Hi, this is Traci Bild CEO Bild and Co. I am conducting the sales and marketing podcast for Bridge the Gap, and we have a lot to talk about today. And for those of you that follow my content, you know, I tell it like it is. And today our topic is on a dirty little industry secret that no one seems to be talking about, but that we see as a consistent theme every day. And working with operators and investors all throughout the US and UK and Canada. And that is really the operator investor tension reaching a boiling point. It’s something that I don’t see people openly talking about. And quite honestly, it’s only getting worse. So I’m going to drag this topic out into the forefront and really make it top of mind so that we can have a candid conversation and find solutions so people can move forward and really get back to the business of enjoying and loving the work that they do and seniors housing.
I’m just thinking back to yesterday two very different calls, right? One call, I was talking with a longstanding owner who had a large portfolio and had worked with this operator since about 2005 and had just lost his passion for working in the business. Not because he doesn’t still love seniors, but because of the relationship with the investor side of the business. It’s sucked the life out of him. And I really could relate and understand because every day here at Bild and Co we work with investors, we understand their frustration and we also get what’s happening and the concerns on the operator side. Yet on an alternative call I was on with an investor who was pulling their hair out and frustrated because in working with their operator, who’s someone entirely different. They simply cannot get results. They see no end in sight to the declining revenue and why no solutions, constant excuses and a refusal to meet in the middle and work on performance problems together.
So, these are the kinds of calls that myself and my executive team in particular are having every day. And while some operators and investors have worked together for a very, very long time, have incredible relationships and are in it for the long haul. Unfortunately, that’s not everyone. We deal with large portfolios to single site operators, and we really get a taste of trends and what is happening nationally. And that’s what I want to talk about today.
Now, as I was getting ready to record this Bridge the Gap Podcast, I was sent an article by Jennifer Saxman, our COO here. Which we’d heard rumblings, but I was like, wow. So a long time client of ours, who we love health peak is exiting the senior housing operating portfolio and triple net lease assets. And it doesn’t surprise me. The real estate trust announced Monday November 2nd, in its third quarter earnings release that it’s in various stages of selling more than 4 billion worth of senior housing properties. And their focus going forward is going to be on growing their three core businesses of life sciences.
So, their MOB and their CCRC. And what’s interesting about this is just yesterday, I finalized a blog that is actually probably going out today, about something that I’m just seeing, and that is investors who are looking at other assets. So, whether it’s storage units, warehouses, commercial real estate, it’s just the rumblings. But I always say everything starts with the rumbling, but the risk involved in seniors housing and the inability to align with operators and really fix many of these problems that are very repairable has become a major pain point for investors. And they can take their funds and invest elsewhere without the headache of working with an operator who refuses to understand that they too have stakeholders that they need to please. So don’t worry. I’m going to look at both the operator side and the investor side today.
Depending on which side of the aisle you’re on, so to speak, there’s a case for everyone here. It’s such a complex business trying to bring real estate and healthcare together. If you think about that, and what’s involved real estate being very, very transactional healthcare, being very emotional it’s very interesting and difficult to align. And we’re seeing that now more than ever, because it’s gotten so tough in the midst of this pandemic with earnings, just being crushed, due to the increased expenses and the decreased revenue that we’re seeing right now. So, we see this big news story come out with Health Peak. And again, when I read it, I just kind of thought, yeah, I get that. I mean, I think there is tremendous upside clearly to being in seniors housing. But I think for many investors, what they’re finding is they don’t know how to proceed when it comes to working collaboratively with their operator to make an impact and turn the tides of what we’re seeing with poor performance. And we’re really seeing big barriers on new development that I’ll be talking about here in just a moment.
