Independent living remains a very attractive subsegment of senior living for New Senior Investment Group due to less government oversight, longer length of stay relative to other areas of senior living, less supply compared with assisted living and memory care, and higher margins due to lower operating expenses relative to other areas of senior living, executives with the publicly traded real estate investment trust said during a Wednesday third-quarter earnings call.
Private-pay assisted living remains of high interest, too, CEO Susan Givens said, noting that the REIT has one of the largest portfolios of independent living and assisted living properties in the country.
“Our strategy has been and continues to be focused on private-pay independent and assisted living properties,” she said, adding that New Senior derives all of its net operating income from private-pay assets, 71% of which are independent living assets. Twenty percent of the REIT’s assets are assisted living or memory care properties, and nine percent are continuing care retirement / life plan communities.
“To put in context, those are the largest concentration of private-pay and independent living assets among our peers,” Givens said. “We recognize the volatility in the market and acknowledge concerns around the senior housing sector, but we believe the senior care industry is one of the most exciting and compelling industries to be invested in.”
The REIT’s target demographic of people aged 70 or more years is the fastest-growing cohort of the U.S. population, she said, and is expected to grow six times faster than the total population over the next 20 years.
New Senior reported that it has $3.1 billion of investments in 154 properties with a total of approximately 19,000 beds across 37 states. Operators primarily are Holiday Retirement (76% of NOI) and Blue Harbor Senior Living (12%).
The REIT is noticing an increase in the average age that older adults enter independent living and assisted living communities, Givens said, but in independent living, length of stay has remained consistent.
“People are living longer, healthier lives, so everything has kind of shifted,” she said. “I don’t think that’s dampening occupancy on the independent living side. In fact, I think it’s actually helping occupancy on the independent living side because independent living facilities are increasingly able to accommodate a slightly older population versus what they have been in the past.”
Operators are using incentives to drive occupancy in areas with more competition, however, Givens said.
“It is not widespread across the portfolio, but with some of the assets, where there has been some more competition and new builds coming online, we are seeing the operators defer to kind of the easiest thing to do, which is to offer incentives to get new residents in the buildings,” she said. Such decisions need to be managed “very, very carefully” so they don’t harm operations, Givens added.