Senior Care Academy
Senior Care Academy is a podcast dedicated to providing valuable information and expert advice on navigating the world of senior care for both senior care providers, and families with aging parents. Hosted by industry professionals, each episode covers a wide range of topics including healthcare options, legal considerations, financial planning, and emotional support for caregivers. If you are a healthcare provider, have aging parents, or are a senior adult, this podcast is for you! Tune in to gain valuable insights and resources to help you make informed decisions and provide the best care for your loved ones.
Senior Care Academy
Empowering Teams and Driving Growth in Senior Care Investments
What if you could transform a company from a $500 million market cap to an astounding $5 billion? Join us on the Senior Care Academy podcast as we welcome Dave Sedgwick, President and CEO of CareTrust REIT, to unravel the strategic maneuvers behind this impressive growth. Dave gives us a firsthand account of CareTrust's evolution since 1999 starting under the umbrella of Ensign Group. Dave shares insight into how REITs function and includes his tips for leadership success.
Our conversation with Dave also sheds light on the delicate balance between leadership and growth. Dave shares career advice on becoming invaluable within your organization. Learn how empowering team members can lead to remarkable business success. Discover insights into Dave's leadership style, including the importance of achieving results while nurturing relationships. His journey offers valuable lessons for anyone aspiring to lead in the dynamic environment of real estate investment and senior care.
As we look ahead, Dave provides a glimpse into the future role of REITs in meeting the rising demand for senior living facilities.
Welcome to the Senior Care Academy. Today on our show, we're thrilled to have Dave Sedgwick, president and CEO of CareTrust REIT, joining us. Dave has been with CareTrust since its inception in 2014, guiding the company's strategic growth in areas such as new investments, tenant relations and portfolio management. Before CareTrust, dave held several leadership roles at Enzyme Group, where he accumulated over 12 years of experience in post-acute care and senior living. Dave's career path, from managing skilled nursing facilities to overseeing one of the most dynamic healthcare REITs in the industry, is truly inspiring. Beyond his impressive business acumen, he's a licensed nursing home administrator and a passionate traveler who's always eager to learn and to share new ideas. We are looking forward to diving into his journey and insights on the future of healthcare real estate. So, Dave, thanks for coming on and welcome.
Speaker 2:Yeah, happy to be here. Thanks, Caleb.
Speaker 1:Yeah. So I kind of want to jump in. You've been with CareTrust since the beginning and it's pretty exceptional what you guys have done. What is kind of the original vision behind Care Trust REIT and how has it evolved over the last decade? Not too many businesses are publicly traded and not too many businesses actually have meaningful growth over a decade.
Speaker 2:Yeah, Well, I guess, to go back, our story really starts back in 1999, when the skilled nursing operating company, the Ensign Group, was born. I started there in the early days, became an administrator, ran a handful of facilities for the company. In 2007, ensign went public and along the way, it had acquired quite a bit of its own real estate. So it's running skilled nursing facilities. In some cases it's leasing the buildings on long-term leases from different landlords, including other REITs, and in other cases it's actually acquiring the real estate itself.
Speaker 2:So by about 2014 or 10 years ago, we had realized that we had acquired a lot of real estate and we weren't really getting credit for the value of that real estate and in a way, to sort of unlock that value, we took 97 properties that we owned outright and spun it off into a public company. That's a REIT. Now, a lot of people don't know what a REIT is. Yeah, it stands for Real Estate Investment Trust.
Speaker 1:Okay.
Speaker 2:And it's really just a type of company that the federal government created so that Joe Public can own commercial real estate. So what that means is if, before a REIT was formed, it'd be virtually impossible for you or me to own commercial real estate because we don't have that kind of money. Tens, hundreds of millions of dollars. Yeah, geez, right and like if you wanted to own a shopping center or a manhattan office or hospital or whatever that's, that's reserved for a very select few people.