So why are we seeing this tension? And will we see more exits from investors in 2021? I think we all know that there’s going to be a lot of assets changing hands consolidations, people are going to exit. But we have so much more power than we realize. And what we need to do as an industry is focused on what we can control versus what we can’t. So we can’t control COVID in particular, as far as, you know, whether it’s a surge or not a surge, we can control our procedures in our own operations, but we can’t control the different policies that the government puts in place, per se. We cannot control the economy, whether it’s going well or in decline and people can sell their houses or not sell their houses or fund seniors housing or not fund it. We can’t control that. But what we can control are many things that have a massive impact on revenue, and that is the proper hiring of sales, talent, executive director talent. The proper training of people in these roles to professionalize the business of seniors housing. So, they understand not just the importance of net growth and gaining traction on occupancy and revenue, but how to do it and how to sell it at market rate rent, not giving away the store. There’s so much opportunity that we have that we’re not seizing.
So, a few things that we’re seeing here is that investors in particular of all sizes are just beyond frustrated with the poor performance trends, many that existed before COVID hit. So, before COVID, as you recall, we had a lot of new development, many operators stating that their markets were saturated, that competition was really hurting them and their ability to get the move-ins they needed and that they were being forced to discount to compete. They were losing their staff. So we already saw this stagnant occupancy, if not a decline going into COVID. And then as COVID progressed, obviously we’ve seen devastation to occupancy. And while we thought that things were normalizing and that we were starting to very effectively work with the new and people were touring again and moving in, we came to where we are today in November, where we’re seeing surges again. Some portfolios are shut down from touring. Some are shut down from admissions. And what’s happening for investors is that they have stakeholders and they need to provide returns. This is their obligation, and there’s really no end in sight. There’s no bottom. And it’s not just that no one has the crystal ball, it’s even worse as that. They’re not able to align with their operators as to a game plan on how to respond.
What are we going to do that is in our capabilities to drive revenue and at least survive this very difficult time so we’re not laying cash out of pocket in order to sustain this operation? Now that’s the frustration of the investor. The operators are also frustrated, because I had mentioned earlier in this podcast about my dear friend who is an operator and owner, is that they feel that investors don’t really care about the operation. Now we know they do, but the sense is in many cases that it’s all about an OI at all costs, even at the detriment of resident services having to cut staff or food costs. And so in the operator’s eyes, the investor is sort of the bad guy that we hear about in the media, who’s just looking to make a margin. And the reality is neither group is right here. It’s just how people feel, right?
The fact is that the investor has a job and that’s to provide earnings to the people who give them money to invest. Operators have an obligation to take care of seniors and deliver on what promises they made to their family members to really give them the care and the lifestyle promise. Now, these things are very tightly entwined because the reality is if we don’t have earnings, there’s really no money to put back into the operation. And some of this frustration could be alleviated with stronger occupancy in margins, because when the operators are frustrated with the cuts that the investors are trying to make in order to provide an earning, what they don’t seem to understand is that if we would be more diligent about training our people to find needs, build value, and sell at market rate rent, refusing to discount in order to get those quick, easy sells, there would be more margin in order to sustain the business and no need to cut, cut. And we know there’s really nothing left to cut. The real solution here is you have to drive top line revenue. When you’re dropping driving top line revenue, you have to be really conscious about net margin per move in. So looking at what we are charging and rent? Is this an accurate market rate rent? You have to have a really good pulse on your market service area and what rents are being charged that are very close to what you’re offering. What kind of deals are people getting? So you are intelligent and can speak about them and be confident in your rate and the fact that you won’t need to discount services in order to make up for those cuts. And that means you have to train your people to have the confidence to talk about these things. And what we’re seeing right now is salespeople are very fragile. They’re not confident. They’re not even closing to the next step of a live virtual tour or an in-person tour. So, there’s a lot that we have control over that we’re neglecting and it’s infecting both operators and investors.
