NIC Chats Podcast with Susan Barlow

Beth Mace: (00:04)
Hello, and welcome to the NIC Chats podcast. My name is Beth Mace, and I am NIC's chief economist. Thank you for joining us.

Beth Mace: (00:14)
The focus of the NIC Chats podcast is talking to interesting people that have ideas that I think you'd like to hear about. As you listen today, I hope that you'll find some humor, insights, inspiration, and hopefully what I call an aha moment when something pithy or insightful is said, and the light bulb may go off for you. Let me tell you a bit about the structure of today's event. First, I will tell you three statements about my guest, two of which will be true. Throughout the podcast you'll learn, which is true and which is false. Second, there are three standard questions within each podcast for each speaker. The first is, what's the largest challenge facing our industry? Followed by a question about one thing we can do to grow talent in our industry. And third, what is one innovative way or idea to strengthen our industry? Now as they say on with the show.

Beth Mace: (01:02)
So I'm delighted today that our NIC Chat's podcast discussion will be with Susan Barlow. Susan is the co-founder, managing partner and chief operating officer of Blue Moon Capital Partners. Susan has also been involved with NIC for many years, serving on the NIC board, serving on the NIC executive committee, and the conference planning committees. She's currently the vice chair of the NIC Board. Susan, thank you for joining us today.

Susan Barlow: (01:27)
Thank you, Beth. Glad to be here.

Beth Mace: (01:29)
Thank you. So, as I've mentioned, I have three statements about Susan. Two are true and one is not. And these statements include that Susan grew up in Wyoming and lived on a cattle ranch. We'll see about that. That senior housing is in fact a family business for her. And third, that she has a Bachelor's of Science in nursing. So, as I said, you'll have to stay tuned for the entire podcast to see which is true and which is not true. So Susan, let's start with talking about you and Blue Moon Capital. So you are the co-founder and as I said, managing director and chief operating officer of Blue Moon Capital Partners. That's a privately held real estate investment advisory firm, and you focus on matching institutional capital with senior housing operating partners, and you only focus on senior housing. So tell us a little bit more about Blue Moon and yourself.

Susan Barlow: (02:22)
Yeah, well, Blue Moon was formed in 2014 as a private equity firm to invest exclusively in senior housing. It's somewhat unique in the private equity space to focus on one sector, but from the beginning, my partner Kathy Sweeney, and I felt that it was very important to have that level of focus given that senior housing is a very unique blend of operations and real estate and apartments. And we felt to really, to get it right, and to mitigate the risk and optimize the return, that having that sole focus was a risk we wanted to take and a commitment we wanted to make too. So we focused exclusively on senior housing and we have not looked back once.

Beth Mace: (03:18)
That's great. Okay. And how did you get involved with senior housing?

Susan Barlow: (03:23)
Well, that's, at least I think it's an interesting story. Kathy and I were introduced. We were asked to participate on a CREW panel, commercial real estate women national panel, in Washington, DC by a portfolio manager from CalPERS that we had both been an investment manager worked for. And this woman asked us to be on the panel and I knew nothing about senior housing, but as we're preparing for the panel, I got to hear Kathy's download of all about what she was going to talk about. And I thought it was fascinating. I had been a consultant in the pension fund space when investors decided they wanted to move into multi-family in the late eighties. And that was such a big move to go from commercial real estate to a residential investment. But I could tell that this was really going to be the follow on to that story, and I thought it was really exciting. So we go to Washington, DC we're on the panel, share a cab back to the airport, and decided at some point not long after that, that we needed to form a business to focus exclusively on senior housing.

Beth Mace: (04:40)
Wow. That's, that's pretty cool. I wonder if CREW knows that. You should let them know.

Susan Barlow: (04:43)
I don't know if they know that, but the portfolio manager that introduced us then became an investor into Blue Moon at one point too.

Beth Mace: (04:52)
Oh, I didn't know that.

Susan Barlow: (04:53)
She's very proud of the introduction and we're very appreciative.

