July 16, 2020  //  Episode 7

Design and Development Innovation with Guest Laurie Schultz (Avenue Development)

– Presented by Senwell Senior Investment Advisors

July 16, 2020  //  Episode 7

Design and Development Innovation with Guest Laurie Schultz (Avenue Development)

– Presented by Senwell Senior Investment Advisors

Show Notes

Episode 07: Design and Development Innovation with guest Laurie Schultz (Avenue Development) – Presented by Senwell Senior Investment Advisors

On this episode of The Investment Opportunity Podcast, we welcome Laurie Schultz (Principal) with Avenue Development. Avenue is a full-service real estate development and advisory group focused on innovative solutions for wellness centered healthcare and senior living properties.

In this episode, we cover the following topics:

1. What are today’s design trends?
2. New technology and how it’s interacting with residents and patients.
3. Technology implemented in new developments vs renovations
4. Trends in construction cost
5. Construction starts in other industries vs. skilled nursing and assisted living
6. The current debt market

You can learn more about, and contact Avenue Development by visiting their website: https://avenuedev.com/.

The Investment Opportunity Podcast is presented by Senwell Senior Investment Advisors, a mergers and acquisitions advisory firm specializing in skilled nursing and seniors housing. The show is hosted by Ben Bohland and Brandon Bohland.

Want to watch the show? Visit our website: www.senwelladvisors.com/podcast

If you have suggestions on topics or guests that to invite on the show, questions or comments, please contact us. You can get in touch with us the following ways:
● Website: www.senwelladvisors.com/podcast
● Email: info@senwelladvisors.com
● Linkedin: Senwell Senior Investment Advisors – https://www.linkedin.com/company/26199139
● Facebook: Senwell Senior Investment Advisors – https://www.facebook.com/Senwell-Senior-Investment-Advisors-105891937461351/
● Twitter: @SenwellAdvisors – https://twitter.com/SenwellAdvisors
● Instagram: @SenwellAdvisors – https://www.instagram.com/senwelladvisors/

Contact Senwell Senior Investment Advisors for mergers, acquisitions and dispositions. Senwell specializes in working with owners and operators of skilled nursing (short-term rehabilitation and long-term care) facilities, assisted living and memory care facilities, independent living facilities, continuing care retirement communities and owners of bed licenses in Certificate of Need (CON) states or states with a moratorium on bed licenses.

Thank you for listening to The Investment Opportunity Podcast!

Guest Bio

Laurie has a true passion for developing innovative strategies with partners to create efficient models for healthcare real estate that are reflective of the rapidly changing care delivery models in the medical field, senior housing, and skilled nursing industries. With a diverse development background, Laurie has spent her career balancing real estate investments with forward thinking healthcare trends. Prior to co-founding Avenue, she developed projects in medical ambulatory care, post-acute rehabilitation, senior housing and market rate apartments exceeding $800 million in value.

Ms. Schultz has an extensive background in advising healthcare systems and physician providers nationally to strategically expand, and created a predictive demographic model to target ambulatory care site selection. She led a development team for the western half of the country for the largest skilled nursing development company in the nation focusing on short-term stay rehabilitation properties. Laurie has also developed 3,000+ units of market-rate, Class A, apartments and senior communities, and directed development for one of the country’s largest and most respected privately-held apartment management and development firms, producing over $150 million of expansion across the Midwest and Mid-Atlantic regions.

Laurie is a licensed Indiana Managing Broker with a CCIM Designation and is currently the 2019 Indiana CCIM Chapter Past-President 2018. She frequently is invited to speak at numerous real estate organizations and healthcare conferences including Indiana Commercial Board of Realtors Annual Conference and the National Investment Center for Seniors Housing & Care (NIC). Laurie graduated with cum laude honors from Butler University and is an active alumnus from the Lacy School of Business along with various other philanthropic organizations.