Speaker 2:Well, a re is created as a way to have everybody who wants to not just buy a share of ibm or apple or whatever, but you can also buy a share of the commercial real estate in the country and so then these different sectors were created to specialize in health care REITs or office or industrial REITs and things like that.
Speaker 2:And so what we did is we spun out the 97 properties into Care Trust REIT and on day one, 10 years ago, we had one operator, one tenant, the Ensign Group that leased their own buildings from us, and we then had to. The idea then was well, and we then had to. The idea then was well, no public company investor is going to be comfortable with just one tenant or one operator, it's all your hands in one basket.
Speaker 2:Even if it's Ensign who's a blue chip operator and bulletproof credit. It still makes people nervous. So you have to diversify your portfolio, and what that meant for us is we're going to grow with new operators so that the Ensign percentage comes down, and that's what we've done. So today we have somewhere around 30% of our business is with the Ensign group oh wow. Percent of our business is with the Ensign group oh wow. And the other two thirds is with new operators. That we've gotten to know, that we knew from our operating days at Ensign and that we've gotten to know since we started.
Speaker 1:So putting it back basically a REIT, you buy nursing homes or skilled nursing facilities and then I can then go invest in CareLife REIT or CareTrust sorry REIT and I own it. And then the operator or whatever entity that the C-Corp that's an operator, the LLC that's operating a skilled nursing rents that building right. Am I saying?
Speaker 2:that right? Yes, very interesting. For example, a lot of our we own buildings that are operated currently by you mentioned before we started PAX.
Speaker 1:Yeah.
Speaker 2:Or the Ensign Group, or Lynx, or Bayshire or Duro, Cascadia, um uh covenant care. There's all these different operators. So you go to a PAX facility. You don't really know, as a family member, as a patient who owns the real estate you know, that PAX is the operator and that's all that really matters, right?
Speaker 2:So you walk into an ensign facility estate, you know that PACS is the operator and that's all that really matters, right? So you walk into an Ensign facility. We have virtually zero control or influence over operations. So whether PACS owns their own property or they lease it from us on a 15-year lease, the patient experience is the same. The employee experience is the same because Pax has 100% control in both of those scenarios.
Speaker 1:It's similar to an office space, right Like you own. If somebody owns an office building they don't necessarily have control. They can deny people that want to work in their space but, like the company that's in the building operating it, if they have one star review, it's not on them necessarily. They just own the land that it's on.
Speaker 2:That's exactly right.
Speaker 1:Yeah, well, that's very interesting and I am. This is not one of the questions I was planning on, but I'm curious as far as investing in just different publicly traded stocks, how does, how do REITs compare to, like I said, apple, these other like technology or service or product companies, cause I feel like, where it's based on real estate and it's always appreciating, like, how does it, is it a safer bet? For me, it feels like it would be a safer bet to go with my dollars as a as a Joe investor and invest in a REIT.
Speaker 2:Yeah. So that's a great question. And there's not. I mean Apple, nvidia, netflix. They can't compete with skilled nursing real estate in terms of sex appeal, right? I mean? There's nothing sexier than investing in nursing homes. That's a joke. I'm glad you get it.
Speaker 1:Yeah, yeah, nobody yeah.
Speaker 2:No one's going to.
Speaker 1:If you go to a second grade class, probably at least 80% of the kids are going to say I want to be a nursing home administrator one day, right, exactly, exactly.
Speaker 2:a nursing home administrator one day, right, exactly so when you think about investing in public companies in security. We all kind of know about portfolio allocation. And that allocation is going to be a function of your appetite for risk, so you're going to have of your appetite for risk, so you're going to have. You know, if you invest in tech, you're probably going to have more upside.
Speaker 1:but you also?
Speaker 2:have the volatility with it. So higher risk, higher reward. The reason REITs are viewed primarily as like an income part of your portfolio. So you're investing in tech type stocks for the stock price depreciation potential that it has.
Speaker 1:Yeah.
Speaker 2:You invest in REITs because, in order to be a REIT technically, you have to distribute at least 90% of all of your income every year out to your shareholders.
