NIC Chats Podcast on the Road with Don Husi

Beth Mace: (00:09)
Hello, and welcome to the NIC Chats podcast. My name is Beth Mace and I'm the chief economist and the director of research and analytics at NIC. I'm so happy that you can join us today for this live broadcast. The focus of the NIC Chats podcast is talking to interesting people that are gonna have some great ideas that I think you'd like to hear about. As you listen today, I hope that you'll find some humor, some insights, some inspiration, and hopefully a moment where an aha light bulb goes off when hear something that will be inspiring for you as you continue to listen to the podcast. Now, let me tell you a little bit more about the structure of today's podcast. First, I'm gonna tell you three statements about my guest and two of those will be true. Throughout the podcast, I will let you know which of those are true and which are not true. Second, there's three standard questions that we always ask during our podcast. The first is the largest challenges facing our industry. Second is one thing to grow talent in our industry. And the third is one innovative idea, a way that we can strengthen our industry. So I'm delighted today that I have Don Husi with me, and Don is a managing director of senior housing and finance practice at Ziegler. Don, thank you so much for being here.

Don Husi: (01:30)
Glad to be here. Thanks Beth.

Beth Mace: (01:31)
So let's start off with the three truths. Oh, the two truths and one lie. We'll weave those into the story. So is it true... Don't tell me! So one might be that you have spent eight days on an aircraft carrier. Maybe. Or that you have raced sailboats as a hobby or that you won the Louis Armstrong Jazz Award when you were in high school. So audience, we'll tell you a little bit about really what's happened. But before of that, tell me a little bit about what you do at Ziegler as a managing director of the senior housing and finance practice.

Don Husi: (02:12)
So I came on board with Ziegler about three years ago to help grow our for-profit practice, which is focused on the primary audience here at NIC. Ziegler is well known in the not-for-profit tax exempt world. We issue between four and 5 billion dollars a year of bonds for projects in the tax exempt world. We've recently moved into building all the products needed to deliver to the for-profit sector. Internally, we called our senior housing and care finance practice to distinguish from our internal tax exempt folks.

Beth Mace: (02:50)
Okay. Great. And what would make you unique in that right now? Why would someone wanna come to you and Ziegler as opposed to another source of financing?

Don Husi: (02:59)
Well look, I think today, CFOs in this business have a really, really difficult job. They're responsible for HR. They're responsible for technology, generally. They're responsible for financials and frankly managing the balance sheet is not the highest priority. So what we bring to the table as a comprehensive approuch of providing debt, providing equity and also M and A services around the industry. So really trying to help CFOs/CEOs manage their balance sheet for growth in a very productive way.

Beth Mace: (03:35)
And what drives credibility for your organization?

Don Husi: (03:38)
Ziegler has probably the best research of any firm out there outside of NIC.

Beth Mace: (03:43)
Of course.

Don Husi: (03:43)
Right, exactly. I said that same thing. But you work closely with Lisa McCracken our director of research. We have extensive experience there. We actually, frankly, just hired an individual to help us on the for-profit side to do research there. So we're excited about that opportunity. She'll join us in January. So that's one, secondarily we have our Zeigler linkage funds that invest in technologies for post-acute care. And technology is going to be a driver there's this synergy between, and it's not the quite the right word, but between technology, care and real estate, that is going to have an impact on this industry long term. So Ziegler linkage funds provide... It's really like our own little shark tank of what are going to be the tried and true resources out there long term that you can invest in that will not be gone in two years. There's millions of dollars you can spend on technology. At our recent leading age conference, there were 50 new technology entrances in there. We counted that.

Beth Mace: (04:55)
Just 50?

Don Husi: (04:55)
Yeah, only 50 this year. So that's the kind of market and we can bring some clarity and direction to the tech strategy for folks.

Beth Mace: (05:05)
Okay. So let's talk about Lisa McCracken, your colleague for a minute. Hey, Lisa, if you're listening, I think that you and she have started a Ziegler and NIC lender survey. Can you tell us a little bit about that?

Don Husi: (05:18)
Yeah. So we're doing this lender survey several times a year to get a sense of what the market is like. There's really no data out there in terms of interest rates. You know, some banks are moving to SOFA, LIBORs are going away. What is the impact there? We recently did a piece that the banks are combining and with the banks combining that's really constraining some of the opportunities and there's even been, I think, two or three more combinations that have been announced in the last few.

