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New Senior Investment Group Inc (SNR)
Q3Â 2020 Earnings Call
Oct 30, 2020, 9:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning, and welcome to the New Senior Investment Group Third Quarter 2020 Earnings Conference Call.
[Operator Instructions]
I would now like to turn the conference over to Jane Ryu, Managing Director. Please go ahead, ma'am.
Jane Ryu -- Managing Director
Good morning, and welcome to New Senior's earnings call for the third quarter of 2020.
With me today are Susan Givens, our CEO, Bhairav Patel, EVP of Finance and Accounting, and Lori Marino, EVP and General Counsel. Before I turn the call over to Susan, I'd like to highlight that this morning's press release, company update, 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 to 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 reports filed with the SEC including the Form 10-Q that we will be filing later today. We undertake no obligation to publicly update any forward-looking statements, 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 & President
Great. Thanks, Jane. Good morning, and thank you for joining New Senior's earnings call for the third quarter of 2020.
In addition to issuing our third quarter press release and supplement, we posted a presentation to our website this morning, which I will be referencing throughout my comments. The presentation includes an update on the status of COVID-19 cases in our portfolio, key observations on trends throughout the pandemic and finally, details on our financial results for the third quarter and expectations for our full-year 2020 NOI and AFFO. We are nearly eight months into the COVID-19 pandemic, and the bulk of our time, energy and focus continues to be understanding its ongoing impact on our 103 communities and positioning ourselves as best we can for the future.
We have now completed two full quarters since the start of the pandemic, and as it has progressed, we have continued to gain better insights and perspectives from the trends that we have observed. It's clear that the virus is not going away in the near term, and we have learned that our operators must continuously adapt their operational strategies to deliver the best possible resident experience while balancing health and safety. We have worked closely with our operators to minimize as best as possible, the impact to our communities operations and to our overall financial results. In addition, we continued to see features unique to our independent living properties that have allowed our operators to adjust protocols within our communities and effectively manage the spread of the virus while also reducing expenses in response to lower occupancy levels. As a result, our financial performance has held up, and our results for the third quarter came in at the high end of our expectation.
While it remains difficult to predict how long the pandemic will impact our communities and when a full recovery will start or what form it will take, we continue to be encouraged by the recent trends that we are seeing. Occupancy trends in the third quarter improved significantly as compared to the second quarter. And while overall occupancy has continued to decline, the magnitude of the decline seems to be slowing, and October occupancy is currently pacing to be the smallest monthly decline since the start of the pandemic.
As I said for each of the past few quarters now, our goal has been to control the things that we can control and to be as transparent as possible. Along those lines, last quarter, we provided revised expectations for the year, and now with only a couple of months remaining in the year, we are further narrowing and increasing our expectations for full year 2020 NOI and AFFO. At this point, we are expecting full year 2020 AFFO to exceed our pre-COVID AFFO expectation. While certainly not the way we had envisioned it at the start of the year, we believe this speaks to the resilience of our portfolio, the flexibility of our operating partners and prudent balance sheet management that allowed to benefit from a declining interest rate environment.
Now I will briefly provide an update on what we're seeing in our communities, and then I'll touch on some key trends before I turn it over to Bhairav to discuss the financial results in more detail. Let me start with an update on the status of COVID-19 within our communities. Since the start of the pandemic, our operators have taken difficult but necessary steps to protect the residents and staff in our communities. And we believe that these measures have helped limit the introduction and spread of the virus in many of our communities. As of Wednesday, our operators have reported 41 active cases across 14 properties, including 34 residents and seven associates. Overall, the weekly number of new cases within our communities has remained relatively low and has averaged about six new cases per week across our entire portfolio.
The rate of new cases within our portfolio has generally tracked broader trends in the market where our communities are located, as well as nationwide trends. For example, new cases flowed significantly in May and June and then increased in July in line with national trends. More recently, as the rate of new cases across the country has gone up, the rate of new cases in our portfolio has also increased. However, so far, the spread within our properties has remained relatively low as 10 of the 14 currently impacted properties only have one active case. Additionally, nearly 60% of the property in our portfolio have not reported a single resident case today.
