Podcast Transcript
Speaker 1:
Welcome to Real Wealth Real Health, the show that empowers you with insights, information, and inspiration to achieve your version of financial wellness. Learn how to balance living a full life today with planning for the future. This podcast is brought to you by Alpha Investing, a real estate centric private capital network that provides exclusive investment opportunities to its members. And now here are your hosts, AdaPia d’Errico and Daniel Coca.
AdaPia d’Errico:
Hi, welcome back to another episode of Real Wealth Real Health. Today we are speaking with Kevin Kaseff, co founder and president of Titan SenQuest Management, a national senior housing owner operator as well as president of Titan Real Estate Investment group and managing member of Titan Realty Investors, a private commercial real estate investment firm. Mr. Kaseff manages the company and directs the firm’s investment activity. Under his leadership, Titan has acquired $2 billion of commercial real estate. Mr. Kaseff has more than 30 years of investment experience in acquisitions, dispositions, financing, leasing and asset management, and has successfully completed and managed commercial real estate transactions nationally and internationally. We discussed the senior housing asset class with Mr. Kaseff why it’s interesting and what investors should look for. Mr. Kaseff gives us insights into what it takes to own and operate senior living facilities to the standards of institutional investors. He also gives us an honest and transparent view into his operations during this COVID-19 epidemic. Mr. Kaseff shares our values of trust and transparency, working with the right people and a thoughtful and disciplined investment philosophy. We’re proud to work with him and Titan as one of Alpha Investing sponsors. Now there’s a lot to learn about real estate senior housing, COVID-19 operations as well as wealth and company building from a perspective of a very successful real estate entrepreneur.
AdaPia d’Errico:
Kevin, we really appreciate you coming on. You’re always busy anyway, but in the midst of the past several weeks, of course, I’m sure everything has escalated. I was listening to a webinar from a large commercial lender and the gentleman, the CEO was saying on Monday I woke up and it was the first time in four weeks that I didn’t have a critical phone call to make like it a crisis call I had to make. So things as you know from your experience and what you’re going through, which we want to talk about today is there’s so much going on, you’re in the thick of it and all that said, I just really appreciate you taking the time.
Kevin Kaseff:
Absolutely. I think all of us are just a little bit unsure of how long this thing is going to last. Is this one month, three months, six months, and how does it affect not only us personally but us professionally? And so I think that as my involvement whether it’s cold storage or it’s office buildings, a senior housing, one of our biggest asset classes, how do you protect people? How do you protect investors? How do you move forward and what does that look like? And we’re in the thick of it and so hopefully if today I can give some of the listeners a little bit of an idea of what I’m seeing on the front lines that would be great.
AdaPia d’Errico:
Yes. And, again, we really appreciate you coming on to do that. Tell us a little bit about your background, your experience, Titan, and then we’ll take it from there.
Kevin Kaseff:
Sure. The 32nd elevator speech on [inaudible 00:04:18] is when I came out of, I got my MBA at Vanderbilt in Nashville, came out, went to work for a New York company, big public company, really enjoyed it. It was on the acquisition side, it was Insignia financial group and I spent about seven or eight years there as a managing director and I was running their acquisitions for the west coast and Asia. So a lot of travel teamed up with all of the big New York funds, we had a lot of joint ventures, was very successful, loved it but then in 2003 it was sold to CB Richard Ellis and candidly, they did not want our group. We were competitive with another existing group they had. At the same time, I was planning on going out on my own. I just felt like I wanted to be in more control. I understood the business and it was time for me to branch out. A lot of entrepreneurs get that time and point.
Kevin Kaseff:
So what I did was I launched Titan Real Estate Investment group in 2003. We are a private value add real estate group. We brought in institutional and high net worth investors to our deals and we just plowed forward. We focused on the four major food groups in real estate, which would be office, industrial, multifamily and retail. We didn’t do any development. We had a very successful track record from sort of 2003 we came out fairly unscathed in the 2008/2009 downturn and then continued on. Fast forward to 2012 and I was introduced to a couple of gentlemen that were coming out of Holiday Corp and wanted a platform in the senior housing sector. Holiday Corp was at the time the largest owner operator of independent living communities in the country with about at the time, I think it was 330.