Beth Mace: (05:57)
Yeah. So mergers and acquisitions, cuz the sector's consolidating. It's been doing this for gosh, my entire career, for like 30 years.

Don Husi: (06:02)
Exactly. 30 years. Yeah.

Beth Mace: (06:04)
So this is unique though, this particular report, because it really focuses on senior housing.

Don Husi: (06:09)
Correct.

Beth Mace: (06:09)
And the funding can be different. The cost of financing can be different for seniors housing, I think. Right?

Don Husi: (06:14)
Exactly.

Beth Mace: (06:14)
Than it could be for multifamily for example.

Don Husi: (06:15)
Well and the risk profiles are different between the different products, right. Entrance facing CRCs are one risk profile, skilled nursing is another risk profile, active adult rental is another risk profile. And IL, AL, memory care congregate with services is a whole different risk profile. So to look at the segmentation in terms of how different banks are viewing those risk profiles, we haven't seen in this industry ever.

Beth Mace: (06:45)
Right. So for those who happen to be listening who are lenders, if you'd like to contribute, we'd like to have your data plug plug. So, so let's switch a little bit, actually. Let me do one of the questions about you, the two of truth and something that's not true. So is it true that you won a Louis Armstrong Jazz Award in high school? Is that true?

Don Husi: (07:07)
It is true. It is true.

Beth Mace: (07:08)
Tell us a little bit about that.

Don Husi: (07:09)
I played the saxophone growing up and I always loved jazz and I played the flute, the clarinet and the tenor saxophone, sometimes Alto sax.

Beth Mace: (07:23)
Do you still do that?

Don Husi: (07:24)
Very rarely.

Beth Mace: (07:26)
A late night, maybe?

Don Husi: (07:30)
Yeah, late night. Now that all the kids are gone. It's a little easier though.

Beth Mace: (07:33)
You have four children, right.

Don Husi: (07:35)
Correct.

Beth Mace: (07:35)
Sounds like they're fully launched. So congratulations.

Don Husi: (07:39)
They are launched.

Beth Mace: (07:40)
That's good for you.

Don Husi: (07:40)
No one's living at home currently.

Beth Mace: (07:42)
That's good. So let's talk a little more about you and your career path cause you've been involved in seniors housing for a long time as a very young man. Tell us about that. Maybe a couple insights you have from the experiences you've had in all the different parts of senior housing that you've been into.

Don Husi: (07:59)
Sure. So what... I've been in the business since 1986. I graduated from the University of Wisconsin healthcare administration program in 1985. My wife actually graduated in 1987 with the same degree. Some people don't know that. And have been in the business... I started with a company called American Retirement Corporation back in 1986. And we had four properties at that point in time. We grew that. I became an associate executive director for CCRC. I turned around a rental community. Managed multiple other entrance fee communities. Then became a regional VP of operations. We took the company public in 1998 and then I helped open a fair number of buildings in the late nineties to early two thousands and had my fourth child. And I was on the road way too much. So I had an opportunity to go work and run the an investment portfolio for healthcare re so I did that for about five years. And then the last 15 years I've been with a number of companies just focused on transactional finance work.

Beth Mace: (09:18)
So you've been focused on seniors housing your whole career. So why? What happened? Why did you like that? What about senior housing is appealing?

Don Husi: (09:28)
You can do well by doing good. I think that's the most important.

Beth Mace: (09:32)
So that's an aha moment. Do well by doing good.

Don Husi: (09:33)
Right. So it's telling someone of yesterday, I'm still on the board at our healthcare administration program at Eau Claire in that program. We're in the school of business, our graduates have the highest starting salary out of any of the programs.

Beth Mace: (09:48)
Good takeaway, highest starting salary.

Don Husi: (09:50)
Right. We need good leadership in this industry. We need strong leaders. We need people that have a passion for the business. My grandmother was my inspiration. She was a very tough individual, had a very difficult life, lived most of her life with one lung and would do amazing things all day long. Just an amazing woman. And, you know, between that and looking at the demographics, I thought that we could make an impact.

Beth Mace: (10:27)
So you're involved with Vision 2025.

