Companies focus on portfolio management among costs and labor availability pressures.
Invesque
Invesque chairman and CEO
Invesque has been very busy for the past 90 days with its active portfolio management, Chairman and CEO Scott White said in Thursday’s third-quarter earnings call, beginning with closure on the previously announced sale of the company’s ownership interests in four communities to Inspirit Senior Living.
This S35.5 million sale resulted in approximately $15 million in net cash proceeds.
In October, Invesque sold five small, non-core senior living communities in Pennsylvania that previously were managed by Saber Healthcare Group, subject to an absolute triple-net master lease. The sale netted the company approximately $2.7 million in proceeds, which the company used to pay debts.
“The assets struggled historically from a financial perspective,” White said.
Saber continues to operate two Invesque-owned skilled nursing facilities that are subject to a revised triple-net master lease.
The company transitioned management of two seniors housing communities in New York from Premier Senior Living to affiliates of Hearth Management last month. Post-transition, the two communities were moved into Invesque’s senior housing operating portfolio and Hearth entered into an interim consulting agreement that will convert to a management agreement, once regulatory approvals are received.
Additionally, Invesque closed on the sale of a community in Richmond, VA, that previously was operated by its captive senior housing operating and management company subsidiary, Commonwealth Senior Living, netting Invesque approximately $3.4 million in cash.
Despite quarter-over-quarter occupancy gains over the past six month, “the operating environment continues to be challenging with staffing and labor headwinds coming to the forefront,” White said.
“Operators are struggling to find and retain staff, and we as an industry are laser-focused on finding creative ways to attract new talent to the industry. We’re confident that the demand for our product type for the next few years is coming full steam ahead as the 80-plus demographic continues to move in our favor,” he said. “Solving the staffing problem now and for the years to come is a critical piece of the industry puzzle.”
Over the past quarter, Invesque has reduced overall company leverage by approximately 100 basis points (1%) compared with the second quarter, which also represents an overall reduction of 300 basis points (3%) since the third quarter of 2020, Chief Financial Officer Scott Higgs said.
“As we move forward in our de-levering strategy, we will look to utilize proceeds in the most accretive manner from a capital structure perspective with a particular focus to paying down our higher priced debt given the favorable interest rates environment,” Higgs said.
Chief Investment Officer Adlai Chester said the company continues to see some challenges in its triple-net portfolio “as operators continue to deal with the linger effects of COVID.”
Invesque, he said, continues to work on streamlining its portfolio “to ensure that we have the right operator for each of our owned assets.” Chester added that Invesque has one of the youngest portfolios in the industry, with an average property age of slightly more than 10 years.
“Having a young portfolio with occupancy upside provides a unique competitive advantage over some of our public peers, and should position our operators to see outsized analog growth for the coming years,” he said.
“In the following months, you can expect to see additional transactions to further push us toward senior housing. We will continue to transition properties to strengthen alignment and grow with our preferred partners while continuing to dispose of non-core assets,” Chester said. “As we have always done, we will remain laser-focused on maximizing value for all of our stakeholders, whether it’s through transitions, dispositions or acquisitions.”
Read more about the earnings call in McKnight’s Senior Living.
Capital Senior Living
“The third quarter of 2021 was a pivotal time for Capital Senior Living, President and CEO Kimberly S. Lody said during Thursday’s earnings call.
“Completing the recent transactions to raise new capital for the company will enable us to address our immediate liquidity needs and strengthen our financial foundation, while we lead the business through the current operating environment and set the stage for long-term sustainable growth,” Lody said in a press release issued Wednesday in conjunction with the earnings call.
With the proceeds from $154.8 million capital raise from a transaction with Conversant Capital that closed earlier this month, Lody said on the call that Capital has “significantly increased the company’s liquidity and are now in the position to further fund our strong pandemic-related recovery, to invest in our assets and enhance our competitive position and to address our near-term debt maturities with flexibility and strength.”
Effective Nov. 15, Capital is rebranding as Sonida Senior Living and will trade under the ticker symbol SNBA.
“While our corporate name is changing, the community names will remain unchanged, allowing us to continue to build upon the positive reputations that our communities have earned in our local markets,” Lody said.
Also, the company is expanding its relationship with Ventas by adding three additional Ventas-owned assets to its managed portfolio, effective Dec. 1.
Chief Operating Officer Brandan Ribar said that recent capital investments provide the company with the resources to continue to grow.
“Opportunistic capital expenditures are now underway,” he said.
Average monthly rent increased to $3,578 for the third quarter from $3,518 in the second quarter, which Ribar said represents the company’s focus on the reduced use of concessions.
“Concessions decreased by more than 50% on a sequential basis, furthering strengthening opportunities for near-term rate improvement,” Ribar said.
Tiffany Dutton, vice president of accounting and financial reporting, said that Capital saw increased in traffic and move-ins during the third quarter. Average occupancy for the quarter was 81%, an increase of 290 basis points (2.9%) from the previous quarter.
“The options we completed over the course of the past two years have stabilized our business and positioned us for future growth,” Dutton said.
In terms of liquidity, “We had $10.7 million of unrestricted cash at Sept. 30, 2021, a $3.9 million decrease from the $14.6 million unrestricted cash balance that we reported at June 30, 2021,” Dutton said. “The reason for the decrease in cash is twofold. Although our financial position continues to improve, we have operated in a working capital deficit since 2017, which was magnified by the COVID-19 pandemic.”
Lody said: “We look forward to being on the other side of this transitionary period of pandemic recovery when the labor issues and inflationary pressures subside. We believe in the promising future of this industry and, more specifically, in the future growth process for Sonida Senior Living.”
Read more about the earnings call in McKnight’s Senior Living.
