining. What do residents seem to want out of dining? Flexibility, socialization, those seem like two big things. What else are you seeing?

[00:32:47] Will: On the independent living side, we just opened a community in Florida and it’s pretty amazing how much dining they’re doing there with family and friends or the residents, which is phenomenal. In many cases, 20% of the diners they had that night were not residents. That’s in between lunch and dinner. We’re seeing in that particular community that some residents are spending well over their declining balance amount.

They’re trying not to spend one penny more and in some cases, and they compete to see who can get the closest to that declining balance number. We want them to be bringing their friends and family in from the outside. It’s a pretty robust program. We do offer alcohol sales on the declining balance, something that we allowed during Covid and I think that’s here to stay.

In our independent living communities, dining’s a big thing and it’s a very expensive offering. Your residents, we were certainly under a lot of pressure from them when we couldn’t offer all those dining services during Covid. They’re excited to have them back and keeping them open is a key component to be able to charge more on your monthly service fees.

[00:34:44] Tim: The settings where residents prefer to dine these days, are those also different? I had an operator who told me that they have a solid percentage of their community that just is now in-room dining. That’s primarily what they want. Are you seeing anything similar to that?

[00:34:59] Will: I’d say most of them are wanting to dine with other residents. Now that everything’s back open for the most part, I would say that in most every independent living community, we have a main dining room, we have a bar, and then we have a bistro grab-and-go. Then we have private dining.

It used to be that they all ate at the main dining room or the club room. Typically those rooms are open just for dinner. Every community’s different. Communities we have in Charlotte and one of them those people show up at five o’clock and are ready to eat. Then in Wilmington, here on the coast, it may be more casual and they trickle in. Some people prefer to be more formal. Every community takes on its own identity, but for the most part, they all like to eat well and drink well.

[00:36:14] Tim: As we all do.

[00:36:17] Will: Most of our ILs are on a declining balance. Frankly, before we increased rates, we were increasing their monthly service. We were increasing their dining minimum as food costs were increasing. They get to see the value that they’re getting there.

[00:36:42] Tim: How are generally food costs trending this year? I’ve heard that there are some items that are still just sort of stuck in high-cost mode. Other things have come down a little bit. But what are you seeing in food costs these days?

[00:37:04] Will: I’m not seeing any drastic decreases in the pricing, but I think for the most part, it’s holding about like it was. What we try to do is price our menu items like what they would see at the clubs that they’re members of. These are affluent communities. Most of these people are members of country clubs or dining clubs, the ones that have been in the market for a while. They have a reference that they can go to. When we had to raise those prices of each menu item, we raised their declining balance.

Do I think we’re going to see menu prices go down dramatically in the restaurant? Probably not.

[00:38:34] Tim: Yes. It doesn’t seem that way to me either. I want to talk with you about technology. There is some very, very cool stuff out there right now. I think every industry conference I go to these days, there is one more product or device to look at, at least on the showroom floor. At the same time, there’s a lot to distract you and there’s a lot of bells and whistles. It seems to me like it can be hard to figure out what’s something that I should pilot and what’s maybe something that’s just cool.

I wanted to ask you, what technology do you feel shows a lot of promise these days, and is there anything that’s on the horizon that you’re particularly excited about?

[00:39:18] Will: Yes. Like you said earlier, I don’t think senior housing is the most innovative industry, and much of that is our own fault but more of our residents are coming in with smart devices — almost every one of our active adult or IL residents today is doing that. We’ve had a good partnership with a wearable device in our assisted living in care buildings with a company called Nextgen. That has really been a good product and a good service. It’s a wearable for the resident and for the staff so we can tell where a resident is, or where a staff member is, when a call is made.

All the other staff members know who’s closest to that resident. The struggle with that is it’s Wi-Fi based and just being sure that we have the Wi-Fi capability for the buildings that we’re developing and then operating our existing ones for that. We’ve been very happy with that. It can intake the data and show it to an adult child that doesn’t think that their mom was seen, or mom just doesn’t remember somebody checking on her. That we can show them the stats and how quick we reply to that.

