“A lot of the buffalo have been shot and you’ve got to get really creative out there to get opportunities. Memory care is a fantastic opportunity… It’s low-hanging fruit.”
— Senior Housing News1
In early November I received a pitch document offering me the opportunity to invest in a private equity fund in the area of “senior housing.” I also got a 300-plus-page legal document, called an “investor kit” so that I could act fast on this tremendous investment opportunity! I can’t actually quote from these documents or refer to the buyout firm or senior housing fund by name or someone will come and take me away in the night. All names are fictional.
To: David Smith, CEO
Buyout Investment Group
The Conundrum Fund
Dear Mr. Smith:
Thank you for the information about your “senior housing” private equity fund. I’m leaning towards taking a pass. If I may, I’d like to explore with you why that might be.
First, a disclaimer: In your pitch booklet you call me a “sophisticated investor,”2 but in fact I’m pretty clueless about private equity. I had to read numerous articles just to be able to write you this letter, and even then I’m on shaky ground.
Having said that …
You have grandmothers, right? Older parents? Elderly relations in general?
What do we know about this segment of the population? A few things: They tend to go to bed on the early side. If one were to generalize, one might say they frequently have a hard time operating the remote control. They have actual memories of things we only read about in history books. They’ve been known to guilt trip a person for not visiting more often. It’s fair to say they often enjoy a sensible shoe.
Allow me to put forth another thought: The way we treat the old folks of this nation is a metric of our own humanity. They’re a vulnerable segment of the population. They deserve our compassion for enduring the physical trials of pain and loss of mobility. Then there’s the loneliness factor, caused by small things like all your friends dying or watching your spouse melt away with a dementing illness. Less obvious are the existential challenges: Imminent nonexistence is something more of a threat than being de-friended on Facebook. It’s kind of amazing when you think about it. These people have every right to cut in line at buffets, steal golf carts, hoard pats of butter, anything. How they get up in the morning knowing they’re careening toward that “undiscovered country from whose bourn no traveler returns”3 is beyond me.
The point is, if you’re to interest me in the profit motive vis-à-vis the purchase, fat-trimming, and subsequent sale of nursing homes, dementia units, and hospice facilities, you must understand, as any sociopath does, that you must at least pretend to care about old folks. It’s vital to your pitch.4
Mr. Smith—may I call you Dave? Dave, here’s what I’m trying to say.
It’s not enough that you offer me “robust returns.”5 It’s not enough that you display wave graphs of the rising tsunami of baby boomers soon to suffer from Alzheimer’s and dementia.6 Alas, even your impressive list of bought and liquidated7 nursing homes, and the amount of profit harvested8 from same, fails to persuade me to pull up a stool next to you and milk this cash cow. You have roused me, Dave, by omission.
I read your whole pitch and investor agreement thingy, I really did, and I listened in on your conference call as well. I heard your calm, positive, tastefully non-ebullient projections of success. Tone-wise, your pitch reminded of an NFL quarterback’s humble post-victory interview, “We just went out there and kept our focus on scoring more points than the opposing team.” Similarly, you say, “Our goal is to generate good returns for our investors.” But until now the companies “rescued,” “made more efficient,” and “exited” by PE firms have concerned themselves with things like rental cars, pop music, and donuts. In this case it just happens to be the housing of our nation’s elderly, infirm, and dying.
I’d be lying to say I really want to help you, Dave. But let’s see this thing through, shall we?
Here’s a thought: If you want to attract investors who (a) have a conscience and (b) have heard about the phenomenon of death, why not have your pitch-book writers brush up on some rhetoric? Phrases like “low-hanging fruit” and “at the end of the day” or “the bottom line” and are okay when you’re only talking about laying off a few thousand factory workers. It’s another thing when it’s the nurses and staff caring for Nana and Paw-paw.
Have your people take a look at a play called Julius Caesar by William Shakespeare10 and get them to study the difference in the eulogies by Brutus and Antony. See, Brutus is like you, Dave. He’s like the quarterback, most Democratic politicians, and the pre-Horta Mr. Spock. Antony appeals to the emotions of his audience, like Republicans or Captain Kirk.11 Or how about reading Richard III, a play also penned by The Shakespeare Group and staged by its subsidiary, The Chamberlain’s Men, LLP? This Richard is so good he seduces a woman over the corpse of her husband after admitting he slew the poor bastard. That would be a good one for your team.
My problem with your pitch as it stands now is that it doesn’t give enough lip service to the welfare of senior housing residents.
To be fair, I see from Buyout Investment Group’s website that your firm has a page-full of charity logos, with the exception of those that might have a conflict of interest.12 Here and there your pitch book also mentions your intent to improve the facilities you flip.13 Such conscience-driven proclamations are a bit harder to spot in your 300-page, legally binding investor kit.
To be perfectly honest, Dave, when I found articles on the relationship between nursing home buyouts, decreased staffing, and incidence of bedsores, I wept.14 You may say this is a low blow, that those studies are unverified. You may say that the very fact of my emotion was proof that I can’t be trusted. And it’s true. I will be honest with you, Dave: I practically jumped at the opportunity to blame you. I fantasized about getting a law degree and an MBA and an MSW all at once, making it my life’s cause to protect the aged and dying. I whispered Rilke’s words, “You must change your life.” I was done burying my head in the sand. A frisson of ego? Yes.
