• December 8, 2017

    Meet Rick Matros, chairman and chief executive officer, and CEO of REIT Special Forces for Sabra Health Care REIT (NASDAQ: SBRA), based in Irvine, Calif. Sabra is a publicly held real estate investment trust that has more than 500 skilled nursing, senior housing, hospitals and other health care assets across its portfolio. The company recently completed deal to acquire Care Capital Properties, expanding its skilled nursing portfolio and presence across the U.S. and making it a more than $7 billion company.

    The company has grown under Matros’s leadership, which spans a wealth of experience in senior housing and care, including work with post-acute providers Care Enterprises and Regency Health Services and CareMeridian, a company specializing in traumatic brain injuries. We sat down with Matros to learn about his approach to defining an organization’s culture, how he became a CEO without ever taking a business class, and why being a workaholic may not be all it’s cracked up to be.

    Tell me about how you got your start in senior housing. Is it true you volunteered in a nursing home in college?

    That was my first [experience]. I majored in psychology, and my college advisor started a course in gerontology, which was sort of unheard of. So he made me take it. We did this volunteer project at a nursing home and I kind of fell in love with the elderly. I went to grad school at USC and got my master’s in gerontology and took a job as an activity director. That was my start.

    The gerontology program at USC must have been in pretty early stages.

    I was in its first class. I’m on the board at the school now.

    Since it wasn’t established yet, how did you hear about the program?

    Because I really liked working at the local nursing home when I was in college, I just started researching programs and found there was a program opening at USC and at North Texas State. I was a New York kid. I was going to L.A., not Texas. That was an easy decision.

    Did you grow up in the city?

    Long Island.

    In volunteering at the nursing home, did you go in expecting to like it as much as you did, or did that surprise you?

    I had no expectations. The project was pretty controversial because went in wanting to study sexual attitudes and behaviors of the institutionalized elderly.

    The administrator did not want us to do it. But there was pressure from the university and we got to do it. Over the course of six weeks we heard that you expected to hear about residents that are institutionalized for health reasons still want to have relationships. The staff encouraged it as well, but it was just taboo. But by the end of the project the only free room in the facility was the chapel that was then put aside certain hours of the week for conjugal visits. It was awesome.

    Then the administrator said we were never welcome back in the building again. But we totally just blew the whole thing open. I just fell in love with it. Back then the residents in nursing homes were what you see in assisted living today. I loved how much I learned from them. They’re 80 or 90 years old and just have a lifetime of memories and experiences to share.

    They allowed the conjugal visits to happen in the chapel even though the administrator wasn’t on board?

    She couldn’t fight the families. The families surprisingly were not resistant. They wanted to see their mom, dad, grandmother, grandfather by happy in their remaining years. It was a trip, really.

    What was the program at USC like as it was as it was just getting off the ground?

    There was no precedent for it. I just got a really broad-based education. Everything was brand new, so there was a lot of learning.

    Did you go straight from undergrad into that program?

    I went straight from undergrad, and then after that found a job as an activity director in a nursing home. I did activities and social services. And I just had a lot of fun. The administrator trained me and I took my exam to get my administrator’s license. And then it was a small, independent company and then they moved me to my own facility and then they filed for bankruptcy. And payroll bounced and all that. Unbeknownst to me, that set the path for the rest of my career. During that initial bankruptcy, I was 23 years old. I had no idea what was going on. And I couldn’t make payroll. It was pretty brutal. I had never even taken a business class. Still haven’t. I found I really liked the business aspect of it. Going through that experience of bankruptcy got me really interested in looking for more turnaround situations. Every job I took for the next several years following that was always going to a facility that was problematic and had some opportunities.

    …I had never even taken a business class. Still haven’t.

    How did you end up at Regency?

    After that bankruptcy I wound to go into another independent company as an administrator, and ran a couple of buildings — both nursing homes and facilities for disabled kids. Which I loved. One of my most favorite things I’ve ever done is working with those kids. And then after a couple of years the president put me in charge and made me director of operations. They had around 15 facilities. Back then we called them “board and cares,” but today it’s assisted living. After a couple more years we were acquired by Beverly Enterprises. So I was a regional at Beverly for a couple years, then a VP for couple of years. Beverly was a really good experience to me because it was huge. It was my first time at a publicly held company with a big corporate environment. The corporate culture at that time at Beverly was not something that I flourished in. It was very difficult to be yourself. So I quit Beverly and then went over to Care Enterprises in 1987, which had been rumored to be going into bankruptcy. And then they did wind up filing for bankruptcy the following spring. And over the course of that bankruptcy, creditors and the court eventually threw out the entire management team except for me. So I was installed to take the company out of bankruptcy, and we did that and stabilized the company, and then a few years later, in the mid-’90s, we did a reverse merger with Regency Health Services. It was an all-stock deal.