Beth Mace: (04:59)
I did not know that. That's pretty awesome. Okay. Tell us about the name Blue Moon. Where is that from?

Susan Barlow: (05:05)
Yeah, well, Blue Moon, once in a Blue Moon.

Beth Mace: (05:09)
Yeah. Right.

Susan Barlow: (05:10)
A unique and rare event. There's only a Blue Moon every couple years, and there is going to be a Blue Moon August 30th for everyone to know that. But it's a unique and rare event. We think our firm, because the fact that we only do senior housing and we are a hundred percent women owned business is also a unique and rare event.

Beth Mace: (05:34)
I would say. So. That's awesome. Okay. So how many investment vehicles do you currently have at Blue Moon and what's your AUM?

Susan Barlow: (05:43)
We have two closed in finite life funds, and we also have an institutional core plus separate account. And AUM is currently just over 2 billion.

Beth Mace: (05:59)
And tell us a little bit, our audience may not know exactly would be the difference between institutional core plus fund versus the two close end funds?

Susan Barlow: (06:07)
The institutional separate account core plus is really a lower, it's a risk adjusted account. So we're looking for lower risk, long-term holds. It's lower price capital versus the funds are the traditional value add funds. Higher cost of capital, finite life. So you're in and you're out. The more total return driven and our core plus separate account is really income distribution driven.

Beth Mace: (06:47)
Great. Okay. so I've known you a pretty long time, and I know you're very passionate about older adults and the care they receive, and that I think really permeates your business decisions. So where does that passion stem from and how does that actually influence your business decisions?

Susan Barlow: (07:06)
I was passionate about the space when I first got in. The more I learned about just what the business was about. But frankly, it wasn't until my mother became a resident in one of our communities and I became the adult daughter you know, customer that I really appreciated what our business is really truly all about. And in my mother's situation, she was a very typical resident, assisted living, recent widow, you know, trying to find her next chapter or purpose in her next chapter, but with some significant health challenges. And so the whole idea of trying at the age of 85 years old to sort of reinvent yourself, what a challenge that was to do that, and how important our communities can be in facilitating that transition to that next chapter. And so I went from focusing more on what the decor looked like and how good the food was to really what we're here for is to help establish community and how important that is for elder adults in that stage of life.

Beth Mace: (08:44)
And the care component too.

Susan Barlow: (08:46)
Yes. The care component.

Beth Mace: (08:49)
So let me switch then to one of the truths or lies and see where we are. So is it true that senior housing is a family business for you?

Susan Barlow: (08:57)
Well, it is true because I just explained that my mother was a resident in our community, so it was a little bit interesting to be the customer as well as the investor and have that perspective. But then in addition to that, my 28 year old son recently started working in memory care in a community in New York. We're now talking shop from that perspective too. And that's been fascinating. So I had the resident experience, but now I'm hearing the frontline caregiver perspective and it really, it definitely influences how I look at the industry and my commitment to it is stronger than ever.

Beth Mace: (09:51)
So when you look as a capital provider to an operator, does that affect... Cause you really understand it. Sometimes it's 10,000 feet and people don't get it. But I think anyone who's had their parent in senior housing, especially who's involved in the investor side, and now if your son is working there, is sort of seeing it on all sides. So does that change how you look at operators when you choose to partner with an operator or the questions you're asking or the insights that you have?

Susan Barlow: (10:19)
It definitely informs, or it broadens my view and understanding of the space, and it's given me an appreciation for how difficult and how challenging the business can be. But I think even more importantly is that capital partners have to understand the business. How could we not? If this is an industry that we're investing in, but it's sort of unique in that not very often do you have the experience of being a customer. How do you really understand the business? And we need to as capital partners to work effectively with our operating partners to understand it. So yes, it definitely informs how I look at the business and I feel committed that as a capital partner, we have to step up and say, what do we need to do in conversation with the operator to make this a better business?

