Jennifer Francis & Katie Potter hedshots

The COVID-19 pandemic caused a shift in strategy for Five Star Senior Living and Diversified Healthcare Trust, but company executives said Thursday during fourth-quarter earnings calls that they remain confident in their paths to growth and improved profitability.

Jennifer Francis, president and CEO of Newton, MA-based Diversified, said the healthcare real estate investment trust started the year with the completion of a strategic plan to transition its Five Star leases to management leases as its primary operator underwent a turnaround. The pandemic swiftly shifted that focus to working with Five Star to protect its residents and team members.

“We did not expect this unprecedented global pandemic, nor the wake of its economic and social disruption. We are pleased our asset diversification provided some stability through the year,” Francis said. “We remain confident that with the steps we’ve taken, combined with expected senior living tailwinds, DHC is on the path of growth and improved profitability.”


As of Feb. 20, more than 23,500 residents and staff members in Diversified’s senior housing operating portfolio (SHOP) communities have been vaccinated, including more than 14,500 residents and staff members who have received both doses of the vaccine. The vaccination clinics are expected to be completed by the end of the first quarter.

Five Star has hosted vaccination clinics in 240 of its 252 communities, vaccinating 87.2% of residents and 42.5% of workers with their initial vaccine doses, with 52.7% of residents and 26.9% of workers receiving second doses. The company also expects to substantially complete vaccination clinics by the end of the first quarter.

Since the post-holiday surge in coronavirus cases, Diversified Healthcare has seen a decrease in active COVID-19 cases to 2.5% as of Feb. 20, down from 3.5% as of Jan. 20. Five Star said that its surveillance testing and protocols resulted in a confirmed resident case rate of 3.1%.

Five Star has administered more than 290,000 COVID-19 tests to residents and staff members, as well as performed health screenings for visitors to its senior living communities. Its communities received and continue to use rapid point-of-care tests at assisted living communities, continuing care retirement communities and skilled nursing facilities.

“The commencement of vaccine distribution in December 2020 marked a major milestone in the early stages of the senior living industry recovery,” Francis said, adding that about 99% of the communities in Diversified’s portfolio are accepting new residents. 

At the end of 2020, 89% of Five Star communities were accepting new residents, a percentage that increased to 98% as of Feb. 20. Five Star CEO Katie Potter said that senior living occupancy and revenues remain under pressure from negative net move-ins due to the ongoing pandemic.

Five Star spent $6.7 million on COVID-19 expenses in the fourth quarter, including $2.4 million on personal protective equipment. Five Star Executive Vice President, Chief Financial Officer and Treasurer Jeffrey Leer said that $6.1 million of that cost was related to its managed communities and was absorbed by Diversified Healthcare.

Diversified Healthcare received $10,139 in Provider Relief Funds under the Coronavirus Aid, Relief, and Economic Security (CARES) Act in the fourth quarter. The REIT received another $7,346 in relief funds in June 2020.

Five Star received $1.9 million in Provider Relief Funds in the fourth quarter related to its independent and assisted living communities as well as its rehabilitation and wellness clinics. 


Occupancy in Diversified Healthcare’s SHOP at the end of December was 72.2%, compared with 83.3% in December 2019 and 75.2% last September. Occupancy dipped again in January to 69.8%. 

Average occupancy during the fourth quarter for Five Star declined 3.2% at the communities it owns and operates and 3% at communities it manages on behalf of Diversified Healthcare, compared with the third quarter. As of Dec. 31, occupancy at owned and leased communities was 71.5%, and it was 72.2% at communities it manages on behalf of Diversified Healthcare.

Five Star Executive Vice President and Chief Operating Officer Margaret Wigglesworth said that the provider expects to see continued deterioration in occupancy through the first quarter. Completion of the vaccination clinics will drive admissions and support occupancy rebounds, however, she added.

Communities in Diversified Healthcare’s portfolio saw an 87% increase in leads over the beginning of the fourth quarter, which is approximately 32% higher than in March 2020, just as the pandemic was becoming prevalent in the United States. Five Star reported that sales leads are 83% higher in 2021 compared with rolling four-week average sales leads at the beginning of the fourth quarter. 

“We find this encouraging and believe it is a direct result of our efforts to make the vaccine available in our communities and the growing confidence in our ability to provide an exceptional resident experience,” Potter said.

Francis said she is optimistic that the vaccine rollout, along with slow inventory growth moderated by 2020 construction slowdowns, will drive recovery in senior living communities and in the industry.

“We expect the combination of these factors to result in a favorable supply/demand dynamic and support the senior living industry as vaccine distribution continues and the pandemic wanes, and pent-up demand translates to increased move-ins,” Francis said. 


Potter said that 2020 marked an important turnaround in Five Star’s business, as it completed the restructuring of its arrangement with Diversified Healthcare. The restructuring, she said, immediately improved Five Star’s financial position and stability.

Diversified sold several properties in the fourth quarter, including three senior living communities in October for $46 million, one senior living community in November for $3 million, and three senior living communities in December for $11.5 million. The properties were located in California, Mississippi, Nebraska and Wisconsin.

As of Feb. 23, Diversified had four properties under agreements for sale for approximately $95.5 million.

Looking ahead

“Much of 2020 and early 2021 has been spent with a focus on the effects of the pandemic and the recent extreme weather events across the United States,” Francis said. “We are cautiously optimistic with the progress that’s been made with vaccinations in our senior living communities and are looking forward to moving out of this difficult chapter and into a more normal world where we can set in place our plans to improve our portfolio and resume DHC’s path to growth and profitability.”

In 2021, Five Star expects to realize $4 million to $6 million in annual cost savings in its senior living segment upon completion of the rollout of initiatives, including a spend analysis to decrease costs and improve efficiencies, leverage scale for operational efficiencies and streamline sourcing opportunities.

The company expects its expansion into new business lines, such as active adult communities, will provide new market opportunities for accelerated growth.