English Meadows CEO: Financials of Senior Living Have Changed, Operators Hold More Power Than In Past | #seniorliving | #elderly | #seniors
With an ambitious 10-year plan and plentiful expansion opportunities arising, senior living provider English Meadows recently hired a CFO who brings unusual experience to the industry, having previously worked for the Central Intelligence Agency (CIA).
As for how English Meadows scored such a hire, the answer is simple: He is the brother of CEO and Co-Founder Mike Williams.
“He has been in finance since college, and for the last 20-plus years was in the U.S. or traveling around the globe with the government or Deloitte,” Williams told SHN. “We were shopping for a CFO, and I was picking his brain and showing him the opportunities and growth plans, and he said, ‘Shoot, why don’t I do it?’”
The Blacksburg, Virginia-based organization will be relying on its new CFO — Rob Williams — as it strives to become one of the “larger” senior living owner/operator/management companies on the East Coast.
Financial expertise will be needed not only to help hammer out deals and forge capital partner relationships, but to guide the company into the post-pandemic era. Mike Williams believes that Covid-19 has changed the financials of senior living operations, suppressing margin and prompting a new perspective on near-term investor returns and reasonable lease terms. He also thinks that strong operators are more in-demand than ever and have greater leverage than in the past.
Meanwhile, he thinks senior living providers also need to be working harder than ever to meet a changing consumer — one reason behind English Meadows’ recent decision to accept Bitcoin as a form of payment.
An active pipeline
Currently, the English Meadows portfolio consists of four communities in the Virginia and Washington, D.C. markets that are owned and operated or third-party managed. The company also will operate a 100-unit community that is about four months from completion, in Manassas, Virginia.
English Meadows recently lost some scale, after a real estate investment trust partner decided to transition to a new operator in several communities. The parting of ways was “respectful” and tied to the REIT’s growth plans with a different operator, Mike Williams said.
But English Meadows did not reduce its management team, meaning that the company now has the bandwidth to take on about another dozen communities, according to Williams. And opportunities are plentiful.
Covid-19 has caused some owners and operators to question why they are in senior living, such as investors who viewed it more as a side business, Williams observed.
“Some operators are just tired,” he said. “These last 12 months have not been the easiest.”
Regional providers that had the scale to weather the pandemic now are seeing chances to grow their portfolios, and English Meadows is no exception. The company is currently under letter of intent for managing and/or operating and owning about seven communities in Virginia, West Virginia, North Carolina and South Carolina, Williams said.
Aside from being regionally focused, English Meadows is casting a wide net as it expands, open to older buildings as well as new developments, and various ownership structures. The company has worked with KeyBank on several financing transactions, and has a sister company called Arbor Bay Investments that is growing a local equity base. English Meadows is also talking with a national REIT, and is open to leases and management agreements.
But, Williams emphasizes the importance of alignment with any capital partner — and that could mean adjusting expectations from what they have been in the past.
“I really do feel that the financials of senior living have changed over the last 12 months,” he said.
It’s possible that driving high rental rates will not be as easy, while there is “definitely” a need to pay employees more, and other costs are also rising. The end result is that net operating income (NOI) is under pressure, and Williams believes it’s reasonable to think that margins could be about 5% lower “for a while.”
“If the payroll is going up, and we know the food costs are going up and supply costs have been up and you can’t increase rates as much, something needs to give there,” Williams said.
That could mean ratcheting down the “huge” returns that some investors have expected or received, or it could mean lower rates or escalators on leases to provide more “room” for operating expenses.
Ownership groups and capital providers have generally been receptive to this message, Williams said, and he believes that is due in part to increased respect for high-quality operators.
“Developers and other groups have driven the senior living bus for the last 10 years, but it looks like operators are really becoming the key focus and are being able to pick and choose where they would go and who they are working with,” he said.
In the case of English Meadows, the company is receiving “ten times” the calls from REITs and ownership groups than it was two to three years ago. Even before the pandemic, investors were concerned about a scarcity of quality operators, and — although Williams is bullish that senior living will have a rapid recovery — there might be even fewer proven operators coming out of the pandemic.
“Where high tides can raise all ships, low tides reveal a lot of problems, and I think the last year showed a lot of problems,” he said.
The English Meadows approach
As for English Meadows’ approach to operations, being hands-on is one hallmark. In 2019, Williams purchased an RV to more easily travel among the company’s communities.
Another operating philosophy is to say “yes” whenever possible to families, residents and team members, and that led to the recent decision to accept Bitcoin as a form of payment.
English Meadows’ home base of Blacksburg is where Virginia Tech is located. An alumnus of the university became a Blockchain pioneer and has been working with the school closely in recent years, and a strong cryptocurrency community has emerged in the local area. English Meadows began to receive questions from a few families about accepting Bitcoin for payment, and saying “yes” to this particular request was “kind of a no-brainer,” Williams said.
The process of setting up the payment system took only about an hour of work, and converting Bitcoin to dollars is “quick and easy” and involves no additional costs to English Meadows.
“We’ve always believed if there’s something we can do to help out to get somebody to join a community or one of our campuses, and move in, we’ve always done it,” he said.
English Meadows also recently received the Senior Housing News Marketing & Advertising Aspect Award for best social media campaign, for its English Meadows Good News Show.
The concept was that in the darkest days of the pandemic, residents and team members needed some good news to lift their spirits. So, Director of Corporate Culture Greg Mehfoud created the “Good News Show,” which featured uplifting stories from English Meadows’ communities, and was distributed via an internal website and the company’s Facebook page.
Residents and team members became excited about submitting ideas for what to include in the show, and eagerly awaited its release, Williams said.
“It really brought everybody in all the campuses closer together,” he said.
And now there is more good news to share, as nearly all English Meadows residents have been vaccinated and communities are seeing demand pick up, with calls and tours escalating.
“The last 30 days have just been phenomenal on our daily Covid calls that we’ve been doing since well over a year now,” Williams said. “It’s just been a night and day difference from summer of last year.”