Speaker 1:Oh, wow.
Speaker 2:Wow. So we can't even all this income that we get from our operators that pay us rent. We can't retain that and redeploy that into growth. We have to distribute 90% of it out in the form of dividends. That's crazy 90% of it out in the form of dividends. That's crazy. And so REITs are really. They're kind of a safe income system, part of your portfolio. Now, care, trust. We try to be both, we try to be that safe income producing stock.
Speaker 2:But we also have a pretty tremendous growth story that a lot of regions don't have, and so people invest in care, trust who who want a little bit of of both of that action yeah, because you've grown so if you started with 97, um enzyme buildings and now you guys are over 200, right?
Speaker 2:Yeah, we're over 200. We have 23 or something operators that lease from us. Wow, um, yeah, so we've gone from I think we started at around 50 million of revenue and today it's closer to 220 million of of, uh, just rent plus interest revenue takes us up yeah that's so when we. When we spun out, our market cap was just below 500 million.
Speaker 1:Last year.
Speaker 2:Last summer we were at about 2.5 billion, wow, and at this point, year to date, we've grown that to about 5 billion.
Speaker 1:So we've been on a pretty meteoric increase, yes, especially it sounds like for REITs where, like, pretty meteoric, yes, especially it sounds like for reits where, like, if you only have 10 of your, your income to try to grow, to be able to grow like that in 10 years with 10 of your income, um is crazy, impressive.
Speaker 1:So that's really cool as far as growing that like the leadership style of it. I was looking at different interviews. You were on one like early last year with CareLife or something I can't remember. It was like the hot seat, but you're like successfully leading companies like that. And then the 10 years before you went into CareTrust you've managed to successfully lead companies through different stages of growth. How would you describe the way that you try to lead and then what principles are guiding you on the way that you lead?
Speaker 2:Um, I think one of my, one of my advantages is that I I have a pretty good awareness of my limitations and I know that here at Care Trust, I'm not the smartest guy in the room, and so we have to have I have to have really exceptionally competent, talented people, and so I try to create an environment where they want to be. Most exceptionally talented driven people prefer not to be really micromanaged.
Speaker 2:They prefer to be empowered, respected, listened to and because I know I'm not the smartest guy, that comes easily to me to respect and listen and trust other people and what they have to say, and I think they feel that because it's genuine and they give their best to the organization because of it.
Speaker 2:And that's what we are really experiencing this year in particular, where we're having this historic growth, but it doesn't necessarily feel like we've already quadrupled our normal year of growth, which we have, because it feels like people are really well motivated, they're doing well, they're doing well and so, yeah, I probably lean toward the empower others side of things as opposed to try to have my fingers on most things.
Speaker 1:Yeah, no-transcript have autonomy where it's like I own this thing and so that's an awesome leadership style of saying like this is I trust you, I know that you're capable and I don't need to, you know, keep my finger on the pulse to make sure that it's alive, because under your tutelage it's going to be an awesome tree one day. You know, I did have a question on kind of that leadership. So last year on the hot seat you were asked about a question about like early on in your career and you said it was kind of a funny story where you had your first skilled nursing experience where they sounds like you kind of were thrown into a trash can fire and then you got out 90 days later or six months, I can't remember, and you're like never doing that, at least I can't remember.
Speaker 2:I forgot how long it's. Yeah, but you're, you're like never again.
Speaker 1:and then a family member got you back in but you said that something that you learned was that your pride and ego drove you to care more about being liked by your staff and then the results and making like those hard decisions to make sure that it's a profitable operation of the facility. So how do you balance what kind of feels counterintuitive, where your nature are counterintuitive to your nature, and like getting results above all, kind of even though you're a seemingly very caring person and it's hard to do those things when ultimately some people aren't going to like you because you have to make hard decisions? How do you balance that?
Speaker 2:Well, that is that is. That was a really formational experience for me and, lucky for me, it came at a very early point in my career.
