Dennis Murphy discusses his growth platform of AVIVA and positive changes around turnaround communities and senior housing transactions for 2024.

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This episode was recorded at the ASHA Annual Meeting. 

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Produced by Solinity Marketing.

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Welcome to season seven 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, NIC Map Vision, ProCare HR, Sage, Hamilton, CapTel, ServiceMaster, Patriot Angels, the Bridge Group Construction and Solinity, and produced by Solinity Marketing.

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Lucas 00:59:

Welcome to Bridge the Gap podcast, the Senior Living podcast with Josh and Lucas here at the annual ASHA meeting in sunny Miami. We got some good weather down here, not like Boston.

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Dennis 01:09:

Nope. Nope. You guys are much better than Boston right now. It's a little chilly out there.

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Lucas 01:13:

And for our listeners to hear that lovely Boston accent, I wanna welcome Dennis Murphy of Aviva Senior Living. Welcome to the show.

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Dennis 01:20:

Excellent. Thank you for having me. Appreciate it.

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Lucas 01:21:

And welcome back. We did a virtual podcast a couple years ago and so it's great to get in person with you because you've taken on several new roles at a very exciting platform. Talk to us about what Aviva and Lloyd Jones actually are. What is it?

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Dennis 01:37:

Sure. So from the Lloyd Jones side, Lloyd Jones is uh, run by Chris Finley, he's our CEO. And he had a very successful multifamily hotel real estate platform that he, um, sold a good chunk of that off recently and has always wanted to get into senior housing. We made a handful of mainly acquisitions. But we have one new development opening in Port St. Lucie in July. It's an IL product that we're very excited about, but mainly acquisition focused. And the idea is that these are value add turnaround style deals. Many of these include some CapEx components. So we're going into maybe an older vintage building that needs some CapEx in order to compete in that market. Once we get the CapEx infused in the building and remains competitive with that market, we can usually lift our occupancy and push rate and really control our operations.

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Dennis 02:23:

And so while we expanded early on, we had a ton of people we hired up for what we hoped would be a great year of acquisitions in 2023. 2023 was a difficult year for senior housing on the transaction side. It didn't really allow us the ability to grow too quickly. The, the debt markets were not cooperating. The bid as spread on a lot of these deals was, was too large. So what we had to do was kind of scale back our operations a bit, reposition people within the organization. We have fantastic leadership on the operations side. We have Julie Lombardo, who I brought over from many years in a past life that we had joined us over at Aviva. And so we had about a six month year gap where we didn't have a lot of deal activity that allowed us to stabilize our operations, put some consistency in our platform, and really start driving the results on the operations side, which we know will pay dividends in the future as we continue to grow here. This slow down is probably gonna loosen up. If I had to guess, once we go towards the end of 2024, transaction volume will pick up in senior housing and that should yield a handful of really good opportunities. So we're excited about the future and uh, we are coming out of what was a tougher time in senior housing, but I do see a light at the end of the tunnel. Very excited.

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Lucas 03:34:

Well, I'm hearing that conversation, you know, more and more frequently, labor challenges, occupancy challenges, uh, you know, all of those things create opportunity. As far as culture at Aviva. What's your vision there?

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Dennis 03:46:

You know, I think that I came from great, operators and platforms in the past where, Benchmark had a very great culture supportive on the growth opportunity. I started as an intern and exited as a VP of investments. So I want to instill that same kind of growth internally in the company that if you are, uh, a young and ambitious person who wants to grow in the company, that exists. As we grow as an operator, we will certainly have the need to add more and more talent to our platform. And we're excited to be able to build that internally. Sometimes we're growing a little too fast and we have to acquire some of that talent and we've acquired some great talent throughout the years. We've just recently, uh, did an acquisition in Stanton, Virginia and acquired a BrightView asset that was Harrison Street, and they have a fantastic team. So that is a great acquisition of talent, but we also wanna build that internally. So I think that's what we're working on from our, our HR side of the house to really make sure that everyone can be set up with that successful growth plan in the future.

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Lucas 04:42:

Sure. I know, uh, so many things have crossed your desk and your experience of working in the industry. Are y'all focused on territory or are you more focused on the right fit, the right deal?

