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The senior living industry has a voice. You can hear it on Bridge the Gap podcast!

197: Julie Ferguson

Julie Ferguson, Senior Vice President and Sector Leader, Senior Living at Ryan Companies US, Inc. discusses the impact of construction costs and labor challenges plus optimistic insight on the future of seniors housing developments.

Lucas

Welcome to Bridge the Gap podcast, the senior living podcast with Josh and Lucas. We’re in Houston talking to thought leaders in the space, and we have Julie Ferguson from the Ryan Companies. You are the senior vice president of senior living markets there. Welcome to the show.

 

Julie

Thank you so much for having me. 

 

Lucas

Yes, it’s great to meet you. We have a lot to talk about as over the past two years, there’s been a number of things that have happened in the marketplace when it comes to development and senior housing. And you have been on the front lines of that. Tell us, first of all, a little bit about Ryan Companies. It’s not a small mom and pop, it’s a pretty big entity.

 

Julie

It is a pretty big entity. So we’re an 85 year old company that started out purely as a construction company, and today we’re a full service real estate development company with investments development, continue to have that construction piece as well, which certainly helps me with my platform. And we really, as a full service organization, one of our best qualities is we do cover it all. So we do everything from the site selection, we do all the marketing analytics on the senior living side, we have an A&E team that does all the design, we do the construction, and then we’ve got a full capital markets team and asset management team that helps us really get the project from beginning to end. The one thing we don’t do is operations, and so we do partner with numerous operators across the country that handle the operating side of our business.

 

Lucas

Absolutely. So a lot of experience in your belt when it comes to this. There’s, I imagine, different verticals that the Ryan Companies are involved in. You’re the leader in senior’s housing, what has attracted you to senior housing and what’s kept you?

 

Julie

Yes, so you are correct. We have lots of verticals at Ryan. We have industrial multifamily healthcare, some built to suit office, and so senior living is one piece of the strategy for Ryan Companies. And about 10 years ago they really decided it was a significant strategy. It was a sector that they believed in, the data, obviously, that’s why we’re all here at NIC. Demographics tells us that we are, we are in this business for a reason, and that there’s a long-term piece of it. And for Ryan Companies, they just really decided it was, it was one of the things they strategically wanted to look at. I’ve been in this business for over 25 years. I started my career right out of college at The Fountains, which is now Watermark, so with David Freshwater and David Barnes. I was a financial and marketing analyst, and at the time we were acquiring projects all over the country. And because we were a small company, I got the benefit of seeing everything from the analytics piece, to the due diligence, to the operations, to the operating budgets, to really understanding everything that goes into the success of a retirement community. And probably at the time, didn’t appreciate the education I was getting on the full aspect of it, and today it certainly serves me well. Didn’t know anything about the business coming right out of college, I needed a job, right? And as I was in the business and really learned and experienced and met all the residents at the communities that we were buying and got to be friends and get to understand how we were positively impacting their lives. It was a business that was just incredibly compelling. It’s an incredibly difficult business, as everybody will tell you, and I think that’s also what keeps me in the business. I don’t know, maybe that says something about me, but I appreciate some of the challenges of having to manage the building, the building aspect, the hospitality aspect, the licensing aspects, the healthcare aspect, that all goes into it. And then at The Fountains, I moved into the development side to really learn the development side of the business and on the job, which was a great way to learn it, and thankfully they trusted me to do that. I did get out of the business for a few years. I went and did some other stuff that just worked better with family life, and I kept getting drawn back into it. And so about 10 years ago, really got back into it and ran for a company, Titans Development, ran their senior platform, which then, thankfully, brought me to Ryan Companies in December of 2019, and had a really exciting five-year growth plan strategy that we were going to implement, and let’s just say that plan changed in March of 2020. But we currently have 20 projects that are open and another six that are under construction right now.

 

Lucas

Okay, so, talking about challenges, you talk to operators and owners and private equity companies that are looking to develop every single day. What are some of the big challenges, problems, and questions that they’re saying, ‘Julie, I need help with.’

 

Julie

Yup. So that is my job. I always say when I don’t hear things they’re going really well, and when I always get the problems that land on my desk, which is, which is truly my job, is to help, help solve those problems. You know, starting really at the very beginning from the construction in, well, the site identification side, is the easy stuff’s been done. And so my development teams are really challenged with finding the sites that we can afford and multi-families not coming in and outbidding us, and really finding communities, finding locations that still need senior living in the short term. Certainly in the long term the demographics are there. And so we’ve really had to pivot from a more suburban model of development. We’re doing a lot more infill work today, tear downs of existing buildings and replacing existing structures with new senior living projects. And those take more time. Sometimes they cost more money, and are a little tougher to get done. And so we’ve had to shift a little bit just in our thinking and how we’re going after strategy-wise and really expanding where we’re willing to, to develop projects. On the operator side, same, same issue that everybody’s having. Related to just attracting labor, dealing with the burnout factor, and certainly wages are increasing for certain positions at an unprecedented rate. And I think the biggest thing that we can offer to our operators, because we have numerous operators, we, especially during COVID, did a great job of getting those groups together on a regular basis, and talking about how are you managing that? And how are you handling this? And, oh, that’s a great idea, I’m going to try that, and sharing those ideas freely, and having the opportunity to really just look at someone, how someone else might be handling something. And I think there’s a lot, there’s also a lot of commiserating that can go on with that to make people feel better, that they know they’re not alone and they’re being supported. And I think that was one of the things that Ryan Companies could do, is support our operators and let them know that we have the patience, we understand, we get it. What can we do to help, you know, our asset management team when two of our operators have a really hard time finding PPE early on. And so I made a bunch of calls and managed to get together several operators who then we were able to place a really big order. You know, a PPE that individually, none of us could have done, but as a group, we were, we were able to get done. And I think our operators just appreciated that they could call us about that when that’s not really what we do, but knowing that we had the resources and the context to be able to do that.

