The effects of COVID-19 have not escaped the senior living and skilled nursing operators in LTC Properties’ portfolio, executives shared Monday on the real estate investment trust’s first-quarter 2020 earnings call.
During the period of April 18 to 29, with 93% of operators reporting, 35 of the REIT’s 180 properties said they had positive COVID-19 cases, Chairman, CEO and President Wendy Simpson said. She noted, however, that the REIT operates in 27 states, which have varying regulations and laws, and that operators use varied testing and reporting strategies.
Difficulty in securing personal protective equipment and sanitizing supplies likely contributed to higher numbers of cases being reported initially, Simpson said. “As this crisis persists, these supplies are becoming less scarce, but shortages remain, and the costs have increased beyond anyone’s estimation,” she said.
LTC helped facilitate discussions about PPE among the operators in its portfolio (which is approximately 60% senior living and 40% skilled nursing), Simpson said.
“We set up a structure … so that they could share information on where to get supplies as fast as they can, and the types of supplies they needed,” she said. “Right now, if you talk to an operator, their biggest challenge is testing. I think gowns are still at a premium in terms of getting enough gowns, but masks and gloves seem to be in good supply every place that they need them.”
PPE concerns lead to rent deferral requests
Concerns about PPE costs were among the reasons some operators requested partial rent deferrals for April, Executive Vice President and Chief Investment Officer Clint Malin said.
The REIT granted a combined total of $772,000 in deferrals to six operators, most of which were senior living operators, he said. Of that total, $137,000 already has been repaid by a senior living operator who ended up not needing the funds and by a skilled nursing operator who subsequently received funds from the government, he said.
Overall, the six partial deferrals represented approximately 7% of April’s contractual rent, Malin said.
One of the operators requested a deferral for May, too, he said. Otherwise, LTC had not received any other requests for rent deferrals as of Monday. As of Friday, the REIT had collected 55% of its rents for May, Malin said, noting that rents are due between May 1 and 15.
“We may deliver additional rent assistance in May on an as-needed basis,” he said. “We are not anticipating an across-the-board rent deferral program. …We have a lot of confidence in our operators’ ability to manage through this pandemic.”
Negative effects on occupancy, wages
COVID-19 also has negatively affected occupancy in the portfolio, Malin said.
Senior living occupancy as of April 23 was 80%, he said. That compares with 83% on March 31 and 86% on Dec. 31. Skilled nursing properties saw similar decreases.
“The decline in both private-pay [senior living] and skilled nursing occupancy is not surprising, given current industry trends,” he said.
Labor-related costs “have also increased to an almost unbelievable level,” Simpson said, “but what do you pay someone to try to fight an invisible enemy? The industry is recognizing these heroes with hero pay and other incentives to reward and acknowledge their value.”
Higher wages likely will continue for the foreseeable future, the CEO said.
“We’ve talked about it with our operators, and it’s very hard to take back money after it’s been given for a while,” she said. “So I would expect that the average salary costs at any facility at any level is probably going to tick up. It’s too early to tell how much.”
The usual challenge of recruiting workers does not appear to be an issue right now, however, she said.
“Our operators last month were saying that the employment base is much better for them because people who can’t get jobs at other places are applying for jobs at nursing homes and assisted living properties,” Simpson said. Hospitals also have furloughed some workers, she said.
“So on the plus side, there is sufficient labor,” she said. “On the negative side, it’s costing more. I would predict that going forward, labor costs are going to be higher. I don’t think it’s going to be 10% or anything like that, but it will be higher.”
Federal relief now and in the future
The federal Paycheck Protection Program has helped defer some of the increased costs for some operators, Simpson said.
The $350 billion Small Business Administration program has assisted “a number” of operators within LTC’s portfolio, Malin said. “Some have already received funding, while others are waiting for distribution of the additional $310 billion in funds that have been allocated,” he said.
It remains to be seen whether senior living otherwise will benefit from the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, Malin said, noting that some other funding from the law has provided assistance to skilled nursing operators. “At this time, the government continues to assess distribution of the remaining $100 billion, a portion of which may also benefit skilled nursing and private-pay senior housing,” he said, adding that Argentum and the American Seniors Housing Association have been advocating for senior living to receive funds from the CARES Act.
COVID-19 also is delaying the opening of a Fields Senior Living assisted living and memory care community in Medford, OR, Malin said.
“This week, Fields expects to receive its license to operate and is currently hiring staff for the community,” he said. The operator has been approved for assistance from the Paycheck Protection Program but has decided to delay opening the community until the stay-at-home order is lifted in Oregon, Malin said. “Fields, with LTC’s support, will continue to evaluate the appropriate time at which to begin admitting residents to the community,” he said.
With one month of the second quarter already over, Simpson predicted that the quarter would be “even more challenging for our operators than was Q1, due to the larger impact of costs related to PPE, cleaning and sanitizing and payroll, coupled with the financial impact related to reduced admissions and reduced revenues.”
“We are closely watching several financial relief programs that could possibly provide assistance to some or all of our partners. But at this point, we are waiting to see how it plays out,” she said.
Editor’s Note: For additional coverage of this call, see “Related Articles” below as well as our sister publication, McKnight’s Long-Term Care News.
