Ventas’ assisted living portfolio saw strong double-digit growth in the second quarter, and actions are being taken to improve performance in a lagging independent living segment, Chairman and CEO Debra Cafaro said Friday on the Chicago-based real estate investment trust’s second-quarter earnings call.
The REIT’s senior housing operating portfolio, or SHOP, is experiencing a demand-driven, multi-year growth-and-recovery cycle and is returning to pre-pandemic margins and occupancy, she said, adding that the company’s “highly occupied Canadian portfolio continues to shine.”
“Growth in the quarter was led by outsized performance in US assisted living, complemented by our highly occupied Canadian portfolio,” Cafaro said in a release. “We are actively managing our SHOP portfolio with our proven playbook to maximize performance.”
Year-over-year SHOP same-store net operating income growth of 14% was expected, with the US assisted living portfolio leading with 32% growth in net operating income, driven by occupancy gains. Year-over-year operating expense growth is moderating, as expected, in the SHOP portfolio, the REIT reported. Labor expenses were better than expected, with contract labor down 55% year over year, Ventas said.
Holiday by Atria portfolio struggles
Seeing “disappointing” results for the quarter in Ventas’ Holiday by Atria independent living portfolio, Chief Investment Officer and Executive Vice President of Senior Housing J. Justin Hutchens said that actions have been put in place to improve performance.
Within the SHOP portfolio, 38 communities are undergoing operator transitions or redevelopments. Among those properties, 26 independent living communities will transition to other existing Ventas operators in Florida, Texas and California, according to Hutchens.
“These regional operators have demonstrated strong performance, robust sales management and they have had solid geographic overlap with the transition asset markets,” he said. “We have the playbook, we are executing, and we expect to continue to drive performance across our broader SHOP portfolio.”
Investment pipeline is strong
The sales funnel remains strong, with leads and move-ins outpacing both prior-year and pre-pandemic levels, Hutchens said.
Cafaro said that the SHOP portfolio is off to a strong start after the REIT took ownership of a portfolio of 153 properties on May 1 by converting Santerre Health Investors’ mezzanine loan to equity. The portfolio consists of SHOP communities, triple-net leased facilities and outpatient medical buildings.
The CEO said she sees an active pipeline of investment opportunities for the portfolio and expects to complete $250 million of investments later this year, focused on its core stabilized, growing senior housing communities as well as outpatient medical buildings.
“There is significant opportunity in front of us to lean into the senior housing growth and recovery story as good assets with challenged financing profiles look for solutions,” she said.
With occupancy still approximately 500 basis points below pre-pandemic levels, and increasing interest rates, Cafaro said, Ventas is beginning to see “significant” opportunities to generate higher returns on quality senior housing properties.