Don Husi: (10:29)
Correct.

Beth Mace: (10:30)
So let's talk about that for a little bit. Tell our audience what that is and how that's sort of helping with young people... Pulling in people into the sector.

Don Husi: (10:37)
Great. So Vision 2025 is a coordinated effort between all of the associations, universities and providers, both for-profit and not-for-profit providers out there to build 25 strong university programs with similar curriculum, similar career guidance and parameters to help drive leadership in this business for the long term.

Beth Mace: (11:08)
Is that undergraduate or graduate?

Don Husi: (11:10)
Mostly undergraduate, but graduate as well. So there's only a few graduate programs in the country, but some are in the school of business. Some are in the gerontology, some are in hospitality. Yeah. And we need all three pieces, right? We need the administrative slash business side. You do need the hospitality side, but the clinical side is becoming more and more important as well. And how we deliver the clinical component. By the way, to all the folks out there that have been delivering care to our residents, you all have done an amazing job over COVID. It is so impressive. So thank you. Thank you to all the caregivers out there.

Beth Mace: (11:53)
Yeah, totally concure with that. So also it's interesting. I know a number of operators now are actually going into high schools as well. And trying to recruit high school students to sort of get that passion developed early on. And then that could be a good feeder into some of the university programs that you're talking about.

Don Husi: (12:11)
Exactly.

Beth Mace: (12:12)
So that's great. So let's talk a little bit more about the industry. What's your perspective on where we are in the seniors housing industry, post COVID as we move into 2022.

Don Husi: (12:23)
I think the next 12 to 24 months are going to be rocky, particularly for senior living. I view the business as our skilled nursing group, which has one set of parameters and senior housing. Skilled nursing had a significant amount of opportunity in terms of federal and state program to help them get through the pandemic. Senior housing has not seen much of any thing and almost nothing from the states in most cases because it's a private pay business. So when occupancy is dropped to 80%, roughly across the industry, it's not true everywhere and it's very different geographically. That's had an impact. You'll see a fair number of properties that are in fill-up. And those properties have delayed fill-ups at least a year. In my opinion, that's about a million dollars of additional losses that you probably weren't counting on roughly, when you're looking at the data 500,000 to a million roughly. That is causes strain. And we're starting to see some of that. The banks have been very lenient so far. I think that's starting to change as we move into 2022. So I think the trajectory of how quickly we get from 80% to 85%, and then hopefully towards that 88 to 90% occupancy is the unknown that will reach us.

Beth Mace: (14:04)
In the third quarter data from NIC Map Vision shows 80.1% occupancy in the third quarter. So we have a long ways to go. So what happens if a operator or if a property starts to waiver a little bit. Will they declare bankruptcy or would you take it back on or how would that proceed?

Don Husi: (14:25)
So I I've had the opportunity to work on a lot of troubled deals. Both as an operator and as a lender and as equity participant. I think the first thing that I would say is talk with your banks, talk with your capital partners early in the process. Most people out there are doing cashflow analysis. Cash flow is everything in this business. Talk to folks early, keep them informed, communicate with them. Life will be a whole lot easier for you when that comes. If you do think that bankruptcy may be an option or out there, get bankruptcy council involved early there's things you can do and can't do prior 90 days to filing and the post 90 days, it's really important. Hopefully we don't have too many or any largerer players have to take that action. In 98, we had essentially every publicly traded, skilled nursing entity have to file bankruptcy because the government pulled back Medicare so far that it just wasn't possible.

Beth Mace: (15:41)
That's not anticipated right now.

Don Husi: (15:43)
Not anticipated right now. We don't see that at all happening, particularly in skilled nursing. But I tell you, I am still concerned about skilled nursing because skilled nursing occupancy is done around 75%.

Beth Mace: (15:54)
Yes, that's right.

Don Husi: (15:55)
And not moving up as quickly as senior housing. At least the numbers I'm looking at.

Beth Mace: (16:02)
Yep. Yep. But in general, I mean, at least so far to date, we haven't seen a whole lot of distressed activity going on. And that's really, I think a statement to cooperation among lenders, yourself included and operators and the equity providers as well. And then there was a lot of support that was given through the government to get everybody through the pandemic. So combination of all of that.

