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Head of third-party operator believes a rising tide lifts all boats.
You are viewing: Who Owns Priority Life Care
By Jeff Shaw
Although Severine ‘Sevy’ Petras may be the CEO of Fort Wayne, Indiana-based third-party operator Priority Life Care, she prefers to play down her title .
“Do not call me ‘boss,’” she insists. “That’s the worst word.”
“When we opened our first buildings, I wouldn’t let anyone put their title on their business card. One day I was a janitor, next I was a server, next I was a CEO. I never wanted anybody to be intimidated by the title on the card.”
After years working on the financial side of real estate for multiple companies, the Great Recession caused her to take a hard look at how the seniors housing industry served its residents — particularly how those residents could or couldn’t afford services, especially as home prices crashed.
She had an idea to launch a new operator with a particular focus on affordability, service and family. And the “family” part is not just empty talk.
The original business plan pitch was held at the family Thanksgiving gathering, where she convinced her mom Debbie, brother Bobby and sister-in-law Brandie to round out her C-suite. Debbie was a longtime seniors housing administrator, Bobby had expertise in business management and Brandie’s background was in social work.
The company launched in 2009 and, since that meeting, has grown to 40 communities totaling 3,045 units, with a heavy focus on assisted living and memory care. The operator focuses on states that have Medicaid waiver programs, which allow residents of lesser means to receive assisted living services via government reimbursement.
Seniors Housing Business sat down with Sevy to discuss growing a company out of a recession, the importance of family and how seniors housing companies need to work together rather than as competitors.
Seniors Housing Business: Walk me through your career path that led you to found Priority in 2009.
Sevy Petras: I started my career straight out of graduate school in investment banking in downtown Cleveland. From there, I had an opportunity to work in Chicago, which was one of my dreams as a small-town girl from Toronto, Ohio.
That’s where I got my entrance into healthcare and CCRCs (continuing care retirement communities). I specialized in variable-rate demand bonds. That’s where I found out there was this market in seniors housing.
It took an interview with Merrill Lynch Capital, which was more on the lending side. That’s where I really got my start on balance-sheet lending for seniors housing. I joined their crew in 2006. I led lending for independent living, assisted living and skilled nursing. I was with them until the banking collapse. We were all sold to GE Capital and basically nobody did anything for a year or two. At that time, anyone who was left was let go.
My mom was an administrator at a private-pay community — half assisted living and half memory care. I was training for an Ironman Triathlon and I was barely 30 and single and taking some time off waiting to see what the capital markets were doing.
I kept hearing these sad stories my mom would tell of people running out of money and having to go into skilled nursing. Families had to figure out how to make it work financially. It was 2008, a tough time, the biggest recession I’ve seen.
People couldn’t sell their homes, which seniors previously utilized to fund their retirement years. It was a real problem. A lot of adult children had lost their jobs, a lot of kids coming out of college couldn’t get jobs. Resources were scarce.
I’d been in the industry about five years at that point. We knew the silver tsunami was coming, we knew all this demand was on the horizon, but construction had ceased. We didn’t know where seniors were going to go.
At the time, people would whisper about the middle market. While Illinois and Oregon were just starting to offer the Medicaid waiver, not many other states were considering it.
I reverse-engineered the numbers. I grew up in the Rust Belt. People were blue-collar workers, true Middle America. There wasn’t a good representation in seniors housing of what America looked like. People from my hometown were going to need assistance.
That is when it dawned on me that there were states looking for operators to fill that hole, to use the Medicaid waiver as a payer source.
At Thanksgiving dinner at my parents’ house I brought an easel with a business plan that would allow us to serve this population in states that were starting to embrace the Medicaid waiver program. I brought a lot of wine, gave a sales pitch to get some free labor going from my family. The next step was to identify the right communities, the right locations that would make sense to entice investors and capital partners.
That was 2008, and we got our first investors in Jan. 2, 2010. It was the middle of a snowstorm. I’ll never forget that.
SHB: What’s it like to start a business with your family?
Petras: Normally, it’s the dad who starts a family company, right? We’ve always been a tight-knit family. Coming from the banking background, my job was to pitch and tell the story at the credit desk. In our industry, operations is what it’s all about. The team at the building and the executive team above providing the guidance is the intrinsic value.
