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Episode 115: Steve Blazejewski

Plane crash survivor and senior living deal maker Steve Blazejewski of PGIM joins BTG for a conversation recorded in January and an additional recap of how COVID-19 is shaping real estate and capital. Don’t miss the story about the emergency landing of a plane that landed Steve on Anderson Cooper.


Lucas: Welcome to Bridge the Gap podcast, the senior living podcast with Josh and Lucas. And this is a special recap interview with a guest that we had on while at ASHA. We’ve got Steve Blazejewski on the program back again to talk about market conditions as it was compared to back in January. Welcome to the program, Steve.


Steve: Thank you very much. Appreciate you guys having me on again. Interesting times for sure.


Lucas: It is, you know, Steve, we were about to release your episode that we recorded at ASHA and we loved the backstory that you gave us and we wanted our audience to be able to hear that. But we also didn’t want to miss the opportunity because of your role and position in the marketplace to come back and say, gosh, Steve, so much has changed in just a couple of weeks and months. What are you guys seeing in the marketplace as it pertains to senior housing?


Steve: Yeah, that’s a great question. I think we’re all in this industry struggling to figure out what exactly we’re seeing and nobody really knows and we’re all very much hungry for data, frankly. And we’re all in a mode of price discovery is what I would say. And so, you know, we have to look at things really from a couple of different perspectives. You know, we do have multiple funds we manage in the industry and frankly, each fund is seeing a little bit different impacts on the business right now. And so, you know, but broadly speaking, you know, we are seeing obviously challenging times and we spent a lot of time talking with our partners, our operators and managers and really looking at the data and also communicating with our investors. And so each of those conversations a little bit different.


We’re obviously facing a period of unprecedented challenge. And so, you know, we’ve gone through and really tried to figure out how we can help our operators. That’s probably the paramount consideration there. In other words, can we help supply materials, PPE, materials to some of our partners? Is there some sort of economic way to be working with some of our partners? Looking at the impact the financials? Frankly, as an investor, you know, we do have a fiduciary responsibility to those investors. And so, while the safety of residents and staff is obviously paramount, as I said before, we do have to consider the other side of the equation. So it’s really trying to balance all those types of inputs and come up with a plan where some action steps that we can implement to help our partners, but ultimately help manage our business. So it’s really, you know, it’s all of the above is what I can say as an overarching theme. Does that makes sense?


Josh: It makes a lot of sense. Steve. So I’m talking just kind of practically as we start looking at deal opportunities. It’s hard to think of that sometimes right now, but as we’re hopefully seeing the light at the end of the tunnel and things maybe get back to whatever the new norm is. How does this change your team’s approach to looking at, I don’t know what the appropriate term would be, diligence or underwriting opportunities for acquisition? Because maybe now the trailing 12 looks really weird. You know, and you hit this bubble over the last few months. What are you guys taking into consideration that maybe a few months ago you never thought about doing?


Steve: That’s a great question. And as I said before, we have multiple funds. So our ship five fund, which we raised and invested over the last four years is in a very different state. So what we’re talking about here and focused on here really is our shift six fund, which we’re currently focused on investing. So we just raised this fund over the last year. In fact, we had the last close and first quarter as all this was going down. So, you know, potentially a very good opportunity. You know, I think unlike some of our peer firms, we do have the ability to invest across the investment spectrum. So you know, we’re doing development of the 30% of the fund. We’re doing 30 to 40% core stable acquisitions and we’re doing 40 or 30% value add type deals. So I think we’ve shifted into a mode now where we see even within those different sections we’re seeing different opportunities.


So from a development perspective, we’re certainly revisiting all of our deals. We have a lot in the works right now we’re trying to figure out what’s going to happen with land costs. For example, does land become cheaper and in certain core markets it probably won’t, where there will be minimal impact. But we’re also likely seeing an impact on construction materials. So as those types of things have been impacted last multifamily, last office construction, are we going to see favorable conditions for cost and for weight and construction? Labor, obviously it’s going to be impacted. So it’s really too early to tell how that’s going to be impacted. But we are revisiting those. We’re buying time on deals where we can, so we’re pushing out land closings and things like that to be able to get a little bit of visibility. Looking at the other end of the spectrum with the cordials, I think that’s where we’re going to see the biggest impact.