So, the bigger issue here is that these two groups are both frustrated. What we don’t see happening enough, and where we end up getting involved is bringing them together to agree on a plan of action, to turn things around. And trust me, that’s not fun. It’s never easy. There’s a lot of ego involved. What I found though is when you get people to the table and you get them talking and you rip the band aid off and you present the evidence for both sides, then you can start to make progress and come up with a plan that will produce a win-win for everyone involved. Which overall will improve the operator investor relationship, because no one wants to lay their head on their pillow at night and just be worried or sick at their stomach or miserable with their job, because they’re not able to be successful. Everyone wants to succeed. What I do find strange is that you know, we get investors need those results because that’s how we’re going to get the developments built. Right? If we can’t produce returns, people are not going to invest in the funds to do so. The kind of anomaly here is for many operators, there’s really no desire for some of them. There’s amazing operators and you know who you are, but there’s this lack of urgency and a lot of excuses and statements like we’re doing that. But those things that many operators think are happening, such as calls being captured and converted into onsite or live virtual tours are simply not happening. And that’s some of the bigger frustration with investors, is they can’t seem to break through to their operators to help them understand that we need to professionalize the sales and marketing aspect of seniors housing so that we can more effectively perform and meet our goals.
And the reality is we are selling a six figure item, right? So a two year stay in an assisted living can easily be over a hundred thousand dollars. We’re not selling a $5,000 product here. So when you think about the level of savvy information skill set that’s needed on the part of a salesperson, it’s very real. There is a lot here that needs to be taught and understood that simply is not being shared with the field. And with COVID everything that worked in the past is kind of out the window. And that’s why a lot of salespeople that are responsible for driving your revenue, margins, returns are failing. They have not pivoted; they don’t know how. They’re dealing with this themselves and their own families. They’re afraid, they’re coming to work, and they can’t be successful because their operators are not providing them with the tools they need to sell in today’s very difficult environment. And right now there’s really no end in sight. There’s just this continued deterioration of occupancy, of revenue, of NOI. And until we align and begin to focus on what we can do, versus what we can’t, we are going to continue to struggle. Now, investors, they feel like they’re talking to brick walls saying the same thing over and over getting the same responses, the lack of urgency. Operators, I think believe they’re doing everything they can. And the reality is we find operators are so overwhelmed, operating, right? Protecting and keeping their residents alive. Making sure that they’re staffing their communities properly in a really difficult environment where people are afraid to come in and care for seniors. They’re inundated in operations. And the reality that I see that again we’re not discussing, is that operators simply don’t have the time or the resources and staff to properly focus on sales and marketing right now. It’s kind of last on the priority list because first for them is keeping residents safe. So, we need to have these honest, candid conversations, and it’s understandable. But what we need to do is pivot. If an operator is short-staffed and they don’t have time, and truly they don’t in many cases, to really retrain their salesforce, to coach, to inspect and shop to make sure what’s inspected, that we’re inspecting what we’re expecting. Then investors are going to have to continue to compel them to admit that and to say, it’s okay. You know what, let us help you get support. What do you need? I mean, even if you go out and get a great book and you all read it together and you pivot and you dive into a specific topic on sales, that’s an improvement over doing nothing. So why are we seeing this? It’s because of performance outcomes. And again, for the investor that’s revenue. For the operator that is patient care in many cases. So, I would be very candid here and say that operators are struggling more than any other time in the history of me being in this business, and I’ve been in the seniors housing space for close to 20 years. I think the sad thing for me is watching owners and operators that have a standing history and seniors housing that absolutely love what they do. And people that got into this business because of grandparent, right? Or it’s a second-generation family member, and they’re very passionate about caring for the elderly. Watching them see this transformation of what’s become more of a transactional business because it’s being driven by the investor side with NOI really driving so many decisions. It’s tough. And I just want to bring that to the forefront for investors, just to try to put themselves in the operator’s shoes. This has happened very quickly and you can’t just shut off your emotions. So with that being said, the operators also need to understand that if it were not for their investors, they wouldn’t even have their communities to start with or have the cap ex, or be able to do the things that they do to serve their wonderful residents. And only together can we be successful, and this sounds really simple, but this is a huge barrier that we need to talk about. It’s creating a lot of friction. If you don’t know where to start, I mean, you just have to be very candid. And I know that can be scary, and it’s not always easy to get into what might be a confrontational conversation but you have to start somewhere. You have to begin this conversation with an end goal in mind. Operator’s zone of genius is taking care of old people. Investors zone of genius is raising funds to develop and finance the buildings in which these services can be provided. One can’t live without the other. And we’re at a point where this alignment, as we saw with health peak, and I’m not saying that’s why they exited, but I see and talk to many investors who are having similar conversations that are pulling their hair out. We don’t want them to leave our space. We want to have their confidence.
