The transaction to restructure Five Star Senior Living’s business relationship with Senior Housing Properties Trust (SNH) remains on track to close on Jan. 1, Five Star CEO Katie Potter said Wednesday.
“As a reminder, the restructuring transaction principally includes terminating the leases and management agreements for all senior living communities we leased from and managed for the account of SNH and replacing those leases and management agreements with new management agreements,” she said on the company’s third-quarter earnings call.
In the meantime, Potter said, Five Star is investing in its workforce.
“We want to continue to attract and retain the best talent, and we intend to do so by providing them the tools necessary to be successful, recognizing and rewarding those successes, and building a culture of accountability, transparency and innovation,” she said. “As a result, total wages and benefits were up $5 million, or 3.5%, compared to the same period last year.”
Wages and benefits in the quarter were $147 million, which represented approximately 54% of senior living revenue, Chief Financial Officer Jeff Leer said.
Overall, Potter said, Five Star saw a net loss of $7.1 million in the third quarter, although she noted that the workforce investments and a one-time non-recurring expense — $1.85 million for a vendor-sourcing platform — “were by design and within management’s expectations as we build a strong operational foundation moving into the new year.”
The net loss, Leer said, marked a decrease of $14.5 million compared with the third quarter of 2018, mainly driven by the effect of the transaction agreement with SNH, which reduced monthly rent rates, but it was offset by the increase in wages and benefit spending.
Other stats reported by executives:
- Companywide employee turnover for the quarter averaged 4.63% compared with 5.01% for the same period last year, and it was roughly 40 basis points below the 5.03% turnover experienced in the prior quarter.
- Senior living revenues in the third quarter were $270 million, a decrease of $2.7 million, or 1%, compared with the same period in 2018, mainly due to SNH’s sale of 18 skilled nursing facilities during the second and third quarters. Comparable community senior living revenue, however, was up 1.5%, driven mainly by “modest” increases in occupancy.
- Total occupancy in the third quarter was 82.9%, up 90 basis points year over year but down 10 basis points compared with the previous quarter.
- Average monthly rate for the leased and owned communities was down 1% year over year.
Rehab is ‘focal point of growth’
Five Star is looking to its rehab and wellness division, Ageility Physical Therapy Solutions, to diversify the company’s revenue stream and also as a source for new senior living residents, Potter said, calling the clinics a “focal point of growth.”
A net 31 new clinics opened in the quarter, she said. Revenues were $12.1 million, a 41% increase compared with the third quarter of 2018 and a 9% increase from the previous quarter, Potter said.
“Opportunities for growth in 55-plus communities were realized in the third quarter, and as a result, Ageility has expanded its target market,” she said. “In light of these opportunities, Ageility continues to evaluate growth potential and fitness offering for older adults.”
Leer said Five Star anticipates continued growth in the division through the rest of the year.