Episode 07: Design and Development Innovation with guest Laurie Schultz (Avenue Development) – Presented by Senwell Senior Investment Advisors

Brandon: [00:00:00] On this episode, we talk design and development innovation.


Intro/Outro: [00:00:06] Welcome to the Investment Opportunity podcast. We’ll educate you on the latest investment trends happening in one of the hottest real estate classes, skilled nursing and seniors housing. We’ll point out the risks so you can reap the rewards of investing in this growing and complex industry. And now your hosts, Ben Bohland and Brandon Bohland.


Brandon: [00:00:30] Welcome to Episode seven of the Investment Opportunity Podcast presented by Senwell Senior Investment Advisors. We are your hosts. I’m Brandon Bohland and I’m sitting beside Ben Bohland today and


Ben: The better looking one.


Brandon: For those of you who are watching on video, you can see if that’s a true statement or not. But for those of you who are listening to the show, I will leave that to you to struggle with that comment. But Senwell, let’s get back to the show here. Senwell is a skilled nursing and seniors housing, mergers and acquisitions firm. And with us on the show today, we are so happy to have Laurie Shultz. Laurie is the principal at Avenue Development and Avenue is a full-service real estate development and advisory group focused on innovative solutions for wellness centered health care and senior living properties. Laurie, welcome to the show.


Laurie Schultz: [00:01:25] Good morning. Thank you, Brandon. And Ben, I appreciate the invite. Excited to talk to you today.


Brandon: [00:01:29] Yeah, we’re excited to have you. Could you actually tell us, if we could, to start the show a little bit more about yourself, and avenue and what you’re doing over there?


Laurie Schultz: [00:01:42] Happy to. Well, as you said, we are a full-service real estate development and advisory firm. We’re really a lot more than just development I think that plays a lot into some of the trends that we’re going to be talking about today.


Laurie Schultz: [00:01:58] So we say that our tagline and mission is development with purpose. And we live that every day. When my partner Mike Mattingly and I founded Avenue, we saw a need in the market that a lot of people who are developing health care properties and specifically senior living post-acute properties were focused a lot on what is the traditional bricks and mortar. But the success of the buildings, as you know from an investment standpoint, really depends on the success of the operations and the care that’s happening in the building. And so, Avenue is really founded on the belief that we have to understand the day to day operational success for our partners, for the buildings to be successful. So along with being experts in actual real estate development and building the bricks and mortar, we do a lot of advisory work as well to underwrite deals, to look at specific markets, to be up to date on regulatory trends that are going to impact the business of our partners in the buildings and really help to advise our clients onto how to do a full holistic approach to a new development.


Brandon: [00:03:08] That’s really good information. So, a lot of our listeners, we have people both who are currently in the industry and some listeners who are just looking to get into the industry. So, we get people all the time that approaches that say, hey, you know, we might be in multi-family now or whatever it may be, and we want to move into senior living. So, they could contact somebody like you to really just jump start the entire process if they want to do a new development deal. And you guys would be known as in that kind of a role the experts to help move them along.


Laurie Schultz: [00:03:45] Right. It’s a big investment, especially if you haven’t been in the industry before.


Laurie Schultz: [00:03:48] And so we have a lot of packages and they can also be customized to break it down into smaller pieces as you move along the analysis to decide if it’s the right investment or not.


Brandon: [00:03:59] Yeah. Including the underwriting, it sounds like. So if they’re going to know, right out of the gate, what’s a good opportunity to look at and what’s not just from working with you right out of the gate.


Ben: [00:04:13] So in terms of the trends you mentioned, I guess there’s been obviously so many different transformative shifts over the years. And in terms of the actual construction design, what are some of the trends that you’re seeing today?


Laurie Schultz: [00:04:31] So the COVID pandemic, in our opinion at Avenue has really just fast forwarded some of the trends that our industry has been looking at for a long time. But it’s no secret that our senior living industry is slow to change.