 

Lucas

So today the conversation has switched from acquiring PPE, to what’s the price of labor. What is the supply chain like? You know, how long do we need to put the project on hold? Talk to us about some of those elements.

 

Julie

Yep, absolutely. And what the construction pricing has been for us, the biggest challenge is its volatility. And so we, you know, no one’s naive to think that, oh, construction prices stay the same forever. But we were able to accurately predict, within reason, where those costs were headed, and so therefore able to get projects rolling and say, okay, six months from now, we know what this is going to cost. Today, the issue is, we don’t even know what it’s going to cost next week. And, that’s really been the biggest challenge for us.

 

Lucas

Or if it’s available.

 

Julie

Or if we can even get it once we sign that sign, that contract. And so the great news of being part of a company as big as Ryan Companies that does work all over the country is, we have a lot of relationships and a lot of contacts that we can utilize to, in certain markets, certainly to move to the top of the list or lock in a price that maybe some other smaller contractors, or some other groups that maybe aren’t doing six projects in that one market, they might not all be senior living, but we’re doing six projects in that market, that we get, you know, we do get the advantage of having that piece of it. That being said, it’s still been tremendously difficult to get that tied up. Supply chain is probably the bigger issue because it just, your schedule, the minute you get out of whack and out of sequence on your schedule, certainly it impacts a whole bunch of other stuff. And that’s, that’s been, that’s harder because no one can control the thousands of ships that have been sitting in the oceans trying to get unloaded. And there’s nothing anybody can do about that, regardless of who you know, or or how long you’ve had a relationship with somebody. So we’ve really taken the approach of early buying on projects. The minute that we’ve got the equity tied up and the debt we, we start letting contracts and start placing orders, and we’ll take that, some of that risk on materials simply to, to maintain our schedules. So the other thing is, you know, from a procurement perspective, Ryan Companies has created a procurement department over the last couple of years, and again, the job he thought he probably was doing ended up being a little different given the commodities pricing the last couple of years, but again, we’re, we’re in it for the long haul. And so we’ve got to figure out how do we solve these issues for the long-term. We’ve spent some time, the past 18 months, really evaluating modular construction, and can it work for senior living, and what does that look like? And we’ve, we’ve completed a couple of case studies on projects that we’ve traditionally designed, and then flipped them over to the modular group and said, what would the, what would this building have to look like in order to achieve the schedule improvement and the cost improvement? What, what do we lose? Do we lose some of our common space? Do we lose having eight unit types and now we only have six unit types? What are the trade-offs? And what we’ve discovered is I don’t think it’s ready for senior living yet so we’re doing some test cases on our multi-family platform right now, and let them work out some of the kinks. But I would say, you know, we, we discovered it’s probably 70%, the same project and 30% we, we sorta have to figure out. But that, that, again, for us as a long-term view of how do we keep doing this in this incredibly challenging environment.

 

Lucas

Well, that definitely lends to the next piece of the conversation is, where is the future of senior housing development going? Obviously, you’ve talked about the modular and that maybe we’re not there just yet. What are some other trends now, kind of coming out of this fog, we’ve talked about supply chain issues, but say I’m an operator right now, and I’m saying, look, I want to develop this property. I’m ready to go. What do I need to be doing?

 