Kevin Kaseff:
They had just been bought by Fortress. A couple of the regional managers were very frustrated about where their jobs were going, where the company was going, so they reached out to me. I looked at it, I liked that industry. It is an operating business, but as I ran it past some friends of mine that worked in that business, they said, “Yep, these guys know what they’re doing.” So I agreed to be the balance sheet and the platform and so that was 2012. Fast forward, here we are in 2020 I think we’re about 17 to 19 communities about 1500 residents. We’re owner-operator, so we have over 600 employees and it’s quickly become the future of our business. We like what we see as far as a return perspective of what’s going on, where we see it going forward. In addition to the senior housing, we also have a nice cold storage division, another area that’s doing very well in this very difficult environment. So that’s where we are today.
Daniel Coca:
Awesome. Kevin, thanks for sharing that story. I think a lot of investors in our network when they see deals from you, they see Titan SenQuest and I think also one of the first things people learn about the senior housing asset class is how operationally intensive it is. Like you mentioned you have 700 plus employees, many of which are skilled laborers, it’s a much larger operational thing that you’re managing there. It’d be interesting to hear a little bit about the merger or the acquisition with SenQuest and how you thought about kind of bringing everything under one roof, why that made sense, just kind of getting your mindset as it relates to that transaction.
Kevin Kaseff:
A very good question. I think that in real estate, we look at a traditional thing, which is it’s not an operating business, it’s real estate you have a revenue, you’ve got operating expenses, you’ve got some capital expenses, debt, and you deal with some leasing issues. With an operating business and that would be, we came into the senior housing having operating business experience from our cold storage, which is the same way, it’s very different. There’s more moving variable parts than traditional real estate. But that also that’s a negative that there’s a lot more to watch and a lot more to go wrong, but it’s also a positive because there are so many people that are in this industry that just sort of don’t care. They’re not taking the time to understand what the operating metrics are and holding their people to it.
Kevin Kaseff:
They have to realize you can be the smartest person in the world and set this whole thing up, but if you haven’t created a culture, 600 people will go off and do their own thing and create problems and all those types of things. And I’m not even talking about the COVID type of issues we’re facing today. I’m talking about sort of pre and post COVID that when you have to set the culture and decide what it is you want to be known for and how you’re going to operate. So those are the kinds of things that kind of got me excited about an opportunity to do better. I chose to bring SenQuest in house very quickly, Daniel, for one reason that they were doing an okay job on the management. It was very mediocre and we wouldn’t put up with it. We’re used to reporting to an institutional level. It’s so important. Everything has to be perfect if it isn’t make it. So we brought in a higher caliber of CFO, regional, managers and that’s what I did. I understand people and I just had to move some people out, move some people in and have better oversight because fundamental and you know this better than I do and all your investors do, is I put up my money along with everyone else and I have no interest in losing it.
AdaPia d’Errico:
Kevin, I wanted to ask a quick question. As you were saying, institutional, and we use that word a lot of course, can we just dive in just a little bit. What does that represent for people who may not understand, when we’re talking about institutional, what does that look like and how can we describe that so people when you’re talking about it had to be brought up to institutional standards?
Kevin Kaseff:
Well, let’s define, institutional to me is either a public or a private company that has amassed a group of investors, pension funds, high net worth family offices, pulled those into an investment fund that has got a certain time period return requirements, and they typically will reach out to us and say they’d like to partner with us. So they’ll put in 90% of the capital. We’ll put in 10%. We’ll have an incentive management fee. That’s fundamentally what I’m talking about. The people could be your typical as far as names so we can be a little clearer, most of your big insurance companies have real estate funds. Wall street is… for instance, Principal, Prudential, MetLife, they all are these bigger funds. Your wall street, private equity funds, multi-billion dollars that will be in every different asset class beyond real estate, they will typically all have real estate and want to do these type of transactions.
Kevin Kaseff:
That would be your Blackstone, your KKRs, your Apollos. Those type of names should be very familiar to a lot of people. Those are your funds. We’ve done business with some of them, but not all of them that I’ve named, that these are very smart investors and they demand that our monthly, quarterly and annual reporting, it’s too at a level. We have to do it per a gap standard. We do not have to have it audited, well, we have to have it such a way that they feel like they’re seeing a clear picture and if you’re on course, great, but if you’re off course, what is it you’re doing to bring it back onto course.
