Ventas Chairman and CEO Debra Cafaro said Friday that she sees a clear path to growth for the Chicago-based real estate investment trust and is committed to “winning the recovery.”
“The demand for senior housing has been robust and sustainable, proving out the value proposition our communities and care providers offer to seniors and their families,” she said, adding that the senior housing operating portfolio recovery has begun.
Cafaro said Ventas delivered strong second-quarter results driven by occupancy improvements and net operating income growth in its senior housing operating portfolio, or SHOP, segment.
“We have now delivered five consecutive months of growth in occupancy and leads in SHOP, with June move-ins and July leads representing the highest levels since the onset of the pandemic,” she said. “These positive trends underscore the strong demand for the socialization and services our communities provide.”
Cafaro said senior housing is entering a period of highly favorable conditions as occupancy rebounds and supply and demand fundamentals improve. She said she remains optimistic as its SHOP communities have “extremely high” COVID-19 vaccination rates among residents and staff.
“If the last 18 months have taught us anything, it’s that as soon as our communities and care providers are ready to welcome residents and their families, we experience a surge of leads and move-ins almost almost immediately, which then builds sustainably and rapidly,” Cafaro said. “Given the macro uncertainty in the COVID-19 environment, particularly the national and regional rise in cases, and the measures that have been taken or may be taken to contain COVID spread, the path to full recovery may not be a straight line, but we believe it will point upward.”
Leads and move-ins in June were the highest since the onset of the pandemic, with leads pacing 106% of pre-pandemic levels and move-ins at about 2,100 residents. Move-ins and move-outs were 112% and 85%, respectively, of their pre-COVID same period 2019 levels.
Average SHOP occupancy grew 110 basis points in the second quarter compared with the first quarter. Second-quarter average and quarter-end occupancy was 77.5% and 79.4%, respectively.
SHOP revenue increased in the second quarter, driven by an increase in occupancy. Those gains were partially offset by move-in incentives provided to new residents, said Justin Hutchens, executive vice president of senior housing. Operating expenses declined by $9.2 million (3.2%), driven by a better-than-expected reduction in COVD-19 costs, partially offset by a modest increase in routine operating expenses.
Hutchens said he expects spot occupancy in its same-community SHOP to increase 150 to 250 basis points in the third quarter, creating revenue growth that will be partially offset by increasing costs due to higher occupancy, labor, potential COVID-19-related expenses and routine seasonal expenses. The third quarter is off to a strong start, he said, with July occupancy increasing 74 basis points from June.
Development
The merger agreement with New Senior Investment Group that Ventas announced in June is expected to be completed during the second half of the year, Ventas said.
The REIT also extended its development agreements with Le Groupe Maurice. June 1, Ventas and LGM opened a new development in Montreal, Elogia II, which already has 50% occupancy. The property was developed adjacent to an existing 289-unit LBM property and connected by a bridge. Residents of both buildings can access all amenities. Work on two additional LGM projects is underway, totaling more than $200 million in project costs, with additional sites in the pre-development stage.
Ventas has approximately $1 billion in dispositions scheduled this year, primarily senior living communities and medical office buildings.
COVID-19
Almost all residents in the REIT’s SHOP portfolio are fully vaccinated, with operators Atria Senior Living and Sunrise Senior Living adopting employee vaccine mandates. The REIT reported that 99.8% of the senior living communities across its portfolio are open for move-ins.
Ventas said its operators have expanded overall resident offerings and activities while maintaining safety protocols, including masks, temperature checks and screenings for employees and visitors.
