Over 60% Sold!
Living Without Limits

Podcast #6: “It is going to sell out.”

Dan Hermann, president, CEO and head of investment banking with Ziegler, one of the nation’s leading investment banking firms specializing in not-for-profit senior living organizations, has a prediction about The Arboretum Villas. “It will sell out,” he said. “What folks are pursuing around the country is exactly the setting that you’re delivering and there’s a huge demand for that.”

For the full conversation, please view our video.

FOLLOWING IS A TRANSCRIPT OF OUR PODCAST

Nitsa Foundos:
Hello. Welcome to Living Without Limits, our fun and informative podcast about the Arboretum Villas at Plymouth Place here in LaGrange Park, Illinois.

I’m your host, Nitsa Foundos, and joining me today are Jay Biere, CEO of Plymouth Place and the Arboretum Villas, along with our very special guest, Mr. Dan Hermann, President and CEO, head of investment banking with Ziegler. Welcome Jay and Dan.

Jay Biere:
Nitsa, thank you, and Dan, I want to thank you for being here. We’ve known each other for over 20 years plus, and I’ve known you in a lot of different capacities, but we’re so excited to have you here to talk on our podcast today.

Dan Hermann:
Thank you.

Jay Biere:
You’ve been around a long time with Plymouth, so talk about the history.

Dan Hermann:
Ziegler’s an investment banking firm so our history dates back to helping Plymouth Place over the years with financing opportunities, but our history at Ziegler ties back very nicely because we are a firm that serves not-for-profit, senior living organizations as well as hospitals and other organizations like that. We go back 120 years to westbound Wisconsin.

Nitsa Foundos:
Wow, that’s a long time. But you don’t look 120 years old.

Dan Hermann:
I am not, but I’ve been at Ziegler for 35 years. I’m now President and CEO and head up investment banking, but grew up with our not-for-profit senior living practice, serving organizations and bringing capital to Plymouth Place and the other not-for-profits around Chicago, Illinois and around the country.

Jay Biere:
Dan, thank you and congrats on 35 years. It’s amazing, and I know I’ve been in senior living on the contractual side and also directly and leading about the same time. You’ve been a very significant leader, making a huge difference in the non-profits. So, I know we want the nonprofits especially to be wildly successful. So, and I want to piggyback on that because a lot’s going on in senior living. A lot’s changed over the past five years, especially. What’s happening out there, because you travel all over the United States and talk to lots of people. So give us your perspective.

Dan Hermann:
So what’s happening around the country is the organizations that are being proactive, that are taking steps to invest in their communities and organizations and developments, expansions, re-positionings, modernizations are the ones that are thriving and surviving.

Today there’s a growing for-profit movement, but our not-for-profits are really doing well because they offer the type of setting you have here at Plymouth Place with nice attractive units in a full continuum, so all settings of independent living from one bedrooms up to multi-bedroom, assisted living and healthcare when needed.

Nitsa Foundos:
If I can interject Dan, I’ve noticed that there’s been an uptick in younger baby boomers that are taking an interest in the continuum-of-care solutions, such as the Arboretum Villas. Would you be able to give us your perspective as why that’s happening?

Dan Hermann:
The reason it’s resonating is you are an established brand. When you’re in settings like LaGrange, it is very hard to get land, hard to get zoning, hard to get approvals. If you can get that land and expand on your brand, what folks are pursuing around the country are exactly the settings that you’re delivering, and there’s huge demand for that.

Nitsa Foundos:
One question, what would the financial advantage be of someone in their late sixties, early seventies to invest into a continuum care at this point in time?

Dan Hermann:
You just said young, early seventies, mid seventies, where folks are absolutely still mobile and living a vibrant life. and then they can reside in that setting for an extended period of time.

So if you think through the math, these should be relatively affordable or compare very well at versus somebody that had to buy brand new land and build out the same setting you have at Plymouth Place. It would be much more expensive. So they’re getting the embedded benefit of this existing community and the existing land.

