Chris Hollister, Chair and CEO of Pegasus Senior Living, speaks on the change in active adult demographics and how labor has become one of the industry’s biggest challenges.
Welcome to Bridge the Gap podcast, the senior living podcast with Josh and Lucas. We are doing more thought leadership conversations. We want to welcome Chris Hollister, he’s the CEO of Pegasus Senior Living out of Texas. Welcome to the show.
Thank you, thank you. Very, very glad to be here.
Yeah, absolutely. Just flew in last night, long flight. People don’t get a lot of sleep when they’re at NIC cause it’s the continuous speed dating, and events on and on and on. Chris, this is obviously not your first time at a conference like this. You got your start a while back. Take us back to the beginning. What interested you in the whole senior housing play?
Well, thanks, thanks again for having me. You know, I didn’t have a passion for senior living growing up. You kind of get into it one way or another, and most people become sort of lifers because it is a very rewarding field to be in. I was in banking, I had an MBA, got out, and took the only job offer I had at a bank in Dallas where I grew up, and things were not going well in Texas banking in the 80s, my dad was with a different bank. He said, if you can get out of banking, you should. So I did. And I answered an ad for a financial analyst. I’d always been interested in how companies make big capital decisions. So it was a great job. Greystone, shout out to Mike Lanahan and Paul Steinhoff and those guys. They did CCRC development for hospitals, and it was a great entree into the sector, cause I got to go all over the country, looking at different markets and really putting the marketing piece together, the market data demographics, with the financial, how much does it cost to build? Because anything can work if you have unlimited demand, but then no one has to pay for it, right? And you have to try to make an intelligent decision for those things, so it was a great training round. And that was the late, that was ‘86 to ‘89, and we were seeing that their typical community would have anywhere from 120 to 200 in independent living. And for your college student listeners, that’s more of a hospitality product with people are getting housekeeping laundry with one to three meals a day, you know, it was one back then, and then we’d have a small assisted living space. And then we would do a nursing home, a few times, if we could get the certificate of need. And the assisted living was just filling up. We weren’t even marketing and it was filling up. So we got Mike Doyle that worked there, he moved to Boston and said, I’m going to move to Boston and start a company, I want you to come with me. And I became CFO of that became the Standard Care Company. Very early days, no one knew what assisting, I call it golden retriever looks, you’d go into a meeting with private equity people and you’d tell them what you’re doing, and they kind of go, you mean like a nursing home? No, we mean like private pay care. Well, we don’t know what you’re talking about. You know Paul and Terry Clawson had started Sunrise, so they were going, and that started, but that was more of a higher end product. So Standish kind of went sideways, we got bought out. I wrote a business plan in North Carolina. I went to business school at Duke and married a girl from Carolina, and, really almost in a cathartic way, said if I was going to do a business plan, here’s what I would do.(03:24):And didn’t even know if it was going to be a business yet. And that became Southern Assisted Living, which we were really one of the first operators to go to middle market, sort of Wal-Mart towns, and put memory care under the same roof, single story, wood frame, construction, middle market product. That was very innovative in 1996. And we built 17 of those, bought out our biggest competitor, and had a very successful culture, very proud of the culture we had there and the financial results were, were very good. And shout out to Steve Morton the co-founder of that with me, and Rich Williams was there with me, who’s now joined us as chief operating officer. So, I sold that company in ‘06, and decided to take a break a bit. Cause if you work around seniors, you figure out that the whole gig doesn’t last that long. If you talk to an 85 year old in our community they go, wow, I can’t believe I’m 85. And so we moved to New Zealand for five years and I did quite a bit of hiking and backpacking. We did a nonprofit thing, raised money for an eye clinic, but I got involved in the sector there because people found out my background. I became a board member of visits in senior living and chairman of the board of that company. And that’s very much a lifestyle product like that independent living that I, I had referenced earlier. But it was great to see how they do that, they have some beautiful communities in Australia and New Zealand. But the girls had just got out of high school, they wanted to go to a university in America and we moved back in 2012. And Welltower, who’s a minority owner of Sunrise, asked me to go on the board of Sunrise, so I was on the board of Sunrise for five years. Stephen Vick is a real pioneer in the sector. You know, he did Sterling House and assist living concepts, and he had signature assisted living. Welltower called him and asked, hey we want you to maybe fix 14 or 16 buildings. We’re riding bikes around White Rock Lake in Dallas. And he told me, he said, well, I’ll help you, I’ll just come help you. So he called the next week said, well, why don’t you just come be my partner? So off we go. And then it kept growing with Welltower and then we had 36 communities, previously operated by Brookdale. And then Steven actually had some health problems, so I bought him out. We’re still friends, he’s coming over in two weeks just to check in on the company. And you know, we had great traction before COVID, and now we’re in this whole world of COVID and trying to, to maximize that for Welltower and they’ve been great to work with, or they’re giving us the resources to spruce up these places. And when we’re excited about a post COVID world.
So some of the biggest challenges for our industry, what do you see them being in the years ahead?
