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New Senior Investment Group Inc (NYSE:SNR)
Q2 2020 Earnings Call
Aug 7, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and welcome to the New Senior Second Quarter 2020 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Jane Ryu. Please go ahead.

Jane Ryu -- Vice President

Good morning. And welcome to New Senior's earnings call for the second quarter of 2020. With me today are Susan Givens, our CEO; Bhairav Patel, EVP of Finance and Accounting; and Lori Marino, General Counsel. Before I turn the call over to Susan, I'd like to highlight that this morning's press release company update presentation, our quarterly supplement and the reconciliations of GAAP and non-GAAP financial measures can be found on our website at newseniorinv.com.

Before we begin, please note that our discussion will exclusively focus on non-GAAP measures, unless otherwise indicated. During this call, we will make forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. No forward-looking statements can be guaranteed and actual results may differ materially from those projected. Forward-looking statements made on this call should be evaluated together with the risks and uncertainties that affect our business, particularly those disclosed in the risk factors and other disclosures in our most recent annual and quarterly report filed with the SEC, including the Form 10-Q that we'll be filing later today. We undertake no obligation to publicly update any forward-looking statement whether as a result of new information, future events or otherwise.

And now I'd like to turn the call over to our CEO, Susan Givens.

Susan Givens -- Chief Executive Officer and President

Great. Thanks, Jane. Good morning and thank you for joining New senior's earnings call for the second quarter of 2020. Since our last earnings call in May, our focus has been on the COVID-19 pandemic and its impact on our 103 communities. I want to start by saying that we are deeply appreciative to all of our operators who have worked tirelessly to ensure the health, safety and well-being of our residents and associates. Throughout the past few months, our operators and our team here at New Senior have shown their resiliency and their flexibility. And they have continuously adapted to the changing circumstances and in effort to minimize as best as possible, the impact to our community's operations into our overall financial results.

Our focus throughout all of this has been to control the things that we can control and be as transparent as we possibly -- can possibly be, recognizing that the situation still remains very fluid. Since the onset of the pandemic, we have shared periodic updates with our stakeholders in order to provide as much information as we can. Our last earnings call in May, we only had the benefit of one full month of results, since the start of pandemic. Today, we are nearly five months in and we now have four full months of results. That has given us better perspective and we have gained some significant insights from the trends that we have observed, which I'd like to share with you today.

While the pandemic has clearly had a significant impact on our business. We are encouraged that we continue to see features specific to our independent living properties, which have resulted in lower occupancy decline and have allowed our operators to tightly control expenses. As a result, our financial performance has been much better than we had originally anticipated at the start of the pandemic. NOI for the second quarter was down 3.1%, year-over-year, a significant improvement relative to what we thought the quarter would look like just 3 months ago. At the same time, interest rates have declined substantially and have resulted in much lower interest expense. The interest expense savings combined with lower G&A from various cost cutting initiatives have enabled us to offset the NOI decline from COVID-19 and report strong AFFO results for the quarter.

As we look to the second half of the year. It remains difficult to predict how the pandemic will continue to evolve and how long it will impact our communities. However, with visibility into nearly seven months of the year, we feel it is appropriate to provide our current expectations for the full year of 2020, which I'll discuss in a minute.

This morning, we posted a presentation on our website, the presentation covers three key areas, which I'll reference throughout my comments. First, it provides an update on the status of COVID-19 with our communities, including some color on how our properties have begun to lift in a phased approach some of the restrictions that we had in place at the properties since the start the pandemic.

Second, the presentation provides some observations on the trends that we've seen over the last several months and includes details on our financial results. And third, it provides our current expectations on our full-year 2020, NOI and AFFO.

So let me begin with an update on the status of COVID-19 within our communities. In early March, as it became clear that COVID-19 was quickly spreading throughout the U.S., our operators took steps to modify and enhance their existing infectious disease protocol. Things evolved rapidly and by mid-March, all of our operators had implemented significant measures that are now commonplace across the industry, including restricting access to non-essential visitors, securing additional PPE and supplies, closing all communal dining services, canceling all group activities, implementing quarantine for residents and performing regular temperature checks for all residents and staff.

