REIT Roundup: Sabra, DHC, CareTrust Give COVID-19 Updates In Q1 Reports

May 13, 2020, Seniors Housing Business - Three major REITs in the seniors housing sector, Irvine-based Sabra Health Care REIT, Newton-based Diversified Healthcare Trust (DHC) and San Clemente-based CareTrust REIT, have released their first-quarter reports, including updates on how the companies are handling the coronavirus epidemic.

Sabra reported that it has “not seen a material disruption from the COVID-19 pandemic in the monthly payment of rents and have not utilized any deposits or other credit enhancements for payment of rent as a result.”  The company suggests the positive news is a result of $320 million in state and federal assistance to its operators, as the bulk of Sabra’s portfolio consists of skilled nursing properties.

Sabra says it has not issued any rent deferrals or other relief, but is prepared to do so if necessary.  The company did report significant lowering of occupancy, with skilled nursing taking the biggest hit of 460 basis points due to a reduction in elective surgeries that require post-acute care.

“We remain optimistic as we manage through the pandemic alongside our tenants,” says Rick Matros, CEO and chairman of Sabra.  “We anticipate that some of our tenants will require rent deferrals, which we will consider on a case-by-case basis.”

For DHC, which has only independent living and assisted living in its seniors housing portfolio, the report was not as positive.

“Our portfolio of high-quality healthcare real estate performed slightly above our internal expectations for January and February before the COVID-19 pandemic began to disrupt our operator and tenants’ businesses in March,” says Jennifer Francis, president and chief operating officer of DHC.

“Market conditions resulting from the pandemic have led to declines in move-ins in our seniors housing segment and, in combination with ongoing wage pressures, EBITDARM was down 14.3 percent.”

The company reports 350 confirmed COVID-19 cases in 46 of its seniors housing communities, but notes that is less than 1.5 percent of its total resident population.

CareTrust, which focuses on skilled nursing and healthcare properties, notes that skilled nursing is primed to survive this crisis better than many industry sectors.

In good times, private pay assets seem to get all the attention, but rain or shine, skilled nursing remains largely needs-based, and its government payor sources pay in full and on time,” says Greg Stapley, CareTrust’s chairman and CEO.

Stapley observes that the supplemental funding provided to date by the federal and some state governments has been helpful in bridging the gap on increased labor and supply costs, and the relaxation of key regulatory requirements such as the 1135 waiver of the three-day qualifying stay rule have been beneficial as well.

“The government’s efforts to keep critical healthcare workers on the job and to streamline the qualifying rules for COVID-19 patients has put a very big finger in the dike,” says Stapley.

Dave Sedgwick, CareTrust’s chief operating officer, noted however that critical needs remain.  “Next step, if we want to really protect our nation’s elderly and the healthcare workers who care for them, it is essential that point-of care molecular testing that provides immediate results be pushed out to skilled nursing facilities as fast as possible.”

Skilled nursing providers and their caregivers are well versed in infection control protocols, “but knowing who is contagious has been the missing puzzle piece from the beginning, and the value of point-of-care testing in saving lives cannot be overstated,” adds Sedgwick.