New Senior Investment Group is scrutinizing 50% of the assisted living / memory care communities in its portfolio in an effort to improve the quality and performance of the portfolio, CEO Susan Givens said Friday during the real estate investment trust’s first-quarter earnings call.
“Our core independent living assets, which represent over 80% of our total net operating income, have generally been much more stable than our assisted living / memory care assets, and this quarter was no exception,” she said. “For the first quarter of 2019, the independent living portfolio was up 2.3% year-over-year, while our assisted living / memory care portfolio, which represents only 14% of our total net operating income, was down 11.9%.”
In the first quarter, Givens said, New Senior moved nine assisted living / memory care communities to new operators, she said, describing the communities as “underperforming.”
Three were transitioned to Grace Management, doubling the number of communities operated by Grace in New Senior’s portfolio. Four of the nine communities were moved to Integral Senior Living, and two were moved to Phoenix Senior Living, new operators to New Senior’s portfolio.
“While an improvement in performance won’t happen overnight, we believe we have the right operators in place for these assets to drive stronger performance at the properties over the long term,” Givens said.
The REIT also closed on the sale of an assisted living / memory care community in April, expects to close on the sale of another such community by the end of the second quarter, and is marketing six additional communities for sale, the CEO said. The latter communities are in the Salt Lake City and Dallas markets, according to David Smith, executive vice president and chief financial officer.
“Those are some markets where there’s been quite a bit of new supply being delivered over the past few years and that have been seeing some pressures on performance,” he said.
Optimizing the portfolio is one of four strategic priorities for New Senior in 2019, Givens said. In addition to transitioning communities to new owners or selling them, the effort also includes “intensive asset management” and capital expenditures, she said.
Forming relationships with Integral and Phoenix helps the REIT meet another of its priorities: Diversifying the mix of operators in its portfolio. With the addition of Integral and Phoenix, New Senior now has seven operators in its portfolio, according to a filing with the Securities and Exchange Commission.
Although the CEO said New Senior is “very pleased” with the performance of Holiday Retirement properties in its portfolio, she added that the REIT is “also very aware of our concentration with Holiday.”
As of the end of the first quarter, New Senior’s portfolio had 133 private-pay senior living properties in 37 states, Smith said. Holiday accounted for 99 of those properties, and Blue Harbor Senior Living accounted for 19, according to a presentation dated May 3 on the company’s website.
The REIT’s two other strategic priorities for 2019, Givens said, are strengthening the balance sheet and sharing more information about financial results.
The first quarter was New Senior’s first as an internally managed company, she said. The company relocated its headquarters on Feb. 1 and hired additional staff members, including Lori Marino as general counsel and Andrew Armstrong as head of corporate strategy.