Since the start of the pandemic, our properties have gone through a series of protocols that fall into three general time frames. The first phase began in March at the outset of the pandemic when our operators quickly implemented significant safety measures, including the closing of dining rooms and switching to in-room meal deliveries, restricting access to our communities to essential visitors only, and stopping all in-person sales activities. The second phase began in May when our operators started to lift restrictions in a phased approach based on the status of state and local regulations, as well as the status of COVID cases at the property. And the third phase, which our operators that started to roll out in the past few weeks, includes additional restrictions being lifted.
It is important to highlight that while this current phase allows for more resident engagement and socialization, the communities do continue to operate with restrictions in place, and we anticipate that this will continue for the foreseeable future. The services typically offered in our communities, including communal dining, group activities, and outside trips and visits are an essential part of the physical and mental well-being of the residents in our communities, and they are often among the main reasons why residents choose to live in our communities. Our operators are focused on maximizing resident engagement as much as possible during this period. However, the ongoing operator protocol, which continues to prioritize recommended CDC protocols such as social distancing and limited social gathering, do require that our communities continue to operate with more restrictions than the pre-pandemic operating environment. As the pandemic moves through its eighth month, we continue to work closely with our operators to strike the critically important balance between the competing needs of health and safety and socialization for our residents.
Now I'd like to spend a little time going through some of the key trends related to occupancy and expenses. Overall, we continue to believe that certain attributes that are unique to our independent living portfolio has helped limit our occupancy decline and mitigate the severity of our NOI decline. On the occupancy side, lead and move in volumes have increased substantially from second quarter lows as restrictions have been eased, and our operators have adopted new sales strategies in response to the pandemic. Importantly, we have seen improving interest from our target middle market IL resident demographics, which demonstrates that there continues to be strong demand for our products.
Total portfolio occupancy declined 160 basis points sequentially in the third quarter. This was a significant improvement from the 250 basis point sequential decline experienced in the second quarter. The occupancy decline in March and April were the most severe and averaged 125 basis points a month. Since May, we have seen the trends improve, and the portfolio has experienced consistent monthly declines of approximately 60 basis points. As I mentioned earlier, October occupancy is currently on pace for the lowest monthly decline since the start of the pandemic with a projected decline of 40 basis points.
Monthly leads and move-in trends have continued to increase from their low points in April. Overall, monthly leads increased 31% in the third quarter versus the second quarter, and September leads increased 67% from the low point in April. Monthly move-ins increased 47% in the third quarter versus the second quarter, and September move-ins increased 106% from the low point in April. As we look to October, move-ins are pacing to grow month-over-month and leads are expected to surpass the 2019 averages for the first time in 2020. While our move-ins have steadily increased, our move-outs have also increased. Total move-outs volume remained below historical levels throughout the second quarter as we saw voluntary move-outs come down. However, over the past four months, move out has trended above historical averages. Move-outs increased 20% in the third quarter versus the second quarter and September move-outs increased 27% from the low in April. As a result, move-outs have continued to outpace move-in.
While we expected move-outs to increase from their historically low levels in the second quarter, in recent months, we have seen an uptick in the number of residents citing COVID restrictions as the primary reason for moving out. This is something that our operators are closely monitoring as they continue to safely lift further restrictions within the community. On the expense side, we have continued to benefit from a flexible cost structure and as occupancy has gone down, our operators have been able to successfully reduce expenses by flexing staffing schedules, supply costs and maintenance costs, something that is much harder to do in a setting with healthcare. As a result, our margins have continued to hold steady at around 40%. In addition, COVID expenses have steadily decreased as our operators have developed more efficient methods for managing these costs.
As we move forward, we expect certain COVID-related expenses will remain in place as our operators continue to implement protective measures within the communities. Importantly, these expenses could vary by community, and there could be new expenses as the pandemic continues to evolve. Nonetheless, we have confidence our operators will continue to manage overall expense as well and remain focused on driving property performance while ensuring safety for all residents and staff.
Before I conclude, I would like to thank our operators and associates at our communities who continue to battle the effects of COVID-19 and work tirelessly to ensure the safety and wellness of all the residents at our communities. They remain steadfast in their dedication to their mission, and for that, we are deeply grateful. Now more than ever, I am pleased by our team and our operators have continued to be resilient and flexible and how they have adapted to the challenges that have arisen. The path of the pandemic remains uncertain, making it difficult to predict how the virus will continue to impact our residents, associate associates and community operations. Nonetheless, we continue to believe in the values that our communities provide to the middle market demographic as well as the powerful long-term fundamentals of the overall senior housing industry.
