New Senior CEO: Holiday Retirement Buildings Well-Positioned to Withstand Covid-19

New Senior Investment Group (NYSE: SNR) saw Covid-related occupancy declines in its senior housing assets in the first quarter of 2019.

Compared to other publicly traded owners, however, recent moves such as its $385 million sale of 26 assisted living communities to ReNew REIT and Merrill Gardens allowed it to mitigate the extent of the decrease.

Moreover, lead volumes across its portfolio are starting to grow, as operators have become comfortable conducting virtual tours, President and CEO Susan Givens said Friday during the New York City-based health care real estate investment trust’s (REIT) Q1 2020 earnings call.


“If you just look at those raw numbers our virtual tours have gone up over 30% [in April],” she said.

Before Covid-19 swept the U.S., New Senior’s turnaround strategy showed positive momentum. The assisted living portfolio sale weighted the REIT’s senior housing portfolio in favor of independent living, which accounts for 100 assets. Before the virus forced operators to secure communities, average occupancy for those properties increased 10 basis points in the quarter compared to 2019, Executive Vice President of Finance and Accounting Bhairav Patel said.

New Senior reported $86.6 million in total revenues in the first quarter of 2020, a 0.8% decline from the previous year. The REIT also reported normalized funds from operations (FFO) of $13.5 million, or $0.16 per diluted share. Net operating income (NOI) decreased over Q1 2019 to $35.5 million, largely as a result of the assisted living sale.


New Senior’s portfolio includes independent living properties across 36 states and four operators, along with one continuing care retirement community (CCRC) in the greater Philadelphia area. The portfolio serves over 11,000 residents and employs nearly 3,300 associates.

To date, New Senior’s operators have reported 141 positive coronavirus cases — 101 residents and 40 associates. The bulk of those cases are centralized to the Philadelphia CCRC.

Occupancy dropoffs

With two months of Covid-centric data to analyze, New Senior expects consistent future dropoffs in occupancy. Total portfolio occupancy declined 130 basis points from 88.7% on February 29 to 87.4% on March 31. Occupancy declined another 120 basis points last month, to 86.2%.

“The occupancy decline outperformed results from other senior housing owners in our coverage,” BTIG Analyst Michael Gorman wrote in a note to investors.

Analysts generally responded positively to the earnings, noting that FFO beat projections and that New Senior’s woes were not as bad as expected.

Tracking with what is becoming an earnings season trend, move-ins decreased 55% in April, and new leads fell 42% versus January and February averages. If these trends hold, New Senior predicts occupancy to fall between 300 basis points to 400 basis points in the second quarter, Givens said.

There are slivers of optimism, however. New Senior reported an increase in lead generation in April, as its operating partners became more acclimated to conducting virtual tours, which Givens points to as a sign that senior housing remains in demand during shelter-in-place orders across the country.

“If you just look at those raw numbers, our virtual tours have gone up over 30%. We don’t want to make any sort of assessment at this point. In light of everything going on, that’s a favorable thing to be seen,” she said.

New Senior sees its independent living properties managed by Winter Park, Florida-based Holiday Retirement well-positioned to ride out the pandemic and tap into pent-up demand, once restrictions are eased. These assets are concentrated in secondary and tertiary markets that have not been hard hit by the pandemic, and do not require the staffing levels of assisted living and memory care communities. 

Through Friday, Holiday reported 33 positive coronavirus cases in New Senior-owned properties, representing 0.3% of the REIT’s total resident population.

“The lack of [building] complexity is an advantage. You don’t have different parts of the building that cater to [higher care levels]. You don’t need multiple dining facilities. It’s a pretty basic building and we don’t think that you need to do a massive reconfiguration to make sure that the residents are safe and are actually adhering to [social] distancing,” Givens said.

Operating expenses climb

Occupancy declines will put added pressures on NOI. So will operating expenses stemming from pandemic response. New Senior estimates an 8% to 10% decrease in NOI in April.

Based on April data, New Senior expects a $1 million increase in expenses related to the pandemic — a 5% jump versus its budgeted expenses. If operating expenses remain elevated between 5% and 10%, versus projections, leadership predicts a 10% to 15% hit to NOI. Excluding Covid-related expenses, cash NOI would have increased 1.5% year over year, which was inline with projections.

“We expect these increased expenses to be partially offset by reduced variable expenses, primarily across marketing and maintenance, as a result of lower movements and reduced occupancy,” Givens said.

In response, New Senior has taken steps to strengthen its liquidity. The REIT realized a $20 million gain from the assisted living portfolio sale, and the REIT ended the quarter with $135 million in cash and equivalents on hand. Total outstanding debt at the end of the quarter was around $1.4 billion, with a weighted average coupon of 4% and an average maturity of six years, a benefit from the sale.

“We now have no significant maturities until 2024,” Patel said.

New Senior buttressed its liquidity by drawing down $100 million from its revolving credit facility, and expects to repay the loan amount in the near term as more clarity is gained from responding to the pandemic and the level of uncertainty subsides. The REIT’s board of directors agreed to slash its dividend by 50% for the foreseeable future, to $0.065 per share.

Non-essential capital expenditures have also been suspended, and the total spend for the year is expected to fall between 25% and 30% below the budgeted $20 million, Patel said.

New Senior stock ended trading Friday up 3.6%, to $2.90 per share.

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