After decades working for REITs, experienced executive makes the jump to operations.
By Jeff Shaw
For having held only three jobs in the seniors housing industry, Mercedes Kerr has quite the resume.
Moving from a career in the hospitality industry in Mexico, Kerr was recruited into seniors housing in 1997 by Irvine, California-based Healthpeak Properties (NYSE: PEAK), then known as Healthcare Property Investors and later HCP. She served as vice president of acquisitions before leaving in 2006 to take two years off to spend time with her children.
In 2008, she joined Welltower (NYSE: WELL), serving as executive vice president of business and relationship management. Just like that, she had gained executive experience at two of the “Big Three” REITs in seniors housing.
After over a decade at Toledo, Ohio-based Welltower, Kerr was recruited in September 2019 to join one of the company’s operational partners, Belmont Village Senior Living, as president. She serves under founder and CEO Patricia Will.
The Houston-based developer and operator boasts 30 communities totaling 4,163 units, largely concentrated in California, Texas, the Midwest and the Southeast. Approximately two-thirds of the units are assisted living, one-quarter memory care and the remainder are independent living. The company plans to open a 204-unit community in Fort Lauderdale, Florida, later this spring.
The company targets a high-end market and employs approximately 4,000 people.
Seniors Housing Business spoke to Kerr in January about her journey working for three of the largest property owners in the industry, and what the future looks like for seniors housing.
Seniors Housing Business: You have held executive positions at many of the top companies in this sector. Walk me through how you became interested in seniors housing and your journey since then.
Mercedes Kerr: I’m from Mexico and I came to the United States to get my graduate degree in real estate development at University of Southern California, graduating in 2005. In Mexico, I had been working in hospitality for a resort developer. My intent at that time was to continue in hospitality.
My journey into seniors housing was a result of a phone call from a headhunter who had received my name about a position at a REIT that specialized in healthcare-type investments. Back then the company was known as Healthcare Property Investors, later HCP and now Healthpeak.
I took a job with the company as an investment analyst, and later in originations and investment activities.
I started there around 1997. It was a period of high activity in the seniors housing industry. There was a lot of growth for the REIT, a lot of acquisitions, a change in the CEO. That was an interesting seat from which to view that growth and change.
A lot of companies we now know well were in the early stages of life, and we financed a lot of that growth.
SHB: How did you end up moving to Welltower in 2008?
Kerr: Women who have high-growth potential and terrific careers might find this interesting: When I left HCP I spent two years at home. I took the proverbial off-ramp to spend time with my children.
When I decided to onboard again, I connected with Healthcare REIT, as it was known at that point, and interviewed with them. They made me an offer and I came back to a similar position. It was like I was jumping in right where I jumped off.
I spent 10 years with the company, once again in a period of tremendous growth and evolution for the industry and the company. It was a pretty different role for me even though I was still in relationship management and the transactions side. It was very exciting, especially working with CEO Tom DeRosa.
SHB: So, you spent 20 years at two of the biggest REITs in seniors housing. What about Belmont Village drew you into the owner-operator space?
Kerr: During my time with Welltower, I spent a lot of time working with the operators. I represented Welltower on a number of boards at operating companies where Welltower had investments. I had a look into that world.
The operators represent the mission of the business at large. They are ultimately in charge of the care, everything that in my mind makes it a unique industry.
Welltower and Belmont Village have a very important financial and strategic relationship. I had known Belmont Village very well for many years while at Welltower, and thought very highly of the platform, the portfolio and the CEO, Patricia Will.
When the opportunity to move over there came up, it was unexpected. It wasn’t something I was actively seeking. But I talked to Tom DeRosa about it and we agreed it might be an interesting segue for my career. Would it make sense for Tom and me to be partners in a different way?
Patricia created a collection of communities that’s absolutely exceptional. But importantly she assembled a very capable, strong team with solid performance. I thought that, if I were able to join her and continue to grow the company, we could do some really important things together. It was a new challenge, the next frontier as I grew professionally.
I don’t know that I would’ve been tempted to join anybody else as an operator. Belmont Village is special. I can tell you it’s all proving out to be exactly what I had hoped for.
Learning to operate
SHB: What have you been able to bring to Belmont Village that you learned in your long career in the REIT business?
Kerr: My background gives me a very well-rounded view of the world. The capital partners and the operator really need to come together for a community to be successful.
I can see both sides of the business in a way that will help me drive value for the capital side and the operating side. All of our team is invested in what we’re doing. I have a slightly different, comprehensive view of how those pieces all connect.
SHB: What is the growth strategy for the immediate future?
Kerr: Belmont Village has developed not all, but most of its communities. Our development pipeline is robust and continues to grow. But we’re very selective about the markets we approach. That’s part of the success formula. There are a number of projects underway or in planning stages.
SHB: How does Belmont decide in which markets it wants to grow?
Kerr: It’s similar to the strategies Welltower has talked about in the past. Belmont Village is very capable of pursuing and bringing projects to market in high-barrier-to-entry, high-demand-potential locations, where it requires a special skill and a certain type of capital to succeed.
A couple of those markets include Wilshire Boulevard on the west side of Los Angeles and Berkeley, California, which are both surrounded by high-rent real estate. The key is to find an entry in markets where others are struggling to gain a foothold.
Some of these projects might take years to come to fruition, but we have the patience and the skill to make that happen. Our investors, which include Welltower and private equity partners like Harrison Street Real Estate Capital and Blue Moon Capital Partners, allow us that patience. That’s been a really successful formula for Belmont Village.
