Operators of independent living communities and operators of senior living communities targeting middle-income individuals have experienced the COVID-19 pandemic in ways that differ from other senior living and skilled nursing providers, according to executives of two real estate investment trusts.
New York-based New Senior Investment Group’s portfolio consists almost entirely of independent living communities.
During the real estate investment trust’s first-quarter earnings call on Friday, New Senior Investment Group President and CEO Susan Givens said that because independent living residents typically are younger, on average, and have fewer health issues than assisted living residents, they are used to having the freedom to come and go as they please.
The REIT’s operators, like others, restricted access, closed communal dining rooms and common areas, canceled group activities, implemented quarantine for all residents, and implemented enhanced screening processes at entrances, including personal protective equipment requirements.
“The measures taken back then, while they now seem common and obvious after the implementation of all the shelter-in-place and stay-at-home orders across the country, in early March it represented a significant shift in daily life for the residents in our communities,” Givens said. “Our operators took difficult, but we believe necessary, steps to protect the residents and staff in our communities, and these restrictions are still in place across the portfolio.”
These enhanced safety protocols increased operating expenses 5% above budgeted expenses, she said.
Residents to date haven’t asked for or been given rent reductions, even though services have been reduced, Givens said. Instead, residents are expressing “overwhelming” support for what operators are doing to protect them.
The REIT’s portfolio of 102 independent living communities and one continuing care retirement community houses close to 11,000 residents across 36 states. Its operators have reported a total of 141 positive COVID-19 cases — 101 residents and 40 associates — across 16 communities. The CCRC, The Watermark at Logan Square, which is in Philadelphia and has a skilled nursing component, accounts for many of those cases (58). Holiday Retirement, by far New Senior’s largest operating partner, managing 98 communities, reported 33 positive cases among residents, representing 0.3% of total residents.
Occupancy fell from 88.7% in February to 86.2% in April, whereas move-ins decreased 55%. Givens said she expects that New Senior will experience additional declines in occupancy and lower move-ins going forward due to measures taken to limit the spread of the virus.
Although the COVID-19 pandemic has led to declining occupancy rates and decreased move-ins, the REIT is seeing increased interest from adult children looking for a safe environment for their aging parents.
An encouraging trend, Givens said, is a 30% increase in virtual tours. Although she said that increase may not lead to actual move-ins, she added that operators are hearing from adult children that three meals a day and oversight of activities are attractive benefits.
“We are hearing a lot of people calling and saying, ‘I want my parents to be in an environment where I at least know they are being fed, they don’t have to go to the grocery store, they don’t have to go out,’ ” Givens said. “We hope that translates to demand beyond the normal demand, but that’s hard to say.”
People still want to move into the properties and take tours, she added.
“The inquiries that we’ve been receiving in the last couple of weeks have been much higher than what we’ve seen historically,” Givens said. “It tells us there is a real view that the value this product offers is important, and people look at it and they want to be able to move their loved ones into these properties.”
CareTrust REIT: Middle-market communities contribute to higher-than-expected move-ins
Meanwhile, at San Clemente, CA-based CareTrust REIT, Chief Operating Officer Dave Sedgwick said that the positioning of the middle-market communities in its portfolio was the big reason that the REIT saw more move-ins than it had expected in April.
The communities, he said Friday on the REIT’s first-quarter earnings call, are more needs-based than more expensive private-pay assisted living options.
“Our seniors housing operators report that prospective residents and their children, after being in quarantine for several weeks and often together, are coming to the realization that they could not get the assistance needed in their homes and they couldn’t afford to wait to move into assisted living,” Sedgwick said.
Occupancy across the senior housing portfolio “held steady” from March to April, he said, describing the development as “really encouraging.”
CareTrust’s senior housing portfolio also contains a higher percentage of residents who are Medicaid beneficiaries compared with some peer organizations, Sedgwick said. He estimated that approximately 30% of residents receive assistance from the federal-state program.
“And so if there’s another round of stimulus … that’s related to Medicaid providers as opposed to the first tranches, [which were] related to Medicare providers, then, conceptually, those Medicaid seniors housing providers would benefit from that,” he said.
It remains to be seen how the economy will affect senior living occupancy longer-term, Chief Investment Officer Mark Lamb said.
“The seniors housing side is going to be interesting to watch over the next three, four quarters to see what operators view as the right operating expense run rate and to really understand how occupancy impacts will take place, particularly on the assisted living side that may or may not be needs-based,” he said. “Do potential residents stay home? Does unemployment stay high? Does the adult child all of the sudden care for mom or dad? We saw that in the downturn in 2008, the impact of the adult child taking on more responsibility for their parents.”
At least one COVID-19 case has been reported at 29 facilities across eight operators in CareTrust’s entire portfolio, Sedgwick said, adding, however, that the REIT has “generally viewed the running COVID counts as a bit of a ‘red herring’ due to the inconsistency in testing practices industry-wide.”
“Early on, our thesis was that any report of COVID cases would be grossly inaccurate and lower than the true numbers,” he said. “Our expectation has been that most facilities, including some of the very best ones, will deal with COVID at some level.”
Tracking the disease, Sedgwick said, has been complicated by the fact that asymptomatic carriers can pass it along. “Without readily available testing for the virus, identifying infected individuals has been extremely difficult,” he said. “Add to that the sudden scarcity of personal protective equipment and even the best providers have been working with one arm tied behind their backs.”
CareTrust has a total of 212 properties in its portfolio, including 41 senior housing properties as well as 18 “multi-service campuses” that include both senior housing and skilled nursing, according to a presentation released in conjunction with the earnings call. Among CareTrust’s top 10 tenants in terms of lease coverage are two with senior housing properties: The Pennant Group, with 11 properties in the CareTrust portfolio, and Premier Senior Living, with eight properties in the portfolio. CareTrust’s portfolio also includes 153 skilled nursing facilities.