Mission Success: Eric Mendelsohn Leads NHI’s Growth Strategy
- Aug 06, 2018
Achieving a leadership role isn’t always the result of a straight trajectory from point A to point B. Sometimes its mantle is thrust suddenly upon individuals who least expect it, yet are superbly prepared for the challenge. Take Eric Mendelsohn’s experience at National Health Investors.
In August 2015, the veteran healthcare executive had been on NHI’s leadership team for a little more than seven months, having joined the Murfreesboro, Tenn.-based REIT as its executive vice president of corporate finance only the previous January. Late one Friday afternoon, Mendelsohn found himself waiting at home to hear from his boss, J. Justin Hutchens, then the firm’s President & CEO. When Mendelsohn answered Hutchens’ call, he heard head-spinning news. Hutchens was leaving to join HCP Inc. as chief investment officer—and the board’s choice for the company’s interim leader was Mendelsohn himself.
“It was a surreal moment,” says Mendelsohn. “I was struck by how life can take sudden unexpected turns.” Two months after that career-changing call, NHI’s board made Mendelsohn’s appointment as President & CEO permanent.
To Mendelsohn, his appointment to NHI’s top job came as a shock; to colleagues who knew his track record, it was anything but. “In a nutshell, Eric is smart, intuitive, extremely business-savvy and a thoughtful leader who empowers others,” said Kellie Murray, who worked side by side with Mendelsohn as vice president of integration at Mendelsohn’s previous firm, Emeritus Corp.
Three years into his run as NHI’s leader, Mendelsohn oversees a portfolio that comprised 225 properties at most recent report. The assets range from ranging from independent-living communities and skilled nursing facilities to medical office buildings. Last year alone, the REIT completed acquisitions and loans valued at $215 million and achieved an 8.6 percent uptick in normalized funds from operations. That performance preceded $98 million in acquisitions and lending activity during the first quarter of 2018, as well as an 8.0 percent year-over-year increase in normalized FFO.
Before joining NHI as executive vice president of corporate finance in January 2015, he had garnered kudos for his role in the $2.8 billion acquisition of Emeritus Corp. by Brookdale Senior Living. Completed in July 2014, the blockbuster deal created the nation’s largest senior housing operator, an 1,100-community giant with a footprint spanning 46 states. As Emeritus’ Senior Vice President of Corporate Development, Mendelsohn was instrumental in making the Brookdale acquisition, and many others, a reality. Each deal “required a complex orchestration of multiple lenders, licensing agencies, attorneys, owners, finance partners, contractors and literally thousands of employees,” Murray noted.
Leaders in Training
A diversified educational and professional background did much to equip Mendelsohn for leadership, as well. He earned his undergraduate degree in international relations at American University, a master’s in banking in finance from Boston University and a law degree from Pepperdine University. “I was drawn to (real estate) in law school and took every course I could related to it,” he explained. “I still feel the same way, which is why I love my current position so much.”
He practiced real estate law for several years, representing both tenants and landlords. In 2000, Mendelsohn made the transition from counselor to practitioner, joining the University of Washington as a real estate transaction officer. That role provided the opportunity to work on the development, acquisition and financing of research, clinical and medical properties. Mendelsohn moved from the academic arena to the investor/operator side in 2006, when he came on board as Director of Real Estate and Legal Affairs at Emeritus Corp. The following year, he was appointed Senior Vice President of Corporate Development.
That set the stage for Mendelsohn’s role in the signature Emeritus-Brookdale merger, which was years in the making. “When we decided to sell ourselves, we began a marketing process that was very quiet and exclusive,” he noted. Mendelsohn describes his own role in the merger as serving multiple masters. He shepherded raw data about Emeritus and its properties and financing to the buyers; provided support to the investment bankers and external legal team; and worked with to gain the blessing of existing lenders, landlords and joint venture partners.
“Eric had excellent relationships with our lenders and other partners. They came to trust him and rely upon him, and it accrued to the benefit of Emeritus,” recalled Mark Finkelstein, Emeritus’ former executive vice president & general counsel. Besides his people skills, Mendelsohn’s gift for seeing the lighter side also serves him well. “He’s very conscientious in everything he does, but I highlight the sense of humor,” he explained. “No matter how tense or stressful a situation might be, he can find the humor in it. I think this facilitates getting things done and bringing people along as you get it done.”