Don Husi: (16:22)
And let's be honest, the banks really don't wanna own senior housing. I can guarantee that banks are not good operators.

Beth Mace: (16:34)
All right. So let's go to some of our standard questions, largest challenge facing our industry.

Don Husi: (16:39)
Labor, labor, labor, labor.

Beth Mace: (16:41)
Everybody at the conference has been saying labor, labor, labor, labor. So any ideas on how to...

Don Husi: (16:46)
I've seen some really interesting things where residents get involved to support your existing staff. So there's a group in DC and an entrance state community there that the residents have taken on the responsibility of helping the staff both get the funding to get their green cards and to pass the us citizenship test. So that's a really cool thing that could be done across the country. I'm not sure I can share who it is. I'll let you know later. And then some other things that we've seen with the kids and COVID, parents have been frustrated that the kids aren't getting any education. There was several communities that took in residents kids, and they had classes for them in the residence. So I think we're going to need more programs like that. The residents have so much capability and they want to help and they want to help your staff. If you can build that culture and drive that culture, you'll... it's hard and it's still... We just don't have enough workers. But those are programs outside of just throwing money at it to make it work.

Beth Mace: (18:13)
That's really good idea. I did a presentation yesterday and I was talking about labor force participation rate. Which is nationally is way down. Well for women, the participation rate is at the lowest rate it's been to the 1970s. When you look at that it's largely a function of the fact that there's not daycare and that women have to... They're in a tough spot, right? Do you take care of your child or do you go and work? So it's a significant issue. All right. So we're gonna discover now which is true, which is false. So how about, have you actually spent eight days on a aircraft carrier?

Don Husi: (18:53)
I did spend eight days on an aircraft carrier.

Beth Mace: (18:55)
I'm been intrigued by that. I really like aircraft carriers. So why is that?

Don Husi: (18:56)
My brother-in-law was in the military he flew A6s which are the planes that would go in and jam radar back in the old days. And he was coming back from a cruise and they do these things called tiger cruises. So we flew to Honolulu with my father-in-law and he and I got on the ship there. And then we came all the way back to San Diego. So a lot of fun. Other cool thing, we're in the middle of ocean, about three days out. And I'm touring the air traffic control tower, and two B52 bombers came back and said, "Hey, we're in the area. Do you mind if we do a fly by?" And apparently this doesn't happen because the airbus, they the air traffic controller, "Is like clear the airspace." They flew by a couple times at deck level and pretty amazing. I have some shots of that.

Beth Mace: (19:52)
So I have to ask, where do you sleep on an aircraft carrier? It wasn't comfortable?

Don Husi: (19:57)
It wasn't as bad as I thought it was going to be. You're in bunks. There's like six bunks in a room.

Beth Mace: (20:04)
And you're right on top of each other.

Don Husi: (20:06)
Right. On top of each other. There's not a lot of room that's for sure. But they eat very, very, very well. I could get great food any time of day or night.

Beth Mace: (20:16)
Okay. So that would mean that you don't race sailboats. That was the other one.

Don Husi: (20:19)
I did not race sailboats. I would love to race sailboats.

Beth Mace: (20:23)
Maybe that day will come. Okay. So back to the standard questions. We already talked about how do you grow talent? So we talked about vision 2025. We talked about other ideas that universities are doing. Let's go to the question about what is another, outside of that idea, and outside the ideas you just gave about residents working with the staff, what would be another innovative idea on how to strengthen our industry?

Don Husi: (20:51)
I think this integration of utilizing technology to improve quality and drive care is going to be very important. One of our strengths at Zeigler is our corporate finance team. They do a lot of work in the telemedicine/telehealth space. So we've found equity and invested in a fair number of telemedicine opportunities. And there's some revenue opportunities in there as well. So I think technology and how to use technology. Pre COVID, there were about 50 codes that you could bill for telehealth. I think today there's about 175 different codes you can use. So that has completely changed the opportunity out there. I think that's key as well. And then I think we need to do some, isn't super high tech, but we've lost our ability to do true consumer research when we're going out and doing products. And until we get back and do some serious consumer research, I'm not sure we're gonna be building what the consumer wants long term.

Beth Mace: (22:02)
Well that's such an important topic because the consumer actually is changing. The resident is changing. Initially when you started in the industry, you were serving the greatest generation.

