November 20, 2020, Ben Swett, The SeniorCare Investor - After Pfizer’s vaccine announcement on November 9, pretty much every publicly traded senior care provider and REIT saw their share prices jump significantly. We believe that much of the exuberance was mainly from the removal of uncertainty surrounding both the vaccine and the election, but as we said earlier this month, it is not like no one thought a vaccine would not be available in the months ahead.
And there was still the fact that the Pfizer vaccine needs to go through the FDA approval process, not to mention manufacturing tens of millions of doses, and then distributing them.
But we also wondered if investors had gotten a little ahead of themselves, sending Brookdale Senior Living’s share price up 49%, Welltower’s up 32% and Ventas’ up 18%, to name a few. So, we looked at a few of these companies, and it appears the optimism around the vaccine has resulted in some sustained higher stock prices.
Sabra Health Care REIT for one rose 16.5% on November 9 and has continued its rise to peak at $17.41 on November 16, the day that Moderna announced its COVID-19 vaccine had an efficacy rate of 94.5%. Sabra’s price is not quite at the level of the first two months of 2020, when the price was consistently between $20.00 and $22.00 per share, but it is the highest value since the March 18 low of $5.55 per share. We’re glad those days have passed.
Sabra’s yield has also fallen from the very-high 30.4% from earlier this year, which was halved and then dropped further once Sabra cut its dividend in March. It currently sits at 7.15%.
Sabra also has another decision to make soon, as its deadline to pull the trigger on its purchase option to buy the remaining 51% of Enlivant still owned by private equity firm TPG is just a number of weeks away. The stabilized share price could help, but with census woes not going away for several years, and the Enlivant portfolio currently posting its latest average quarterly occupancy of 75.8%, or 3.1% down from the previous quarter and 5.6% off the year-ago, same-store census, that complicates the prospect a little.
Then again, investors may want Sabra to further diversify away from skilled nursing and into private pay seniors housing, and that investment could be a big step in that direction. TPG could also want out. We will find out soon, either way. And, and we are sure Rick Matros will seek a price cut for the 51% given the pandemic’s impact.
Another one of the “small” REITs, National Health Investors, has also further improved its stock price from the November 9 jump. That Pfizer/election-driven rise was over 12% for NHI, and the share value has hovered roughly between $62.00 and $66.00 ever since, peaking at $68.84 on November 16. That is the highest closing price since early March but still about a third off the 2020 peak of $91.12 per share on February 25th. Who knows when that level will be reached again, for any publicly traded senior care company or REIT?
Omega Healthcare Investors followed Sabra and NHI by rising 18% to $35.15 per share on November 9 after the Pfizer announcement and hitting a recent high of $36.97 per share after the Moderna announcement on the 16th.
We understand there are reasons to be optimistic now, especially surrounding the great vaccine news, but the current senior care market, occupancy woes, tenant ability to pay 100% of rent, and demand for community-based senior care services show that the road ahead may be long, and especially bumpy. There we go again.