    Next, I acquired a small company with Harold Andrews, who’s our CFO at Sabra. And that was a company that was focused on traumatic brain injury victims. Harold and another one of my executives were running it. After we acquired that, I started a dental practice management company called Bright Now, which became the largest in the space. I ran that for a couple years, and then I stayed on the board for another 10 years or so. By then a lot of the companies in the skilled space had been filing for bankruptcy and I started getting calls.

    Rick Matros, Chairman & CEO, Sabra Health Care REIT

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    You’ve been on the West Coast throughout this whole period?

    Once I got to USC for grad school, I wasn’t leaving. That was an easy decision. The creditors called me from Sun Healthcare. About 30 seconds into the call I gave my party line: If I can move corporate headquarters from Albuquerque to Newport then I’ll consider it. They said no problem. We restructured that company over a course of two years and rebuilt. And then the recession hit. There was no capital available to continue to grow the company. But we had acquired two regional companies that owned a lot of real estate. Prior to that, Sun leased everything. And so we’re sitting there with all this real estate. And we would look at our market cap even when the stock was really peaking. We felt like the market cap wasn’t capturing the value of the real estate.

    More from the Leadership Series

    So I started to exploring different options to maximize value for the real estate and then the CEO of Evive had been asked me to come on the board. So I went onto the board of Evive, which gave me the opportunity to understand the REITs a lot better. Than I came to the conclusion that the right path would be to spin out the real estate and create Sabra. The last one had been done about 10 years earlier in the Ventas-Vencore deal. Some the rules had changed, but we were able to figure it out. So Sabra was created at the end of 2010. And that was proof of concept the day the deal closed because the day after the deal had closed, the two separate companies worked twice as much as the day before.

    We did around $220 million in deals that first year. Our cost of capital started improving dramatically.

    You say you still haven’t taken a business class. How did you learn? Just on the ground?

    It was really on the ground. Being in troubled situations like that you learn a lot more pretty quickly. I was fortunate to have good CFOs and spend a lot of time with them. Because of my lack of business education, I got into everything. I probably knew everything about the numbers, what the balance sheet was…

    With Sun Healthcare, how did you go about changing the culture of the company?

    I just hit the road. I started going to every building, making changes, calling people and asking people to come and take other people’s positions — and in some cases things were so bad I was letting regional staff go without even having replacements. I remember at one point HR called me and said, “You’re going to have a thousand direct reports if you don’t stop what you’re doing.” But it had to happen. Because there were so many problems, in some ways it was easy for me to change the culture.

     I remember at one point HR called me and said, “You’re going to have a thousand direct reports if you don’t stop what you’re doing.” But it had to happen.

    At the corporate level I had an all-hands-on [deck] corporate meeting my first day there and I said, “From now on, this is how it works. You guys serve the field. That’s the only reason any of us exist, is serving the field. Part of your job responsibilities are going to be giving tours in our nursing homes [near the corporate office].” Someone raised their hand and said, “That’s not the job I signed up for. What if I refuse to do that?” I said, “Find another job.”

    It took time. The people out in the field work really hard to take care of patients and be responsive to families. They loved it. The fact that I would interact with them directly —
    I would have e-mail dialogues with nursing assistants. And that kind of stuff is viral. It just spreads. I think it really helped a lot, and once we put the new leadership team together, then that made it a lot easier to execute that.

    Can you tell me about Sabra’s path of late? There have been some big developments recently with the CCP merger and the deals since then.

    One of the frustrating parts for me being on the REIT side is, in a lot of ways, it’s not as easy to grow.

    When you’re on the operating side and you’re acquiring someone else’s company, you’ve got huge infrastructure synergies. You can make a very compelling case for the deals from a shareholder value perspective. But with REITs there aren’t very many synergies.

    I’ve been exploring different kinds of possibilities for several years now. It just so happened that this year, several things happened to click at the same time.

    LEADERSHIP

    How do you define leadership?

    Culture is the most important ingredient to a company’s success. To me the right culture is a culture where everybody feels like they’re bringing value to the company because it’s an inclusive environment, it’s collaborative. Because you’re never the smartest person in the room.

