The confluence of COVID-19 cases peaking in January across the country and a severe winter storm in Texas during the first quarter had a noticeable effect on The Pennant Group’s senior living segment.
But Chairman and CEO Daniel Walker said during a first-quarter earning call on Friday that the “historic and unique quarter” also provided an opportunity to further develop its leadership teams.
After experiencing relative stability in segment occupancy in September and October, occupancy declined at an accelerated rate from November 2020 through February 2021. Occupancy for the holding company’s senior living services segment in the first quarter was 72.1%.
Walker said the winter storm drew resources from across the organization, with more than $1.5 million in emergency-related expenses.
Senior living revenue decreased by $4 million, or 11.5%, in the first quarter compared with the same period in 2020, primarily due to an 8.1% occupancy rate decline from March 31, 2020, to March 31, 2021.
“As expected, our senior living segment experienced a very challenging operating environment in the first quarter, as COVID-19 cases escalated in the early weeks of the first quarter in many of our key markets, resulting in the sharpest decline in occupancy we have experienced in our history,” Walker said. “The challenging operating environment was exacerbated by the severe winter storm in Texas that significantly impacted our 12 communities in the state, three of which temporarily evacuated due to a loss of power and resulting damage.”
The complexity and challenges of the “trial by fire” the company experienced in the first quarter acted as an accelerant for improvement and revealed opportunities for improvements in leadership, cost management and the ability to attract new residents, Walker said.
Focusing on recruitment, development and retention of leaders in its senior living segment, Walker said that Pennant has moved methodically to expand and deepen its bench of entrepreneurial leaders — and beginning to see the fruits of those moves.
“As a result of these efforts, combined with our low real estate fixed costs and an improving operating environment, we are getting stronger in the second quarter and anticipate better performance in the second half of the year,” Walker said.
Walker said his optimism over the segment’s recovery is due to an improved senior living operating environment, the decline in COVID-19 cases, vaccine rollout, pandemic restrictions easing and growth in move-ins.
“The pandemic is accelerating the transformation of the senior living community into a setting where quality of care is elevated on par with quality of life amenities,” Walker said. “As the industry continues to evolve, our world class systems and best practices, in spite of the short-term headwinds, have positioned us to thrive in a highly fragmented senior living industry.”
While the company is working to develop and strengthen its senior living pipeline through home health and hospice deals, Chief Investment Officer Derek Bunker said he doesn’t anticipate an allocation of capital for acquisitions in the senior living space in the near term.