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When I looked at projects we had underwritten at my prior jobs and looked at the teams we did business with, I knew the team in front of me — my mom, brother and sister-in-law — had the business plan that could attract capital partners. Though we didn’t have a track record, I knew we collectively had what it took to attract capital and give a comfort level to lenders.
There was no option for failure. Our chips were in. If there was anybody who I knew I could rely on to do what needed to be done, it was them — especially for no money. Everybody had the right alignment.
My mom had been an administrator on the marketing side, so she knew how to put the business together.
Brandie was a social worker, and a lot of our marketing culture comes from her social work background — understanding where somebody’s coming from and where that person is best placed.
My mom was our first administrator. We structured a lot of our culture around her experience and understanding, her medical background as a caregiver. Then, on the marketing side of things, mom provided the level of expertise on how to run the day-to-day operation.
I knew the numbers part — how to set up a budget, profits and loss.
My brother came with the people background. He’s a successful athlete, then he went into his business career. Our business is based around rallying teams and building up the people to help. He worked for a cell company and trained people and built-up teams at locations that weren’t performing.
Our culture is built around how our family trusts each other and our skillsets.
Coming from that white-collar banking world, I had to learn the softer side of the business. I came in from the man’s world, banking, and talk about some cut-throat stuff. But now I couldn’t walk into work wearing a suit because I’d make everyone nervous thinking someone was going to get fired. Mom helped me understand how we impact people. Coming from that background, we don’t realize the impression we’re making without saying a word.
I never would’ve learned that if my mom wasn’t there. People would’ve been afraid to say that to me.
Growing up fast
SHB: Is Priority Life Care usually a partner during development or does it largely take over for existing operators?
Petras: It’s a combination. We’ve done seven developments to date. Five years ago, it would’ve been 100 percent acquisitions of operations. I’d probably prefer going forward to be more 50/50 because I feel that the product is changing.
We don’t have the physical buildings to accommodate the programming the baby boomers want. I think specifically about the fact that my generation, Gen X, we think the stuff our parents do is cool. We listen to the same music. I go to concerts with them.
If I think about how I grew up, I didn’t eat at the same table every meal. My kids don’t. But in seniors housing right now everything’s at the same table at the same time. That’s not going to fly with the boomers, and it’s not going to fly with me.
That said, I don’t think buildings need to sail off into the sunset. There’s a lot we can still do with existing buildings. The replacement cost right now is ridiculous, so the ability to renovate and repurpose is very important over the next five years. But building something new for the next 20 years is equally important.
SHB: You generally don’t have an ownership stake in properties, serving as a third-party operator. Why do you prefer that structure?
Petras: That’s evolving, as it always does. When I started in the industry, everyone was primarily owner-operators. The banks required skin in the game. But institutional investors and REITs largely prefer leases. The markets have been evolving.
Bobby and I had to make the decision: Are we third-party operators or owner-operators? We decided we didn’t want our partners to think we were paying more attention to what we owned. We manage their asset as if it was our own.
SHB: I notice you play in standalone memory care, which is sometimes considered a less desirable niche by investors. What appeals to you about it?
Petras: I like standalone memory care as an operator because it allows us to focus on one area. I don’t like it because in order to operate these facilities well, they should be smaller. More than 60 units in any given market is tough.
Standalone memory care is operationally more difficult to manage because it’s a lot more hands-on, with more training and specialization. The people working there are really amazing. We have some great teams. It’s just that because the facilities are smaller, it becomes more difficult to make them profitable. The margin for error is so much smaller.
We love it because it’s smaller, it’s all you’re focused on, but it’s more difficult. You have to pay the bills. It has to make financial sense.
SHB: What do future growth plans look like?
Petras: My goal is to always take care of our teams at the community level — the support teams, the back office. My way to support them is to give them opportunities for advancement. We do that by growing.
The way culturally that we like to run Priority, we can maintain that [support] and have between 75 and 100 communities. That also allows us to make sure that we have a variety of capital partners, that our company is diversified like any good investment. I don’t want to have to let go of my teams and my resources because one partner changed operators.
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So, scaling up to that 75 communities, or the big, audacious goal of 100, that’s the sweet spot for us. I feel comfortable and confident that for our team and regions that we could continue to provide opportunities for those that want to continue to advance, while providing best-in-class training and support.