Jay Biere:
Just to piggyback on what Dan’s saying, we did two market studies just to make sure we were hitting a bullseye and that this was going to be a great product. So everything, Dan, you’re saying is true with regards to what our audience told us and then the focus groups, and so we feel very, very confident.

In fact, Nitsa we’ve already begun. We’ve already are in current process of doing the demolition, land preparation and also utilities, even ahead of the financing, because we believe so much in this product.

Dan Hermann:
You’ve heard me say, and I’ve covered this stuff so often … It is extremely common, and this is going to tie into the scarcity principle, for these smaller expansions by unit count to sell out and then have a waiting list. That is very common.

Nitsa Foundos:
Oh wow. That’s good to know.

Dan Hermann:
I’ve watched this happen a hundred plus times, and it’s going to sell out. I’m just telling you that’s what’s going to happen.

Nitsa Foundos:
That is such a refreshing statement.

Dan Hermann:
Yeah. I don’t want to make it, but you should see what happens when people realize it sells out, and the difference with a big building like this versus 59 is people won’t cancel. So you’ll end up with a waiting list

Jay Biere:
You’ve seen a lot of projects out there over many, many years. How does that relate to what we’re doing?

Dan Hermann:
Well as you know, you and many of your peers have been doing expansions for years. So the hardest part in the business is getting an existing community established and get the brand in place and the quality of brand in place.

Dan Hermann:
In your case, you did a replacement building and now you’re doing the expansion, and we have found, and we have financed hundreds of expansions … That expansions of 25, 50, 75, 100, 125 units onto an existing brand tend to do very well. Sales tend to go very strong and they tend to sell out, and they tend to build a waiting list for many reasons.

Dan Hermann:
One of which is it tends to be attracting younger people or younger couples, because the community’s had a chance to position a perfect mix because they’ve had the time to determine what do we need.

Jay Biere:
So Dan, what might be your statement, encouragement to those who are looking at this opportunity at the Arboretum Villas, from everything you’ve seen, from everything you know that we’re doing and what we’re about, because you’ve been with us for 20 plus years?

Dan Hermann:
From our experience and knowledge of not for profit, senior living in the Chicago market, the country, there’s only a handful of projects of this nature where expansions of this nature of quality, not-for-profit senior living in all of Metro Chicago. So as you know, Jay, I could actually name every community in Metro Chicago.

Jay Biere:
You can.

Dan Hermann:
Well I can, and if we went just from LaGrange and LaGrange Park around in five and 10 mile increments, you’re not going to find another similar opportunity with this type of offering, for an established brand, that’s also at a community that’s right in the center of LaGrange Park and LaGrange, with a walk-ability index that’s very high, with the train station in downtown nearby. You’re simply not going to find it.

Jay Biere:
Absolutely. Well, let’s segue into Plymouth Place at large. So interesting. If you kind of go back in history, history might be replaying itself to a certain degree. When we were building the main building currently, which is 95% per percent sold out, there was some tough economic things going on, and we’ve got through that with your help, with all the right partners and so forth.

So here we are. There’s some wobbliness in the economy. What might be your statement about that? Why invest in Plymouth Place now in light of the news you hear out, the greater community?

Dan Hermann:
Sure, and we had a brief period of market disruption, and now everyone’s hearing about inflation, but it ties into everything you said.

The housing market is still extremely strong. When folks talk about interest rates being higher, we’re simply back to the 10 or rolling 12 to 15 year average. Rates are still attractive, interest rates, but they were just exceptionally artificially low because of the pandemic. It was an artificially-low period and now they’re at averages.

So for the homes in this area, you will still be able to sell very easily. Instead of the one day on the market it might be five days or 10 days or 20 days, but this is still a very desirable area.

Then we go back to you get a chance to get today’s pricing on these entry fees and you get a chance to get one of the 59 units that will, in my opinion, be sold out or have a very limited number available figuratively soon. So from an economic perspective, we’re not concerned.

We still have an unemployment rate of 3.6% or 350,000 jobs created, announced last Friday. Again, we are a long way away from the economy not supporting somebody putting their home on the market. The unemployment rate’s going to stay down below 4% for an extended period while the fed raises short term interest rates … that’s been in the news … to stave off inflation.