The way I want to discuss with you now is, you know what will bring alignment. What is the solution here? How do we solve this very complex problem? Well, I want to start with first operators; you have to admit what you don’t know. We see a lot of ego and you know me; I tell it like it is, but it’s true. If you don’t know something, admit it. This is one of the greatest barriers we see. It’s operators who don’t want to admit that they don’t have the time or the resources to address the gaps in their sales and marketing infrastructure or training. They don’t want their investors to be aware that there’s a weakness, but the reality is that the sales performance isn’t there, so they already see it. So, if you are struggling with teaching your salespeople, how to stop discounting and to sell at market rate rent, how to generate organic natural referral leads from your local hospitals, rather than using outside agencies who take your first month’s rent. Both of which kill your bottom line, or even things like how to get their salespeople to comply with something as simple as using the CRM so we have accurate reporting and data. We have operators that really are struggling here, and we have investors who are offering to bring in help resources to get people trained, to pay for that training. And operators that are saying, no, thank you we’ve got this. When the reality is they don’t. So operators, if you are struggling here, you must be candid with your investor and ask for what you need. And just because an operator has a BPSM or regional sales manager doesn’t mean that they understand how to develop new training for a pandemic that is wreaking havoc on move-ins, right? So many operators are afraid that if they admit it, their jobs will be eliminated. I’ve had many vice presidents say this to me, that if we need to bring in someone to do training, that means I’m not doing my job. But the reality is the job is so tremendous and overwhelming that we can’t expect them to know how to develop and roll out massive training very quickly that is very difficult. Their job should be able to implement, to inspect, to coach, but their job should not be in jeopardy because they come and say they need help. So just something to think about. Investors have to be willing to either provide operators with the financial resources or to just provide those resources themselves, to spend on getting the sales infrastructure. To put in systems that will help them to succeed. So, something as simple as phone systems, many salespeople do not have cell phones. We do not break sales calls out from other calls coming into the community, which means it’s very difficult to direct calls to an answering service who could pass them off to the salesperson when they come in, they’re antiquated. So just the simplest things from that to call tracking lines, to see which marketing campaigns are working.
There’s a lot of infrastructure that can be put in place that provides very quick wins. And with margins where they are and the pressure and the stress that operators have to perform. The last thing they’re going to do is come and ask for more financial resources. So, operators have to be open and receptive to the help that an investor is willing to give because many are offering. And investors that aren’t currently offering have to be open and receptive to the fact that what worked yesterday, doesn’t work today. And that if they knew what to do, they would be doing it. So, if they’re not getting results, they need a new plan. You can take time trying to figure it out yourself, or you can bring in help that can plug in a plan and get your people trained to sell seniors housing and a pandemic and begin to net up and grow occupancy.
This is the reality we’re in a new world. What worked yesterday, it just really doesn’t work today. The entire sales environment has changed. Another example, reporting and data. So most operators have a great CRM system that is being paid for that. They are not forcing their salespeople to comply with using. Meaning that when leads are coming in, some are being put into the CRM, some are not. Leads are being coded out as dead leads when they’re actually viable. When reports are being pulled, the data’s bad because bad data entry in bad data out. This is another example of complete frustration between operators and investors, to where because we’re looking at bad information, we’re making projections for move-ins that ended up being way off base. So little things, big things that we control and that are in our hands are not being done. So, if you have a CRM, it must be consistently used so an accurate pipeline and forecasting can be projected.
