Meet Paul Dendy, CEO of Milestone Retirement Communities, LLC, based in Vancouver, Wash. Milestone began in 2008 with six communities and today manages more than 80 communities in 18 states nationwide including independent living, assisted living and memory care. The company owns and operates communities, in many cases through third-party management contracts that may not carry the Milestone brand.

With an accounting and business background, Dendy has a long history in seniors housing. His career in the space began in 1989 and he has since held roles with Leisure Care, Wedgwood Retirement Inns and Lifestyles Senior Housing, before starting Milestone with several partners in 2008. We sat down with Dendy to learn about how the company recently doubled in size from 40 to 80 properties, why sometimes the best course of action is to turn down new business, and how he has helped define the culture of Milestone Retirement Communities.

You came to senior housing in 1989. What brought you to the industry in the first place? And what the path was to Milestone?

I’m from Seattle, went to the University of Washington, and got a degree in finance in 1971. In ‘72 I got an MBA and went to work for Price Waterhouse (now PwC). Later I switched to another accounting firm in Seattle and went to work for a family investment office, and then migrated to become CFO of a venture capital fund in the Seattle area. And in that fund, we were introduced to a guy named Dan Baty. He talked to us about seniors housing as a growing space.

In 1988, we took run at investing in a seniors housing company in the Seattle area. And I did all the analytics on that, the modeling, how we could help this company grow and whatnot. And we ended up not doing the deal. It wasn’t a good fit for a venture deal, with a husband-and-wife team who ran this company and owned it 100 percent.

But I was really intrigued by the business and was wanting to get in a more hands-on operating business than being a CFO of a venture fund. So I called the company and told them I thought I can help them grow the business. Obviously, I knew they didn’t have a CFO because I was deeply involved in the due diligence. They said “We were just talking about maybe needing a CFO.” And I said, “I’m your guy.” And I wrote the job description and it fit me pretty well.

What company was that?

The company was Leisure Care. And the guy I talked to is Chuck Lytle, who is one of my mentors. It was a great experience. I was only with Leisure Care only about four years, but received a very strong basis in focusing on quality and business details at the same time, controlling labor and day-to-day costs, but delivering a high-quality product to the residents.

I went from there to a company in Vancouver, Washington, called Wedgwood Retirement Inns and worked with my second mentor, a guy named Gary Rood. We grew that company, sold it to a public company but, unfortunately, that didn’t work as well as it should have. Years later, Gary called me and he had started another assisted living company and asked me to come back and work for him on the business development side. That was in 2003.

Initially, I was a CFO/development officer, and then the last dozen or so years, president or CEO, but still focusing on business development.

So I came back to Vancouver in 2003 and worked with Gary at a company called Lifestyles Senior Housing. In 2008, he offered to buy out myself and two others; the four of us owned that company at 25 percent each. Gary had founded the company, and initially it managed only the properties he owned. We were growing the business and working with different owners to manage their communities and entering into leases of communities outside of his portfolio.

He said, “I know I told you to do that, but I really want this company to focus on my properties, and when I buy you guys [out] you can start your company.”

So we did that. On April 1, 2008 we opened the doors. We had six small communities. And the phone almost immediately started ringing because people, even by that time, knew me pretty well. I’ve been to every NIC. I’ve been on the NIC board, advisory board, and we had a reputation of bringing communities out of the ground and turning communities around. We kept adding through acquisition, leasing and management; sometimes the management would turn into buying opportunities or investing opportunities. About five years later, Gary Rood called us and said, “I want you take over my communities. The management isn’t doing a good job.” So we went from 16 communities to 27 overnight.

We thought: “This will be easy.” We had managed all but one of those communities, and some of the same people were in place. But the management team had really kind of messed things up and didn’t take care of the physical asset. They were short on staffing. It was a big challenge for us.

Then we had some organic growth to the area of around 40 properties by late last year. We are very focused on the resident and our company from the outset always said that we will grow because it creates opportunities and it’s fun. But we won’t grow unless we can handle it, do it well and maintain the quality. And to do that, we’ve got to have good people around us. We have grown the management company to 84 communities in 18 states. We’ve added people to our management team in specialties like HR, food services, recruiting and depth in all functional areas. We now have about 140 people in the management company with two regional offices. But there are a lot of regional groups that don’t have an office per se. For example, a regional group lives in California and they oversee a number of California properties. Our regional teams are operations, clinical, sales/marketing, and so it’s a building block approach to replicate as we add communities.