So if you had a building that was 93% occupied prior to this, are you going to see occupancy erosion over the last six weeks in the next six weeks to the point where that 93% building is now 85% occupied and you have to price it very differently. So I think those are going to be the toughest. And those you’re really looking at the market in terms of where was it, how was it operating for the last five years, or whatever the history data set is, and how do we think it’s going to perform in the future and what’s the path to recover? Right? So those are a little bit more mathematical perhaps if you will. I think you’re really looking at some of your baseline assumptions. What’s going to happen to labor growth, what’s going to happen to your rate and ultimately your revenue growth and those types of questions.


Sandwiched right there in the middle I think is really the most interesting area. This value add type bucket that for the last five years, we’ve had a really difficult time to find those deals. And I say that largely because, no, going back to the global financial crisis, a lot of communities, a lot of operators and developers did pretty well. There were not that many broken deals. And so as you think about that opportunity going forward, is there going to be pressure or are we going to see lender covenants being tripped? And we’re going to see lenders, you know, pressuring operators and developers to make some sense. Our lease ops going to be impacted. Are we going to see a situation where your typical 24 month, lease up not be a 36 month lease up or there may have been a backslide. When you look at development and lease up type communities, you typically see a pretty strong trajectory for the first 18 to 20 months.


Then often you see a little bit of a plateauing as you get to a point where units are a little bit harder to fill, you have some units that maybe don’t sell as well, maybe you start to see some move outs. And so I think depending on where those communities are in that cycle, they’re going to be impacted differently. But, but again, from the acquisition perspective, I think we’re pretty excited about those types of deals going forward. So, you know, I think to answer that, you know, perhaps you just have to break it up into different components and each component is going to be impacted differently. But it’s all about the recovery and assuming there is a recovery, whether it’s a V, a U or a bathtub shaped, those are all the terms I’ve heard thrown around in the news lately. You have to make some assumptions and make your best guess. But we’re trying to be conservative. We’re also trying to be optimistic. You know, we do believe in the longterm health of the sector and I think that the sector will come out of it looking pretty good when all the data comes in at the end of the day. And so when you look at our funds, we’ve got nine years left on the ship, six fund and five years left on the ship five fun. I think there’s a lot of opportunity for recovery and I think there’s a lot of investment opportunities.

Josh: So I think you probably just answered some of my next question, which was where’s the silver lining? Is there a silver lining out there?


Steve: That’s something we’ve been talking about a lot. And I was actually with an industry colleague on the phone yesterday from Welltower actually talking about that. And the data is still not in yet. I would say in terms of that silver lining. And I think what we’re hoping is going to come out of this is that we’re going to see that seniors in senior living communities performed better than the senior population as a whole. Meaning were there less positive tests? Was there a greater success rate? Were seniors happier? Were family members happier coming out of this and due to the performance here? So I think it’s too early to tell. I mean, we’re only realistically six weeks into this, and so we haven’t seen a lot of the data yet, but I’m hoping, as I said, that we’re going to see the industry performed better.


And I’m really hoping that we’re going to see what we think are the best in class operators are going to perform even better than the industry as a whole. And that’ll create a nice little story there. So I think that is really one of the silver linings. The problem with that or perhaps the fatal flaw in some of this data is that a lot of things are being blurred right now. You have residents, unfortunately in some senior living communities, let’s be honest. Unfortunately the industry, you know move out is an unfortunate situation that does happen quite often and I think there’s a lot of blurring between somebody passing away due to health complication and COVID-19 and I think it’s being flagged as a COVID-19 issue when perhaps it wasn’t or maybe it was compounded by that. So I think you’re going to have a lot of great data and you’re going to have a lot of situations that just aren’t black and white.


And I’m a little bit worried from that perspective about how things get grouped and how the data looks at the end of the day. But long term, again, very bullish. I mean, you know, you still look at the aging demographic. We’re still going to see a million new seniors per year coming into the senior living target demographic over the next several years. And this will certainly have an impact. And depending on the reputational impact that’s really gonna impact that. But you know, the demand as a whole is going to, can continue to grow. Prior to COVID-19, we saw a record number of absorption of units in the industry and I just think you’re going to have a hard time swallowing that when you combine that, particularly with the data that we’re going to be able to show talking with our operators, we still hear very strong interests from family members and from residence. So there’s absolutely interest. We’ve just governed essentially the number of move ins that we can have because of the need to quarantine residents, new people moving in. And in fact, if you look at our portfolio, when we do see positive COVID-19 cases coming in, a lot of times they’re residents coming in from nursing homes and places like that. So I’m sorry, I went off on a little bit of a tangent there, but I think it’s all important to look at all the different inputs to that silver lining question.


