Peter Kane - Episode 10

Peter Kane, Managing Director and Group Head, Healthcare Banking at CIBC US, has been involved in financing senior housing since 1998, with a team that’s been together more than 15 years. Listen in as he and Beth Mace discuss the challenges of financing through the pandemic, particularly with skilled nursing, which is Kane’s specialty, and what is happening in the market today. On a more personal note, you’ll hear about Kane’s upbringing in a large family, and his experience on the golf course with Michael Jordan.

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Transcript

Introduction: 0:05

Welcome to NIC Chats, ideas and inspiration from senior living leaders with host, Beth Mace NIC's chief economist and director of outreach. Get to know some of the people influencing senior living today and perhaps learn a thing or two from their experiences.

Beth Mace: 0:22

Hello, and welcome to the 11th NIC Chats podcast. My name is Beth Mace and I am the chief economist and director of the research and analytics team here at NIC. Thank you so much for joining us today. The focus of the NIC Chats podcast is talking to interesting people that have ideas that I think you'd like to hear about. As you listen today, I hope that you will find some humor, insights, inspiration, and hopefully what I call an aha moment when something pithy or insightful is said and the light bulb might go off for you. Now, let me tell you a little bit more about the structure of today's event. First, I will tell you three statements about my guest. Two of those will be true. Throughout the podcast you'll learn, which is true and which is false. Second, there are three standard questions within each podcast for each speaker. The first is"What's one of the largest challenges facing our industry?" Second,"What's one thing to grow talent in our industry?" And third"What's one innovative way or idea to strengthen our industry?" Now, as I say on with the show. So I'm delighted that our 11th NIC Chats podcast is with Peter Kane. Peter is managing director and group head of healthcare banking, us commercial banking at CIBC. Peter, thank you so much for joining us today.

Peter Kane: 1:40

Happy to be here.

Beth Mace: 1:42

So, as I mentioned, I have three statements about Peter. Two are true and one is not. And throughout the podcast you'll learn which is which. One, did Peter actually caddy for Michael Jordan or does he play three musical instruments or could he possibly be the youngest of 10 children? We'll stay tuned and see. Let's ask Peter as we start, tell us a little bit about yourself, what you do at CIBC, how long you've been there and your team.

Peter Kane: 2:11

Yeah, I've been involved in the senior housing business since 1998. I started my career with an investment bank that was doing tech and bond financing. I did that for two years. I then moved into a commercial banking role at the South Bank in Chicago. And from there, my career has kind of been with the same team, albeit under three organizations with South Bank first till'07, and when Bank of America bought the South Bank and a group of us, which started with about 50 and wound up being close to five or 600 of formerly South Pank employees joined this little bank called the Private Bank. We were at the private bank from 2007 to 2017, we grew the private bank from$4 billion in assets to about$21 billion in assets. At that point, CIBC the Canadian Imperial Bank of Commerce made the Private Bank their US footprint. And since then we have continued to grow as a part of CIBC and the team that I'm a part of, there's about 35 professionals. The senior team has been together literally for 17 years i n a ggregate. I've reported to my boss, J eff Steele for 21 years and the continuity that we've had in the industry has been tremendous and has been a selling point of our services for both banking and lending.

Beth Mace: 3:47

I would imagine, honestly, that's a long time to have a team together. So I would imagine you have a lot of advantages just because you know, how to, you know, how to cross each other's T's and dot each other's I's as you go along. Tell us a bit more about the type of lending that you are focused on.

Peter Kane: 4:03

We will lend throughout the spectrum of senior housing, senior housing system, assisted living, memory care and skilled nursing. I would tell you what we would probably say our competitive advantage is the skilled nursing space. I would say it probably accounts for 85% of our portfolio. Our portfolio today is roughly$3.2 billion on our balance sheet with another five to$600 in the syndication market. And the reason why we are so good at that, and we've been consistent with that is because we have a pretty good knowledge base of the industry. And we've been able to over the years, continue to learn and understand the intricacies of 50 different Medicaid systems. If we're in all those states really understand reimbursement, but most important know the right people to do business with them, being able to differentiate, you know, who are the right players to be aligned with because you know, this industry sometimes has its challenges and you have to be able to figure out who can be the right partners to assist along their way.

