Ally Senior Living Founder and CEO, Dan Williams discusses the challenges communities are facing and the power that repositioning can have on their future.

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This episode was recorded at ASHA Mid-Year Meeting.

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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, Hamilton CapTel, Service Master, Patriot Angels, The Bridge Group Construction and Solinity. And produced by Solinity Marketing.

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Lucas 00:42

Welcome to Bridge The Gap podcast, the Senior Living podcast with Josh and Lucas. Beautiful Utah Day here at the ASHA Summer membership meeting. And we got a great guest on. Want to welcome Dan Williams, the president and CEO of Ally Senior Living. Welcome to the show.

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Dan 00:59

Hey, welcome. Thanks for having me, Lucas. Appreciate that.

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Lucas 1:02

Yes, yes! Dan and I cross paths, obviously at these conferences, but a new resident of the DFW area.

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Dan 1:10

Yeah, that's right.

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Lucas 1:10

Walk us through this brand new startup as we kind of roll through some of these topics of how to turnaround a distressed asset and kind of what it's like to be a new senior living operator in the business.

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Dan 1:23

So it's a new company. Ally's a new company, but I've been around a while in the industry and stuff. And so I've worked for some large companies and some smaller companies throughout my career, almost 25 years now. Just recently went out and started my own. Figured, hey, I turned 55 and it was like now or never. Okay, let's jump out, the pandemic is coming out of that. It's a good time to do this. So I did. I chose to go out on my own and start Ally Senior Living and so far it's been fantastic. As you mentioned, I'm new to the DFW area. We, my wife and I, have been out in the northwest for many, many years and so I didn't grow up out there as we were talking about earlier. So it's nice to get back closer to family and people that behave like I do, I guess you'd say.

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Lucas 2:09

Well, quite a temperature change, but got some Southern hospitality maybe.

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Dan 2:16

That's right.

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Lucas 2:16

Back to some real barbecue, that's for sure.

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Dan 2:18

For sure.

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Lucas 2:19

So, all right, now we've got that established, baseline, right? Talk to us about what your positions are, what you're trying to do. Are you trying to be a turnaround operator or is that just one aspect of your skillset that you're able to offer?

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Dan 2:32

In the state of the industry and what's going on in it there's a big need for that. Our growth plan and our plan for Ally Senior Living as we grow over the years, it's going to be multifaceted with different aspects. We'll do turnarounds, we'll do new developments, and do various different things. But it's all going to center around specifically just a senior housing product model, no skilled nursing, that kind of thing. As you know, during the pandemic, occupancy went down as an industry quite a bit. We haven't completely rebounded, although it has been getting a little bit better. But what that's created is a lot of lenders' maturity notes. I mean the maturity on their notes are come and due. Owner, operators or specific owners that don't operate who are looking for a solution. Because the banks are breathing down their neck. The loans come and due and the building's not stabilized. The occupancy is not stable. We can put our skills to the turnarounds and do pretty good. And so far that's been our bread and butter for the last year. We've done several turnarounds.

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Josh 3:34

That sounds a lot easier than what it is. I would say, Lucas, you're also in the turnaround business with the renovations and that specialty. But can you unpack a little bit about what has been some of your ingredients to success in a short time in these turnarounds coming out with a new brand? And from my experience, it's a lot different than just your shiny new community that's coming out, launching a new brand, and you've got all that excitement. Talk about some of the challenges and how you're overcoming those, the strategies you're using.

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Dan 4:05

It's a lot different than opening a new building. Throughout the years in my career, I've opened 30 plus new developments throughout my career. I started my career working in a building as like an assistant manager. And I lived in that building. Cook didn't show up. I was scrambling eggs and I had 117 seniors that I had to take care of and took it really, really seriously about my responsibility to do that. After a little time, I got good at it. So the company put me out there doing turnarounds. So younger in my career, I spent a lot of time going to buildings that weren't performing well and flipping those around so they would perform well. So going into it now with my own company, I have a little bit of that I can fall back on that experience and wisdom from those days to apply it now and help out some buildings.

