Meet Tim Buchanan, founder, CEO and president of Legend Senior Living, based in Wichita, Kansas. Buchanan started the company in 2001 after a successful foray into senior living through his co-founding of a previous company: Sterling House.
Spotlight on Technology
Do you think that the industry is doing a good job investing in technology at this point?
I think so. I think it’s not an industry where we can readily experiment with technology that touches the customer, because the risks of failure are human. We could be accused of being slow to adopt because the difficulty and the length of time it takes to test the technology that touches the customer. It just takes time. The other forms of technology, call systems, tracking systems and things like that, I think the industry is adopting at a fair pace.
Even without that technology, do you think the industry can still provide a good resident experience?
Well, part of the resident experience is the resident’s comfort with the technology. Part of the slowness is the customers’ acceptance of the technology. Up until the last few years, the customers have been fairly resistant to the technology.
Today, Legend Senior Living has 35 communities spanning 2,300 units of independent living, assisted living, memory care and skilled nursing in Kansas, Oklahoma, Florida, Colorado and Texas.
We sat down with Buchanan to learn about what sets his company apart, what it was like to grow his first senior housing company from one property to 100 properties, and why patience is a virtue for senior living operators that are weathering the current occupancy storm.
Senior Housing News: Tell me about how you got in senior living, from the first company you co-founded: Sterling House.
Tim Buchanan: In the late ’80s, I was a residential developer and homebuilder. I started spending time on the mission field, and I had gone to Haiti a few times and learned that I could connect the things I did with my hands and my intellect to transforming people’s lives in a meaningful way. Coming back, I just didn’t feel that level or that connection in that vocation, so I was looking around for something to do. A friend of mine, Steven Vick, came to work with me. A mutual friend of ours actually introduced us to this idea of assisted living, which was merely an idea and an experiment back in 1989 or 1990.
We looked at assisted living and there were some models in Oregon and some back in Maryland. I think Sunrise had opened one or two, but nothing really in the Midwest. We contrasted that with nursing homes of the day, which was the only available option for senior adults. Home, congregate care, or a nursing home. It was striking: The country needed this. We had the ability to build them,
I had the ability to design them, so we just started off building one in a little suburb of Wichita not knowing where it would go. It turned out that that was the moment in time when all of the things that I had prepared for, and that Steven would do, became relative to helping to build a brand new industry that transforms the way people age.
How much money did you put into that first community?
We built that first building—all in—for $650,000. It was 26 units. That was 1991. In 1995, we had 13 and went public. Exactly 24 months later, we opened our 100th location and had 50 or 60 under construction.
On that first community, did you think: “What the heck are we doing?”
It was scary because we had investors and it was a lot of money. We knew then that it was a health care business and there were different models of thinking. We really saw the growth of the health care component, so we built around that health care model and went out and sought some real health care experts to help us build the company. I think that’s what helped set us apart from some of the other operators of the day.
How long did it take you to fill the building?
Gosh. Steven and I actually did home visits to help sell the building. We were the sales team.
What were all those first meetings like when you were telling people about assisted living?
They didn’t know what it was, but they knew the prospect of having their own apartment, bringing their own furnishings, and receiving the care that they needed and having a choice. Independence was something completely new in the minds and hopes of senior adults. It’s hard to imagine today.
Was it hard to convince them, or did they get it?
It took a lot of trust for those who didn’t have the ability to go tour an assisted living facility. There was no licence category. We got sued by three different state agencies in Kansas because of that. There were no zoning ordinances for assisted living. We’d go into a town and tell the Realtor we were looking for land, they’d say, “What are you going to build?” We’d say, “Assisted living,” and they’d say, “What is that?” So, it was tough going those first five, 10 years. It was about educating consumers. Everybody was learning what it was. It was scary and fun all at the same time.
So, you went from educating people in their homes to then eventually taking the company public?
Yes. We learned every job in the business. Any profession I’ve been a part of, I’ve always tried to learn every job and understand how things work, and be able to put myself in the role of anybody who works for me.
What was it like to take the company public?
That was even more treacherous for me and Steven. We had never run a public company, so it was a lot of education and asking for trust from our customers. We had to extend a lot of trust in some wonderful advisers that helped us go public and trust them with things that we didn’t fully know about at the time.
More from the Leadership Series
Let’s talk about your next venture after that.
Going private. In ’97, we merged the company with Alterra, and we renamed as Alterra. I left in 1999, the industry went through a real evolution—a flood of capital, both public and private—and the industry became overbuilt in the late ’90s and up until like 2001.