With that, let me turn it over to Bhairav.
Bhairav Patel -- Executive Vice President of Finance and Accounting
Thanks, Susan, and thanks, everyone, for joining us on the call this morning.
As of the end of the third quarter, our portfolio was comprised of 103 private pay senior housing properties across 36 states. Overall, we are pleased with our operating and financial results for the third quarter, which came in at the top end of our expectations. Same-store cash NOI for our portfolio of 103 assets for the third quarter of 2020 was down 7.6% compared to the third quarter of 2019. The decline relative to the same period last year was driven by a decline in occupancy since the beginning of the pandemic. We began the current quarter with occupancy 400 basis points below that of the beginning of the third quarter of 2019.
The expenses were lower by 1.4% year-over-year due to the decline in occupancy-related and other controllable items despite incremental expenses of $0.8 million during the current quarter, specifically related to the COVID protocols implemented by our operators to prevent and control the spread across our properties. Excluding the incremental COVID related expenses, expenses declined by 3% year-over-year.
After factoring in the results for the first two quarters of 2020, year-to-date total same-store cash NOI was down 3.6%. We did not begin to feel the impact of the pandemic until the very end of the first quarter. As a result, same-store cash NOI was up slightly during the first quarter and was down just 3.1% during the second quarter on a year-over-year basis. On a sequential basis, ending occupancy declined by 160 basis points in the quarter, a meaningful improvement from the 250 basis points sequential decline in Q2. While we have seen an increase in move-outs versus the historically low levels in Q2, we are encouraged by the uptick in both leads and leasing volume in the quarter. These trends have further improved in October, and we are expecting a 40 basis point decline in occupancy month-over-month, which will be the smallest monthly decline since the start of the pandemic.
Our operators continue to tightly control costs. In particular, COVID-related costs were down by over 40% quarter-over-quarter as they were able to move to more cost-effective alternatives, in-room dining supplies and third-party cleaning services. Total expenses did increase sequentially mainly due to the impact of typical seasonality that drove higher utilities expense.
Now I'll discuss our financial results, balance sheet and our expectations for the remainder of 2020. AFFO for the third quarter was $14.4 million or $0.17 per diluted share compared to $0.19 per diluted share for the second quarter. AFFO includes approximately $0.8 million of additional expenses specifically related to the impact of COVID. The decline in AFFO was entirely driven by the decrease in cash NOI we just discussed. Offsetting some of the decline was interest expense, which was down $0.7 million as average LIBOR for the quarter was 16 basis points, a decline of 34 basis points versus the previous quarter. After closely monitoring LIBOR since the start of the pandemic and with LIBOR close to historical lows, we successfully executed a five-year $270 million interest rate swap at the end of August that increased the fixed debt component of our capital structure from 52% to 72%.
After incorporating the impact of the swap, the weighted average interest rate on our total debt is 3.5%. We are pleased with the execution, which locks in lower rate and will keep interest costs low while reducing earnings volatility. It is also another example of our continued focus on balance sheet optimization. We continue to be well positioned from a liquidity standpoint. As a reminder, at the start of the pandemic, we drew on our revolver, given overall uncertainty and market volatility. We repaid the remaining balance of $60 million on our revolving credit facility during the quarter. With the facility fully undrawn, we now have access to total liquidity of approximately $160 million. Additionally, we have no near-term debt maturities. The weighted average maturity of our debt is 5.6 years and our next significant maturity is not until 2025, providing us with a great deal of financial flexibility to navigate through the current environment.
Now I want to provide some color on our latest expectations for full year 2020 as we are raising our full year 2020 expectations. With three quarters of the year completed, third quarter results coming in at the top end of our expectation and recent operating trends, we currently expect full year same-store cash NOI to be down 4% to 6%, an improvement over our previous expectation of 4.5% to 7.5% we shared with you last quarter. The NOI improvement, along with our expectation that LIBOR will continue at the current levels, results in increase in our AFFO range to $0.69 to $0.72 per share, which is slightly higher than our previous expectation of $0.67 to $0.71 per share. Lastly, on October 28, our Board of Directors declared a dividend of $0.065 per share. The dividend will be paid on December 18 to holders of record on December 4.