Beginning in mid-May. Our operators at certain of our properties began lifting some of the restrictions in a phased approach. Currently, 78% of our communities are in some form of a recovery phase. The recovery phase has allowed for increased participation in group dining and activities, non-essential visitors by appointment and internal sales tours, all in an effort to start to bring communities out of the restrictions in a safe and measured way. However, you should know, that while some of the restrictions have been lifted, the communities are not back to their pre-COVID-19 operation. Our operators have taken difficult but we believe necessary steps to protect the residents and staff in our communities. And we believe that these early and aggressive measures that were taken, did help limit the introduction of the virus in many of our communities and the spread of the virus when it did appear in our communities.

As of yesterday. Our operators reported a total of 19 currently active cases across 10 properties, including 13 residents and 6 associates. The active resident cases represent only 0.1% of our total resident population. Additionally, to-date 56% of our properties have not reported any positive resident or associate cases and 72% of our properties have not reported a single resident case. Of the 44% or 45 properties that have reported positive cases, only 29 had a positive resident case. So just 28% of our portfolio. Moreover, of the 45 properties that had a positive resident or associate case, nearly 70% have had 3 positive cases or less.

Since the start of the pandemic, the weekly number of new cases within our communities has remained relatively low, averaging about six new cases per week across our 103 communities. The rate of new cases slowed significantly in May and June. However, over the past month, as the rate of new cases across the country has gone up, the rate of new cases in our portfolio has also increased modestly. We believe that this is likely the result of restrictions being lifted in local markets and within our properties, as well as increased testing. Importantly, we are seeing that effective operator protocols are continuing to ensure that the virus does not spread within the properties. We do believe that there are components specific to the Independent Living model, which has helped to limit the spread of virus, particularly when combined with good protocols. Because our operators do not provide healthcare services in our communities, there are few interactions between residents and associate. So fewer touch points and therefore fewer opportunities for the virus to spread. This will be something that needs to be carefully monitored as our communities continue to lift restriction. And there are more interactions among resident and associates.

I think it's important to note, that due to the at risk nature of the residential communities served, we expect that many of the protocols in place will continue for some time even at federal, state and local orders are relaxed. The services offered in our communities, including communal dining, group activities, outside trips and visits are an essential part of the physical and mental well being of the residents in our communities. And our operator faced a host of challenges, including the wishes of the very seniors that they serve as they continue to balance the competing needs of health and safety and socialization. Striking the balance is critically important, as we work to bring new residents into our community and ensure resident satisfaction among our existing resident base.

Now let me turn to how COVID-19 has impacted our financial results. With four months of financial results, we have observed a few key trends. First, while occupancy had declined, the declines have not been as severe as we had originally expected. Second, as an owner of independent living communities, we have benefited from a flexible spend structure that has enabled our operators to effectively manage expenses in light of lower occupancy. And third, with 48% of our debt, subject to floating rate. We have significantly benefited from a sharp decline in interest rates. As a result of those trends. And as I mentioned earlier, our NOI for the quarter was down 3.1% year-over-year, a significant improvement over what we had originally expected at the onset of the pandemic. And while NOI was down, decline in interest cost combined with G&A reductions resulted in AFFO per share of $0.19, up from $0.17 in the first quarter.

Let me go through occupancy expenses and interest expense in a little more detail. On the occupancy side, while restrictions began to be lifted across our portfolio during the second quarter, move-out activity continues to outpace move-ins, resulting in total portfolio occupancy declining 250 basis points from 87.4% on March 31% to 84.9% on June 30. In total, occupancy is down 430 basis points from February 29, roughly the start of the pandemic through July 31st. The occupancy declines in March and April were the most severe and averaged 125 basis points a month. Since May, we have seen the trend steadily improve with lower rates of occupancy declines each month and July being the strongest, with only 50 basis points of decline.

Monthly lease and monthly move-ins remain below their historical averages. But they have continued to trend positively since their low points in April. Just to give you some context of how much of a rebound we've seen, monthly leads were up 62% in July from a low point in April and monthly move-ins were up 119% in July, also from the low point in April. Importantly, July move-ins were almost to the level of pre-COVID-19 move-ins in January of this year. While we are encouraged by these recent data points and the sequential improvement in lead and move-ins, the path to a sustainable recovery remains uncertain. And we have observed that each month is a little different and the trend vary by geography and community. On the move-out side, total move-out volume remains below historical levels throughout the second quarter as we saw voluntary move-outs come down. That said, move-out has steadily increased since April and we're up 28% in July versus April.