Daniel Coca:
And so let’s jump in at a high level into the senior housing asset class. So that’s where you spend the majority of know your sponsor time today. We’ve worked on a lot of deals with you over the past four or five years we know a lot about the space and why it’s interesting, but I think it’d be great for investors to hear that from you. Yeah. How do you look at this asset class? Why should investors find it interesting to invest their capital here? Something high level about your thoughts generally on the space.
Kevin Kaseff:
Okay. I believe that senior housing is excellent sector to be involved with. The number one reason is that the demand, the number of adults that are crossing over that 65 into sort of their retirement years that are demand that’s needed in this sector is going to be very large and there’s all kinds of very good statistics and I think you’ve shared some with your investors. We will see this really continuing up until 2030. It’s 10 years from now, that’s a long run. On that senior housing has a very unique asset class that’s very different than other real estate. More than half of the base, more than half of the communities in the United States are not owned by institutions, but owned by say a Mom and Pop a local person.
Kevin Kaseff:
Why that’s attractive to me is because these people typically don’t run it well, don’t understand what the good operating metrics are, so there’s a real opportunity to just step in and right size the ship, bringing in our culture but actually make operational changes so you can reduce expenses almost day one, sometimes up to 20%. that allows us with a conservative level of debt to really start getting to double digit cash returns by year two. That’s something you typically don’t see in office industrial retail, definitely not now, and it’s something that I think is very attractive to us as an opportunity to get in there. So it’s an operational focus.
Daniel Coca:
You see most sponsors in the senior housing asset class working on ground up development deals. That’s not where you focus your efforts. What are your thoughts? Why is that the case?
Kevin Kaseff:
You know what? I’m a big believer in do what you know and stay away from what you don’t know. That’s really what it comes down to. There’s very good money to be made in development, I am not a developer, I just I’m not going to touch it, I’ll leave it to somebody else. I think our mantra is buying good cashflow with upside.
AdaPia d’Errico:
So Kevin, at this point, one of the questions that I’m sure everybody’s asking is what are you seeing across your properties as it relates to COVID-19?
Kevin Kaseff:
Seniors are one of the most at risk groups and likelihood of having a very bad outcome from an outbreak inside of the community does keep us up at night. So let me give you an overall what we’re seeing across our communities nationwide. First and foremost, at this time we have no positive COVID-19 cases in our communities and that would be both residents and staff. I will not be so arrogant to say that we won’t get one, but I think that we’re, for the last month, sort of a head of the CDC, we have been trying to put in some protections that limit the ability for an infection to get into our communities and or spreads. So let’s run the kind of stuff we’re doing right now. Number one is we do almost weekly email campaign to both the residents, the family members and our staff updating of what’s going on company-wide, letting them know.
Kevin Kaseff:
We are restricting things like no new admissions even to the detriment of our leasing, no non-essential visitors, no communal dining and no group activities. I know these are very difficult for a lot of residents and family members but we hope and we’ve tried to annunciate to them, it’s so important. We have to keep this virus outside our communities when it gets inside and can spread very fast. So the kind of things that we are doing would be trying to help them be positive, keep it up and fun. For our employees, we’ve had sort of a positive negative issue. We know it’s very difficult. A lot of the caregivers are young mothers and they’ve lost daycare, the kids are no longer in school. So we have outside these communities tried to help them by organizing some child and daycare.
Kevin Kaseff:
We have increased our sick leave so we’re spending more money. We’re trying to appreciate our employees more. We are now going to start feeding our employees on site during their shifts and we also have… we sort of pulled everything together to make sure that… to show them that we care and that we’ll get through this. So this one month or three months, that’s what it takes and the company’s willing to spend the money. The positive on the labor side, it’s not all negative, the positive on the [inaudible 00:19:26] side is that with the number of layoffs that are occurring in elsewhere in the economy, especially in the retail, say the restaurant, fast food sector, we have a tremendous number of job applicants and therefore it has helped us. We have not laid off one person.