Beth Mace: 5:13

Let's talk a bit about those challenges for skilled nursing. So through the pandemic, the skilled nursing sector is one of the hardest hit sectors in terms of occupancy. So the market fundamentals are a little wobbly right now. So how do you get comfortable with that?

Peter Kane: 5:27

Well, I think if you look at the response right away the government realized because, you know, if you think about skilled nursing, probably depending on the facility, 80 to 90% of the revenues that come into a skilled nursing facility are government based, government reimbursement based. The skilled nursing sector is a critical part of the healthcare delivery system in this country and is a necessary release valve for the acute care system. Right away the government realized this and realized that they needed to make sure that the skilled nursing industry stayed strong and open so that they could be that release valve for the acute care system. So that as people that potentially had COVID or had emergency surgeries for other reasons, there was a place for them to go to if they weren't ready to return to home. A congregate care setting usually for these people is the best setting we feel because the care can be provided efficiently and probably at the lowest cost across the industry.

Beth Mace: 6:34

So we hear a lot about people saying that they want to stay at home and they want to, you know, age at home and go to end of life at home. So do you think that's a realistic expectation or is that going to put the skilled nursing business out of business?

Peter Kane: 6:50

I don't think so, because I think ultimately what happens is that, and it's possible for people to age and stay at home, but it might not be always practical. Care costs money and I don't, I think there's going to be a limit to what, you know, what the government's going to be able to provide in a home setting and there's going to be a limit to what people can afford. So it's, it's going to be that balance between affordability and what people have saved for to be able to do that and what the government's going to be able to reimburse. And will that be enough? And if you think about, you know, what happens in skilled nursing facilities by and large, you know, it is a lot of times the place where people wind up, you know, passing and that's not being morbid, that's just reality. And that burden, if it's not provided in a skilled nursing environment can be with children of the individual or family members. And that can cause its own set of stresses because, you know, there's not really a set program to have those people not have a job and stay home with mom or stay home with dad to make sure that everything's cooked for, clean for, taking care of medications provided, assistance provided with daily living. So it's difficult.

Beth Mace: 8:17

Yeah. And then we also have the challenge with labor and that's certainly top of mind for every operator I talked to and the idea of thinking that there's going to be sufficient labor for us to really be able to go into individual homes to take care of people, to me is not probably practical or realistic. And I don't know if you have any thoughts on that.

Peter Kane: 8:37

A hundred percent. I mean, that's part of the cost. I mean, if, if you've got one person that's responsible for visiting, I'll pick a number, four people a day and they can spend two hours per person, but then they have the travel time there and back. Is that as efficient? Is that providing enough care as somebody who's in a congregate setting that has, you know, significant issues, both medically and psychologically whatever, to be able to handle that and will it be enough care and will there be somebody there in the other 22 hours of the day. That person may need something.

Beth Mace: 9:17

Right. Totally agree. Let's switch for a second and we're going to talk about one of your statements. So out of the three statements that you provided me, one that you play three musical instruments, one that you actually caddied for Michael Jordan, or that you are the youngest of 10 children, which one of those is true.

Peter Kane: 9:37

I am the youngest of 10 children.

Beth Mace: 9:40

Wow!

Peter Kane: 9:40

I grew up, the house that I live in today is about three miles from the house I grew up in where my 94 year old mother still lives alone, by the way.

Beth Mace: 9:50

Wow. Wow.

Peter Kane: 9:50

Of the 10 of us, nine of us live within a five mile radius. So that has, I know that's kind of crazy. But it's kinda just attribute to what, how our family is.

Beth Mace: 9:59

And where is that?

Peter Kane: 10:00

It's in Northfield, Illinois. It's a suburb of Chicago.

Beth Mace: 10:03

Yeah. Well, I come from a family of six, so you beat me by four, but that was kind of a bad limp situation as well. All guys, all girls, what's that? Where, where does that fit?

Peter Kane: 10:13

I am blessed with seven sisters and two brothers.

Beth Mace: 10:17

And I have four brothers. So you're dominated by the women and I'm dominated by the men in my family.

Peter Kane: 10:24

Let's just say I was, well-trained

Beth Mace: 10:27

Very good. I bet your wife appreciates that. Okay. So let's talk a little bit more about sort of about your career path and if there's anything that you know, that you could share with our audience in terms of lessons learned or know you've been with a group of people, your team, I think you said for 17 years. So talk about that a little bit more and any lessons that you may have learned in terms of how you plan a career path or how you've gotten to the position you're at, cause you had a pretty senior level at CIBC.

