Trailblazing owner, operator of luxury CCRCs is still winning over customers and employees alike.
By Matt Valley
In 1987, hotel heiress and entrepreneur Penny Pritzker had a vision to incorporate hospitality-level service into senior living. To fill that void in the marketplace, she launched Classic Residence by Hyatt.
Early on, the Chicago-based company acquired a few high-end independent living rental communities that contained some assisted living units. Classic Residence by Hyatt also co-developed a couple independent living rental communities with Forest City Enterprises Inc.
But it wasn’t until 1992 that the company’s identity began to really take shape. That’s when it acquired Bentley Village, a continuing care retirement community (CCRC) in Naples, Fla. The entry fee community had fallen into receivership after the original developer violated some covenants required by the state.
Through its acquisition of Bentley Village — which has since been renamed Vi at Bentley Village — Classic Residence by Hyatt was introduced to the CCRC business. Soon after, the fledgling senior living company formed its own in-house development team in order to complete the Vi at Bentley Village development, which occupies 160 acres.
Today, Vi at Bentley Village includes 565 independent living units and 200 units of care split between assisted living, memory support and skilled nursing. It’s the company’s largest community.
In 2010, Classic Residence by Hyatt changed its name to Vi — pronounced “vee” — the contraction for the word “Vita,” which is Latin for “life.” “We’re not about end of life, we’re about making the most out of this stage of life. A lot of what we provide for residents has to do with lifestyle and quality of life,” says Randy Richardson, president of Vi since 2000. Under his leadership, the company has completed over $1 billion of new development.
The name change has benefitted the company because customers are curious about its origins, says Richardson. “It allows us to tell the story of what we do and what we provide. It’s worked extremely well for us.”
Vi currently owns and operates 10 CCRCs across six states. The 4,024 total units serve more than 4,400 residents. Three of the CCRCs are located in Florida, followed by two each in California and Arizona, and one apiece in Colorado, Illinois and South Carolina.
The company has developed six of the communities from the ground up. It acquired the other four communities, each of which required additional development. The newest communities that Vi has built from the ground up typically include between 270 and 300 independent living units, plus care centers.
“The care centers are sized to support the needs of that population as it ages,” says Richardson. “They’re not built to be stand-alone operating units. They’re built to be part of the continuum of care that we offer people.”
The company surveys its residents every other year to gauge satisfaction about topics such as housekeeping, food and beverage services, lifestyle programming, and care. In 2014, more than 90 percent of Vi residents responded, and overall satisfaction was 91 percent for both independent living and care center residents.
Seniors Housing Business spoke with Richardson about the consumer benefits of the CCRC model, the challenges and opportunities for Vi and his accomplishments as former chairman of the National Investment Center for Seniors Housing & Care (NIC).
Seniors Housing Business: What is the company’s site criteria for acquisitions and new development?
Randy Richardson: Part of it is real-estate driven. For example, we bought TidePointe, a Vi Community, located in Hilton Head, S.C., out of bankruptcy. The name and the location have some cache, so that was an opportunity we were able to take advantage of from an acquisition standpoint. We also expanded the community.
When we qualify a market for ground-up development, what we’re looking for is a certain density of age- and income-qualified individuals. We also focus on the upper quartile of the housing market. The product is priced generally at the higher end. That will guide you to markets that would have the kind of density of population that would make sense to build a community. It gets you to those great addresses.
But finding 20 acres of land to build a campus, or four to five acres of high-quality property to build a high-rise is not that easy in those markets. In great real estate markets, there are a lot of competitors for real estate. So, you do have to search a bit.
Vi at Palo Alto in California is a unique community adjacent to Stanford University. Vi at Grayhawk and Vi at Silverstone are in the best market area of the general Phoenix market. The community we built in Denver, Vi at Highlands Ranch, reflects the Colorado architecture. We’re the first for-profit CCRC in Colorado. So, it was an underserved market from our perspective.
