Andrew Dick:                    Hello and welcome to the Health Care Real Estate Advisor Podcast. I’m Andrew Dick and I’m an attorney with Hall Render. Have you ever wanted to look at market rental rate data for MOBs in Charlotte, North Carolina, or construction data for hospitals in Atlanta, Georgia? Well, you’re in luck. A company called Revista offers this information to its subscribers, the resources online and most of the services are offered on demand. Think of a Google maps type search where you can identify medical office buildings around the country in various metro areas. Today we’ll be talking with Mike Hargrave at principal with Revista about big data for healthcare, real estate assets and how he and his partners decided to start the company. Mike, Thanks for joining me.

Mike Hargrave:                 Well thanks for having me, Andrew. I appreciate the opportunity and I’m excited to chat with you here.

Andrew Dick:                    Well Mike, before we talk about Revista let’s talk a little bit about your background and how you ended up where you are today. Where are you from? And once you got out of college, what was your first job?

Mike Hargrave:                 Well, I grew up in Montgomery County, Maryland, in a nice neighborhood there. And I ended up going to college at the University of Maryland where I earned my undergraduate degree. I eventually went on a few years later to earn my Master’s in Business Administration from Loyola College in Maryland. When I graduated from the University of Maryland, I went about the process of looking for a job and I had actually accepted a position with a financial services company at that time. My mother, who was living in Colorado at the time as a recruiter and consultant within the healthcare kind of longterm care sector had called me and was a little frantic one day. She went up to her, her boss who was with her in Colorado and asked if she could move back to Maryland and open up an office.

Mike Hargrave:                 And her boss told her no. So she called me frantically and desperately wanted to move and so we decided to go into business together. Let me go ahead and back up a little bit though. My mother is really the reason that I got into the business of healthcare real estate. She prior to her doing the recruiting and Colorado, she was a registered nurse and she worked as a director of nursing and then a regional director of quality assurance for a company ManorCare Health Services. Many of us may know ManorCare. They just got sold to a ProMedica Health System and did that big real estate transaction with Welltower. But she was working for, for ManorCare traveling all around the country doing quality surveys and regional quality assurance for their nursing homes.

Mike Hargrave:                 She was recruited out of ManorCare and recruited to help start up a new nursing home company a relatively young nursing home company back then called Integrated Health Services, which was based in Hunt Valley, Maryland. She became their corporate director of nursing or quality assurance, I guess they called it and really helped integrate it from a clinical perspective, develop a lot of their programming at the time. This was in the late ’80s, early ’90s. And at that time there was a big movement in the skilled nursing industry to prepare for subacute care. Basically, it was a higher intensive level of care than traditional nursing homes would, would normally give. Basically the nursing homes at that time, were going after increased medicare reimbursement. They did that by renovating their therapy departments and putting in more expansive rehab areas. Companies like Integrated Health Services, specialized in things like ventilator care and ventilator rehab.

Mike Hargrave:                 So she helped develop a lot of those programs and helped take integrated health services public back then. But she ended up leaving and going to start a recruiting business out in Colorado with a company that was an existing company. And then eventually she expressed an interest in coming back to Maryland. That’s when she called me and because the company did not agree to that, she called me. I was just graduating from college, and we devised a plan together to start our own sort of consulting/recruiting business that would specialize in the mostly post acute business. At that time, there wasn’t a ton of assisted living companies out there. I think Sunrise was just getting started. This is 1991 or 1992. And so we spent the next 10 years or so, 11 years doing corporate recruiting and executive level recruiting for companies that were involved in the skilled nursing business as well as the post acute business.

Mike Hargrave:                 And we did some work for of the large behavioral health companies back then and even hospital companies. So that was really a sort of my segue into kind of the healthcare real estate side of things. I had a finance background going into starting the business with my mother and I sort of specialized on the consulting and then recruiting and with the finance side of things. So I became networked with a lot of finance people, CFOs and acquisitions people and lenders and investment people. And so I had a really good background back then in terms of the finance and investment side of the healthcare business and also the real estate side of the business. So when we wound down our recruiting business in 2003, I believe, it was an easy segue for me at that point to kind of get involved in the finance side of the business. So that’s kind of a long winded background I guess through and just after college there Andrew.

