Invesque in 2022 will focus on simplifying its portfolio and capital structure after a record year for dispositions in 2021, Chairman and CEO Scott White said Thursday during a fourth-quarter earnings call.
“It wasn’t an easy year for the industry or our company,” he said of last year.
Transactions
Invesque sold more than $210 million worth of properties, with almost half of those sales occurring in the fourth quarter, White said, calling 2021 an “extremely busy year” with more sales than acquisitions.
As previously announced, in October the company closed on the sale of a Richmond, VA, community previously operated by Commonwealth Senior Living for $2.7 million in proceeds. The healthcare real estate company also closed on the sale of five non-core senior housing communities in Pennsylvania previously operated by Saber Healthcare Group.
In November, Invesque sold a five-property portfolio of communities located in California, Kansas and Arizona to the Ensign Group for $93 million. The sale included an assisted living community operated by the Pennant Group and a four-property skilled nursing portfolio operated by Ensign. As a result of the sale, Ensign and Pennant no longer operate any Invesque communities.
After the fourth quarter ended, on Feb. 1, Invesque closed on the purchase of a Grand Rapids, MI, stand-alone memory care community operated by Constant Care Management. The acquisition expands the company’s relationship with Constant Care to nine properties.
March 1, Invesque closed on the sale of a Harrisburg, PA, non-core senior housing community for $5.5 million; it previously was managed by Greenfield Senior Living.
“The portfolio-pruning process will likely continue in 2022 as we look to further optimize our portfolio with a go-forward focus on assets and operators that are a strategic fit for Invesque,” Director and Chief Investment Officer Adlai Chester said.
The strategic repositioning has shifted the balance of Invesque’s portfolio to predominantly private-pay communities, Chester said, adding that he expects that the company will further increase its exposure to private-pay communities over the next one to two years.
COVID-19 effects
An increase in COVID-19 cases in December and January due to the omicron variant tapered off in the first part of this year, executives said.
Staffing continues to be the top challenge in the industry and at properties in the Invesque portfolio, and executives expect it to continue for the foreseeable future. Despite continued occupancy increases in the company’s seniors housing operating portfolio, agency staffing costs in the fourth quarter were the highest ever seen by the healthcare real estate company, White said.
To offset some or all of those staffing cost increases, most senior living operators increased residential rates in 2022 at a higher percentage than had been seen historically, he said. Invesque will continue to evaluate whether additional increases might be necessary later in the year, White added.
Senior living operators successfully have increased rental rates over the past 18 months, with the average monthly rate in the portfolio up 4.2% in September compared with September 2020. Chester said he expects to see that trend continue. Most of Invesque’s partners have implemented rate increases in the 5% to 10% range to offset significant pandemic-related operating expenses, he said.
Commonwealth Senior Living
Inveque’s senior housing operating and management company, Commonwealth Senior Living, which operates a core 20-property portfolio for Invesque, saw its occupancy and overall financial profitability significantly affected by COVID-19, but it continues to rebuild census, White said. The portfolio saw a 110 basis point (1.1%) increase in occupancy in the fourth quarter, with current occupancy rising an additional 50 basis points as of March 4.
As of Sept. 30, trailing 12-month occupancy for Invesque’s stabilized triple-net assets and stabilized seniors housing operating portfolio was 75% and 76%, respectively.