Moving to expenses. This is where we saw a significant change relative to what we had originally expected. Operating expenses were down 4.5% in the second quarter versus the first quarter. There are really two things happening and it's worth breaking them into separate buckets. First, variable operating expenses and second, COVID-19 expenses. On the variable expense side, we have benefited from a flexible cost structure. As occupancy has gone down, our operators have been able to successfully reduce expenses by collecting staffing schedules and supply cost. Something that is much harder to do in a setting with healthcare. We believe that is unique attribute of independent living and so while others in senior housing have experienced large price and healthcare-related labor costs, including hazard pay and over time, we have not incurred those expenses. As a result, our margins have held steady at roughly 40%.

On COVID-19 expenses, at the beginning of the pandemic, we started to incur additional expenses, as a result of COVID-19 and the enhanced safety protocol, including the cost for acquisition of PPE, additional supplies, enhanced cleaning and the need for additional labor. While we continue to incur those expenses, they have been significantly less than we'd originally anticipated, mainly driven by lower supply costs and lower labor cost as we have seen less of a need for temporary labor. As we move forward, we expect certain COVID-19 related expenses will remain in place as our operators continue to implement protective measures within the communities. Importantly, the expenses could vary by community and there could be new expenses as the pandemic continues to evolve.

Now turning to interest expense. Since the start of pandemic, we have seen significant interest rate volatility with average one month LIBOR declining from a 173 basis points at the beginning of the year to 15 basis points this week. With 48% of our debt floating rate, we made the decision not to swap more of our debt and as a result we have benefited from the steep decline in LIBOR. Our interest expense was down 18% in the second quarter versus the first quarter, a significant saving. As we move forward, we expect to continue to benefit from lower interest costs.

And that brings me to our current expectations for 2020. While it's still difficult to estimate to complete impact of the pandemic on our result, we now have seven months of actual results and four months of results, including the impact of COVID-19. And we believe that we have enough information to provide our current expectations for 2020 NOI and AFFO. Despite the disruption caused by the pandemic, the interest rate -- interest savings resulting from our floating rate debt and then the initiatives that we have in place to reduce G&A are expected to offset our NOI declines, which we expect will result in full year AFFO per share of $0.67 to $0.71, which is the same as the 2020 range we provided publicly in February, prior to the onset of COVID-19.

Before I turn it over to Bhairav. Let me conclude by saying, that as we all know this crisis has severely impacted at-risk populations, including the seniors that our communities serve, being disproportionately impacted. Our operators have taken several critical steps to protect the health and safety of the residents and employees within our communities. While necessary, we know that these important measures have had and will continue to have an impact on our financial results. It's difficult to predict how long the pandemic will impact our communities and when a full recovery will start and what form it will take. Nonetheless, we continue to believe in the value that our communities provide to the middle market demographic, as well as the powerful long-term fundamentals of the overall senior housing industry.

And lastly, prior to the onset of the COVID-19 pandemic, we implemented several initiatives to significantly improve the quality of our portfolio and the financial profile of the company. Those initiatives combined with the decisions that we have made since the start of the crisis has put us in a good position as we continue to move through this pandemic.

With that, let me turn it over to Bhairav, to discuss the financials in more detail.

Bhairav Patel -- Executive Vice President of Finance and Accounting

Thank, Susan. And thanks everyone for joining us on the call this morning. Our portfolio remained unchanged versus the prior quarter and comprised of a 103 private paid senior housing properties across 36 states. As Susan mentioned earlier, we had just begun to feel the impact of COVID toward the end of the first quarter. During the second quarter, we felt the full impact of COVID-19 across our entire portfolio. While we expected the quarter to be challenging, we were encouraged by the fact that the impact on our portfolio was not as extensive as previously anticipated.

Same store cash NOI for our total portfolio of a 103 assets for the second quarter of 2020 was down 3.1% compared to the second quarter of 2019. Our total cash NOI for the quarter includes approximately $1.5 million of COVID related costs and adjustments. Excluding such adjustments, our total cash NOI was up 0.9% year-over-year. And variable expense savings, more than offset the revenue reduction from the decline in average occupancy for our managed IL portfolio. Average occupancy for our Managed IL properties was 84.9% at 220 basis points decrease versus the second quarter of 2019 and RevPAR grew by 0.2% year-over-year as lower moving fees were offset by steady rate growth.

