As we all know, the skilled nursing sector was battered during the pandemic, and not only by the media. But optimism is in the air, at least at Sabra Health Care REIT. Its top seven skilled nursing providers, making up 63% of its skilled nursing rental income, saw an average increase in occupancy of 431 basis points from a late-December low to the end of April. In addition, its skilled mix census in its skilled nursing/transitional care portfolio at the end of April 2021 was 148 basis points higher than in February 2020, before the pandemic.
Just like other owners of seniors housing, its senior housing managed portfolio occupancy bottomed out in the first half of March and has increased by 143 basis points through the end of April.
The performance at Sabra’s Enlivant joint venture portfolio is beginning to see a turnaround, and it couldn’t come fast enough. Gross move-ins in March were at the highest level in 18 months and close to their historical peak of 2.3 move-ins per month. Remember, these are mostly small communities (under 50 units). The leads and tours in March 2021 were 35% higher than March 2019 levels, and move-outs were 13% fewer than budgeted for March. The Holiday Retirement portfolio has experienced similar improvements in move-ins.
The Enlivant portfolio, however, has a long way to go. Average occupancy in the first quarter was 68.0%, down 1,350 basis points from the first quarter in 2020 (81.5%), and down 360 basis points from the fourth quarter. The cash net operating income has plummeted as well, hitting a quarterly low of $3.055 million in the first quarter this year. In the year-ago quarter it was $8.541 million. That has taken the cash net operating margin down to 9.7%, from 23.3% a year ago.
Excluding COVID-related expenses, the margins were much higher. From a recovery perspective, because the Enlivant communities are relatively small, to gain 20 percentage points in occupancy means they would have to average less than one net new resident per month for a year. Sounds easy, but the portfolio has never been at 88%, so it is not that easy. But increases are coming.