Laurie Schultz: [00:04:46] And a lot of the things that are being implemented now, I think a lot of people could argue, could have been done five, 10 years ago. But we’re seeing a lot of shifts specifically into technology. And I want to talk about that first, because I think if people are going to look at a new development, a lot of people think, OK, well, what do I need to do? What’s happening with socialization and do I need to change dining areas or private rooms, air filtration systems? The number one advice I would give is to look at your technology that’s going in the building and make sure that your wireless infrastructure, you have enough bandwidth to take on all the new technological advances that are happening post COVID. But also, that’s going to happen in the future. That will change how we operate in a building and provide staffing efficiencies along with technology.


Laurie Schultz: [00:05:38] I you know, I mentioned some of the things in the bricks and mortar that people are looking at changing.


Laurie Schultz: [00:05:44] We’re looking at a lot of different areas of dining. When the pandemic hit and even right now, we’re trying to address two concerns from the physical plant safety and also socialization.


Laurie Schultz: [00:05:57] Families want to know that their loved ones in these buildings are safe.


Laurie Schultz: [00:06:01] The people moving in want to know that there are precautions that they’re going to be looked after. But they also we don’t want to take away the socialization aspect. And that was the first thing that that went of our knee-Jerk reaction. And so, some of the new designs are looking at how we balance safety and socialization, specifically in areas like fitness centers and the salons in the spa environments, even dining. We’re looking at different types of materials for partitions and some that that might have a see-through approach, but it may be a little more aesthetically pleasing than just the acrylic partitions that you’re seeing everywhere. And so how can we in use design to reconfigure those areas, but also keep the residents safe by using partitions? The other thing that we’re looking at for visitors is how do you keep that socialization aspect? I know a lot of people who might not have a community right now that has a large front porch. Luckily, though, when the pandemic hit, it was spring going into summer. People have been using the front porch aspect on to help their residents and families come to socialize. But on a new development, how can we bring in that feeling of safety and a front porch setting? Maybe inside to the lobby and have a segregated area that visitors aren’t entering the main area of the community, but staying up front a little more isolated, but still provide opportunities for families to interact.


Brandon: [00:07:40] So it sounds like you’re almost introducing both permanent solutions, as well as if they need to adjust the building design as they’re, quote unquote living in it. We can make some adjustments as we go. Is that fair to say?


Laurie Schultz: [00:07:55] Yes, I think it’s important for everyone to realize that some of the changes that are happening from COVID are going to be long lasting in our industry.


Laurie Schultz: [00:08:04] But some of them are going to be short term. And since developments are a long-term play, it’s, two to three years until we get these out of the ground. If you’re starting from something today till its opening. You want to make sure that you have the long-term interest of your investment and of your residents in mind. So I don’t know that we have to totally get rid of dining rooms and say that that’s never going to come back or all kinds of socialization in the wonderful community areas that have become so popular in our hospitality model of senior living. But we have to think of a way that it can be done smartly and flexible because this is going to be on the minds of everyone and families who are making the decision for their loved one for years to come.


Brandon: [00:08:49] That’s great. So one of the comments that you had, though, too, is that it sounds like a lot of these technological changes are more geared towards things that the operator can implement, whether that be software, hardware devices built into the actual structure. Could you talk a little bit about maybe some technology that you’re seeing with operators implementing with their residents or their patients? And how are they interacting with the operator itself and some of the staff within the operators. Is there any new technology that’s out there that’s beneficial to them and even how they’re interacting with family members?


Laurie Schultz: [00:09:33] Yes, as you just said, it’s all related and that’s the beauty of technology. It helps in a cost-effective manner. Answer all of those. First, as you said, from the operational perspective. To hone in on the safety aspect the residents and their families are interested in.


