Healthpeak Properties CEO Thomas M. Herzog
Although staffing challenges are affecting the entire healthcare continuum — including the continuing care retirement community sector — there are signs of improvement and good momentum on occupancy in the new year, according to Healthpeak Properties.
CEO Tom Herzog said Wednesday during a fourth-quarter and year-end 2021 earnings call that the real estate investment trust completed $4 billion in senior housing dispositions in 2021, reinvesting those proceeds into its now-core life science and medical office building businesses.
“With our portfolio restructuring now behind us, we are now positioned exclusively in vital, growing and high-barrier-to-entry businesses,” Herzog said of the REIT’s CCRC properties.
Good momentum at entry-fee CCRCs
President and Chief Investment Officer Scott Brinker said that entry fee sales at the properties have had good momentum, with December its best month for sales since 2019.
“We have strong pricing power on entry fees and rental rates supported by the housing market, with little or no discounting,” he said.
Staffing, however, remains a challenge, with the cost of labor shifting higher and vacant positions a problem across the healthcare sector. Two-thirds of Healthpeak’s communities had to limit admissions in the fourth quarter due to staffing shortages, Brinker said.
But signs of improvement have appeared in the past month, he said, adding that one of them is good momentum on occupancy.
Chief Financial Officer Pete Scott said that the CCRC portfolio has seen a 200 basis point (2%) increase in average total occupancy and a 5% increase in average daily rent for its independent living, assisted living and memory care units. Those gains, however, were offset somewhat by outsized compensation costs due to the challenging labor market. The CCRC portfolio still has at least 500 basis points (5%) of occupancy to recapture to return to pre-pandemic levels, he said.
The rate increases in the CCRC portfolio, Scott said, stand in contrast to what the REIT is seeing in its rental senior housing portfolio, which includes 19 Brookdale Senior Living properties. Although senior housing is seeing a more than 5% rent growth with existing residents, significant discounting is occurring for new residents.
Herzog said that although its CCRC portfolio accounts for only 10% of the REIT’s business, it is a “safer asset class,” with a consistent stream of earnings. New supply, he added, is almost non-existent, and it takes seven to 10 years to get a new CCRC in place and stabilized.
