• March 29, 2016

    Meet Debra Cafaro, CEO and chairman of Ventas, Inc. The $26-billion-plus REIT has risen to become a senior housing investment powerhouse, securing its place in the “Big Three” healthcare REITs among industry peers Welltower and HCP, Inc.

    But Ventas did not always have such solid footing in the industry. When Cafaro took the CEO helm in 1999, the company looked quite different. From her career change in the legal profession to managing a multi-billion-dollar international company, Cafaro says she has learned many lessons—and is still learning. We sat down with Debra in her Chicago offices to hear about what makes Ventas different, the best advice she’s ever received (it came from her parents) and why being too far ahead of the curve can be just as bad as being behind it.


    What’s your definition of leadership?

    My definition of leadership is the ability to motivate a group of people around a common goal and achieve that goal.

    As the leader of Ventas, what does your average day look like?

    I am very hard working and I get up at 5:00 am, have coffee and start working. I do a lot of thinking and reading and responding in the morning to people who have reached out to me. I either then travel during the day, which I do almost every week, or I come to the office and spend all day in meetings, on the phone and working with the team. Often at night I’ll have dinner with clients or other relationships so I get home on the late side.

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

    The biggest risk was changing careers. I was a very successful lawyer, I really enjoyed being a lawyer, I enjoyed my clients, and I was recruited in 1997 to become the president for Ambassador Apartments, a multi-family REIT here in Chicago. It was a big risk to change careers, to become an executive after having been a lawyer for 13 years.

    You were on the deal side right?

    I was a deal lawyer, yes. I was great with numbers and one of the reasons why I enjoyed my work was I almost became another “deal guy” for the client but also served as the lawyer. I did have a deal background, but that’s very different form having a senior role in a company and that is what you learn when you change [careers].

    Lawyers [operate like] cottage industries; there are individual contributors and teams come together for individual assignments, but when you work at a company and you lead a company, it’s much more a leadership focus and management focus than you would find in professional services.

    Debra Cafaro, CEO, Ventas

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    When you spoke about coming over to the REIT side in 1997, you said it was a “baptism by fire.” Tell me about that.

    Yes, exactly. Different things are expected of executives and leaders and companies than are expected of lawyers. I actually have a book on my desk at home called Why Lawyers Make Lousy CEOs, and many of the skills that you need to succeed as a lawyer, including skepticism and covering every little thing, are really not helpful when you’re leading people and making decisions.

    There’s a joke that lawyers always have “too many hands.” [They’ll say] “on one hand…on the other hand…” But as a leader, you have to be decisive and you have to make decisions based on imperfect information. That was a significant change.

    Law firms are very flat. They have a lot of highly educated, highly motivated, highly compensated people, and when you work in [larger] organizations, there is a much wider range of individuals that you are responsible for. That calls for a different kind of relationship with them, a different kind of leadership style, and it really was a shock to my system.

    How did you learn to make that change?

    I think my specialty is being dropped into situations about which I know virtually nothing and figuring them out. Including figuring out how to be the president of a large publicly traded organization.

    I think my specialty is being dropped into situations about which I know virtually nothing and figuring them out. Including figuring out how to be the president of a large publicly traded organization.

    It seems like you figured it out, right?

    I’m always still learning. Believe me, I have not figured it out yet; I am still learning to be a great CEO.

    Some people would disagree and say that you already are.

    Well, thank you. I have really high standards for myself, the company, and for the team — I strive for excellence. I strive to get better every single day, and learn something every single day.

    Sometimes I succeed, and often at the end of the day I feel like I have fallen back, or I haven’t been my best self. Maybe I’ve not been clear enough with someone, maybe I didn’t give someone enough support, then I just come back the next day and try to be better.

    That’s really what we expect of people [at Ventas]. It’s a constant-learning, constant-improvement, setting-high-standards culture.

    Who would you consider to be your mentors and how have they helped you?

    I could write a book about my mentors because they’ve been essential in my career from the very beginning. I’ve always been really lucky that people took a chance on me and helped me succeed. The biggest influences on my career have been the lawyers who I started with at Barack Ferrazzano who chose me to be their only associate when they started the firm in 1984, and in business it would definitely be Sheli Rosenberg, Doug Crocker and Sam Zell.

    What’s the best advice you’ve been given in your career?

    It came from my parents: to treat everyone with respect and to earn the respect of others every day.

    What’s the best career advice you would give someone?

