Meet Joel Nelson, president and CEO of longtime senior housing owner and operator LCS. Nelson took the helm of Des Moines, Iowa-based LCS in January 2018, following a long tenure under former CEO Ed Kenny, who now serves as chairman of LCS’s board of directors.

Nelson, who began his career in hospital administration, has been with the company for more than 30 years and has most recently held positions as chief operating officer and chief development officer. As the chief executive of LCS, Nelson oversees six business lines: management, development, real estate, purchasing, insurance and home health, spanning core operations of more than 100 communities across independent living, assisted living, memory care and CCRCs.

We sat down with Nelson to hear about how he sees the company shifting under his direction, where opportunities lie ahead for experienced operators like LCS and why vision is the key to all good leadership.

Senior Housing News: Tell me about how you got into senior living.

Joel Nelson: I was always on the path for hospital administration on the acute-care side and I was doing an internship at the local hospital with the trauma center. I met LCS’s head of HR at a meeting and she started describing senior living to me.

The way she described it back in 1985 was: “Joel, it’s so engaging. Go see one of our communities. We have people doing all kinds of things, it’s active and you should learn more about our company.” I took it to heart and did a little research and started interviewing with LCS and never looked back. I left the hospital just short of one year and have been with LCS ever since I started in 1986.

What was your first role?

I started as an administrator-in-training (AIT). True to form with a lot of our company, [former CEO] Ed Kenny was an AIT, our EVP and head of life plan communities. Rick Exline was an AIT. That’s just the way many of us have grown up through the company.

Did you ever think you’d be running the company?

Not in 1986. I wasn’t sure I was going to be running anything in 1986. You just reset your goals every few years, and that’s a great thing about LCS. In my career of 32 years I’ve had new opportunities every two, three, four or five years. It probably wasn’t until I moved back to Des Moines in the late 90s that I started being mature enough to think that I might want to prepare run the company someday.

Do you remember your first day at LCS?

It was at Friendship Village South County. My first day I went to a resident council meeting.

What did you learn?

I remember the resident, her name was Ruth Allen, who was the resident board member. Ruth pulled me aside and told me the way life rolled at Friendship Village.

What did she say?

Ruth was a teacher and she volunteered immediately that she would review all of my resident communications. So she was my resident editor whenever I did memos or communications with the residents.

Was she tough on you?

I think generationally the way we speak and write is different. But yes, she was very helpful. There were two local communities, and we would alternate locations for the board meetings. And my job for the board meeting as an AIT was always to make sure that Ruth got to the board meeting when it was across the city at the other community. I had a little sports car and I remember getting her. Here I had this 80-year-old lady in my little Mazda RX-7 and off we’d go. She was a wonderful woman.

I don’t know your whole story yet, but if there’s a common theme at LCS, it seems to be that there are many LCS “lifers.” Is that fair?

Yes, and I think that’s very fair for me. As we’ve evolved as a company, what’s really changed our organization over the last 10 to 15 years is a decision under Ed Kenny’s leadership to bring in external capital investors. Today we have a board of managers with five LCS employees and two external board members. I think just having that external perspective has challenged us to go down some paths that maybe we wouldn’t have in the past. On my leadership team, I have what I consider two lifers and three who are becoming lifers because they’ve all been with LCS now ten-plus years.

You took over for Ed Kenny on January 1. How are things going to change under your leadership?

Ed’s been a very, very successful CEO. He’s been my boss for 25 years. I’ve worked with him for 32. I think we were very aligned on where the company is headed, and the vision. I think where it’s going to change is in driving the strategic shifts in our company to become more active as an owner. The rental company is clearly a strategy. And then the ability to adapt to our workforce challenges is going to change how we leap forward.

But there will not be any sweeping changes, is the short answer. We’re looking at doing some new things and we’re doing some things differently, but the fundamentals of LCS and principles of LCS are solid and I like the path we’re on.

We’re looking at doing some new things and we’re doing some things differently, but the fundamentals of LCS and principles of LCS are solid and I like the path we’re on.

What are some of the new things you’re looking to do?

The way we execute our real estate strategy is one thing. Today, we have various partners that bring equity to the table or participate in the equity. We’ll continue to do that with a select number of our investment partners, but our goal is to really have our own fund. We’re in the market today. There will be more coming about that this year.

How much is LCS looking to raise?

