What Makes Senior Housing A Good Investment? With Susannah Myerson
Lucas: “Welcome to Bridge the Gap podcast, a podcast for senior living. I am Lucas McCurdy, the senior living fan, along with my co-host Joshua Crisp. Hey, Josh, what’s going on man?”
Josh: Lucas, it’s good to talk with you, glad to be on another episode of Bridge the Gap. Our listener audience is growing and (I) love that we have the loyalty. It’s good to be here with you. Great lineup today, great topic, so I look forward to chatting.”
Lucas: “Excellent, excellent. Well, our esteemed guest today as we continue to roll through our love for senior living and connect with other passionate people, we are very fortunate to welcome Susannah Myerson. Susannah, hi, how are you?”
Susannah: “Hey guys, I’m good, how are you?”
Lucas: “Good, good. Thank you so much. Well, Susannah and I, as well as Josh, we’ve connected at a lot of the conferences and I have admired her from afar and so now I’ve been able to formally meet her and just gotten to know a little bit more about her and her life and really what drives her. And it was just a natural progression and the next right step to invite her on the podcast because I really do believe that she adds a lot of value to the industry and she has a lot of great insights. So, Susannah, tell us and our listeners just a little bit about you and your background and what got you to having the love for the senior living industry today.”
Susannah: “Sure. I’ve been in the senior housing space for, gosh, probably 18 years now. I started in about 2000 and I started out my career just in real estate finance and commercial real estate in general and you know buying office buildings and multi-family buildings and regional malls.
“The company I was working for, we were investigating purchasing a couple senior housing facilities and then of course I was the 20-year-old, 21-year-old kid out of college. They said, ‘Susannah, you go figure out this senior housing nonsense and see if it makes any sense.’ And as I started digging in to it, I realized it was such a more interesting industry than frankly buying an office building or buying a multifamily building.
“Senior housing kind of had all the things I like. It had residents, of course. It had some healthcare, it had hospitality. So, I just jumped in. I started learning more about senior housing and then I got the opportunity to go work for a senior housing developer and operator that was based in Arizona. And I grew up on the East Coast and so I took this job to move to Tucson, Arizona and my friends thought I’d lost my mind and they said, ‘oh you’ll be back in a year, tops.’
“They didn’t think I’d like Tucson, small little college town. And they didn’t think I’d like senior housing. ‘Oh, you’ll be back to the commercial real estate field.’ And now, that was 2000 and now it’s 2018, and I’m still in the senior housing space. So, that’s kind of how I got roped into senior housing.
“And I’ve been on, essentially, all sides. Maybe not all sides, but it’s three distinct sides. I worked for about 10 years for an operator and developer. And then I worked on the consulting side, helping operators and developers with their projects, figure out if their projects made sense. And now, I work on the third side. Essentially, I work for a lender and I lend money to senior housing developers.
“So, I kind of tell people that I’ve sat in three different chairs and kind of can understand the aspects of each part of that.”
Lucas: “Very interesting. So, Josh, you have pretty diverse background in seniors as well. Hearing that, probably for the first time, what bubbles up in your mind about that background of experience?”
Josh: “Well, it’s awesome. I don’t have the trilogy that just explained. I’ve mainly been on the operating side of it and because it’s such an operator centric business, I’ve had the great opportunity to be able to be a part of seeing, you know, how you identify a market, how you identify a site, and how you approach a lendor and how you package a deal and develop a deal.
“So, I have a great appreciation for all of Susannah’s experience and so I’m looking forward to kind of talking more about each aspect of that. I know in today’s short episode, we don’t have time to dissect a lot of that, but it’s fascinating to me and what a great asset to have of that unique perspective on all sides.”
Lucas: “So, Susannah, with that background, what do you think, especially working for one of the top 10 operators, how has that shaped your approach to financing as you know it right now.”
Susannah: “Ooh, that’s a good question. I mean, you basically, we look for, I work for Wells Fargo Bank and we are financing all of the top operators in this space and kind of in a lot of the major markets. We look for infill…locations, really strong operators. You know, we really look for kind of the things that check all the boxes. It’s a strong market, it’s a strong operator. It’s a good product.
“I think there’s a lot of new things coming out in the industry, too, but we at least for the most part kind of stick with the tried and true kind of what’s working, what’s worked in the past and really good locations.”
Lucas: “Excellent. That makes sense. So, Josh, you’ve been on that other side and been through some of the real life challenges of navigating the finance. I’m sure you’ve got some two cents to give there.”
Josh: “Yeah, well, I don’t know, it would probably be less than two cents, but you know I do have some great questions so for me this is a great learning experience to be able to have this much time with Susannah without sitting across the desk and trying to present a deal that gets dissected.