Laurie Schultz: [00:09:52] You want to minimize the touch points with staff, but it also is interesting because staffing efficiencies were a huge topic in our industry even before the pandemic hit. So, some of the technologies that are really important for addressing this are remote patient monitoring. And this has been fairly new in our industry, but very specific for higher acuity models, usually in post-acute. We were looking at this. But it has direct benefits even to our lower acuity models and into our private pay assisted living and independent living facilities. If you can have remote patient monitoring and check on vital signs and different kinds of sensors that you can have in the room for temperature checks or motion sensors, all of this technology leads to what is called predictive analytics. And so people way, way smarter than I certainly am. Create these algorithms that are used in the attack that all the data that it collects and it’s able to spit out information on a software platform to the operators to say, hey, Mrs. Smith in room 123 is doing okay today. You might just need to check on her one or two times at these times a day. But Mr. Jones over at 243 his motion is a little off from normal. And so, you might want to check on him a little more today. And so, what that allows the operator to do. One, you’re having less touch points with Mrs. Smith instead of doing regular rounds. But for Mr. Jones, who needs more attention, you are being able to be more efficient with your staff and their time by dedicating those resources to the people that actually need it versus having regular rounds on each resident every day.


Brandon: [00:11:53] And that almost. Go ahead. I’m sorry.


Laurie Schultz: [00:11:55] No, go ahead.


Brandon: [00:11:57] That almost seems like a solution that everyone has been waiting to implement. But COVID is almost been a scenario where it’s just forcing people to implement much faster than anticipated.


Laurie Schultz: [00:12:11] Absolutely, and we have been talking about these technology changes for the past two years and looking at it in our new developments. But you’re absolutely right.


Laurie Schultz: [00:12:20] It’s become from a nice to have to a need to have and socialization aspect too a lot of this technology that is being put in the resident rooms or even in community areas.


Laurie Schultz: [00:12:34] Most of it are just from the resident’s standpoint screens.


Laurie Schultz: [00:12:38] Right. Unless you’re talking about the sensors. But if you’re adding more video screens, those can be smart TVs you can use tablets. And so, all of those interfaces are able to use from a socialization aspect, not only to communicate with staff, but also family members. And some of our partners are using it as a way to create community engagement. So instead of having a get together in the dining room, you might be able to do a live stream movie night or do other activities virtually, even though everyone’s not gathered in the short term, at least in one room.


Brandon: [00:13:14] And a lot of a lot of these changes, though, to seem like they could be. And I do want to touch on this a little bit about. Maybe the difference between implementing technology in a new development project versus an existing maybe a renovation that somebody is going through. And it just seems like a lot of this technology could be implemented wirelessly now today. So, a lot of these changes that you’re talking about seems like you could take any existing skilled nursing facility, assisted living facility, independent living and implement a lot of this technology. But what are some things that people think about with their existing assets vs. some things that they may not be able to do where they could accomplish through a new development project?


Laurie Schultz: [00:14:07] I think you’re right.


Laurie Schultz: [00:14:08] Most of it is wireless technology, the gating factor to determine if you can do it in an existing building or a new development is really the bandwidth that you have coming into your facility. So that’s why I said my number one advice when looking at a new development is to make sure you have fiber going to your building, that you’re going to have enough bandwidth. So seeing what is available on your existing project and to make sure that you’re not taking away from bandwidth you have for your electronic medical records or other vital things that you need at your community for the new technology would be important. From a safety and socialization aspect on renovations. There’s a lot of things that operators can do now that are inexpensive. We’re working with several different architects who have some really unique ideas on how to package some of these renovations by cost. So if if you have it in the budget for a large cap X project, you can do these things with your building. If you only have a small budget but still want to react to what is happening, post COVID and make your residents feel safe. You can do things in this bucket.


Laurie Schultz: [00:15:20] It’s really interesting. And a lot of this technology, again, has been around. We just haven’t had a catalyst to implement it.