Josh: I totally agree. And it is a very complex issue. We’re obviously figuring it out altogether as we go. Gosh, you know, thinking back as Lucas said in the beginning of this interview in January when we were all sitting around at ASHA with some of the best operators and capital providers in the country and I don’t think any of us would have been thinking this was what our future was. And so it has been extremely rewarding to see the senior living industry rally together. It’s been really rewarding to see the great stories for many of the awesome operators and communities that are out serving this very fragile class that could potentially be impacted very negatively. But so many positive stories as everyone’s coming together. Steve, we appreciate you taking time out of your busy schedule. I know you’re working from it looks like the home headquarters. Yeah. Appreciate you taking time out of your day to spend with me and Lucas.


Steve: I appreciate being here as well. It’s certainly challenging times and I appreciate that you guys are continuing to, to move this initiative forward. I think it’s helpful for people to hear a lot of different perspectives right now.


Lucas: Steve of PGM on the program back on the program and we hope that you guys stay safe out there and also enjoy this recap from ASHA.


Welcome to the Bridge the Gap podcast with Josh and Lucas. We are at ASHA in California in a beautiful setting here. The sun is out, hardly any cloud in the sky and we’re talking about senior living and all of the thought leadership that is here. Josh, we have a great guest on the show today. I want to welcome Steve Blazejewski. He is the Managing Director of Senior Housing Funds for PGM real estate out of Atlanta, Georgia. Welcome to the show.


Steve: Good to be here. Thanks for having me.


Josh: Yeah, glad to have you. Thanks for joining us.


Lucas: I’m interested to dive into a number of things cause Steve is, he has been famous for a couple of different reasons and it’s not all on the brokerage side. Steve has also been famous because he has survived a commercial airplane crash.


Josh: Yeah. Not too many people have that on the resume.


Lucas: Which landed him on the Anderson Cooper show. So Steve, you gotta unpack that a little bit for us?

Steve: Yeah, happy to do that. I guess I would start, it’s you know, it was pretty uneventful day plane trip. I was flying from Atlanta up to LaGuardia airport in New York city. Typical business trip and a snowy day, icy on the runway. And it was, I was a little bit worried, honestly, starting the landing process and you can tell it was bad weather. And as we hit the runway, you know, you could just tell and I fly every week typically, and you could just tell right away that we didn’t have traction. And so it was, you know, we just started drifting off slightly to the left off of center line of the runway. And I don’t know if you know what Guardia, but on the left side of the runway is water, right? 


Josh: Right. 


Steve: You know, and there’s a sort of a stone rock wall there and then it’s the Bay. And so we started drifting, you know, laughed and laughed and laughed and you could just tell this was not a good scenario. And I just started questioning, exactly, you know, we’re going on the water. And I started my, I sort of resorted to my military background and my training and essentially just started thinking about it, processing, okay, here I am, where am I? How am I getting out and I’m going to get out. And so I was actually in the exit row on that plane and started thinking about looking out the door, you know, we’re going to go in the water. How am I going to have this plane and how am I going to open the door and help people out? 


And so I don’t know if you remember the plane crash at National Airport about 30 years ago?That was the first thing that came to mind, honestly, is we’re going on the water, it’s going to be cold, it’s going to be icy. And I’m getting out of this darn plane. So eventually the plane did actually you know, we stopped, we had rotated about 90 degrees and so the plane was not perpendicular to the runway and the plane stopped with the nose of the plane over the water and the wing broke off. The landing gear broke off. And long story short, you know, we went out the exit row, which, you know, if you fly a lot, you know, the flight attendants come and they ask you, are you ready, willing and able to get out of the plane cannot change. I’m like, I’m like, I’ve done it. Like been there, done that. So yeah. So we went out the exit, slid off the wing, they closed the airport and I got filtered into the, they closed the sky club, the Delta Sky Club and a one in there. And I actually sent off a tweet about it and that’s how I got on Anderson Cooper. Wow.