Investors want to bring up things like new development. So, on the investor side, we see very aggressive performance and lease ups on new developments that are so far off base. This is another example where rather than an operator pushing back and saying, this is crazy we’re never going to hit this because they want the deal. They’ll say, hey we got it. And then six months before opening, when they’re way behind their goals and all of the problems begin to arise and that frustration level on both sides has reached a peak. It’s almost too late. Now, is it too late? No, but it could have been prevented if there’d been an open line of communication and more candid conversation. So, investors during COVID with your new developments and COVID is probably not going to go away for some time. We’re in this new world where we’re not getting 200 leads and our new developments every month. So, what was, is no more. What we are seeing across the country is if a new development leases up is getting 30 to 40 leads in a month, that’s great! That’s what your performance should be based off of right now. Now that’s not a lot of leads. So, what that means is that the people in the sales seat need to be very savvy and have incredible sales skill sets, so they can convert a higher number of those leads into deposits and move-ins. You can still hit your goals, but you have to go about getting them hit differently. So, we need more candid conversations around these budgets and performance and how we’re going about achieving them rather than yes ma’am yes ma’am, Hey, this looks great. When we get there, we’re not hitting the goals then trying to make excuses.
The reality is that both operators and investors need to put true effort in better understanding one another’s business. Riding along together, if you’re able to. So that maybe an operator’s going on some of the visits with the asset manager. The asset managers going on some sales calls to the hospitals with a salesperson or sitting in the office and just kind of working but listening to those inquiry calls, the follow-up calls, the work it takes to close leads in today’s difficult environment. Talking to residents and understanding the difference that the community has made in their life. Even during this pandemic and beginning to better understand what it’s like to walk in one another’s shoes. Because here’s the good thing, there’s so much opportunity for operators and investors right now, because those baby boomers they’re coming. And they will need to move, because the reality is no matter what their fear is of being separated from their loved ones and being isolated in their apartments to getting COVID at a community. If the need is there and it’s strong enough due to the realities of aging and not being able to care for oneself, the need is going to outweigh the fear and they are going to move, but we have to work together. And the more we do this, the more successful we will be. We’re going to need more new developments. But in saying that we need more realistic performance, right? And lease up plans. We need more operators who are able to meet their investors in the middle and understand their frustrations and challenges and be honest when they’re struggling and having a difficult time in particular market service areas. We want to leave our egos at the door because that is the greatest killer of any business that I’ve ever seen in my 20 years of being in seniors housing is that ego. It is detrimental. Let it go. Now is the time to be learning, growing, striving, interviewing, talking to line staff, executive team members, reading as much as you can and digesting and pivoting and experimenting and working to get better and better every day. That is your opportunity right now.
And I would start with your operator or your investor. A great tool if you’ve not accessed it yet for you to follow together to further collaborate and unite is my executive book club series. It’s on my email@example.com. It’s under resources. And right there, it says, join our book club. It’s a really phenomenal series and we cover different books and we break it down and talk about how to apply the information to seniors housing. And then of course you can sign up for my regular blog series and all of these content series that we’re putting out are available now, in both podcast format and in written word. Depending on your style and how you like to digest information, whether you’re in your car wherever you are. Our goal is to continually make it so that you can educate yourself, motivate yourself, be inspired and grow.
So please sign up for those, if you’ve not done that yet. If you’re sitting here, you’re thinking, geez, this makes sense. I can relate. I understand. If you operate a portfolio, or maybe you invest in a portfolio and you really want to get real about the sales process and what that buyer experience is like right now. How your staff is doing it, scheduling the next step and doing those live virtual tours. We are happy to do a complimentary sample of mystery shops to really gauge and communicate what that true buyer experiences right now at the site level, within your organization. We can do upwards of three to five of those for you complimentary. All you have to do is shoot me an email with the locations you’d like us to shop and just send that to firstname.lastname@example.org and let us know those locations, or just say, do a random sample of my portfolio, let us know what it is. We will get those in queue, and we will be able to come back to you and show you very quickly where those wins are that you’re missing. So, you can literally start to turn the tides on revenue and customer experience delivery within days, if not weeks. I appreciate your time. I hope I’ve not offended anyone. My goal here today is to be candid with you to speak truth so that you can learn and you can grow. I’m always open and receptive to receiving your feedback. Any data and information you want to share with me can also be sent to email@example.com. And I want to as always thank the Bridge the Gap team for the opportunity to speak with you today on this wonderful podcast series that I get to be a part of. Thank you so much.