A look to the future with Steve Monroe and SeniorCare Investor
By Steve Moran
When I was a kid, dinner was always a battle front in my little head . . . between what I had to eat vs. what I wanted to eat. I would actually force myself to eat the lima beans first — assuming there wasn’t a drooling dog under the table that I could inconspicuously temp into disposing them for me.
As an adult, I have realized that things haven’t evolved too far from that mentality. There are things in life we have to deal with, things we have to face, in order to get to the good stuff. Just as it was as a child — sitting at the dinner table, staring down those evil lima beans, contemplating how best to deal with my legume nemesis — it’s always better to face tough issues head on.
Our industry is no exception. Since there is no drooling dog that will come along and scarf up the lima beans of our grown up world, we have to anticipate both the threats and the opportunities in our industry and deal with them directly. I had the opportunity to speak with someone who, not only understands this necessity, but does it on a daily basis with SeniorCare Investor. In his work, Steve Monroe tracks the merger and acquisition market, as well as the financing market in senior housing and care. While at NIC in Washington, D.C. I got a chance to visit with Steve about the current market and the future.
The Lima Beans
During our conversation, I asked Steve directly what he considered today’s biggest threats for our market.
“Today I think the biggest threat is probably labor on two fronts. One, the cost of labor going up where they’re really used to controlling that cost and with all the minimum wage going up to $10 or $15 in some states, that’s going to be a big change.” Steve clarifies, “It’s not only the cost! Where’s the talent? All those properties opening up, where are they finding people who know senior housing, senior care? They’re stealing from other existing places and maybe offering them an extra dollar an hour. There are not providers, cooks, executive directors, waiting to jump into that new property. And the number two threat I think is the potential for overbuilding and over-paying.”
The Candy Store
While there will always be threats to consider, there are also opportunities that we shouldn’t ignore. Smart investors will view the future potential in our industry with as much glee as a kid looking through the window of a candy store. So much wonderful bounty awaits, but we have to be selective in our approach if we expect to avoid the financial bellyaches of the past. I asked Steve if somebody were to go to him saying, “Okay, you’re a guy who sees a whole bunch of stuff out there. If you decided you were going to become a senior living developer/operator, what would you go do?”
“On the development side I’d say right now and you’ve got to choose your markets. I’d go for independent living, full-service independent living.” Steve explains, “There’s just not that much and it’s funny because you’ve got the real estate people coming in you would think they’d be more comfortable with independent living because it’s more like what they’re used to. But they’re going into assisted living and memory care. I think they’re a little scared because independent living is not need-based like assisted living and memory care is, so they’re not going into the IL market. But every statistic I’ve seen shows IL is doing better from an occupancy perspective than anything else. They actually seem to fill pretty decently but the people building them are being very careful of the markets they’re going into. So that would be one area. The other area would be, and I know a little on this, but I still think the CCRC market has room for expansion. It’s a model that when it works it works on steroids and you’ve got to have long-term patient capital.”
To hear more from Steve Monroe and learn about SeniorCare Investor you can listen to the rest of the podcast below:
If you are looking for a deeper dive into the senior living marketplace, there is no better source than the NIC Spring Investment Forum that is being held in Dallas, TX March 9-11. Register Here