Laurie Schultz, Principal and Co-Founder of Avenue Development and Viva Bene, discusses how they’re integrating value-based care into their active adult developments with the launch of Viva Bene and how they’re navigating this complex market.

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Welcome to season six of Bridge The Gap, a podcast dedicated to informing, educating, and influencing the future of housing and services for seniors. Powered by sponsors Accushield, Aline, ProCare HR, Hamilton CapTel, Service Master, Patriot Angels, The Bridge Group Construction and Solinity. And produced by Solinity Marketing.

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Josh 00:51

Welcome to Bridge The Gap podcast, the senior living podcast. I am your host today and I could not be more excited to have with us as our guest on the show today. Laurie Schultz, Principal and Co-Founder of not only Avenue Development, but Viva Bene. And we have an exciting topic if you've been around the industry over the last year or two, you know there's been tons of topics around active adult developments and so look forward to some of Laurie's insights on that. Laurie, welcome to the show.

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Laurie 1:27

Thank you, Josh. Thanks for having me. We've known each other a while and it's great to be on today.

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Josh 1:31

Thank you for taking time for our listeners and I want to dive right in because we've only got about 15 or 20 minutes here. There's so much to talk about because Avenue is doing so many cool things. I have enjoyed watching your success during what some might call pretty difficult times for development and we have been around the industry, we have actually seen you on panels and that's always fun to hear your insights. So share with us the latest of what's going on with Avenue.

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Laurie 2:02

Success is all relative, right? But I think our team, what we call "Team AV," has really been instrumental in the last 18 months. One of the secrets that Avenue has I think is being diversified. While we really do focus a lot on senior living and active adult, which is our bread and butter, we've always kept in the background our healthcare development going and that has some nuances we might get into later about value-based care and primary care and how we're integrating that into our active adult and senior living platforms. But that's really helped us to be able to divide and conquer as things get difficult in one sector or another to continue doing development even in these tumultuous times.

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Josh 2:46

So speaking of development, I know recently I was listening to a panel of probably six or seven of the larger developers in our industry and about half of them have just put development completely on hold, the other half were excited to talk about not as big a pipeline, but that they did have a pipeline. You guys still continue to be getting product out of the ground. And so tell me a little bit about some of the challenges and how you're overcoming that and your thoughts on the industry forward looking for development.

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Laurie 3:20

It's tough. I honestly haven't seen a market like this since 2009, 2010 and I think we're going to be in it for the long haul here for another 18 to 24 months now. We've had less projects come out of the ground than normal years, right? But we have been able to do 1, 2, 3 projects in the last 12 months that's across senior living and our healthcare platform. I think the number one thing, if you're in this, this is not the time to start development and be a new developer, but we have a track record and I think those developers that have track records of bringing projects in on budget, on time, you're still going to be able to get things through. It's going to cost more than it's cost you in the past. It's going to be harder to raise equity. I think one of the biggest challenges we've had in the last year is the ability to raise equity and depending on how you were raising it, if you're doing a syndication route, it may take more investors. There are going to be smaller check sizes that people are writing right now. But again, having that track record, being able to say you know your product type, you're able to divide and conquer how the cost overruns have happened have really helped us be successful. Again, it's going to be tricky to continue to raise money. The debt markets are going to be, I think the harder part than equity over the next year, I think, as the office commercial real estate sector and multifamily sector start to see some real headwinds and challenges. I think they're facing more than we are in senior living, but that's still going to make debt lenders a little bit uneasy about going out on new construction loans. But I think everybody agrees that we have demand in our industry. If we can weather this and you can find the right local regional lending partner that knows their market, might not be a market for the large banks, but if you can find a local regional lender that really understands the dynamics of their particular market, they'll see the value of the demand that we have across all sectors of senior living right now. And if you can get that done, there's going to be a lot of good things waiting for you when that project opens.

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Josh 5:27

I think many of our listeners are very familiar with you, the great work that you're doing at Avenue, but maybe not as many have heard of Viva Bene. So explain to us a little bit about the purpose, what that product type looks like, where it is now as that's now I believe out of the ground.

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Laurie 5:47

It is. Yes. Solinity Marketing has been helping us project and doing some great marketing work for us on that. So Viva Bene is our active adult platform. We're doing a different twist on it. Active adult traditionally has been right age restricted 55 plus housing that operates like a multifamily like an apartment community and a lot of residents choose that because they want a sense of community. What we're doing with Viva Bene is adding a proactive wellness and healthcare component that's at the same affordable rent level as a traditional active adult. So we have national healthcare partners, SEVI Health, that focuses on primary care and care coordination services depending on the community, they will either have an onsite clinic and/or do a combination of virtual options and also help us with our programming. So they'll have onsite direct primary care, they'll be able to help residents with all kinds of things from medication management, transitional care management, even some advanced care like planning. Their staff is going to be working with our Activities Director to do fitness programming, meditation classes, healthy cooking, and all kinds of fun stuff about why residents want to live in an active adult community. So we're very excited to bring this platform first in St. Louis and that's our first development and then rolling it out nationally with developments and acquisitions to help residents live a healthier lifestyle longer in the comfort of their own homes to avoid the need to move into a higher acuity setting.

