New Senior Occupancy Hit by Holiday Management Shift

Like other companies in the senior housing space, New Senior Investment Group (NYSE: SNR) experienced bumps in the road related to occupancy, new supply and heightened competition last quarter.

Some of the challenges faced by the New York-based real estate investment trust (REIT)—especially where occupancy is concerned—can be traced back to management changes made by its largest operator, independent living giant Holiday Retirement. Other challenges were more market-specific, such as increasing labor cost pressures and fresh assisted living competition coming online.

In an attempt to get the company back on track, New Senior is actively working to sell assets that do not fit with its growth goals and desires, CEO Susan Givens said during the company’s second-quarter 2017 earnings call on Thursday. In the meantime, REIT leadership expressed confidence that occupancy at its Holiday communities will continue to steadily increase over time—and that the occupancy issues the operator is currently experiencing are merely “growing pains.”


‘More professional’ Holiday executive directors

Holiday Retirement’s decision to abandon its longstanding management model has negatively impacted New Senior’s occupancy numbers “a little bit more than [the REIT] had anticipated,” Givens noted.

In fact, occupancy for New Senior’s same-store portfolio fell 270 basis points year-over-year, and the majority of this decrease was driven by its communities operated by Holiday. Holiday had not responded to Senior Housing News’ request for comment as of press time.


As of 2016, the nation’s largest independent living provider operated 308 communities nationwide, according to senior living industry association Argentum. In February, approximately 77% of New Senior’s senior housing properties were managed by Holiday.

Beginning in May 2016, Holiday began transitioning leadership at its independent living communities from managers who lived on-site to executive directors who lived off-site. Though this change “introduces a true business leader at each community,” according to New Senior Managing Director David Smith, it has also led to an above-average drop in occupancy.

Still, New Senior is optimistic that Holiday’s transition to off-site executive directors will benefit both Holiday and New Senior in the long run, as traditional executive directors are more inclined to treat a community “like a mini business,” focusing on occupancy, NOI and boosting sales, according to Givens.

“More professional leadership is what it boils down to,” she concluded.

A tale of two property types

New Senior’s second-quarter 2017 revenue of $114.29 million missed analysts’ expectations by $390,000, while its second-quarter funds from operations (FFO) of 29 cents missed analysts’ expectations by 1 cent.

As of June 30, New Senior had a portfolio of 148 private-pay senior housing properties. The REIT’s independent living portfolio outperformed its assisted living portfolio in the three months leading up to June 30, Smith said on the earnings call.

Labor cost pressures last quarter were more prevalent in New Senior’s assisted living portfolio than in its independent living portfolio, Smith said. Additionally, the REIT anticipates the rest of 2017 will see “elevated levels” of new openings—though the majority of these new openings will be assisted living communities.

For these and other reasons, New Senior’s outlook for its independent living portfolio varies from that of its assisted living portfolio, Givens suggested.

“I often refer to this as a tale of two cities,” she said. “Our independent living facilities have generally fared better than our assisted living and memory care properties, which have seen weakness in performance, generally consistent with what the rest of the industry has experienced.”

Consequently, New Senior is working to sell off assets—including assisted living and memory care communities—that no longer complement its long-term goals. As part of this process, New Senior is building relationships with new operators, which is something Givens is “enthusiastic” about.

“We’ve seen solid, continued interest in our assets,” she said.

As of market close on Thursday, New Senior’s share price had fallen over 9% to $9.40.

Written by Mary Kate Nelson

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