It all comes down to finding the right people and having the discipline to not get too far ahead of ourselves. Growth is a challenge. The latest growth we had at the start of the year, where we went from 40 properties to over 80 communities; [that] could not have happened had we not all been a part of the team in 40 new communities. We helped bolster that team before the combination took effect. We filled a lot of holes since then. We’ve turned down more business this year than we ever have, which surprised some people with growing as fast as we’re growing.

It all comes down to finding the right people and having the discipline to not get too far ahead of ourselves.

We found that the three of us who founded Milestone—Don Anderson, Mark Wiesner and I—were all passionate about seniors. We believe that if we do that well and take care of our team, we’ll be profitable. It’s not that we don’t budget, it’s not that we don’t pay attention to the dollars and cents—but that’s not our primary motivator. We want to work with like-minded people.

We have worked with investors who are mostly bottom-line oriented: Buy it, increase the value, flip it. We’re not at this point interested in working with that approach. They have to also understand that this is an operating business; it’s not just a real estate play, it’s more of a management play, taking care of people and helping them with their lifestyle.

It sounds like the formation of it was unique to the situation the three of you were in. What was it like to be doing this with a company at the same time as a major recession was taking place?

When we made that decision, it was early in 2008, and things hadn’t really hit the skids yet. We opened the doors on April 1 and the joke was, it’s our company now. We’re working twice as hard as we used to, having more fun and making half as much money.

And the first community we added was a deal we had been working on before the doors opened. We closed on it in June with Harrison Street Real Estate in Chicago. The property is in Phoenix, and the housing market in Phoenix fell off the table in September—that community was primarily independent living, and our occupancy plunged.

We had to get creative. Fortunately, the whole building was licensed for assisted living though most of the clientele were independent. When they couldn’t sell their homes, they stopped moving. We had to get creative on how to attract more assisted people. By the time we sold the property in 2007, the mix had virtually flipped. We just rolled with the punches. We started leasing a couple of properties at the beginning of 2008, and those were in rural communities where we historically had done very well and they have been tough the entire time, because those rural communities got hammered so badly and some of them really haven’t recovered. In one of them, the only car dealership in town closed, and never reopened. You think that would work somewhat to our advantage [because] people need jobs, and there’s a certain amount of truth to that. But the ability of people to pay privately has really diminished in those communities.

It’s been a constant struggle, but we’re seeing an uptrend in occupancy across our portfolio over the last several months that is going away from the industry trends. We’re quite pleased. We’re doing something right. We have the right people in place, the right product, and we’re moving it forward.

That was one strategy in that time period: focusing on the needs-based product when you could. Were there other strategies that were fruitful for you in that time period, or was it really just making sure you had the basics right?

Well, having the basics was the key to all of it. A lot of the work we took on in that time was turnaround work. We have to be good it. There was a community open for two years that was 30 percent occupied and wasn’t filling up. You just have to do a lot of blocking and tackling. Our marketing approach has never been to spend a lot of money on print, radio and TV. Make the residents happy so that they tell their friends.

One thing we’ve never had is a cookie-cutter approach to the business. We have very small communities, very large communities… and even when we develop new communities, they’re not all the same. We try to look at each market and each community and determine what will make this one successful. Should we convert part of it to memory care? Should it stay assisted? Where should it be priced? How can we take what we have and work with [it], and be as successful as possible? That just takes creativity and effort.

One thing we’ve never had is a cookie-cutter approach to the business. We have very small communities, very large communities… and even when we develop new communities, they’re not all the same.

Can you describe Milestone in terms of ownership of some communities versus pure management for others? Do you have a preference for having an equity stake versus being pure-play management?

When we started with six communities, we covered all the possibilities. We had a management contract, we had three properties we owned in part, and two that we leased from investors. To this day, we still have all three. Twenty-five percent of our 84 properties are third-party management only, some with equity funds, some with private owners — including our former partner Gary, where we manage three properties for him, which is all he has left in his seniors housing portfolio after selling most of his communities, which we now lease from a REIT.

We have ownership either of the real estate and the business, or just the business where we lease the real estate from REITs or other investors; that is the other three-quarters of the portfolio. I think that’s one of the things that sets us apart as a management company, is that we’re not just a fee manager. We’re owners. We know what it’s like to write a check when things aren’t going well, to subsidize the building, if you will. We can relate to what an owner needs and wants and expects because we’re in the same position.

Do any of your communities have Milestone branding?

