New Senior Investment Group’s independent living model and more flexible expense structure have served it well during the pandemic, according to CEO and President Susan Givens.
“We continue to see features unique to our independent living properties that have allowed our operators to adjust protocols within our communities and effectively manage the spread of the virus while also reducing expenses in response to lower occupancy levels,” Givens said during the real estate investment trust’s third-quarter earnings call on Friday. “As a result, our financial performance has held up, and our results for the third quarter came in at the high end of our expectations.”
COVID-19 impact
The coronavirus pandemic continues to affect the REIT’s operations and financial results, however. New case activity has trended higher since mid-September but remains low as a percentage of total resident population, according to the company.
As of Oct. 28, New Senior’s operators reported 34 active resident (0.3% of the total resident population) and seven employee COVID-19 cases across 14 properties. Only three of the 14 properties affected have more than three active cases.
COVID-19 expenses declined significantly in the third quarter, decreasing 43% from the second quarter, as operators implemented new strategies to manage those costs. The favorable expense trends helped to partially offset lower revenue form occupancy declines, New Senior said.
Occupancy trends
Although occupancy continued to decline, trends improved significantly in the third quarter versus the second quarter. Third-quarter occupancy declined 160 basis points (1.6%) from the second quarter. October occupancy is on pace to improve further, showing a decline of 40 basis points (0.4%) compared with occupancy declines of 125 basis points (1.25%) in March and April.
“While overall occupancy has continued to decline, the magnitude of the decline seems to be slowing, and October occupancy is currently pacing to be the smallest monthly decline since the start of the pandemic,” Givens said. “Our goal has been to control the things that we can control and to be as transparent as possible.”
Operators have adopted new leasing strategies and have seen improving interest, according to the REIT. Givens said attributes unique to independent living — namely, no healthcare exposure and a more flexible expense structure — helped mitigate occupancy and net operating income declines. New Senior’s operators, she said, were able to tightly manage expenses, including those related to supplies, labor and maintenance.
Leads and move-ins continued to increase from the second quarter to 31% as restrictions on communities eased and operators adopted new sales strategies in response to the pandemic.
“Importantly, we have seen improving interest from our target middle-market [independent living] demographic, which demonstrates that there continues to be strong demand for our product,” Givens said.
Total lead volume in September increased 67% from April’s low point. October leads, she said, are on pace to increase from September and are expected to surpass the 2019 average for the first time this year.
“In the environment that we’re in, our operators are giving concessions and doing some discounts in order to drive occupancy,” Given said. “I think in a normal operating environment, that’s not a strategy that you necessarily want to pursue, but given the occupancy declines we’ve seen, I think that’s a tradeoff worth making.”
Move-ins also increased significantly from April to July and held steady throughout the third quarter, at 47% over the second quarter. Move-in volume, Givens said, recovered to pre-COVID levels in July and August, and October is trending to be the best month since the pandemic began.
At the same time, move-outs recently trended above historical levels and continue to outpace move-ins. Despite the recent increase, total year-to-date move-outs are still down 2% compared with 2019.
Some residents are citing COVID-19 restrictions as reasons for moving out, deciding to live with their adult children and families, the CEO said.