Laurie Schultz: [00:15:27] But things like touchless fixtures. Right? Like water faucets and toilet sensors like that technology has existed. But that is pretty inexpensive to buy and renovate the building. There’s film that you can put on door handles and other high touch surfaces. That’s a micro Biovail film that can be cleaned 50 to 60 times before it has to be changed. That’s pretty inexpensive things like doing voice activated sensors in elevators. And then you kind of move up higher into the cost. You know, I think just like when all of us are going to a doctor’s office now or other facilities, people are doing these temperature checks now. Right. To make sure that there’s no fever. Well, a lot of times to renovate a lobby or an existing entryway is not that expensive to have stations set up to do temperature checks, to do hand sanitizing even foot sanitizing stations. Now, granted, those operators that maybe have more in cap ex can do a little bit more. You can do body scans of if you want to implement that level of technology to do temperature checks. It doesn’t have to be hand-held. But there’s a lot of things that you can do to make people feel safe, right when they come in that lobby entryway of the building.


Ben: [00:16:54] Yeah, so obviously with all of this technology, it can add up some of these things might be inexpensive and you can even if they are quite costly, you can save through staffing or however the technology can replace it. But overall costs and construction costs. Where do you where do you see it now? Where do you see it going? And then with the current projects that are currently out there, do you see any supply chain issues that that have come up just through the covert outbreak?


Laurie Schultz: [00:17:29] I really think implementing some of the technology on the cost of a new build is fairly minor.


Laurie Schultz: [00:17:37] Even some of the more cutting edge things that I discussed, like the heat sensors, or if you’re doing potentially like UV air filters if you’re looking to do that on a grand scale, we might be adding a quarter million three hundred thousand dollars to the project cost in a 20 million, 25 million dollar development. That certainly doesn’t break the bank so we can seamlessly integrate a lot of that. Construction costs I think we’re really early in this to see where the fallout comes. We are on the short-term seeing construction costs come down. And I think the suppliers and subs are having a knee jerk reaction to a lot of the projects that have been put on hold. Specifically, a lot that was happening in the leisure and hospitality industry. So for the short term this summer or fall projects, we’re going to start we are seeing a slight pullback. My question really is more for the mid-term things that are going to start next spring where where we go with that. The supply chain right now, everything that is coming from China, if you’re doing a larger project that needs structural steel, we’re starting to see that open up a little bit. But we have to remember, we’re in an election year, too, with some pretty strong political winds that could go one way or the other.


Laurie Schultz: [00:18:57] And so we’re facing, I think, a two headed monster, so to speak, with the supply chain from the pandemic. And what happens if we’re in a second wave right now or third wave? What happens to that supply chain and imports coming in, but also how the countries that we import from what’s going to happen with trade regulations and tariffs. So, I’m really interested to see next spring between those two things where construction pricing goes. I also am keeping an eye on the labor market. Again, right now we’re seeing a pullback, but construction hasn’t stopped in most states. They considered construction an essential business, which is wonderful, but there’s been a lot of onus put on general contractors and subcontractors to make sure their employees are safe. And depending on how long this continues, we could see some pressure in labor prices, even though the volume of projects may not be there. I think subs could be very aware of the fact that their workers are on the front lines doing essential work in construction and we could see some pressure in labor pricing.


Brandon: [00:20:08] That’s a good point. So, have you. I would imagine being in the development business, you pay attention to construction starts. Have you paid any attention to other industries and what their construction starts look like versus our industry right now? My only reason for the question is if there’s any hesitation. A lot of times these days we see a lot of bad news with nursing homes and assisted living facilities. And so, I think we’re kind of in this temporary negative media gap where I think we need to get through it. And so, I guess I would just be curious to know if you’ve paid any attention to other industry construction starts versus ours.


Laurie Schultz: [00:20:54] That is so true. It is so much is driven by what is in the media and our industry is strong.


Laurie Schultz: [00:21:02] We have amazing operators that care about the aging Americans in this country and their families. And I have no doubt that we’re going to get through this coming together and creating a different story. I think, again, the pandemic is showing just highlighting some things that already existed.


