Diversified Healthcare Trust is “well positioned to unlock value and improve performance within its senior living portfolio,” RMR Group President and CEO Adam Portnoy said during the company’s third-quarter earnings call Tuesday.

The Newton, MA-based RMR Group provides management services to both DHC and Five Star, among its other holdings. DHC was tasked in April with transitioning 108 Five Star communities, representing approximately 7,500 units, to other operators by the end of the year after Five Star released a new strategic plan to exit the management of those communities and exit the skilled nursing business completely as it planned a shift in focus to larger senior living communities and stand-alone active adult and independent living communities.

Portnoy said that DHC has entered new management agreements for all of the properties transitioning from Five Star “to a diverse group of best-in-class regional operators.” 

Operationally, he said, DHC’s senior housing operating portfolio has started to rebound from pandemic lows, specifically related to the Five Star-managed properties. Same-property senior housing operating portfolio occupancy in those properties experienced their second consecutive quarter of occupancy growth, he said. Sales leads increased 41% sequentially during the third quarter, and tour volumes also “increased materially” in October, Portnoy said.

“We remain optimistic regarding the senior living sector, giving these encouraging signs, and believe the industry will benefit from a rapidly growing target demographic. It will drive demand for senior living in the future,” the CEO said.

Labor challenges

Senior living is not alone in its labor challenges, Portnoy added.

“We don’t only see labor shortages and wage inflation in senior living,” he said to an analyst participating on the call. “We obviously run a large hotel portfolio within the organization; we also run a large number of truck stops that have a large number of employees. This is pervasive, not just in senior living, but across industries.”

Five Star has been addressing its challenges partly by increasing wages, Portnoy said.

“It’s not a one-size-fits-all in all markets, because we have a portfolio in several different markets,” he said. “It sort of depends on the prevailing wage in that market. What are your competitors?”