Beth Mace: (11:21)
Yeah, I've hearing that pretty much since COVID that, you know, increasingly the relationships between the capital provider and the the equity provider in this case and the operator as well as the debt provider, it's much more of a conversation, ongoing conversation for people to really understand the challenges and the opportunities that each piece of that triangle is forming.

Susan Barlow: (11:46)
Yes. Critical. We can't sit in our ivory tower and with our spreadsheet and not really understand the business to. If we're going to be investors, we have to jump in.

Beth Mace: (12:00)
So you have a number of investors that give Blue Moon capital and from that capital then you guys invest that in operators that you select that you think will be able to provide the best service to you. So how do you differentiate yourself from other advisory businesses, other investment management companies that are looking at senior housing? What makes Blue Moon unique? You said you were a hundred percent women-owned business. You only focus on senior housing. Anything else that would make me want to invest with Blue Moon as opposed to a different company?

Susan Barlow: (12:37)
Yeah, well what we hear from operating partners is the fact that we are exclusively focused on it is a key element in how operators look at us in that operators are in are focused on this business a hundred percent of the time, 24/7. And the fact that Blue Moon is also singularly focused really resonates with those operators.

Beth Mace: (13:08)
With the energy we were just talking and the compatibility.

Susan Barlow: (13:10)
Yes.

Beth Mace: (13:12)
Ok. Now looking forward into the future for Blue Moon what are some of the things that you're most excited about that you guys are doing?

Susan Barlow: (13:22)
I mentioned the separate account that we have had in this sort of lower cost of capital. And so focused on looking at long-term holds, lower cost of capital, the industry as it matures to be matching our investment vehicles and structures with the strategy. So if there is an opportunistic bucket of capital that's investing short-term to take advantage of an opportunity, that's one thing. But if it's capital to invest with the operator in a long-term program, that needs to look different. And so in the past a lot of the investments were made through finite life. Whether it was a long-term hold or short-term hold. And that can lead to challenges at some point. So I think as we look forward to be really to be able to match our structures and our hold periods to the strategy. I guess that would boil down to bringing long-term capital to the space. That's what we've done in the separate account and it's really worked out well. We'll do more of that.

Beth Mace: (14:46)
An operator likes that because then they don't have to worry about the idea of changing capital partners frequently so they can do a longer term strategy plan with that with you.

Susan Barlow: (14:57)
It's one thing if you're in a development or repositioning phase that might be a different structure in different capital, but if you're in an ongoing operations mode than having long-term lower risk adjusted, lower cost of capital is important. So I think there's quite a bit of talk about that and, and we've had experience with it with the separate account and as I said, it's worked out really well.

Beth Mace: (15:23)
No, no, that sounds terrific. Let's talk a little bit more broadly about the industry. So, you know, it's great. I get to talk a lot about the market fundamentals because that's what NIC does is collect that data and see how the market fundamentals continue to improve. In the first quarter of 2023, we saw the highest number of occupied units that we've ever seen. At the same time there are a number of external factors weighing on the sector. And you and I have talked about this a fair amount, you know, higher interest rates, capital markets, the cost of debt, maturing loans that are coming due. Certainly uncertainty in the transaction markets, which is pretty much frozen and not just for senior housing, but all property types is very limited activity going on. So how are you advising your clients during this time?

Susan Barlow: (16:10)
What we're seeing is that institutional investors are very intrigued about the space. They recognize certainly the demographic trends. They're looking around at what is happening in other property sectors and there's challenges all the way around. so, you know, we're getting inbound calls from institutional investors. That doesn't happen that often. When you look at the you know, the institutional investor trade press, there's quite a few articles or we're seeing more articles about senior housing. And so we are working with investors and with our investors on these long-term strategies and income generating vehicles. And there's, as I mentioned, there's quite a bit of interest in that.

Beth Mace: (17:13)
Terrific. And again, sort of in your crystal ball, what are you most excited about as well as concerned for the senior housing sector? I think in the near term there is concern about what's going on in the sort of the external factors that are facing the market, but longer term... I look at the sector as, you know, pretty positive in terms of opportunities. Do you agree with that or how are you looking at it?