“So, I think it’s fascinating right now what’s happening in the industry and Susannah, you probably have a unique perspective on this. But, my personal feeling is we’re obviously, I’ve only been in the industry for about thirteen years now and it’s changed so much during that 13 years. And, you know, what I’m seeing is it has a lot more change as the next generation of seniors are coming and nobody really knows exactly what that looks like. I think everyone is trying to forecast that and I know there’s several of us, me included, who are trying to say, ‘okay, we know that lifestyle preferences of the next generation are different in a lot of cases, we know affordability is gonna be an issue.
“So, there’s all these factors that are converging and you put that box beside the senior housing box now, if you will, you know like wow these may radically need to change and you know, I’m curious to know your insight on that multifaceted approach is one of the real challenges I see is, you know, we’re working with designers, we’re working with designers, we can create these really good models that are appealing to people of the right apartment styles, they’re in the right markets, they’re in the right positions, they have the right amenity packages.
“And so, they’re interesting to the people and when you look at it on a proforma, and you think oh, wow, an operating proforma, this starts to make sense and then you start looking at, oh my gosh, if we’re talking about multigenerational housing, this touches several different silos of finance, and silos is not the right term but I think you know what I’m saying, but how do we get that funded, how do we package this deal.
“What on your side, and because you’ve had a lot of different sides, but put on your lender hat for a minute and on your finance hat, what are you all talking about the next generation looking like even though you’re focused on lending now, what’s that conversation look like that might different then what just an operator or a developer is looking at it from?”
Susannah: “Sure. I think flexibility is probably the key word I’d use. You know you don’t want to necessarily build a community that’s got maybe designated rooms for certain activities but if you can build a community that’s got a common area room that can be something in the morning and then something else in the evening, I think that leans a lot to the success of a community and something we would look at.
“And then just in terms of flexibility too, you know, we’ll see…sometimes someone will have, let’s say it’s a 100 AL unit memory care, 80 units of AL, 20 units of memory care. Well, if it’s built in such a way that you can make it in the future 60 units of AL and 40 units of memory care or even flip it the other way, maybe it becomes 40 units of AL and 60 units of memory care. I think the flexibility in programming and in unit mix is really a good thing because, as you mentioned, things are going to constantly change. What’s built today, 10 years from now might be outdated.
“So, I think that’s the advice I would give to developers, is to built some flexibility into not only your building plan but into your programming space and that would be what I would say.”
Josh: “I think that’s great advice. And so, are you seeing that? Are you seeing that actually the developers and the operators are working now to create communities that have the flexibility and space and what I would call the convertible space to where they can stay relevant with the changing times? Given that I think we know a lot and we can forecast, but there’s also just so many unknowns, are you seeing people actively doing that?”
Susannah: “We are, yeah, we’re seeing people doing kind of what I said. They’re starting unit mix is probably going to be 80/20, 80 AL, 20 memory care. But, they’ve made a secondary memory care wing, maybe they’ve kind of made a common area space that’s got an additional country kitchen so that they could then build off that and have another 20 unit memory care unit, two, three, five years from now they could go from 80/20 assisted memory to 60/40 assisted memory and have two distinct memory care neighborhoods.
“We’re also seeing, some of the operators that we work with, kind of building classroom and meeting space on their campus or in their facility and that can be used obviously for the residents to have a game or craft or whatever. It can also be used for students, you know, if they’re going to partner with the local university, or you know high school or something. And it could also be used for like the rotary club or any local community organization. So, you could potentially have a classroom or a meeting room space be used by three different groups over the course of the day. You know maybe the residents are using it themselves in the morning for some kind of game, then after school you have a bunch of high school kids in there who are coming to learn about senior housing and then in the evening you’ve got the rotatory club…coming in to use that space.
“So, that’s the type of thing that we are seeing which I think is great.”
Josh: “Yes, so I think that’s a great point. You know Lucas we’ve been talking on some of her podcast about flexibility and space for employees right because the workforce is also changing. We’re thinking about on the resident side but also thinking of it on the employment side. So, that’s great. It’s encouraging to know that a lot of operators, the big operators like what you’ve been talking to are doing that.
“I’m also curious, you’ve also and you see you are feasibility studies, you see a lot of market analysis. I’ve started saying some of the feasibility studies, I’d say that in my short career, I’ve probably seen at least two or 300 market studies in secondary to tertiary to primary markets, are you seeing any changes and in the approach to feasibility and site selection and market analysis? How do you think that’s going to change, do you think it’s going to change?”
Susannah: “Yeah, that’s a really good question too. And I think one of the things I’ve seen recently is, you guys have probably talking about this even, there’s been a rise in the development of age restricted apartments, so apartments with no services but are 55 plus. There are a couple of big companies out there right now developing these and it used to be in the market studies would kind of ignored those.