Further highlighting the flexibility of our cost structure sequential cash NOI was up 0.4% despite a decline of 250 basis points in ending occupancy compared to the prior quarter and a full quarter of COVID related costs. Expenses elsewhere were down across the board including but not limited to labor, direct marketing, utilities [Indecipherable]. As a result, our operating margin increased to 40.9%, an increase of a 120 basis points compared to that for the first quarter of 2020.

Now, I'll discuss our financial results, balance sheet and provide a quick update on how we see the rest of 2020 shaping up. AFFO for the second quarter was $16.1 million or $0.19 per diluted share compared to $0.17 per diluted share for the first quarter. AFFO includes approximately $1.5 million of additional expenses and other adjustments, specifically related to the impact of COVID. With cash NOI up modestly quarter-over-quarter, the increase in AFFO was primarily driven by interest rates.

We had a lower average debt balance in the second quarter as a result of the repaying of debt in conjunction with the sale of the assisted living portfolio in Q1. And we paid average LIBOR of 50 basis points and our floating rate debt during the second quarter. As a result cash interest expense during the second quarter was lower by $3.3 million sequentially, with approximately 50% or $750 million of our total debt subject to LIBOR fluctuation. As of June 30th, LIBOR went below 20 basis points, reducing the weighted average interest rate on our total debt of $1.6 billion to 2.4%. Lastly, with the refinancing we completed during the first quarter in conjunction with the sale, we are well positioned from a maturity standpoint with the weighted average maturity of 5.8 years and no significant maturities until the second half '24.

We ended the quarter with gross assets of $3.3 billion in cash and cash equivalents of just over a $100 million. As you may remember, we had drawn down a $100 million on our revolving credit facility at the onset of the pandemic to safeguard our liquidity position. In light of the Fed's action to support the orderly functioning of the financial markets better than anticipated operating results, improved cash flow profile and improved visibility over the near-term. We paid down $40 million, the total drawn amount during the second quarter.

Finally, I wanted to provide some color on our latest expectations for full year 2020. With the pandemic still evolving, there remains a wide range of potential outcomes for the second half of the year. However, given first half actual results and the recent trends, we wanted to frame what we believe could be a potential range of outcomes. At this time, we expect our full-year total cash NOI for our 103 properties to be down 4.5% to 7.5% as we enter the second half of occupancy 400 basis points below, where we were at the same point last year. However, if interest rates remain at current levels, we expect savings on interest along with reductions in G&A to offset the decline in NOI. Given these assumptions, we expect the quarter range to be in $0.67 and $0.71 per share, which is consistent with the initial range we provided at the beginning of the year.

With that, I will turn it over to the operator to open the line for questions.

Questions and Answers:

Operator

Thank you. And we will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Daniel Bernstein of Capital One. Please go ahead.

Daniel Bernstein -- Capital One -- Analyst

Hi, good morning.

Susan Givens -- Chief Executive Officer and President

Hey, Dan.

Daniel Bernstein -- Capital One -- Analyst

All I can say is Wow to an expense decrease. Actually, do you want to go into that just a little bit. I'm wondering if the high occupancy that you started out within the portfolio aided that expense flexibility, I mean, when you look at peers starting off at occupancy at 80 or the low '80s, are they going to -- like we have a tougher time flexing expenses, then your portfolio that was in the high '80s. That's right way to think about it?

Susan Givens -- Chief Executive Officer and President

Yeah, I can't comment on exactly how others are kind of managing the expenses, what I can say is, what we have always believed and known to be true is that there is more flexibility with independent living, given the fact that we don't have healthcare. And so I think when you start off with a model that has healthcare that always has some limitations around expense tightening. And then when you layer on top of that, a pandemic, that is really a healthcare focused pandemic, then it means there's be even more stress in terms of how to manage your healthcare expenses. So we've seen that we've been able to very quickly adjust and adapt as occupancy has come down. And I think that -- give a lot of credit to our operators for being very focused on trying to be as nimble as possible and that's whats happened. So how that -- whether it's higher occupancy starting point or just really a function of our kind of model, I'd tell you a little bit of both, but I think we are obviously pleased with our ability to manage on the expense side of the equation.