We’ll be looking at $300 million-plus as an initial step in. That’s an exciting place—we really think that syncs up with us being able to have a little more control. David Laffey, who is an executive vice president and leads our LCS Real Estate business line, is spearheading that initiative for us and we’re really excited about it.

So is the company raising the money to take advantage of opportunities you see, such as problem assets in the market? Is it an opportunistic kind of fund?

It’s a fund that will allow us to play in all spaces: value-add for life plan and rentals, new development and then core. Today, we get an opportunity and underwrite it with our real estate partners. Then we go out and say, “OK, who’s going to be our partner on this one?” This new fund will allow us to be a little more nimble in the market. And it also allows us to play on the rental and life plan models. We have partners that prefer the life plan model, and then we have partners that want to stay in the fairway of rental.

CCRCs faced a difficult market for a while there, and then bounced back. Were you surprised?

No. People have the discretionary income and are making that lifestyle choice to move to a CCRC. Over my three decades in the business, there have been other economic cycles where real estate markets got tough, and sales were slower. I think there’s always going to be a spot for CCRCs. I think we’ll see and we’re starting to see some recovery even with new development of CCRCs.

How do you manage the balance of not-for-profit and for-profit communities and CCRCs versus rentals? Is there a certain percentage you’d like to see of each?

Not necessarily. The company was built on 75 or 80 not-for-profit communities that we manage. So we have a large portfolio of management contracts and the rental company has experience some nice growth. I expect we’ll have greater growth on the rental side of our business just because of opportunity and availability. But I think the CCRC business will remain very fundamental to what we do. The rental company will grow at a much larger clip and in that rental company of assets, we’ll own more of those than we will third-party manage. It’s almost flipped on the CCRC side—the heavy load will be on the third-party management but we will continue to look for CCRC acquisition opportunities as well. You mentioned distress earlier—if there’s a distressed portfolio of either, 10, 12 communities, that would be a really good fit for LCS or a large rental community.

Are you seeing a lot of distressed portfolios coming your way?

We’re starting to see more. And I think that’s bittersweet because it’s not always best for our industry. But it is a great opportunity for us to come in and make a difference.

Do you think it’s going to get worse before it gets better?

Yes.

How much worse?

Define worse! I think we’re going to remain a very strong class in the real estate space in terms of performance. We expect there will be a number of senior living portfolios that are going to be put on the market. Some of those wouldn’t be a good fit for us. Then I think it all depends on the next 24 months of the economic cycle, too.

Do you still have a lot of owners coming to LCS to operate their buildings?

We do. We continue to invest in and build in that infrastructure. We’re getting better at it with technology running different platforms for different products. Our business growth continues.

TECHNOLOGY

What are some of the technologies LCS is looking to implement?

It’s really across the board. There are business technology and business platforms, [and tech like] electronic medical records. In assisted living communities, electronic health records, CRM systems, billing systems… they are givens. You have to have strong CRM and HR systems. We just implemented a full new platform on the HCM Cloud for all of our employee’s management That’s a technology that is going to give us better data and metrics, and will be very beneficial in the operations of the communities.

This is only the beginning. The exciting stuff is in keeping residents in their independent or in their assisted living units longer through telehealth. I think that’s becoming more and more sophisticated each year in terms of being able to manage chronic conditions and illnesses.

And then there’s the exciting stuff everyone’s talking about, like robotics. We have a community that’s got robotics for security checks. You have certain security points in each community. Depending on the size of the community, you might go check all those points manually. In this situation, a robot can go and check every room and walk the whole entire campus and do the checkpoints. That data goes back to the central security desk to let the staff know “John isn’t home,” or “We haven’t seen John in [a while] and there needs to be a check.” You’re also seeing some of that technology in health care centers.

As an industry, we have the Thrive Center, the Innovation Center up at Direct Supply in Milwaukee. We have Aging2.0 with Katie [Fike] and her team out there trying to find new technologies. We’ve got LinkAge with Ziegler. They’re looking at two to three new technologies a month. There’s very little of it that’s proven, but it’s coming. The only struggle I have is balancing the technology. This is a human and relationship business that is about a social lifestyle.

I think the other part of technology that’s been changed so much is [in terms of] wellness. Google’s into it. The other part is with smart homes, we’re doing some sampling in Seattle, where we are looking at making some units fully, complete smart homes.

What is LCS doing?

It’s the technology of really running everything from your mobile devices, to Nest thermostats, keys.