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Dan 4:57

So when you go into a distressed asset, there's several things that can be wrong. And there typically are several things. There's not really just one. It can be a leadership thing, it can be the previous operator leadership thing on their part of not enough training for the executive director, not enough for the team that's in the building. It can be a rate issue. Maybe they're overcharging, it can be a physical plan issue. Lucas comes in and helps out on those that it's just old and outdated. They're trying to charge too much or what have you. But I'll visit every market and I'll talk to all the competitors. I kind of go in under the guise of, "Hey, I'm here doing a market study. I just want to ask some questions." I don't like act like I'm "bang" or so looking for my mom or anything. But you get those probing questions and you can kind of start determining what the root cause is for the poor performance of the building. There's several things that we do right off the bat. And typically all buildings will have some culture issues in them.

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Josh 5:57

Sure.

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Dan 5:57

I mean, that's one thing that you're always going to see.

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Josh 5:59

Yeah. Well one ingredient that I think is probably a huge key to your early success in turnarounds with Alley or Ally, sorry, we were talking about that earlier. People have been calling it Alley instead of Ally. So for our listeners it's Alley.

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Dan 6:16

Ally.

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Josh 6:17

Ally, ally. Oh my gosh. And now that's going to be stuck in my head. So, but at Ally your success, one of the things I think is you just kind of brush through in your experience of opening and living. I think that's such a cool thing that more people should experience that, that are in operations, but the commitment that you're going to do whatever it takes to get it turned around, whether I need to be the chef one day or whatever. And I think that's something that really separates a lot of the really good operators from the operators that I would almost classify as more asset managers.

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Dan 6:56

Yes.

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Josh 6:56

Meaning that they're looking at the financials, they've got a host of regionals out there that they're telling, "Go get it boys and girls. Bring me back a good financial spreadsheet." But when you're really rolling up your sleeves in these properties and diagnosing what has gotten them off the tracks this far, as you said, it's not normally just one thing and that requires a certain level of commitment and a unique style and experience of operating that I think, and I would assume, that's probably what you attribute to a lot of y'all's early success. Am I right?

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Dan 7:30

Yeah, absolutely. I talked to a lot of capital folks. I talked to a lot of investors that own buildings. And sometimes what they'll do is they'll look at, "Okay, well you need this system and you need that system and you need this and have this, and then this CRMs going help you do that. And this is going to do - " it's about the people in the building, running the building and it's about the residents in the building and the people taking care of them. So you have to diagnose and you have to work on the culture first and foremost before you can start wanting to roll out these different things. And a lot of capital providers and partners that I've talked to over there, they get mad because I'm not doing what they think I should be doing. But I've been there and I've done that. So I know what we should do and what we shouldn't do. And I know what you typically will work and what won't work. And so kind of butt heads a little bit.

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Josh 8:21

Well, I would love to know how you respond to this because through the years, I think one of the challenges, and I think you started touching on it there, is managing the strategy and expectations from whatever the ownership group is. And you go in and you start executing a strategy that you have that you know, if we'll work the strategy, if we're committed to the strategy, it's going to get us to these results. But oftentimes what I've found is that some of the capital that's maybe purchased, they don't really understand or have the patience to get there, to take all the steps and they want to just a short term, put lipstick on it and make a miracle happen. So how do you set the tone for expectations going into a project like that and give them an executable plan and get everybody rallied around that? I mean, that seems like a big part of the challenge.

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Dan 9:14

It is. And the key, one of the key words you just said was executable. Because there's a lot of trial and error to begin with. You have confidence you can turn a building around. So you tell, you tell 'em, "Hey, yeah, I can do this. I'm fine. Don't worry about it." You got spreadsheets, I get it. Go look at those spreadsheets, let me do this.

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Josh 9:36

Yeah.