Andrew Dick:                    Mike, this is interesting. When your mom calls you about this opportunity, you already had a job offer. Did she have to convince you to come start this new business or was the opportunity it really attractive to one, start your own business but two, to work with your mom?

Mike Hargrave:                 Yes. Good question. Well, my mom was very successful not only when she was working with Integrated and ManorCare before that, but also in the recruiting business, she was doing quite well. And so it was really, I mean I’m just graduating from college and I accepted a more or less entry level job in financial services and I was very interested in that field. Um, I believe I would have done quite well in that field. But it was really a no brainer to help put this venture together with my mother. And it was very quickly successful. We were hitting the ground running and the first really 90 days and we had to start hiring people within the first, I think the first year of operating and we moved to offices and I mean, we quickly became a big name in the industry. And it was really because of my mother at that time, she had a lot of existing relationships and so I was able to dovetail on a lot of those relationships and then eventually establish my own.

Andrew Dick:                    You work with your mother, you build this business for roughly 11 years. And then at some point did you and your mom decide that you both wanted to do something different or how did you end up making the leap from the recruiting business to NIC? And when I say NIC, the National Investment Center, which covers or represents the interest of seniors housing and various longterm care facilities.

Mike Hargrave:                 If everyone recalls in 1997, the Clinton White House and Congress passed the 1997 Balanced Budget Act, which really fundamentally changed medicare reimbursement back then for the skilled nursing companies. Prior to the BBA, medicare was really a cost based reimbursement system, which meant that the nursing homes would figure out all their costs of operating the medicare beds and departments and areas of a skilled nursing facility and then basically submit that for reimbursement as long as they were, were accurate and honest, they would get a check back. The BBA changed that to more or less a per diem based system meaning, so instead of all of your costs going towards being submitted for medicare, medicare would now instead, pay you X number of dollars per day per diagnosis.

Mike Hargrave:                 So if it was a hip replacement and you need to rehabilitation for a hip replacement medicare, depending upon what region you are in, would pay the nursing home X number of dollars per day, for a defined period to care for a resident like that. And it really the net result back then, there’s a lot of different figures. But the net result was for the year following the BBA, the average medicare rate went down by about 25% year over year. So that’s the average daily rate for medicare. And the skilled nursing companies back then were in high growth mode. Most were like the largest ones were publicly traded on the New York Stock Exchange. And they had high equity prices and they had a high levels of debt as well.

Mike Hargrave:                 With the change in reimbursement, the skilled nursing companies quickly found that they were more or less underwater and really headed in a bad direction. Many of the stock prices plugs for most of the companies, several of them went into bankruptcy. And there was generally a lot of distress in a skilled nursing industry really by 2010, 2011. I believe I saw a report back then at about one quarter of the entire industry was in bankruptcy because of the changes in reimbursement. Medicare eventually raised the rates a little bit from there, but the damage was done and the industry was fundamentally changed back then. So a lot of these companies that ended up going bankrupt where our clients. And so we ended up taking a hit ourselves during that period. And in 2002, 2003, my mom decided to retire and we decided just generally just to wine the business down. And that’s where I found the opportunity with NIC.

Andrew Dick:                    So you move over to NIC and that seems to be a good fit based on the connections that you’ve made working with your mom and the longterm care industry. And so what did you do for NIC?

Mike Hargrave:                 Well, I joined NIC in 2004 and I joined them to lead a new division that they were starting, a new product. They were starting called NIC Map, which was at that time, a database of skilled nursing and a long term care and assisted living and retirement community properties that we were covering, I believe at that time, the top 25 metro areas. And really I was familiar with NIC before that and had been in touch with them. So it was really, along with my contacts. It was an easy transition. I really understood and bought into the mission of NIC. NIC is a not for profit 501C3, and really their mission is they have this, sort of, or had back then this theory that, and really it wasn’t a theory, it was actual fact that does the skilled nursing and assisted living industry and retirement community industry was largely a cottage industry.

Mike Hargrave:                 There wasn’t a lot of ton of, institutional investment capital that went into the business. And so NIC had this mission of really propping up the industry and promoting its merits. And the way that they saw that, that would happen is through regular reports on the sector. And eventually that merged into this database called NIC Map which I was brought on to lead and grow. Uh, so I joined them in 2004 and worked there until, I believe 2013.

