As vaccines roll out to the broader population, older adults and their families are growing more comfortable about moving into senior housing, driving up leads, move-ins and occupancy, according to New Senior Investment Group President and CEO Susan Givens.

“More than a year after the pandemic began, we are cautiously optimistic that current trends are signaling the start of a potential recovery,” Givens said Wednesday during a first quarter 2021 earnings call. “Monthly occupancy trends have improved for three consecutive months, and in April, our portfolio had the first month of occupancy growth since the start of the pandemic.”

After a challenging year, Givens said she believes that the senior housing industry is well positioned to benefit from a stronger recovery.

COVID-19

As of Monday, the New York-based real estate investment trust reported one active COVID-19 case across the nine properties in its portfolio, with weekly cases declining by 95% since the peak of infections.

Vaccine clinics have been held at all properties, with operators collectively reporting vaccine uptake trending at 81% for residents and 51% for associates. A majority of properties are operating in a manner largely consistent with the pre-COVID-19 environment, executives said.

Occupancy

Although occupancy continued to decline in the first quarter, monthly occupancy trends improved significantly. January ending occupancy was down 80 basis points (0.8%), February was down 60 basis points (0.6%), and March occupancy was down 20 basis points. Ending occupancy for the quarter grew in April by 40 basis points (0.4%) — the first month of growth since the pandemic began.

The entire sector has been significantly affected, but independent living properties have performed better than other property types since the start of the pandemic, executives said. To date, independent living has experienced lower occupancy declines from assisted living and memory care — down 740 basis points (7.4%) and 940 basis points (9.4%), respectively. New Senior credited this performance to independent living’s more flexible operating model and lower COVID-19-related expenses due to lack of healthcare service provision.

New Senior reported strong demand, as lead and move-in volumes were above pre-pandemic historical averages. Positive sales trends suggest continued growth in the rest of the second quarter and heading into the second half of the year, executives said. Financial results are expected to be affected in the near term but to improve as occupancy continues to recover, according to Bhairav Patel, executive vice president of finance and accounting. 

Move-ins increased sequentially in February and March following strong lead growth in the quarter. March move-in volume recovered to pre-COVID levels, up 46% over a January low point. March leads were up 103% since a low in April 2020, the highest since the start of the pandemic, Givens said. April move-ins increased again month-over-month and reached the highest level since December 2019. In the near term, the REIT expects operators to continue using discounts and incentives to drive occupancy growth. 

Move-outs continue to stabilize, increasing slightly in March as elevated COVID-19 cases in December and January led to an increase in non-controllable move-outs due to death and higher care levels. April move-outs declined 15% from March as non-controllable move-outs stabilized. 

Expenses declined 3.2% year over year, but not enough to offset revenue declines from occupancy losses during the pandemic, executives said. Expenses were affected by increasing labor, marketing and maintenance costs as operators shifted their focus to occupancy growth. 

Patel said he is “cautiously optimistic” that the company is experiencing an inflection point, signaling the beginning of the recovery. He said that he anticipates labor, marketing and maintenance costs trending higher in the near term as operators intensify their focus on increasing occupancy. 

Looking forward

New Senior successfully completed the transition of 21 communities from Holiday Retirement to Atria Senior Living on April 1.

“We believe that by completing these transitions now, we are not only advancing one of our stated priorities of increasing operator diversification and alignment, but we are also positioning the assets to benefit from a potential recovery,” Givens said.

Despite challenges presented by the pandemic, Givens noted that senior housing fundamentals remain compelling. The aging population and demographic trends were unabated by the pandemic and are expected to drive demand for decades to come, she said. Supply dynamics are favorable, too, she said, as new construction starts and deliveries slowed due to increased construction costs on key raw materials. Independent living new construction starts are at the lowest level since 2014, and assisted living starts are at the lowest level since 2011, Givens noted. 

“Returning to pre-COVID-19 occupancy levels of 87% could represent $25 million of incremental net operating income,” she said. “If we assume the portfolio returns to peak levels of 92% occupancy, it could represent another $35 million to $40 million of incremental NOI. So together, we believe that there could be $60 million to $65 million of potential organic NOI growth within our existing portfolio today.”