Speaker 2:It was my very first facility that I ran and I'm not naturally a real detail control type guy. And running a skilled nursing facility, super regulated, right, Tons of policies and procedures and the phrase system in place is what you hear all the time. What's our? I'm not naturally oriented to being a real system process guy and I thought I don't need to right. I'm just going to play to my strengths, and my strengths are, I mean, come on, who's not going to want to work for me?
Speaker 2:I just got to get up there tell some inspiring stories and I'm going to be the best leader they've ever had, and that ultimately not ultimately, but initially that was my goal and it wasn't articulated that way and I didn't really realize it until I failed and got fired. That I realized that my goal was to be viewed as fill in the blank, and the blank I filled in was the best leader they ever had. So if your goal is to be viewed as something you're, you're already in trouble. You're you're as a leader, right.
Speaker 2:As the top person is is you have the inconvenient responsibility to, to be responsible for results, and there's nobody else to pass that to.
Speaker 2:So what I, what I've, what I learned then and have learned over the years, is that if you're focused on yourself and how you're viewed and liked, you're probably not going to make the hard decisions that your A players need you to make. And it's because you tolerate some C players, some C performance, some C attitude, and that really ends up frustrating. You think you're being all noble and virtuous and merciful and kind and patient for this C player and that's fine. Give second chances, of course, to people who deserve them, and the people who deserve those second chances and coaching are the people who create attitudes. Defenses and coaching are the people who create attitudes. But if they continue to underperform, then what that's going to do is it's going to cause so much strain and frustration on your A players that they're going to burn out and leave results. And you you have to realize that those results are going to come from great people working together really well, and so then, that's really what you're focused on.
Speaker 2:You're, you're not focused on being popular with everybody and you're going to just and the other thing that you realize, caleb, is that if you're, if you have these folks that are underperforming, they're probably not very happy right yeah, nobody likes to lose, even if they're not competitive even if you're talking about a nurse or a marketing person or a housekeeper or a cook or whoever you're talking about, Like if they're constantly being coached and criticized and this and that, and look this, you're not here. We need you here. They're probably not in the right seat.
Speaker 2:Yeah, it seems like the most successful people find the seat on the bus where they're very naturally, very naturally perform well, and so sometimes you got to move people from seat to seat. You coach them. Ultimately, if they're not going to perform, you help them find some place where they're going to actually thrive.
Speaker 1:And that's ultimately the most charitable thing you can do. I had a mentor of mine that I had a similar not quite to that extent, but it was where there was somebody that wasn't doing what needed to be done in the seat and my mentor said that he's like you want to be charitable. You're a charitable person, you're a caring person within your organization. You're never going to be able to have the excess income or the excess profit or anything to be charitable in a meaningful way, like you can be, charitable to one person and never grow the company the way that needs to be grown.
Speaker 1:So you can invest and donate whatever percentage to whatever cause you feel is important, or you can make that hard decision and Um and or that. Have that, not even a hard decision, have the hard conversation Cause ultimately then it ends up kind of being their decision as well, of like this is what the seat entails. I don't think it. I don't think there's a mesh right there. There's this other thing that might not be um, as high paying or as in the same vertical or or department in the organization. If you want to go to that and if they don't decide that, you know like, help them have those decisions, but some incredibly meaningful advice of help them find where they can be best, and then that's really the charitable thing is, get them to where they can win, and if it's definitely not in your organization, then let them know that so that way they can feel like they're winning wherever, whatever organization that they fit into. Right, you know, I love that.
Speaker 1:The other question that I had sorry, I have all the questions that I'm trying to find it oh, on kind of that same vein of just your style and things. You are also like, a self-confessed member of the 5 am club. So how does starting your day early and impact your productivity and then, overall, just your ability to be a great leader?
Speaker 2:Well, you caught me on a good day. I can't say I'm very distant, uh, as consistent as I'd like to be with it.