Vi at Aventura in Aventura, Fla., is a high-rise community. Vi at Lakeside Village in Lantana, Fla., was an acquisition. With the ground-up developments that we did, we were looking for market areas that were underserved and that have the age and income qualification we needed to support the product. The other four communities were really acquisition opportunities. Vi at La Jolla Village in San Diego is fairly unique. We bought that community out of bankruptcy and then we built the care center and the second high-rise tower of that community.
SHB: Does Vi operate everything that it owns?
Richardson: We have a joint venture in Scottsdale, Ariz., with a local developer, the Plaza Cos. We co-developed Vi at Grayhawk and Vi at Silverstone. We’re the operator of both communities. We want to operate anything that we have an investment in. (Based in Peoria, Ariz., the Plaza Cos. has developed medical office properties, senior living communities and bioscience/biotechnology centers across the state.)
SHB: As of March 2015, Vi had 2,761 employees. That is a fairly large number of employees spread across the 10 communities.
Richardson: First of all, it’s a highly service-intensive business. Part of that number includes part-time employees, but there is a base of approximately 2,000 full-time employees. We only have 62 or so employees in the corporate office. The majority of the employees are working in the communities.
These big CCRCs often will have over 200 employees because you’re providing housekeeping, food service, care, laundry service and transportation. You’re in a lot of different businesses all at the same time. That’s the reason for the high employee count.
Our focus is to position ourselves at the upper end of the market. How do we do that? We provide quality service. Our goal has been not only to build great communities in great locations, but also to be the best operating company in the business.
Our model allows us to be full-service. We don’t really make our money on the operation of the business. We get a management fee. We make our money on the unit turns. So, we’re service rich. That allows us to charge the price points we have.
SHB: Can you explain what you mean by unit turns?
Richardson: In an entry fee CCRC, a resident will pay an entry fee that usually has a repayable feature to it. We offer different contracts at different prices in each community, ranging from a zero percent repayment to a 90 percent repayment. A resident or a couple will pay an entry fee that allows them to live in the unit of their choice and enjoy the use all the amenities of the community. In all of our communities we have health clubs, theaters — they’re amenity rich.
We also have the care available to them, if and when they need it. They pay a monthly fee. The monthly fee covers the operating cost of the community, including care. So, when they move through the continuum, their monthly fee does not go up.
The value proposition for our customer is that when they move in, they may pay a $4,000 monthly fee, but when they move into assisted living or skilled nursing their fees do not increase. The care side of the CCRC becomes a bargain for them. (The average monthly, all-inclusive fee across the Vi system is $4,200. The average entrance fee to a Vi community is $450,000, but varies by location.)
When people move in, they usually live the rest of their lives with us — 12 to 15 years on average. They move in when they are in their late 70s. If they have a repayment included in their contract, then when they leave the community we repay that amount to their estate or wherever it is designated per the contract.
SHB: If the average resident stay in Vi communities is at least 12 years, your residents are living long, healthy lives.
Richardson: Usually a more affluent customer has had access to healthcare throughout his or her life. Our residents are physically more active and healthy when they move in.
SHB: Before joining Classic Residence by Hyatt in 2000, you served as senior vice president of asset management for General Growth Properties, one of the giant owners and developers in the shopping center business. How and why did you go from the retail world to the shopping center business?
Richardson: It was really kind of serendipity. I was with General Growth for 15 years. At that time I was in charge of all of the properties that we owned in partnership. It was a great job and a lot of fun. A recruiter called me one day and said, “Several people have referred us to you. Penny Pritzker is looking to hire a president to run her senior living company because she’s doing other things. She needs somebody to pay day-to-day attention to it.”
I said, “This is interesting, but I really don’t know anything about the senior living business.” The recruiter encouraged me to have the meeting, which I did. During the first discussion I had with Penny I said, “I’m flattered, but I don’t know anything about this business, so I don’t know why I’m here.” She said, “I don’t care if you don’t know anything about seniors housing. I need someone with enterprise management skills, and I need somebody who knows how to grow a company and knows about development because that’s the opportunity we have. If you are smart enough, we’ll be able to teach you the business.” That’s how we came together. She took a chance on me, and here I am 15 years later.
