Omega Healthcare Investors and Maplewood Senior Living hope to open their Manhattan high-rise assisted living and memory care community “as soon as possible,” Omega Chief Corporate Development Officer Steven Insoft said Friday on the real estate investment trust’s third-quarter earnings call.

Work on the $310 million Inspir Carnegie Hill is complete, and the building is pending licensure from the New York State Department of Health, which could come “probably sometime in the next week or so until year end-ish,” he said, noting the “tough environment” for state officials during the coronavirus pandemic.

“We did see a building in Brooklyn get licensed in the last few weeks, so we know the surveyors are out there,” Insoft said. “We’re working on communicating with the state.”

Marketing to prospective residents has continued during the pandemic, he said, adding that “there has been little if any resistance to pricing during the marketing.” Pricing for units in the luxury high-rise, he said, will be in the “mid to high teens” per month, including a basic fee and some value-added health services.

The deposit level has remained “fairly constant,” although the names on the deposit list have changed since April “as you might expect, given the frailty of the population,” Insoft said. Omega expected a 36-month sell-up when the REIT underwrote the project, Insoft said, adding that the ultimate timing may be affected due to the pandemic and the timing of licensure.

In early 2018, Omega had predicted a May 2019 opening date for Inspir Carnegie Hill, then referred to as Inspir Manhattan and marking the launch of the Inspir brand. At that time, the building was expected to cost approximately $260 million.

Maplewood, with 15 communities, represents approximately one-third of Omega’s investment in senior housing, Insoft said, and offers an example of early challenges and later stabilization and strengthening of occupancy amid the pandemic, which he called “encouraging.”

The Maplewood portfolio is concentrated in metropolitan New York and Boston and “saw meaningful census erosion early in the pandemic, with second-quarter census hitting a low point of 80.4% in early June,” Insoft said. “That said, their portfolio occupancy had returned to 84.5% by the end of August. While anecdotal, this experience provides some evidence that the pent-up demand during admission freezes can translate to faster-than-typical fill rates in the months that follow.”

Assisted living aid is ‘giant step in right direction’

Insoft noted that “while they very much appreciate the help they have received, private-pay senior housing operators have not seen the level of government support provided to other areas of senior care.”

Nonetheless, Omega Senior Vice President of Operations Megan Krull said, “The willingness of [the U.S. Department of Health and Human Services] to establish a portal for licensed assisted living facilities is a giant step in the right direction in terms of much-needed support for that sector.”

Federal and state aid to skilled nursing and assisted living operators, Omega CEO Taylor Pickett said, “has been critical in protecting and saving lives as we combat this unprecedented, deadly pandemic.”

Across the country, he said, as infection rates decrease, operator expenses drop and related cash flows improve, providing the REIT with “cautious optimism that once the pandemic is controlled, the pre-COVID operating environment, with appropriate new infection control protocols, will rapidly return.”

In the meantime, Pickett said, federal and state government support will be “critical” for skilled nursing and assisted living care settings, and a vaccine for skilled nursing and assisted living residents and frontline caregivers will be “a crucial catalyst to returning occupancies and cash flows to pre-COVID levels.”

Pickett predicted that operators will see additional aid regardless of the outcome of the upcoming presidential election, although the election may change the timing of the aid.

“It doesn’t make sense to provide … the type of support that’s been provided today and then to just stop,” he said, noting that $30 billion of Coronavirus Aid, Relief, and Economic Security (CARES) Act funds remain unallocated.

Krull said, “There is no rest for the weary as it relates to the battle against COVID-19, and continued government support into 2021 is necessary to combat with the long-term and short-term effects of this virus on the industry and the population that it serves each and every day.”

‘Challenging environment’ for acquisitions

Although the REIT remains confident in the prospects of senior housing, “the COVID-19 outbreak has warranted a far more selective approach to development,” Insoft said. “While we make further progress on our existing ongoing developments, we continue to work with our operators on strategic reinvestment in our existing assets,” he added.

Omega invested $22.3 million in new construction and strategic reinvestment in the third quarter, Insoft said, adding that $12.6 million of this investment predominantly was related to active construction projects, and the remaining $9.7 million was related to Omega’s ongoing portfolio capital expenditures reinvestment program.

Regarding potential acquisitions across the company, Pickett said that deals were “nonexistent” in the past few quarters but are starting to pick up.

“There is a difficulty with underwriting, and there is a difficulty with due diligence, too,” he said. “It’s hard to go into a building and interview employees, kick the tires, bring in third-party contractors, etc., [and] do environmental assessments on [capital expenditure] needs, so it just makes it a much more challenging environment.”

Also, Pickett added, operators are focused on minimizing the effects of COVID in their buildings right now. “I think there’s a perception that if they were to put up a facility on the market today, it might seem like a little bit of a ‘fire sale,’ so I think that’s slowing things down a little bit. It’s just a challenging environment to do deals.”

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