Speaker 2:But today, I happened to to be a uh, a faithful member of that club. Um, you know what, what I notice, and I actually just noticed this on Sunday. So on Sunday I was reflecting on um, on the momentum or lack thereof that I have in my different areas of responsibility in my life, and I realized that I wasn't feeling as productive and effective in some areas as I should, and it dawned on me that I had stopped some really important habits a few months ago because of just a ton of travel that I had. So you travel, you get out of your rhythm, you come home and you're playing catch-up, it seems like, and next thing you know, a few months have gone by and you haven't been faithful to the habits that have brought you success. So it was just this week very timely your question is very timely.
Speaker 2:Just a week that I got back to my practice of starting each week with this, so um, starting each week with this, so, um, so, wake up. You know you wake up around 5.00 AM, I, I study, I read in the morning, pray um, work out. I have to have about at least an hour to work out and then um, send the kids off to school and um, and then come to work. And when I get to work on Monday, what I do is I, I do this for the week and I found that monthly goals are too, their timeframe is too long. But if I can set weekly objectives for myself over all these areas, then that's when I'm really, I feel, dialed in. And so on the left-hand side this is all work related I've got um areas of responsibility and what I want to give attention to for investments with my board, because we have our board meeting next week uh, investor relations and some finance, some financing activities. Those are kind of some things that I'm working on this week.
Speaker 2:And then on the right-hand side I've got my wife's name Jess, kids, spirit, body, community service, son, brother, friend and CEO. And then underneath each of those I have one or two things that I want to accomplish. So one thing was one-on-one time with my son, and last night I went to dinner.
Speaker 1:I took him to dinner just the two of us.
Speaker 2:We had Indian food and had a heart-to-heart that was much needed.
Speaker 2:But if I hadn't kind of planned my week thoughtfully, intentionally, around the different areas of responsibility, that I could go months without really having it occur to me that I need to have some one-on-one time with my son. It's so easy just to drift through life. It's so easy just to drift through life. That 5 am club helps a lot because it gives you that time to get your day started right. When you come into work you've already accomplished so much, you're already so productive. You want to not lose that momentum throughout the day. The days that I don't do that and I wake up at 6.30 or 7 or something and I'm kind of rushing to get the kids out and get to work.
Speaker 2:It's a totally different vibe.
Speaker 1:Yeah, I love that a lot. I'm going to implement that right now because it's so easy, especially if you're really driven and you're early on in your career or you're getting revitalized and you're really diving into your work.
Speaker 1:It's easy to set those goals because you have measurables, you have these metrics that you're trying to hit. So it's like, okay, these are the. You know the five to seven things and if I move these forward this week, I'm going to kill it at work. And then you get home and like the rest of your life. I love the right hand side of the page where it's like here's all the different seats in my personal life that I'm sitting in. What can I do this week to progress? Like that's something that I need to. That was a great reminder for me. So, thank you, I need to.
Speaker 1:I need to dial in all the other side. I feel like I'm doing pretty good on the left side of the page, but the right hand side of the the page needs some improvement. And then the other kind of key that I think people need to, where you had, as you were reflecting on Sunday. Basically, you're like thinking back to when was I feeling really dialed in last? And then you're like, oh my gosh, it was when I was doing 5 am. It was when I was waking up and exercising and doing all my goals and I'm just going to start doing that again, and then you get dialed in again.
Speaker 2:So think about a time in your life. Yeah, that's the thing about momentum, right, I played a lot of sports, I played basketball a lot, and momentum in a game can switch, just like that. And if you look at the word momentum, it starts with the word moment and momentum switches in a moment.
Speaker 2:It is literally you're having a bad day, you realize it. You can change that in one moment, just like in a game, and it doesn't take days and weeks and months. It just takes a moment to wake up and make a better choice, and then that creates some dominoes.
Speaker 1:And thinking about in the day-to-day life of people, kind of in the senior care space too, where you maybe you're feeling momentum, like the day's going so well and then you get like a family member call and then all of a sudden it's like, and the momentum, everything that it was like, oh my gosh, we're gonna have the best month of our, of our life, of our existence. And then that one calling like crap, there's all my momentum, but it's just that another finding that next moment to switch it back on. It's kind of cool that I like that. All it takes is a moment. Um, the this 30 minutes has, um, I have like a few more or the last two kind of questions.
