Q4 2020 New Senior Investment Group Inc Earnings Call

Whenever we are providing guidance for the first quarter based on actual results to date and current trends you're seeing across the country with respect to case counts.

We expect ending occupancy declined by approximately 170 basis points during the first quarter, while occupancy through the end of February is expected to fall by 140 basis points 80 basis points in Jan and 60 basis points. In fact, we do anticipate that trend to improve in March based on recent developments and are forecasting a 30 basis point decline.

We expect our first quarter 2021 same store cash NOI to be down approximately 15% year over year and first quarter EBITDA for <unk> to be between 14, and 15 cents a share again the year over year decline as a result of the cumulative impact on mentioned earlier as NOI for the first quarter of 2020 was not materially impacted by the.

<unk> until late March.

As we have done through the pandemic, we expect to keep you updated with respect to new information and trends that affect our portfolio and the potential impact on such of such trends on our business and financial results with that I will turn the call over to the operator to open the line for questions operator.

We will now begin the question and answer session.

Good question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys.

Withdraw your question. Please press Star then two and at this time, we will pause momentarily to assemble our roster.

And the first question will come from Michael Gorman with BTG. Please go ahead.

Yes, thanks, good morning.

Hi, Michael.

Hi, Susan I Wonder if you could just talk a little bit about the new relationship with atria and kind of how you sourced the relationship how you decided on what properties are moving over.

And maybe when you think about the the management contract with atria versus holiday.

Any differences or similarities that you made churches to include in there.

Yeah sure so.

In terms of how we how we source.

And we've now on <unk>.

Atria for a long time and actually have.

I've had discussions with them for a number of years about.

Ashley do together.

We as a team have always been very impressed with their entire organization.

You're very very innovative and new data driven company.

And we also know that they have successfully transitioned and manage independent living assets that are exactly like ours. So.

As we have gone over the last couple of years about our diversification and an alignment they've always been a group that has been kind of top of mind. So we've been in conversations and discussions with them for a long time.

Obviously the pandemic.

Cause all of us to think and to be really mindful about what the right timing and approach should be but it.

It's a relationship that came to be over a long period of time. So we're very excited about it and think that they'll do a great job on there just you know they are best in class as we thought so I'm happy about that in terms of the assets that we decided in how we thought about the portfolio, we were very careful and considerate in detail.

On which assets to transition and we looked at their footprint and their presence and also you know thought about what makes sense for our other operators and how we could manage that as best as possible. So the assets that were transitioning to them fit well with the geographic footprint that they already have.

So they will be able to really full.

We'll be adapted into their organization and we think very seamlessly on easy.

In terms of the actual specifics of the deal you know, we don't actually disclose specific management contract terms.

You know part of our desire to enter into this relationship was really to create real on better alignment.

With our operator, so I think a couple of things to say it is a it's a long term contract and it's set up to really incentivize performance and to make sure that you know we're all we're all kind of operating on the same day.

Okay, Great. That's helpful and then maybe on.

The ATM program understanding it's pretty you know pretty typical program for a REIT to have.

And its tool kit I'm just interested in how the.

Strategically kind of why now was the right time to put one in place.

You know I understand not necessarily looking to use in the near term but.

Just kind of some thought process behind why why now with the ATM.

Yeah honestly, there's no magic to know, it's something that our new now and as you pointed out most of it I think we might be the only I could be wrong, but I think we're one of the only if not the only reason our sector that does not have on it and so it was something we planned on putting in place and for US We just felt like.

They are putting into place in conjunction with the K made him up on there's no magic to it on as I mentioned and said you know we don't have any plans to use it in the near term. It's just you know very much could housekeeping and a standard tool that most recap.

Okay, great. Thank you very much.

Michael.

The next question will come from Vikram Malhotra with Morgan Stanley. Please go ahead.

Hi, Thanks for taking the question.

Wanted to dig into sort of the the guidance a little bit more you've laid out the occupancy side of things. Just wondering if you can give us a little bit more color on the.

The Revpar expectation then.

Oh, you expect expenses to trend and then just related to that the new.

Look forward into 'twenty, one no debt a lot of the residents have been vaccinated.

Big picture sort of how what's the high level plan in terms of getting kind of the occupancy back.

Sure so in terms of the guidance as.

As we pointed out that the expectation.

Is that occupancy trends will improve slightly in March and so as we said on occupancy well our expectation is that we'll see you know 30 basis points with declines in March so a bit of an improvement based on from the trends and then obviously, we felt that accelerate in terms of breadth or are we are expecting.

And it's actually holding pretty steady and pretty much in line with what we saw on kind of in the fourth quarter. In fact, I think it's up a little bit our expectation.

Is that it's it's up slightly in the first quarter versus the fourth quarter. So what we've seen is that you know we're still our operators are still able to get pretty good rate increases and kind of a historical rate increases with existing residence and he asks are discounting and promotions that are being offered to new residents.

But to me. He you know rate increases for existing residents are holding very well, which had been very much a positive you know seemed to come on come through all that so in terms of your specific on Revpar and not that that's you know what we're sort of expecting in terms of expenses. We do expect on our operators will continue to.

New tightly managing expenses, they've done a great job in doing that which you know as we've talked about extensively we think that's a much easier in an independent living model I'm just given the lack of health care. So our expectation is the expenses will continue to be you know kind of tightly managed it really is a function of occupancy and the fact that at this point.