We’re also doing some wellness tracking in our gyms. On the independent living side, we’re taking assessments of residents before they come in and tracking their progress and ability. Having that data to show to the resident and their adult children has really been very cool. We’ve not so much on the tech side as we probably could be with the applications for that. That’s something our wellness director is working on..

[00:42:03] Tim: That’s interesting. Tracking wellness, it seems easier said than done, but I suppose on fitness and nutrition, those are things that are data-rich and you can have numbers there. I want to ask you about business intelligence, we got into it a moment ago a little bit. I’m talking more about operations though. It seems like there’s an ever-complicated array of technology that you can use to track business metrics, from occupancy and margins to really, really granular stuff on the community level.

I wanted to ask you, what is your method of collecting this operational data and maybe also, what do you focus on?

[00:43:00] Will: Yes, as far as computer programs, we have our CRM, we have PointClickCare that we’re driven to because so much of our business is healthcare. Having a system that can talk across different products where it may not be the best thing for independent living. Then we’re using Entrata on the active adult side.

What we’re looking at right now is occupancy and our leads on the marketing side, staffing costs, and that coverage. We are then blocking and tackling and looking at it as cost per-resident per-day. Also, what’s your turnover? I wish we had a computer program or business intelligence that would accomplish all that for us but we just don’t have that.

[00:44:17] Tim: Maybe someone’s watching right now that will make the next program that you use to do this.

I want to ask you about the middle market. We talked about this a little bit ago. It’s a huge opportunity, I don’t think that needs to be said. But obviously it’s very hard to reach, and like threading a needle essentially.

It seems like active adult is, at least in my mind, maybe the most practical way to meet the middle market right now, given where those rates are. Do you have any additional thoughts on maybe how the wider senior industry can best serve this demographic? There’s so many people and it just does not feel like there’s still much out there for them.

[00:45:23] Will: Yes, the middle-market for assisted living, which I assume that when people say middle, these are people that aren’t going to qualify for Medicaid, and that’s not what we do on the assisted living side. I’ve just yet to see an offering on assisted living that is going to do that. Unless it’s getting subsidized by an adult child, it’s just very expensive. Our play on the middle market is active adult, but how much of that’s really middle market?

It may be because as you’re getting a younger resident, they may not be a middle-market but your 78-year-old, 80-year-old may be middle-market. That’s certainly our play for more affordable housing than what we’re doing on our independent living communities. We’re not really building a lot of independent living that’s not in very, very affluent areas.

[00:46:42] Tim: Do you feel like the industry can even truly meet this demand by 2029? It’s not much time until then, and it still seems like there’s just not a lot out there to meet it.

[00:47:13] Will: I don’t know how you do it with staffing costs, even what they were before Covid. It was a problem before Covid. We all talked about it, but I don’t know how you do it when staffing costs and all costs have increased.

It’s going to be a big opportunity for someone if they can figure out how to solve the problem. I think active adult is going to solve some of the problems on the non-care side that are not the biggest ones. The biggest problem is in assisted living, because people can stay in their home if they want for independent living.

[00:48:07] Tim: We are in a new year, 2023. We actually had a survey a little bit earlier this year about what people see on the road ahead. It seems like folks are optimistic that they could see full occupancy recovery this year. Others, I think see that more in the beginning of 2024.

Do you have any thoughts on how demand for senior living’s going to play out in the next 12 months? I won’t ask you to tell us when you think the industry will fully recover, but what are you preparing for in terms of demand this year?

[00:49:01] Will: It’s not necessarily occupancy as much as it is margins and how those have impacted. I think you’ll see occupancy recover. We had some lease-ups that we had to not only maintain but absorb and then go through periods where you couldn’t admit new residents. That is one of the things where I think the industry came out stronger from Covid, at least in my opinion.

The perception of independent and assisted living, specifically on the private-pay side, is that they were tired of being isolated in their home. That communal living is something that people who were in the communities saw the benefit of. Then there was certainly pent-up demand when you couldn’t admit. I think all of those were very positive. For us as a company, we’re going to continue to focus on the things we talked about really for Liberty. We have a lot of expansion.

