The board of Strategic Student & Senior Housing Trust Inc., a publicly registered non-traded real estate investment trust sponsored by SmartStop Asset Management, has reported in a letter to shareholders a number of concerns facing the company, including those pertaining to liquidity, COVID-19, restricted cash reserves, among others. The company also reported increased occupancies at both its senior housing and student housing facilities.
Regarding its limited liquidity, the company said that it was “unable to reach any economies of scale” since it closed its public offering in March 2020 and has not raised any new equity in over a year.
In addition, the REIT noted that the Delta variant outbreak is continuing to impact its senior housing communities and occupancy levels could decline until the surge is over. The REIT said that governmental directives have limited its ability to lease units at certain properties on several occasions.
The REIT explained that it is highly leveraged with a loan-to-value ratio of 81 percent. This percentage includes $44 million of bridge loans, which mature in April 2022. The company said that it does not currently have the cash flow to pay off these loans.
Lastly, the REIT’s lender-mandated restricted cash reserves are required to increase by $1.8 million on January 1, 2022, and it does not have the cash on hand to meet this obligation.
“For the last 12 months, we have had discussions with investment bankers, real estate brokers, appraisers, and our lenders regarding strategies that address the concerns…,” the REIT said.
“To address our liquidity concerns and debt maturities, all options are on the table including but not limited to asset sales, a joint-venture recapitalization, and bridge loan extensions.”
Occupancies at the REIT’s senior housing facilities increased from 77.2 percent during the first quarter 2021 to 80.5 percent in the second quarter 2021. The REIT said that while it is encouraged by the 330 basis point increase, it incurred “significant” expenses related to concessions, sales incentives and higher payroll due to labor shortages.
Net operating income from the senior housing properties totaled $1.8 million in the second quarter of 2021, compared to $1.9 million for the same period last year.
KeyBank, the REIT’s lender, confirmed that the Small Business Administration forgave $1.95 million in Payroll Protection Program loans specifically procured to support the senior communities.
For its student housing properties, the REIT reported that academic year 2021-2022 pre-leasing percentages for its Fayetteville (96.3 percent) and Tallahassee (100 percent) properties were “encouraging.” However, due to “over development” in Fayetteville, the REIT was unable to increase rents over the prior year.
Net operating income from the student housing properties totaled nearly $1.1 million in the second quarter of 2021, compared to $823,700 for the same period last year.
Citing senior housing data from an August 2021 Green Street Advisors report, Strategic Student & Senior Housing Trust said that occupancy appears to have troughed in the first quarter of 2021, and most senior housing portfolios are seeing sequential occupancy increases of 50-100 basis points per month. Green Street forecasts that industry occupancy should reach pre-COVID levels by 2023.
Strategic Student & Senior Housing Trust invests in Class A student housing and senior housing communities and owns two student housing properties and four senior housing properties. The REIT raised approximately $93 million from its private offering which ended in March 2018, and its public offering was declared effective in May 2018. The company raised $17.4 million in investor equity in its primary public offering.
In March 2021, Strategic Student & Senior Housing Trust suspended its primary public offering and share redemption program, as well as distributions to shareholders, citing the coronavirus (COVID-19) pandemic and its potential financial impact on the company.