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192: Dennis Murphy

Dennis Murphy, Vice President of Investments at Benchmark Senior Living, discusses occupancy gains and M&A trends in the industry. He shares how a large career movement in 2020 is impacting the senior living workforce.

 

Lucas 

Welcome to Bridge the Gap podcast. The senior living podcast with Josh and Lucas.  We got a great friend on the show today. We’re going to be talking about M&A, market conditions, and some real estate transactions. You’re going to want to lean into this. We want to welcome Dennis Murphy. He’s the Vice President of Investments at Benchmark Senior Living. Welcome to the show.

Dennis 

Thanks for having me; appreciate it, Lucas. 

Lucas 

Absolutely. Josh, Dennis looks like a young guy, like he’s just kind of getting his start. But for those you all don’t know, Dennis, you’ve had a long career. You started your career kind of in seniors housing. You’ve been at Benchmark 12, 13 years, right?

Dennis 

Correct.  Started in accounting, then did some time on the FP&A side. And then actually was an executive director in a building kind of metro Boston, just outside. A 90 unit AL memory care, and then spent the last three or four years over on the investment side.

Lucas 

Josh, when I retire and go into senior’s housing, I can only hope and pray that the executive director is a guy like Dennis. That would be a fun senior living community to live in. And anybody in the industry that knows Dennis, has spent time with Dennis, he’s a work-hard, play-hard guy. And I also have a great deal of respect because you’ve invested your entire career, your young career in this industry, and you actually really do care about great outcomes in these buildings, which impact the lives of older adults. I have a lot of respect for that. Dennis, where does that…this is something I’ve actually never asked you, do you have a family connection or some personal story that I mean, you could have gone to wall street, you could have gone commercial real estate. What has kind of kept you in senior’s housing?

Dennis 

So how I got involved in senior housing was actually my neighbor back in Brookfield, Connecticut, where I grew up. She was actually a recruiter for Benchmark at the time, and I was looking for an internship out of school. She offered an opportunity. But could I say that the accounting side that I entered the business was not exactly, probably the most exciting thing to me. I think accounting is great, but it quickly became boring. So I think the best thing about Benchmark I can say is since I’ve joined, they’ve given me the flexibility to move around within the company and get exposure to the operations side of the house, the investment side, finance, the accounting, and partnering with resident care, sales to really execute on some of the strategies we’ve done. And so I’ve been lucky enough and fortunate enough to be at a company that supports my growth. And I think that’s, that’s rare and certainly lucky to be here, lucky to be working at a Benchmark.

Josh 

Well, Dennis, I think that’s a testament just to the cool factor of our industry. We talk about this a lot. Of how many opportunities….a lot of people that don’t know, or understand, haven’t worked, or been exposed to senior housing and operations. We tell people all the time on the show and as we’re having conversations with college students that basically anything you study at university or college, you can come in and find a career in senior living. So it’s really cool that at Benchmark you’ve had the opportunity to get a very wealthy and diverse background of experience and found your place kind of doing what you’re doing today. Which is, maybe our audience should hear a little bit, like what is the day in the life of Dennis like right now in your current role?

Dennis 

Well, I think that currently a lot where I spend a lot of my time is really partnering with operations and sales. There’s a lot of things on the back end of numbers that I do to really drive and help and support those groups. Whether it’s creating sales contests, incentivizing our sales teams. Whether it’s partnering with resident care to ensure that all the measures we’re putting in place from a staffing and safety standpoint are actually coming through in the results. And so we do a lot of tracking of our data. There’s a good amount of data out there. We have a fantastic home built business intelligence platform here at Benchmark that allows me to diagnose and analyze things in ways that other companies really don’t have access to. So I’m incredibly lucky that I have access to some of those tools. But really it’s the ability to partner with the operators and the salespeople on the day to day, figure out what their issues are, whether it’s scheduling, or labor issues and how we can try and resolve them. Putting plans in place, and then tracking that and giving them the tools so that they can take those decisions on the ground.

Dennis 

That’s where I spend a good chunk of our time. Right now we’re in budgets. So that’s one piece of the job, but we will continue to move forward on what is our day-to-day operating strategy coming out of COVID, and coming out strong. We’ve had fantastic success over Q2 and Q3, as have many other operators kind of coming out of the second wave of COVID. So it’s good to see the industry as a whole rebounding and we’re certainly been a big part of that. So very pleased so far.