We’ve always felt that the management company is less important than a local connection. A lot of our properties are named in a way that fits the locale they’re in, after a physical feature, neighborhood, something locals will relate to. That’s just our philosophy and it’s worked for us.

Do you think that there’s some truth to the idea that scale can be problematic in the senior housing space? Do you have any thoughts on a sweet spot for a company’s size?

When we got to 15 properties, we were feeling pretty comfortable that we had enough mass to do things quite well covering the bases. And that stayed up to 40.

With the 80 properties, we’re more visible and that’s both good and bad. I don’t know that there’s a specific sweet spot. I know there are people who had a handful of properties and they couldn’t manage them well, and we know there are large companies that struggle.

The key to us has always been: We’re going to turn business down if we don’t feel we can do it well. We have turned down a lot of business in our existence, even our first year. I’ve turned down more business this year than I ever have.

Can you elaborate the thinking behind staying away from the public model and where being a public company in this space is challenging?

Well, two of the three founders of Milestone, Mark Wiesner and I, had worked in public companies in the ’90s. And they both got perverted by the quarterly earnings drive and the sequential need for growth. They were making decisions based on satisfying Wall Street rather than what’s happening in the communities.

Poor decisions about where to build or where to buy properties. Decisions about growth for growth’s sake and not about residents and quality control. We didn’t want that kind of pressure — we wanted to steer things in a way where people are committed to taking care of the residents and maintaining quality and even improving quality. If it meant we would grow slower at times, then so be it.

Wall Street just has different needs and expectations.

LEADERSHIP

Do you have a definition of leadership you subscribe to?

My definition is a good leader is someone who creates the desire for other people to follow. You can’t lead by command. You have to lead by desire on the part of the other person. For us, our leadership is at the level of culture and philosophy and standards, and finding high-energy intelligent people who share our vision on the softer side of things. Let them have wings and do things. We’ve always operated more as a partnership than a hierarchical organization — even though we have an org chart. Lenders need to see it.

I’m the CEO, but I don’t make all the decisions by any means. We do things as collegially as we can. We get input from a lot of people and we usually try to build consensus. Very rarely do I say “Okay, I’ve heard everybody, and we’re going to do it this way.” Usually we’re building a consensus.

You brought up the importance of culture. How would you describe the culture of Milestone, and what are some important things you do to create that culture?

We hire more for people skills than we do for technical skills. We want people to be good leaders. The executive director in a community is a leader. The regional team have to be leaders. The senior team have to be leaders. We want people who have tremendous skills who create the desire, whoever is down the chain from them, to meet the goals and work together. We problem solve. We tell people, “If you share a problem, we’ll help you fix it. If you don’t share a problem, you own it.”

It gives them a real incentive to communicate. We’re open in our communications. We’re all available 24/7 and we lead by example. Other than myself, most of the people in the senior team have actually been executive directors. I’ve gone to buildings. I’ve been there when a crisis hits, or a food truck comes. We’ll help them unload it, or we’ll help them clean the kitchen. We do things that show we don’t sit in an ivory tower. We care a lot. We recognize people and we graduate people. We had a property in Florida; our team did a tremendous job during the hurricanes. We supported them and asked everybody in the team to think about how they can help. We set up an employee assistance fund. We show that we care about the team.

Can you share one or two key pieces of advice you feel have really helped you in your career?

Do the right thing. Always be honest. High integrity…You may not be required to do something, but if it’s the right thing to do then do it. Contracts are there as a guide, but if you can’t do the right thing, even if the contract says differently, then you’re not as strong ethically and morally as you think you are.

Do the right thing. Always be honest. High integrity…You may not be required to do something, but if it’s the right thing to do then do it. Contracts are there as a guide, but if you can’t do the right thing, even if the contract says differently, then you’re not as strong ethically and morally as you think you are.

We always try to be fair with people, try to be honest. Don’t hide mistakes. If you make a mistake, own up to it. Help solve it. That retains a lot of respect for you in other people’s eyes. Don’t cut corners.

One challenge we hear a lot about is recruiting people in the industry at all levels, and all types of jobs. Do you see that as a big challenge at Milestone? Do you think that senior housing is doing a good enough job grooming future leaders?

I don’t think the industry as a whole is doing a lot there. Except at the very highest levels…NIC has the young executives they bring along, but it’s very difficult because the work ethic has changed since I got into the business.

