First-quarter earnings calls continued Wednesday with updates from Aleris Senior Living, CVS Health (parent of Omnicare), Diversified Healthcare Trust and Healthpeak Properties.
AlerisLife
Newton, MA-based AlerisLife held its first-quarter earnings call under new leadership Wednesday.
Monday, the company announced the resignation of President and CEO Katie Potter and the hiring of healthcare consulting group Alvarez & Marsal to conduct a comprehensive operational review. Recommendations are expected by the end of the second quarter.
“At this pivotal time for the senior living industry and our company, it is critical that we continue to maintain our focus on the core business functions of our senior living communities and Ageility clinics,” said Jeffrey Leer, interim president and CEO. “Our goal is to narrow our focus in the current environment to capture occupancy growth and drive cost efficiencies.”
In the short-term, AlerisLife’s focus is on stabilizing its senior housing portfolio and “operational excellence,” Leer said. The company experienced a net loss for the first quarter of 2022 of $9.7 million, or $0.31 per diluted share, compared with net income of $3.3 million, or $0.10 per diluted share, in the first quarter of 2021, according to a company press release.
Of working with Alvarez & Marsal, Leer said, “We are excited to work closely with their team to improve our operational performance by driving efficiency and standardizing processes that will ultimately enable us to better serve our senior living and Ageility clinics customers.”
Five Star Senior Living changed its name to AlerisLife in January, but the Five Star name continues to be used for AlerisLife’s senior living division.
Same-property revenue per available room in the portfolio of senior living communities that AlerisLife manages for Diversified Healthcare Trust increased 4.4% compared with the previous quarter, Leer said, whereas same-property revenue per available room in the portfolio of senior living communities that AlerisLife owns increased 4%.
“Both rate increases and the continued roll-back of concession packages offered in previous quarters helped drive these improvements and more than offset decreases in occupancy from the sequential quarter,” Leer said.
See more coverage of the earnings call in McKnight’s Senior Living.
Diversified Healthcare Trust
Diversified Healthcare Trust’s net operating income is skewed toward medical offices in the first quarter as a result of the effect that COVID-19 has had on senior living over the past two years, according to President and Chief Operating Officer Jennifer F. Francis
Same-property cash basis net operating income in the senior housing operating portfolio decreased compared with the first quarter of last year, primarily resulting from increases in operating expenses on a per-resident basis due to increased labor costs, which were partially offset by increases in occupancy.
Francis said the Newton-MA-based company is eager to reduce debt and accelerate growth.
“Over the next several quarters, we expect senior living segment NOI [net operating income] to increase as we deploy capital to rejuvenate and stabilize our SHOP [senior living operating portfolio] segment through renewed occupancy rates and combined community EBITDAR [earnings before interest, taxes, depreciation, amortization and restructuring or rent costs] growth,” she said.
Throughout 2021, Diversified transitioned 107 senior living communities from Five Star Senior Living to 10 new third-party managers. Five Star changed its name to AlerisLife in January, but the Five Star name continues to be used for AlerisLife’s senior living division.
Monday, AlerisLife announced the resignation of President and CEO Katie Potter and the hiring of healthcare consulting group Alvarez & Marsal to conduct a comprehensive operational review. Recommendations are expected by the end of the second quarter.
“We believe that their review and findings and the resulting plan will accelerate the improvement of performance of the communities that Five Star manages on our behalf,” Francis said.
The senior living industry faced setbacks in occupancy last year and, Francis said, “recovery has been more measured than anticipated.” At the same time, she added, the new operators of the 107 transitioned properties are now executing their business plans, and those plans are “beginning to materialize in our operating results this quarter.” Occupancy within this portfolio increased approximately 100 basis points (1%) from the previous quarter, she said, with eight of the 10 operators reporting an increase.
Additionally, Francis said, seven of the 10 operators raised rates during the first quarter, resulting in non-same property revenue growth of $4.5 million, or 5.8% compared with the fourth quarter.
“Following the completion of these transitions, we believe we have the right operator mix and are starting to see the benefits from both our capital spend and the investment our operators are making in their communities, and in their corporate and marketing teams,” Francis said.
See more coverage of the earnings call in McKnight’s Senior Living.
Healthpeak Properties
Denver-based Healthpeak Properties “operating results were ahead of our initial expectations,” CEO Tom Herzog on the real estate investment trust’s first-quarter earnings call.
Continuing care retirement community entry fees saw increased cash sales volumes of 42% year over year, he said.
“CCRCs are benefiting from strong demand and supportive housing values with almost no new competition,” Herzog said. “CCRCs require eight years to 10 years from pre-development through stabilization, and our portfolio’s replacement cost would be at least three times our cost basis. Additionally, the yield for our irreplaceable CCRC portfolio is incredibly strong on a risk-adjusted basis.”
Scott Brinker, president and chief investment officer, added that CCRC occupancy was up 120 basis points (1.2%) sequentially. In addition, he said, leads and tours exceeded 2019 levels last year and are trending favorably.
“Entry fee cash receipts totaled $21 million during the quarter, exceeding the amortization amount we recognized in earnings by $2 million,” Brinker said. “That gap has now occurred in four straight quarters, and we expect it to continue, which is a positive sign for future earnings growth.”
See more coverage of the earnings call in McKnight’s Senior Living.
CVS Health (Omnicare)
Woonsocket, RI-based CVS Health’s pharmacy volume from the Omnicare operations has increased slightly in recent months, according to Shawn Guertin, CVS Health executive vice president and chief financial officer. Omnicare provides pharmacy services to skilled nursing facilities and senior living communities.
A healthcare analyst on the call noted that the skilled nursing industry has seen an uptick in occupancy in the first few months of 2022 after a slow recovery last year.
“So I’m just wondering if that’s translating into just better Rx volume results for the LTC Omnicare operations in early 2022,” the analyst asked.
Guertin said that, for the most part, that the Omnicare side of things “has tracked with our expectations this year, but I certainly wouldn’t characterize it as an inflection point or anything like that. It’s definitely been recovering from its bottom during COVID and has more or less been consistent with expectations this year.”