Josh 

That’s exciting to hear about the success. So let’s sit down there for a minute and talk because we have a very diverse audience representing pretty much all sectors of senior living and even people outside of senior living that are curious about what’s happening in senior living in this transition. The card deck through COVID was basically tossed up in the air, shuffled, and things are really coming down and there’s some winners and there’s some losers. And there’s some people that are handling the change very well, and there’s some that aren’t. And we’re here to kind of support everyone. And to that, I think it’d be cool to get your perspective on when you start seeing results. Not only with your large platform over a big section of the country, but as you’re talking with peers, you’re obviously on the future leaders council, you’ve got big influence and get to talk to a lot of people. What are some of the trends and results that you’re seeing? Specifically let’s talk first about maybe the, as you mentioned, that operating side, maybe the sales and marketing side. What are some trends that you’re seeing that are helping operators get good results? What are they doing?

Dennis 

I think a lot of the operators, there was certainly some pent up demand coming out of COVID. Families who are maybe a little bit reluctant to put the family members and because of fears of COVID. So the vaccination component of this that is rolled out, and been very successful, has kept many residents safe. And I think that’s brought back a comeback and occupancy, and you can see that across the board, over Q2 and Q3. Most markets, if not all, experienced occupancy improvement. Certainly not back to kind of totally pre COVID levels, but most moron kind of a year trajectory between now and then to get back to what they were accustomed to from an occupancy perspective. During that time period there weren’t a lot of new developments underway. So I think you will see a pause in construction, which will actually help the absorption of occupancy in all markets. New England, which got hit fairly tough at the start of COVID has bounced back very strongly.

Dennis 

The operators I speak to including ourselves have seen great moving pace, better than pre COVID levels. And it wasn’t just for a month or two. So it wasn’t just the pent up demand coming out of Q2. This continued all the way through Q3. And many operators like us experienced phenomenal occupancy gains. And so I think that is a true testament to the resiliency of senior housing, the need for our products, and where the future will ultimately lead to. It’s beneficial to all of us that the products are absorbed and even some of the few new builds out there that are having great success from the lease up, that’s great stories to hear whether it’s Benchmark or otherwise. We will continue to see occupancy improvement probably over the next year, and it’ll normalize it kind of the high eighties, low nineties, where most of these stabilized operators are used to operating at.  There’s a handful of properties through COVID that maybe experienced more soft occupancy dips or leadership turnover.

Dennis 

I always say that the biggest way to fix the problem always starts with the people that you have to build it. So having the right leadership from the operator side, all the way down to the executive directors, and department teams, and frontline. Making sure that everyone has a good culture. They come into work for the right reasons. They’re all willing to go the extra mile to make sure that the residents and their staff members alongside them are all on the same page and working together. So I do think that there were certainly people who got burnt out through COVID. And so some of that turnover that we had on the employee side will ultimately help us as we get new leaders in there who didn’t really get burned out and can operate through it. And we’ve seen great success in the HR side of this; coming up with leadership and training programs to support new management because I don’t think there’s enough talent in senior housing at the moment. We’re having a little bit of a talent crisis.

Dennis

So figuring out who the next leaders are and giving them the training to do so. Some of these new operators or bigger operators are coming out with great training platforms. So that’s great. That’s great for everyone in the industry to be able to leverage that and utilize those to get the right leadership in a building. And then from there, the turnaround stories are usually pretty easy. It’s really getting that talent on board. So being an attractive employer is very important right now. And I think that’s kind of step number one in the recovery.

Josh 

So Dennis, a lot to unpack there. I want to in just a moment, I got a couple of questions on labor, but back to marketing real quick, you guys are experiencing success. If you look back over the last couple of years, it’s hard to believe how radically different all of our lives were a couple of years ago. But in that last couple of years, is there anything that you can point to that you guys, or a group that you’ve seen out there is really doing a lot differently in the marketing and sales side than you did a couple of years ago, that like it’s radically changed? Is there anything that you can point to that’s a lot different?