“They’d say, oh they aren’t really competitive, but the market studies I’ve seen recently are now taking those in to account and I think they should, I think that’s right to do that. To take in to account the 55 plus, age restricted apartments that are nice, that are upscale, that would be comparable to say an independent senior living facility. Some would argue, well you don’t get meals, you don’t get transportation, but I think that with the rise of seniors using Uber, senior using Lift, seniors using GrubHub for food delivery, you know, I think those age restricted apartments are a definite, should definitely be included in a market analysis.
“You know, Mrs. Jones could go there and lease an apartment for probably half the price of an independent living and then it almost would be on her to get all the other services. But I think it’s definitely a competitor.”
Josh: “I think you hit the nail on the head and I’m seeing that as well. And we’re actually requesting, you know, that our market study third-party companies that we partner with, if they’re not doing that, we’re asking that they take that in to account.
“I think that there’s a lot of other factors other than just preferences kind of pushing that popularity. You know what the acuity that has risen in our industry. Particularly, I’ve marked it since and noticed it since after 2008, a massive change in the traditional kind of senior living setting without a rise in acuity and cost going up and the regulatory environment trying to catch up with that acuity, I think what it’s doing is forcing a lot of traditional senior living developers to go downstream so to speak and to develop in a lot less regulated environment and to coordinate in a lot of the traditional services that would’ve been delivered into and through maybe an assisted living community so people are able to stay in that environment often times more affordably because it will be developed more affordably often times and then with less restrictions and I think people could argue whether that’s a good thing or a bad thing sometimes.
“I think that’s exactly right. So, if I’m hearing you correctly, you think there might be more of that kind of stuff taking place.”
Susannah: “I do. I think, we’re certainly seeing it in a lot of the markets that we’re in, especially down in the more urban markets where you know you can get age restricted apartments probably through the entitlement process easier than you can maybe a senior housing facility. And then, if it’s in an urban environment, in New York, D.C., somewhere that seniors are used to kind of ordering services on their own anyway and maybe they’ve lived in a condo their whole life, sent out their dry cleaning and ordered food, ordered rides. So, I think that we are certainly seeing that more around the country.”
Josh: “So, Lucas, I always love that you and I have such a different perspective and now we’ve got a third perspective here, you come at this from construction side and that’s your background. I’m sure, especially in your business of renovating communities, there’s a lot of opportunity, I think and I’d be interested to know Susannah’s perspective, but I think I know the answer because she was talking about flexibility and convertible space, so there’s going to be a lot of repurposing or taking the old and making it new or making it more relevant for the future, what are you seeing on your side of the business?”
Lucas: “Yeah, I mean, candidly and maybe a little bit selfishly, that excites me for several different reasons because we love the industry and the work that we do but the opportunity that’s coming to take older legacy properties, newly acquired properties that need to be repositioned and so talking about the next generation and the next phase of what senior housing looks like and all of these new ideas and features really excites me because it’s going to allow me and our company to do a little bit more than your standard turn with carpet and paint and maybe moving a few walls and you know changing a few spaces. And occasionally we do get in to some major, major construction and repurposing but I think that coming in the future we’re going to really get to flex a lot of muscle as the market is going to demand it and a lot of these buildings are going to need to be repurposed.
“And there may be even some other assets that get repurposed. Retail is a big topic right now, I’ve been reading about that. I have some close friends that are very, very heavy in the retail plaza business and they absolutely think that those major malls, strip centers are going to be repurposed in to other things so maybe that would be in the future, even an avenue that I would get in to.
“But, I think there’s a lot of exciting things coming up and for the sake of time, I know Susannah that one of the big exciting things that you’ve been involved with are some of your initiatives that you’ve worked hand in hand with Nick and Connect the Ages with Amanda Cavaleri and I love the fact that you don’t just want to come to the conferences, make the deals and just kind of hold all your knowledge in, you actually are giving and recruiting people in to the business. So, tell us a little bit about your experiences going out to these universities and you know getting your soap box out and talking about your love and passion about the industry to bring awareness.”
Susannah: “Sure, yeah that’s something I got involved with through Nick, as you said. And, you know, I’ve done it twice now at the U of A, so I live in Tucson as I mentioned and I live about 15 minutes from the University of Arizona which is a pretty big school. I had to kind of find my way in to different departments and talked to some of the professors. I found that they are very receptive. I say, ‘hey, I want to come in and talk to your class about senior housing.’ And they say, oh okay, yeah sure come on in. And these kids, I call them kids because they’re 20 years old, they have no, unless they’ve had a family member who has lived in assisted living facility, they really have no concept of senior housing and what a huge industry it is. And, frankly, it’s what a multi-million dollar business, one facility can be.