With that, I will turn the call over to the operator to open the line for questions. Thank you.
Questions and Answers:
Operator
[Operator Instructions]
Our first question will come from Vikram Malhotra with Morgan Stanley. Please go ahead.
Vikram Malhotra -- Morgan Stanley -- Analyst
Thanks for taking the questions. Good morning, everyone.
Susan Givens -- Chief Executive Officer & President
Hi Vikram.
Vikram Malhotra -- Morgan Stanley -- Analyst
Just maybe first question -- hi. Maybe just first question on the lead improvements and just sort of the increase, kind of, interest. I'm just wondering if there's any data you can share with kind of leads to conversion, how that may have trended over the last, call it, six months or so. And then just on the move-outs, it was interesting, sort of, you indicated COVID being one of the reasons. Has that generally increased? And is there any difference in kind of move-out reasoning by region or property type or anything else you can share, that'd be great. Thanks.
Susan Givens -- Chief Executive Officer & President
Sure. So let me start with the question on conversion rates. The conversion rates, as we've seen, have moved around a bit, kind of depending on where we've been within the pandemic. So there hasn't been a whole lot of symmetry. But overall, conversion rates are down a little bit this year versus what we've seen in the past. But it's something we've been carefully monitoring. It hasn't come down significantly. So what we are seeing is that it's taking a little bit longer to convert leads. And so some of that is -- has been due to the restriction. So it's been harder for people to kind of formally move. But that really is kind of the most notable thing we've seen so far. And overall conversion rates have not materially moved from historical levels.
And the lead -- we are just really seeing that our operators have taken the time to adjust and to figure out how to sell kind of more effectively in light of an environment and a virus that isn't going away anytime soon. So I think that, that's sort of consistent with what we've at least seen across the industry that the operators are really trying to be proactive and make sure that they can move people in safely but adopt new sales strategies to be able to address the environment that we're in.
On the move-out side, we haven't really seen anything that is varied by region necessarily. So I don't think there's any pattern that we can point out there. It's interesting because we obviously didn't track COVID as a reason for move out prior to the pandemic. So it's something that we've really started to look at in the last couple of months. And we are seeing, in some cases, residents cite the restrictions from COVID as a reason for moving out. And if you take some of those move-outs away, you'd be very much in line, if not below, kind of historical move out levels. It's not something we're entirely surprised by, given the length of the pandemic, and given the fact that this has continued and restrictions to some degree have remained in place, we also have been closely monitoring other move out reasons, and those have really been in line with historical averages.
And so we haven't seen a big uptick for the reasons that we would normally see so we feel like that's a positive, that trends are pretty consistent other than we do have people citing COVID and the restrictions as a reason for move out.
Vikram Malhotra -- Morgan Stanley -- Analyst
Okay. That's helpful. And then just one more. RevPOR sort of held up well, was up 1.5%. Just wondering sort of as you enter into the winter months, the flu season, but also into '21, just kind of your thoughts on the strategy behind gaining back the occupancy and using sort of pricing as a lever, or discounting as a lever, just how do you think that will interplay with occupancy over the next, call it, six to 12 months?
Susan Givens -- Chief Executive Officer & President
Yeah. It's a great question. And you can imagine this is something we spend a whole lot of time talking to our operators about. So it's critically important that RevPOR holds and grow, that's kind of how we all think about things. But I do think in the environment that we're in, our operators are giving concessions and doing some discounts in order to drive occupancy. And I think in a normal operating environment, that's not a strategy that you necessarily want to pursue. But given the occupancy declines that we've seen, I think that's a trade off that's worth making. And so the operators have started to do that and did start to do that in the third quarter, and there was some success around that. And so I think as we move into the fourth quarter -- move through the fourth quarter and into next year, that will be something our operators continue to do, but it has to be done very carefully.