Dennis 

I do think the customer is different. Yeah, there were a lot of older products out there and having Formica countertops and things like that. The bricks and sticks of the buildings. When new products hit the markets, it really made that old product look pretty tired. So there’s a lot of operators out there that are renovating their existing units so that they’re up to the newer standard granite counter tops, white cabinets, and new showers and things like that. There’s an enhanced focus on the data side of the house. And so having electronic health records in that platform is really important as well. But I do think that the expectation from the resident family side of the house is you have to have a competing product. And so the older products that are out there, those are probably suffered a bit.

So I think us and others are going through renovations right now to bring some of the older product up to the newer standard. So that’s the bricks and the stick side of the house. The most important, most valuable side of the house is the feeling people get when they enter a community. Having an active vibrant programming, where people can see everyone engaged is incredibly important to prospects and family members. They want their family and loved one to feel like they’re getting a full life and that they’re getting to live an active lifestyle. And so I think that there is probably an additional focus on making sure the entertainment, transportation, and all the other amenities that support senior housing are up to par and up to the standards that people would expect nowadays. So I do think that along with having a good, good executive director and good sales person, those can fix and rebound the occupancy fairly quickly. 

Josh 

Well so moving on into it, and in the brief time we’ve got together, the labor side of things you did mention the word crisis. I’d say that’s very true. Our industry is definitely, and I think it, we’re not alone. As you know I’m out, obviously as a consumer, it seems like everywhere I go labor, no matter where you look in what industry, what vertical, labor is very much a real challenge for any operator in any business. Our industry is no different. But I’ll tell you, I was just Lucas, I don’t even know if I told you this. I was perusing the internet the other day and saw several ads for different senior living job types. I saw one operator literally advertising for LPNs, a $10,000 signing bonus for a senior living community. And I saw a $5,000 signing bonus for CNAs. 

And I’m sitting here thinking, oh my gosh, I haven’t seen anything like that. Maybe my head’s been in the sand. That seems very extreme to me. But obviously there’s at least one large operator in the Southeast that’s advertising that. Which lets me know there’s people out there having a major crisis, and I’m just sitting here thinking is money the answer? Because I know prior to the last couple years, we were not having to do that. And so what are your thoughts on this labor crisis, and are there successful strategies you guys are starting to see in practice that are actually attracting talent?

Dennis 

I think labor as a whole, if COVID did anything it either pulled people out of their existing careers or even to new careers. So I think there was a lot of movement of jobs through COVID. Certainly people found that flexibility and working from home is very important. And so they found themselves moving over to jobs that allow that. Senior housing going into this, I think that we probably were going to go through some of the growing pains that other industries are doing right now, whether they’re correcting for labor or if it was disconnected and over the years hadn’t gotten the full attention it needed in certain markets. I’m always a little bit weary of the companies that have to throw such a large sign-on bonus or throw a lot of money at you because if it’s that unbearable, why is nobody taking that job?

 

So I do, I think money is the ultimate way to buy out of this? No, I think there’s a massive culture component to this. How do you establish a career and show somebody that there’s a career path to help resolve some of this? Because I think employees now have their pick and where they want to work.  Obviously, pay has to be competitive. And that’s a must have. But from there on the culture will ultimately dictate the ability of operators to successfully rehire and be a chosen place to work and, be the place where if you are a CNA or if you’re a nurse, you would choose to go there because the culture and the quality of everything else along with the benefits and the career are really what makes makes you tick. If it was just about the compensation component of it, all those jobs, where you’re saying that people are offered these large signup bonuses, we get filled immediately because everyone would want to work there.

 

It’s truly not the case. And I think sometimes you have to step back and really look at the leadership and management building, on whether that’s partially somebody’s issue with some of the recruitment and retaining employees. And it’s not all compensation, but I think there’s a lot of operators right now that are adjusting the compensation because they were kind of so far below market, and this really opened their eyes. So coming on of COVID, there’s been great occupancy gains, but you need staff to support those occupancy gains. So the operators are working diligently right now to come up with attractive programs for their staff members, some of it’s compensation, some of its flexibility and work. Some of it’s really giving unique creative benefits, whether it’s transportation options to and from work because maybe they can’t afford the car, and they rely on public transport or things like that. That we can kind of creatively come to solutions.