Daniel Bernstein -- Capital One -- Analyst

Were there any one-time expense gains in the quarter, such as like reduced management fees or something that would come back, I mean obviously from your guidance, it sounds like first half results are going to flow into the second half. But I just wanted to make sure that there wasn't anything one time, like a reduced management fee that might come back a little bit.

Susan Givens -- Chief Executive Officer and President

Yeah, that's a great question. No, there were no one-time fees like reduce management fees. I think the only thing to note is that obviously in the kind of high -- the early days, our operators did pull back on things like marketing and due to that -- that's part of what we factored into the second half of the year, that as we start to push move-ins and really kind of try to get the restrictions lifted at the properties, things like marketing are going to pick up a little bit. So no swings that were one-time, but there was a pull back on some of the expenses that we expect will -- kind of will go up as we move forward, but we factored that into the numbers that we provided for the full year 2020 NOI.

Daniel Bernstein -- Capital One -- Analyst

Okay. One more, before I go back to the queue. Obviously, the reduced interest expense on LIBOR has been a huge benefit to you. In your earnings at this point, have you thought about maybe hedging some more of that floating rate debt?

Susan Givens -- Chief Executive Officer and President

Yeah. And that's a great question. So it's something we as a management team talk about a lot, daily and weekly. And we don't think we have a crystal ball as it relates to kind of interest rates, but we did make a very conscious choice not to swap additional debt when at the onset of the pandemic. And I think that's helped us, but I do think that as we sit here today with LIBOR at 15 basis points, that's something we're continuing to evaluate and it's kind of an ongoing conversation. So to answer your question, yes, we're considering and thinking about it.

Daniel Bernstein -- Capital One -- Analyst

Unless you think it's going to go negative. I mean that's just possible.

Susan Givens -- Chief Executive Officer and President

Yes.

Daniel Bernstein -- Capital One -- Analyst

I'll hop back in the queue and if I have any more questions I'll just come back on. Thanks.

Susan Givens -- Chief Executive Officer and President

Thanks, Dan.

Operator

Our next question today will come from Vikram Malhotra of Morgan Stanley. Please go ahead.

Unidentified Participant

Hi, this is a Elena on for Vikram. Thanks for taking the question.

Susan Givens -- Chief Executive Officer and President

Hi.

Unidentified Participant

Hi. I just wanted to go back to your comments on move-ins. The levels near pre-COVID, that sounds pretty positive. Just wanted to see if you're operators are providing any rent concessions to get those move-ins to those levels or how -- or has pricing held up pretty well?

Susan Givens -- Chief Executive Officer and President

Yeah. So obviously we're encouraged by the trends we've seen on the move-in side. So as I said, starting from kind of a low point in April, we have seen a steady increase. July is just one month. So I don't think we want to claim that we're kind of out of the woods. But July was a very, very strong month from a move-in standpoint and we just thought that context that kind of looking at it and comparing it to January move-in, was important and relevant. So again I don't want to necessarily say we're back to kind of pre-CVOID move-in as we move forward, but we do think July provides some interesting kind of data points. There were some discounts that our operators started to roll out just in July, toward the end of the month. So it's hard to say whether those discounts actually had a huge impact on July or if they'll start to have more of an impact as we move into kind of August and beyond. But it's something that we talked to our operators about frequently and it's always a balance in terms of driving occupancy and discounting. Our operators are not providing a huge number of concessions and they're managing that very effectively, but there were some discounts that they started rolling out at the end of July.

Unidentified Participant

Great, that's helpful. And then just from your experience there talking to the operators. What are they saying about firm wide ban versus partial wide ban, just after their experience with the new I guess resurgence, new cases.

Susan Givens -- Chief Executive Officer and President

Sure. So it's kind of an ongoing conversation. Balancing the need and the desire to keep the residents and the associate safe but also recognizing that keeping residents in isolation for a prolonged period of time is not good for kind of physical or mental well being of the residents. And so there is a balance. And we're working through that with them. I think what we've seen is that the protocols that they have in place are really effectively managing the spread of the virus. So we have had cases pop up in communities, but we haven't had widespread positive cases in any one community. So they've been able to manage kind of the safety of the residents and the associates while also trying to lift some of the restriction and they haven't had to really have widespread lock down again with kind of the surges that we've seen around the country.