SHB: So, Penny had the foresight 15 years ago to position the company to accommodate the growing needs of seniors?
Richardson: She is a very smart lady. I have a tremendous amount of respect for her. Think of how hard it would be to turn over the day-to-day operation of this business you built from the ground up. Don’t get me wrong, she was strategically involved, but she didn’t sit on my desk. She let me do my job. It was more like a partnership. We had a great run together.
SHB: Is Penny no longer affiliated with Vi? (Penny Pritzker is currently serving as the U.S. Secretary of Commerce, a post she’s held since 2013.)
Richardson: Taking a job like U.S. Secretary of Commerce requires you to more or less divest yourself from your business so there’s no conflict. She resigned as chairman in 2011. Kevin Poorman, who was with her from the beginning and who was vice chair, took over as chairman. So, we’ve had great continuity of leadership.
SHB: During your last 15 years in the business, what has been the biggest takeaway for you?
Richardson: I learned early on that the way you win in this business is by being a great operator — especially in the CCRC business. Our reputation locally drives our business. While we may have a national brand to point to, we really are in the business at the local level. That means day in and day out you need to do a great job of taking care of, and serving, your residents. That’s not easy when you have a very discerning customer.
The new investors that are coming into the business are finally beginning to understand that it’s not a real estate play. It’s an operating business and you need a good team. Otherwise, whatever you consider your investment in these assets to be, it will be compromised.
SHB: It’s clear that having a quality operator in place is critically important to the success of a community, but does simply knowing that make the operations side of the business any easier to execute?
Richardson: It isn’t easy. I’m a big believer in investing in your people and investing in systems to help your people do a great job. Our company is relatively small with 10 locations and a little over 4,000 units today, but we have very robust operating systems in place. That helps our people do a great job.
We have put a lot of money into training and development of our personnel. Our turnover is only 20 percent in an industry that is often 50 percent or north of that. You can’t deliver high-quality service day in and day out if you have 50 percent employee turnover because you’re continually bringing in new people that you have to bring up to speed.
When you keep that turnover rate down and you’re investing in quality employees — and you keep those quality employees in the communities and provide opportunity for them — that’s going to pay off in terms of resident satisfaction. Ultimately, that will drive your business locally. That’s how you win.
We try to be competitive in what we pay people. We offer a good benefits package, and we invest in them. That makes a lot of difference to people in this business. They feel like they’re making a difference in somebody’s life. God bless ’em.
SHB: What’s next for Vi?
Richardson: We are continuing to pursue new development opportunities for higher-end CCRCs. We’re also going back to our roots and looking at the development of independent living rental communities that will include assisted living and memory support in 200 to 300 total units per project. That sector has really been overlooked. We hope to break ground in the next 12 to 18 months on an independent living rental community. Whatever we do will be amenity-rich and heavily service-oriented.
We’re very targeted in terms of location. Florida is a big market for us in the CCRC business. Even though it’s difficult to do business in California, we see opportunities in select markets. The Northeast is a market we haven’t tapped, but we think there are a few opportunities there for providing higher-end product.
SHB: You served on NIC’s board of directors for 11 years and as chairman in 2012–2013. What were your biggest accomplishments?
Richardson: Looking back, two projects stand out for me. One was NIC MAP. (Today, the web-based suite of research and analysis tools tracks and reports seniors housing and care data on more than 13,000 properties within 99 U.S. metro areas.) It was a major accomplishment for NIC and the industry. It was an idea that the board put its shoulder behind and made happen over a decade ago. I certainly didn’t lead the effort from inception, but I am proud to say that I was able to contribute.
I’ve also been a champion of trying to get the different industry organizations, especially NIC, ASHA (American Seniors Housing Association) and ALFA (Assisted Living Federation of America) to have a much more productive working relationship. During my time as chairman, there were a number of us that spent a lot of time on initiatives to bring ASHA and ALFA together as one organization with NIC’s support. Even though we weren’t successful in making that happen, I think we forged a better working relationship between the organizations.