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193: Tonya Scharf

Tonya Scharf, Commercial Real Estate Partner at Waller Lansden Dortch & Davis, LLP, shares how a 20-year career in law is impacting her involvement in operating memory care communities in Tennessee. 

Connect with Tonya.

Waller Law was a partner of the VIP Ignite Experience

Lucas 

Welcome to Bridge the Gap podcast, the senior living podcast with Josh and Lucas. We’ve got a great guest on today. We want to welcome Tonya Scharf. She’s the commercial real estate partner at Waller. Welcome to the show.

Tonya 

Thanks guys. Thanks for having me. Good to see you. 

Lucas 

Great to see you again. We had a blast with you and all of your great friends from Waller at the VIP Ignite Experience on the rooftop at the Bobby. It was such a fun time. And one of the cool things we found out is your office is literally right down the street from there.

Tonya 

It is! And it was wonderful. What an innovative conference. I think that was the word that I took away the most from that conference, the innovation I’ve never seen a conference set up that way; so much fun. Also it was my birthday, so being up on that rooftop that night, we really blew it out, had a great time. But what a fun event. I met so many new people, which is fantastic.

Lucas

Well, we are so appreciative that Waller was so supportive of Bridge the Gap in helping to bring that event to everyone in senior living. We’ve had amazing feedback and we just couldn’t have done it without you guys, so thank you once again for being a great sponsor there.

Tonya 

Well, thanks for having us, looking forward to seeing you guys in person at the NIC. I know you’ve got a few, at least one event going on there as well. I saw the invite for that. So really looking forward to that, I’m sure it’ll be another innovative event. 

Lucas 

Yes, exactly. One interesting thing that people that are listening may not know is you have a 20 year career in law and commercial real estate and a variety of different verticals. And you’ve really developed a wonderful practice, a bunch of relationships, and are really well-known in this sector. People may not know that you and your husband actually own senior living communities there in Tennessee and are about to break ground on your fifth. Tell us more about that.

Tonya 

You’re exactly right. I’m so excited. It’s been an interesting ride. Like you said, I’ve been an attorney for 20 years now, but back in 2009, we all remember that year. My husband was in investment banking and we decided he wanted to make a switch. There weren’t a lot of viable opportunities in 2009, but senior housing was one of them. And we were so lucky that we were able to find out about this opportunity with three distressed senior housing facilities. We scooped them up, invested, turned them around and then started adding to the Legacy Facilities. So we developed a fourth facility a couple of years ago, and now we’re breaking ground on our fifth facility. So it’s very exciting. We specialize in memory care. So we really are a mom and pop situation here in Tennessee. We’re smaller facilities, just focused on memory care and that’s our niche.

Tonya 

And that’s what we love. We’re passionate about it. Both my husband’s and my grandfathers, they both had Alzheimer’s. So it’s something that is very personal to us. And so when we took all these facilities, our main focus was the resident. Because having been the family members with our grandfathers as residents, you have that perspective going into it. And so it was all about the resident and turning these facilities around for the best care that we could give to these residents. So it was an interesting experience. I was totally new to the space other than my legal background. So it was interesting to then enter into the owner/operator space of it and get that perspective, which just gives me such a deeper understanding of what my clients are facing and the pressure points for them. What is important to them. And really helping deepen my ability to represent them.

Josh 

So Tonya, I’ve got to back this train up for just a minute because you just brushed over a lot of history there, that my antennas went up because first of all, an amazing, very interesting and I think very unique background has prepared you for what you’re doing today. But the part that you just with a pleasant smile on your face, 2009, invested, scooped up and just turned around these… I’m sitting here thinking now I’ve turned around a few communities and I don’t know if I could say it with a smile on my face like you just said it. So I love that you have the family perspective, which is what I think positioned you for great success. But right now I think you have such an interesting perspective because in the mergers acquisitions world that we are living in, in senior living right now, there is a lot of legacy properties that are in the process of either needing turned around, repositioned, or they’re in the process of being repositioned, or will soon be repositioned and turned around.

Josh 

And that is not in any stretch of the imagination easy work. You’ve done this successfully. So for the benefit of our listeners, a very diverse audience that are either living through this right now, or will live through this in the very near future. Give us some of, the word I’ll use is “nuggets of wisdom.” Lucas hates when I use the word “nuggets,” because I probably overuse it.

 

Lucas

It makes me hungry. 