Josh: Did you guys actually have to get into the water? 


Steve: We never did. No. 


Josh: Okay.


Steve: The wing was over the runway or the land, the grass still, but the front of the plane was hanging over.


Josh: So scary. So scary, man. 


Lucas: That’s an incredible story. So let’s, let’s kind of transition off of that to talk more about your background. Cause you mentioned this military training, so I mean, really the takeaways there is you want Steve in the exit row on the plane that you’re on if that’s where you’re at, cause he knows how to get that door open. So talk to us about your, your background and your training and then how did that lead you into a senior housing?


Steve: Absolutely. You know, I never intended to go into senior housing to be totally honest. You know, I had gone to the Naval Academy to be a pilot. I saw top gun and I wanted to be Maverick. What kid at that time didn’t want to be Maverick? But I was, while I was there, I just opted to pursue submarines and did my summary and training and served my seven years. 

Getting out of the Navy and out of the military. I wanted to pursue some type of career in finance. I was looking at investment banking options, private equity, and it was able to find them out position, working as an affiliate with the Carlyle group, the private equity firm with CSH, now capital senior housing. And that was my first job getting out. And so I was there about four years, a very fast paced environment, learned a lot and very good introduction to finance and also the senior housing industry. So it was a good fit there. 


Spent about four years there and then went over to Welltower formerly healthcare REIT. 


Josh: Right. 


Steve: Worked for the chief investment officer, spent three, four years there. Really developed a strong I would say Rolodex, a lot of good contacts, met a lot of people and saw a lot of deals. While I was there, we grew from being about a $6 billion reach to about a $26 billion lead. So that was obviously a great experience. 


Josh: Right. 


Steve: And then about eight years ago, I had the opportunity to come join Prudential PGM real estate and made that move and moved to Atlanta. And the rest is history as they say.


Josh: That’s exciting. 


Lucas: Yeah. 


Josh: So on that journey you know, and appreciate the background story, but what’s a day day in the life of Steve like now? 


Steve: It’s a lot of phone calls and a lot of email to be totally honest. You know, my background really is in transactions, negotiating deals and trying to identify good investment opportunities within senior housing. And so, you know, that’s certainly my bias and my lean. That said, as I’ve evolved and grown in my role, I’ve taken over the role of senior portfolio manager in charge of our senior housing funds, which we currently have two funds that we’ve invested in. We’ve actually gone down the path of liquidating one and we’re managing one and starting to raise another one. But to answer your question, it’s, it’s managing a team, it’s managing resources. It’s, you know, try and identify investment opportunities and are not dictating, but working on the strategy for the overall fund, trying to maintain partner relationships and those types of things. So it’s, it’s really a lot of email and a lot of communication. You know, I come to a meeting like this obviously because we can have 20 meetings with some of our best. So you get to see everybody. I frankly haven’t even been to one session. And so, you know, I spent a lot of time talking to people really throughout the day.


Josh: Well that’s awesome. So now talk to me a little bit and a little bit deeper on your role. ‘Cause obviously you’re heavy looking at what are good investments and things like that. So nowadays the market’s changed so much. I mean, how are you sizing those up? Has that changed over the last few years? You know, tell us a little bit more about that.


Steve: Yeah, no, that’s an important point. Our company has been investing in senior housing going back to 1998 and so in those 22 years, the industry has seen a lot of change and our group and our unit has seen a lot of change and we’ve evolved along with that. So it’s become far more competitive. I mean 22 years ago, and I wasn’t even in the space 22 years ago, but far smaller, far more niche, you know, and, and there weren’t a whole lot of institutional investors, you know, known to be investing in senior housing. So we went out on a limb a little bit there to do that. 


But over the years we’ve obviously become more sophisticated to become more competitive. Our team has grown from really being two men and a truck to now 13 people dedicated for senior housing at our platform. And our funds have grown. And so our first couple of funds maybe were a 100 million bucks and now we’re, you know, between 500 and a billion for the total fund size we’ve shifted a little bit more into development. We’re a little bit more bullish on development opportunities right now. And a lot of that is because the product is evolved. So you look at some of the communities built, you know, 20, 30 years ago and the average age of the communities in our sector right now is like 17 years or something like that. It’s, it’s significant. And so the products evolved, the amenities have evolved and, and frankly the seniors have evolved as well. They expect more, they demand more and therefore we have to, you know, provide more. So, we’ve changed a lot.