Mendelsohn was tasked with carrying on business as usual as negotiations proceeded. “In the middle of all of this, we acquired 38 communities from Merrill Gardens and Welltower,” he recalled. “The employees in the new buildings were wondering why we didn’t order any new signage after the closing.” The reason? “We didn’t want to pay twice for the signs once we closed with Brookdale.”
Brookdale and one other suitor—a healthcare company not involved in senior housing—emerged as the finalists, and hammering out the details demanded a steady stream of late-night and weekend meetings. “At the end, it was determined that Brookdale would be a better fit and we decided to move forward with them,” Mendelsohn recalled.
Working on Emeritus’ acquisition by Brookdale yielded valuable lessons in leadership, management and operations. Many vital tasks during the course of a merger don’t fall under anyone’s job description, so it’s important to take on tasks that afford the opportunity to make a positive impact, Mendelsohn says. His team was skilled at transitions from long experience with acquisitions, so an internal group met with Emeritus departments to prepare them for the change ahead.
Another lesson, he says, is to always be gracious, even when the new ownership’s decisions take a different course than you might have hoped. “One should be as helpful and courteous as one can be in these situations, because that attitude will be remembered and admired by the other side as well as their advisors,” Mendelsohn advised. “People who grumble and are negative will be noticed by everyone on both sides, and that impression will follow you a long time during your career.”
To that last point, Mendelsohn notes that a career consists of a cumulative body of work, and whether you’ve been at a job for two years or 20, creating a good impression by the time you depart is invaluable. As Mendelsohn put it: “Referrals, future business and job leads can come from those colleagues you leave behind.”
Life at the Top
At NHI, success is defined as working with thriving operating partners that help seniors live fulfilling, joyful lives. Mendelsohn’s personal goal as company leader: “Having a team that is motivated, successful and feels supported by me so they can do their jobs effectively and still have work/life balance.”
Mendelsohn has initiated operational and strategic changes since stepping into the top job at NHI. “Operationally, we have upgraded our technology and data security systems,” explained the self-described consensus-builder. To ensure that the firm’s departments don’t operate in silos, Mendelsohn has added regular asset management and ‘all staff’ meetings. On the team-building front, NHI sponsors events ranging from lunches to celebrate birthdays and anniversaries to management retreats.
While pursuing a conservative investment strategy, NHI continues to explore paths for continued growth. The company has hired a new business development person to promote growth in the West and Midwest. “We are also focused on acquiring some behavioral health assets in the near future, so look for that,” Mendelsohn adds.
During Mendelsohn’s 17 years in healthcare real estate, a dozen of them in senior housing, the sectors have earned rising acceptance and participation from institutional investors like Blackstone as well as from non-healthcare players. The veteran executive cites that evolution as a positive trend.
“We need ideas and perspectives from people in industries like hospitality and multifamily,” he asserted. “Thinking beyond just real estate and to the overall care of seniors, we are seeing some amazing new products and devices come to market. Think robotics, artificial intelligence, uber-eats and facetime phone access with doctors. All of this will impact how care and healthcare is delivered to seniors.”
That said, Mendelsohn identifies areas of the senior housing sector that need improvement, such as the affordable segment. “A nice environment and great food are good if you can afford it—but what if you can’t… what happens then?” he observed. “There are a few clever operators out there who have figured it out, and we need to do more as an industry to help them.”
Moreover, Mendelsohn emphasizes the importance of recognizing what makes senior housing tick. He calls caregivers “the secret sauce” of success. “They create community, they create personality and they form deep friendships with the residents,” he contends. Even though many of those professionals could earn more money elsewhere, they prefer to work with seniors, he notes. “It’s a sense of mission, and I hope that this next generation has people who can take up that mission for us.”
Photos courtesy of National Health Investors, Inc.
Read more about Eric Mendelsohn in the CPE-MHN Mid-Year Update 2018.