In our opinion, inflation will gradually come down, but the employment rate’s not going to go up materially. So for the folks considering these 59 units and the health of Plymouth Place, everything should be perfectly fine.

Jay Biere:
Yep. So what you’re saying, I guess really by deduction, any community worth their salt is thinking about repositioning, leaning into the boomers who are coming in and elevating really the programmatic side, service side and culinary experiences, wellness experiences. So this is really a wise move, a good choice, and the timing is good.

Dan Hermann:
Correct. Absolutely.

Dan Hermann:
Again, the biggest concern in my opinion is the lack, the limited availability that won’t, and there will not be units available in a few months in my opinion. We’ve seen that play out all over the country many times.

Jay Biere:
Yeah. We’re emerging to that end Nitsa, and so now is the time.

Nitsa Foundos:
Now is the time with over 50% sold and we have appointments scheduled over the next three weeks with some new clients. We’re so excited to reach that full capacity and start taking wait lists because as Dan said, life happens, right?

I’m extremely interested in talking to folks that want a very nice large one bedroom den, so that den can be enclosed for a second bedroom option. Come give us a call and you can reach us any time at 708-482-6634 or just stop on by at the Arboretum Villas and say hi to Shelly. She’s there Monday through Saturday, 9:00-5:30. So that’s what I have to say about it, Jay and Dan.

Jay Biere:
Thank you. Exciting. Dan, as you know, we are a faith-based nonprofit. So let’s talk about the advantages of a nonprofit. One of them that we talk about is that you can reduce or write off the health benefit in your monthly service fee, as well as a portion of the entry fee, and all those details will be provided at the Design Center or by our sales team.

Dan Hermann:
So it’s very important for any not-for-profit organization and your peers are hospitals and health systems like LaGrange Hospital, Northwestern University. You get to exist in perpetuity and reinvest the cash flow into cash reserves for safety and into the physical plant for the organization. So how much do you reinvest each year?

Jay Biere:
Really, over the past four years, we’ve invested either between three, three and a half million dollars back into the organization, and that’s huge. Matter of fact, we just completed Phase One, which is our Promenade area with upgrades in the dining, the wellness, the bar lounge, the theater and the marketplace.

Dan Hermann:
What that allows you to do is stay highly occupied in all of your levels, and that drives the economics of the organization, also makes it more vibrant.

Jay Biere:
Right. I love that because Nitsa, we always tell our residents here, our partners, that this is their home, we’re the guest, and we want to make it absolutely the best.

Nitsa Foundos:
That’s correct, Jay.

Jay Biere:
Let’s dip down just a little bit further now into the financial strength of Plymouth Place and what that looks like from your perspective.

Dan Hermann:
Sure. So for projects of this nature, whether you’re a university health system or senior living provider like Plymouth Place, all three of those entities have access to tax-exempt debt, tax-exempt bonds, and it’s common to borrow for projects. It’s common to borrow over 30 or 35 years and pay off that long-term debt over time.

Now in your particular case, the entry fees that folks pay coming in will help pay down a fair amount of the debt right at the front end, and that’s one of the benefits of a not-for-profit entry fee community, and then you’ll add on some permanent debt to the existing permanent debt of Plymouth Place.

Plymouth place is in a very strong financial position with its current annual debt service coverage and its forecasted debt service coverage to be viewed as a very healthy investment by the bond investors around the country. In fact, this week at Ziegler, as you know, we’re going to have 50 plus investors in our office because we’re the national leader in not-for-profit, senior living investment banking and about 20 of those own Plymouth Place bonds as we speak, which is pretty neat.

Nitsa Foundos:
That’s so cool.

Dan Hermann:
In addition to the debt service coverage, I mentioned earlier, the annual excess cash flow then gets contributed to your balance sheet. A certain portion stays in cash reserves, and then you mentioned a certain portion gets spent on what we call annual expenditures.

Dan Hermann:
You’re in a perfect position after this project to have optimum cash reserves for the long term, and then of course your finance committee oversees that very closely as to how those are invested.