    I’ve always surrounded myself with really, really smart people. One of my greatest strengths has been putting teams together. If you’re going to do that, then your team has to drive everything. Having that kind of culture, not keeping people in the box…everybody has a certain job to do. But we expose people to everything we do in the company. Everybody knows strategically what we’re building. Everybody spends time with the board. So the board has complete access not just to senior management but to everyone in the company, and they get to know the board. Really both at the board level, and at the team level, it just creates a different culture. You can really feel that in the place. And people step up. I like having a more entrepreneurial environment.

    There are certain people that don’t prefer that type of environment. They prefer a more scripted type of environment. For us, no one’s on the clock, everyone understands the mission. So if someone wants to take Thursday and Friday off to take a four-day weekend with their kids, I don’t care. They know what their job is and they do it. Having that level of confidence in people really helps.

    I think you’re a different kind of leader stylistically. You have tattoos. Do you think that you bring a different leadership style than is typical among REIT leaders or senior housing leaders?

    Yeah. Because when I quit Beverly, I had no job. I had two little girls at home. I just felt like I couldn’t breathe. I had to dress a certain way, walk and talk a certain way. As I was getting promoted, it just didn’t fly. I made a commitment that you’ve got to have corporate infrastructure and systems of checks and balance, but the culture doesn’t have to be corporate.

    Early on in my career I had just taken on a job as a new administrator. The woman who had been the administrator before me was sort of the queen of the building. There was another employee, Yolanda, who worked in medical records. I was in my 20s, she was 22. She came up to me, introduced herself and said, “I don’t know what you going to be like as the administrator of this building, but in between the sheets are all the same.” And she wound up working for me for like 10 years and four different companies. But that’s kind of really what it’s about. No one is any better than anyone else. You may be in a different position so you may have opportunity or certain privileges because of that position. But you’re not any better. You’re not smarter than anybody else. When you treat people like that and recognize the individuality people have, it’s easier said than done.

    When I’ve met with folks over the years, there are some people that just defer to you automatically, because you are the CEO. So then your responsibility is to get them really comfortable so they don’t just tell you what you want to hear. To me that’s the worst thing. And it happens all the time in corporate environments. Me always being who I am, regardless whether I fit or not in that corporate environment, and that in of itself also sent a message that everybody else can be whoever they are as well. It’s pretty cool, because we have open discussions around the company about people’s lifestyles and the things they choose because we don’t have these judgements. It’s pretty cool, I think.

    When I’ve met with folks over the years, there are some people that just defer to you automatically, because you are the CEO. So then your responsibility is to get them really comfortable so they don’t just tell you what you want to hear. To me that’s the worst thing. And it happens all the time in corporate environments.

    Do you have a favorite tattoo?

    Usually it’s my most recent tattoo that’s my favorite tattoo, but I have a lot of family stuff, so all my grandkids are tattooed on me. But it’s usually my latest. I’ve been doing it for 30 years.

    How recent is your newest one?

    Just a few months. I’m going to Israel next month. There’s a tattoo artist in the old city of Jerusalem. It’s the oldest tattoo shop in the world. It was opened almost 700 years ago and is still run by the same family.

    He’s a Lebanese Christian guy. When I go to Israel, he always does something for me.

    It sounds like you have a lot of family. Did I read correctly that your son-in-law was on “Home Improvement”? How do you balance work and family?

    Yeah, he was the oldest kid on “Home Improvement.”

    And do you have some involvement in TV production?

    Yes. [My son-in-law] Zach wanted to get on the production side of the business. So he sent this script for a horror movie. I’m like, “This is great, good luck.” He goes, “Actually, I need more than luck. Would you mind writing the check to make the movie?” So I kind of got sucked in. I did a couple of movies with Zach, and I’ve done a number of movies since then, including one with my son, a documentary called “Life and Hummus” that we did in Israel.

    But it’s been good, and kind of fun. I have my own IMDB page. So Zach is doing that and my son is at Netflix now. He’s gotten into the business as well. We have three biological kids: two girls and Alex, our son. Our girls, Carly and Chelsea, have five little girls from four to 16 months. Five grandgirls. And then we have four adopted girls who are sisters. And we have six grandkids through them as well. So 11 grandkids.

    But early on in my career, I was a total workaholic. And when I quit Beverly, I was home for close to a year. And the girls were pretty young. Having that time at home every day with them just changed everything for me. So when I went back to work after that, I just scheduled everything. Sports games or whatever activities just became part of my calendar. Everything else had to scheduled around that. And I actually started taking vacations after five years of not taking a day off.