Well, right now, if you talk to operators here, you know, the old saying in real estate, that it’s location, location, location. I mean, right now it’s labor, labor, labor. And not just, oh, we got to pay people $14 instead of $12, or $16 instead of $14. At all levels I think it’s worn people out. I mean, there was a nursing crisis already, and that has been greatly exacerbated by COVID with, with nurses, just leaving the profession. We’ve had the executive director just go, you know what? I need a break. I’m going to travel for a year. I’m going to do something else. And then at the local level, just getting people to show up. I think it has triggered a paradigm shift with this new generation where they really want to have meaning in their lives, they want to be treated with respect, and they want a livable wage. And you know that that’s not asking a whole lot. You can’t blame them, this is hard work. So right now the big challenge is labor. You know, it was interesting, I don’t know, if you guys saw The Economist this morning, we had Paul Krugman and Larry Summers who are two of the top economists in the world, and they said they were somewhat perplexed by the current times we’re in. I think everybody feels that way with supply chain disruptions and inflation, what is, what is the future going to be? So I think for the next 12 to 24 months, it is labor. And then it’s also, hopefully we don’t get another variant of the COVID. Besides that, I mean, I think fundamentally there’s a lot of demand, particularly for memory care, we’re doing a number of memory care conversions. If you do that program right, you’re really solving a major societal problem. For your young people that are looking for careers, coming into this sector, to have meaning in your life. If you have a soul, you might not know you love it, but you’re going to get in and you’re going to find out that these places are actually a lot of fun. These are places to go live, not to go die, if it’s done right. Life enrichment is a passion of mine, and we don’t have the newest shiniest penny, you know, but we can, we can win on software, we can win on life enrichment and our connection to memory care program, and that’s really the strategy I’m trying to bring to Pegasus.
Well, and you may have just answered my follow-up question. And that was, what is the greatest opportunity for us? What do you think is the greatest opportunity for your company in this difficult time with labor, labor, labor as you say, what would be the flip side of that that you’re looking for?
I think mission one for us is to fix the communities that we have from Welltower, these 36, and that’s a challenge. And if we do that, I think we have a lot of opportunity to become sort of the turnaround specialists in the industry, and we’re trying to create a great culture. We’re working with the activated insights on resident employee surveys, which we’re really trying to drive home the culture, we want to have a very strong recognition program. But if we can fix these 36, I think with Welltower and then with others, there’s going to be a lot of communities. Because you know, it’s hard to do this ride. There’s a lot of new people in the sector. Some of them have been extraordinarily successful, but not all of them have. And I think the capital providers are getting smarter and they’re seeing that it’s difficult to do this on a massive scale. It’s really best to have, I don’t want to be at, you know, 500 communities, I think if we got from 36 to 50 or 70, probably would over time get more concentrated in the middle of the country, which is sort of where we’re based, would be a lot more, would be the opportunity for Pegasus.
So, take us, I guess back 25 years ago, talk to our listeners that are in the same situation that you were. MBA, banking, you got people out there right now, they’re thinking, hey, I’m not really digging what I’m doing right now, or now’s the time to do something for the future. What would your advice be to them?
Well, if they’re interested in sector, one would just be job security. I mean, I’m 60 and it’s the next 20, 30 years, this is the pig going through the pipeline, right, demographically. And I think the big opportunity, that I don’t think is a Pegasus opportunity, per se, but I do think the active adult, there’s going to be tremendous, tremendous growth and diversity coming with LBGT or people who just like organic gardening, just custom ideas on that. You look at the whole ESG movement and wall street, and how do you have a community that’s sustainable? And you know, triple bottom line with wellness financial and social. Maybe we bring a daycare in and we have an intergenerational program. I think there’s going to be a lot of energy in that space.
Do you think that active adult community that is traditionally, I guess it’s described as 55 plus type, what do you think is going to be, do you think that’s going to widen as we saw assisted living and independent, the acuity creep down into even independent living and it’s kind of what assisted living, some of them, used to be. Do you think active adult will start seeing more acuity in those communities as well and you’ll see delivery of care?
Yes. I think it needs to be done in a way that it’s sort of like an airbag, where you don’t see it, but it’s there if you need it, and I think that will be the second or third phases of some of these communities. You know, just 25 years ago, it was, and I was a demographic geek, that’s what my job was, it was 75 plus. And frankly, one of the challenges is, a lot of the demographics on these feasibility studies are still using 75 plus. It’s not 75 plus, it’s 85 plus. And you know, these people are there because they need care. And 10, 15 years ago they would have been in a nursing home, and now they’re coming to assist living. The 55 plus, I was on a panel with a guy, I don’t remember his name, but he was, in the active adult as it’s done now and where it’s multifamily, and I just, I don’t get it. I’m not saying it’s not a good idea, I’m just saying I don’t really understand it right now, but I will tell you what it’s not, it’s not 55 plus. If they were here, they would tell you that. It’s 75 plus. I heard of a project that has pickleball courts and they don’t have anybody in the building that can play pickleball. So there’s a mismatch. If you’re going to get people my age to 70, I mean, Jimmy Buffett is coming in and is showing what you can do with creativity and new energy. I mean that dude is a genius, not just musically, writes books, and now he’s doing where you can make it fun and you want to make it a place to go live and people will move in when they’re 65 or 70. And they can stay 15 years.
I love that. Well, we’re hearing a lot about that and I appreciate your insight; I know you’re on a tight time crunch, thanks for spending time with us today. And I know our listeners, Lucas, are gonna want to connect.
Absolutely. We’ll make sure we connect Chris and Pegasus into the show notes so you can reach out to them, and check out what they’re doing on their journey. You can also go to btgvoice.com and listen to all of our episodes and connect with us there on social. Chris, thanks for your time today.
It’s been wonderful, Lucas, Josh. Thanks so much.
You got it. You got it. Thanks to all of our listeners for listening to another great episode of Bridge the Gap.