And importantly, we're also seeing that the anniversary [Phonetic] increases have actually held up decently well. So that's a good sign that our existing residents each year, they have the annual increases, and there hasn't been a whole lot of pushback on that side of things. So it's both things. It's getting new people in, and it's also ensuring that your existing residents are paying and their rates are growing. And so I think that both sides of it, we're obviously closely monitoring, but I do think that in some instances, discounting and some concessions make sense considering where occupancy is.
Vikram Malhotra -- Morgan Stanley -- Analyst
Great. Thanks so much.
Susan Givens -- Chief Executive Officer & President
Thanks, Vikram.
Operator
Our next question will come from Michael Gorman with BTIG. Please go ahead.
Michael Gorman -- BTIG -- Analyst
Thanks. Good morning.
Susan Givens -- Chief Executive Officer & President
Hi Michael.
Michael Gorman -- BTIG -- Analyst
Susan, I just wanted to go back for a minute to the move-ins and the leads and just kind of chat about that. As you mentioned, we're kind of eight months in. So I'm just wondering if you could give a little bit more color on maybe what the sales strategy is that some of your operators have found success with? What have they changed, or maybe even what are they hearing? Because obviously, you have the dichotomy between the move-ins and the move-outs, what are they hearing from the potential move-ins or the actual move-ins that have chosen this point in the pandemic cycle that they want to commit to an independent living scenario?
Susan Givens -- Chief Executive Officer & President
Sure. I think one thing that has helped is being able to do more in-person tours. And so the fact that we were able to start lifting restrictions across some of the properties in May and allow in moderation, some in person tours, that really has helped. I think we've all talked a lot in the industry about virtual tours and other things that had been a tool we have looked to. But at the end of the day, these are big decisions for people. And our average length of stay is 2.5 years. And so residents continue to want to be able to see the property and their family want to see the properties before they move in. So I think that's one thing that's notable.
I think the other thing that our operators have done is they've really looked at a very kind of targeted approach to individual communities and individual markets. So as COVID has evolved and moved, they try to look to communities where perhaps there's not a -- there's a low incidence rate of COVID within a community, they develop sales strategies that make sure that they can try to drive some increased activity there. So it's being a little bit more specific and targeted on specific communities. As I just mentioned, there are some concessions that our operators are starting to roll out, and that has been helpful. So that's something as well.
And then I think the other the other thing that I would note is that as the protocols have evolved and as our operators have been able to demonstrate that residents has been able to be safe. And yes, COVID has appeared in our properties but I think our operators at this point, eight months in, have a better handle on what works and what doesn't. And I think that has translated into increased interest from our resident base. So I think people now believe they can be safe within independent living communities, and they trust the protocols that are in place. And so that's led to increased lead activity and then also translated into higher move-ins. So I know I just said a lot, but hopefully, it gives you some additional color.
Michael Gorman -- BTIG -- Analyst
No, no, that's definitely helpful. And then maybe on the -- just flipping to the move-out side, and I apologize if I missed this. I know you talked about some of the reasoning. Where are these tenants generally going when they move out at this point? Are they going home? Are they moving into another apartment, right? Are they -- is there a sense that these are temporary move-outs that once the restrictions start to ease a little bit, they would they would become tenants again, or is there any color there that you can give?
Susan Givens -- Chief Executive Officer & President
Yeah. Obviously, that's our hope. If someone moves out and maybe decides to move in with their adult children for a period of time, that would be our hope that they would eventually come back to us. But we're seeing -- and again, it's kind of early in terms of analyzing the people who are citing COVID as the reason for moving out. But it's a little bit of a mixed bag. There are some people that are moving home with their children or families. We've also seen candidly, in some situations, people have on to multifamily where there are no other services. So that would be for our very kind of low acuity residents who don't necessarily want some of the services that are offered in independent living. So that's always the reality that we face in terms of independent living versus assisted living that for some of our residents, multifamily is an option.
We've seen that to some degree. But I think that is few and far between. It's more people moving on with their families, as they have grown -- it's a long time where they've had restrictions on who they can and can't see and other kind of activities. So it's really that. It's more family. But in some instances, people are looking at it and saying, if I'm getting sort of the same services that I might get in multifamily, maybe got the better option for the time being. I will say that we had -- as we kind of map the trajectory of the pandemic, early on, we did have some people that kind of moved out, and moved out temporarily in the April, may time frame. And we did see some of those people come back. And so that's a positive sign as we look to what's happening now. But I think our job, along with our operators, is to try to ensure that people feel like they're getting the best out of their experience as they possibly can, while also knowing that we have to have certain safety protocols in place, and that isn't going to change, but we have to continue to adapt and evolve. And our operators have done a good job so far, but it has to keep on happening.