 

You mentioned it was kind of a crisis. I don’t view it as truly a crisis as more of a really us and the operators all getting on the same page with a strategy to recruit and retain employees going forward. All of it’s very solvable. But this next 12 months, 24 months I think is going to really be telling for who did it right, and who didn’t. Because it will ultimately limit your ability to grow occupancy. If you can’t have staff in the building to support and make the experience great for the residents. So I think that we’re going to come at this from a handful of different angles as are other operators out there. And that there’s a wage component of it. And then there’s the benefits, the incentives, the flexibility, and things that we can do to make this better. Some of it’s just, they want their schedule changed. And we just never thought about asking what the schedule change needed to be,to make your life a little bit better. “I have to get home for the kids at three.” Okay. Let’s build a schedule that can do that. So I think there’s just different ways to go about it, but operators have to really keep their ears open and listen to what staff really wants, and try to provide solutions for them on that.

Josh 

Well, so I feel like here in just a minute, Lucas is going to get the shepherd stick and be reeling me off for a commercial break or something with the music, because I want to keep talking and we’re going to run out of time. But the final topic for me is, I know Lucas deals with this a lot because he is the king of renovations in senior housing. But Dennis, you’re dealing with investments and you’re seeing a lot of what everybody is seeing right now. And that’s a lot of mergers, acquisitions. Every day I’m hearing of one big operator going to eight smaller operators, or eight different operators, or there’s constantly right now a giant shuffle of the real estate and the operations going on in our industry. And you mentioned over the next 12 months or so, we’re going to begin to see the good operators and the adaptive operators. And I think this is also going to be interesting to see unfold over the next 12 months with all of these changes in operations, and these changing of hands that takes a little time to get some things going. So if you can look into your crystal ball here with us for just a minute and give us your forecast of what are some things that you think are going to happen in this giant shuffle that’s going on over the next 12 months in the real estate world?

Dennis 

I think that there’s operators that performed well through COVID and operators who were performing well coming out of COVID. Those operators are ultimately going to get given opportunities for the equity partners, and capital partners who have been upset with the operations of really through COVID and coming out of it from an occupancy perspective. So to the extent that their larger national operator was not able to perform, and you could divide that up into some regional, super regional players who really know the market really well and possibly drive better operational results. Then I think capital partners are willing to take that shift. Even if they know there’s going to be a little bit of a low in the transition period. And I think you saw less of that historically, but coming out of COVID capital partners are trying to protect their investments. So they want the best people with the football on Sunday throwing it down the field.

 

And so at least from what I expect to happen, I think that’s a continued trend. That there’s going to be distressed deals or deals where they haven’t been able to recover fully. And other operators will be given a chance to kind of step in and make up for that, whether they’re management deals or joint venture deals. That will be determined on an individual basis. But I do think that there’s going to be an opportunity for these strong operators who have shown great performance coming out of COVID. And it’ll be great to see who rises to the top, but I think there’s some early indications that there’s a handful of operators out there, these ones signing these new management deals, or new JV deals, they’ve shown they can perform. It’s a testament to the industry, which is certainly a hundred recovery and rebound coming out of, out of COVID. And I just think that that’s a trend you’ll see continue for the next 12 to 24 months. And then eventually it should stabilize. Most of the buildings that we’re seeing low occupancy will rebound. And then there won’t be a need for as many transfers of operators that you’re seeing currently.

Josh 

Well, that’s a great forecast from you, Dennis, thank you for sharing that Lucas, we talk about it, great challenges create awesome opportunities. We’re living through those kinds of times with some great challenges. It’s fun to watch guys like Dennis be successful with their head down, working and hear about those. So another exciting episode for our listeners today, no doubt. 

Lucas 

Absolutely, great speaking with you, Dennis. And for our listeners that are going to be around the Houston area at the beginning of November, Bridge the Gap is having a meet up at the Rustic and Dennis may make an appearance there. But we’re going to be in Houston the whole first week of November. I know Dennis is going to be in town as well, a big event there if you want to meet Dennis. We’ll put all of this in the show notes so that you can connect with Dennis and connect with BTG. Dennis, thanks for spending time with us today.

Dennis 

Thank you so much, Josh and workers for having me on. I really appreciate it. Best of luck. I will see you at NIC.

Lucas 

Yeah, we look forward to seeing you soon and thanks to all of our listeners for listening to another great episode of Bridge the Gap.

 

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192: Dennis Murphy