COVID-19 has had a negative effect on the senior living industry, impacting operator revenues and building occupancy rates, but National Health Investors’ leadership said during a second-quarter earnings call that its operators have performed well considering the challenges.
“Move-ins are happening, while move-outs are slowing, which is resulting in improved occupancy trends,” NHI President and CEO Eric Mendelsohn said. “Federal programs have assisted many of our operators, which is helping to bridge the gap until we return to a more normal operating environment.”
Mendelsohn said “reputations are made during a crisis, and when history reflects back on this time, there will be operators hailed as heroes.”
“Our operating partners weathered the initial onslaught of the pandemic, which introduced significant obstacles, including difficulties in sourcing PPE, and addressing erratic staffing and regulatory issues — not to mention negative media coverage,” Mendelsohn said. “While certainly not back to normal, our operators have adapted and general experienced better stabilization as move-ins have gradually rebounded to slow the rate of occupancy declines in the earliest stages of this crisis.”
As of Aug. 4, the Murfreesboro, TN-based healthcare real estate investment trust had 450 confirmed active resident cases — including 90 cases at its senior housing properties — at 85 buildings, including 43 senior housing properties, spanning 16 operators in 22 states. Although cases were down from the previous week, they represented the second highest total of positive cases since the company began reporting cases six months ago, according to Chief Investment Officer Kevin Pascoe.
NHI collected approximately 100% of its rents due for the second quarter and 96.9% of July rents, and August rent collections are as expected. NHI has not granted any rent concessions to tenants as a result of the pandemic as of June 30, indicating that it will evaluate any rent deferral requests as a result of the pandemic on a tenant-by-tenant basis.
The REIT has agreed to defer $2.1 million in rent due for the third quarter from Bickford Senior Living and has executed a non-binding letter of intent with Bickford to negotiate the potential sale of nine properties currently leased to the operator.
NHI also is negotiating an agreement to defer a portion of rents for the remainder of the year with another tenant; that agreement also would provide the option to defer a portion of rents related to the first half of 2021.
“The pandemic continues to pressure our operators’ margins, though occupancy is showing more signs of leveling off in June and July, while COVID-19-related expenses have also come down significantly in that time frame,” Pascoe said. “Our needs-driven senior housing operators were hit hard at the onset of the crisis, but they seem to be leveling off as move-in activity, while well below normal, has picked up enough to slow the pace of occupancy losses.”
Bickford’s average occupancy was 84.2%, down 300 basis points sequentially. NHI’s entrance-fee communities fared slightly better, as resident turnover is lower and residents tend to be younger and healthier compared with other occupancy types.
Senior Living Communities experienced average occupancy of 79.1%, down 120 basis points from the first quarter. After experiencing occupancy losses in April, occupancy has flattened out at around 79% and even ticked up to 79.2% in July, Pascoe said.
Holiday Retirement’s average occupancy was 83.5% in the second quarter, down 380 basis points from the first quarter. Occupancy continued to decline in June (82.3%) and July (80.7%). Although occupancy declines were more severe, Pascoe said NHI was impressed with Holiday’s response to the crisis, which saw infection rates below 0.5% in its buildings.
Donald Thompson, founder and CEO of Senior Living Communities, provided some color commentary on the pandemic from an operator’s perspective.
Thompson said he sees the COVID-19 pandemic as a short-term issue lasting 12 to 18 months at most. He believes a vaccine will be available in December, and by April society could see some sort of new return to normal.
Thompson’s Charlotte, NC, group of CCRCs experienced COVID-19 infections in 14 of its 15 communities — primarily in employees.
“COVID-19 has been at the forefront of our efforts for the last five months,” Thompson said. “Generally speaking, people in our industry have been prepared for this. And while you may hear a few stories of people that don’t do a good job, I’m here to tell you that 99.5% of the people I know are doing a great to fantastic job.”
Thompson said he has two substantial concerns moving forward — when and how will adult children be able to visit their loved ones in communities, and the overwhelming negative media coverage identifying skilled nursing — and by extension all of congregate settings where older adults live — as hotbeds of COVID-19 deaths.
“I know of multiple older folks who are trying to stay in their own homes. They’re isolated, they’re lonely, they’re eating poorly, they’re not getting the care they need,” Thompson said. “And yet they could be living in a senior housing community and they’d be living a more enjoyable, fuller, better and safer life. That’s what I’m hoping the story is that we can start to get out as an industry.”