    So the balancing is really important, and I really maintained that culture. You’ve got to have balance in your life that’ll keep you happy and productive.

    Whom do you consider some of the biggest mentors you’ve had in your career?

    I had three. My psych advisor in college, who sort of introduced me to gerontology when I did that first project. The guy at Catered Living, Jim Otto, which was the first independent company I worked for in my 20s after the bankruptcy. Jim saw whatever he saw in me and took me under his wing and made me director of operations. I was 28 years old. He started really teaching me the business side of the business. He was awesome. And then Care Enterprises; the largest shareholder in True Care Enterprises, John Adams. He was who I reported to when we came out of bankruptcy. He taught me the ways of the street. So he was really my mentor for that side of the business.

    I understand you have experience with PointClickCare. Do you think the adoption of technology in senior housing has been fast enough?

    Sun Healthcare, Genesis, and ManorCare were the first three companies that engaged PointClickCare. And It was interesting because there were other companies that had an opportunity to take market share, but they had no vision. And PointClickCare did. And so the three companies put together a clinical team to work with PointClickCare to develop a product. So it was actually a really collaborative effort between Genesis, ManorCare, and Sun at the time to work with PointClickCare and develop their product. We were in on the beginning with PointClickCare. In terms of the broader question, you know, it’s always been frustrating because health care has been behind the curve on technology. And post-acute space was carved out of Obamacare in terms of getting funding for IT. It hasn’t happened fast enough. There are a lot of products out there. We support Aging 2.0, which brings a lot of startups together. When I went to the first 2.0 conference a few years ago, I felt like it was 1997 on the high-tech side. It was finally coming to the health care space and to senior housing and long-term care. I still figure it’s very fragmented. I think there needs to be more integration of various products because there’s so many similar products out there. But I also think it’s one of the reasons I like our orientation to the smaller or regional-based companies. It’s just easy for them to buy stuff that’s available and roll it out.

    If you had a dashboard that gave you some data points to look at every Monday morning, what would be on that dashboard?

    We have one. We actually have the most tricked out system in the health care REIT space. Most REITs get data from their tenants, and they manually input that data every month. We don’t do that. All of our tenants have an Excel spreadsheet template. They put their data in every month and it uploads into our proprietary system that we developed with KPMG a number of years ago. It’s called COSMO. On every one of our devices, we have every single data point about the company. At the highest level, I can just turn my phone on, open that application, and I’ve got occupancy, mix, rent coverage, development projects, every acquisition we’re looking at. And I can drill down into as much detail as I want on that.

    It gets fed in real time. Every time one of our asset managers visits a facility, those notes pop up into the system as well. No matter where I am, I can manage everything about the company through an application. Every component, every relationship we have, it’s got minimal data points at the highest level, but I can drill down.

    We hear a lot about attracting young talent to the senior housing industry as a big challenge. Do you see it as a big challenge, and do you think that the industry is doing a good enough job grooming future leaders?

    It’s a big challenge, but it used to be a much bigger challenge. I guess it just sort of dates me. We never used to do it at all. So where we’re at today is still not good enough. Yes, you’d always like to have that set path at a certain pace. But we’re in a better place than we used to be. We just need to keep focused on the other question of developing talent internally. To me, the best operators in the space are operators that have developed internal talent. There’s a real lack of investment in developing the talent. That’s a bigger problem than attracting younger, new talent.

    I think that you’re pretty blunt and outspoken on say earnings calls, versus some other CEOs. I think you’re pretty transparent and don’t mince words. I appreciate it as a reporter. Do you think of yourself as that kind of person? And has that ever gotten you in trouble in running public companies?

    It hasn’t gotten me into trouble. Life’s too short. So much is about expectations. So if there’s bad news, I just throw it out there. I want to be transparent. The more transparent and direct you are, you get better questions that way, too, because there’s better dialogue. I just think in this business, there’s no secrets. There’s no secret sauce, no secrets about anything. Everybody finds out everything anyway. It’s better to be direct, and I don’t like when people aren’t direct. And if you’re that way, it kind of guides people. I know that about me. I hear that, obviously. I always get really positive feedback about it. It does create conflicts with colleagues sometimes.

    Do you have any hobbies? Or what do you do to blow off steam when you’re away from the office?

    I practice yoga every day. I haven’t missed a day in about three and a half years. I actually don’t look that pretty doing it. But I practice every day. And I’m taking ukulele lessons.