    The usual, I would say, is work really hard, have integrity, go the extra mile. But for me the differentiating piece is to take intelligent risks with your career. That risk between perceived risk, “How could anyone take the Ventas job?” and the real risk (which was minimal and the upside was much greater). That’s what I try to encourage people to do.

    The Rise of Ventas

    When people look at Ventas today, most see it as a well-oiled machine with private pay assets. But it didn’t start that way, did it?

    It’s a really good story and it shows the importance of relationships and always doing your best. When I went to Ambassador, I left my clients behind, which included Equity Residential where Doug Crocker was the CEO. We had helped take that company public.

    When I went to Ambassador, [Doug and I] stayed in touch and after we sold Ambassador, he called me and said he had a very interesting job opportunity for me and it was to become the CEO of Ventas.

    It was a very distressed situation in 1999. He acknowledged as much and asked me to come on board, really to save the company because we had more problems than you could possibly imagine—very significant problems. The company was all single-tenant, all government reimbursed, 70% nursing homes.

    Because there’s a lot of risk to take it on, how did he pitch you on that opportunity?

    It was. First of all, I trust Doug. So that’s really important. He was honest, although I don’t think either one of us fully understood the depths of the problems the company faced.

    He said that it was a healthcare company that needed restructuring and the people in place really were not up for the challenge. It was a good opportunity to be a CEO, and he would be there as my partner to fix the situation.

    I realized that it was a deeply distressed situation. If it didn’t succeed, everyone would believe it was too far-gone to save. On the other hand, if it was a success, it could be a great opportunity to learn how to be a CEO, to learn about healthcare, and to create a net worth for my family. Also, it was an opportunity to build something that was really unbelievable.

    So when you look at the risk [of taking the job], it’s a case where I would say the perceived risk of failure was much higher than the real risk and the upside was much greater, albeit not probable, but the upside was greater than I think people could have imagined.

    Walking into that situation, on Day One as CEO, what was the first thing you needed to address?

    It was definitely to find my suitcase because the airlines had lost my luggage, and I showed up the first day without my clothes.


    Yeah! The suitcase got there [eventually], but I only had my jeans [at first].

    The first week when I got there, it was really chaotic. Everyone was calling asking what was my plan…all the distressed debt investors, all the shareholders—what was my plan?

    I really did not know the difference between a nursing home and LTAC, and I didn’t know what the issues were. The second day [as CEO], our stock halted trading on the New York Stock Exchange; it went from $8 to $5. It was unbelievable!

    Everyone kept running in asking: “Debbie, what do we do?” “What should we do?” and of course I didn’t know what to do. We figured it out. The main thing early on was just to understand the situation, get to know the people at the company, and to make sure we had the right advisors. It was a highly complex, very difficult situation and we needed the right advisors to start to dissect the situation and then figure out how we could craft a solution.

    When you were starting to run the company, was there ever a time you thought, “Is this going to work?”

    [We needed] to understand the situation, and for a year or two, our little team of “Special Forces” bled blood every day [trying to fix it].

    Ventas had some value in the real estate, and we had many people who wanted that value. Everyone was coming after us: the banks, shareholders, distressed debt guys, and even the Department of Justice.

    It was this little band of special forces trying to do something very improbable — survive. Those early years were really just about survival and there were many, many days where we did not know how it was all going to resolve itself.

    Was there a defining moment when things started to get better?

    At the time, we were the centrifugal force of pulling together a comprehensive restructuring of Vencor, which is now Kindred Healthcare, with a sustainable capital structure.

    We were very committed to a solution that could make them successful.

    They needed to have a lot of debt taken off the balance sheet and to have a balanced structure where everybody who was a constituent was able to haircut some of the obligations that were owed to them. [We had to] get back things that would enable the people who had contributed, to be paid in full ultimately, if Vencor succeeded.

    When we got to a point where we really thought we had that balance right, that everybody was giving up the right amount and getting the right amount in return, we then realized that [Kindred] could come out and be the leading provider of post-acute care in the United States, with a sustainable capital structure. That made me think that we had a shot.

    From a leadership standpoint, how has your role evolved from back then to now? Today Ventas is a very different company compared to when you took over.

    We have many more employees at Ventas now. We obviously have many more relationships, many more customers, and an unbelievably strong balance sheet.

    We’ve evolved a great deal. We’re a very large, international company.

    It’s different to run a team of “Special Forces” than it is to run a large global company with many customers, many constituencies, and many generations of employees who want different things.

    Leadership has to evolve to meet what the business requires and what those constituents require. I’ve tried to change with the business and be what the business needs, what our customers need, and what our employees need at any given point in time in the company’s evolution.

