Unique seniors housing operating model produces profitability
LONDON: Occupancy declines in the early months of the COVID-19 pandemic were replaced by slight occupancy increases as the Pennant Group’s Pinnacle senior living business produced strong results into the third quarter, according to Chairman, CEO and President Daniel Walker.
During a third-quarter earnings call Wednesday, Walker said the Eagle, ID-based holding company produced another strong quarter as its local teams continue to face ongoing COVID-related challenges head on.
“In our senior living business, local leaders continue to find ways to move their operations forward despite challenges stemming from the pandemic,” Walker said, adding that this “determined execution” was the foundation of the holding company’s continued profitable results in the third quarter.
COVID-19
Although Walker said a “significant surge is ongoing” with COVID-19, he said testing and overall clinical procedures place the senior living sector in a better place, adding that staff members at local communities are interacting with residents and families to explain how they are keeping residents safe.
“We feel good about our position and our ability to track and support our staff members,” Walker said, adding that the organization’s emergency and critical needs funds implemented in the first phase of the pandemic to supplement federal and state programs around keeping staff safe remain fully active. “We feel a lot more confident in our ability to work through this next surge than we were even at the beginning.”
The company incurred $2.5 million in COVID-related costs and supplies for the nine months ending Sept. 30. Pennant’s senior living communities expect to continue to see increased labor costs due to increased overtime and premium pay, as well as the need for temporary labor to supplement existing staffing. Communities also expect to see increased expenses for personal protective equipment, testing and infection control supplies.
As the senior living industry continues to face ongoing pandemic headwinds, Walker said he is encouraged by news on the efficacy and future availability of a potential coronavirus vaccine.
“Like the rest of the world, we’re waiting and watching and doing everything you would expect to do without it coming,” Walker said of a vaccine. “I don’t see it as a complete solution to what people are going to have to face as they think about this, but we think it will be an enormous help.”
The company’s results do not include funds from the Coronavirus Aid, Relief, and Economic Security (CARES) Act Provider Relief Fund, which the company returned during the second quarter. Chief Financial Officer Jennifer Freeman said the company will continue to assess the impact of the CARES Act and other ongoing government legislation related to the pandemic.
Occupancy
Since the pandemic began, communities in the Pennant portfolio have experienced a steady decline in senior living occupancy as move-ins declined relative to move-outs. Weighted average senior living occupancy declined approximately 370 basis points from the first quarter, standing at 76.8% in the third quarter. Walker said that occupancy trends were ahead of national assisted living averages by 250 basis points as reported by the National Investment Center for Seniors Housing & Care.
Occupancy hit a low point in August but has since seen a 40-basis-point increase across the senior living segment.
“While COVID has impacted the senior living industry broadly, in particular the restrictions on in-person touring and visitation, not every senior living community has been impacted in the same way or to the same degree,” Walker said. “Our local operating model is uniquely suited to equip our local teams to respond to local market dynamics, including pandemic-related challenges.”
Walker added that this “operational resilience” is occurring in a portfolio of assets assembled at a significantly lower cost basis than industry averages. Those factors, he said, will help the company weather the COVID-19 storm and drive significant long-term shareholder value over time.