AdaPia d’Errico:
What I was thinking about when you were talking about bringing food to people that are on shift and seniors not being able to do their group activities because so much about these communities is the loneliness factor that’s being removed by them being in a community as opposed to aging in place. And the morale issue is really what I’m trying to get at, like it’s such an important piece of everyone’s life right now, everyone’s to some degree suffering, whether it’s loneliness or boredom or anxiety. So I think it’s wonderful that you’re taking these initiatives to help even from just a morale perspective as I’m sure that that is something very, very important in your communities.
Kevin Kaseff:
Well thank you. I think like all of us, we’re sitting here at home in the sheltered place with no playbook. Whoever thought this was ever going to be the situation. So beyond that now you have an issue of we’re all sort of sheltered place and we have a responsibility to take care of some seniors. We’ve been entrusted to take care of them. So this is not just dollars and cents, this is about caring and doing the right thing. So with that, we bring together a good group of people. Titan is incredibly lucky the person that I brought in to lead our internal group in addressing this COVID-19 Richard Terry, he’s one of our regional managers, he is a former fire chief as well as he was trained as an emergency management coordinator, so he’s gone to all the FEMA training.
Kevin Kaseff:
So everything from a biological attack to a terrorist attack, he understands that, so when this thing popped up in, call it early March that we first became aware of it and I found out about his background, he was immediately tasked with being our lead. We talked several times a day, seven days a week, but having somebody who doesn’t panic, he understands, he knows what needs to happen, we have already reviewed, if there’s an outbreak in our community, what we’re going to do, here’s what we do. Every one of our executive directors is on the phone with him with, I have a question, what about this? What about that? We have an upset family member, we have a happy family member. There’s always that person. It’s having the right people in place. I feel like we’re doing everything we possibly can to get through this as unscathed as possible.
Daniel Coca:
Right now we live in this fake news world, right? The news media tends to be really alarmist, people are hearing a variety of different truths around kind of what’s happening here, but you’re on the front lines. You’re talking with the actual health agencies and of course more than most, you have a real financial incentive to make sure you handled this a pandemic in the right way. What are you hearing? What are the things that worry you and then one of the things that give you hope that maybe this thing will pass relatively soon?
Kevin Kaseff:
I have a couple of very strong, I will not touch on the national media just because I think there’s a hot points and somebody can have an opinion either way. Let me just talk to you about actual running these communities. The CDC is phenomenal. Most of the health departments in the cities are phenomenal. We are actually on a first name basis with most of these people and there really is good working relationship. The minute something goes wrong, we call, is it a possible positive test? They’re all over it. They’ll follow up. It’s really good teamwork and I feel very positive. The part that I [inaudible 00:23:47] is, and you brought it up, it’s called fake news.
Kevin Kaseff:
I hear reporters are trying to come up with stories. So they’re talking about the number of people that are going into assisted living that this is not going to work in the future. [inaudible 00:24:04] somebody gets sick. Absolutely ridiculous. Loneliness is one of the most difficult issues that seniors deal with. And aging at home doesn’t work for loneliness. These people may not have common dining, we may not have group activities, but we’re having pajama parties, we’re having funny hat dates, all that stuff to keep inside our communities. Senior housing is going nowhere and these people are writing these silly stories based on maybe one skilled nursing in Northern Washington state that had an epidemic pass through and they had to clear it out is not a representative of an entire industry. So that’s what I’m hearing.
Daniel Coca:
And as you have conversations with colleagues that maybe are sponsors in the senior housing asset class or investors in this space, what are the things that you’re hearing in that world?
Kevin Kaseff:
I actually was very surprised approximately three weeks ago, some huge pension funds with hundreds of millions of dollars invested in the big reads. I started getting calls from some people saying, “Hey, these guys want to talk to you.” And I’m like, okay. So I had a series of three to four hour long conversations. What they were doing is we’ve heard good stuff about Titan. What are you guys doing in this COVID? We want to hear this. And they peppered me with where do you see this industry going? Where do you see the dip? How long to come back? Now, a lot of this takes an ability to look into the future, which I don’t have. I have to react to it and I’ll try to do my best. But I was flattered and I tried to give them my take on what we’re doing to combat COVID-19 inside our communities, best practices that we’ve instituted, and hopefully they learn something from that. But I was impressed that a group of 17 was talking to an investor that had invested in a company that has 3000.