Speaker 1:Um, I am curious, what role do you think REITs, like care trust, will kind of play in the senior living industry, cause the demand is growing so much, especially over the next decade? I've seen different articles about how the demand is growing faster than building, because these, these big building, the commercial real estate, it takes time to move everything along. There's just so much red tape. So what role do you think they play? Or what kind of projections do you have in the REIT and long-term senior care space over the next decade?
Speaker 2:Well, so for our company for health care reads you know you look, you're looking at skilled nursing or seniors housing, assisted living right abilities. And you're right, because of interest rates and covid, the, the building boom really paused and it's going to take quite a while for that to start up again and catch up to the demand. So you know, reits are a capital partner for operators. That's how you really think of.
Speaker 1:REITs.
Speaker 2:They have banks that can help them grow and acquire facilities. They have reits that can help by acquiring facilities for them and just lease them the properties. Um, we don't do. We personally don't do much in the in the world of developing or building new locations. There's so many opportunities to grow just through acquisition of people who are exiting the business. That's where we spend most of our time.
Speaker 1:Very cool. Are there any trends that you see on the other side of so those other, because there are a lot of developers out there or what I guess? What market shifts should people be looking for to be able to see that like? Is it interest rates dropping, that kind of create the boom again? Or or what things do you look for? Because I mean, as, as they're getting developed, then you can go around acquiring them as well.
Speaker 2:But yeah, I think so I think. I think just the cost of capital has kept a lot of people on the sidelines and they're waiting for those, those interest rates, to come down so that their borrowing costs become better, and it makes these investments for them pencil, because right now they don't.
Speaker 1:Yeah, and then we're out of time, which I'm really sad about. I was loving getting into Momentum and the 5 am Club and all this stuff. So this went really fast getting into Momentum and the 5 am Club and all this stuff, so this went really fast. But the last question I'd like to ask is what advice, if you had one or two pieces, would you give for people getting into their career?
Speaker 2:whether it's in the senior care space or more into the like a REIT type space. I'll tell you, the folks that rise the fastest, that get the raises, that get the promotions, that really grow the most, whether they do it on purpose or not, they make their bosses, their immediate supervisors' life as easy and as good as possible. It's the employee who is more focused on what's in it for them, how they're being treated, what experience they're getting that tends to not get recognized and promoted, et cetera. It's, it's the person that becomes just invaluable to their boss. That either as that boss rises and they, they got to take them with them or if there's opportunities to lose that person would be a sin and so you're going to be promoting that person. So it's a little bit paradoxical, because I've interviewed and met with some people who, when they interview, their question is around you know what can? What kind of experience can your company provide me?
Speaker 2:Because the question that I want to hear is one that exposes the mindset or the orientation of. I am so hungry to make a difference in your company.
Speaker 1:Yeah.
Speaker 2:You know, am I going to be able to do that? Am I going to be able to? You know, if that's the attitude that you have and you're less focused on you know your experience and what you're getting from it, you're going to rise a lot faster. You have much more success.
Speaker 1:And I think, ultimately have a better experience yourself because you're, because you're rising. It's fun to rise, it's fun to be invaluable, but I like that a lot. Become the person or the individual that the idea of you leaving is like a nightmare for your director board. They wake up with cold sweats like, oh my gosh, caleb or Joe or Schmo anybody, they can't leave please.
Speaker 1:So I love that. That's great advice. Well, dave, thanks so much for taking some time. Sorry, I went a little bit over. It was fun talking to you and learning about REITs. I hadn't. I kind of had a concept of it, but now I really understand and it's plays a valuable part in the whole senior care ecosystem.
Speaker 2:So I appreciate what you do Uh enjoyed the time with you, Caleb. Best of luck to you.