Meet Stephanie Handelson, CEO of Harmony Senior Services, a subsidiary of Roanoke, Virgina-based real estate developer Smith/Packett. With a career that began in food and beverage operations and quickly led to rising the ranks at Sunrise Senior Living, Handelson then served for several years in leadership positions with Benchmark Senior Living, most recently having served as chief operating officer.
Now tasked with driving operations for Harmony, which currently has 21 communities and 10 more under construction, Handelson is focused on guiding the company’s growth in a calculated and manageable way. We sat down with Handelson to learn about her top lessons learned at Sunrise, why “heart” is the key to working in the senior housing industry and why mission must prevail in the mission-margin equation for today’s owners and operators.
Senior Housing News: Tell me about how you got into senior living.
Stephanie Handelson: That’s a really long story! In 1999 I was actually working in food and beverage. I was a general manager for Ruby Tuesday’s, and the hours were really tough with two small kids. I saw this advertisement for Sunrise looking for a general manager for a brand new building in Lynbrook, Long Island. So I applied. Nine interviews later with Tiffany [Tomasso] and Paul [Klaassen] … I finally got the role and I started, in a construction trailer. The rest is history. I stayed with Sunrise for 10 years, opened that building, did a few turnarounds …
Were you the executive director?
I was the ED. And then became a regional operator and then VP, SVP, and when I left I had two hundred properties [in my territory] from Maine to Florida.
In 2009, Tom Grape from Benchmark, who I’ve known through the years, asked me to come join them as the COO and president. So I did.
I worked with Benchmark for seven and a half years and have now just joined Harmony as their CEO.
What attracted you to the Sunrise job? Did you know anything about senior living at that time?
I did not know anything about senior living. I actually thought it was going to be a bed and breakfast. And it’s a very heavy sales experience, which I did have. I have my degree in hotel and restaurant management, but an associate degree in sales, so I was really excited about the opportunity. Once I got to know Tiffany and Paul and Terry Klaassen, it was an easy transition.
What was it like to come up through the ranks at Sunrise?
It was excellent — probably the best learning experience I’ve ever had. I was fortunate enough that Tiffany took me under her wing very early on in the process.
So how did Tom recruit you to Benchmark?
I knew Tom from all the industry conferences, and when Tiffany announced that she was going to be separating from Sunrise, Tom gave me a shout. It was a good time to move on.
What are some of the things you learned at Sunrise?
I think one of the best things I learned at Sunrise is you have to have the heart to do this work. It’s more than just the capital. It’s more than the real estate. You really have to have the heart to do this work, and finding people who have it is hard.
We’ve had a lot of very good regional folks and EDs who have had MBAs, and I have an MBA too, but it doesn’t make me good at caring for people. Tiffany really instilled in [me] that there’s a very strong culture of: The resident comes first.
Did you know you had that “heart” when you joined Sunrise?
No, I didn’t. My first snowstorm as an executive director, when I had staff that couldn’t show up for work, I really had to think long and hard. Did I really want this responsibility of caring for seniors? And I did. It’s actually really fun.
What attracted you to your current role with Harmony?
The growth. I’m very excited. It’s an interesting platform. [Harmony’s parent company] Smith/Packett has been around for 35 years, and they own Wessex Capital, so they actually drive their own capital. Less than four years ago they had about seven Harmony properties and today we have 21 — of which 10 are in lease-up. We have five more opening before year’s end, and next year.
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Tell me about that process of making the move to Harmony.
I was doing consulting, and we had just moved from Boston back down to Florida. I was really excited to be back in my house and taking a break.
[A head hunter called about the opportunity] and I didn’t think I wanted to move again. Then they called me back about two months later, and I had the opportunity to speak with [Smith/Packett principal] Hunter Smith, and I said I’d come in for an interview. If you’re going to pick somewhere, Charleston is not a bad place. I met with Hunter and his dad, Jim Smith. And they just won me over. They have a really interesting model because they own all three of the businesses. There isn’t a lot of pressure from the outside, which is a good thing today. So much of the industry has changed [toward being] really capital-driven and I think [some people] forget about what we really do. At Sunrise, when we started chasing the quarterly earnings call, we didn’t make the best decisions. It was pretty clear that I wasn’t going to work for a publicly traded company.
How did they pitch you to join? Were you nervous that you didn’t know who they were?
I was a little nervous. It was really funny; they got my name from a few of the capital partners who said that I was the right person to do what they needed to do. The growth is really, really extensive, and it’s fast-paced, and they really don’t have the solid platform that Sunrise did. So I bring a lot to the table for them as far as setting up the platform in the appropriate way. And I also attract good talent.
What was the first thing you did on your first day?