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Dan 9:37

But their patience runs out. Because I get it. I mean they have, the pressure comes all the way down. Money makes the rules. It can come from the lender, it can come from the LP equity, it comes from GB comes all the way down and you're down there trying to execute certain plans that will turn that building around, managing those expectations. I have people that work for me that do it much better than I do as I get a little impatient myself, frankly. All in all, when you get a capital provider or an owner investor that's been in the business a while, they understand that you just, you can't flip 'em overnight typically. I mean you sometimes can, but that's rare. It takes patience. It takes executing a plan over and over. And a lot of times these turnarounds, they depend upon the leadership and the building. You got to change that out. The fact is most, when I do a turnaround, I would say that unfortunately, and this is not the way that we go look at it, but after six to nine months, there's usually no department heads left. A lot of the building staff has turned over. They've either, their choice or by our choice, had to be replaced or they've chosen to go work for somebody else or where they're a better fit. While you always try to hire the best person, you really don't know that until they get in there and start performing. And then you give a little time. And if you go through that two or three times to find the right person, well that's stretching it out and in capital usually that's tough on them. That's tough on them. But luckily we've been able to come up with some good screening systems and stuff and hire better.

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Josh 11:14

I'm assuming you guys either probably have or will work together, you and Lucas, on positioning these assets from the lack of a better term, the physical plant. Like changing the environment to be a winning, a wholesome, welcoming environment to provide a better environment and care to the residents. Do you find that when you're getting into these projects, how big of a piece is that nowadays? Because I know you talked about leadership and changing that culture. I'm assuming we've got a lot of probably marketing and PR efforts to kind of change, maybe some of the bad reputation, but how much is the repositioning piece, is that something you're dealing with before you ever take over and giving them a temperature measure on what they're going to hve to spend? Or is this something you just kind of get in there and figure it out as you go?

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Dan 12:03

As an operator you have to feel confident you can sell the building to the public. I've got some buildings right now that are in our nine building portfolio that are 35 years old. They've been through two or three remodels and they still need a fourth one. I go in and look at a building and go, "Yeah, you probably need about X amount of dollars in CapEx." And what we need to do is focus on the presentation of the building. When you come into the building and what's the marketing sizzle? Do we have a bistro? Do we have those things to compete against competitors out there that we need? And does it look nice? Is it clean? Is it all that kind of thing? Getting them to fork over $5 million or $1 million or two is a different ballgame sometimes. But I've found that over the years it's better to be real with them and go, "Look, you want me to come in here and sell this building and get market rates and compete a bit against the building down the road that's two years old and you want to charge the same and your building looks like crap. So you need to put money in or you need to figure this out, or we're going to have to go lower rates and we're going to have to do some kind of strategy that makes it the price leader in the market." Those are tough conversations sometimes to have because I said, and I want the job. I mean, I want the job, do I tell him what he wants to hear or do I tell him reality? And so telling reality is a lot better to do.

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Josh 13:23

So as a newly branded operator doing the things that you're doing and all the challenges, what would you say over the next three to five years for our industry, in spite of all of what the talking heads say the problems might be, what do you think the challenges will be that we have to put at the forefront and have to focus on fixing first in our industry?

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Dan 13:47

The first thing that comes to my mind is staffing. And I try to remind people too when I talk about staffing, as we had a crisis of staffing, hiring people before the pandemic hit. I mean we were looking, trying to figure out the keys to staffing back then because we couldn't find employees and wages were going on and stuff like that. It just became so much worse during the pandemic and now we're coming out of it. Our government gave a bunch of money out to people and they wanted to sit at home or they wanted to do whatever they could for a while. And that drove the wages up in our industry, which by the way needs to go up for the caregivers. They're the hardest working people in the building. They need to be paid accordingly. And unfortunately over the years, our industry just hasn't really grasped that concept. I hope that changes. Now the demographics are there. We all know that. We all know that, here they come, they're coming, the baby boomers are going to hit that 80 year old threshold, 2030 I think, or 29 and that's when they really hit assisted living and memory care. The studies that I read are showing that we just don't have enough caregiver type force. We don't have enough people entering that to help us out no matter what the wages are. No matter what the benefits. So I think that's a huge thing and for us is to figure out what are we going to do? How do we attract, how do we keep, how do we pay wages? The second part of that is the expectations that investors have, which is hard. They're used to going back and underwriting these deals and writing to a 25 IRR as you know and stuff. Those expectations have to change a little bit. We just don't get the margins we're used to as an industry right now.