Drugs are a bigger problem. We drug screen and do criminal background checks on all our employees. And many, many people are not capable of being hired because of those factors.

When I got in the business, rural locations were very strong for our industry because of smaller properties, of course. The work ethic was great, the people would tend to stay at home and that’s changed now. It’s hard to find talent in small towns, particularly for the executive director position.

This country has a horrible immigration policy and open borders isn’t going to fix our need to find qualified people. We need immigrants with skills. And we need immigrants who will come in and want to become fluent in English so they can communicate with our residents. It’s becoming an increasing challenge, and I think that is the elephant in the room. Everyone talks about it, and I know every company is probably dealing with it individually, but I’m not aware of anything at an industry level. I’m not sure how that would work.

We’re very active with Washington State University, which has a seniors housing program that’s an offshoot of their hospitality school which is probably the second-best in the country next to Cornell. Our COO is a graduate of Washington State. So we’re working that angle as well, but again, that’s something we’re doing locally. I know a number of other companies are doing the same thing.

TECHNOLOGY

Are there any sort of technology initiatives at Milestone right now? Or any kinds of technology that are more recently integrated that you’re excited about?

Well, we were forced a couple of years ago to change our clinical system, because the one we were using had been acquired by another company and they were sunsetting it. We had hoped that they would take the good parts of that and integrate it into a new best-in-breed clinical system. We didn’t feel that was happening so we had to change systems.

We’re using a lot of data on the marketing side, sales and marketing outreach. We’re finding more power there that can help with more real-time reporting on the whole CRM, for a good sales and marketing process.

If you had a dashboard that you could look at every Monday, what sorts of information would you want see?

I just last week previewed a test run of a dashboard. We’re going to have a sales and marketing dashboard which is going to focus on inquiries, contacts, tours, closings, move-ins, that sort of thing — occupancy…. We’ve also been using tools to track labor daily but that’s a time clock exported to Excel, and then we built a fairly fancy “flash report” which the executive director uses every day. The next step is to take it to the dashboard level so that I or anybody can look up any property or combined properties, look up any region. So that’s coming.

You come from a strong financial background. Do you think the financial skill set is what you bring to an organization as your greatest strength?

Clearly, my technical skills are strongest in finance area, acquisition development and analytics. My weakest area is probably market analysis. There are lot of pros in that. I think what has made me successful in the business is that I’ve always been in a service business. I maintain every business is a service business, but I was a CPA serving clients, and the venture field was a little different. We were trying to create a better world for mankind by investing in new technologies and things.

In seniors housing, I found that was a perfect blend for me. At the time my folks were still alive. They were still relatively young but they’re part of the Greatest Generation. I just found it to be a tremendous privilege to serve the Greatest Generation. And now there just aren’t that many of those folks left. The elders are just wonderful people, and to serve them is what drives me. I feel blessed I’m able to use my management and technical skill set in a way that helps people 24/7. I’m not just a deal junkie.

I probably wouldn’t have done as well on Wall Street, because it’s all “go-go.” It’s all about the numbers. I think it’s a privilege to take care of people.

Do you think Milestone would ever invest in a technology since you have that background in investment?

Actually, we have. We invested in a software company that developed the care suite we formerly used that then was acquired by another software company . We made an investment in a company that’s exploring an ACO approach in doctor and pharmacy in our communities.

We think in the next three to five years, almost every assisted living will have a tie in to a physicians group and pharmacy that goes beyond what they have today. Because the pharmacy is still outside the building, and the doctor’s still outside the building.

In the work-life balance arena, what do you like to do in your spare time? Do you have any hobbies?

My wife and I are both music lovers. Music runs in her family. She’s involved in an annual gala for the Vancouver Symphony, which she’s done for the last five years. That’s a big part of our lives.

We play golf when we can — but not often enough or well enough. We travel when we can — and it’s not enough. We have 10 grandchildren. That’s really where the love lives. Nine of them live up in Seattle, so that’s three hours away, and one is in San Jose, so that’s a quick flight. We get together with them as much as we can.

What I want to do is change that balance. I still work 60 hours a week. One of the goals among all the founders of Milestone is creating a company that can outlast us when we pull back — if we retire completely, although I don’t know if I ever will. When this new, larger Milestone has fully assimilated the recent growth we can put more balance into our lives if we choose, and let the younger guys run with it. We’ll be on the board and watch and mentor.

And then I’m going to some mentoring outside of the business. I’m interested in teaching at the collegiate level, or doing mentor-type consulting.