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Dennis 04:52:

I think it's gotta be the right opportunity for us. There's markets that we shy away from, but for us, the right opportunity can exist in many other other markets. We operate in Texas. Uh, we have management contract in Atlanta, uh, where we did a startup at a lease-up property that we did very successful for an operator. So we do everything from development to management contracts, uh, turnaround style deals where maybe they didn't have the right operator before and we can step and then take over. So we're very excited about that from our standpoint, we will look at most markets, but it has to be the right opportunity, especially if we're gonna, uh, join as a JB partner, which most of our deals are.

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Lucas 05:27:

Looking more macro at the entire industry. I don't wanna let you get off the show without picking your brain about kind of bigger picture, uh, industry things. You and I met on the Future Leaders Council at NIC and you've had such great kind of exposure to so many different aspects of the industry. You got a great mind around it too. You mentioned 2023 being a challenge for you. I think it was a challenge really for the whole industry, 2022, 2023, uh, interest rates, I mean, all of these factors, labor, occupancy. What do you think kind of holistically, macro for the industry does 2024 look like?

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Dennis 06:01:

I do think that the debt markets settle down. We have some opportunity ahead of us. There's a lot of debt maturities that are due. I think at this point, most of the operators have been able to push their banks to extend and extend, but some of them are gonna have to come due L to 2024. There may be kinda more distressed stuff that hits the market or at the same time, I think that cap rates should return eventually long term to where they were at a pre covid basis. But it may take a couple years to get there. So I think it's an improving environment on the investment side, but I think it's, it's still a challenge. Certainly is a challenge today, you know, we can't get a development deal to pencil. It's very, very difficult. So that lack of supply that happened through covid and the lack of development recently is going to kind of add a challenge to the industry as a whole. We were already having a hard time being able to meet the needs of the seniors in the future, and now we have this gap where it was very difficult. We're at just the start of the funnel there. I think we have a long way to go. So I'll probably have a nice 15, 20 years of great demographics behind us to propel me through my career here, but I'm excited about it. I think we, we have gone through covid, the future environment is getting more friendly.

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Lucas 07:05:

So I think there's a much bigger focus this year due to the difficulty of, like you said, getting a development to pencil, it seems like everybody's turning their focus more towards the value add. Does that, uh, create some sort of a saturation where it makes it even harder to get these deals done? I mean, there's gonna be winners and losers and even I imagine interest rates are even affecting just even these value add. Who's gonna win in that sort of a realm this year?

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Dennis 07:32:

I think that the best operators will always succeed here. And so the ones that are disciplined that have the right standards in place and policies and procedures will be able to operate more effectively than others. A lot of groups are leveraging technology to try and improve their operations, but in many cases it's the basics of the industry that that really allow us to, control your labor. If you can control your occupancy and push rates. Um, occupancies come back industry-wide, which is great. Uh, we're getting back to that kind of pre covid average level of occupancy, but the margins still aren't there. So there's still an opportunity for that value add, style return. Everyone loves a value add style return because they like the idea of it, but it is a lot of work to do some of these turnaround deals. Some of them take a little bit longer to get the them turnover. Some of them have reputational damage that you need to overcome. So it's not as simple as just stepping in and turning around in two months. I think you just need to be partnered with a good operator and if you do so, believe in them, support them, and they can get you to these returns that you're looking for, as well as create a great product for the seniors in that market and that community, which I think ultimately is what all of us are really trying to do.

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Lucas 08:37:

Well, that's a great way to, uh, kind of end our conversation, Dennis, it's, it's great to see you here in Miami at Asha in some warmer weather and have a good conversation. So I know our listeners are probably thinking like, wow, you know, I wanna make sure I'm following this journey with Aviva. We'll make sure that we connect all that in our show notes. So if you're listening to your podcast, just scroll down on your podcast player. You can hit the links to Dennis and his company there and follow along as well. Go to btgvoice.com, connect with us. Hit us up on LinkedIn. We'd love to hear your thoughts about the current, uh, affairs of the marketplace. What are you seeing? What is this year gonna be like? Join the conversation and thanks for listening to another great episode of Bridge the Gap.

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09:18:

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.