Owner-operator aims to push the boundaries of changing demographics and trends.
By Jeff Shaw
Real estate is in Andy Isakson’s blood.
His grandfather, Andrew Isakson, started a homebuilding business after coming to the United States from Sweden in the early 20th century. His father helped form prominent Atlanta-based commercial real estate firm Northside Realty in the 1950s. His brother Johnny — now a U.S. senator — led that firm for over 22 years as well. Several of Andy’s nephews work in commercial real estate, including Kevin Isakson who is a business partner.
Isakson worked in a variety of commercial real estate sectors early in his career, starting in retail shopping centers before founding his own firm in 1982. That firm developed nearly 5 million square feet of office and retail space before Andy’s passions changed.
Leaving all other real estate sectors behind to focus on seniors housing, Andy founded Isakson Living in 2002. The company opened Park Springs Place in the Atlanta suburb of Stone Mountain in 2004. The massive continuing care retirement community (CCRC) spans 1.2 million square feet and serves more than 600 residents — and it is currently in the midst of an expansion and repositioning. The project will feature the emerging household model in which smaller groups of units share a communal kitchen and common areas.
In October, Isakson Living broke ground on its next CCRC, Peachtree Hills Place in the affluent Buckhead neighborhood of Atlanta. The first phase of the project is already nearly 90 percent pre-sold, and Isakson believes the property is going to introduce a new model that could shake up the seniors housing industry.
Seniors Housing Business met with Isakson at the future Peachtree Hills Place site — including a walk-through of a model unit — and asked him about his approach to seniors housing and what the future holds for the industry.
Seniors Housing Business: What caused you to move from more standard commercial real estate fare into seniors housing?
Isakson: My father was in his mid-70s when he started looking around at his seniors housing options. He knew real estate in Atlanta really well, but he never really found exactly what he was looking for. He ended up renting two independent living units, combining them and doing a complete renovation. He was 77 when he moved in and enjoyed the socialization, but unfortunately he passed away in the first year.
My mother had Alzheimer’s disease. As her dementia progressed, we had to move her five times in the last five years of her life.
So I learned the business from the consumer side first. I was exposed to these campus-style projects with the full continuum of care and saw the benefit of that — of not having to move.
I was also looking for a sector with barriers to entry, and seniors housing was a little bit unique in that way. It’s a niche business. Not everybody can do it. That’s an advantage if you invest the time.
SHB: It’s been almost 15 years since you founded Isakson Living. How has the company evolved since then?
Isakson: We started off developing Park Springs, a campus-style CCRC in Stone Mountain, Ga. Our focus when we got in the business was development. That’s changed over the years. We’re now focused more on management than development.
To really do a good job in seniors housing, you have to focus on management. We enjoy that part of it, and I think that it opens a lot of opportunities in the future. We focus on trying to be the best manager we can. That will serve us well in the future.
As we learned the business, we took on more and more of the management role. We fully own and operate all our properties now.
We opened Park Springs in 2004, added a second phase in 2006 and a third phase in 2008. This year we expanded our healthcare services with the addition of a new 117,000-square-foot health services building. In total we now have 398 independent living units, 54 skilled nursing units, 36 memory care units and 60 assisted living units. The campus is 60 acres and over 1.2 million square feet.
We purchased the property for Peachtree Hills Place in 2005. The recession prevented a planned start in 2008, so our 2017 groundbreaking has been long anticipated.
Rebranding the CCRC
SHB: Do you focus on any particular points on the continuum of care more than others?
Isakson: We like to focus on the whole continuum. Our properties are licensed as CCRCs, but we don’t always call them that. That’s for marketing to the customer.
We refer to Peachtree Hills Place as “Peachtree Hills Place, an Isakson Living Community.” The only restriction we put on it is that it’s for residents 55 and older.
SHB: How do you move them through the continuum of care, both from a marketing and functional perspective?
Isakson: At Peachtree Hills Place, we have reorganized the CCRC for where we see the market going. We have a full continuum of care, but the independent living areas are condominiums. We have as nice of condos as you see on the market here in Atlanta. There’s no reason anyone wouldn’t want to live there. It’s very nice residential real estate.
Then we have the club. When you buy your condo, you also join the club. We looked at other high-end clubs in Atlanta, and we think our offerings rival any other in Atlanta. Croquet, dining amenities, fitness center, social activities — everything you’d expect.