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Josh 7:26

So as we dive into learning a little bit more about that, when we talk about active adult, 55 plus, it seems that there's a lot of differentiation and a lot of variety and flavors of what people classify as active adult. They're going after different age and demographic segments, different service types in that 55 plus. What would your average resident look like? Are they going to be on the low end of the 55 plus, very active? Are they going to be more looking for like a frail senior that is needing coordination of health related services and more your independent style or where do you see this product falling?

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Laurie 8:11

I appreciate that question, Josh, because I think that is an important nuance to what we're doing and we get that question a lot even from residents as we're starting to market this on the consumer side. Viva Bene and what we're doing with what I hope preventative care transitions to into senior living more broadly, this is not meant to increase the age of a resident and trade active adult, but more to have a preventative healthcare service that allows a resident to manage the one or two chronic conditions that an average 60 year old may have and to help them live a longer healthier lifestyle. In our industry, we've heard the term like "well span" instead of "health span" and that's what we're trying to do here. So we're still targeting an average resident age coming in of about 60 to 70 years old and there's someone that wants to stay active, they're active now, they just don't want to maintain their house. Things that you and I have heard for years, right? And why active adult has become so popular. And a lot of residents are just lonely. They might be living alone and they want that sense of community as the added benefit of this. They want to remain in their new Viva Bene or active adult home longer and to manage those chronic conditions and to not have a need for higher healthcare services and keeping up this active lifestyle is not only going to keep them healthier longer, but it's going to reduce their overall healthcare spend that they have. So we're really trying to maintain the average active adult demographic, but just a new added service.

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Josh 9:48

Exciting, so active adult, big-time buzzword in the industry, but also value-based care. So it seems like to me you guys could almost be approaching both buzzwords because it seems like if you're talking about primary care services, and healthcare coordination, that's potentially positioning you very well for a value-based care model. Is that in your thought process and strategy?

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Laurie 10:16

Yes, value-based care, it's my favorite buzz term. We are, I'm going to call it like dipping our toe in. So I think there's a broad range when you talk about value-based care and how senior living and active adult can integrate into that. Value-based care starts from the one end of the spectrum for the healthcare provider having no risk in the game and they only have upside all the way into taking on full risk for a resident or patient and needing to raise millions of dollars for that downside risk, but having more of the upside and everything in between. Our long-term goal for Viva Bene is to have a fully integrated residential living community with these healthcare services, but for right now it's two separate entities that we're doing that under. So Sevi Health is its own entity. They are providing the healthcare and wellness services directly to our residents. It's completely voluntary. So a resident can move into Viva Bene and they don't have to choose Sevi as their primary care doctor. They don't even have to have those care coordination services. What we are piloting in this model with Sevi is that the way that Sevi handles payments in a value-based care model is what we call "payer agnostic." So a lot of what is on the market today with senior living requires a resident to be on a Medicare Advantage plan in order to have those healthcare benefits. And that has been I think a challenge. A lot of people would say that that's a challenge to get residents to sign up for that because they don't want to change a health plan if it requires changing their physicians. What Sevi has done is created a fee-for-service value-based primary care model that allows a resident to keep their own insurer or as we know, some of these active adult residents are still working and so they can still keep their employer-based insurance plan as well. Again, we're dipping our toe in, we're going to find out some things that work, we're going to learn a lot of lessons that don't as well and we hope to be talking again in a couple of years Josh, about maybe how senior living can provide a fully integrated service for this.

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Josh 12:22

You guys are at the ground level of this, so I think I heard you also, obviously you guys are ground-up, full-service developers. Are you also, did I hear, also acquiring during this time and repositioning assets or are you just focused on the new construction ground-up development?

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Laurie 12:42

We're doing both. You heard that right. Because of all the challenges we talked about a few minutes ago about development and how much we believe in this Viva Bene model, we are looking at acquisitions of both age-restricted, multifamily, active adult acquisitions, which are hard to come by right now, but I would say more of what we're seeing are the independent light facilities that are starting to see some distress that we can convert into Viva Bene model.

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Josh 13:09

Is this predominantly a play in the Midwest or Southeast? Do you see that this is most promising in certain markets, certain size markets? Or where are you focused right now?

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Laurie 13:21

All of the above. We all know there's demand for this product type nationally. Avenue has traditionally focused in markets where I like to say like we provide value to the end consumer and to our investment partners. And so that's markets that we've worked in that we know well that our construction company has affiliations with subcontractors in and we like to go a little bit on the path less traveled. So I think why a lot of groups are focusing on the SMILE states, we're going to be focusing a little more on the Rust Belt markets where there has not been as much product development.

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Josh 13:53

Thank you for taking the time today. I know you've got a very busy schedule with everything you've got going on and I know our listeners are going to want to connect with you. There are not a lot of development companies that are having great success or even trying to develop right now, so congratulations on your success in getting projects out of the ground during these difficult times. And that's obviously because you've been doing this a long time and you've got a great team that knows how to get these to close. So thank you for connecting with us and thanks for being on the show today.

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Laurie 14:28

Thanks, Josh, always appreciate it.

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Josh 14:31

Listeners, we will connect in our show notes with Lori and her team at Avenue and Viva Bene. Exciting times. Make sure you look for this episode and many more on btgvoice.com. And thank you for listening to another great episode of Bridge The Gap.

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14:50

Thanks for listening to Bridge The Gap podcast with Josh and Lucas. Connect with the BTG Network team and use your voice to influence the industry by connecting with us at btgvoice.com.