Daniel Coca:
It’s really great to hear how proactive you’re being given the vulnerable age, population that you’re looking after and just how thoughtful you guys are and really looking at it in a holistic way, not just protecting from COVID but also still providing a really high quality of life. And so I’m sure everyone here appreciates that. Moving on to a topic that we as an investment group talk about a lot or as investors, we think about a lot is this idea of personal wealth building and strategy. And so you’re obviously a very successful real estate sponsor, you’ve been doing this for a while, but you don’t just invest in real estate, I’m sure you’ve got a broader strategy beyond that. It’d be really interesting I think for people to hear a little bit about how you think about building wealth. What your goals are, what your plan is for your life post Titan real estate, that sort of thing.
Kevin Kaseff:
Well, my life actually took a big change this last year. I left LA, which I lived for 20 years and moved to a ranch in North of Santa Barbara, a horse ranch. So we’ve got 11 horses and a whole lot of acreage. So my life is very different, it’s improved. But wealth building is going to be different for everybody and I’ve found it when I talk to my brother and sister, it’s their propensity to take on some level of risk and everybody’s different. And at night you have to be able to sleep with what decision you made. So trading Forex futures is fine for some people and absolute out of line for other people. For me personally, a substantial amount of my net worth is tied up in real estate and I feel comfortable with that because I understand it.
Kevin Kaseff:
That’s where it comes down to all of this stuff. If you don’t understand it, get out. I just can’t see, just because somebody talked to you and do it, don’t chase yield, stick with what you know. The downside to having a lot of your net worth in real estate is real estate is a long-term perspective. We can’t, it’s illiquid, we can’t get in and out quickly. So therefore you have to make some decisions based on looking out long-term. For instance, interest rates are incredibly low. We don’t see them climbing anytime soon, especially with all of the money that’s being baked into this economy right now. We see hyperinflation, well, they’re printing a lot of money. Those type of things. You have to look long-term.
Kevin Kaseff:
So yes. Well I’d get involved with you put a certain amount in stocks, very little in bonds right now because I [inaudible 00:29:25] sure what you’re buying, but for me it’s always don’t just trust somebody’s opinion. Assume that it’s with like a number of our investors will when I’ll show them a project they go, I drove over, I got on a plane, I drove over and I saw it. I’m very impressed. They wanted to see what I see and I like it. I like when somebody peppers us with a lot of questions, challenges our assumptions. We’re making a guess into the future, I’m very impressed when somebody uses that same level of due diligence. By the way, I know this is just a shameless plug for Alpha, but I’m very with you guys with the number questions, you’ll spend an hour just digging into financials. You understand part of the business, I understand it better, but you don’t back down from challenging. Are you sure of this, what about this? What happens over here? That impresses me and that will, I believe we can all look back, that will be a long-term perspective versus a short-term, just do the deal.
Daniel Coca:
Well we’re going to definitely remember that the next time we’re on a two hour diligence call. That’s for sure.
AdaPia d’Errico:
So having a one another question that comes to mind and we’ve talked about this a little bit before, is you said this and I took notes from our pre-call was you said that there’s keys to success that transcend real estate and apply to all investing and I think you’ve covered some of that with the due diligence, know what you’re investing in, don’t be afraid to ask questions. Is there anything else that in your experience, these keys to success that are applicable across the board when it comes to investing?
Kevin Kaseff:
Yes. I think we hit a few of them right there. Number one should be at the top of the list was everything goes up and goes down. So yeah, I think it’s very important to understand that before you get into something, where are you going to get out. It always amuses me where people just get in on the stock market and I think you know what, it will forever go up. No, many times it’s dropped 30% those are brutal time. If your investing horizon is not 80 years, then you need to watch out. So I think it’s two things. One is things go up and down and number two is in an operating business it’s so dependent on who’s operating. You better be able to trust that person.
