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Invesque Chairman and CEO Scott White said that 2021 has been a busy year with active portfolio management as the company continues its push into the senior living sector through strategic transitions, dispositions and acquisitions.

During a third-quarter earnings call on Thursday, White said the healthcare real estate company in early October sold five small, non-core assisted living communities in Pennsylvania previously managed by Saber Healthcare Group. The properties struggled historically and were a drag on the portfolio, he said. Saber continues to operate two skilled nursing facilities within the portfolio.

In late October, Invesque closed on the sale of a Richmond, VA, community operated by Commonwealth Senior Living after a market assessment concluded that the property was best positioned for another use. 

During the quarter, the company also transitioned the management of two senior living communities in New York from Premier Senior Living to affiliates of Hearth Management. The transaction effectively ends the firm’s relationship with Premier while expanding Hearth’s strategic footprint in the region, according to Chief Investment Officer Adlai Chester.

Chester said that the third-quarter dispositions reflect the company’s continued efforts to streamline its portfolio. He said the company has assembled one of the youngest portfolios in the industry over the past two years, providing a unique competitive advantage. Older properties that require maintenance carry a cost burden that could add to already challenging labor pressures and supply chain costs, he added.

The strategic repositioning of the portfolio also shifted the balance to predominantly private pay assets —  a long-term goal for the company. As of Nov. 10, the company’s portfolio composition is 57% seniors housing, 36% skilled nursing and 7% medical office building.

Occupancy rising

Commonwealth, Invesque’s active operating and management company, continues to see strong long-term move-in numbers, executives said. Spot occupancy in the 20-community Commonwealth portfolio acquired in 2019 was 170 basis points (1.7%) higher on Sept. 30 compared with on June 30 and 250 basis points (2.5%) higher versus March 31. October brought an additional 35-basis-point (0.35%) increase.

Looking beyond Commonwealth, Invesque’s overall stabilized senior housing operating portfolio saw a 140-basis-point (1.4%) jump in occupancy quarter-over-quarter. But the sector continues to face labor challenges.

“Despite occupancy gains we have seen in our Commonwealth portfolio and other [senior housing operating portfolio] assets over the last six months, the operating environment continues to be challenging with the labor and staffing headwinds coming to the forefront,” White said. “Operators are struggling to find and retain staff, and we are all, as an industry, laser-focused on finding creative ways to attract new talent to the industry.”

White said that he is confident that the demand for senior living over the next few years is moving “full steam ahead” as the 80-plus demographic continues to grow. But he acknowledged that solving the staffing challenges is a “critical piece in the industry puzzle.”

He added that the combination of increasing Social Security benefits, inflation and the acceleration in street rates place operators in the position of having “the proverbial wind at their backs.” He said he expects that operators will start pushing rent rates higher in the coming quarters.