One of the things we didn’t talk about was, in most cases we have adjacent properties to expand campuses. That’s something that we want to continue to do. In some cases, there are small expansions. We have a CCRC here in Wilmington where we’re about to build 12, what we call garden flats or a big-house concept. We’ll do those and have several campuses that we can expand that we’re in the planning stages on. Then we have a robust pipeline of active adult that we will really focus on in the balance of this year.

[00:51:03] Tim: Actually you took the words out of my mouth. I was going to ask you about growth. I actually want to maybe put some numbers to that pipeline if you can. How many projects on the active adult side are you working on in addition to the expansion you just mentioned?

[00:51:21] Will: Most every campus that we have on the CCRC side has expansion capabilities. Some of them have some regulatory zoning issues to get through but most of everything in our portfolio on the full continuum side we can expand. I think I mentioned we have five projects under construction right now and three of those should be delivered this quarter, if not just a little bit later.

As far as our pipeline goes, the bulk of it is really active adult we have aside from our expansions.

We own, like I said, many of these — I guess you could consider them expansions where we have a skilled nursing building right now that one of our parent companies runs. The bulk of those are in North Carolina and we have four of them in Florida. Still, these active adults, the four in Florida, are not going to be adjacent to skilled nursing campuses. We don’t operate skilled there. How many will get out of the ground this year I’m not sure, but we have a pretty robust pipeline in Florida and throughout North Carolina.

[00:52:57] Tim: Great. As you look ahead this year, what’s your top worry, and then maybe what are you most excited about?

[00:53:14] Will: I would say staffing is my biggest worry with regard to our operations. Continuing to retain good front-level staff is probably our biggest issue. Interest rates are another issue. That’s a big struggle right now, more so than the availability of capital. It’s just the high rates that we’re having to pay and then the scrutiny that the Fed’s putting on a lot of the bigger banks.

[00:54:15] Tim: On interest rates, someone I was talking to a few months ago said basically, “I’ve been in this industry for a while. This is more of a correction. These interest rates are actually closer to where they were when I got into the business. I feel like it’s a return to form. We’ve been very blessed with low-interest rates. Now we’re kind of going back to normal.”

Do you feel the same way? Or do you feel like maybe this is a harder environment for various reasons than it was before?

[00:54:51] Will: Well, I was previously a mortgage banker. It’s been 14- plus years. I agree with that. We were hooked on low-interest rates for a very long time. Depending on how long you’ve been doing this, somebody in the late ’90s would have been very happy with a loan constant of 9% or 8.5%. Then we just got used to rates that were next to zero.

There’s so much uncertainty out there right now where you could have a five-year fixed rate deal that is way lower than a floating-rate deal, like 200 basis points lower. There’s just not a lot of certainty out there on what rates are going to do to me and how you’re planning for it.

Certainly, we’ve had very good banking partners, really I couldn’t ask for better. We’ve got a lot of them and we have different banks that offer different tools. Some like to fix stuff on their balance sheet and others want a float-rate deal and want us to swap it. Or some, they want to sell us a swap. One thing we are going to be focused on more in the future is getting to a fixed-rate environment where I think people didn’t have a need to do that when floating was so low for so long.

I don’t disagree with the previous person you’re talking about. I don’t disagree that historically they’re not high, but certainly, this is the biggest run-up in interest rates that we’ve seen since the late ’70s.

[00:57:29] Tim: That’s a good point. Also, I think the flip side of that is also the cost environment for operators is just different than it was.

Maybe a rehash of some of the things we’ve already talked about. Pretend for a second that you have a magic wand, you can wave it and change anything that you want about the senior living history overnight. What are you changing and why are you changing it?

[00:58:07] Will: Oh, man, if I could change one thing, that’s a tough one.

I’d probably say staffing and making it more stable. If you’re saying I can change one thing and it wouldn’t go backward, it would be that just because it’s very simple and it can certainly erode your margins, probably more so than anything else can. It’s hard to plan for staffing issues. The hard part is finding the good ones and then you don’t want to lose them.

[00:59:17] Tim: Absolutely. All right. I think we’ve about reached the end of our discussion today. I think we’re about out of time with the late start here. I appreciate you coming on with me, it’s been a great discussion. Thank you for coming on.

[01:00:00] Will: All right. Thanks, Tim.

[01:00:02] Tim: Thanks, Will.