With its acquisition of Cadence Living, Cogir Senior Living is building a company with wide-ranging expertise.
By Jeff Shaw
In a time when large-scale, entity-level acquisitions have been nearly non-existent, Cogir Senior Living’s acquisition of Cadence Living in November stood out.
Both companies have a focus on the West Coast, and the combined total number of units is approximately 8,000 across nine states, making the company the 21st largest operator in the United States.
Cogir is the Sacramento-based subsidiary of Cogir Services LP, a Montreal-based real estate company operating over 300 properties in Canada, including more than 70 senior living communities. The U.S. division was launched in 2018 with the acquisition of 12 seniors housing communities in Washington state and California and has grown to 25 communities with others under development.
The initial 12 communities were part of a joint venture with Welltower, currently the largest healthcare REIT with a market cap of $38 billion at the close of business on May 19. The company usually has a 5 to 20 percent ownership stake in each of its properties.
Cadence was founded in Scottsdale, Arizona, in 2017 and has since grown to operate 35 communities in nine states, with several additional communities under development slated to open in the coming months.
“What started out as a casual conversation between [Cogir CEO] Dave Eskenazy and I evolved into what we both felt was an ideal solution for both companies,” says Rob Leinbach, CEO of Cadence. “The more we talked about it and the more we thought about it, the better it fit. We believe that the combined company will have the expertise, culture and foundation to be an industry leader in our space for years to come.”
“The two companies are so complementary,” adds Eskenazy. “As both companies were growing, both had challenges and skill sets that seemed to fill each other’s gaps perfectly. But more than that, as we both learned more about each other’s organizations, it became clear that philosophically we also shared so much in common culturally in the way we feel about our team members and what we believe our residents should experience.”
Cogir will continue to remain headquartered in the Sacramento area with additional offices in Seattle and Scottsdale. Leinbach’s title is now executive vice president of portfolio growth with Cogir, and the buildings branded under the Cadence banner will retain their names.
A chance meeting
That casual conversation, coincidentally enough, was at the InterFace Seniors Housing West conference in Los Angeles. Seniors Housing Business co-produces the event.
“I showed up to dinner 30 minutes late, and the only seat at the table was next to Dave,” recalls Leinbach. “Dave told me his story of being taken out of retirement with a charge to build all the infrastructure that I had just built. I told him I was looking for the next capital partner to help us grow the next five to 10 years, to drive our efficiency and take us to the next level of profitability.
“Dave asked if I ever thought about selling. I hadn’t before then, but after talking with him for two hours I was.”
Eskenazy jokes that he and Leinbach “grew our companies exactly the opposite from each other.” Cogir entered the business as a property owner and was trying to grow an operational program, while Cadence had strong operational background but hadn’t yet built a large portfolio.
“One of the things Dave was about to embark on at Cogir was to build out resident activity programming. Cadence had already built that,” says Leinbach. “The idea is we’re all Cogir employees, we want to push that brand, but inside the buildings we want our entire portfolio to have that Cadence, that beat, that rhythm. So, we’re branding the programming as Cadence.”
Both executives have deep industry experience. Eskenazy spent 20 years working in the hotel industry, followed by stints at seniors housing stalwarts Aegis Living and Merrill Gardens. While he retired in 2019, Cogir convinced him to come back and launch the Canadian company’s U.S. seniors housing efforts.
“I made a feeble attempt to retire,” he jokes. “I tried. I had a party and everything.”
Leinbach was a lawyer until 2007, when he similarly helped a Canadian company invest in U.S. real estate. Seeing both an opportunity in the strong demographics of seniors housing and a chance to launch his own company, he launched Cadence in 2017.
“I felt like there was a lack of sophistication in the seniors industry,” says Leinbach on his decision to enter seniors housing. “There were a lot of mom-and-pops. [Our rationale was] if we put together an institutional-level executive team, we could put together an excellent operator. We would get venture capital funding and grow the company that way and grow into a revenue base.”
Since both executives have experience with Canadian companies, they’re hoping to bring to the U.S. seniors housing industry some of the unique features offered at senior living communities in Canada.
