Significant headwinds challenge senior living, but experts remain optimistic about recovery. Here is a round-up of three earnings calls held Thursday.

Diversified Healthcare Trust

Jennifer Francis headshot
Jennifer Francis

Diversified Healthcare Trust has completed its selection of new third-party managers for 107 communities that the real estate investment trust is transitioning from Five Star Senior Living, and executed agreements with 10 managers to operate these communities, DHC president and Chief Operating Officer Jennifer Francis said Thursday in a third-quarter earnings call.

“Given the composition of this portfolio, which consists generally of smaller buildings, with residents that require a high level of care, we believe that each of these carefully chosen operators is the best choice to establish and execute business plans that optimize performance and create exceptional experience for residents and team members,” she said.

The Newton-MA-based real estate investment trust transitioned 69 communities during the third quarter, with an additional 30 transitioned after the end of the quarter. “We remain on schedule to complete all of the community transitions by year end,” Francis said.

One additional Five Star property is slated for closure, she said, and the REIT is evaluating the property for its highest investment use.

Looking ahead, Francis said, the senior living industry’s recovery will “continue to be uneven.” 

“Operationally, significant headwinds persist in senior living, and the delta variant has created additional pressure in some areas and magnified those challenges in others,” she said. “Although new supply has remained largely muted, many of the communities that compete with our Five Star properties offer aggressive rate concession packages this quarter and last, pushing Five Star to follow suit.”

Expenses related to wages and benefits in the Five Star managed portfolio decreased 1.9% from the second quarter following the transitions and the closure of a nursing home, Francis said.

Read more about the earnings call from McKnight’s Senior Living.

Five Star Senior Living

Katie Potter headshot
Five Star Senior Living President and CEO Katie Potter

Eight months into Five Star’s strategic plan to exit the skilled nursing business and the management of 108 senior living communities, “the transformation is taking shape,” Five Star president and CEO Katherine “Katie” Potter said in Thursday’s earnings call.

“As of today we have successfully transitioned 99 of the 108 smaller … communities [where residents have greater care needs] to third-party operators,” she said. “We expect all community transitions to be completed by year end.” 

Even before the pandemic, Potter said the demographic makeup of the Newton, MA-based company’s customer base was shifting to an older population and shorter stays, according to Potter. The turnover not only affected Five Star’s growth and consistency in revenues, Potter said, but also affected costs and working expenses. 

“Given these dynamics, we believe we can drive a more efficient business for both a younger and [lower needs] customer,” she said, such as offering concierge services. It also gives the company the opportunity to engage clients earlier in the aging process, Potter added.

“They have the options to use the services they want or need, as well as finding more flexibility,” she said.

Occupancy in Five Star’s portfolio of 20 owned communities increased 280 basis points (2.8%) at the end of the third quarter from the previous quarter. Likewise, occupancy in the company’s 120 communities managed for Diversified Healthcare Trust increased 130 basis points (1.3%) from the previous quarter. As of Oct. 31, occupancy for these communities has improved further to 74.9%, which represents a 250 basis point increase from pandemic lows, the company reported.

Read more about the earnings call from McKnight’s Senior Living.

Sabra Health Care REIT

Rick Matros headshot
Rick Matros

From the beginning of the COVID-19 pandemic through the end of the third quarter, Irvine, CA-based Sabra Health Care REIT has collected 99.7% of its forecasted rents, the real estate investment trust reported in its third quarter earnings call Thursday.

“This includes drawing on a letter of credit to fund $7.9 million of rent for September and October of 2021 due from Avamere,” the company said in a press release issued Wednesday in conjunction with the earnings call.

“Our investment pipeline continues to be very active. We have approximately $2 billion in the pipeline,” CEO and Chair Rick Matros said.

“In the third quarter, Sabra’s wholly owned senior housing portfolio continued to build on the recovery that began late in the first quarter,” said Talya Nevo-Hacohen, executive vice president, chief investment officer and treasurer. “As we stand here today, the recovery of occupancy seems on track.”

Sabra’s eight top eight skilled nursing operators, which comprise 68% of the REIT’s skilled nursing rent, saw increased average occupancy of 536 basis points (5.68%) from the late December 2020 low point through mid-October 2021. Excluding Wilsonville, OR-based Avamere, which has experienced a 274 basis point (2.74%) decrease in census since late December, average occupancy for Sabra’s remaining top seven skilled nursing operators has increased 701 basis points (7.01%) since late December, the company reported.

“Avamere’s occupancy dropped to as low as 67% in the first half of October 2021 as a result of admission restrictions in the states they operate in, but currently occupancy is at 71%, primarily reflecting occupancy benefits from the establishment of new COVID-specific units in the state of Oregon,” according to the press release.

Workforce challenges are the biggest obstacle to recovery, but Matros said that the increased vaccination rate among healthcare workers, and the new federal mandates from the Centers for Medicare & Medicaid Services and the Labor Department, point toward recovery. 

“With the holiday season coming shortly, we are hopeful we will see more of the workforce returning, if not by year end, then shortly thereafter,” he said.

Read more about the earnings call from McKnight’s Senior Living and McKnight’s Long-Term Care News.