And then we have seen occupancy declines every month since the start of the pandemic and that has a good point you know impacted the NOI as we as we look to Q1, so that's tougher within those numbers.

Okay.

Helpful. And then just a you know did the operator transition are you know I agree it's sort of good to get that growing interest obviously, a good operator, just wondering kind of bigger picture goes in terms of how much diversity or new operators do you plan to sort of inducted into the fold in.

In the interim as a transition occurs is there likely to be any.

Any sort of time that the transition takes.

In terms of the you know NOI growth, so that might be delayed or just the transition might take a while how should we think about that.

Sure first in terms of operator, you know kind of concentration and diversification plan.

We think this is a great you know kind of a first step in addressing our concentration in alignment them. You know we are continuing to evaluate and consider what makes the most sense for our portfolio.

That is very happy with our existing operators, but we do recognize and understand that there's a benefit to having you know a different perspective and in more than one one operator relationships. So it's something we're continuing to evaluate it and focus on them and I think you can expect to see that going forward.

I think the second piece of it around.

Alright.

To your second part of the questioning on yes.

Yeah, just the transition or the like is it from the South birds, you know could there be sort of a day.

Delay or pause in sort of the that the trajectory that you witnessed so far in underlying occupancy just sometimes transitions take a while before you see kind of improvement in underlying results. Yeah. Sure. So I think you know our expectation is that the transition will go very smoothly again part of.

Our decision to work with atria in particular, they've done this before and so you know they they know how to do it obviously independent living is.

Generally a little bit more stable and so we think that that no will of course help as we transition and on top of that and do you think that you know while COVID-19 is obviously difficult for all the reasons. We know it's also a good time to transition and as long as we're being very mindful of the impact it has at the community level.

You know I think that you know putting atria into the App. It's now when we are hopefully starting to see some signs of recovery well actually you know results in a really good runway for growth as we move forward. So I think that our expectation is it will be you know smoothed out.

And they are committed to working you know very very carefully and closely and working in conjunction with holiday to mature very smooth transition. So we think it will go well.

Okay, great. Thanks, so much thanks.

Thanks Vikram.

The next question will come from Daniel Bernstein with capital one. Please go ahead.

Hi, good morning.

I'm actually going to follow up on price.

I'm going to follow up on that and to school.

No.

I didn't hear anything in the steps in terms of <unk>.

Investment in and I was just trying to understand maybe.

How that fits into the picture in terms of diversification.

And when we May start seeing you become more aggressive on the investment side.

Yeah, obviously, we're at the bottom of a cycle here and.

There's probably opportunities for growth.

And diversification of operator, so just kind of wanted to get your thoughts are there, especially in light of the ATM.

Yeah sure I mean, I think that obviously diversification through growth.

It is important and is a way of achieving some of the diversification goals that we've pointed out. So that's something we're certainly looking at and considering I do think that by partnering with additional partners that could lead to additional growth opportunities, which is part of the reason why we wanted to enter into.

This relationship and so you know that's definitely there in terms of you know what we're seeing in and considering in terms of investment I mean, I think that after a very quiet 2020 on.

There had been more activity in the beginning parts of 'twenty 'twenty, one and I would expect that no more thing on it will start to.

Come up as we move through the year I think that as we all know it's been difficult for potential buyers to underwrite them in some cases finance, a new investment and so on and I think theres, a little bit more visibility into a recovery you'll start to see a lot more activity and you know people can feel a little bit more comfortable.

And kind of what their what their underwriting what theyre looking at so we're always net sort of out there you know thinking and looking at stuff, but I think that you know our focus has really been more internally focused and it's been focused on trying to make sure that we can definitely.

Definitely the pandemic as best we can and focus on our operators and building and bolstering goes relationships. So.

We're always considering other ways to grow to bid on that but I do think that you know right now you have to be pretty cautious and careful as you look to growth but.

Got more stuff will come out for sure.

Okay.

And then I just wanted to go.

Seems like the move out move ins are picking up but I just wanted to dig a little bit deeper into the move outs, which seem to I mean, if you listen to your peers. It.

It seems like move outs, maybe you have.

Picked up a little bit, but that doesn't seem to be the case and new.

Your portfolio and maybe some thoughts around that weather.

That's that's regional geographic or do you think that maybe is more of an independent living versus assisted living kind of trade off.

Yeah, our move outs or move outs trended higher in the third quarter and then they came back down kind of more historical levels in the fourth quarter and so you know that that's been what we've seen him. You know I think there is every month you know provides a little bit of a different story.

I think that you know we have seen them move outs coming from you know cash.

Covid, some additional kind of depth and I think that we have had people on certain instances that have remained in our communities kind of longer than they normally would have but I think from our standpoint, we've actually seen move out normalized you know through the fourth quarter and into kind of.

The first quarter, but it's obviously something.

We're pretty focused on on our operators are pretty focused on but that's what you're seeing for now.

Okay.

That's all I have I'll hop off thanks.

Thanks, Dan.

This concludes the question and answer session I would like to turn the conference back over to MS. Susan Givens for any closing remarks. Please go ahead.

Thank you everyone. I appreciate you joining us and we will be in touch and look forward to updating you as we move forward.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

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