Profile — Going the distance: Arnold Whitman, CEO, Formation Capital
The Big Sur International Marathon is no jog in the park. The 26.2-mile course along the central California coast includes a fierce headwind, a two-mile climb up Hurricane Point, changing weather patterns and an undulating terrain.In other words, the perfect conditions for Arnold Whitman, who ran the legendary North American race for the 11th time at the end of April.
"It was a tough day, but I endured," said Whitman, who slayed the beast in 3 hours and 45 minutes. (Slightly disappointed, he said that a bidding war for the Genesis chain cut into his training.)
A veteran of long-term care investing for more than 20 years, Whitman is accustomed to long, difficult treks. He describes his work as CEO and president of Formation Capital as a bit of an uphill climb. It began with the purchase of nursing homes at a time when other investors were fleeing the market.
Now consider the past year: In June of 2006, GE Healthcare Financial Services agreed to purchase Formation's six portfolios, or 186 nursing homes, for $1.4 billion. Then it was on to the purchase of Tandem Health Care for $620 million. To top it off, Formation, as of press time, was fighting off a rival suitor for nursing home giant Genesis HealthCare.
"The sale to GE was the culmination of a strategy that began in 2000-2001, when the market was really in bad shape," he explains.
Formation's accomplishments over the last 12 months have won a lot of admirers.
The sale to GE and the Genesis deal were "the biggest shots in the arm of the skilled-nursing sector," said Robert Kramer, president of the National Investment Center for the Seniors Housing & Care Industry.
Those who have worked with him consider Whitman passionate and personable.
"He's straightforward. He's direct," says Jim McKeon, executive vice president and CFO of Genesis who worked with Whitman during the transaction. "He really believes in the long-term value and modernization of senior housing."
Not all Whitman's ideas turn to gold. An attempt to launch a hostile takeover for the former Beverly Enterprises in 2005 fell flat. While he says he wouldn't change his tactic, Whitman understands why Beverly officials were offended by the overture.
"We took an aggressive stance in the beginning and I think it hurt us in the end," he said. "They did not want us to buy the company because we put them into play. It's human nature."
Whitman, 55, readily admits he is a hard-nosed competitor who thrives on executing a deal. A college basketball player, the 6-foot-4-inch Whitman grew up outside of Boston. Basketball pro and former Sen. Bill Bradley was one of his role models.
Ironically, his first encounter with a long-term care facility was not a positive one. While working at a Washington D.C. consulting firm, just a few years out of college, Whitman went to the nursing home of a client.
"My thought was, why would anyone want to be in this business?" he recalls. But then another idea started to shape in his mind: opportunity. It was the same visceral reaction he had during the down cycle in 2000.
"I'm a bit of a contrarian," he says. "I look at a situation and say, 'there is value here.'"
His longtime business partner Chris Sertich describes Whitman as a "walking Rolodex" who is always coming up with ways of capitalizing on opportunities. Undoubtedly, one source of Formation's strength is the chemistry of the team, who complement the CEO's sales talents.
When he's not configuring multi-million-dollar deals, Whitman likely is running. He also relaxes by composing jazz and pop pieces for piano, and doting on his 21⁄2-year-old son, August. He also has a daughter, Anna, 18, and a 14-year-old son, Georden. His wife, Terri Lundberg, is a former officer at Health Care Property Investors.
Whitman's secret to success is relationships.
"My philosophy is always have your interests aligned with your partners', whether it's in business or in life," he said. "If I'm investing money and I align my interests properly with my operating partner, I'm more likely to be successful than if I'm selfish and a bit more focused on what I get."
Arnold Whitman's Resume
1975 - Graduates with psychology degree from the University of Denver
1985 - Joins The MediPlex Group, a publicly traded seniors housing and sub-acute care company
1986 - Serves as vice president of acquisitions at Meditrust, a publicly traded healthcare real estate investment trust
1993 - Forms Health Care Capital Finance, a private debt provider. HCCF eventually merges into PRN Mortgage Capital
2000 - Creates Formation Capital as an advisory and equity investment firm for
senior housing and healthcare
2006 -Formation sells six portfolios, including 186 nursing homes, to GE Healthcare Financial Services for $1.4 billion
Editor's Note: Formation prevailed in the Battle over Genesis, but a Fillmore lawsuit is still pending.