 

Josh

Yes it does. And it’s lunchtime, but what are some nuggets of wisdom that are practices or methodologies that have been successfully implemented firsthand by your team that you’re going to continue to use and that maybe some of our listeners can take advice from?

Tonya 

Certainly. So part of this is, the main part of it is putting the resident first. The name of our company is Family First because we do put the residents and their families first. And in order to do that, we went into these facilities, all kudos to my husband who’s not on the podcast, because he is the main operator, owner operator. And we do it together, but he’s boots on the ground. So you go into these facilities and we changed so many things from the bottom up, everything from implementing a program where food was made from scratch. That doesn’t sound significant. But it is significant when you have families that want to come visit their residents that are in the facilities. So we wanted to encourage that. How do we bring the families? How do we make them more, an integral part of this place that we are trying to make into a community, into a home for each of these residents and make them as comfortable as possible?

Tonya 

Because at the end of the day, it is all about resume care and bringing the best care of those residents. And that is how you will entice others to come to your facility, because you’re going to be building your reputation in the community. So what are the things that you can do? Okay, fine. We’re going to implement this new food program, everything’s made from scratch. The food is delicious. Great! Families are now going to come. You can come and have lunch with your family members anytime. Just let us know, give us a heads up. Encouraging them to build that community within our building, if you will. But everything…obviously investing money into the facilities. As you said, these distressed facilities, they are not in the best shape, generally speaking. You have to be ready to come in and infuse X into that facility and bring it up to speed, where are the holes?

Tonya 

Literally probably in the towels. Like upgrading the linens. It really is such a grassroots kind of effort that you really have to go from the ground up and determine where are the holes in the care being given to the residents? Let’s fill those in. And then let’s talk about, are your employees happy? How are the employees being treated? Because obviously employee retention right now is such a crisis in the senior housing community. But, it has been for years. We’ve been losing employees in this sector for so many years now. And so how do you invigorate them? Because when they come to work invigorated, they want to give the best care to these residents. And at the end of the day, they’re the ones there day in and day out. They’re the ones the residents see the most.

Tonya 

So how do you invigorate them? How do you retain them and make them excited about their work and make them feel how important they actually are so then you have that established community with these invigorated employees, with families who want to come in and spend more time with their resident family to invigorate that community. So much of it was about that was just about coming in and turning certain things around and just making it a better place to be. And then obviously community outreach. You’ve got to have that component as well, building your brand within the community so that people know the kind of care you’re giving to your residents. And so that they begin to trust the facility again. Because if you’re a distressed facility in a small community, which we are in smaller communities, you have a certain reputation to people. It’s not as if people don’t know that it’s a distressed facility or that they wouldn’t call it distressed. They might call it running down in lieu of distressed. But they’re not bringing their family members there. So you’ve got to re-establish those connections within the community, reinvigorate the community to want to be a part and to bring their family members to your place. I’m not sure how many nuggets of wisdom there were there. Those were the things that we did.

Josh 

Well, great nuggets of wisdom actually. And we could get into the details of all of that. And I may, if Lucas lets me chase some of that, I would, but for the sake of time, I know we have very limited time today. One question I have, because I love that you have been and are very successful. You’re breaking ground on another community. You refer to yourself as a small operator, which small growing operator right now I hear very mixed things, but I will tell you what I hear a lot of that I love that you’re kind of disproving. I hear so much about smaller to regional operators that are going to struggle, is the forecast, with keeping up with the big operators. But a lot of the things in the strategies that you’re talking about, I personally believe some of the smaller regional operators are so much more equipped to be agile, to adapt to the changing needs, demands, and preferences of the consumer, which is that resident, the family first, as you say, but can you speak to that? And how do you think that you, as a small regional operator, are actually positioned for success for the future, as none of us know what that is, but position for success as the foreseeable future is ahead of us.

Tonya 

Well I’ll backup for just a second because I’ve been hearing for the past 10 years at NIC how all mom and pop owner operators are going to go under. That’s been the forecast for us for years, we’ve been living under that cloud. And yet here we are. And we still see it along with various other small owner operators. For us, our niche is that we are standalone memory care. That is our focus. It is not a random wing at the end of a hallway. That is what we do. So we have our niche, but we’re also in rural markets. So we’re a smaller facility in a smaller community. And so that has been our niche and that has been successful for us. In fact, our fifth facility, we are venturing out a little bit from that because we’re going to be in a bit of a bigger community than we usually are.

