I’m often asked why I started Benchmark, and now that we’re in the eighth month of our 20th year, it’s a good time to share that story with associates who may not know it. I think it’s also helpful to share what we did differently at the beginning to set us up for 20 years of success . . . as well as what we did that almost “killed us” before reaching our 10th anniversary!
What today’s high-tech companies went through in their early years, we went through, too. Like having a set of index cards as our accounting system. And being so undercapitalized that we frequently didn’t know how we’d meet payroll. I remember those days vividly. Especially the first day.
On Jan. 1, 1997, I moved into a rented space with two little offices in a building on Walnut Street in Wellesley, Mass. There was an area on the right where I could fit a desk, and I moved in by myself along with my new Dell computer, which I had ordered online. That was a big deal at the time, and I thought it was pretty cool.
I’d been in the senior living industry for a few years before that, having started in 1991 at a company called ADS, a local nursing-home company where I helped start a new affiliate called ADS Senior Housing. For them, I built 13 or 14 assisted living communities, which were the first ones in Massachusetts and Connecticut. The principal owner of that company decided to sell it in 1996, and I didn’t want to go with the company he sold it to. That’s when I started Benchmark Assisted Living.
After moving into my little office in 1997, I proceeded to put together a business plan and went off to raise some capital. After a couple of months, I got a commitment for $25 million in capital from a Boston investment company called AEW, which still actively invests in senior living. I remember thinking, “Oh my God, how am I going to invest $25 million?” Of course, since then we’ve invested $1.3 billion!
At that time in the industry, the late ’90s, assisted living was brand new, and it was really red hot. Companies were going public when they had just three or five communities, which I thought was ridiculous.
Experience Helps Forge a Different Business Plan
There virtually were no communities to buy, so everybody was in a development or new-construction mode. And that was the business plan for Benchmark – to build new communities. With our first $25 million commitment, we built eight communities and acquired three. Pretty good for a brand-new company!
Now, one thing I had learned the hard way was how investors work: They invest pension-fund money or school endowment money, they build something or turn it, and then they have to sell because, ultimately, they have to determine their return in order to know what their profit is. They can’t own for a long time.
I didn’t want to repeat my experience at ADS where, halfway into building an enterprise, the company was sold and I was out of business. This time, I wanted to control things, so my deal with the investor was to create a real estate company and a management company. Real estate requires a whole lot more capital, so I said to AEW, “Why don’t we invest together in the real estate, and I’ll own the management company?” And that’s what we did. We invested jointly in the real estate, and I went off and raised a bit of money for the management company on my own.
That was a really important decision because, had I done it together as they originally suggested, when they wanted to sell, I would have been out of business – again! Having control of the management company allowed me to do the successive joint ventures with different investors, and that’s the way we’ve operated ever since. Does it have downsides? Of course. But it has, strategically, been a very important decision for Benchmark.
Some Mistakes You Just Never Forget
There were a couple of moments in the early years that almost killed our company. Keep in mind that we started off in 1997 to develop. We began construction in 1998, 1999 and 2000, and by 2001 we were managing six communities and developing eight. Well, it takes a while to find sites, get them permitted and start construction, and we planned to open five of those eight in the first half of 2001. Plus, we acquired the Crossings portfolio of eight buildings on March 30 of that year. In all, we took on 13 more properties, and we almost killed ourselves! But we survived.
Four years later, in 2005, while we were managing 14 or 15 communities, we acquired 19 more! Within a 12-month period, we more than doubled the size of the company, and, of course, it was the second time, by doing the same thing, that we almost killed ourselves again. I used to have a great quote about how we learned to do business in those early years: “We’ve had to make every mistake twice just to make sure we didn’t forget.”
Hey, it’s 2017 and Benchmark has more than survived for these eventful 20 years. And while I assure you that we’re still learning from our mistakes, I can also say, with pride and gratitude, that we’re building a future on all that we’re doing right.