of chairs do we want to use in the dining room? We’ll bring in four chairs and let the residents have the fi nal say, since they are the ones who are going to be using them.” In conversations with corporate lead-

ership, Jensen advocated strongly for the memory care expansion. “We were already providing that level of service but not always in the most advantageous ways. We would try to manage someone at an assisted living center, or we might even have to send them out to another community. So, we really needed the ability to support those residents in-house,” he said. He focused on the health center in part

because it was the oldest part of the cam- pus, and also because of the nature of the resident experience in this higher-acuity space. “You have someone in the room who doesn’t come out very often, perhaps, so we want to make that living space as nice as possible,” he said. Executives at the corporate level say this

kind of guidance from the community ex- ecutive director is crucial in helping them to establish priorities. “They have substantial input,” Smith

said. “We go through an annual budgeting process and in addition to setting the oper- ating budget we also set the capital budget, and the executive director really takes the lead in putting together the fi rst draft of the projects that are of interest for the coming year. From there it’s an iterative process: Pri- oritizing, getting input from headquarters, getting input from residents, and ultimately getting to a capital budget for the next year.” It’s expected that executive directors will

advocate for the needs of their own commu- nities, and corporate leadership relies on them to help prioritize needs. At the same time, cor- porate executives look to executive directors to off er a balanced view, to look at more than just the frayed carpet and fading paint. “They should also look at the big pic-

ture—not the whole company but at least their whole community,” Warren said. “That means that what they are recom- mending and asking for shouldn’t be the fl avor of the month, but something that will have the best and biggest impact across their whole community.” That big-picture thinking is something executive directors are uniquely poised to



A successful capex strategy requires thoughtful money management. At Wedgewood Investment Group, an investment banking entity focused on fi nancing senior living communities, CEO Rudy Trebels off ers three tips:

1. Hoard cash: When considering the capex reserve, “you really should be on the conservative side,” he said. “You want to have more reserves than less. Things take longer, and they cost more than you think, and if you don’t have enough you either end up borrowing more or else holding off until you have more money, which can come at the expense of losing new residents.”

2. Consider leasing: Rather than buy, it is possible to lease a range of capex items including furniture, kitchen equipment, phone systems, computer systems, nurse calling stations, shuttled busses, and even an HVAC system. “If you have cash that’s great. If you don’t have cash and need to borrow, you can get a bank loan or a second mortgage, but that is quite involved, where an equipment leasing transaction could be approved and funded in a couple of weeks,” he said.

3. Refi nance: Rather than take a building loan for a roof or driveway or other 20-year asset, consider refi nancing on a long-term mortgage. “If the asset is expected to last 20 years or longer, don’t do a fi ve-year loan. Pay for the asset you are replacing over the life of the asset,” he said.

off er, as they are able to view the ongoing and evolving needs of their communities over time.

In addition to cataloging immediate

needs, “they can help by looking forward for the next two or three years,” Lessard said. “If they are requesting several things this year, it helps if they can provide input on what is critical for this year versus what can be deferred for a year. If they can be proactive in sharing that information, they are more likely to get their top-priority proj- ect approved.” Experts say that while an executive di-

rector’s input is a vital fi rst step, it should be only a starting point—that the capex analysis ultimately needs to go broader and deeper. If your $200 million community were a

$200 million aircraft, you wouldn’t have the pilot working on the engine: You’d have a team of highly skilled technicians and me- chanics, said John zumBrunnen, founder of senior living consultancy zumBrunnen. In much the same way, the executive direc- tor’s guidance on capex should feed a more thoughtful and complex analysis. “You start by having a detailed physical

assessment of all of the properties, to deter- mine the big capital events for the next 20

years,” he said. “When are the chillers going to go? When are the roofs and the major paving going to be due? If you only look at one-year or fi ve-year budgets, you aren’t considering enough information. If you do a 20-year forward look you can benchmark one property against another, you can drill down to the per-bed price to help determine what you need to reinvest.” By gathering the input from multiple

executive directors for an across-the-board look, a senior living company can realize substantial savings over time. “If this prop- erty needs a new roof next year and this other property needs a smaller roof repair, maybe I can wrap all those projects together and get a better price, rather than having the individual community directors nego- tiating separate deals,” zumBrunnen said. Ultimately, having more eyes on the prob-

lem often is the surest way of getting that big-picture view. Warren for instance has some 25 people engaged in capex planning, including professionals from health care, sales, operations, and other disciplines. “We want the big decisions to be made with input from across the spectrum,” he said. “Then, at the end of the day, the needs of the residents come fi rst. That’s always the motto.”

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