 You know, in terms of some of the things we’re looking for, you know, we are very bullish, as I said, on development. And that development specifically is also more urban. So we’re seeing more infill type communities, things where you have mass transit that’s accessible, you know libraries, coffee shops, bars, you know, seniors are going to want those types of things in the future. You know, that said, we still believe in a diversified portfolio and investments. So just because we’re investing in an infill location, and I don’t know the Washington D.C. suburbs, we’re still investing in some of the smaller markets. We do believe that seniors live everywhere and we want to provide great living options for this you know everywhere. So we’re in some what I would call tertiary markets and rent some primary markets. So really everything.


Josh: Wow. Fascinating. So interesting that you guys have kind of moved into new development, which completely understand. Do you think there’s still a lot of opportunities and are you guys interested in the repositioning of these older assets? Do you think those are just going to be diminished or can they be positioned from for relevancy? I mean, how do you guys feel about that?


Steve: It’s a little bit of everything. A little bit of both. And it’s case by case. And so, you know, we are, while I said it, we’re positioned more towards development in newer assets right now, one of the best performing communities in our portfolio right now is probably 40 years old. You know, the reason it’s successful though is because it’s got a great operator and it’s also in the San Francisco Bay area where it’s extremely difficult and extremely expensive to create something new like that. Right? So there are absolutely opportunities for those types of projects or investments. But there are, I’d say they’re few and far between. 


Josh: Yeah. 


Steve: You have to be very selective and with construction costs being higher and labor cost being higher, that also makes those conversions and those repositionings extremely difficult to do as well. So it’s really finding the needle in the haystack as you know, as you hear everywhere else. 


Josh: Yeah. So on the repositioning, you did mention the, it’s got to have the right operator. Does that still play as heavy a factor when you start looking at the new development opportunities or is it really more based on the sophistication of the developer and the experience? Or is it kind of a combo or like how do you guys approach those new development deals when you’re looking at your partners?


Steve: Again, I think it’s case by case. I would say it’s all of the above. And depending on the type of the community, the location, the acuity of the care at the community, then all those things are going to take a different significance. So if you’re looking at something that’s perhaps more age restricted or in or in independent living oriented, then I think that the developer and the amenities are going to be more important, right? That isn’t to diminish the role of the operator of the manager, but then as you go further up that care spectrum, then you get into assisted living and ultimately a memory care, then I do think the operator is still the paramount factor in terms of success. So our strategy has been really to focus on strong regional and super regional operators that may manage between 10 and 50 communities. They focus on a certain geography and they do that extremely well.


Josh: Well, you know, I’ve heard that by a lot of people and I’ve also heard in those kinds of situations I heard one guy say that he was looking for groups that had enough scale, but that also the principle of the operating entity was still very involved in the daily operations and driving the cultures. Is that something that’s important to you all as well?


Steve: Extremely important. And so I, you know, I used the rough numbers of 10 to 50 communities and those are soft numbers. Obviously it could be smaller or larger, but the involvement of the senior leadership is extremely important and it gets to, I think what I would call dilution of talent and leadership. And as you get to a certain level, you know, look, I’m not trying to discount any of the larger operators out there cause they do a very nice job as well. But for our investment where we’re laser focused and very tactical, we absolutely want, you know, if there, if there’s an issue, I want to be able to text the COO and say what’s going on at this community and how do we fix it, right? And I think it takes, you know, some high level attention. But as you said, you also want a reasonable amount of infrastructure. You know, they have to be able to retain talent if they don’t have infrastructure to retain talent. And I think they’re going to have a hard time succeeding without some size. So it’s trying to find that right balance. And it’s trying to find the right rate of growth. I think if operators try to grow too fast, that creates, introduces challenges.


Josh: So from your perspective I mean obviously weigh in on anything but particularly on the financial markets side, real estate side of the business, what are some kind of thumb in the wind forecast that may be great opportunities. And then on the flip side of that, some challenges that you foresee over the next year or two or three that we’ve got to be prepared for, you know, as an industry to kind of weather that storm?