While American seniors housing has successfully created a turnkey lifestyle similar to a condominium or hotel, “in Canada, they’ve taken that one step further,” says Eskenazy.
“On the first floor in the United States you see activities and theaters. In Canada, the seniors housing communities have a doctor’s office, a dentist chair, and two days a week an accountant is there to talk taxes, or a massage therapist comes to provide services.”
Eskenazy adds that having the sales and marketing approaches of the larger parent company has been very beneficial.
“We are trying to share best practices. When we get stumped a little bit, we call and ask how the parent company handles something,” he says. “On the other side, they asked us about our pandemic protocols as they worked through that in Canada because it hit us before it hit them.”
On the development front, Leinbach notes that Cogir has incorporated seniors housing into some impressive mixed-use projects in Montreal that he hopes to replicate in the United States.
“I’m talking condos, houses, hotels and seniors housing all in one mixed-use village. That’s exciting, and we’re using their expertise to create those integrated communities.”
Leinbach says he even hopes to borrow some of the corporate structuring from Cogir.
“The U.S. model that everybody uses is regional sales, operations and clinical departments. You each have the same buildings and work together. But sometimes you get regional workers saying it’s a sales problem, or sales says it’s an operations problem.
“In Canada, Cogir eliminates that conflict. One person is responsible for both operations and sales, but only for four buildings. It’s been very successful, so we’re going to pilot that strategy in Arizona. We’re excited about it because we believe this industry needs to be high-touch to be successful.”
The company is determined to grow even larger, which means this sense of connection on the community level is particularly important, says Eskenazy. He believes Cogir can fight the notion that the larger the operator, the poorer the care — a concern that was shared with him at a recent company-wide meeting.
“Those buildings are where our hearts beat,” says Eskenazy. “If, at the top of the organization, we lose track of how it feels and how it’s working because we have so many layers, processes and systems between the executive team and what’s happening in the buildings, that’s where things break down. It is our quest to have a heightened sense of awareness of that particular element so that as we grow, we don’t fall into that trend.”
So far, Cogir (and Cadence before it was acquired) focus on the high-barrier-to-entry markets one might expect: Northern California, Southern California, Phoenix, Denver and Washington, D.C.
“You have to start with cost of services and the high increase that has occurred,” says Leinbach. “With inflationary operating expenses, 50 percent of our costs in every community is labor. We’re focused on markets where we can push rents to cover those costs. Those markets have become fewer and further between.”
The company has several developments underway, including Acoya Shea in Scottsdale, Arizona, which is scheduled to open in September. It will be the company’s second property in Scottsdale and eighth in metro Phoenix.
“We want a cluster, not one-offs here and there — three to four buildings minimum and grow from there,” says Eskenazy. “But we wouldn’t even try those three to four if we didn’t believe in the demographics and the outlook for the area.”
He doesn’t mince words about targeting a luxury market, and how that informs Cogir’s approach to where it builds.
“Our costs are significant and rising rapidly,” says Eskenazy. “Inflation is not new, it just happened to hit the front page. We’ve been battling this for years. We can’t apologize for how much it costs to provide quality care and recognize that not everybody can afford what we have to offer. We need to stay healthy anywhere where people can afford what we can do.”
Future growth plans may explore the active adult and multifamily spaces, but for right now the company is in a “digestion period” following the acquisition of Cadence, Eskenazy adds. “Right now, it’s about executing on what we have. We want to not only not be distracted by this, but bring augmented results.”
However, he is quick to note that the buildings that were already in development before the merger will come on line at the perfect time, as the pandemic and soaring construction costs slowed down the pace of ground-up projects.
“This ‘time out’ in new development will serve our industry so well. When interest rates come back down, we will hit that with very few new openings and we’ll hit supply and demand equilibrium right as the demographics arrive. The table is set for a terrific period of five-plus years beginning in a couple years.”
At the end of the day, though, Eskenazy believes the complementary expertise of Cogir and Cadence will result in a premier seniors housing company.
“Two plus two equals five in this case,” he says. “We will get better together than we would separately.”