“You know, I kind of draw up on the white board, okay let’s say you have 100 residents and they’re all paying $5,000 a month. And then I basically do really simple, simple math to show them that, you know, it’s a huge business and even one facility is a multi-million dollar revenue generator and multi-million dollar operating net income and their eyes kind of go like, woah, like they had no idea that this was that big a business.
“And I talk to them, you know, about hey there are so many different career paths in senior housing, you know. If you’re interested in care giving or aging services, that’s an opportunity for you. If you’re interested in construction and development, that’s an opportunity for you. If you’re interested in finance and accounting, that’s an opportunity for you. And I’ve had really good experiences speaking to students.
“I know that other folks that I’m friends from through the Future Leaders Council have gone out to their own either their local universities or universities that they graduated from and they tell me that they have similar experiences, that the kids are just, their eyes are wide open. They had no idea this was an industry. They had no idea it was kind of as exciting as it is. I mean, I guess we do a good sales job, right on selling the industry, but they you know after we talk, they’re like, ‘wow, this is really cool.’ It involves so many different things and I’ve several kids then follow-up and say ‘I want to find out more. Are their internships available?’ and all these kinds of things.”
Josh: “Susannah, I totally agree with you. So, we have the awesome opportunity of On Bridge the Gap to get to talk to some folks like you that are getting outside the box, giving back, educating the industry. I firmly believe, I’ve talked to Lucas about this (and) we talk about this every episode it seems like, we have to tell our story. We create so many great love stories as I’ve shared in our space. We don’t do a good job of telling them. So, we’re creating love stories, we need to talk about the love stories.
“And, it’s fascinating to me, yes, you’re exactly right, there’s a huge business opportunity and it’s growing with the aging population, it’s going to be very diversified and there’s so many various opportunities other than just the traditional senior housing community to get involved, but I also think we have an extra reward because people that get in this business for the right reason and the right why, which we haven’t heard all your why yet, our listeners haven’t, but me and Lucas know your why and when people get in it for the right reason and are savvy business people, there’s a really great opportunity and that genuineness is what our industry needs, so we appreciate all that you’re doing.
“And I know Lucas is thinking, ‘Josh, you’re a broken record because you talk about we need to be telling our story better every single time.’”
Susannah: “And I’ll tell you to answer your question about my why, certainly I mentioned that once I got in to it, it was much more exciting asset class to me personally; it had more moving parts, you know, than just a standard apartment building you buy or a standard office building. Certainly, senior housing had more moving parts and I’m a person who likes to do puzzles so like you know would you rather have a 50-piece puzzle or a 200-piece puzzle? I’d rather have a 200 piece. So, that’s one part of the why.
“But, another part of the why is one of my favorite all-time memories, and I mean frankly, it was years and years of memories. I used to spend a month every summer with my grandparents and my grandmother was, God bless her, all four-foot-ten of her. She was this little tiny woman and spit fire and…all month long, I was an only child so it was just me going down to spend the summer with my grandparents, and we’d go, I mean there was nothing she wouldn’t do.
“Like I said, she was four-foot-ten, but I’d say ‘grandma, let’s go play basketball,’ and she’d be out there playing basketball and taking me to mini golf and taking me swimming and you know just taking me everywhere. So, I spent probably from the time that I was about six to about the time that I was about 15, until I was old enough to get a summer job, I spent a month every summer with my grandmother in Raleigh, North Carolina. I’m a big Tar Heel fan and I know you guys are from the South so don’t hold that against me.
“Once I got in to senior housing and my grandmother passed several years ago, but once I got in to senior housing, I started to visit communities and I’d go and talk to them these women that I lived in these communities and I was like ‘oh my god, I get to hand out with grandmas all day, this is the best thing ever.’ You know, not only is it a fun business, but I get to walk around the communities and like chit chat with people like my grandma.”
Lucas: “We love it and Susannah we love you at Bridge the Gap and I’m so thankful that you’re telling that story. Thank you for going out to the universities. You know, it matches up with our mission and our why, Josh and I and are partners with Bridge the Gap. It’s why we do this and to continue this conversation and this narrative, so Susannah, thank you for spending time with us today. I know that this was just a brief moment where we get a little bit into your life and your expertise so we’ll make sure that we connect with you and the show notes we’ll take it to social media and if our listeners, they want to engage and ask questions, we encourage them to do that. We will make sure that we follow up and get back.
“Susannah, look forward to seeing you again…and just again we’re very, very grateful. Josh, thank you for chiming and I know this helped make it a really great conversation. Thank you all for listening to another great episode of Bridge the Gap.”