• July 19, 2016

    Meet Pat Mulloy. After happening upon the senior living industry purely by accident, Mulloy took his roots in law and government service to lead several senior living organizations. As CEO of Elmcroft Senior Living, Mulloy and his partner, company President Tim Wesley, led the company’s management team to purchase the company in 2014; making a mark both on Elmcroft and the industry. Today, they operate approximately 80 communities across 18 states. The Louisville-based operating company continues to target calculated growth and excellence across its operations.

    We sat down with Mulloy to hear how he continues to dream big, why he’s doing away with the term “human resources,” and what he does when business (or life) throws him a curveball.

    Tell me how you got into senior living.

    Completely by accident. I practiced law for 20 years and I had taken a break in the law business between 1992 and 1994. I always had an itch for public service, and I served as the Secretary of Finance for the Governor of Kentucky and I went into his cabinet for two years. I loved being a lawyer and I’m still licensed as a lawyer. I try to think like a lawyer. I went back to the law firm after leaving the Cabinet and I had an interest in building something. Lawyers are great problem solvers and are supposed to be good critical thinkers, but I got tired of sort of parachuting from one issue to the next. I got a call from a friend who founded a company called Vencor, which today through lots of corporate iterations is Ventas, the big REIT, and Kindred, the large post-acute care company. They had acquired a large skilled nursing company in Tacoma, Washington and buried inside of it were 19 senior housing communities.

    He called me and said, “Let’s have supper, I have an idea,” just completely out of the blue. I don’t think before then I’d ever set foot in a senior housing building.”

    My friend said, “If we can create a separate company, I think we can create some value here.” I came over a couple of days later to his office after talking to my wife and on a handshake I told him, “I’ll try this.” Wall Street was in love at the time with assisted living. It was a new hot business in the mid-90s. Sunrise went public in May of ‘96 and we went public in August of ‘96.

    In that process, I met a young finance guy that he joined us a Chief Financial Officer. His name is Tim Wesley, and he’s the president of our company today and has been my partner and close close friend for 20 years. We tell folks we were a bit of a shotgun marriage and we’ve survived and stayed good partners and close friends. We ying and yang pretty well together.

    That’s how Atria came to be?

    I asked my friend what we were going to name the company. This tells you how times have changed—he said, “It’s gotta begin with an A.” Why an A? He said, “Because it needs to be first in the Yellow Pages.” The Yellow Pages don’t matter too much anymore, but in 1996, they mattered a lot.

    At that point I’d traveled to some of our buildings, and each community had a center gathering area. I began to think about the word Atrium. So I’m driving home and I’m daydreaming one evening and I wondered what the plural of atrium is. It’s gotta end with an A, I thought, from my Latin. So I got home and took the Oxford dictionary out, and sure enough, I called my friend up and said, “We’re gonna name it Atria.” That’s where the name of our new company came from.

    You said you went home and talked to your wife. What were some of the things that you were concerned about before you took over?

    I don’t think of myself as a crazy risk taker. My politics are a little liberal. My personal life, hopefully, is a little conservative.

    I don’t think of myself as a crazy risk taker. My politics are a little liberal. My personal life, hopefully, is a little conservative.

    I heard your partner’s very conservative.

    We laugh. I’m an Obama supporter, he’s a Romney supporter. We have some interesting conversations about politics. We’re both pretty moderate guys and agree on most issues.

    I can’t tell you that every day has been a joy, but most days are. I enjoy this business. I tell our teams all the time, other than bringing babies into this world, helping people leave this planet with some level of dignity and grace and having a meaningful experience in the last home they have, that’s important work. It matters.

    Is that why you’ve come back three times?

    Yeah. I like it. I joke with my partner now that this is our last company. We like what we’re doing, we’ve been through a series of re-capitalizations. We disposed of some assets; and last year we sold our skilled nursing division to Signature Healthcare.

    Why did you want to get out of skilled nursing?

    It wasn’t our core discipline. It was a bit of the tail wagging the dog; we had 19 skilled nursing communities in two states. We’re an assisted living, independent living and memory care operator in 18 states with approximately 80 communities today and that’s Tim’s and my passion.