Laurie Schultz: [00:21:22] The biggest construction start cause, again, that we’ve seen is in hospitality and leisure and hotels and kind of dovetailing that into the construction cost. Especially if you’re doing wood furring construction on senior projects. A lot of the hotel construction, unless it was large, is similar. And so, I think that’s been helping our pricing a little bit. But trends in multi-family, those are going to ramp right back up. I think very, very soon everyone was just taking a small pause to make sure that before they move forward with large investments, we knew what was happening in the market.


Brandon: [00:22:05] Thanks. That’s helpful information. Another question I had is more on the debt side of things. So have you seen or paid attention to the debt markets as it relates to construction loans or any kind of Mezz financing?


Laurie Schultz: [00:22:23] Yeah, this is one I would say that we’re seeing more of an immediate impact, but no surprise, Right, most lenders are going to be very conservative.


Laurie Schultz: [00:22:31] We’re out to the market for a couple developments right now. Either that or starting late this year in fourth quarter or early next year. Early spring. And we have definitely seen more of a difference now in the product type than we have before. Some of the business that we do at Avenue is medical focused and unique areas of medical office. Lenders on health care and medical related in general are very bullish. And if anything, given where market terms are, we’ve actually seen compression of some cap rates and interest rates in medical. The senior living in post-acute world has really spread the gamut. The independent living and active adult market. Again, the lenders seem very bullish on that. They can wrap their head around that because it doesn’t have a health care component and everyone is more self-contained as you get up into the acuity into assisted living and skilled nursing. We are definitely not seen as much interest from lenders who don’t have experience in that market. But if a lender has specific senior housing or post-acute skill nursing experience, they’re still interested. We’re just seeing probably a 25 to 75 basis point increase on their underwriting.


Brandon: [00:23:53] Yeah, that’s really helpful. We’re seeing the same thing and that that also includes any acquisition, too. So, we’re seeing a slight difference in some variations on that side. Again, we’re seeing the higher the acuity, the bigger the impact right now.


Laurie Schultz: [00:24:12] It’s just the fear of the unknown. That everybody has right now.


Ben: [00:24:16] Yeah. Well, hey, Laurie, we really appreciate all of your information and your guidance and all of the knowledge that you brought to the table today. So how can people get a hold of you if they want to learn more information?


Laurie Schultz: [00:24:33] Well, I’ve enjoyed the conversation today. We’d love for everyone to check out Avenuedev our Web site.


Brandon: [00:24:41] It is a great new Web site, by the way, you guys just did a phenomenal job redesigning the Web site. You guys should all go take a look.


Laurie Schultz: [00:24:49] And you can learn more about our wonderful team at Avenue and that.


Laurie Schultz: [00:24:53] That’s what makes our ship run is the great people that are there that I have the pleasure of working with every day. Our email address is info@avenuedev.com or you can reach me directly at Lschultz@avenuedev.com.


Brandon: [00:25:07] Laurie, it was a pleasure. And as expected, you did not disappoint. So, thank you for being on the show. I really appreciate it.


Laurie Schultz: [00:25:16] Thank you for the conversation. Have a wonderful day.


Ben/Brandon: [00:25:19] Thanks Laurie.


Brandon: [00:25:21] Hey, guys, thanks for listening to the show. This is the What You Got segment. Since we just did a show talking about development projects. I want to take the time today to talk a little bit more about an opportunity to develop skilled nursing beds in Florida. We talked in a previous episode in Another What You Got segment about skilled nursing beds in Palm Beach County, Florida. This opportunity is 100 plus skilled nursing beds that are available to develop in Bay County, Florida. Of course, the big city there is Panama City. If you have any interest in developing in that market, you can contact me directly at Brandon@SenwellAdvisers.com. That’s Brandon@SenwellAdvisors.com.


Intro/Outro: [00:26:11] Thank you for listening to the Investment Opportunity podcast. If you want to hear more about investing in the skilled nursing and seniors housing industry, head to our Web site at www.senwelladvisors.com/podcast.


Share this Episode



Subscribe Now

 Subscribe to Receive the Latest Podcast Episode