Peter Kane: 10:58

Well, you know, I've been in the banking business, in the financial services business, pretty much my whole career. I had family members that were in the banking business and that seemed like a logical path for me to follow. I got internships in college, two summers after my sophomore and junior year, and I liked the business. And then I kind of wound up in the senior housing business kind of almost by mistake. I was doing something different in financial services. I didn't think that I was advancing in my career as fast as I wanted. I had an opportunity to join a boutique investment bank. And I did that for two years and that bank, that investment bank specialized in senior housing. And I learned a lot about the business but I learned that there was things that I wanted to do differently. And then two later, once again, a situation where I didn't feel like I was advancing enough in my career I got an opportunity to join a commercial bank. And instead of dealing with the nonprofit side of the business, I was able to deal with the for-profit side of the business. And what I've found is that I definitely have meshed well with entrepreneurial type middle-market business owners. I help provide my expertise and understanding of the industry and the business and my perspective on how to efficiently grow your business through the raising of capital efficiently, but also making sure that there's enough cushion in there to weather storms because this industry does have its share of storms. You know, lending is the same by and large you lend on kind of three things. You lend on collateral, you lend on cashflow and you lend to people that you believe can create the cashflow and then have the collateral. And it's a combination, that's an art. And I think, you know, being a specialist has been uniquely beneficial because I seem to have fallen in a specialized, in an industry where I'm confident that I have career lifetime job security because there's the senior housing business isn't going anywhere and there's always going to be somebody that's going to be needed to advise people how to raise capital, how to borrow money, how to look to the future and figure out what they want to do. And by the way, there's been a lot of times in my career when I've helped people decide, you know, it's time for an exit. And so let's, let's talk and figure out a way to wrap this up and move on.

Beth Mace: 13:25

Your expertise is really, if someone is borrowing with you, they're gaining the expertise of you and your team as well to help them guide their own business strategies and structures.

Peter Kane: 13:35

Right. I would say our approach to the industry has not necessarily been one of purely transactional business, although we do a fair amount of transactional business, but I think by and large, you know, we're very relationship focused. I mean, I can give you a perfect example, real world. There's a public traded company in the industry called Diversicare. I started working with Diversicare in 2004. I banked Diversicare for the last 16 years through three CEOs. They just decided that they'd just gone private as of today, they will go private.

Beth Mace: 14:13

Oh is that right?

Peter Kane: 14:13

The people there, the relationship, the time, the effort it's been great dealing with and every time there's an adjustment as every different management team comes in, you gotta acclimate yourself. And then once again, prove myself worthy to be there helping, assisting, advising and guideing. And so it's not just, I'm just not selling loans or selling deposits. I'm selling, you know, the 21 years of experience that we've got and helping along the way to have a good exit.

Beth Mace: 14:44

That's great. That's really interesting. We're going to go to one of our standard questions and that's what you do think is one the largest challenges facing the skilled nursing industry?

Peter Kane: 14:54

Well, no question today it is staffing and I think staffing is not just in skilled nursing, I think it's in the entire senior housing industry, it's in the hospitality industry, it's almost everywhere. You know, there was a big shock with COVID and I think people woke up and they said, you know what, maybe I don't w ant t o do this anymore. Or maybe I can do something different or maybe I'm just going to wait this out and see how long I can survive without, you know, having this job. And so, because of that, and because of the fact that some people don't want to get vaccinated and that's becoming, i t's going to become a requirement in order to work in any healthcare setting. It's g oing t o continue to be a challenge. And this whole thing has had a profound effect on a lot of people and other people it hasn't had an effect at all. So you've got a lot of different opinions and feelings about how much of a problem this pandemic has been, but the people that have been a ffected by it, it affects them deeply. So I think they e nded up sometimes maybe even being scared to come back to the industry. Hopefully what we can do is continue to educate people and continue to fight the virus so that, y ou k now, we c an get back to normalcy.

Beth Mace: 16:09

Yeah, I've been, you know, using the phrase lately that our industry really has a mission of care. It's a care mission, and it's not necessarily the industry for everybody but for those who are involved, it's a pretty compelling industry in the sense that you doing well by doing good. And I wonder if you're finding that as well, when you talk to your counterparts in the industry.