Andrew Dick:                    Okay. So NIC Map is somewhat similar to what you’ve created it Revista isn’t that right? Where you could look at data, for example, for a skilled facility, whether it be number of beds, who the owner is, transaction prices, et cetera.

Mike Hargrave:                 Right. So NIC Map was always envisioned as being a regular database of all the senior housing properties located in basically most of the major metro areas of the United States. They tracked skilled nursing, assisted living, independent living retirement communities like CCRCs. They had all kinds of different cuts on data. After about a year or two, they started tracking construction then they were tracking rents and occupancies really from the beginning. They started tracking construction a few years after they started and then they transitioned into sales transactions through a relationship that NIC had established with real capital analytics which is still in place today, I believe. So it was very much like a typical real estate data service that you might see in commercial real estate, except it was specialized and cut for kind of the seniors housing and care industry.

Mike Hargrave:                 And during my time there, it grew from 25 initial markets to eventually a 100 markets. And I believe there are up to well over a 100, I think 50 markets now. I haven’t checked it recently but it’s a growing data service. The users of that data, they sold it through annual subscriptions. The users of the data are typical users that you see in many real estate data services. They’re appraisers and the lenders and investors and owners. Even the occupiers like the operators use the NIC Map data a lot as well. So it’s a growing data service and it’s pretty similar to or at least somewhat similar to what we’re doing at Revista with a different product focus.

Andrew Dick:                    So Mike lets talk about you work for NIC for eight plus years and then at some point you decide with some other colleagues at NIC to start Revista. How did you come up with the idea and really what prompted you to start this new venture?

Mike Hargrave:                 Sure. Well NIC, so when we worked at NIC and even from my time before, we had lots of relationships with lots of different healthcare, real estate investors or different types of debt and equity providers to the sector. So the four of us that started Revista, each of us left NIC individually and not at the same time. So my partner, Elisa Freeman, who runs our event and all of our marketing left NIC I believe first. And then followed Hilda Martin. My other partner left maybe a year or two later or something like that. And then I left after Hilda and then Jim Leavy, who is our fourth partner, he left just after me. There was a fair amount of turnover in general at that time at NIC but we all left for various different reasons and we still are all to this day on good terms with everybody back at NIC.

Mike Hargrave:                 We got together really in, I believe it was early, or the summer of 2013. This was just after I had left NIC. We got together and had some meetings and discussed the fact that we had thought that there might be an opportunity to start a data service that would specialize more or less in healthcare real estate. So in medical office buildings and hospital real estate and other types of healthcare real estate that kind of, not necessarily what NIC tracks, but stuff that investors that have holdings in that space would be interested in tracking. So we touched base at that time with a few investors that we knew from my experience in the past and our experience in the past and we set up conversations, set up meetings, kind of spent about six to eight months doing due diligence all across the country in terms of we went around these companies and we said, “Hey we’re thinking of starting a data service that would track healthcare real estate. If we were to do that how would you want it to look??

Mike Hargrave:                 So, that’s where we learned things like that a lot of the companies in the sector currently were expressing to us that really there wasn’t a resource like NIC that really covered kind of healthcare real estate. That a lot of the firms use some existing real estate databases but we’re expressing that these databases specialized more or less in commercial real estate and they didn’t really have a focus at all and had not great coverage of healthcare real estate.

Mike Hargrave:                 So a good example is most commercial real estate databases, their filters are suburban office and core business district. And within healthcare real estate, what drives value is not core verse of course businesses, directors or suburban locations. It’s really how close to the hospital campus it is, how affiliated with the hospital it is. What types of tenants are in the building. Those things really drive value in healthcare real estate. And you really couldn’t pry that out from any of the commercial real estate databases. So the bottom line on that is, during our travels in, during our conversations, we found that in fact that there was a thirst for this type of information. That there was that company’s very much, if we would have listened, if we had listened to them and developed a database using filters that they recommended to us, that there was in fact a lot of opportunity to create something of value in the sector.

Mike Hargrave:                 So we also asked about the conference side at that time. And we found that there were a number and are still to this day, a number of smaller events. I think some of the news publications put on conferences throughout the sector. But there was really not a premiere kind of investment focus conference, similar would NIC had back in the senior housing and care industry. So with that we spent about six months kind of doing due diligence and we collectively decided at that time that we would make a go at it. So we put together a plan to make that happen and that’s where it all started.