Susan Barlow: (17:37)
Yeah, I'm definitely very positive about it and I think we have a, you know, unique opportunity at this point in time to really change the conversation about senior housing that there is increasingly... If you look at the demographics and look into the future and as the baby boomers arrive and what they're going to want and they're focused on developing community, they're focused on health and wellness finding purpose. And I think that to be able to do that in an environment, in a senior living type environment, that it's a place where you go to live instead of a place where you go to die. That we really have that opportunity now. And there's a lot of conversation about that. So I'm very excited about it. And I'm also... I'm sure we'll talk about staffing or just some of the challenges, but with my data point of one of my son who is a Gen Z, early Gen Z. That group is looking for mission and they want to do something that's meaningful and millennials, something that's meaningful.

Susan Barlow: (19:06)
What I've really enjoyed is seeing how much he gets back from what he gives in his job and how much he loves that. So I think there's a huge opportunity to really match those cohorts with our space. So evolving the space into something that is really desirable and also developing an employee base that is a good fit too.

Beth Mace: (19:36)
Yeah. It seems like there's a win-win here. We have, as you were saying, the Gen Z with mission and meaning and purpose may also have a different feeling going on in a lot of senior housing properties right now of treating the residents, you know, as people that want to continue to live and want to have quality of life and that they're looking for purpose as well.

Susan Barlow: (19:55)
Yes.

Beth Mace: (19:56)
And I think you've told me some stories of your son finding people that they're jiving together because they're both enjoying each other's company and providing purpose to each other.

Susan Barlow: (20:07)
That's right. He's got his friend group of residents there. You know, that is really fun to hear about. That is really the opportunity for us now. And the, you know, the coming out of COVID, the isolation that people went through and we used to say women, people, residents would like to stay in their home as long as possible, but when you had to stay in your home as long as possible and you were isolated, that was not a good thing. So I think people are looking at wanting community more and thinking about it and staying at home in isolation, we now know what that looks like.

Beth Mace: (20:56)
We know that's not healthy. It's doesn't help people in the long run. Poor quality of life and often shorter.

Susan Barlow: (21:03)
We've got the data for that now. So anyway, there's a lot to be excited about with the sector.

Beth Mace: (21:10)
Okay. So let's switch now to your role at NIC. So as I mentioned earlier that I know you've been involved with NIC for a long time. You served on its board currently, you're on the executive committee currently and you're also on conference planning committees, and right now you have been the vice chair. So on behalf of NIC and it's staff and all the stakeholders and volunteers related to NIC, I'd like to personally say thank you. It's a lot of time commitment, very well appreciated. So, you know, you've given ideas and time to this fairly small not-for-profit 501c3 organization that NIC is. So let me ask you why have you volunteered for NIC and specifically devoted so much time and commitment to this organization?

Susan Barlow: (21:54)
Well, first of all, thank you. I love volunteering for NIC. So I entered the senior housing sector in, call it 2014. And that's about two decades behind most people that I know in the business who've been here for a long time. And I felt a really strong need to get to learn the sector as quickly as I could. And so I, from the beginning have loved to attend the sessions, the educational sessions. My colleagues are very much into networking and that's great too. But the sessions were really important for me to learn the business, right? And to hear from leaders what was important to them, what was changing. I've been very committed to that from the beginning. I also then have done some volunteering with some of the tech startups in the space. And the feedback that I got there from the age tech group is they are fascinated by our sector and really interested in the fact that at NIC you get a couple times a year, you get the whole industry, all participants that come together under one roof having conversations. So if you are trying to enter the space from any angle, to be able to come to NIC and have conversations with leaders from the whole industry under one roof is pretty remarkable.

Beth Mace: (23:40)
It's pretty good one stop shopping and it's good. Yes, it's very efficient and cost effective.

Susan Barlow: (23:47)
That's exactly what it is. Yeah.