Unidentified Participant

Okay, great. That's all my questions. Thank you.

Susan Givens -- Chief Executive Officer and President

Thanks.

Operator

Our next question today is from Michael Gorman of BTIG. Please go ahead.

Michael Gorman -- BTIG -- Analyst

Thanks, good morning.

Susan Givens -- Chief Executive Officer and President

Hi Michael.

Michael Gorman -- BTIG -- Analyst

I was wondering, Susan, if you could just talk about -- I know it's still a relatively small sample set. But as we look over the past two months, say June and July. At the performance of those properties where you were able to start lifting restrictions kind of Phase I, then into Phase II and maybe when we talk about moving trends and lead trends and things like that, maybe how that differs from the properties that are still under enhanced protocols?

Susan Givens -- Chief Executive Officer and President

Yes, sure. Now for us, we have roughly 80% of our portfolio has moved into kind of what we characterize as the recovery phase. And I think it's safe to say that across the board where the restrictions have been lifted, we're seeing more leads and higher move-ins. And it obviously varies by community and by geography. So there are some parts of the country where people feel relatively comfortable and so we've seen higher move-ins coming from those areas. But I think the overall change kind of comment is that, yes, where the restrictions have been lifted, we have seen more of a return to higher leads and move-ins. And so that's a big part of lifting the restriction. Also, part of the -- what goes along with lifting the restrictions is the ability to allow kind of physical tours inside of the building. So yes, everyone looked at virtual tours and that has grown in usage and acceptance. But at the end of the day, people want to know where they're living, they want to see where there living. And so what we have seen is getting people kind of back into the communities where they can lay their eyes on their apartments and the actual physical community has been incredibly important.

Michael Gorman -- BTIG -- Analyst

Great, that's helpful. And then I'm sorry if I missed this, but do you guys have the number of what the year-over-year decline -- actual decline was in marketing expense and maybe how should we think about that expense line item normalizing as we get more properties kind of back into the normal swing of things.

Susan Givens -- Chief Executive Officer and President

Sure. Our marketing was down on a year-over-year basis, about 30% in the second quarter. So -- and that was done very intentionally, if you remember, obviously you're kind of going into April. There we didn't really know how this would kind of evolve and all of our facilities at that point, were in a lock down, we weren't allowing physical tours, so it didn't make a whole lot of sense to really be spending a lot of money on the marketing side. As we move forward and have moved through the quarter, we have, what can I say, as we moved through Q2 and then as we move into the second half of the year, we have increased that spend and so definitely factored into our second half of the year. I don't think we are expecting that we get back to kind of the completely kind of normal marketing spend any time soon, but we're definitely not expecting marketing to be down 30% as we move forward.

Michael Gorman -- BTIG -- Analyst

Great. And then maybe last one from me, understand there's still a lot of variability about what's going on and the path of the virus. So, I appreciate the reinstated guidance range. As we think about it directionally, should we think about third quarter potentially being sort of the floor, even if fourth quarter isn't a huge bounce back or is there a possibility that as we go into the fourth quarter, it will still be kind of toward the midpoint or maybe even on the lower end?

Susan Givens -- Chief Executive Officer and President

Yeah, I mean I think that we -- the second half of the year. What's important to note is that obviously, the starting point from an occupancy standpoint is lower. So while we've seen some kind of positive trends. We're still looking at occupancy, starting off in the third quarter, roughly 400 basis points lower than what it was last year, starting in the third quarter. So I think that as we move through the third quarter and the fourth quarter, we had originally thought like most people that there might be kind of acquiring in the summer months and we wouldn't see any surges and then we thought that maybe in the fourth quarter as we move into the fall, we might see a spike. I think what we're now looking at is a little bit more kind of a steady state and steady through position on the occupancy side. So we don't have kind of a significant variance between the third quarter and the fourth quarter. I think that, that is something we're adjusting kind of daily. But I think that what's important is that while the first half of the year was better than we had thought, it also benefited from the first quarter where we really only saw COVID coming in the second half of March. And so as we move into the third and fourth quarter, I expect them to be sort of the same, but I think that obviously it's hard to predict right now. What we do you feel comfortable with, just kind of where we think we'll land as a whole as it relates to kind of NOI and AFFO.