Steve: Well, if I knew those we would- 


Josh: -I’m giving you your opportunity right here, man. You can crystal ball it. 


Steve: No, I, you know, I think some of the opportunities I’ve already mentioned, I think that the urban and infill type communities are really important. I do think some of the turnaround time projects are going to be very interesting over the next couple of years. You’ve had so much development through this development wave in the last three to five years, it’s been delivering. You’ve seen generally speaking industry occupancy drop a little bit. It’s since flattened and plateaued a little bit or trough bottom if you will. But I think you’re going to see some distress in some of those communities that have not will stop very quickly. 


I also think you see a lot of new capital coming into the industry and so some of these investors just see seniors housing as having been successful and they don’t realize the complexities or the difficulties you have in running and running a community well in terms of keeping it occupied and performing well. So I think there are going to be some near term opportunities there as an investor where people are going to get frustrated and lose their patience and we’re going to be able to come in a little bit more opportunistic and, and find some of those types of deals. 


So those are really some of the opportunities we see. As I said, we’re big believers in development and providing some of the some of the new designs. And I think our sector is learning a lot from multifamily. I think that’s bleeding over into senior housing. And if you were to talk to multifamily developers or investors, I think they would say senior housing amenities and design is 10 years, 20 years behind. And I think that’s going to change. So we’re, we’re trying to be on the forefront of that. 


You know, conversely, we already talked a lot about development and innovation and new supply. I think that’s going to be a concern because as new supply comes in, more people come in and we’re going to continue to see pressure there in terms of new supply delivering and it’s going to pressure occupancies. Labor is obviously one of the biggest challenges out there right now. It’s oftentimes we see a proforma from brokers and they’re performing 3% you know expense growth, which, you know, labor growth or labor costs is excrete increasing 5.7% I think right now. Right? So, how can you offset 6% wage growth with, you know, 6% rent growth, that doesn’t always work. You can’t always pass that along. So I think those are gonna be challenges. 


You know, people talk about the baby boomers, but the boomers, the oldest boomers right now are like 75 years old and they’re not going to even really be a factor in assisted living for another five to 10 years. And so I think there’s a sense out there that, you know, we’re already in the baby boomer wave, but there’s still really a blip on the horizon.


Josh: Well, you know, that was interesting to me because I was going to ask a followup question and you kind of started to answer it because with you all a focus on the more urban and the infield and the development model and like who’s moving into these communities is a, is it a very different product type? Because I, I associate that with, Oh, well maybe that’s the, what the boomers are looking for, but we know they’re not here yet. So are these communities that you guys are developing and the operators are they filling those with the resident of today and this is just being more driven by the adult son or daughter that want them to be close and convenient or what’s driving that from your perspective?


Steve: It’s a little bit of all of the above. Again, I hate to keep saying that, but it’s the reality of it. And so if you’re a more independent living, then the senior themselves is making more than decisions, right? If you’re looking at assisted or memory care, then oftentimes it’s the prototypical eldest daughter that’s making that decision. So it really varies. 


But I also think the industry, and we’re generally kidding ourselves if we think that the boomers are the first generation to not want to move into senior housing. So we absolutely have to make it attractive. We have to make it a great lifestyle option. But the seniors, 20,30 years ago, didn’t want to move out of their homes either. You know? And so they resisted just like boomers are going to be resistant. That doesn’t mean the product doesn’t have to evolve to become more attractive and we have to compete for that, that resident. But you know, I think we’re seeing a lot of the same things. It’s just the same thing in a different format, if that makes sense.


Josh: Yeah it does. Are you guys having any concern or putting any emphasis on- everybody’s been talking about for awhile now and nobody’s got it figured out- obviously the middle market people are starting to really even, I’m starting to hear people talk of like, okay, well we’re, we’re not going to say we’re going to try to meet everybody’s need in the middle market, but we’re going to start trying to get the most upper extreme of the middle market and see if we can tailor around that. Is that something that your team’s talking about and involved any and trying to figure out solutions for that? Is that a conversation y’all are having?