Beth Mace: (24:01)
So that's a good segue into a little bit about your career. So you told us how you met Kathy at a CREW meeting and then you've started off with Blue Moon Capital and then now you've been volunteering at NIC. Tell us a little bit more about that. How did you even get to that place to have that meeting with Kathy?

Susan Barlow: (24:27)
Think you're saying what did I do before this.

Beth Mace: (24:31)
Yes.

Susan Barlow: (24:32)
Before this in a prior life?

Beth Mace: (24:33)
Yeah. It's a long-winded way of asking. Yeah.

Susan Barlow: (24:36)
I really started my career in the institutional consulting world, so advising pension funds who were coming into real estate, into the real estate sector on how to structure their portfolio, risk return, performance measurement. But it was at a time when they were just beginning to come in. So it was a little bit of the wild west in that we were making it up as we go to a certain extent. And that, you know, so your hiring advisors and on behalf of the pension funds are working with them as they do that. And the industry was growing. It was involved with commercial real estate, as I said, and then it evolved into multi-family. But in the beginning the business was concentrated you know, 80% of the business with just, with a handful of the big investment management shops.

Susan Barlow: (25:35)
Yep. And I felt strongly that there should be more entrants coming into the space. And so I left my consulting role as a consultant and had my own firm that was advising and raising capital for new entrants, new investment managers that were coming into the space. And so I got to see a lot of different strategies and different groups that were passionate about what they did had established themselves as a niche in a niche of some form. And and needed, somehow needed an introduction, needed the door open to get into meet with institutional investors and did that for an extended period of time. And that was, and somewhat how, what led me to the introduction to Kathy. I had been introducing these new groups and Kathy was out raising capital. And so the portfolio manager thought that I would be a good person for Kathy to talk to. I don't think she envisioned that we would end up setting up a business.

Beth Mace: (26:53)
Well, I can remember, I've known Kathy for a long time. I used to work with her as you know, at AEW and I remember when she called me and told me that she'd met you and she was so excited. She goes, I think I found like the perfect partner.

Susan Barlow: (27:05)
Yeah.

Beth Mace: (27:06)
She was really, really excited. And you guys have done terrific. So it does seem like you've found each other and made a really good partnership with the course of your staff as well and your colleagues.

Susan Barlow: (27:16)
Well, it's such a great business and it's easy to be passionate about. It sort of awakens the sense of social responsibility, I think, in all of us.

Beth Mace: (27:27)
Yeah, the old S in the ESG, right? Yes. That's good. Okay, so I want to be mindful of time here. Let me just ask for a minute. So sometimes you get younger adults that are listening to this call. Any advice that you'd like to give to someone who's trying to sort of make their way through and starting, you know, career or mid-career?

Susan Barlow: (27:50)
Well, II think it's really important for people to find, either find their passion or find something they can be passionate about and make a difference. So sometimes if you're the new person in the organization, it's a little hard to do that, but you can identify that project that nobody wants to do and do it really well and have it be impactful. It's really throwing yourself into a project, being passionate and kind of approaching every day, asking yourself, did I, I'm using a sports analogy. Did I move the ball down the field? Did I make a difference today? On a daily basis, which is a little, you know, it's a kind of a high bar. If you look at it on a day to day basis that way, then it doesn't really seem like a job. It seems like a fun thing to do.

Beth Mace: (28:53)
Yeah. I couldn't agree more actually. The idea of having a passion and really liking what you do. Cause it doesn't seem like work in the end.

Susan Barlow: (29:00)
Yeah.

Beth Mace: (29:01)
There is not a day that goes by to be honest with you. And I serve the day and I, it goes by really fast and it's like, oh my gosh. Yeah. Cause I enjoy what I do.

Susan Barlow: (29:10)
Yeah. And then if I put in a plug for senior housing, I think it's pretty easy to get excited about what we do. There have been a lot of times if I was working with somebody on the industrial side to try to get really excited every day about industrial properties, well that's sometimes a bigger challenge, but what we do is very exciting.

