Although the COVID-19 pandemic continues to have a significant effect on the senior living industry, New Senior Investment Group’s independent living business model has meant lower occupancy losses, resulting in better-than-anticipated financial performance, executives said Friday on a second-quarter earnings call.
Declining interest rates, lower general and administrative expenses, and cost savings initiatives allowed the New York-based real estate investment trust to offset its net operating income decline from COVID-19 and report strong operating results for the quarter.
CEO and President Susan Givens said that in early March, as the virus spread throughout the country, operators implemented significant measures that are now commonplace throughout the industry, including restricting access to outside visitors, securing access to personal protective equipment and supplies, closing all communal dining services, canceling all group activities, implementing quarantine for residents, and performing regular temperature checks for all residents and staff.
In mid-May, operators began lifting restrictions on most communities in a phased approach. Today, 78% of New Senior Investment Group’s communities are in some form of a recovery phase, allowing for increased participation in group dining activities, non-essential visitors by appointment and internal sales tours.
Across its 103 properties in 36 states — 102 independent living communities and one continuing care retirement community — New Senior has 19 active coronavirus cases among its 10,500 residents — 13 residents and six employees — across 10 properties, comprising 0.1% of its total resident population. Givens said that 56% of its properties reported no positive cases throughout the pandemic, and 72% never had a single resident case. Of the 45 properties (44%) reporting a COVID-19 case, only 29 reported a positive resident case, comprising 28% of its portfolio.
“We are seeing effective operator protocols continuing to ensure the virus does not spread within the properties,” she said. “We do believe there are components specific to the independent living model that limited the spread of the virus. Operators do not provide healthcare services in our communities, there are fewer interactions between residents and associates, fewer touch points and, therefore, fewer opportunities for the virus to spread.”
Givens said that due to the at-risk nature of the residents in the REIT’s communities, she expects that many infection control protocols will continue for some time, even as federal, state and local orders are relaxed. Services offered in its communities — including communal dining, group activities and visitation — are essential for the physical and mental wellbeing of residents, she added.
“Our operators face a host of challenges, including the wishes of the seniors they serve, as they strike a balance between the health and safety of our residents,” Givens said. “Striking that balance is critically important as we work to bring new residents into our communities and ensure resident satisfaction among our existing residents.”
Although the company experienced occupancy declines, Givens said they were not as severe as expected. As the owner of independent living communities, New Senior benefited from a flexible expense structure that enabled operators to objectively manage experiences in light of lower occupancy, she said.
As a result, net occupancy income was down 3.1% year over year, which was better than projected at the start of the pandemic.
Restrictions were lifted during the second quarter, but move-outs continued to outpace move-ins, down from 87.4% in March to 84.9% in June. Occupancy declines in March and April were the most severe relative to other months, but Givens said that trends are steadily improving, with lower rates of occupancy declines in June and July.
For instance, she said, monthly leads and move-ins remain below historical averages but continue to trend positively from low points in April. Monthly leads are up 62% in July from a low point in April, and move-ins are up 119% from April, Givens said. July move-ins are almost at levels seen in January, she added.
“While we are encouraged by the recent data points and the sequential improvements in leads and move-ins, the path to sustainable recovery remains uncertain,” Givens said. “Each month is a little different, and the trends vary by geography and community.”
Move-out volume is below historical levels throughout the second quarter but steadily increased. Move-outs are up 28% from April 2019.
Operating expenses associated with COVID-19 were about $1.5 million in the second quarter — representing 3% of total expenses — and below initial expectations as a result of lower costs related to in-room meal delivery supplies and temporary labor. This resulted in operating expenses trending down 4.5% in the second quarter.
“We believe this is a unique attribute of independent living,” Givens said. “While others in senior housing experienced large spikes in healthcare-related labor costs, including hazard pay and overtime, we have not incurred those expenses.”