Peter Kane: 16:33

Totally agreed. And, and what I will tell you is that one of the most important things that I do over time, as I develop relationships with people is I get a sense of where they're at. And by the way, making the decision to lend to people is a lot of, as I said before, there's collateral, there's cash flow. And then there's people. And I think sometimes the most important thing you can lend on is people because if you have the right person doing the right thing, if they do get into trouble and they're honest and open with you, there's a way to work it out and figure it out but you can have people that have got great collateral and a great cash flow that are just people that want to cut corners or not do the right thing and not provide the quality care that they should. And instead take that cashflow and collateral and use it for themselves. That that becomes an issue.

Beth Mace: 17:30

That's interesting. So that's going to be one of my takeaways today, collateral, cashflow and people. That's a good, I should put that as a new motto for CIBC. That sounds great. All right. So let's talk a little bit about staffing. Have you had any ideas or when you talk amongst your teammates in terms of how you can grow talent in our industry, be it frontline workers all the way up to, you know, executive directors.

Peter Kane: 17:53

Well, I think it's like anything else. I mean, I think people want to be... wherever people work in whatever environment they want to be appreciated, they want to be compensated and they want to have a vision towards advancement. And if that can be provided and that can be put in front of people and show them the path of how they can have financial independence and a good work environment. I think that is what can attract people to the business. I think that, like you said, there's a care aspect. So if you're not somebody that is interested in providing care, then yeah, this is not the industry for you. But then also helping people along the way through that advancement with additional training and education, so that you can come into a facility and start as a CNA and then perhaps work your way and have tuition reimbursement to get higher levels of education to come as far as long as people want to go so that they can advance in their career. And then perhaps, you know, go, and I've seen it, I've seen people go that started as CNAs and end up at administrators and then end up people that own and operate multiple facilities.Those are the great stories. And that's when I, when I hear, and I was just at a dinner the other night... Guy that's been in the business for 45 years, and then his son is now in the business and we were talking about things at dinner and the topic of physical therapy brought up. He's like, that's me, I'm a therapist. And so I started as a therapist and today after 45 years, 50 years in the business has been incredibly successful, but still he goes back to"What does he know the best?" He talks to the therapist. He needs to know what to have or things he needs to know that people are advancing.

Beth Mace: 19:47

Yep. Yeah. I've been hearing stories recently to organizations that have paths for workers. And once that path is identified, I mean, you're totally right. Everybody wants to advance and do better for themselves. And you can go from being, you know, a dishwasher at a property all the way up to being, you know, the head of the environmental services, to being a much higher management position. So I think our sector actually does have a lot of opportunities for young people to come into it. So one more question. What is one way you think that we can strengthen our industry maybe from the financial point of view or that you're involved with, or some other tech as well?

Peter Kane: 20:26

Well, you know, I think that regulatory wise, I think there's this industry, especially skilled nursing is very, very heavily regulated. And, you know, when there's changes in administrations, there can be changes in the way people think and view things. And while I understand that the industry needs to be regulated. It almost sometimes feels like you need to get some industry experts that really know... An independent industry experts that can provide their thoughts, because I think sometimes, unfortunately, politically people make decisions that are going to help get them reelected. And I think it's not always the right decision. And I think it's kind of one of the issues I think this country faces because our political system, especially right now, is so divisive. So getting some common sense and regulatory processes so that care can be delivered. But then at the same time, if good quality care is delivered, that incent people to do that, as opposed to, you know, the rate is X a day and that's what you get paid and that's it. But if you can provide quality incentives so that people want to do better and have better outcomes and provide them incentive for doing that, I think that's something that really should be looked at.

Beth Mace: 21:49

Great. You and I had talked a little bit in prepping for this podcast today about workouts and stress in the industry and why we're not seeing that. So, and I get that question all the time. Is there a lot of distressed properties that are going to be put back into the market? So what's your feeling on that?

Peter Kane: 22:08

Well, I, I think what's happened is that if, and we've said this a lot around our shop is that if you went into the pandemic and you were having issues, you probably were able to survive through the pandemic. Based on if you were a skilled nursing provider, if you were because of the assistance you received and that could have done one of two things, giving you the time to fix your issues, or provided a bridge for you to sell. We're seeing a lot of that. There's a lot of transactions going on right now. I think there's the people that went in fine, and I think they're going to come out of the pandemic better. And then there's the people that went into the pandemic great and they're going to come out even better. So I think what's happening in those second and third categories is you have people that have quite a bit of capital that they've been able to conserve through the pandemic because they've had been successful through it and they got assistance for lost revenue and increased expenses. And so their balance sheets looked better and now they are in a position to put that capital to work and acquire other assets in their markets where they currently are today. And that's, what's taking the buildings that had issues going in that needed an exit. I think it's been well played so that the assistance that was given to the industry overall, I think has made the industry overall a lot stronger.