Day one was just getting the lay of the land. I have only been there since January 2, so it’s very, very new. But I’m very excited. The owners have a really good way about them, and I’ve been very honest about what we need and they’ve been very open to making sure I get whatever I need.
What are some of the things you’re implementing?
A new care structure, for one. I think that people are becoming more and more sensitive to the cost of the real estate when they’re looking at senior housing options, and what we have put in place is a way to keep the rent attractive and then we have tiered pricing for care.
Whether they get the care from me or a home care provider, they need the care. The real estate, not so much. We have a care platform that has five different levels to it, where we can cover the full gamut, which is really exciting and creates attractive price points. If you think about home care as an example, with a minimum four-hour contract at $25 an hour, that’s $100 [per] day.
We’re able to provide our care levels at less than that price point.
I love that our buildings are IL, AL, and memory care, so we have the full continuum from a rental standpoint. We’re taking a very strong focus on the associates. This talent pool is very, very tight. Because everybody is building, there is a lot of supply, and some people are kind of jumping ship. We are working to button down what really is important to [the associates]. Everybody thinks it’s money [that retains people], but money is not always the first thing.
How are you going to attract millennials?
Flexible work schedules really seem to be something that they like. And this industry does not take advantage of that as much as we should. One of the things we’re thinking about is how we move people to a Tuesday through Saturday or Sunday through Thursday schedule, so they have a day off during the week. We’re looking [at] four 10-hour days, and things we think they want. We should have some better answers [after we set up a working group].
We’ve started to see a lot of occupancy pressure coming from the NIC data. Do you think it’s as bad as some people might say?
I think [it depends] on what market you’re in and what the competition looks like. Development has been very heavily focused on standalone memory care and AL memory care. I think our product line gives us a little bit of a competitive edge. And our price point does, too.
Where would you consider Harmony to be on the price scale?
I would say we’re mid-market.
Everyone likes to say they’re mid-market…
But you know what? They’re really not. That’s one of the things that everybody wants: that five percent group. The next group of people who are coming don’t have the same [means]. We are serving the richest generation right now. Baby boomers have less money. Many of them have big mortgages. They put kids through college. They have champagne tastes and beer budgets.
We are serving the richest generation right now. Baby boomers have less money. Many of them have big mortgages. They put kids through college. They have champagne tastes and beer budgets.
What are some of the differences between Harmony and Benchmark?
Benchmark was absolutely a top-tier premier provider that goes for that five percent. Our buildings are beautiful, but they don’t have all the bells and whistles that Benchmark had.
Going from high-end providers like Sunrise and Benchmark, what attracted you to the more mid-market opportunity? Was it because that market has a bigger population to serve?
If you can keep your price point below $50,000 a year, I think that you will have a much bigger audience.
Do you think you can still deliver a pretty good resident experience at that middle tier?
I think we can. Harmony is focused on our activity platform, which is, bar none, the best I’ve seen. The young lady who’s running it from the corporate office used to work for the cruise lines.
It’s not as complicated as we make it out to be. One of the interesting things after doing this for 20 years is that in a lot of the buildings that I’ve built in my lifetime, so many of the common spaces are never used; they’re just for show. What we’re trying to do is make the buildings the right size and have the right amenities, without wasting space.
With your background, did you ever think about starting your own operating company?
I did, and I guess I’m just too old, to be honest. One of the things that was really interesting is that I thought I was going be able to do consulting part-time. And it just didn’t end up that way. I was really, really busy, and it was nice. It was a choice: “Do I want to stay in the game or is it time?” Twenty years in the same industry is a long time. I’m happy. But I have an expiration date.
When’s your expiration date?
Did you give Harmony a road map?
Yes. And I think it will be in a good, strong position.
How many communities do you want to have in five years?
I think we’ll have close to 60.
Do you think senior living scales at all?
I think it scales to a degree. Larger providers have demonstrated that’s not always the case. I think what happens is there becomes too much space between the actual consumer and the decision-makers, and that’s never a good thing.
Where do you think the upper limit is on the size of a company?
[Around] 100 [communities]. If you think about Brookdale, they acquired a lot of properties and Emeritus had acquired a lot of properties, so they actually had multiple brands within that Brookdale umbrella. If you want to have that kind of scale, that could work if you had separated the brands into sub brands. Even with our company I’m starting to look at that. Every market is different, and we need to make sure we’re responding to the markets appropriately. We shouldn’t be building the same thing in a top-tier A market that we’re building in a C market. I think that’s where we lose our way. As an industry, [sometimes we try to create a] repeatable performance with systems in place across the board from a branding perspective. But at the end of the day, it’s market-driven.