SHB: The Mexico City development seems like it might be an example of that.
Kerr: It’s a terrific project. It’s attached with a skybridge to one of the best hospitals in the country, and a high-end hotel sits atop it, with retail and restaurants below. It has a total of 133 units of assisted living and memory care.
I’ve spent some time visiting there since I’m from Mexico. The culture in that community stands out in my mind.
Lunch is a big event in Mexico City. That’s the big meal of the day. Every single day at lunchtime a lot of family members come to visit their loved ones.
That was an unexpected treat. Lunchtime in our dining room is always a happening — chock-full of people, tables of eight, the children and the grandchildren having lunch with grandma. It’s a very homelike environment, which we strive for.
The seniors housing industry in Mexico is very new and there are few developers and operators. Belmont Village is leveraging its vast experience in this new market, while adapting certain aspects to fit local cultural needs, such as the dining experience.
We have a terrific team there that is very capable of balancing a Mexico-centric community that is applying technologies and processes designed in the United States. All things considered, that project is something to really watch and learn from. And I don’t mean just the mixed-use component, but also what’s been accomplished in that operating culture.
SHB: Belmont Village partners with a variety of universities. What’s the benefit that you see from those partnerships?
Kerr: We have a very thoughtful program centered around how to engage in a purposeful way with residents who have early dementia, trying to create a program to improve or enhance their quality of life. We call it Circle of Friends.
Our programming around that is evidence-based, with the participation of experienced professors and others who helped us define the program. They help us collect and refine information, such as cognitive decline measurement. We’re benefitting directly from that collaboration.
Both Patricia and I sit on the board of the USC Leonard Davis School of Gerontology in Los Angeles. We’re in constant dialogue about what they’re studying related to nutrition. We also partner with Vanderbilt University.
How do we age most successfully? That’s the umbrella under which these collaborations fall. We’re interested in working with anybody doing good work in that field and using those findings in our communities for our residents.
SHB: In addition to cultivating the university partnerships, your job description at Welltower included building and managing relationships with operators, health systems, developers and lenders. How have those skills transferred to working at Belmont?
Kerr: It’s early days for me at Belmont, but I have a fair appreciation of the common goals of the various constituents in supporting the successful aging of our population and achieving the desired operating results. That’s helpful context.
For example, my experience in the multiple facets of the business, together with my extensive interactions with a broader range of stakeholders led to my appointment to California’s Stakeholder Advisory Committee. The committee was established to answer Gov. Gavin Newsom’s call for a Master Plan for Aging to prepare the state for its aging population. Now we have a voice as an operator. The state also has initiatives concerning Alzheimer’s and dementia, and Maria Shriver [Peabody Award-winning journalist and former first lady of California] is leading that effort.
My point is to say that a lot of what we do has a greater impact on the community at large.
SHB: Two of the bigger challenges facing seniors housing right now are affordability for middle-class seniors and recruiting/retaining quality staff. How are you and Belmont Village tackling these issues?
Kerr: With respect to recruitment and retention, Belmont Village does a lot to move its own people up the operating ranks. We’re very proud of that. That gives us a certain stickiness. Approximately one-quarter of our employees have been with us for more than five years, with hundreds exceeding 10 years. It has to do with that promise and opportunity to be able to grow within the company.
Patricia and the company have been very active in nonprofit groups where they do a lot of the training, such as JVS SoCal, which helps 50,000 people a year find employment. We fund and support them, but we also hire from this organization.
We’re trying to attract people to our industry, and then give them an opportunity to grow.
We are certified as a Great Place to Work and have been recognized nationally by Forbes magazine as one of the 50 Best Workplaces for Aging Services. We’re proud of those designations. They’re a commitment to our staff, and show that we are listening and paying attention, taking their feedback and acting on it.
As a board member of NIC (National Investment Center for Seniors Housing & Care), the topic of affordability is a high priority. In a recent presentation to the California Advisory Committee I serve on, I discussed a NIC-sponsored study called The Forgotten Middle that addresses the fact that many middle-income seniors will have insufficient resources for housing and healthcare. We’re trying to inform and educate, to advance the dialogue across states.
SHB: What are some of those solutions the industry is working on?
Kerr: There are lots of different ways this problem is being addressed already. Some have to do with simple structural design solutions — whether it’s about shared amenities and services, or modular or other types of construction.
With respect to operating models, there might be limited services or bundles to make the choices more ample.
With respect to financing, there are possibilities for tax abatements or other incentives to be offered in ways that promote options in housing.
The biggest opportunity of all is collaboration, whether public-private or otherwise. There’s a waiver program in California that’s relatively small. We’re trying to expand on that program to be like Supportive Living in Illinois. That program makes funds available for seniors that shouldn’t live in an institutional setting, so they can instead live in an assisted living environment that uses some government funding to pay a portion of those costs.
SHB: How has growing up in Mexico played a factor in your career in the United States?
Kerr: Having a multicultural and multilingual background is additive to the whole. In 10 years, our seniors are going to be much more diverse, ethnically and culturally.
Our population is evolving in a way that for me to have a multicultural, multilingual background is helpful. I love being able to go to Mexico City and take care of our business in Spanish.
SHB: What is something people in the industry might be surprised to learn about you?
Kerr: My sister is a very successful pop star, but not in the United States. She’s a multi-platinum selling artist and is very famous in Latin America. Her stage name is Patty Cantú.
Also, I lived in Germany and speak fluent German. My other sister lives in Germany. She is extremely fun and is kind of half German now because she’s lived there so long.