I got out in ’99, lived out my non-compete, and then started again in 2001, just buying a building here and a building there, and then eventually started developing again.
What made you want to get back into it?
I love the people. I never stopped wanting that role in my life to influence other people’s lives. It’s not just the residents that we have today, but the families and all of our 1,900 associates.
When your non-compete was fulfilled, did you already know the building you wanted?
No. Actually, a longtime friend of mine, Pete Russell, was a developer of senior living, and he was in Florida brokering properties that were on the resale market back then. He found one in his hometown that looked promising, so he called me, and he and I partnered on buying that, and then that started building the portfolio.
Why did you start Legend Senior Living? Was it different from what you had done previously?
It was different in the sense of the reasons I wanted to be in the business: to be near the customer, and near associates. Being public and being a part of the larger company, my role changed quite significantly, and that felt different for me personally. I wanted to be more intimately involved with people, and having a smaller footprint helps do that. I know employees at every one of our locations. I know residents at most all of them. I’m a CEO who’s easily recognizable in our properties, except for my beard, which is a recent addition.
Let’s go back to the public company. How many communities did you add over time?
We had 13 in October of 1995, and in October of 1997, we opened our 100th. They were all new constructions. Keep in mind, you couldn’t go buy an assisted living building in those days, because there weren’t any. You had to build them, so we built them all from scratch. You couldn’t go to too many places in those early years and hire a “experienced assisted living director,” because there weren’t any, so we hired people from all different kinds of vocations. That’s one of the reminders for our business today: We all look within the assisted living sphere to hire talent when we should be looking outside the assisted living arena, and hire people from other vocations and invite them into senior living. We wouldn’t be competing with each other so heavily for talent, and that would help a lot of things. It would help the progression of people’s careers within our business and help reduce turnover.
What is it like going from 13 to 100 that fast?
Was it too fast?
We ramped up with a lot of great people we hired. We did it all with our own internal construction company at the time, because I owned one, so we hired people from the hotel business to come manage that part of our business, so that I could focus on my time on Sterling House, on the brand, and on health care. We went from five employees to hundreds in just a few months.
Is it fair to say Legend has been designed to be a smaller company?
Yes, we grow four to five buildings a year. We develop a lot, we buy some along the way, but that’s been our growth trajectory. We have 35 now, we’re opening five this year.
No desire to build another 80 in two years?
No, none. We’re pretty prudent. We don’t do any third-party management, so we own a stake in everything we operate. We don’t buy things and flip them, or build things and flip them. We build them to hold; it’s our investment strategy.
After going through the public channel where Sterling House got really big really fast, the strategy seems to have changed completely.
I personally think that if private investment capital is available to satisfy your growth trajectory, you should just stay private. In today’s world, the way our business has evolved, the way the profession has evolved, there is the public money available at a public cost of capital. But there’s so much equity that’s available from the private markets, I just don’t think it’s reasonable for someone to be public unless you’re at some huge scale. There are still some public companies in the strict assisted living environment, but there’s not as many as there were. When is the last time you heard of one going public?
I personally think that if private investment capital is available to satisfy your growth trajectory, you should just stay private.
Most of them are being taken private.
Let’s talk a little bit about trends. NIC data is starting to show a lot of pressure. How do you think operators are going to get through this rough patch?
Being patient. This happened to a much greater extent already once or twice. The industry has gone through a couple of these cycles. The patient operators and the patient capital survives. We’re patient. I’ve seen this before. The NIC data is accurate, and all these trends exist to large degrees and lesser degrees in different parts of the country. The important thing is to be well-capitalized and be working really hard to understand we have to face the trends head on and address them with diligent hard work. They’re not permanent. If you panic in this environment and do rash things, you end on a low note.
How much more pain do you think we have to go through before it gets better?
I think NIC would tell you 2019.
It starts to get better in 2019?
Yes. Looking at the construction starts and absorption, I think the headwinds are starting to subside a little bit in a lot of the markets. NIC has suggested that there is still a lot of capital coming into the marketplace, but the lenders aren’t as interested in new development as they were a few years ago. We see more acquisitions today coming across our desk than we saw two years ago. The volume of deals that are for sale today are pretty high compared to a couple of years ago.
Are the properties pretty expensive?
They’re pricey. I think we’re at a point where pricing is high, and smart investors see that and think, “Maybe I should test the market and sell these things.”
Are you interested?
Yes, we’ve looked at them. We’re patient, so we don’t have any need to do a deal or overpay for something to meet the quarterly report. We’re prudent buyers, but we’ve acquired properties.
