May 25, 2015, Tim Mullaney, Senior Housing News - Since its founding in 2002, Commonwealth Assisted Living has grown to become one of the major senior housing players in Virginia. The provider has expanded from three properties to 21 by pursuing an aggressive but carefully considered acquisition strategy, and has been successful in buying properties even as other small and midsize operators have been priced out of the M&A market across the country.
In April, the Charlottesville-based company reached the 21-property milestone with the $4.6 million acquisition of a community that will be rebranded as Commonwealth Assisted Living at West End (pictured). Under Commonwealth's ownership, the assisted living building in the Richmond metropolitan area will add memory care services as well; it previously was owned by Meadow Glen of West End, LP.
Commonwealth's ability to steadily expand has been due largely to its focus on workforce development, founder and CEO Richard Brewer tells SHN.
Brewer chatted with SHN about the company's talent development and overall growth strategy, offering a glimpse into how a once-modest operator is emerging as a regional powerhouse.
SHN: How did Commonwealth get started?
RB: We started Commonwealth by acquiring three smaller communities that didn't have memory care services. Our strategy was to update them with a significant injection of capital and add services like memory care. That enabled us to not only have a new product but an expanded service line, and it gave us economies of scale.
SHN: And you've grown through acquisitions ever since?
RB: We view it as less risky than building a new community. We don't look for opportunities to grow just by adding buildings in our portfolio, but look for where we can add value. We buy a community for what it's worth today. We can add value by adding services. You can do everything right in building a new development, but if it doesn't fill in two years, it's a failed project.
SHN: A recent survey found that smaller operators are turning more to construction, though, because acquisitions are becoming so pricey.
RB: We are very competitive on some deals and not on others.
SHN: How do you typically finance your acquisitions?
RB: We've worked across the spectrum from local banks to regional banks to big health care lenders to agency financing. It depends where a project is. At the end of the day, financers are lending â€¦ our industry has matured to the point that lenders understand it's not the real estate that protects them but the people who are running the business on the real estate. I think a lot of people forget that our products are people and not pieces of real estate. So hiring and training the right people is what will set you apart.
SHN: How do you approach hiring and training, to set Commonwealth apart from competitors and make the company appealing to lenders?
RB: We went out and interviewed 350 people in the company and said, why do you come to work every day, what's going well, what's not? Out of those discussions, we developed our core values as a company.
Now, everyone is measured by how they do at their jobs, but also how they live up to our core values, which are that we care, we are respectful to those we work with, it's important to speak up, it's important to be engaged, have fun and celebrate success. Those that have the skills and the values, they're our top talent. We developed Commonwealth University because there are people who share our values but need help with their skills.
SHN: What's Commonwealth University?
RB: We have regular trainings to build skills in departments at particular communities, and top talent are trainers. One advantage of being regional is that no one has to travel too far to these sessions.
We're really trying to build leaders. We have a huge gap in our industry for leaders. We have a top talent academy twice a year, off-site, which is a five-day intensive training. A couple times a year, we bring 15 or 20 people together to help them build their leadership muscles. When our workers are making decisions, we want them to decisions that are good for the residents foremost but also good for the business.
SHN: How do you identify good candidates during the hiring process?
RB: We identified personality traits and leadership skills of the best-of-the-best. Now, we use a hiring assessment to help determine if the candidate has these traits and skills. We're looking for people with high altruistic values on the frontline. They're also identified on their ability to follow regulatory guidelines and whether they want to stand out alone in a crowd or work as a team.
This way, we can assure folks in our communities that we're hiring someone who has the ability to be great. We ask workers to commit to helping onboard new hires for the first 90 days. That's cut our turnover rate significantly.
SHN: It sounds like a comprehensive approach, what are the associated costs?
RB: It would be hard to put a specific number on what we've invested in our human capital strategy. It's been significant. But from an ongoing standpoint, we're using people already in the organization to build the organization, and returns have been phenomenal. We're experiencing significant growth from our efforts, organic growth.
SHN: And as far as ongoing growth through acquisitions, do you foresee expanding your footprint?
RB: I don't see us being an operator with one community in Florida, another in Texas. Almost anywhere in Virginia makes sense, and we'd look for opportunities in bordering states.
SHN: Is there anything in the pipeline now that's in a bordering state?
RB: Not in bordering states. But we've got two other opportunities. One we expect to close this year, and one late this year or early next year.
SHN: Commonwealth has an associated home care business as well. Did you acquire that originally?
RB: No, it was all organic growth. We started it 12 years ago, I think. There were fewer players in the industry at that point. We had staff who wanted to pick up more hours, so we found a manager who had been in the business previously and opened our first agency. We've got four locations now.
SHN: And are you looking to grow that as well?
RB: Yes, we plan on growing across the board. I think for anyone in this business, the next 50 years will provide lots of opportunity to grow.