Confession: I’m not disinterested. You and I will likely end our days in hospitals, nursing homes, and hospices. We’ll spend more time than is right waiting for dialysis, CT scans, blood tests, or someone to come pick us up off the floor. No amount of wealth will spare us, Dave. I’ve seen it with my own eyes, in the very best nursing homes money can buy. For the past eight years I’ve spent a good deal of time in that most fecund of senior housing’s low-hanging fruit, a “memory-care facility” where I visit an elderly relation.15 I’ve gotten to know residents, nurses, aides, freelance talent, volunteers, and administrators.
The thing is, the residents of a “memory-care facility” are entirely dependent on aides and nurses for their wellbeing. I can’t stress this enough, Dave. Entirely. So, while my tears may be suspect, to say nothing of inconsistent with past and future performance, I have personal reasons for caring.
But take heart, Dave.
I rose the next morning, Nov. 5, made breakfast and poured myself a cup of coffee. There was something I was supposed to remember. I checked my calendar. Nothing. What the heck was it? I hate when that happens. So annoying. I settled in with my coffee and started reading the New York Times. Dang, what was that thing I was supposed to remember? It feels like it was important. This really bothered me, Dave. I needed to tune out. I clicked over to one of my guilty pleasures and caught sight of something in the sidebar. It was a headline from America’s Finest News Source©: LIFE CHANGING EPIPHANY WEARS OFF ON THE RIDE HOME.16
It was then that I realized what was nagging at me: that whole nursing-home business. From the night before.
I went about my day in a state of preoccupation. My epiphany was that the yin of “You must change your life” could coexist with the yang of being full of shit. Now, that might not sound like a major revelation to you, Dave, but it had an odd effect on me. It vitiated an internal argument that insinuated, “Because you have never cared about this issue before and because you barely know the difference between a stock and a bond, you have no right to the simple, uncomplicated conviction that you felt from the start.”
Dave, at the end of the day, as you guys like to say, there are some places in our society that shouldn’t be “low-hanging fruit” for profit. A hospice shouldn’t have to fear that a private equity firm will come in, cut staff, siphon cash flow, pay itself big fees, and walk away from the smoking corpse. Even if a nursing home chain is on the brink of collapse and cries out for “rescue” as you claim, let there be some way to save it without recourse to people who are, at the end of the day, interested primarily in the bottom line.
Forget rhetoric, here’s a math quiz for you, Dave.
1) When a private equity firm threatens to fire a nursing-home-franchise manager if massive staff reductions aren’t made while promising said manager a fat bonus to lay off 300 people, how many managers will resign in protest?
2) If the guy who comes on Tuesdays to play Sinatra tunes on his Casio is no longer paid carfare to a memory-care facility in Fort Lauderdale, will Mrs. Rosenzweig ever hear “New York, New York” again?
3) If the aide who daily dresses Mrs. Hightower in spiffy velour loungewear no longer has time to do it, what percentage of Mrs. Hightower’s projected remaining life expectancy will she spend in pajamas?17
You may say it’s unfair of me to play the “care” card. Day by day, nurses and aides, not I, care for my mother. They wake her. They dress her. They wash her hair, feed her, put her to bed. For that an entry-level aide in a Florida nursing home might make $24,000 a year. That’s less than I’d pay in a single capital call to The Conundrum Fund.
I can’t do it. I’m out, Dave.
At the end of the day, it’s wrong.
1 Gerace, A. 3/18/13, Senior Housing News quoting Scott Stewart, Managing Partner at Capitol Seniors Housing at a National Investment Center for Seniors Housing and Care Industry panel, “Tapping Into Private Equity.”
2 Rich person. The average cost of investing in one of these funds is $250,000.
3 Start Trek VI.
4 Actually, no it isn’t. Many funds are vastly oversubscribed.
5 Although whether these funds do better than the S&P is debatable, since so many fees are hidden. Search: SEC Bowden private equity.
6 Graphs that are both horrifying and tempting, because, my god, if they’re right, then there really is a massive amount of money to be made. In my childlike understanding of reality, I want to imagine that “low-hanging fruit” means profit accrued from inventing a gadget that makes life better for these souls, a medicine to relieve pain, a design for age-friendly residences. Heck, low-hanging fruit might be any actual product or service for these people. But there is no product. There is no service.
7 Your word.
8 Your word.
9 Even if some of them and their fathers had worked for the company all their lives and had personally ingested prototypes for something called a “cruller” lovingly developed by the company’s own president.
10 Dramatist whose 37 plays yield a tragicomic baseline for a global audience.
13 Or drive into bankruptcy. University of Chicago-sponsored academic papers refuting this slander of an industry can be sent to me c/o the McSweeney’s headquarters in Duluth, Minnesota.
14 Indignant brandishers of studies refuting this claim can be sent to me c/o the McSweeney’s satellite office in the Grand Cayman Islands.
15 My mother.
16 The Onion, 11/5/14.
17 Minus the number of days management knows in advance her son will be visiting.