Beth Mace: (29:33)
Because we're helping, we hope, we like to think that we're helping older adults. I think most cases.

Susan Barlow: (29:39)
Or get up every day trying to make sure that we're doing a better job than we did yesterday.

Beth Mace: (29:43)
Yeah, that's great. Okay, so real quickly, so I have some standard questions that we usually ask about staffing shortages or biggest challenges in our industry and an innovative way to sort of strengthen the industry. So can you sort of touch on those? A challenge or a solution to a problem that you're facing or, you know, staffing is always a challenge.

Susan Barlow: (30:09)
It is a challenge and it's fascinating to me in so many ways in that you know, it's the frontline delivery of our business. And it's just hard to execute on a day-to-day basis. But my takeaway from my experience with my mother as a resident in our buildings, and she, for the last several months of her life was on hospice with round the clock care. So there were people there. The whole staffing challenge was something that we dealt with on a regular basis. And right before her passing within 24 hours, there must have been six or eight of them that came in that had worked very closely with her to say their goodbyes and, you know, tears in their eyes, really strong bond with her and with our family.

Susan Barlow: (31:19)
And to see what they bring every day is, you know, it's just an incredible thing to ask of them. So I feel strongly that we have to get it right. And when sometimes we talk about staffing, it sounds like it's this inanimate object almost. We need to make sure that staffing is being handled the right way at the frontline. It's fair wages and benefits, it's training, ways to identify and reward outstanding performers and weed out the underachievers, career paths, developing, helping people develop career paths to long-term employment and leadership opportunities and culture. Culture where they feel supported. You know, some of them may be having challenges in their own personal life, but they feel supported and that that's understood. So if we're going to ask this team of employees to do what we ask them to do, we've have to deliver.

Susan Barlow: (32:32)
And we have to not just assume it's happening, we have to follow up and make sure that that's happening. We're working right now with a young woman who's developing an app. It's fascinating in that it's a tool for staffing efficiency andit helps evaluate caregivers. So caregiver performance and retain the best caregivers and also capture care revenue. And what it ultimately does though is by being able to identify who's really good at their job, you can provide opportunity for growth for them. But if it's hard to identify if somebody is an outperformer or an underperformer, then it's really not fair to those that are outperforming and they don't have the same incentives. Yeah. So we have to get better tools to reward people that are really outperforming.

Beth Mace: (33:43)
Wow. That's great. That sounds really good. So let me go back to the truth and lie and is it true that you have a bachelor's of science in nursing?

Susan Barlow: (33:54)
It's not true. But I have three years out of four years where that was my major and after the third year, I don't know why they wait so long. but they send you through the clinical and the clinical is six months is working in the hospital, which was quite an eye-opener to me. While I had enjoyed organic chemistry in every science class I had taken, the up close and personal in the hospital was really not what I was looking for. So I had no idea what I was going to do then. And because I didn't want to work in an office and sit at a desk all day that had seemed like complete torture. But now it started looking a little better. And I changed to business. But I am very grateful for those three out of four years and I am somewhat regretful that I didn't go ahead and finish it. Especially now doing what I do.

Beth Mace: (34:58)
Yes, I can see that. So I guess that would mean that you did grow up in Wyoming and you did live on a cattle ranch. Is that, is that true?

Susan Barlow: (35:06)
I did grow up in Wyoming and I lived on a 30,000 acre cattle ranch and had a Yellowstone experience before it was popular. I think.

Beth Mace: (35:19)
That's a very popular show. All right. Well that's great. So I think that's the time we have. So thank you so much again for taking time to do the podcast today. And thank you again for all you do for the industry, for all you're doing for senior residents and older adults and for everything that you're doing for me as well.

Susan Barlow: (35:39)
Well, Beth, thank you for inviting me and thank you for everything that you do. Thank you.

Beth Mace: (35:44)
Okay, very good. Thanks. Bye everyone.