Michael Gorman -- BTIG -- Analyst
Great. Thanks for the color.
Susan Givens -- Chief Executive Officer & President
Thanks, Michael.
Operator
Our next question will come from Daniel Bernstein with Capital One. Please go ahead.
Daniel Bernstein -- Capital One -- Analyst
Hi, good morning.
Susan Givens -- Chief Executive Officer & President
Hi Dan.
Daniel Bernstein -- Capital One -- Analyst
Hi. I guess my question revolves around really more of your expectations of what the occupancy that's embedded -- for 4Q, that's embedded in your guidance? And then I have a follow-up on essentially, what's the kind of the criteria for restrictions and the risk at further facility restrictions are going to be put back in place in the next month or so, given COVID trends?
Susan Givens -- Chief Executive Officer & President
Sure. So on the occupancy side, we are basically looking at the remaining months of Q4 being consistent with October. So as we all know, things have shifted and can shift kind of pretty quickly but when you look at November and December, what's embedded in our projection for the full year is kind of occupancy decline consistent with October. So that's kind of where we're landing. We did -- the expectations we put out last quarter had slightly worse occupancy assumptions for the third quarter. So we actually had kind of a better occupancy outcome for the third quarter relative to what we had initially anticipated. But again, for the fourth quarter, it's pretty consistent with what we've seen for October. And sorry, what was the second question again?
Daniel Bernstein -- Capital One -- Analyst
I'm just trying to understand, there's obviously a correlation with occupancy and the restrictions that are being put in place in facilities when needed. And so I'm trying to just understand, kind of, coming off a trough of COVID cases within the facilities, and looking at your presentation, a trough of cases within the county surrounding your facilities. Kind of, what's the criteria to reimpose restrictions? And just trying to understand that risk. Because if restrictions are put back in place and the occupancy is not going to be linear with October.
Susan Givens -- Chief Executive Officer & President
Right. Sure. So look, we obviously can't predict what's going to happen across the nation or in our counties entirely with COVID. But what I will say is that our operators have really focused on the protocols and focus on making sure that the protocols are being followed. And so to the extent we see a COVID case in our communities, they are moving away from a strategy that involves effectively shutting down the facility to a strategy that involves isolating that individual and making sure that it stays very contained. And I think when you look at the data, for our communities, in particular, the vast majority of our communities where we've had cases come up, it's been less than three cases within the community. And this is, again, relevant -- we speak about kind of independent living. We don't know what it's going to look like as we continue to move through this. But so far, we have seen there are just fewer interactions among residents and associates.
And so when there is a case that pops up, it's relatively contained in the protocols can ensure that it stays that way. So if the protocols are maintained, then I think the operators feel good that they have the right systems in place. Of course, if there are dramatic shifts and things really change across the US and continue at a pace that is not workable, then our operators are going to have to adjust and consider different strategies. But I will say that they do have a decent amount of data to look to, and they feel confident that they can continue to operate without putting full-scale restrictions in place, but it's obviously something we have to watch.
Daniel Bernstein -- Capital One -- Analyst
Okay. And then the only other question I have is on labor turnover, which obviously is a huge part of [Indecipherable] facility. Any trends on the labor side to note whether that's reduced labor turnover, wage pressure being -- wage pressure coming down? Just anything you could cite there that would talk to the labor side of the expense equation?
Susan Givens -- Chief Executive Officer & President
Yeah. I don't think there's anything that's particularly noteworthy there. We have had pretty low turnover levels or consistent turnover levels with what we see usually. And so I think that's positive. There are some anecdotes where the individuals that the EVs [Phonetic] effectively that around the communities those turnover levels have been lower in some areas, which is always a very positive thing, particularly when you're in the midst of something like this. And so I do think that unemployment being where it is, has helped. And that has benefited businesses like ours. But overall, we -- again, because we don't have healthcare workers within our communities, we have not been as susceptible to people needing to call out sick or all those kinds of things. And so it's -- the labor side of it has actually held up pretty well, all things considered.