    We made the strategic decision to exit and, frankly, it coincided with Ventas’ vision to spin out the CCP REIT. The timing was serendipitous and it allowed us to close a transaction with Signature. It left Tim and me to focus on what we know best, which is to build, develop, and operate senior housing.

    Today, we are a bit of a mixed company. We own a few real estate assets and we have a substantial relationship with Ventas. They’ve been terrific partners. Debbie and her team were supportive of Tim and me when we started the company in 2006 and we have just continued to build on that relationship.

    Pat Mulloy, Elmcroft Senior Living

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    What was one of the tough times?

    Our primary equity partner in Canada in 2013 decided that he and his partner wanted to exit the business. We worked through a lengthy process with them, in which we were able to conclude a transaction in late 2014 that allowed our equity partners to exit the company and allowed Tim and I to become the majority owners of the company.

    How much of the company do you and Tim own?

    I can’t disclose publicly, but we own the majority of it. We’ve diluted our ownership a bit with other senior officers, but today there are no outside investors and no private equity. We’re at an interesting spot where we’re trying to figure out how to grow. We’re growing with support from Ventas, conversations with other real estate investment trusts, and conversations with some private equity folks. We’ll see where all of that goes. We like our spot though.

    It’s an interesting inflection point in the industry right now. I think operating platforms are going to have real value, particularly if they operate to certain operating standards. That’s one of the engines for value creation going forward.

    More from the Leadership Series

    There are only a certain number of a certain scale.

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    We’re not Brookdale, but in terms of operating companies, we are top 20 in size.

    It’s probably an advantage right now, isn’t it?

    I think we’re pretty nimble and we’ve been blessed with wonderful people. There’s a woman in our company, Melissa Owens; she’s a great example of the kind of people we like to grow. Melissa joined us at our last company as a young woman in her early 20s, as an assistant executive director. She became an executive director, then a very successful regional director of operations, and then she became a very successful regional director of sales and marketing and got her MBA. She’s in her mid-30s and she’s the senior vice president of sales and marketing for our entire organization, and she is relentless about learning. She’s curious, wants to understand the data, she understands that the sales and marketing aspects of this business are going through a sea change right now as well.

    How so?

    Ten years ago this was—I mean, it’s still relationship-based sales that matter, and you’ve got to meet the needs of my 60-year-old wife, the adult daughter, because she’s still the primary customer. But the way we reach her is driven today by social media, it’s driven today by the internet, it’s driven today by our ability to analyze and understand the data, search engine optimization, search engine marketing. None of that stuff existed ten years ago; it was about, do I discount my price or not? Do I run a sales contest? There are still some threads of that throughout the industry, but it’s a more sophisticated, data-driven sales process today. You have to have meaningful touches with your clients, your patients and your residents. You’ve got to sell a value proposition to them. The whole notion of pricing is another whole conversation.

    There are some people who are fighting back on that transparency.

    We’re one of the few who post the entry level price for every room.

    It’s hard because of the add-ons.

    That’s the complex part of it, because the service assessment tools vary. My partner and I are going through a big debate right now. We don’t believe in rate locks, but we are in select markets right now testing pricing that is not add-on pricing; it is one set of pricing if you want to move into our community. And it’s working in a few markets.

    How long has it been going on?

    Less than a year, but we are piloting some new models in a few markets.

    How do you do it?

    You try to find a transparent price that the consumer can understand with predictable rate increases as residents live with you. We can’t prove it scientifically yet, but we’re testing it.

    It’s interesting that there’s a lot of business activity right now in Louisville, where you are based.

    It’s because Humana is based in Louisville. It’s a little bit like Nashville and HCA—there are many spin off companies. Tim Wesley came out of Humana, then he went to Vencor, then he started Atria, he was the first CFO of Atria, then he has started a couple other companies with me since. There are dozens and dozens and dozens of examples of that all over our city.

    I learned from interviewing Ventas CEO Debra Cafaro is that so much of this industry was built from Vencor. It all came out of Louisville.

    Oh yeah! In Louisville, my office is practically across the street from the Ventas Louisville offices; they’ve got about 70-80 people there. Their general counsel and chief administrative officer, Rick Riney, is a good friend. He is also right across the street.

    Has it been fun to kind of work with more or less the same people over the years?

