Senior housing has so far managed to weather Covid-19 better than some feared, according to Rick Matros, CEO of Irvine, California-based Sabra Health Care REIT (Nasdaq: SBRA). However, he emphasizes that more testing is needed to keep the senior housing communities safe and secure — particularly because Covid-19 has spread through Sabra’s buildings in odd ways, highlighting how difficult the virus is to contain.
“The narrative has been: SHOP’s going to get killed. With our portfolio, it just has not been the case,” he told Senior Housing News. SHOP refers to REITs’ senior housing operating portfolios.
In Sabra’s portfolio, senior housing admissions have slowed but so have move-outs, Matros said. This might reflect that residents feel more secure in senior living communities or that they lack other support systems.
About 27% of Sabra’s net operating income comes from senior housing, with the balance mostly coming from skilled nursing. The REIT has a total portfolio of about 430 properties. Sabra is not putting out specific occupancy numbers prior to its Q1 2020 earnings call next week, but among its major senior housing operating partners, Chicago-based Enlivant is down slightly while Markham, Ontario-based Sienna Senior Living and Winter Park, Florida-based Holiday Retirement are flat, according to Matros.
Like other senior housing REITs, Sabra has taken steps to preserve capital in the face of Covid-19. In late March, the company lowered its quarterly dividend and postponed a planned $150 senior housing joint venture. But, Matros believes that Sabra’s senior housing portfolio is benefiting from the REIT’s decision to focus on secondary and tertiary markets. While all markets have some advantages and drawbacks, he thinks that labor has been more stable in secondary markets, given greater staff loyalty and a less “competitive, dynamic” environment.
“We’ll see what happens; it seems like some of our peers had seen more declines in senior housing,” he said.
He’s hopeful that senior housing will continue to perform well, particularly given that this market is more vulnerable to consumer demand than skilled nursing.
“Independent living is an optional service. Assisted living/memory care is much more needs-based, but there’s still some level of optionality there,” he observed. “To the extent that they don’t take as big a hit, I think that’s a positive, because I think they’d maybe take a little bit longer to come back.”
While there has been some concern that older adults will want to avoid communal living as a result of Covid-19, Matros is optimistic that demand will still be there for senior living as buildings can start to accept more new residents in the weeks and months ahead — but more testing is needed in order to approach infection control more strategically and reassure current and prospective residents that they will be safe.
Testing has started to occur throughout Sabra’s portfolio, and so far, the virus appears to spread in unpredictable ways.
“When the flu hits your building, it just runs through your building, right?” he said. “That doesn’t seem to be the case here. We even had one really odd situation with a senior housing facility where we had seven residents that were in shared rooms that tested positive, but none of the roommates did — something that’s really weird.”
So far, Sabra has not seen a large influx of hospital overflow patients — a scenario that seemed likely a few weeks ago, and which could lead to a cascade of people into assisted living communities. However, Matros believes that Covid-19 is showing how interconnected aging services providers are with the overall health care system, and he hopes that this results in more government support in the form of supplies and financial resources.
“I’m still hopeful that, at least from a funding perspective, it’s going to become apparent to everybody that skilled and senior housing, as well as home health and everything else — everybody’s an important part of this continuum. It isn’t just the hospitals,” he said.
With reporting from Skilled Nursing News Editor Alex Spanko