Ventas Identifies Operators Taking Over Eclipse Assets, Cafaro Sees Solid Recovery Underway

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Ventas (NYSE: VTR) is progressing well with its plan to transition 90 communities formerly operated by Eclipse Senior Living to eight other operators, 65 of which have already changed hands.

Among the operators so far revealed to support some older Eclipse properties is Discovery Senior Living, which supports 19 older Elmcroft communities. Other operators who revealed Friday that they are tackling Eclipse’s properties include:

– Residence for the elderly Sinceri; 21 communities

– Priority life care; 17 communities

– American House Senior Living Communities, 17 communities

– Residence for the elderly Sodalis; 13 communities

– Grace management; 4 communities

– Sonida Senior Living, formerly Capital Senior Living (NYSE: CSU); 3 communities

Another operator taking over the Eclipse properties – but not for Ventas – is Sagora Senior Living, which is expected to manage eight Elmcroft communities and four Embark communities.

Justin Hutchens, executive vice president of senior housing at Ventas, noted that executives of companies taking over properties are “excited” about managing regional portfolios and improving performance in 2022.

“These companies are excited to grow and there is just an energy that is really positive,” Hutchens said on the REIT’s third quarter earnings conference call with investors and analysts on Friday.

In the third quarter, Ventas’ total senior housing portfolio included 813 communities, and the REIT also has significant investments in other areas of health such as life sciences and medical practices.

For the third quarter of 2021, Ventas reported normalized operating funds of 73 cents, which was roughly in line with analysts’ expectations. SHOP’s same-store net operating income (NOI) fell 12.7% in the third quarter compared to the same period last year, mainly due to higher labor costs.

Ventas’ stock price rose 2.23% to $ 53.98 per share as of market close on Friday.

“A huge opportunity to increase income”

Chicago-based real estate investment trust recorded its eighth consecutive month of occupancy growth in its operating senior housing (SHOP) portfolio, which recorded an occupancy rate of 82.2% in the third quarter . This represents a sequential increase of 230 basis points and marks the first year-over-year gain in SHOP occupancy since the start of the pandemic, despite the increase in the delta coronavirus variant over the course of summer.

Leads and moves in October totaled 109% and 104% from 2019 levels, respectively.

SHOP’s revenue increased 3.1% in the third quarter of 2021 thanks to a higher occupancy rate and a sequential increase in revenue per occupied room (RevPOR) of 0.3%.

Recent gains give CEO Debra Cafaro the assurance that “a strong recovery in senior housing is on track”.

“Our aligned and experienced team continues to focus on doubling up on senior housing both the resumption of the pandemic and the expected growth of the senior population, and also continuing our long experience of external growth,” Cafaro said on Friday.

The retirement home labor market remains tough and Ventas saw its labor cost pressures accelerate in September. SHOP’s expenses increased 5.4% in the third quarter of 2021, with rising labor costs accounting for half of that increase. Still, Hutchens believes there are ways for the REIT’s operating partners to manage these pressures.

“But inside [metropolitan statistical areas], there are some communities that really have an inordinate amount of agency [staffing] that is being used, which indicates the desirability of a working solution, ”he said.

Ventas’ latest earnings follow acquisitions and investments totaling $ 3.7 billion since the start of 2021.

The principal of these deals was the recent acquisition of 103 independent living communities formerly owned by New Senior for a purchase price of $ 2.3 billion. During the third quarter, Ventas also strengthened its relationship with Hawthorn Senior Living, based in Vancouver, Wash., Acquiring five independent living communities and one assisted living community in Canada for $ 180 million.

Looking ahead, Hutchens sees the potential for expanding seniors’ living margins for two main reasons: one is that Ventas believes that the market’s supply and demand characteristics are favorable for growth in the market. occupation; and overall, there are signs that headwinds in the labor market are easing somewhat. Ventas’ operating partners have proposed an average in-place rent increase of 8% for U.S. residents for the coming year, and an average 4% increase for residents of Canada.

In addition, executives of the company expect significant sequential revenue growth in the REIT’s SHOP segment in 1Q22.

“So there is a huge opportunity to increase revenue,” Hutchens said.


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