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After Year in Flux, Distinctive Living Gears Up for Growth in 2023

Distinctive Living was only founded two years ago, but CEO Joe Jedlowski has in that time grown the company to 26 communities in seven states.

Persistent labor pressures and other headwinds complicated the company’s overall strategy this year. But after a year in flux in 2022, Jedlowski has his sights set on even more growth and improvement.

“[2022] was really setting that stage and holding and getting our teams accountable and accustomed to that new norm of the operating environment that we’re in, which is very different from the past 10, 15 or 20 years that we’ve operated in this space,” Jedlowski said during a recent appearance on the Senior Housing News podcast, Transform.

Freehold, New Jersey-based Distinctive Living’s 26 communities range from 20-bed homes to larger 250-unit communities. The company has developments underway that will push its reach to nine states, and it’s seeking new relationships with ownership and capital partners to expand its reach even further

“We want to work with capital partners that are aligned with us philosophically,” Jedlowski said. “We are looking to grow our business in 2023, but in a very structured manner in which our current operating base does not suffer.”

Highlights from Jedlowski’s podcast appearance are included below edited for length and clarity. You can listen to Transform on Soundcloud and Apple Podcasts.

On Distinctive Living’s portfolio:

So we started Distinctive Living just under two years ago. And our goal in starting Distinctive was to create a development platform where we are either developing senior housing projects for ourselves or co-developing with others. Also, providing development services to other folks that may be outside of our space that are looking to enter our asset class, as well as our primary core business, which is our operating platform. We are a full-service, senior housing management company, where we currently have 26 operating assets. And we currently have 19 buildings that we are working from a development standpoint on in many phases of development.

Our geography currently is from Florida, all the way up to Connecticut, and also in Indiana, in Wisconsin. As it relates to growth, we have several opportunities and acquisitions that we are evaluating that we will probably be bringing on sometime in early Q12023. We’re super excited about where we are, where we’ve been and where we’re going right now.

On the origins of Distinctive Living:

My grandparents had a very big influence in my life as I was growing up. My paternal grandmother today still plays a very big part of my life. And so when I was growing up, she worked in a senior housing community, specifically skilled nursing. And so I was introduced at a very young age into the senior space, and just really fell in love with it.

I have held almost every position within an organization. I really understand at all levels, as well as my business partners. We started in the trenches and we really understand what it takes to build an organization from the ground up and really flipping that organizational pyramid on its head. For us, what drove us to start our organization was to be able to continue to provide and influence the direction in which senior care is provided today.

Then the second piece of it is something that really I think is very important to our organization and to our mission. It is really about creating opportunities for others that we work with to see that they can have a career in senior housing and not only share that career opportunity with them, but really create a plan specific to that employee to help them grow and dedicate time dedicated energy dedicated dollars to help our team members either grow professionally or personally.

On operations in 2022:

I think it was a year of flux and a year of establishing and developing what the new norm was. For us coming out of the pandemic it was how are we growing our organization and second, how do we grow in this new normal where we have margin compression, labor shortages and we have agency in our buildings. We have all these challenges. I think it was a year of resetting the stage with the ownership groups that we work and with the capital partners that we work with in what is the new norm; [and a reset] inhow are we working to continue to grow our business to pre-pandemic occupancy percentages, normal overtime percentages and reducing labor. I was really setting that stage and holding and getting our teams accountable and accustomed to that new norm of the operating environment that we’re in, which is very different from the past 10, 15 or 20 years that we’ve operated in this space.

On the biggest challenges in 2022:

I think staffing for us was the biggest challenge that we had. We’re starting to see this trend where agency is coming down, overtime is on the rise which means we have more employees to have overtime. I think that’s a good trend for us. We have been dedicating a lot of resources, a lot of tools, a lot of technology … to the staffing challenges that we have. I think we all realize while unemployment is now around 3.5%. I think we are going into a further recession as interest rates continue to go through the roof here. But this is also going to be another new norm for us.

I think we are going to have a whole new world of challenges in 2023 that are not unsimilar to what we’ve seen in 2022. I think we’re gonna see wages stabilize. But we’re also going to continue to see the staffing challenges.

On Distinctive Living’s successes in 2022:

We saw revenue growth. We’ve been very blessed and fortunate that our teams have done a great job in creating a great product in our communities. And so we have pushed rate increases, right, significant rate increases, like many other providers, but we’ve also looked at other ancillary revenue opportunities. We have taken levels of care and increased levels of care.

We have looked at our community fees, we have looked at our rent model versus our level of care model we’ve looked at, we’ve really dissected the revenue opportunities.

We saw close to 9.5% revenue growth from January through October as an organization. And so for us, I think we’re very excited about that. I think we’re also excited about the growth that we’ve had within our organization, bringing new assets that were either being repositioned value, add, or continuing to take a stable product and growing and maturing the asset. And so I think for us, those are where a lot of our successes have been. On the development side, being able to get many of our development projects capitalized and off the ground.

In today’s environment, as you can imagine, it’s just not an easy task, and will continue to get harder every day for the next 12 months to get projects capitalized. So we’ve been really successful in getting those projects up and running.