SHB: As a company that works largely in the middle-market sector, is there anything you’d like to say to people who shy away from the “forgotten middle”?
Petras: We have a building right now that is all assisted living. It’s a building that was constructed through the Low-Income Housing Tax Credit (LIHTC) program and is all Medicaid waiver. We opened it during COVID.
We have 35 percent margins in that building. Nobody would believe that in this industry. It’s not a nonprofit sector. We do actually derive decent margins while serving the middle market. Anybody would take that margin in their buildings today.
Let’s work together
SHB: What makes a specific market a target for Priority?
Petras: It’s based on if we can help. I love Hawaii, but it’s really far and I don’t have any teammates out there.
We go as far west as Texas and Oklahoma, but everything is really Midwest and East Coast. We already have teams established. There are sister communities. But Oregon would be tough. We don’t have the teams or expertise.
We really look at where our expertise would be helpful. We look at any given geographic location, home in and say: “What’s going on in this building? Why isn’t it successful? What’s going on in the local area? What’s not being provided?”
We look at the solutions, as well as the competition to determine what our specialty is or could be. We want to create a individualized experience that continues to build value with both current and prospective residents.
As operators, if there’s a price point that families are looking for and we’re not at that price point, we would refer them to a nearby community. Or if you want two bedrooms but we don’t have that, we know communities that do.
Consumers have a better out-of-the-gate experience knowing we’re all working toward what’s best for them. If you try to fit a round peg in a square hole, they have a bad experience. That gets us into trouble, especially in the media. As an industry we have been working in silos instead of standing up and saying: “We all have to stick together. What’s good for one of us is good for all of us, and what’s bad for one of us is bad for all of us.”
SHB: You have a strong focus on employees. What does Priority do differently to recruit and retain top talent?
Petras: We want to make sure people who come to work with us know they have access to Bobby and me. If you have a great idea, be careful bringing it to us because you’ll be running it.
We don’t have a human resources department. It’s our “corporate soul” — we’ve called it that since the get-go. A lot of people think of HR (human resources) as the place to get your paycheck. We have a different approach. Our mom, Debbie, is the director there.
It’s a place for collaboration. It’s where you’ll have a conversation. If you’re on a performance improvement plan, it’s not a countdown to your last day. It’s where we figure out how we can better support each other. That’s really making sure we all have a touchpoint together to say, “Have we not given the tools you need? Have you not given us your full efforts?”
I’m not saying our family approach is the right one for everybody. I’m a hugger. We’re a family organization, and we treat everyone like family.
Do not call me “boss.” That’s the worst word. We’re all working in this together. My job is to support people at the communities, and their job is to support the residents.
We want to understand what people really want to achieve and provide opportunities. If that’s to move from housekeeping to marketing, awesome, we’ll help you get that. If you want to be an administrator and grow into my position, awesome. If we don’t have people to replace our C-suite in the long run, we haven’t done our job.
We just started working with Arena Analytics, which has been a huge help finding cultural fits for us. Somebody can have the skillset and expertise, but not work out. Sometimes it’s a cultural fit.
That goes back to collaboration in our industry. If someone has a great skill set but isn’t a cultural fit, maybe they would be a better fit somewhere else. We have to retain people within our industry, to make sure they find the right homes.
We’ve all had jobs where we can do the work, but don’t like who we’re working with. That doesn’t make it a bad organization, it’s just not a fit for you. Look at it like how you select a school. It’s not that Ohio State University is better than the University of Michigan; it’s where you feel most at home.
SHB: What’s something that people within the industry would be surprised to learn about you?
Petras: That’s tough, because I’m such an open person, there’s nothing you can’t ask me. What’s my favorite food? You could go around any of our communities and they’d all tell you “champagne and french fries because they can be passed around the room and shared.”
I’m a champion for women, and I love to celebrate. Everybody knows I’ve competed in several Ironman Triathlons.
Part of it is I’ve been in the industry a long time. This year was the 17th NIC conference that I attended. People have known me. I’ve been open and honest about the struggles of being a working mom in a non-traditional house and managing a family business. I don’t think there’s much people don’t know about me. I’m a terrible secret keeper.
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Category: WHO