Do you think you want to come out with a high-end brand for Harmony?
I think we could be like Marriott and Courtyard. There’s nothing wrong with Courtyard.
What are some of the hard decisions the industry has to make right now?
There needs to be more alignment between capital and operator. And what I mean by that is 10 years ago, you were probably getting mid to high 20s on a return, and we should all be happy with 18.
The fight for $15 an hour, workman’s comp., benefits… all of those have grown almost double digits in costs. And we haven’t been able to grow double digits in revenue. So something has to give somewhere. In any other place, with 18 to 20 percent returns, you’d be pretty happy.
The fight for $15 an hour, workman’s comp., benefits… all of those have grown almost double digits in costs. And we haven’t been able to grow double digits in revenue. So something has to give somewhere.
We’re starting to see the REITs put a lot more pressure on operators right now, and It seems like we’re starting to see what used to be like.
But it’s a solid industry. I think the supply came in a just little before its time. It’s all going to work itself out. It’s just going to be a little bit of time before that happens.
Do you think there’s a lot of pain coming?
I think there’s a little bit more pain coming before it gets better. I think this year is going to be a really tough year for everyone. There is still a lot of supply coming in. I also believe some of the pricing that’s out there in the market, it’s not helping anybody. It’s not helping the industry.
With all these new communities coming onto the market, how do you think operators need to set themselves apart?
I personally believe our biggest competitive advantages are people. And people aren’t really buying the bricks and sticks. They’re buying how we make them feel. If you think about Disney, it’s very similar to our business where the end user and the decision maker or the buyer are two different people. Kids love Disney, but the parents are the ones making the decisions.
They’re doing it for their kids. With us, it’s the same thing. We’re serving the resident who we have to take care of. But the adult child is generally the decision maker. So how do we bridge that gap by serving two constituents and pleasing both of them? What’s important to one is not always important to the other.
So how are you doing that?
A lot of discovery and a lot of listening, a little bit less talking and really understanding why are they making their decision for Mom. What’s really important? It might be medication management as an example, and getting that nurse involved really early on so there’s a relationship between the adult child and the nurse, which I think is important. [That resident and family] may not be as concerned about activities, as an example.
It’s really personalizing the relationship with the right people.
We’ve seen a big boom in ancillary services. Do you think that’s the future of services?
I think people are making a choice either to provide it themselves or partner and the industry is going to have to pick:
Do they want to play in the health care arena or not? If they want to stay on the hospitality side, that’s fine, but I don’t think they’re going to be able to play in the middle.
Where do you want to play?
Actually we tend to play on the lighter side on the acuity scale. We have a much bigger IL inventory then we do for AL and memory care.
During your senior housing career what’s the biggest challenge you have faced?
It’s always finding good talent. Industry talent keeps getting recycled and as we continue to get more sophisticated, now before I hire somebody, if they’ve been in the industry, I go and pull their last survey. Surveys are online now, and I don’t want to pick up a problem.
What’s been your personal biggest challenge that you faced from a career standpoint?
Building for the sake of building and growth for the sake of growth is something that I struggle with. I really believe that when you hang your shingle in this industry, you have to be committed to the people and to the product that you’re delivering — and executing on that belief that the family is really putting so much trust and faith in you regardless of how big the company is.
So when we’re chasing earnings and other things, it makes it very challenging. The hardest thing is finding partners that really believe in what we’re doing. It’s a constant battle of walking “mission and margin, mission and margin” all day long. With so many new entrants into the marketplace, some of them haven’t had the mission piece and that’s really not a part of their equation.
With so many new entrants into the marketplace, some of them haven’t had the mission piece and that’s really not a part of their equation.
What’s the biggest risk you’ve taken in your career?
Probably leaving Sunrise and going to Benchmark.
Tell me why.
Sunrise gave me my start in the industry. I had come from a different industry. I come from hospitality and actually, I started in the airport. I worked in sales and other areas, which is very different from this customer-centric industry. Sunrise gave me my first shot and I had 10 great years there. I loved who I worked for. When you look at the people who were with Sunrise in those early days, most of them are very successful.
And I think it’s because it was a great place to work. Having to make that break after 10 years was really hard. Any new company that you go to is different. Not that one is better and one is worse, it’s just different.
The way you described Sunrise sounds like a breakup that you didn’t want to necessarily go through.
Exactly. But the opportunity was too great. I knew that in order for me to achieve the rest of my goals, I had to make a move. It was very hard. But more importantly, I felt that Benchmark was a great landing place. Tom was a great partner. He was unbelievably fair. At the end of the day, I did seven and a half years of good work there and they have a scalable platform and they’re going to continue to grow and do the things that they do. And it was a great time in my life as well.