Tonya 

So the facility will be a little bit bigger. But you hit the nail on the head. We are nimble. We can make accommodations that the larger operators cannot. We can infiltrate into a community in a way that perhaps a larger owner operator could not because they wouldn’t necessarily be as relatable because we’re in these smaller communities, because our administrator is at the local church and volunteers with the local chapter of the Alzheimer’s associates. So obviously there are some of those components that could be mirrored by larger owner operators, but we establish ourselves within the community. We are known for the care we give our residents and that you can pick up the phone and get ahold of someone if there’s ever an issue. We are local. we are here. And I think that brings a level of comfort versus a corporate headquarters off in some other state.

Tonya 

Those are some of the components I think that make us stand out and have helped ensure our success. Also partnerships with local banks. This is something I stress to my mom and pop owner operator clients. You do not have the leverage with the large lenders when you’re a mom and pop, you just don’t. So where are you probably going to be more successful? It’s with the smaller local banks. You’re in the community, they’re in the community, that’s where you base, that’s where you’re focused. And those seem to be the more successful relationships I see between mom and pops and lenders is where they really are in these markets together. And it’s more of a partnership not to say that larger lenders and larger owner-operators don’t have those partnerships. It’s a different kind of partnership. And it’s not the kind of hardship that’s as successful for mom and pops because big lenders aren’t as interested in the mom and pops. And you won’t have any sort of leverage with the larger lenders because your portfolio is going to be a lot smaller.

Josh 

Well, you bring up great points and I’ll also think, I think you and your husband’s specific backgrounds prepared you greatly in a way that maybe a lot of smaller operators didn’t have the preparation with the investment background, the legal background and things like that. So I think you’re in a very unique position to inform and educate and influence, which is our mission, a host of other smaller operators with awesome intentions and with willingness to execute, but needs some coaching. And so I’m so grateful that you’re on our show. But one of the things, I think you could speak to because you actually do get to being, working with such a well-known successful law firm. You have great experience dealing with all types of clients, the big, the small, which we are firm believers, there’s space for everyone, but there is a huge part of the market share of senior living across the United States that is small to regional operators. That gives a great opportunity to specifically meet some of the underserved markets that maybe the bigger operators can’t go into as easily. So what are some of the things that you might see as potential pitfalls or downfalls in your legal work that the smaller regional operators and really everyone, but specifically those small to regional operators can potentially avoid getting themselves into issues that could put them out of business. Are there any red line issues that you’ve found that you could speak to that?

Tonya 

I think one of the biggest stumbling blocks that I’ve seen for smaller owner operators is failing to continually invest in the facility. Being penny wise, pound foolish. You have to keep up with maintenance. You cannot allow it to continue to defer. You are only harming your own bottom line. And I see that quite a bit with smaller owner operators. “Well, I just want to save that money.” Okay. Well, you may be saving that money right now, but it is going to cost you down the road. And I, so I would say that’s one of the major pitfalls that I see. And then not having, to your point earlier of advisers, not investing in the right advisors. And I don’t mean, oh, you have to have an attorney, but not investing in other advisors to make sure that you are staying abreast of developments and you are offering up the right services in the right way.

Tonya 

For example, for the past, I would say maybe five to 10 years, there has been such a focus on new facilities being luxury facilities, right? Everybody wants to be the luxury facility for seniors. Great, awesome. We have a spa. We have this, we have that. What’s the focus going to be on now post COVID? Now we all understand senior housing facilities are healthcare facilities. They are not luxury apartments. You’re going to have to have upgrades in certain technologies. Are you advanced? What are you putting in that’s touchless maybe? Are you putting in more of a health director? Are you putting more of your focus on the healthcare side of it? Because you’re going to have to. COVID is not a singular pandemic. We all thought it was going to be gone at the beginning of 2021, right? We thought, “we’re going to get the vaccine and then everything’s going to be great.”

Tonya 

And here we are here. We are with occupancy rates just now starting to increase in senior households. Great, we had PPP loans last year. Those aren’t helping us this year, right? Everybody spent them, we had to use them last year. I’m sorry, I’m circling back to the point. But really investing in the right advisors for yourself. Make sure you’re partnered with a bank that is a partner, that they can help you. When COVID hit our local lender immediately picked up the phone and said, “you need to get a PPP loan immediately.” That’s a partnership. If your banker isn’t picking up the phone and calling you in that regard, you might want to think about that. Same for your insurance broker. Oh gosh, the increased cost of insurance right now, right? You need an insurance broker that’s going to be working with you to help you figure this out because all of those increased costs have to go somewhere. They’re going to get passed through to the families in increased occupancy rate, which is not ideal for anyone. So investing in the right advisors would be my second point there.