Daniel Bernstein -- Capital One -- Analyst
Okay. That's all I have. Appreciate it. Thank you.
Susan Givens -- Chief Executive Officer & President
Thanks, Dan.
Operator
Our next question will come from Kyle Bauser with Colliers International. Please go ahead.
Kyle Bauser -- Colliers International -- Analyst
Hi, good morning.
Susan Givens -- Chief Executive Officer & President
Hi Kyle.
Kyle Bauser -- Colliers International -- Analyst
[Speech Overlap] So looking at some of the recommendations for the distribution of an eventual COVID vaccine, it looks like it could be rolled out in four phases, this could change. But my sense is the majority of New Senior residents who are the most healthy among the senior housing bucket, would get access to the vaccine during likely the second phase. Just kind of curious what your sense is for when most of your housing population will become vaccinated and we can kind of move forward here?
Susan Givens -- Chief Executive Officer & President
Sure. Look, it's hard for me to speculate around a vaccine and kind of availability and the distribution of it, obviously. But as you pointed out, at least from what we have seen and heard, and I also know from operating in the industry, seniors will be through at the front end of any sort of distribution. And within the senior housing industry, there are a lot of people doing a lot of work and pushing for that to happen very, very quickly, just given the at-risk population that we all serve. So I'm hopeful and confident that to the extent there's a vaccine and it's effective that our residents and associates, given kind of the importance of their job, will be very, very high up in the priority list. And so I think we believe that I think everyone in the industry believe that and obviously, I think just even the kind of the emergence of a vaccine will help build confidence for other seniors as they think about senior housing and look to senior housing. So I think there's certainly the distribution of the vaccine that's important. But I think just the presence of a vaccine will help kind of regain some traction across the industry. That certainly is my hope. And obviously, we all are fingers crossed that we can get there sooner rather than later.
Kyle Bauser -- Colliers International -- Analyst
Sure. No, definitely. And I know -- sorry if I missed this, but total discretionary capital expenditures have been significantly lower in 2020 for obvious reasons. What sort of metrics, is it some of these new fixed COVID related costs, reduced variable? What sort of metrics are you waiting to get to before we can kind of get back to kind of pre COVID discretionary capital expenditure levels in 2021?
Susan Givens -- Chief Executive Officer & President
Sure. So what we did in the second quarter, we stopped all discretionary capex. So we still kept spending and still had capex spend, it was just the discretionary capex that we really tried to pull back. And that was one, because kind of going into all this, we wanted to be very conservative around capital. But it was also that, given the restrictions that were in place in our communities, we didn't want people going in and out of our communities unnecessarily. And so that's what happened in the second quarter. Starting in the third quarter, we did begin to spend some discretionary capital. So we did begin that in the third quarter.
For 2020, our discretionary capex will be lower than normal because of the kind of Q2 halt but we expect to kind of pick that up and continue spending as we move through the fourth quarter. And as we move into 2021, we expect to be kind of right on top of that again. So I hope that answers. It was a temporary kind of hold, but we don't think it's a good strategy to stop discretionary spend over a long period of time. We really did it one because we were wanting to make sure that our communities were safe, but then also as a kind of capital preservation, if you're going into the depth of this, but now we've gotten back to it.
Kyle Bauser -- Colliers International -- Analyst
Okay, great. Thanks so much.
Susan Givens -- Chief Executive Officer & President
Thank you.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Susan Givens for any closing remarks. Please go ahead.
Susan Givens -- Chief Executive Officer & President
Great. Well, thank you, everyone, for joining us, and we will be in touch and look forward to keeping you updated. Stay safe and healthy. Thanks, everyone.
Operator
[Operator Closing Remarks]
Duration: 42 minutes
Call participants:
Jane Ryu -- Managing Director
Susan Givens -- Chief Executive Officer & President
Bhairav Patel -- Executive Vice President of Finance and Accounting
Vikram Malhotra -- Morgan Stanley -- Analyst
Michael Gorman -- BTIG -- Analyst
Daniel Bernstein -- Capital One -- Analyst
Kyle Bauser -- Colliers International -- Analyst