With all these new communities coming into the market, as an established player, how do you set yourselves apart?
We’re a mission-based company and we celebrate our culture and our values a lot. We’re regional, so we don’t have 500 buildings. We are intimate in the sense that our senior management team are actively involved in operating and knowing the people who work for us, and knowing our residents. That human touch is pretty significant around our company. We’re innovators, we try new things. We’ve won some Argentum “Best of the Best” awards for things like that.
We take risks, and we make decisions fairly quickly, because being privately owned and the size of the company we are, we can decide things fairly quickly. So that really helps in today’s marketplace. We’ve been around a long time. I have people that have worked for me for 20, 25 years. My son [Matthew] is our EVP, and we have a lot of Generation Y and millennial-age people in the company. I think we’re well positioned to make that generational transition in the operations of the business while still having the expertise and the wisdom that comes with experience on board.
Was it hard to convince your son to join the family business?
I actually did no convincing. I gave him complete freedom to choose to go work somewhere else before he came to work for the family business, or to never work for the family business. While he was working on his master’s degree at the University of Kansas, he began to express overtures about what he wanted to do next. He thought it through really, really well—all the pluses and minuses of working externally and then coming for the company. He always had the freedom to leave. He had an interesting summer: He graduated with his MBA from KU and went to CNA school. He started with a company doing caregiving work and laundry, and worked his way up. He got his long-term care administrator’s license along the way in those early days. It’s that philosophy, if we are going to own a business and lead a business, we need to know how to do all of the jobs and understand the mindset and the difficult work that it is doing the jobs that we ask people to do every day.
His primary job is that he’s our EVP, but his primary job in life is to raise my grandchildren!
Do you think the resident response to technology is changing?
Yes. The Eisenhower generation use technology, and so they are much more accepting of it. They don’t mind being tracked where they are. But even with tracking technology, when you tell consumers that you are going to keep track of them and you have a dead zone in your wireless network for a reason that you can’t control, that’s a pretty significant failure. It’s not a piece of hardware; it’s somebody’s life that hangs in the balance. The testing takes a lot of time.
Has Legend made technology investments to make sure that doesn’t happen?
Yes. One of the easy investments in technology is things like electronic medical records, electronic health records, electronic prescription records, and technology to manage the care that takes place in the buildings. Those have been really helpful for communication with the caregivers and data collection.
Does that cause you to communicate more with the children of the residents?
Yes. More and more, people want more and more information. Balancing privacy in the senior living setting, because of the available technology, is becoming an issue. How do you balance the privacy of a resident and the privacy of the employees with some families’ desire to have a video camera in their room that can be hacked, or the video can be used in ways that are not helpful for the parent or for the associate? Those are ethical issues and things that we’ve really never had to face or address in the past.
What’s your definition of leadership?
One of the best quotes I’ve heard is that leadership is taking people to where they’ve never been before, even if they don’t want to go.
That requires some sense of persuasion and the ability to paint a vision and aspirations for people to want to go to a level of performance or do things they’re not comfortable with, or aspire to be things that they may not see themselves being capable of, and being able to get them there. Some go willingly, some are skeptical, and some go unwillingly, but it’s the leader’s job to find those people that have that promise and get them there.
Another element of good leadership is a sense of ownership. If you’re leading a company in a middle management position, are you willing to take on the same risks and the same burdens of ownership that the company investors face, the great sense of loss that they face if things go poorly? I think a great leader in any level of management acts like an owner. It affects their paradigm of thought, and it affects their approach to everything.
I think a great leader in any level of management acts like an owner. It affects their paradigm of thought, and it affects their approach to everything.
Leaders have a sense of urgency to get things done, and the sense of responsibility to not defer responsibility to someone else. You don’t defer things when you’re an owner.
How do you attract people like that?
Part of it is being transparent with who we are and how we operate the business, and with our core values. Our first three core values are serving, stewardship, and caring. We tell people, “You have to be good at those three things, or you need to be willing to get better at those three things, or you’re just not good fit.” Our other core values are integrity, individual development — those things that drive good leadership values in people.
During your senior housing career, what’s been the biggest challenge you faced?
Is it fair to point to 1998? I think the biggest challenge in the profession was those years of 1998 when the industry became so overbuilt. There was a big failure rate, and for two years there was just no development. It was a dark period. There was no capital available. Today, we’re all much smarter. The data is much better. The professional capital is much more educated and we have a lot of experience. NIC has been just unbelievably spectacular, in my opinion, in helping provide that transparency, provide the research for capital to make smart decisions. It was really the most difficult cycle I went through.
