Sabra Health Care REIT is continuing to see traction in operational recovery as senior living operators that overcame labor and wage challenges over the past two years now focus on occupancy, CEO and Chairman Rick Matros said Thursday during the real estate investment trust’s first-quarter earnings call.
“It feels good to at least believe we’ve gotten the worst behind us,” he said. “All in all, we anticipate a relatively quiet year, positioning us to constructively move forward as the industry continues to recover from the pandemic.”
Effective May 1, the Irvine, CA-based REIT withdrew and resigned its membership in the joint venture through which it owned with TPG Real Estate 157 assisted living communities operated by Enlivant across 18 states. As for 11 other Sabra-owned senior housing communities that are operated by Enlivant, Matros said he expects to transition them to a new operator.
Operators growing digital marketing footprint
Talya Nevo-Hacohen, Sabra’s chief investment officer, treasurer and executive vice president, said that providers are continuing to invest in new ways to acquire customers that now are seen as “foundational.”
“Our operators first became attuned to this when the pandemic began and they were forced to pivot to virtual sales, and they have embraced this change,” she said. “High-yielding, time efficient, cost-effective custom acquisition strategies are critical to filling communities.”
Larger operators that have the benefit of scale and capital are successfully using digital marketing to generate qualified leads that have a high rate of conversion to leases, Nevo-Hacohen added. Although conversion rates from personal referral sources are higher, she said, the absolute number of move-ins sourced through operators’ digital presence far exceeds those from other lead sources.
Occupancy, labor trends continue to improve
First-quarter same-store occupancy was 80.7% in the overall portfolio, a 140-basis-point increase over the first quarter of 2022 but a 100-basis-point decrease over the fourth quarter of 2022.
Sabra’s Enlivant senior housing portfolio continued its margin recovery, as both the Enlivant and Holiday properties implemented 10% annual rate increases.
“Occupancy in our skilled nursing and triple-net senior housing portfolios grew sequentially over the prior quarter,” Matros said. “Labor challenges still hamper the speed of recovery; however, we are seeing improved labor trends, albeit slowly.”
Its leased, stabilized senior housing portfolio saw consistent occupancy increases, with occupancy recovering to a pre-pandemic 88.2% as of February, 11.5 percentage points above pandemic lows seen in February 2021.
Move-out rates driven by higher care needs and deaths across the senior housing portfolio are stabilizing but remain elevated compared with pre-pandemic levels, Nevo-Hacohen said. She speculated that residents who moved in during the first round of COVID-19 vaccine clinics — which she called pent-up demand — are driving those higher move-outs 18 months later.
Sabra’s owned Canadian senior housing portfolio slightly outperformed its US communities compared with the fourth quarter of 2022. Nevo-Hacohen said that the Canadian operators are seeing a similar phenomenon as its US operators, with higher move-outs offsetting occupancy gains.
Labor costs and availability are resolving in Canada, she said. Sabra’s Canadian joint venture reduced agency cost by 85% in the first quarter compared with the prior quarter.