New Senior Investment Group will transition the management of 21 senior living communities in its 103-community portfolio from Holiday Retirement to Atria Senior Living in an effort to diversify the operator mix in its portfolio, President and CEO Susan Givens announced Thursday during the real estate investment trust’s fourth-quarter and full-year 2020 earnings call.
The move is expected to be complete in April and will mark the first U.S. communities for the Atria Retirement brand, which Atria described in a news release as “a lower price point independent living product.” Atria Retirement Canada has 29 independent living communities across seven provinces that collectively are home to more than 3,500 older adults, according to its website.
As of the fourth quarter, New York City-based New Senior’s portfolio included 98 independent living communities managed by Holiday Retirement, four independent living communities managed by other operators, and one Watermark Retirement Communities continuing care retirement community under a triple-net lease.
In addition to being a “great first step” in meeting the REIT’s goal of operator diversification, Givens said the new relationship with Atria is expected “to provide us with additional perspectives and best practices to drive organic growth as well as establish a new partner for potential future growth opportunities.”
Holiday will continue to be “an incredibly important partner” to New Senior, managing 75% of the REIT’s portfolio properties after the Atria transition, she said.
“They have consistently performed well, and we believe that their performance throughout the pandemic has solidified their position as a top operator in the industry,” Givens said of Holiday. “Our decision to transition assets to Atria was not based on poor performance at the properties. Rather, we recognize the benefits of having a diversified portfolio of operators, and we believe the transaction represents an important step to position in the company for future growth.”
The CEO said that New Senior and Atria have held discussions over “a number of years” on ways they could work together. She described the operator as “best in class.”
“We as a team have always been very impressed with their entire organization,” Givens said. “They are a very, very innovative and data-driven company, and we also know that they have successfully transitioned and managed independent living assets that are exactly like ours.”
The properties being transitioned from Holiday to Atria “fit well within the geographic footprint that they already have,” she said, “so they will be able to really fold these assets into their organization, we think, very seamlessly and easily.”
In a news release, Atria said that the transitioning communities are spread across nine states, concentrated in the Northeast, Midwest and Pacific Coast.
The agreement between New Senior and Atria is a long-term contract, “and it’s set up to really incentivize performance and to make sure that we’re all kind of operating on the same page,” Givens added.
Other priorities for the REIT, she said, include positioning the portfolio for recovery and growth after the coronavirus pandemic, as well as strengthening the balance sheet. New Senior’s top priority, however, is “safely managing through the pandemic,” Givens said. “We expect to continue strict expense control and to preserve liquidity until occupancy begins to grow,” she said.
Givens said New Senior is encouraged by recent trends related to the pandemic.
“We are cautiously optimistic based on the news from the last few weeks and the data that we are seeing in our own portfolio, and we are beginning to see some light at the end of this long tunnel,” she said.
COVID-19 cases across the REIT’s portfolio have declined “dramatically” as of Feb. 22, falling 78% from peak levels in January, Givens said.
As of Monday, New Senior’s operators were reporting 73 active cases — 60 residents and 13 staff members — across 23 properties, she said.
Active resident cases have not exceeded 1% of the total resident population at any one point during the pandemic, Givens said, adding that almost all portfolio properties have experienced at least one case, “but very few have experienced a significant number of cases at any one time.”
Independent living communities were not included in the first priority group for COVID-19 vaccination, she noted, but “[v]accine distribution is accelerating across our portfolio, and today, 83% of our communities have held vaccine clinics or have a confirmed provider.”
Operators are adding new clinics every day, Givens said, adding that New Senior is optimistic that 100% of the communities in the REIT’s portfolio will have had access to the vaccine by the end of the first quarter.
So far, approximately 80% of residents and 50% of staff members are participating in the vaccination process, she said.
Total portfolio occupancy declined 150 basis points (1.5%) in the fourth quarter of 2020 compared with the third quarter, but the drop was “a slight improvement” from the 160 basis point (1.6%) decline experienced in the third quarter compared with the second quarter, Givens noted.
October occupancy was down 20 basis points (0.2%) compared with September, making it “the best month since the start of the pandemic,” she said. “However, following stronger October results, occupancy trends worsened through the balance of the year and into January, corresponding with the surge in national cases.”
January occupancy declined another 80 basis points (0.8%) sequentially, Givens said. “We currently expect February occupancy to decline by 60 basis points sequentially, an improvement compared to the decline in recent months,” she added.
A positive trend, however, Givens said, is that sales leads and tours have “increased significantly” in January and February, with lead volume now at pre-pandemic levels after lead and move-in volumes had decreased “significantly” in the fourth quarter as a result of the resurgence of COVID-19 cases across the country.
“In January, leads surged 22% versus December, as COVID trends began to improve across the country and in our communities,” she said. “January weekly leads reached their highest level since before the pandemic in the middle of 2019 and were up over 100% versus the April low point.”
Lead volumes are expected to decline “slightly” in February because the month has fewer days, Givens said, but “weekly volume remains strong, and move-ins are at their highest point since November.”
Move-ins worsened in the fourth quarter, she said, but move-outs were more in line with historical levels. After experiencing higher than usual move-outs in the third quarter, move-outs decreased 10% in December and January from peak levels in August.