On building back occupancy:

Our stabilized assets are in the low-to-mid 80s. I’ll share with you that being a company that’s two years old, a lot of our assets that we have had come into our portfolio have been distressed. So our occupancy basis starting our organization was probably lower than most organizations that have a legacy portfolio that’s highly stabilized. For us, it’s really been about keeping our sales team very focused on the things that matter, and that’s really closing sales. In some communities, we have 100 to 150 leads coming in a month.

Our sales teams are really focused on closing ratios. That’s conducting home visits that are really focused on folks that are financially qualified. [We’re] creating an individualized lead generating plan for each one of our communities, and really the intensity of the oversight of those communities. So that means staff muscling up in the buildings, going out and understanding the competitive landscape and understanding the market intelligence.If you’re not looking at pricing within a market every 30 days, you’re probably going to be left behind.

We really have gone back to the basics of blocking and tackling. And we’ve sprinkled in some flair right of technology and some other things. But really, it’s bringing our teams back to doing what we do best. That is when there’s an inquiry generating inquiries, following up on those inquiries and closing the tour. Sometimes I think we get waylaid in this industry making things a little more complex than they need to be.

On stabilizing assets and shoring up existing operations:

When we are taking on a new asset that either needs to be repositioned, or is coming into our portfolio, the first thing that we do, before we even take over an asset is three things: We go in and understand how to be successful in the market so we’re running data analytics around the competitiveness of the market and what our proposition is within that market. The second piece is the talent that we have in the asset. k

Our philosophy is that right out of the gate, if we don’t have the right talent, or we are not inheriting the right talent, that is our number one mission to go find the right talent in that market at whatever the cost is.

The second part of it is really understanding are we competitive in the market, as it relates to the physical plant. The third part is just systems and process and accountability. Those are all of the things that we look at that we have from an organizational perspective.

On labor, talent retention:

I think one of the [questions] that we have gotten is why we’ve focused on recruiting new folks to our organization. Just like residents, we have equally if not more focus on the residents and the staff that we have already working for us. We have looked at this in multiple ways. One, we have introduced some components of technology that allow us to communicate on regular cadence with our employees via text. That is something that we are actually in the process of rolling out organizationally right now, which we’re very excited about. It also allows us to get pulse surveys of how our team members are doing, So we get immediate results on how assets are doing and how teams are doing within those buildings. It’s a really hard conversation with capital partners, but right now is a time that we are really investing in our employees, which I think is critical and a big part of our mission.

The last piece is we compare our assets right against one another, whether it’s geographically, whether it’s based on all memory care, based on the physical plant layout. And what we find is leaders that are very strong within our buildings that are very successful industry leaders that are operating for us tend to have a much higher retention rate. So it reinforces everything that we all know, we’ve been told for 25 years, is that the leadership at the top level really matters.

On the state of senior living development:

It’s interesting. Right now I think capitalization of new development projects is very hard. You have interest rates, capital markets that are going off the charts, you’re still dealing with high inflationary cost of building materials. As a development team, we spend a lot of time vetting projects and the current environment before we take on a project. I still believe and I still stand true to this and speaking with a lot of equity and debt groups on a daily basis, that projects that have good basis going in projects that have good returns. Projects that have good sponsors and projects that have good operators. Those projects will get capitalized.

I’m still very optimistic, because capital still has to be deployed for our project. I very much believe we are coming off of three years of no supply and a hard period of time economically where it’s very hard to get capitalized if there’s marginal profit. I think we’re going to be poised to be very successful from a development standpoint.

And the other piece of our development side is that we have other folks coming from outside our asset class. Hospitality, student housing, other asset classes, and that are recognizing the returns in good projects with good operators with good sponsors, even in today’s world where the returns are exponential over other asset classes from an exit standpoint. We have been very inundated with working with other groups. I’m optimistic, cautiously optimistic. But I think the projects that we have, we’re fortunate to work with good capital and good sponsors, and good equity groups.

On the evolution of Distinctive LIving:

I think we have built a very strong, foundational, institutional organization that can be poised for growth.

I think as we go into 2023, we want to be diligent about the assets that we take on. We want to work with capital partners that are aligned with us philosophically from taking care of their asset that is taking care of their people and having good communication. We are looking to grow our business in 2023. But in a very structured manner in which our current operating base does not suffer. In fact, if we bring on additional properties, it would be to bring strategic and intentional resources into our company to provide our platform with additional resources.

On what Jedlowski expects in 2023:

Challenges are going to be what’s not trading on the market because interest rates are so high that deals just don’t pencil out right from a trading standpoint. They’re going to be very focused on who’s the operator operating my assets right now.

We’re going to see from an opportunity standpoint, that lots of buildings trading from an operator standpoint, where debt and equity say, Okay, we’re at a pandemic, we’re not afraid to make the move, now, we’re not buying new assets to balance our portfolio necessarily. And now let’s maximize the portfolio that we have. And so I think for us, we are very poised to do that and to take on those assets and then turn those assets around for our capital partners.

On what Jedlowski would change about the industry if he could:

My answer would be transparency.I think we’ve gotten better about it through the pandemic because we are forced to collaborate a little bit more. But one of the reasons I say transparency is because from a collaborative standpoint, I think we can all save each other a lot of time, energy and aggravation by collaborating better.

The post After Year in Flux, Distinctive Living Gears Up for Growth in 2023 appeared first on Senior Housing News.

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