Omega Healthcare Investors started the year by completing a $510 million deal with Healthpeak Properties that resulted in the acquisition of 24 Brookdale Senior Living communities.

The Hunt Valley, MD, real estate investment trust completed the deal Jan. 20, acquiring properties with a total of 2,552 units in Arizona, California, Florida, Illinois, New Jersey, Oregon, Pennsylvania, Tennessee, Texas, Virginia and Washington.

“We believe that Brookdale is exceptionally well-equipped to address the current COVID-19 environment and to prosper as we emerge from the pandemic,” Omega President and CEO Taylor Pickett said Friday on the REIT’s fourth-quarter and full-year 2020 earnings call. Brookdale, he added, has an “excellent leadership team,” substantial liquidity to sustain and expand its operations, and valuable home health and hospice operations. “We look forward to working with the team and possibly identifying new opportunities where we might partner in the future,” he said.

During the fourth quarter, Omega also completed $78.4 million in new investments and $19.4 million in capital renovations and new construction projects, including a $78.4 million acquisition of one assisted living community and six skilled nursing facilities in Virginia.

COVID-19

As of Jan. 31, 95% of the facilities in Omega’s portfolio had conducted or were scheduled within the next week for first-dose vaccination clinics. The vaccination rate for residents is at 69%, whereas the vaccination rate for staff sits at 36%. Pickett said he anticipates seeing those percentages increase with the upcoming second and third clinics.

Chief Operating Officer Dan Booth said the company’s portfolio experienced a “significant” drop in resident census and a “dramatic” spike in operating expenses, particularly for labor costs and personal protective equipment. Per patient day operating expenses increased $40 from pre-COVID levels in January to November 2020.

Those negative results, he added, were more than offset in the second and third quarters of 2020 by federal stimulus funds from the Coronavirus Aid, Relief, and Economic Security (CARES) Act — Omega operators received $175 million in federal stimulus dollars in the second quarter and $102 million in the third quarter.

Overall operator performance continued to be significantly affected in the third and fourth quarter due to the ongoing impact of the pandemic, Booth said. “We are cautiously optimistic that the rollout of the vaccines, which began in late December 2020 and continued in earnest in January 2021, will provide an important catalyst for improving occupancy statistics as infection rates decline and visitation restrictions begin to ease,” he added.

Pickett said continued federal and state government support will be critical for assisted living and skilled nursing settings. With at least $23 billion in Provider Relief Funds that remain unallocated, Pickett said he is hopeful some of those dollars will go toward supporting the senior living and care industry through its 2021 recovery.

| See: $261M disbursed to assisted living providers via Provider Relief Fund in Phase 3 |

“The efforts of both federal and state governments, including to grant priority access to vaccines for residents and staff, have highlighted their understanding of the vital role skilled nursing and assisted living facilities play within the healthcare continuum,” he said. “With both occupancy and facility costs meaningfully impacted by the pandemic, we are hopeful that this support will remain forthcoming as the industry continues to focus on protecting their frail and vulnerable residents.”

Steven Insoft, chief corporate development officer, said that private-pay senior living operators have not seen the level of the support provided to other areas of senior care.

“The COVID-19 pandemic poses certain challenges unique to senior housing operators, including increased costs, the challenges of managing COVID-positive cases, and meaningful practical limitations on admissions,” Insoft said.

Recovery

Occupancy challenges in senior living, Insoft said, have been tied to COVID-19 outbreaks. But he added that he has seen evidence of stabilization and strengthening of census in certain markets. 

The Maplewood Senior Living portfolio, for example, saw meaningful occupancy erosion early in the pandemic, with a second-quarter occupancy low of 80.4% in June 2020. Portfolio occupancy returned to 84.5% in August, however, and increased to 85.6% in November.

“We find this resiliency in occupancy to be encouraging, but we still have a way to go before pandemic-driven top and bottom line risk for our assisted living facility operators is behind us,” Insoft said.

The opening of Maplewood’s luxury assisted living and memory care high rise in Manhattan, Inspir Carnegie Hill, is awaiting licensure from the New York Department of Health, Insoft said. The final project cost came in at $310 million. The community was slated to open in the first quarter of 2020 but was delayed due to the pandemic.

“While we remain constructive about the prospects of senior housing, the COVID-19 outbreak has warranted a far more selective approach to ground up development,” Insoft said. “While we make further progress on our existing ongoing developments, we continue to work with operators on strategic reinvestment in our existing assets.”

For more coverage of the Omega call, see the McKnight’s Business Daily e-newsletter article and coverage by sister brand McKnight’s Long-Term Care News.

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