Andrew Dick:                    So Mike it sounds like Revista really compliments the NIC Map data in that it covers other asset types that NIC probably isn’t tracking. Like you said, for example, the medical office buildings or on campus versus off campus, pure hospital, general acute care hospitals, Ltax or rehab hospitals. Is that right?

Mike Hargrave:                 Right. Our core property type that we track is the traditional or even newer version of medical office buildings or outpatient buildings. That’s the predominant part of our database. But we also track the hospital real estate. We also track, some post acute real estate, we track acute rehab, long term acute care hospitals. We’re going to be making a push into the behavioral hospitals sector. We currently track transactions there. There’s a lot of activity in that sector and it’s just a matter of time before we have a good existing inventory of all the behavioral health hospitals in our associated real estate in our database. So, that’s the area that we focused on. It doesn’t bump them into either skilled nursing or assisted living or any of those types. We may in the future examine those. But at this point we have no concrete plans to really diverge from the property types that we’re in right now.

Andrew Dick:                    So Mike talk about how, I mean there had to be a huge undertaking to build this database. Where do you get the data from and how do you put it all together?

Mike Hargrave:                 Well it’s a tremendous effort to build a real estate, an existing real estate database. And it’s quite expensive. So we spent almost a year of building a database. We were lucky enough in our initial travels to these large companies that several large companies agreed to sponsor us financially starting in 2014. So we had some monies to help pay for the development of the database in the research. But it wasn’t easy. It wasn’t like starting a database of residential housing where you can just go download all the assessment information on residential housing and bam, you’ve got an existing database and you can just go at it. I mean the assessor officers do a good job telling you whether it’s a single family home or a multifamily resonance, number of units, square footage, all that kind of stuff. But when it comes to healthcare, real estate, it’s completely different.

Mike Hargrave:                 There’s very little information in the public records that signifies that a building would be medical or even a lot of the hospital campuses, you can imagine the hospital they’re not for profit. And so that the local assessors looking at these monstrosities of buildings on these hospital campuses don’t always have a high level of interest in measuring what they look like or measuring the square footage or even when they were built. I mean, there might be 30 different buildings on an average hospital campus.

Mike Hargrave:                 And the hospitals themselves have historically done from a real estate perspective, not a very good job of parceling out the different buildings that are on their campus. So there, you could have the main hospital building and you could have maybe five medical office buildings, that are either attached or not even attached to the hospital, but are on campus. And yet they all have the same parcel. They all have the same address. And it’s very difficult a lot of times to really figure it out. What buildings are what with the hospitals and the systems. And so we spent literally an entire year just building our database of medical buildings. And it was very difficult. And it took a lot of effort. We leveraged several existing databases of health care practice locations. We scoured bond filings. We leveraged the hospital location lists like that via their website or even via newsletters and things like that.

Mike Hargrave:                 So that whole process took us about a year and that was really just to identify all of the medical buildings, whether they’re medical office buildings and are on campus. Are they affiliated with the local hospital or not? Just identifying and developing a directory of those buildings all throughout the United States took just about a year. And when we were done doing that, what we had is we had an existing database of about 37,000 medical office buildings. And these are buildings that, we qualified each of those buildings as a medical office building. And what that meant was we determined that the building was either purpose built or converted into for medical use. That the vast majority of the tenants in the building, if not even all of the tenants were healthcare practices involved in specific types of healthcare delivery?

Mike Hargrave:                 So as a for instance if it’s a health insurance company that has their regional headquarters in a building. That to us that’s not a medical office building. If it’s a counseling center that’s not a medical office building. A lot of school based clinics are in office buildings. And those aren’t medical office buildings. Typical medical office buildings that we track would have,, primary care or cardiology, the typical physician type practices that you’ll find in what most of us consider to be a medical office building. And so that was sort of the result of that first year of building a database of these 37,000. And there were almost 20,000 other types of buildings that we cataloged in our database as well at that time. So it was a big, it was a huge effort, it took a lot of resources and we were very lucky that we did get support in the very beginning. And we really owe a debt of gratitude to these initial sponsor partners that really helped us through that period.