    Tim and I are lucky. He and I get along and we balance each other out, but there are a whole bunch of people who worked with us at Atria, who work with us now. There are a bunch of people who worked with us at LifeTrust who work with us now, so that’s nice. It’s nice to be able to grow leadership, groom leadership and bring folks along. That’s one of the most satisfying things.

    Leadership

    What’s your definition of leadership?

    People following. People listening to you, believing in you.

    How do you convince them to do that?

    You lead by example. I’ve screwed up lots of stuff and I’ve tried to get better at it over the years.

    Communication matters. You have to be able to talk. Writing is important. Because I’m trained as a lawyer, I’m a real stickler for good writing. Clarity of thought and critical thinking goes with that. But the more important piece of it that took me a long time to learn is to be a listener. One of the blessings I have with my partner, Tim Wesley, is that we speak pretty bluntly with each other. We aren’t ugly, but we’re pretty blunt.

    I remember 15 years ago he said to me, “You’ve gotta understand with the job title you’ve got as CEO, that when you talk, people listen. You’ve gotta listen more, talk less. Or when you’re talking, be careful, because if you just joke that you want to paint the building yellow, somebody will go out and get a bucket of yellow paint.” You need people to think for themselves, and you don’t need to take up all the space in the room.

    You have two ears, one mouth.

    Yeah, and there’s a great book on active listening. I’m not a big believer in a lot of these leadership books, but there are two of them that have resonated with me over the years. One is Jim Collins’ Good to Great, which I think is seminal, probably the best business book ever written. He went looking for this magic answer of why these companies outperform the S&P over a decade, all these public companies, like Walgreens and Johnson & Johnson, and what he found was it’s the ‘who’ and not the ‘what.’ What he calls it, Level 5 Leadership, I call being an adult. It took me a long time to get there. You hope that you’re leading with a sense of maturity, setting a good example.

    The other business book is Marshall Goldsmith’s What Got You Here Won’t Get You There. He was a UCLA business professor and his point is, and I’ve learned this in my personal life and my married life: we’re all fairly imperfect vessels, and—whether it’s therapy in your marriage or therapy at the workplace—you’d better be capable of self reflection, and learning and acknowledging your mistakes. What made me a successful lawyer 20 years ago, I’m a fairly polite guy, I can stand on my feet naturally, I don’t get intimidated speaking in front of people, that’s just a gift I’ve got. But a whole other series of gifts of listening, critical thinking, analytical skills, those are skills

    I’ve had to learn and learn and learn some more.

    You said as you learned about leadership over the years you’ve made some mistakes. What’s one big mistake you can remember where you learned a good lesson?

    Talking too much. Leading with anger instead of reflecting and thinking. Letting my mouth overload my brain.

    During your time, what’s been the biggest challenge you’ve faced, and how did you overcome it?

    For me, the biggest challenge in business is that it’s so dynamic. It is constantly changing. When you think you’ve got it figured out, you haven’t.

    For me, the biggest challenge in business is that it’s so dynamic. It is constantly changing. When you think you’ve got it figured out, you haven’t.

    Can you give me an example?

    Atria. The company effectively was sold out from under us because of issues at Vencor beyond our control. Tim and I had this enormous sense of pride in birthing that organization with a lot of people from Vencor. We did not control the company and guided the sale through an auction process in 1998. We’d spent three years building something, took it public, had three successful public offerings, and very little debt. But because of a major reimbursement change that occurred at Vencor, it changed their destiny and ours. All of a sudden, this trajectory that Tim and I had of building a senior housing company, a publicly traded company out of Louisville, we had to figure out what to do.

    We understood after we went to the market and went through this auction process that we needed to take this company private because the whole industry was getting overbuilt. At the end of that process, we ended up being owned by a large institution in New York that neither of us had any relationship or history with. Now it all worked out, they treated me fairly, I exited fairly, but it sure as heck wasn’t what we signed up for.

    My wife, five years ago this month, was diagnosed with stage four uterine cancer. My wife is a gorgeous 60-year-old fitness instructor. More like a model; she doesn’t look like she’s ever been sick in her life. She got through all of that terrible treatment, and that curveball has made me more grounded. I’ve got a sense of what matters. All of this business stuff does matter, because we have 6,000 jobs we created that we are proud of. All of that matters, but it is not any more important than what I’m building at home. You get curveballs in life and they just make you stronger.