How did that change you?
It made me much wiser.
More prudent. I developed a need to make decisions on a quarterly basis to meet earnings reports that were not necessarily prudent for the long-term benefit of the company or the industry. I say prudent would be, in my opinion, a wise decision that is made for the long-term.
If a banker from Goldman Sachs came up to you and said, “We should go public right now,” would you do it again?
I’d give him three names of my peers and say, “Go talk to them.”
What’s the biggest risk you’ve taken in your career?
The public offering, because we bet the farm on it. We worked for five years creating this thing. It was a huge risk for me to get over that control element, because I wound up owning a lot of the company. That was a big deal for me. That was a real learning experience to realize that value of a board-led company versus owning all the stock also was a huge risk, because we’ve bet everything we’ve worked for. We put it on the table, all the chips were out here. We could lose it all.
If you were to do it again, would you have done it?
I think we made the right decision back then. Would I go public in today’s environment? No. Would I go public in 10 years? You’d have to ask me in 10 years. I don’t know.
After an experience like that, do you think you’re more risk-averse?
No. We’re opening five new buildings this year. Any one of those could lose millions of dollars. I’ve made a payroll since I was 19 years old.
So, you’ve always been an entrepreneur?
Yes. Always personally guaranteed everything I did until a few years ago. That sense of ownership and having everything you have on the line is a huge element of risk. A lot of people aren’t comfortable with that, but I just got used to it.
That sense of ownership and having everything you have on the line is a huge element of risk. A lot of people aren’t comfortable with that, but I just got used to it.
What’s the best piece of advice you’ve received in your career?
Can I quote Emerson? It was a quote that I had written on the inside cover of my Bible when I was in high school. The quote is: “There is a loftier ambition than to merely stand tall in the world. It’s to stoop down and lift mankind a little higher.” I think it’s a great thing to live by.
What would you say are some of your great strengths as a leader?
I think I have an ability to see the broader picture. When I hear of an issue or a situation or an idea, my mind tends to broaden. Yet I have the ability to be very detail-minded when I need to be focused on something. I’m a pretty detail-oriented guy. When people around the table are discussing ideas, I think I have the ability to see a big picture and consider all of the constituents and prompt people. I don’t necessarily have all the answers, but the ability to prompt people to greater thought around the bigger picture from whatever the situation is. Whether it’s problem-solving or whether it’s innovating something.
What do you think your greatest weakness is then?
Being detail-oriented. Yes, being detail-oriented is a good thing, but being obsessed with it sometimes is not helpful.
Say I’m about to graduate college, why do you think I should look to senior living I think as a career?
You know, you fell right into my trap. That’s one of my favorite soapbox, stump speeches.
All right, bring it.
I speak a lot to universities, I’m on the board of a university. I love talking to young people, because I think over the next 25 to 30 years of the college age person’s life, if you look at the demographics of our country over the next 25 to 30 years, two things are going to drive the economy. One is health care, and one is older Americans. If you can align your career in some way that converges with health care and/or senior adults, you’ll have the wind at your back for jobs, because our profession needs more workers than there are today in the workplace. We’re doing everything we can as an association and as a profession to educate university students, and caregivers, and high school students about the wonderful career there is in senior living.
If you want to go into technology, find technology that benefits health care or benefits senior adults. If you’re going into publications, find a way to write things that are valuable to health care, valuable to senior adults. If you’re going to design cars, if you’re going to be a photographer … the most rewarding role is to be in a role where you know the work that you’re doing will change the quality of life of another human being. The two professions that are most significantly connected to that are healthcare and caring for senior adults.
When you go to college campuses and tell the story of senior living, are people excited about it?
Yes. There are programs at Cornell and Washington State University and others where I’ve spoken, and we’ll pack the room out because college-age people want job opportunities. Colleges want to place people in successful careers. There’s huge interest on the part of college students, and huge interest on the part of high school-aged kids who are wondering, “What am I going to do for my life?” To introduce them to a vocation like this is life-changing for many of them, to attach their heart to something that’s bigger than they are.
All right, last question. What’s the biggest challenge the industry faces?
We just went over it: staffing. All those things related to being able to find enough people to fill all of the positions.
We have plenty of capital, we have construction, but this is a very labor-intensive business. It requires people with particular heartfelt motivation and some particular skills. Until Google comes up with a self-driving caregiver, we need a lot of people.