When a customer buys a condominium, he or she joins the club for a fee of $2,600 per month for the first residents, and an additional $1,300 for the second. Of that fee, $500 is a food credit for dining onsite. The average condo price is $1.1 million and the condos average approximately 2,000 square feet.
We provide home care in the condominium should people want that. The Terraces is our healthcare building with assisted living, memory care, and long-term and short-term skilled nursing. There are a-la-carte health offerings in our clinic wellness area in the main clubhouse as well.
I think we’re really a crossover product. We get a lot of people who are traditional 55-plus customers and we get some buyers that traditionally would’ve gone to seniors housing. We’re hitting both.
SHB: It seems like flexibility is the key here.
Isakson: We’re getting a lot of people looking to downsize to a condo. They don’t want the big house anymore. They would normally move to a condo or something of that nature, but they think, “I don’t want to move twice. Why should I do that? At Peachtree Hills Place we have as nice a place as we’ll find elsewhere, plus healthcare if I need it so I won’t have to move. I don’t need it now, but it’s insurance for the future.”
SHB: What’s the timeline for opening Peachtree Hills Place?
Isakson: The first phase was going to be 85 condominiums. When we pre-sold 75 of them before construction started, we added another 32 units to Phase I, and about one-third of those sold within the first week. The market has really accepted it well. We started construction in October and we’ll open the building in the summer of 2019.
About 30 percent of our buyers are Baby Boomers, the oldest of which are 71. I don’t think anybody’s done that before.
The condominium works better for Baby Boomers. They understand that. They own it. Nobody can take it away. There’s security. That’s a different way to function with the CCRC. It’s more palatable for financing for the lenders and investors, as well, as there’s no refund obligation like with the entrance-fee model.
Buyers pay their own utilities, taxes, insurance and such. In the entry-fee model we’d pay that ourselves, but we’d have to make a margin on it, so we’d turn around and charge the customer. That really doesn’t make sense. So they own the condominium, they join the club and pay the services fee, and the healthcare is a pay-as-you-go should you ever need it.
We’re getting a wide spectrum of ages, from 50s to 90s.
Finding a new approach
SHB: You are beginning to use the household model, which offers smaller groups of units sharing an open kitchen and common space. Why does this appeal to you and how big of a role will it play for Isakson Living moving forward?
Isakson: We certainly didn’t invent the household model, but through our research on best practices it’s something we’ve adopted. It’s a great model.
To me, you look for seniors housing today and we have two customers: the senior that buys the product and the staff that work for you. Attracting staff is going to be as much of a challenge as attracting residents, especially in the future as you look at the changing demographics.
While researching healthcare and better ways to do it, the household model jumped out at me. I saw campuses where they had multiple types of products, and the household model was always full. The customer liked it better and the communities didn’t have any staff turnover. People wanted to work there.
The household model is a relationship-based model instead of a traditional, task-based model. It’s all about relationships. That’s what people are looking for.
Regulations drive you to take care of people’s health and to take care of safety, but they forget about the whole person. For the lifestyle of the people that live there, it’s better to focus on relationships and engagement. It’s better for long-term care.
I’m really surprised more people haven’t adopted it. I don’t think it costs more to operate and it’s a much better model. You have to have the building set up for it and then train accordingly. So it’s a culture change you have to go through, but it’s well worth it.
SHB: What levels of care are you using it for?
Isakson: We use it for long-term skilled nursing and memory care, and we’re going to use it for assisted living too. It really applies to all of them.
You go to a party at my house, where do you end up? You end up in the kitchen. You go to traditional seniors housing, where’s the kitchen? You can’t get to it. It’s behind the doors. That’s not really how people want to live.
In the household model, you have a household kitchen in the center of all the units with a homemaker there, breakfast through dinner. They know the members — that’s what we call people who live in our communities — and know what they like.
The meal is part of the experience of the day, and the homemaker can personalize it to what people feel like eating. You might have a favorite recipe, so we’ll do that for dinner one night.
I like to eat out two nights a week, but I want to eat at home the other times. It’s giving people the environment they’re accustomed to. This is about the lifestyle and experience, not just health and safety.
SHB: Do the residents do any cooking?