Don Husi: (22:14)
Correct. And then the silent generation.

Beth Mace: (22:15)
Yeah. Now you're in the silent generation. Unfortunately, not too many of the greatest generation that are left. But we're moving into the baby boomers. And today, the baby boomers born from 1946 to 1964. So the oldest baby boomer day is 75. So typically in senior housing, you get a resident that's 83 to 85. So we're, we're close. We've been waiting to be close for a long time. So we're close. We're not quite there yet. Right. So we're trying to figure out what that consumer wants. So what do you think the baby boomer wants?

Don Husi: (22:45)
Well, that's really interesting. I'm not sure I know what the baby boomer wants, especially post COVID. I think everyone is rethinking their lives and how they're living post COVID. We heard that just in the last session with Paul Krugman and Larry Summers. The other interesting thing that Bob Kramer has just been talking about is people choose senior living in their last five years of life. Well, that last five years of life has slowly increased over the past 20 or 30 years.

Beth Mace: (23:18)
Meaning they're getting older.

Don Husi: (23:19)
As they're getting old, right. So in today's world we're serving more like 85 to 92/93 year olds. Whereas when I started in the business, we were serving basically 78 to 82. So that means that people are living longer. The quality of life is better, but they also have more and more complicated health issues that can be controlled from diet to social determinants of health, therapy and medications as well. So it's gotten more complicated and will continue to get more complicated. And we have another company that is in our Ziegler linkage fund called Colser, which does end of life care management. And they use some data analytics and nurse practitioners and physicians to help manage the cost of that care over time. I think you're going to see a lot more of that as we move to the future.

Beth Mace: (24:26)
It's interesting. I actually characterize the industry as sort of maturing. And we're starting to see more product segmentation and product diversification. So you're seeing more products that are being developed for middle income seniors, all the way up to higher and more affluent seniors. And at the same time, you see products being developed for higher acuity and end life. And then you're going down the other spectrum to the way the baby boom was there today are 75. So you see a lot of developers now going out and starting to build what we're coining as a phrase right now as "active adults." So, do you do any lending? Are you all involved in the active adult area?

Don Husi: (25:00)
We have done some lending in the active adult area. We have, I think one product just right now that we're trying to raise some equity for as well. So we're actually looking at working with a not-for profit provider that's going to do some active rental, active living. Things continue to change. Yeah.

Beth Mace: (25:24)
That's a great thing about our industry actually.

Don Husi: (25:26)
Right.

Beth Mace: (25:27)
Doesn't stay still, right?

Don Husi: (25:28)
Exactly.

Beth Mace: (25:28)
It keeps on moving. All right. So we're about to wrap up anything else you wanna share with our audience or any insights you wanna share or especially if there's a young person. Anything? Any wisdom?

Don Husi: (25:39)
Wisdom? The one thing that I tell folks all the time, especially our younger folks, you know, there's this drive to, you know, kind of wanna advance their career as fast as possible. I would really encourage folks to find a mentor and spend some time with that mentor and really learn. There's a lot to learn out there. The world's changing. I'm impressed with the team of folks that we've been able to bring on board. We have a great team that we're building; hard workers, smart. We have conversations where we can agree to disagree and come together at the end to drive the product. So I would say finding a mentor has been kind of a lost art, I think. And it can really be helpful, especially for someone in say their mid twenties to early thirties.

Beth Mace: (26:43)
Yeah. And I would say that's also a shout out to those who could be mentors.

Don Husi: (26:46)
Correct.

Beth Mace: (26:47)
To other people, to find someone you can mentor. Cause I think in your life we had a conversation and prepping for this, that you had some pretty significant mentors in your life. And I certainly have in mine as well.

Don Husi: (26:57)
Exactly.

Beth Mace: (26:58)
And its really nice to have a person that you can lean on to give you some direction. So with that, I think we're good, Don. Thanks so much.

Don Husi: (27:07)
Great.

Beth Mace: (27:07)
We'll see you later at the conference.

Don Husi: (27:08)
Thank you, Beth.

Beth Mace: (27:09)
Thank you all for listening. And if you wanna find out more, you can make sure to tune in to nic.org/chats. Thank you so much.