    Are you able to think more long-term now?

    We are definitely thinkers and innovators, and ahead of the curve. We’ve proven that multiple times at Ventas. The most recent example is the spin-off of the skilled nursing portfolio that we completed in August of this year. That was a long-term thought-process. It started years before, created a lot of value and was ahead of the curve. We should always be doing that.

    As a leader, do you ever worry that you’re too far ahead, or that you might be thinking too far ahead?

    It’s a great, tremendous question. I was with an investor last week and the truth is, if you’re too far ahead, it’s the same as being wrong. If you’re an investor and you say that this is a great idea, but it takes ten years and three different owners to make it successful, then that’s the same as being wrong.

    If you’re too far ahead, it’s the same as being wrong…You have to be forward looking, but not too far forward.

    You have to be forward looking, but not too far forward. Maybe a couple of years at most.

    Has there been a time that you were wrong?

    I am wrong so much. Go out in the hall and everyone will tell you how many times I’m wrong every single day.

    Sometimes there were deals that in retrospect I think we should have done and we were too conservative, or deals we did do that maybe we should have taken a pass on. But in the big picture directionally, we’ve gotten it more right than wrong.

    That’s what people value, ultimately. You have to get a lot right to build a big successful enterprise, and we need to keep getting it right. That keeps us on our toes.

    Is your Ardent deal ahead of the curve, maybe?

    I hope so! We believe that it is, and we hope to prove it.

    Do you think the Ardent deal has any risks to it? It’s totally different than anything Ventas has ever done.

    Every deal has risk in it. We try to look at the reward and see if it’s commensurate for the risk that we’re taking and we try to collar the risk. In the case of Ardent, we think getting into a trillion-dollar revenue business in the U.S. in a high-quality way is a risk worth taking. But we’ve done it in a way, again, with a top-10 operator [and] with a management team that’s been around for 30 years and has been very successful, [and] with a partner in Sam Zell who is a great investor and a good partner.

    It’s a $[1.75] billion investment, and we think the upside rewards could be huge if we could scale Ardent in the way we’ve done Lillibridge, and the way we’ve done Atria, so we’re excited about it.

    Is it interesting for you to think about what Kindred is today compared to what it was when you took over? You guys have kind of grown up together to some extent.

    Yes, we have. We have seen it all together. We have been through everything together.

    We had an investor day in November 2015 and I introduced Ben Breier, who’s the CEO of Kindred. It was such a pleasure for me because I said we started together, we’ve been through everything together, we’ve seen it all, and here we are now in Louisville, KY where it all started, and I’m introducing you and you are running the leading post-acute business in the United States. You are No. 1 in home health and you’re No. 1 here and there, and I couldn’t be prouder that you’ve succeeded and we’ve succeeded, and here we are together. It was really a very rewarding moment. There was a lot of hard work that went into that, and we’re both really proud of it.

    Risk and the Art of the Deal

    You always talk about risk.

    Risk is opportunity. If you see it, you understand it and you can manage it.

    Ventas isn’t what most people would call a risky investment. Do you ever miss the challenge of taking something broken and fixing it?

    We are about as secure and blue chip as they come! It’s a perfect question. I really love puzzles and fixing things and building things. From time to time we do encounter situations where I think we can bring that special expertise, that special sauce, and I do look for those opportunities. I really do. You’ve found something that is right. I do enjoy that because you can really create a lot of value in fixing something.

    What do you fix here at Ventas?

    Everyone has bumps in the road. Everyone. Anyone who tells you they don’t is not telling the truth. Often if we have a situation that needs to be fixed, thinking about the other person’s point of view and how we can work it out so that everyone comes out well, that’s a challenge I enjoy.

    Sometimes looking at investment opportunities we do see things that other people may say are very risky, but we think that we have a downside protection somehow, and we can get a good return for that risk and we can collar the risk and manage it. Those are investments we do look for.

    Speaking of deals, everyone I’ve talked to says you’re one of the best.

    I love deals.

    Why do you love deals?

    I’ve loved them since I was a young lawyer. They’re fun, they’re intellectually challenging, they’re puzzles, and you can find a way in them for everybody to win.

    Is that the secret to success?

    In most deals, finding out how everybody can win is the secret to success, yes.

    Have you gotten better at it over the years?

    I think I have. I understand more the point of view of the person on the other side and I’m less dogmatic than I was in my younger days about what’s right and what’s wrong and really try to put myself in the other person’s shoes. When we look at deals, we try to help customers; we literally think about what does this do for them? That is the secret [to getting deals done].

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