A strong third quarter was the result of actions taken to drive performance, combined with powerful demand in the senior living market, Ventas Chairman and CEO Debra Cafaro said Friday during a third-quarter earnings call Friday.
Cafaro reported that the Chicago-based real estate investment trust’s senior housing operating portfolio, or SHOP, fueled overall performance, with its Canadian SHOP segment ending the quarter at almost 96% occupancy.
Across the SHOP business, move-ins significantly exceeded 2019 levels, and the portfolio experienced board-based occupancy gains in both assisted living and independent living, the REIT reported. Spot occupancy accelerated in the third quarter for the portfolio, increasing 180 basis points.
“The multi-year growth and recovery cycle in senior housing is in full swing,” Cafaro said.
She attributed the company’s success to a portfolio serving a large and growing aging population, increasing investment opportunities in senior living, and the continued buildout of its proprietary investment management platform.
“We are pleased to improve our 2023 outlook and to see that while we certainly have more work to do, our total returns to shareholders over the last one- to three-year period, and since the beginning of 2022, have outperformed healthcare REITs and the REIT industry,” Cafaro said.
SHOP segment sees ‘healthy’ growth
Broad-based demand combined with the implementation of Ventas’ Operational Insights, or OI, active asset management data and analytics platform, delivered “healthy” growth in the company’s SHOP segment, according to Executive Vice President of Senior Housing and Chief Investment Officer J. Justin Hutchens. The portfolio continued to produce double-digit net operating income growth for the fifth consecutive quarter, at 18.2%, led by the US portfolio.
The US portfolio saw 219 basis points of occupancy growth in the third quarter, with move-ins at 120% of 2019 levels. Third-quarter average occupancy increased 130 basis points from the second quarter and 110 basis points compared with the third quarter of 2022.
The company’s US independent living portfolio contributed “significant” occupancy gains during the quarter, the REIT said. Seventy-five Holiday by Atria-managed communities saw spot occupancy increase by 190 basis points, which Hutchens attributed to a more streamlined profile that allowed for enhanced focus with a “renewed sense of urgency to execute.”
The company successfully transitioned 26 Holiday by Atria independent living communities in Texas, Florida and California to three senior other operators — Sodalis Senior Living, Priority Life Care and Discovery Senior Living — during the quarter. Spot occupancy for those communities increased 140 basis points sequentially from July 31 to Sept. 30. Hutchens said that Ventas will continue to advance its OI platform to affect the portfolio.
Sunrise Senior Living communities in Ventas’ portfolio experienced “outsized” performance, with “exceptionally high” move-in volume as transitioned communities saw occupancy growth, the REIT reported. Similarly, Ventas’ Brookdale Senior Living portfolio of 120 communities showed an improved trend in performance, according to Ventas.
Looking to year-end, Hutchens said, the company expects SHOP growth to come in at 17% to 19% for the full year, with key assumptions including average occupancy growth of 110 basis points and revenue growth of 7.5%.
“Our operating partners are focused on delivering valuable living experience to residents and families, a meaningful work experience for employees, and a value proposition that is attractive to residents and families,” Hutchens said.
Ventas will ‘lean into’ senior living in investment pipeline
The REIT closed two investments in the third quarter through its Ventas Investment Management, or VIM, platform, including the acquisition of two senior living properties in Connecticut and Maryland from Benchmark Senior Living for $79.5 million.
Hutchens said that Ventas’ top investment priority continues to be senior living acquisitions, adding that opportunities in recent months and weeks include several institutional sellers dealing with debt maturities. Cafaro said that the company intends to “lean into” senior housing, where it has significant expertise.
The company has 170 projects underway that began in October 2022 and should be completed by year end, the REIT reported. Those projects include improvements across mostly middle-market communities, including unit upgrades.
Executive Vice President and Chief Financial Officer Bob Probst said that the company increased its redevelopment capital expenditure spending to $230 million this year, which he expects will remain at an elevated level next year.