Andrew Dick:                    So Mike when you sent me a couple of reports and it was really interesting to look at all of the data that’s available through your database. For example, you sent me a property view for a specific medical office building in Seattle and you could look at who owns the building. Look at what the most recent sale transaction when that occurred. There was a list of comparable buildings in that particular area along with rental rate data. And I’ll tell you the amount of information in the report was impressive. And so I’m guessing that appraisers and investors they want access to this information. Because it’s been my experience over the years when I hire an appraiser to come up with rent comps or to confirm a sale price for a medical office building, that data is hard to come by. It seems to be closely held and if your bank hires an appraiser that doesn’t do a lot of work in this area, you can be at a real disadvantage. And so I’m guessing, Mike, that appraisers and lenders and brokers all want this information because it seems to be closely held. Is that right?

Mike Hargrave:                 That’s exactly right. And we’ve actually, it’s interesting Andrew, but we’ve had conversations with some banks that use our data and they’ve expressed that exact sentiment that they had wished that all of the appraisals they got in or all of the due diligence they got in, that those firms just use our data because we have a really quick and easy access to rental rate comp information sales transaction comp information and other pertinent information that really zeroed in on the types of real estate that they’re looking at. And so it’s that’s why we started the databases ’cause we felt that there was really a void of this type of information. Or if it was out there, it was very clunky to go get, you had to leverage either different data sources or you had to piece together information from a data source that you already used.

Mike Hargrave:                 And it was maybe you were relying on broker reports in an area, things like that. And so the database that we have is really meant to provide an easier way to access that type of information and it’s custom made for healthcare real estate. And that’s really what our goal was from the very beginning.

Andrew Dick:                    So from what you’ve sent me, it looks like you have the ability to look at specific properties. You also can pull market view or metro reports that show different trends and comps within a certain metropolitan area. For example, Charlotte, North Carolina. And then you also sent me some information about construction reports. Now what’s involved in a construction report? Are we looking at construction costs trends, number of new construction projects within certain areas, or all of the above?

Mike Hargrave:                 Really all of the above. So in addition to our existing database, we started in 2015 tracking construction as well as transactions. It was our opinion back then that, there wasn’t really a good existing construction database out there. I know a lot of, I know the dodge data is out there. But we started tracking construction, the types of information we tracked. We didn’t approach it from competing with it with the dodge which specializes in getting as much information on a project as they can. So as early as they can so that the trades people can help bid on projects. Our approach and tracking construction has really measured up at the market level and let our subscribers know how much is under construction and what that translates to in terms of inventory growth over the next 12 months.

Mike Hargrave:                 And is it leased up or is it not leased up and what are the rental rates on these projects, and who are the active developers. We really approach it from more of a market risk type tool development thing. So that’s kind of how it will look at construction in a market. But we do track both medical office as well as hospital construction.

Andrew Dick:                    So Mike if someone wants to get more information about the day that that’s available, what do the subscription models look like?

Mike Hargrave:                 So we sell our data on an annual basis. So a company comes in and they say to us, we’re interested in looking at your data service. We want to buy a license to it. We would sell them a license and they get a certain number of users and that would enable those users to log into our data service and begin using it so they can run reports. All the data in the data service, it’s a interactive meaning you can pull up a report and click through to different properties or click through to different areas or even click through to other reports. You can filter the data as you want. Our database underlying databases is continually updated with things like rents, vacancy rates, sales transactions, construction information, any changes in ownership, we catalog immediately.

Mike Hargrave:                 So our users can pull this information up through a property view report and as long as they have username and password access they can do that at any time, even at midnight in one night. So that’s kind of how are our access works.

Andrew Dick:                    And if someone wants a trial subscription, that’s an option as well. Correct?

Mike Hargrave:                 Yeah. So we do have if people go to our website revistamed.com and they register in the upper right hand corner, there’s a link to sign in/register. If they do that, their email will be in our system and they’ll have an email and a password and they can search our property database. They generally can’t download reports other than just a few property reports. But you’ll at least get a taste for the types of information and types of data that we have in the system. And then if you’re interested from there, you just give us a call or send us an email and we can set up a demo or have further discussions and sample reports and then quote pricing as well.

Andrew Dick:                    Great. And I’ll tell you, I was really impressed Mike with the data you sent to me. I mean just the volume of data. I think some of my clients could use it when they’re trying to set rental rates with physicians. And an on campus MOB for example this data would be really valuable. As we wrap up here, I want to make sure we spend just a minute or two talking about your conference. You mentioned it earlier, but Revista has an annual conference. This year it looks like it’s in February in San Diego. Mike, talk just a little bit about that and what someone can expect if they attend the conference.