Michael Gorman -- BTIG -- Analyst

Great. Thanks, Susan.

Susan Givens -- Chief Executive Officer and President

Thanks, Michael.

Operator

Our next question is a follow-up from Daniel Bernstein of Capital One. Please go ahead.

Daniel Bernstein -- Capital One -- Analyst

Thanks. I actually got two. On the move-outs that it seems like maybe guess there were some pent-up move-outs. People needing higher levels of care or maybe people just wanted to move out of IL. Just, I don't know if you have any information to kind of drill down on what those move-outs involved. Where do people go to, do they move to higher levels of care or was it something else?

Susan Givens -- Chief Executive Officer and President

Yeah, sure. So, I think you're exactly right. I mean as expected in April and May and even June, move-outs were lower than historical levels. And so, I think everyone had expected that, that there was less kind of movement when people really kind of been locked down and so we had anticipated that as people started to feel a little bit more comfortable, we would see a pick-up in move-outs. And by the way, in our business, it's a natural part of our business to have move-outs. We're independent living and so we do have individuals that have to go to higher levels of care. That's important, that's necessary and so we saw that in July, our move-outs picked up a bit, but we've already seen is that in August, the move-out numbers are coming down from the July level. And so we can't completely determine what that's going to look like going forward, but it tells us that as people felt a little bit more comfortable and as the needs of some residents increase, they did move out in July, but we've seen that we've cut pace down a little bit in August.

Overall, on to your question of where people are going. Higher levels of care, like I said, is always a big source of move-outs for us and that's just going to happen in our business and it's important that people when they have higher needs, we're not the right setting for those individuals and so they do need to go and we've seen that there have been some people that have moved back home. When I say back home, that's either with their adult children or to their own home. So that has increased a tiny bit in the last couple of months. Nothing that we think is to an alarming level, but I think it's understandable. There are people out there. As we all know and expect that if they have the option to bring their parents' home right now, they might want to do that, that's not across the board, but we've seen that. I think it is important to note though that we haven't had a spike in move-outs. And it's been pretty consistent with what our historical move-out levels have been. We're pretty focused on it. And I think this is something our operators in the whole industry have to be really focused on as we move forward. It needs to be enjoyable within these communities, for these individual that live, there needs to be an active environment, it needs to provide some engagement for the residents. And I think our operators have done a terrific job being creative and really providing that resident experience. Because we know that's critical and if we can't achieve that, then we could see higher move-outs

Daniel Bernstein -- Capital One -- Analyst

Okay. And then the other question, I know this is probably a little early, but are you -- have you seen or are you looking at any investment opportunities. I know there's a lot of distress out there. Again, obviously you're portfolio did well. But there's probably a lot of distress out there right now in senior's housing have you -- are you looking at or seeing any opportunities to maybe invest money.

Susan Givens -- Chief Executive Officer and President

Yeah, I mean we're always paying attention. If for no other reason then also just being informed about how our assets are kind of looking and feeling relative to others out there. So there is some stuff. I'd say that by and large, there has been much less activity which is understandable, of course, it's hard for people to get out and visit properties, it's hard for people to due diligence. And so we're looking, but I think that it's also pretty early and I don't think -- I think people are talking a lot about distress, but I don't think there has been a lot of sellers that yield distressed. And so, I think that will continue to play out as we move forward.

Daniel Bernstein -- Capital One -- Analyst

Okay. All right, that's all I have. Thank you very much.

Susan Givens -- Chief Executive Officer and President

Great. Thanks, Dan.

Operator

Ladies and gentlemen, this will conclude our question and answer session. At this time, I'd like to turn the conference back over to Susan Givens for any closing remarks.

Susan Givens -- Chief Executive Officer and President

Great, thank you everyone for joining us. We look forward to keeping you updated as we move forward. Stay safe. Thank you.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Jane Ryu -- Vice President

Susan Givens -- Chief Executive Officer and President

Bhairav Patel -- Executive Vice President of Finance and Accounting

Daniel Bernstein -- Capital One -- Analyst

Unidentified Participant

Michael Gorman -- BTIG -- Analyst

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