    So did you learn a lesson with Atria where you said, “I want to own this?”

    Yeah, but I still am a risk taker. Tim and I are at an inflection point right now in terms of growth. We have a great deal of organic growth left in our organization. As I said, we’ve got relationships with Ventas, which is very supportive of us, and other capital sources, and they’re helping us grow with deals and situations. That will continue.

    What’s the biggest risk you’ve taken in your career?

    Probably telling my friend “yes” in 1996. I shook his hand and took the job and left my law practice. I never had an employment contract with him; I just shook his hand and off we went. He trusted us with a substantial group of communities to watch over. We grew the company and successful sold the company. It was a good stewardship lesson for me. What’s the best piece of advice you’ve gotten in your career?

    I’ve gotten lots of good advice. I’m a bit of a big dreamer; I had a teacher one time in tenth grade English who said to dream big.

    What was the teacher’s name?

    Chester Day. I’ve always had big dreams and a lot of things I’ve wanted to accomplish in life, so that was a great bit of advice to me. My partner telling me to listen more, that resonates with me. It’s something I work on every day: to listen and try to be wise.

    So you’re a big dreamer, what else do you need to get accomplished?

    I’ve always been interested in public policy.

    Well, you have a history in it.

    Yeah I do. I ran for Congress when I was 30.

    Wow.

    I lost a very close race. And I managed a Governor’s campaign in Kentucky and I worked in the Governor’s administration.

    So after you’re done with senior living, will you go back to public policy?

    I don’t know. I did love my two years working for the governor. That wasn’t political work; I worked for a political guy, but it was public policy stuff.

    What was your slogan when you ran?

    My slogan? I don’t know! I really don’t remember. I remember red, white and blue bumper stickers….It was probably the best thing that ever happened to me, to lose. I learned some humility, and it probably saved my marriage. I was a damn fool to be a politician at age 30.

    Would your wife let you run again?

    She would now! She thinks I’d be a pretty good governor one day.

    Who do you consider to be your mentor and why?

    Oh I’ve had a lot of them. There’s a businessman in Louisville that I have great respect for named David Grissom, the former chairman of PNC Bank. A guy that I’ve looked up to for the last 30 years, Clayton McWhorter, who just passed away, was the chairman of our second company called LifeTrust America, Inc. in Nashville. He was very kind to me, and good to me, gave me a lot of guidance. Then there’s Bob Doll, who was a great lawyer in Louisville. I learned a lot of lessons from my dad; he was an extraordinary lawyer and taught me a lot. Tim Wesley is my closest friend alive today. I buried my closest friend from law school four years ago from leukemia. He was the general counsel of Price Waterhouse in New York. Extraordinary guy. We were the same age, but he was the guy for 25 years that if I had a hard decision to make, I called him.

    Has your dad gotten to see all of the things you’ve built?

    Yeah, some of it. My dad just passed away in the last few weeks. He lived at one of our former communities.

    That’s gotta be cool for you to build all that now and have him watch it though.

    Yeah, I think he appreciated it. I’ve had an up and down relationship with my dad sometimes. He was a tough guy, but he taught me intellectual curiosity. He believed if you’d been given some gifts, you’d better use them. He taught me how to work. I’m not the smartest guy in the room, but I’m rarely out of work.

    Two things I’ve heard and read about you is that you’re a relationship guy and you work hard. Is that fair?

    It is.

    Why are relationships so important?

    They matter a lot. If I’ve got a tough issue, say with Ventas—they absolutely know that I’m telling them the truth and they never doubt that because of our relationship. I know they’re telling me the truth. So when you’ve got that kind of reservoir of goodwill, it matters a lot. You need it with a business partner. I’ve been “married” to Tim Wesley for 20 years and he’s my “work wife.” We’ve had difficult moments, not personally between us, but you need those deep relationships.

    What’s the toughest moment you guys have been through together?

    Well, sales and business, or how to negotiate something, or when to give on a point or how to hire somebody.