Mike Hargrave:                 Sure. So our conference, again, my partner, Lisa Freeman she worked at NIC for a number of years before even I got to NIC and she really developed a NIC’s conference into what it really has become, which is kind of the industry’s premier finance and an investment conference for the seniors housing industry. So we have more or less a similar type of vision for healthcare real estate. It was our supposition that there really wasn’t a conference that was squarely focused on finance and investment within healthcare real estate. And so that’s what we’ve aimed to produce. It’s an annual conference. So we’ve held these since 2015 and they’ve grown significantly each year since we’ve had the inaugural event. So last year the conference was in Miami, Florida. This year it’ll be in San Diego, it’s the first week of February and it’s going to be held at the brand new Intercontinental Hotel in downtown San Diego, right near the water.

Mike Hargrave:                 The hotel just opened in August. So it’s San Diego newest luxury business kind of hotel that’s in the city. So we’re very excited to be there. It’s going to be warm weather. There’ll be a golf tournament the first day, networking sessions and then we start our general sessions the afternoon of the first day and then programming continues the for the next day. So there’s great educational sessions. The sessions are a little different than you’ll find at some of the normal healthcare real estate events. They tend to focus on real estate. They tend to focus on finance. We focus on construction and we try to fold in different data sources and different information factual, statistical information that can help fuel some of the discussions that happened at these sessions.

Mike Hargrave:                 You also have, because it is a finance oriented conference, you have a growing part of the audience that is interested in attending for the deal making side of things. And so there are a lot of all of the suites are reserved and different you know, the hospitality rooms are all reserved. And there’s a lot of different investment meetings, a lot of different deal making meetings that happened during the conference. And that’s where a lot of the audience or a lot of the participants end up. And it’s been told that you have to fill your dance card quickly at our conference. And so for those that are thinking of attending, the suggestion is to look at our attendee list or you can access it after you register online and start making your meetings sooner rather than later and then you’ll have a nice successful conference.

Andrew Dick:                    Great. Thanks Mike. So looking forward, where do you see Revista in five years from now?

Mike Hargrave:                 So five years from now we have a lot of, to be honest with Andrew, we have a lot of growth straight ahead of us in this sector. It was a little surprising to us quite frankly, that the sector didn’t have a premier kind of investment conference. It was a little bit surprising to us that the sector didn’t have a dedicated focus data service. So we’re still growing our data service. We’re still growing our conference. We see just a ton of growth ahead just there. As we grow over the next few years, we may start to look at folding in some other fringe types of property types. I mentioned earlier behavioral health hospitals were now that there’s a decidedly a lot of activity in that sector, both construction wise as well as transaction wise, we are going to start tracking that.

Mike Hargrave:                 We might build out our coverage of acute rehab as well as Altax. We do track transactions on those property types now. We may move into some of the more post acute settings that are out there as well. But we’ll always stay close to kind of where we’re at right now. It’s a very large sector. I mean, when you total up the hospital as well as medical office sector, I mean, you’re talking about a real estate sector that has about a trillion dollars in current value. And so it’s a very large sector and there’s just a ton of information that we can mine even into the future that helps really prop up the real estate value of these properties and really helps create a good transparency and good information on these properties moving forward. So the bottom line is we have a lot of growth ahead of us, just where we are. We may dip our toes into a related sectors but by and large, we’re going to be focusing on what we have just in front of us here.

Andrew Dick:                    Great. So Mike, how can our listeners contact you if they have questions about your data service?

Mike Hargrave:                 Well, they can send me an email. My email address is mike@revistamed.com. Our website is www.revistamed.com. And we’re located in a Arnold, Maryland. And our phone number is 4439498794.

Andrew Dick:                    Great. Well, Mike, thanks so much for joining us today. This was a great discussion and I’ve certainly learned a few things. I want to thank our audience for listening to this podcast. On your Apple or android device. Please subscribe to our podcast and leave us feedback. We also publish a newsletter called the Healthcare Real Estate Adviser. To be added to that list, please contact me at adick@hallrender.com and remember the views expressed in this podcast are those of the participants only. And we thank you for your time and thank you for listening.