Jay Biere:
It’s interesting because obviously what we want to do, and if you looked at the last annual report, our goal is to create long-term sustainability financially, and then service and program. We’ve been here 78 years and by the grace of God, we want to be here another 78 years plus, and we can do it based upon some of the steps that are being taken now.

Nitsa Foundos:
Right, and we stress that it’s pre-construction pricing. Once the construction begins, we’re not going to be able to lock in those rates any longer. So time is ticking away, but don’t hesitate. Give us a call.

Jay Biere:
I’m going to segue to another topic, and this is kind of interesting. So as we see the influence of the boomers and what’s happening, the other thing that’s going on is technology. We’ve been invited by the Ziegler corporation to go ahead and sit at the round table associated with all those who are thinking about and moving on and actually have developed different technologies, which is changing senior living.

Dan Hermann:
Absolutely, and being in a community that’s serving hundreds of older adults puts you in a position to get access to that technology, possibly better than you would at home. So many of these companies are pursuing voice recognition using Alexa, but doing it in a way that’s tied into the senior living community and to all the communication in the senior living community. So we know that’s going to continue advance.

And we all know falls are one of the most challenging items for seniors and one of the most expensive areas for healthcare in general, and can actually lead to very negative outcomes as we all know.

Virtue Sense, is from our home state of Illinois, from Peoria, and it’s one of the leaders on artificial intelligence for fall assessment, risk assessment and fall prevention, and they’re doing extremely well, and the reason you’ve heard about them is because of your association with the Ziegler linkage funds in Ziegler. So we’ve literally scanned our Ziegler linkage funds as a venture-style fund, investing in age tech around solutions that are either technology-driven or technology-enabled.

We’ve seen over 2000 companies. We’ve vetted over 800. We’ve done educational webinar demos to the investors like you for 130 and now invested in over 30, and you wouldn’t believe everyone, the spirit of innovation that every one of these founders and entrepreneurs has.

You’re at the center of it, and Jay in particular is tech savvy and tech oriented. So you’re bringing that to Plymouth place at a pace as if you were a large health system.

Nitsa Foundos:
We’ve always been on trend, right Jay? We’ve always thought, we thought about smart home technology before it was even popular, but all I can tell you is I just, I can’t wait.

Jay Biere:
We’re excited about it, and Nitsa and what we could see Dan, with your help, we’ve been able to do this. We’re going to launch the Plymouth Place app, so if you’re here at Plymouth place, whether you’re moving into the villas or the current community, you could be on the train coming home from a visit in Chicago or one of our trips, and you can go ahead and turn things on or off in your home or order a pizza, or you might just want to find out what’s happening for the week with regards to events and all the things going on, scheduling transportation, and so everything being driven through that app.

Jay Biere:
I’m going to give you the last word, Dan. What does the future hold? What do you think? Where does all this go?

Dan Hermann:
Where does this go? I think you’ll be a wonderful organization long term, very healthy, and who knows where you go from there when you are completely built out with this land, but always thinking about how to serve residents into the future. So we could see some neat things, on the technology front in particular. To you and I the other day, we’re talking about robots. What about robot servers are already here?

Jay Biere:
Yeah.

Dan Hermann:
… And robots replacing more mundane task everywhere because we do have a labor issue. I think you’re truly going to see that play out in retirement or senior living communities are a perfect setting for that.

Nitsa Foundos:
Well, I’m not ready to give up my day job yet, so no robots in the sales department, okay?

Jay Biere:
All right. Well thank you so much, listening audience. We really appreciate you being with us. Dan again, thank you so much for partnering with us, and Nitsa, any last words?

Nitsa Foundos:
Yeah. So if you’d like to see our beautiful floor plans and finishes in person, stop by our Design Center at 26 South LaGrange Road right there in downtown LaGrange. We’re open again Monday through Saturday from 9:00 to 5:30.

Well thank you so very much for tuning in to Living Without Limits. We look forward to talking with you all again. Until then, I’m Nitsa Foundos.

Jay Biere:
Thank you, Nitsa. Let’s circle the wagons and bring the cows home.

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