Steve: So we think about, and we talk about it a lot as a company and as a team I call the middle market problem, if you want to use that term, really the Holy grail for industry. And I think that’s pretty widely accepted as the, as the number one issue for the industry. You know, we talk about it. I know many operators have tried, we’ve seen it work here and there, but I don’t think anybody has really come up with the, you know, the one stop solution for that issue yet. You see the active adult, the 55 plus sector kind of creeping into that. I think a lot of investors, the industry think that that is a possible solution. But I still, you know, I questioned a little bit of the value proposition there, whether seniors are really willing to pay 50% more just to be in a building where you have to be 55 to live. Certainly some investors and developers and operators have been successful in that space. But I don’t know if that answers that question. 


Josh: No, it’s good. I’d just like to know your thoughts cause you know, you have a big perspective from a hundred thousand foot view and then you get to work with a lot of these partners. So it’s good. And I think our audience, really one of the things, the feedback we get is just all the unique different perspectives. Cause I, I think one thing we can all realize in the industry is, is we’re all a finger in the wind. They’re trying to figure it out. Nobody’s quite nailed everything. So the collaboration is key. So sharing your experiences is great. 


Lucas, we’ve talked a ton about the repositioning. You’re heavily involved in that business. It seems like a lot of people are really trying to reposition assets right now to make their assets more, more relevant. We’re already seeing that. 


Lucas: Yeah, it’s a very interesting topic of conversation. I think to transition here to round out the show. One of the aspects on this operating front, and maybe it applies to middle market, maybe it applies to a lot of different things that you’ve been mentioning. You were recently quoted in an article in the Wall Street Journal specifically talking about technology. Talk to us about that.


Steve: Yeah. And I, technology is obviously huge and I’m a big believer in disruptors. And I use Uber and I use all of that stuff as well. Right. but at the same time, when you, when you look at an industry that’s so care focused, I think you have a hard time replacing that care and that personal touch with technology. Fundamentally if you’re that eldest daughter and you’re, you know, you’re bringing your mom to the community for the first time, do you really want a robot helping her out of bed? You know, and so I think it’s sort of gray in concept. And I know there’s a lot of investment going on in the space right now, but I question it a little bit. 


I was in a hotel in Chicago a couple months ago where they actually have robots that deliver things to the rooms and so they deliver a towel, right? And you know, I transitioned that a little bit, translate that to senior housing. And so, you know, what can happen there with respect to technology replacing that expensive labor? And I struggle to find a situation where technology can replace all of it. It can certainly optimize, it can help performance, it can help the employee performance. But senior housing, if you look at a community P & L, it’s better than 50% labor cost, right? So there’s a huge incentive to replace that labor or at least lessen the cost of it. But I don’t, I don’t think we have a solution yet as to how to do that with technology. 


Josh: Yeah, I would totally tend to agree with you and we’ve heard some other guests on the show mentioned that, that, you know, it’s such a high touch industry, but how can we take that high tech, I think Bob Kramer was the one that said that high tech and high touch and how do you blend that? That’s going to be the real secret recipe because I’m like you, I don’t think this is ever going to be an industry when it’s all about the relationship and the care that when you take the relationship and the personal touch out of it, you know, what do you really have? 


Steve: -But it’s still your mom and your dad or your husband or your wife or whatever it is. 


Josh: Absolutely. Absolutely. So, but it’s fascinating. But it is something that I think there is a place for it and maybe it can help some of the shrinking margins. Yeah.


Steve:  One of the analogies I like to use there is chess. It sounds silly, but the best chess players in the world right now are people who use computers, not the computers themselves and not the people themselves. So you know, I think about that it’s, it’s the ability to really leverage technology and you can call that disruption if you want, but that’s leveraging that technology to make performance and make communities better.


Josh: That’s a great point. 


Lucas: Yeah, exactly. It’ll be interesting to see how that plays out now. We’re in the year 2020. We’ve got the next decade to look at how all of these things, cause they are going to change every single of how operations in senior living senior housing is going to look and see and feel over the next decade for sure. No doubt. 


Well, Steve, thank you so much for taking time out of your conference here at ASHA to come and sit down with us. We’ll make sure that we connect with our listeners to you in the show notes and to your company so that they have any questions they can reach out to you. And thanks everybody for listening to another great episode of Bridge the Gap.

Thank you to our supporting partners NRC Health, OneDay, TIS, Morrison Living, Argentum, Solinity, and The Bridge Group Construction. 

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Episode 115: Steve Blazejewski