Julie

Yeah. Certainly all of these challenges in the near term is leading us to the higher end work. It’s easier to get done when you can, when you can charge higher rents, which is really leading us to a lot of more urban and infill projects than we have in the past, historically. The other piece that we have, one of our operators called Grand Living Management, and their entire platform is based on a true age in place model. So if you move into an independent living apartment and you need care, you can stay in that apartment until you need memory care or more care than we can provide. We’ve discovered we’ve built that in several very crowded markets where we’ve struggled to get equity because equity partners have said too many competing units, and we’ve been incredibly successful. I think what it offers is a product that isn’t readily available, certainly a handful of people are doing it, but this is all they do. And they’ve really figured out how to do it. We’re able to charge premium for that, and so it makes it a little bit easier for growth from that perspective. I think what I tell all of my operators is, and I remind them constantly, they already know this, certainly not telling them they didn’t something they didn’t already know, we have to be incredibly flexible about unit sizes, amenities, services, how we’re delivering the product. And I think our industry has done a great job of building product, we haven’t done a great job of diversifying our product. And why would we think when we’re all 85 years old, we suddenly want to all live in the same type of community when we haven’t wanted to do that for the past, you know, 84 years of our lives, and I think that’s the one thing that we need to recognize. There’s different product types that are going to come out of the pandemic, certainly other factors of how people want to live economic conditions. This, the fact that, you know, this middle market piece is real. And, and that’s, you know, part of the reason we’re trying to figure out, can we deliver something faster, less expensive, because we know there’s a market for that. And we’ve got to figure out how we incorporate that into our strategy in order to continue building and be successful. And so I would encourage, you know, I certainly encourage all my operators, just because that’s the way we did it two years ago doesn’t mean that’s how we have to do it this year, and let’s talk about it. When we sit down and talk about the performa let’s talk about different dining programs or venues, or let’s peel out those services in this particular market, because there’s a reason to think that that might be what this market needs. And so, I think, you know, we definitely need to listen to our consumers more and we need to be paying attention to what, what they’re doing and how they’re having services delivered. You know, this whole technology piece, Amazon and their Echo, and you know, Walgreens is now getting in the business and Best Buy has bought a whole bunch of the technology pieces. That’s going to be a bigger component. And again, our population today hasn’t leaned into technology as much as the next set of population will, but I think as an industry, we certainly have to figure out how does that get incorporated? And does it change the design? Does it change the size of the apartment? I don’t know that it has an impact on the physical built environment, maybe it only impacts programming, but maybe not. Maybe there’s something else there that we need to be paying attention to. So I think we’ve, we’ve all got to make sure our heads are up and we’re paying attention to what’s happening around us. 

 

Lucas

So rounding out the conversation, let’s talk about design for a minute. What’s the modern approach, what’s the new design, has COVID impacted that, are they building differently as far as even the MEP or physical plant? You know, what are you seeing in those categories? 

 

Julie

Yeah. And certainly for 12 months, it’s all anybody talked about, what are we going to do, and how are we going to fix this, and how are we going to make it better? What we discovered is we were already doing a lot of things that improved air quality or had a lot of the standards that people were talking about. We just never talked about it because no one cared. 

 

Lucas

Right, now everybody really cares.

 

Julie

Suddenly it’s a marketing sheet in my brochure, I mean, who wants to talk about MEP? Nobody, as far as I know. So what we discovered is we went and did an inventory of what do we have, and are there easy fixes and shifts and just changing the filters that we use or putting another air exchange on. But really what we discovered is we were providing a pretty high level of air quality and air flow and air exchange in our buildings. We just, again, we never talked about it. And so, you know, I think certainly we as an industry spent a lot of time talking about it, figuring out what’s the right reaction instead of the overreaction. As you know, development takes 24 months. So let’s pretend that all of us started building 50 projects last year at this time to meet the COVID standards. They’re not opening for, you know, for another year and does anybody care anymore, right? So, we really, we tried to really look at it with our operators to not overreact, and to do the things that we could certainly talk about. You know, we can’t afford to triple the size of our dining rooms, that’s just unrealistic. And I think what really came out of it was flexibility of space, and how do you turn the activities room into another dining space easily and readily and make it easy for everybody to execute that? How do you create a back-of-house for your employees, where people can take their shower before and after break, when maybe you didn’t design that into your building originally, and can you take a unit? We, you know, a lot of times we took an apartment, repurposed it and did the thing. So it really, I think came down to flexibility. And we spent a lot of time, we had several focus groups with operators we work with, and then my industry friends, really talking to people about what do they want to see? And the one thing was air quality, and the second thing was really about flexibility of space and how do we build things that we can use them for multiple things, because we know we have to be flexible in today’s world.

 

Lucas

And those are problems that are easily solved through design? 

 

Julie

Correct, yes. 

 

Lucas

Well, very, very good. I think that for myself, I’m very optimistic. Are you optimistic about the future of senior housing?

 

Julie

I am very optimistic about the future of senior housing. And I think as we learn more about you know, the studies that NIC is doing about how did communities do, how did our residents do? We were pretty much you know, on par with people who were either you know, didn’t live there and people were just as safe, and I think that’s an important message that we have to make sure that the world knows in order to continue with senior housing. But again, it’s a need and the population is not going anywhere, it’s coming, and I’m incredibly optimistic about it. But again, I think we just, as an industry, have to realize one size doesn’t fit all, and we have to flex our products and our communities to meet the needs of the future generations. And I think, again, we just have to be paying attention to what are they telling us and what do they want to see?

 

Lucas

Julie Ferguson of the Ryan Companies, great topic on thought leadership in this category. Thank you for coming and spending time with us here on Bridge the Gap today. 

 

Julie

My pleasure. Thank you. 

 

Lucas

And thanks to all of our listeners for listening to another great episode of Bridge the Gap.

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197: Julie Ferguson