Isakson: It’s a participatory thing. You have to work within regulations — the hardest part of the model is just overcoming regulations — but if you were a homemaker and always cooked your whole life and enjoy doing it, why shouldn’t you be able to help make the meal? Let them cut some carrots or bake some cookies. The kitchens are open. It’s not an issue.
At Park Springs we have about 600 independent living members. We built a new household model in our expansion for skilled nursing and memory care. With 600 people, there are a lot of opinions and usually things are controversial. The household model is the one thing everybody is thrilled about it.
When we opened the community, the members toured through there. Thirty to 40 people pulled me off to the side to tell me how happy they were. They were impressed with the model and they weren’t so scared of long-term care anymore.
SHB: What makes a property unique to Isakson Living?
Isakson: Park Springs is 1.2 million square feet. We do big projects, but we don’t do as many of them because it takes a while for the planning and pre-sales. That’s our niche and what we like doing.
What’s unusual about it is we’re really involved day-to-day in the communities. We know the members and the members know us. We know the staff. We’re really involved, even in a large-scale project.
A lot of seniors housing owners have so many properties that the executives can’t visit all of them. We’re really involved as an owner-operator, interacting with the customer. We enjoy that part. That’s where we’re a little bit against the grain.
SHB: You’re exclusively in the greater Atlanta area. Do you have plans to expand geographically, or are you content staying local?
Isakson: There are a lot of opportunities in Atlanta. We can do everything close to home and stay busy. We don’t have to travel.
It’s an advantage to have multiple properties in the same market — knowing what goes on in your own backyard. It’s a better strategy to have five properties in one market than one property each in five cities.
That said, I’ve done other kinds of real estate outside Atlanta so I wouldn’t rule it out. We may do it as an operator in partnership with somebody else in the Southeast.
SHB: The seniors housing industry seems to be in the midst of many changes right now. Where do you see us going, and what’s the best way to get there?
Isakson: In the last 10 years since the Great Recession, the industry has focused on needs-based housing because that fared better during the recession. We’ve neglected the want-based product, and I think there are a lot of opportunities there.
In the past we dealt with the World War II generation. Now we’ve got the Baby Boomers and they’re wanting something different. We’re all trying to see what that’s going to be.
There’s going to be a lot of new products and interesting things going on, particularly in the want-based areas. We’re going to blur the line between active adult and traditional seniors housing. I don’t think consumers will take a lot of product that we’ve sold in the past. There’s going to be some interesting changes there in how the industry develops.
SHB: You’re repositioning to stay ahead of the curve, expanding and implementing the household model. Is that a solution for the older product to stay competitive?
Isakson: Early on in my career I said to myself, “I’m going to stick to what I know. It’s been successful, so I’m going to do it again.” Then I learned that what worked yesterday isn’t always going to work tomorrow.
Things change. You always have to look at what you’re doing, be innovative and try to get out in front of trends to be successful. We’re all going to have to look at our product and how it needs to change. Everything needs to be updated as you go along.
I don’t think we can just plan on doing the same models over and over again. We have to look at what’s working and make improvements to them. We’re always trying to improve on what we do, to either innovate or adopt innovative measures.
For example, we found a private consulting company founded by Dr. David Sheard in the United Kingdom called Dementia Care Matters. The company is doing its first project in the United States with us. It is a household model program, but with some unique approaches to memory care.
Feelings matter most in memory care because the emotions are the last thing to go for seniors with dementia. They can’t put two words together, but they still understand love and hate and relationships.
We’re in a yearlong training program of how to better operate such that we’re sensitive to people’s feelings and know how to relate to them.
I’m really excited for that program. We didn’t invent it, but we’re adopting it because it’s so innovative. I think it’s going to offer a lot better product.
SHB: What’s something people in the industry would be surprised to learn about you?
Isakson: I’m 65 years old, I’m in good health and my wife’s in good health. I’m not ready to stop working, but I am buying a unit here in Peachtree Hills Place. It’s a lifestyle decision for me and I think it’s a great decision. It’s going to improve our lifestyle. It’s in town, it’s close to a lot of things. We have the amenities of the club and it’s a short trip to work.
I’m not doing it as a marketing gimmick. I’m doing it because it makes sense for us as a lifestyle decision. That’s a reflection on the product.