Beth Mace: 23:32

So if you had a crystal ball and you had to look forward that would be cautiously optimistic.

Peter Kane: 23:37

I'm definitely optimistic. I still think that there are going to be some of those that went in that were in trouble and for whatever reason they're just not going to make it, they're too far gone. They didn't make the right decisions, that those people that were in bad situations long ago and didn't make the right decisions during and are going to come out just the same, if not worse than they were before, and then buildings are going to close.

Beth Mace: 24:05

So we have to remember that, you know, this is a people industry. So in that instance, if a building closes, how is that handled in terms of their patients and staff?

Peter Kane: 24:15

Well, so what's going to happen is that, you know, those patients, and you know, it's not like the industry right now. That's the other thing that, you know, the occupancy is relatively at low levels relative to pre pandemic. So if you think of what's happened, the skilled nursing industry got hit hardest than any other industry. So there's a whole part of the population that just doesn't exist anymore because they're now gone. So that's one thing. Number two, you know, there's been a lot of elective surgeries that have been deferred. So that hasn't come up, that hasn't come back in. So I think you just have an overall population drop based on deaths because of the pandemic and that is driving lower occupancy. So if buildings fail and they have to close those patients... There'll be plenty of places for them to go.

Beth Mace: 25:06

That's the beds for them to move into.

Peter Kane: 25:08

Plenty of capacity.

Beth Mace: 25:09

Yeah. Great. Okay. Thank you. All right. Now I want to go back to, again, to your personal questions. So, again, we had that you were once a caddy for Michael Jordan that you play three musical instruments, and we know that you are in fact, the youngest of 10 children. So, which are the other two? Do you play three musical instruments or did you actually caddy from Michael Jordan?

Peter Kane: 25:34

I love music, but I couldn't play a musical instrument to save my life.

Beth Mace: 25:39

Okay. So that means that you actually caddied for Michael Jordan. So tell us about.

Peter Kane: 25:44

Yeah. So my job growing up was a caddy. I caddied at a local country club and back in the Bulls heyday, Michael Jordan had befriended the caddy master at the club I worked at and routinely he would play, and he did this with a number of places that he would call somebody up that he knew and he said, okay, I'd like to come and I'd like to play. Does anybody want to have a game? And there's plenty of guys at country clubs that would just love the opportunity to play with Michael Jordan. And usually if you played with Michael Jordan, the understanding was that you were playing for some serious money. So that's what happened. There was one day when this was routine. He probably would come a couple of five times a year and it got to be my turn. And so it was my turn and he played two other members and then he brought a friend. And the interesting part is, is that how it worked back then, is that because the other caddie said,"Okay, I'll take the two members cause I know that's a good loop." So he would carry two bags. And then Michael Jordan brought his friend. Well, his friend just happened to be Charles Barkley. So I caddy for both Michael Jordan and Charles Barkley. And I was very quiet, my mouth shut and I just did what I was supposed to do.

Beth Mace: 27:05

Oh, that's awesome. I would have been a great day. How old are you when you did that?

Peter Kane: 27:09

I think I was like 20 or 21.

Beth Mace: 27:12

Wow! That would've been a good highlight. That's fabulous. All right. Well, this has been a really great interview. Is there anything you'd like to share with our audience before we say goodbye today?

Peter Kane: 27:23

You know, I just think the industry is going to continue to have its struggles, but I think what needs to occur is that you need to have, and with this is the motto of NIC, you got to continue to bring capital providers and operators together to solve problems and figure out ways to take sometimes difficult situations and make them better situations because this industry is so needed by the aging population in this country. And we have to make sure that it is and continues to be a strong andhealthy.

Beth Mace: 27:57

I couldn't agree more. Thank you so much for your time. And for those who are listening, we appreciate you tuning in today and we'll be on to the next podcast. But in the meantime, thank you so much, Peter. I really appreciate it.

Peter Kane: 28:10

Thank you, Beth. Take care.