    Whatever the issue happens to be. Personnel, human resource issues, those are all hard issues. They have human sides to them because you’re affecting lots of people. One of his other strong suits is, I can be a bit impulsive, and sometimes he’ll say, “Just sit with it.” Sometimes if you sit with stuff, my dad used to say this, time heals lots of stuff. Time takes care of lots of things.

    Attracting Future Leaders to Senior Living

    Say I’m about to graduate college, what would be your pitch to me on why I should look to senior living as a career?

    A: because it’s a business that matters. Doing this business, morally you’re doing the right thing. I’m not a righteous guy, but this is a good business that matters a lot and you’re making a difference in people’s lives. B: you’re giving an opportunity to all kinds of people. There’s a terrific young man named Aaron Dean in our organization who’s as good a financial modeler and budgeter and analyst as there is in this industry. He knows the economics of these buildings backwards and forwards. He started with us at Atria; today he’s an owner of the company and he’s a senior VP. To help a young man like him have an opportunity to grow and to build a career, that’s good, rich stuff.

    Do you think the industry does a good job of taking people on the frontlines and giving them a career to grow?

    Lord knows we’ve done a good job of creating jobs. We’ve got to do a much better job of engaging, retaining, keeping. My company is very typical. We’ll retain a significant portion of our workforce every year. But recruiting, on boarding, retention, and training are the most important issues in our industry. We have much work to do on these fronts. People will tell you differently or fib it to you. People manipulate statistics and I don’t believe when somebody tells me their turnover is 20% or 30% per year. I don’t believe them. If somebody stays with your organization and has tenure with your organization, there’s a direct correlation to quality of care. The biggest complaint you’ll hear from the family is that the aides change all the time. Or this aide who has taken care of my mother for eleven months left because she got a better job up the street. Issues of dignity, respect, training, on boarding; these are very difficult issues.

    What are you doing to develop your people?

    It’s a huge initiative for us right now. We’re re-engineering, as we speak, our whole on boarding program. I’ve scrapped the term ‘human resources.’ I don’t like that term because it speaks of compliance and checking the boxes. I’ve got to do criminal background checks on everybody. We drug test everybody, we train on sexual harassment, we do all of that stuff, but I’ve gotta do way more than that. We have to find people with passion and train them.

    Can you train passion?

    Sometimes.

    …Tim Wesley and I are knee deep in re-engineering our training programs right now. They are not so hard to create. They are tough to operationalize. We have just internally promoted a gentleman to Vice President of Organizational Development. Recruiting, training and on boarding is his and his team’s focus.

    I think we have a pretty good culture of people. Not to brag, but they like working for us, we’re a fairly flat organization, Tim and I are fairly visible in the organization. The other four senior officers who run the four operating geographic footprints we’ve got– people know Ed Ward, in California, they know David Grady in the Southeast and our regional directors of operations are visible. But we’ve gotta get better at engaging with that front line. At the end of the day it’s still a very difficult job.

    Thank God they’re there. Now I have fun question for you. Apparently you’re a big Kentucky Derby fan?

    Not as crazy as my friend Mr. Wesley, but we both like it a lot.

    So were you at the race this spring?

    Oh yeah. I think I’ve missed three in 36 years or so. I saw Secretariat win in ‘73, I was in the infield. I was stupid and in college.

    Wow. I heard the infield is just like a Jimmy Buffett concert.

    In the ‘70s it was nuts. In the old days you could go all the way to the rail, and bodies would crowd up on the fence. But for safety reasons, there’s now a big fence and you can’t get out near the horses.

    Were those the good old days?

    I’m too old for that. I remember in ‘74 my wife and I went; we were in college; we were dating but we weren’t married at the time. We were in the infield with a bunch of knuckleheads from Vanderbilt and some guy got naked and was swinging on the flagpole just going around and around… A little bit like Mardi Gras. It’s crazy. But it’s fun.

    So is the story true? I read that you were taking a test…

    That’s a true story. I got up and left a corporate tax exam to watch the Derby and then went back and finished the exam.

    How’d you do on the exam?

    That’s a hard class. I was a pretty good law student but that wasn’t one of my better grades. I think I got a B+ on it.

    Do you remember who won the race?

    No, I don’t remember who it was. It was law school. I graduated in spring of ‘77, so whoever won in spring of ‘77, that’s who I saw win that year.