Josh 

Well, great advice, Lucas. It sounds like a lot of attention on focusing what’s important with family first and an awesome background to boot. So you experienced this firsthand in the great state of Texas, as you’re working with a variety of operators. Can you say a hardy amen to this?

Lucas 

I can, I can. I think it’s just such a unique experience that you have, Tonya. This has got to transcend very well to your existing customers because talking about having the right advisors, I think it’s so important. And all of the smart entrepreneurs and all the smart business people that are in this industry and they’re listening right now, they know this goes way beyond like just people saying, “yeah, well you need to have a good doctor.” Everybody knows that they need to have a good doctor. Well, you need to have a great attorney. You need to have a great insurance broker. You need to have a great contractor. You need a good architect, a good designer, you need a good…oh, there’s a whole list of things that people need. And with senior housing, it’s so important that they have a specialized approach in understanding the nuances of this marketplace. And we know that Waller is a big nationwide law firm, but you have these specialty sectors within the company. Tonya, could you speak to that for a minute? Obviously having multi disciplines, but then specializing on healthcare and seniors housing. And you’re obviously able to pull in resources. Can you speak to that?

Tonay  

From the Waller perspective? I will say that, so I’m in the real estate group, but obviously we have all different kinds of attorneys focused on all different types of laws. We have a multidisciplinary approach. I’m on teams with corporate attorneys, tax attorneys, regulatory attorneys, so important in the senior housing space, the regulatory attorney. And so what’s fantastic about being at Waller. If I get a deal in, let’s say it’s one of my developer clients and we’re going into a new market. I don’t know what the regulatory risks are there. I don’t know what the regulatory rules are. So I picked up my phone, I have my partner call them up. They’re going to look into that for me. Perhaps there’s a tax issue. I’ve got a tax expert. I can ring. And these aren’t just people who, “oh, they do tax law.”

Tonya 

No, they do tax law for senior housing owner operators. This isn’t just a regulatory attorney. This is a regulatory attorney that has pulled regulations for senior housing related operations across the country. I think last we spoke about this 70% of Waller’s overall work is in the healthcare space. So we have 260 attorneys offices in various parts of the Southeast, but 70% of our workload is in healthcare. That is what we are known for the most. I mean, we obviously do other types of law for sure. Me, myself, healthcare has been my focus for many many years. And so it’s interesting, there are very different approaches When you’re dealing with the acquisition of a hospital, the acquisition of a medical office building, or the development of senior housing, but they all relate in the healthcare space.

Tonya 

So you definitely have that overlap. And it’s, we never said when 2009 hit, we never said that healthcare work was recession proof, but we did start saying it is somewhat recession resistant. So if you’re in the healthcare space, there’s always new developments, there’s always something interesting happening, and there’s always a space to learn. But I’m very lucky that I have such a deep bench of colleagues because if something comes up that I have no idea how to handle it, I know that there’s someone I can call and they’ll know how to do it.

Josh 

Well, Lucas, we were just talking earlier today, and I think I even said this, the great challenges that we have, that we are going through, that we have gone through, are creating great opportunities. I do believe for the small to regional operator there are great opportunities just as there are for the large operators. If everyone is focused on the things that they should be focused on, like Family First. With you Tonya, thank you for sharing those words of wisdom, those nuggets of wisdom with our audience. I know our listeners are going to want to connect with you. Lucas, what do you think? The conversation’s been great.

Josh 

You know I love the nuggets. I feel full today. This has been a great conversation.

Tonya 

Thank you so much Josh, Thank you so much Lucas. I really appreciate it. 

Lucas 

Yes. Awesome. So a big shout out to Waller. Thanks for being a wonderful supporter of Bridge the Gap and our network and our events. It’s been a great relationship and a lot of fun to get to know you guys there in Nashville, and we will definitely be interacting with you in the future. We’ll put all of this information in the show notes so that our audience can access it very easily. Go to BTGvoice.com and you can download the transcript, watch the video, and see all of our content there. Connect with us on social media. And we look forward to seeing you on another episode of Bridge the Gap. 

 

193: Tonya Scharf