Kevin Kaseff:
There’s some good people in this world and there’s some bad people and when things get tough are they excuse makers, do they stop returning phone calls or they just step up and say, look it, this was not something we counted on, it caught us by surprise, let us tell you what we’re doing. If I’m going to put my money in, I’m going to put… I want to know that I can trust the person and that’s not something you’re going to see on paper, that’s getting to know them. We’re doing business now, we have joint ventured with some younger guys that I think are very talented. We’re very careful about, it’s almost like a marriage, we want to be very careful about who we’re teaming up with because if they screw up it’s a reflection on me.
AdaPia d’Errico:
I think a great segue based on what you just said is your approach to building Titan, I think everything you talked about it really weaves into our whole conversation this time like who you are, the quality of the person that you are and it comes through and how you do qualitative work as well with returns to investors. But I’m curious, how much of this has permeated your approach to building Titan, like trusting people, putting the right people in place, what has been your approach to building Titan and some of the challenges and rewards and specifically building culture and if anything is going to change and how you might see that changing when things start becoming open again with social movement and being able to interact with your residents?
Kevin Kaseff:
I started Titan just because something deep inside of you said that I wanted to be… I liked what I saw at this large company and the education I got and the money I made and the transactions I did, but I believed that I would be happier in a position where I was running my own shop where I could be responsible for the good and the bad, and set the tone, set the strategy, within that is the culture. There’s certain things we all know. We’ve met people we didn’t like, we’ve met people that we really liked and wanted to emulate and I’m no different and I think that’s it. But I create this culture. Things will ebb and flow over the next short-term, long-term. What won’t ever change is my culture and right or wrong, I said it and I maintain it and I have responsibility for putting the right people in.
Kevin Kaseff:
So if I put in somebody that’s the wrong fit for them, you just call it quits and you move on better for them, better for us. There’s some smart people that just wouldn’t work within our organization. They’re great people, they’re smart, all that stuff, it just doesn’t work. It’s so important. Trust is the number one thing that I have to have with everybody that’s in this organization. If you can’t trust everything, doesn’t matter after that, I’m very transparent. We have a very flat organizational structure. I’m not big on these layers of regional managers and reporting and all this stuff, we’re high tech focused, so we use a lot of cloud-based systems to immediately know where our variable expenses, where our operating metrics are, but down deep is I pick up the phone and I’m talking to people and you just have an honest conversation and they know, don’t tell me what I want to hear, tell me the truth, you get stuff handled if stuff went wrong own it and move on. And that will never change. Will Titan change into the future? Absolutely. Absolutely. Probably riding more horses and turning over day to day to somebody else while I have ultimate oversight on it.
AdaPia d’Errico:
Yeah, that’s really inspiring to hear. I mean everything about our conversation today has really inspired me and I’m sure it’s done the same for others. You’ve given us a very honest and open overview of your business. Probably a lot of people don’t want to be talking about what’s going on in senior living because there is still this fear component. So we really appreciate you being so transparent with what you’re seeing and it’s even for us trust and transparency and constant communication is so important. It’s the only way to fight against the 24 hour news cycle and which really is meant to keep us riveted to fear actually. So I really appreciate you coming on and just blasting us with some truth and really inspirational insights into your business.
Kevin Kaseff:
Good. I hope that was helpful and like anything, sometimes you just have to turn off the TV and do something else. Watch a movie, right? Go ride horses. That’s what I like.
AdaPia d’Errico:
Listen to a podcast.
Kevin Kaseff:
Listening to a podcast is the best idea yet.
AdaPia d’Errico:
Awesome. Well thank you. Thanks Kevin. Really appreciate your time today.
Kevin Kaseff:
My pleasure.
Daniel Coca:
Yeah. Thank you, Kevin.
AdaPia d’Errico:
Thanks for tuning in to Real Wealth Real Health. We hope that you’ve enjoyed today’s episode and found it both informative and insightful. We welcome all your questions and your feedback about today’s episode and especially we welcome your questions about specific topics that you would like us to cover. So shoot us an email @[email protected] and if you have a moment, we really appreciate ratings and reviews as it helps us grow our online community and our interactions with you. And we’ll also be linking to a number of relevant articles on topics that we might have touched on during our conversations. Some of them are broad, some of them are technical, but we’re always aiming to provide information that helps you better understand the mechanics of building this healthy financial foundation, especially if you’re looking to do this with real estate.