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Josh 15:28

Man, I feel like we should just start part two of the podcast and talk about realistic margins because we could probably agree on and disagree on a lot of things. But I probably, one of the things because just hearing you talk a little bit there, but there is an un-proportional amount of margin share when you look at the real estate side and the operations side because if you look at the real estate side, the financial side, the expectations for the same margins prior to Covid from 10, 15 years ago, they haven't moved much off of that, of what the expectations are. But the expectations at the community level is you need to give, you need to give, you need to take less margin, you need to do this on the operators. Caregivers should still be expected to make this wage. So at some point the private jets of the industry have got to start figuring out, we may have to downsize our private jets a little bit to be able to deliver a quality product. And that's not a really popular thing to say on this podcast probably, but I do think that is kind of the coming storm and probably some of the staffing issues that we are facing. That's kind of a low hanging fruit answer that is easier said than done, but at the same time there's got to be a margin share of taking a little bit of haircut because we're all in this together.

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Dan 16:50

So there's a reset coming, I mean, whether we like it or not, and whether we want it or not, there's a reset coming when it comes to margins, prices, cap rates and all that kind of stuff. And I think we're pretty close to that now, depending on what the economy does, interest rates and all those good things. But it's kind of a perfect storm because you have projects that are maybe four years old and so they've in they're five year cycle. They sold the investment on the fact that in five years we're going to exit, sell it or recap it and we're going to get our investors back. This margin, this amount, it's called an IRR, but for the sake of things, just we're going to get them back X amount of dollars and we can't do that anymore. You can't. Now I understand that some of the capital folks went out and promised this. They're like, and the investors are going, well, where's my, you know? They don't see us in a building trying to hire somebody and we can't hire 'em. They don't see all those things. They're just like, where is this coming back to? So when we talk about the demographics of the industry too and all these seniors coming, well, I start worrying, okay, well yeah, they are, but are we going to price ourselves out of the market? Is it going to be so expensive to live in assisted living or memory care that all those people that are turning 80 and 82, can they even afford us at that point? So it's a lot of what ifs. A lot of what ifs coming.

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Josh 18:12

As we start rounding on the show, I'll say, I didn't get a chance to meet you until today, but I like you. And Lucas has been bragging about you and all that you're doing. I know you've been in the industry for a long time. I'm excited to see what Ally is going to be doing. Did you see I got that right?

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Dan 18:28

You got it right!

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Josh 18:29

I got that right. And I like the just kind of keeping it real. I think that's something that we've got to really dial in realistic expectations for where we are as an industry, where we are on troubled properties and the whole team. From the capital stack all the way down to the operator has got to be aligned with reasonable expectations and then develop that team. You've got a great partner in Lucas and it's cool to see that and the results that you guys are getting. I'm already a huge fan. Appreciate you taking time here at the busy ASHA Mid-Year Meeting.

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Lucas 19:01

Yeah. And no one unplugged our microphones, so that was good. We made it through the conversation.

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Josh 19:06

I'm surprised I usually have that effect on microphones and when I start talking.

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Lucas 19:15

Well, not today. Not today. Well, this is a great conversation. Fun, fun time here. It's great to see everybody. And so all of our listeners, we invite you to go to btgvoice.com, connect with us on LinkedIn. Why don't you be a part of the conversation? I'm sure you have some thoughts on this. And that's what this is all about. It's having these conversations on the Bridge The Gap platform where we can all participate and help growing to educate and inform and influence the industry that we love and work in the senior living industry to make it better. Thanks for listening to another great episode of Bridge The Gap.

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19:44

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.