Brookdale Senior Living, Pennant, Sabra Health Care REIT and Welltower reported their third-quarter earnings on Tuesday. Here’s a roundup.
Brookdale Senior Living
Brookdale Senior Living occupancy increased to 180 basis points in the third quarter.
“Our weighted average occupancy grew 750 basis points since the start of the positive turn in March 2021, which demonstrates the strength of our recovery,” Brookdale’s President and CEO Lucinda “Cindy” Baier said in a press release issued in conjunction with Tuesday’s earnings call.
According to Baier, despite continued labor shortages, the Brentwood, TN-based company sequentially reduced contract labor for the third quarter by more than 40% and achieved its 11th consecutive month of positive net hires in September.
Income from same-community resident rates increased year over year due to increases in occupancy and revenue per occupied room.
“The increase in occupancy primarily reflects the impact of the company’s execution on key initiatives to rebuild occupancy lost due to the COVID-19 pandemic. The increase in RevPOR was primarily the result of in-place rate increases, partially offset by lower care revenue as new-resident [care needs] returned to pre-pandemic levels,” Brookdale said.
Operating expenses increased year over year, primarily because of labor expenses, owing to higher wages and merit increases, the company reported. Communities paid more in overtime wages, but this was partially offset by a decrease in the use of contract labor. Other inflationary pressures also contributed to an increase in same-community operating expenses.
Since the beginning of the third quarter of 2021, Brookdale has removed seven communities from its portfolio through sales or lease terminations. These actions have resulted in $7.2 million less in resident fees during the third quarter of 2022 compared with the third quarter of 2021. Additionally, the disposition of four communities since the beginning of the second quarter of 2022 resulted in $2.2 million less in resident fees during the third quarter of 2022 compared with the second quarter.
Read more coverage of the earnings call on McKnight’s Senior Living.
The Pennant Group
“Our third-quarter results reflect another step forward operationally as we seek to unlock the significant latent potential in our existing business,” Pennant CEO Brent Guerisoli said in a press release issued in conjunction with Tuesday’s earnings call.
Total revenue for the quarter was $118.4 million, an increase of $6.4 million, or 5.7%, over the same quarter in 2021.
The senior living segment showed signs of recovery, with gains in occupancy and revenue per occupied room, the company said. Revenue for the senior living services segment for the quarter was $32.6 million, a decrease of $0.3 million, or 1.1%, over the prior-year quarter.
Same-store senior living revenue for the third quarter, however, was $32.2 million, an increase of $3.4 million, or 11.8%, over the prior year. Same-store senior living average occupancy was 77.6%, an increase of 140 basis points over the prior-year quarter, and average monthly revenue per occupied room for the third quarter was $3,560, an increase of $386, or 12.2%, over the prior-year quarter and $90 or 2.6% over the second quarter of 2022.
Eagle, ID-based Pennant’s home health business saw strong admission volume in the third quarter, the company said. Total home health admissions for the third quarter were 10,152, and total Medicare home health admissions for the third quarter were 4,637, an increase of 10.2% and 10.1%, respectively, over the prior-year quarter.
The home health and hospice services segment’s revenue for the third quarter was $85.8 million, an increase of $6.8 million, or 8.6%, over the prior-year quarter.
“We look forward to accelerating results across both segments as we head into 2023 and as our leaders drive revenue and contain costs despite an inflationary operating environment,” Guerisoli said.
Sabra Health Care REIT
As announced Monday, Irvine, CA-based Sabra Health Care REIT will transition a 24-property skilled nursing portfolio leased to North American Health Care to two of Sabra’s existing tenants, The Ensign Group and Avamere Family of Companies.
“This is a very good portfolio. We’ve always gotten inbounds on it, so we knew that we would have some terrific options in terms of transitioning the portfolio, CEO Rick Matros said during Tuesday’s earnings call.
Matros said that North American came to Sabra in mid-August after, having new management, it re-evaluated what it wanted to do with the portfolio.
“One option was to downsize the company to the 12 non-Sabra facilities that they had primary ownership in, and the other was a rent reduction,” he said. “We didn’t [think] the rent reduction is something that was necessary, given our assessment of the performance of the portfolio, and we’re actually happy to accommodate them on their request to downsize [to] the 12 buildings.”
According to Matros, Sabra signed a transition agreement with North American, which he described as “very cooperative.” Rent is fully covered at the current contractual level through the Feb. 1 expected transition date, he added.
The Ensign Group will add 20 properties in California to two master leases with its operating companies with initial terms of 18 and 20 years. Avamere will add four properties in Washington state to its existing master lease, which includes nine other properties in Washington, with an initial term of 13 years.
Ensign is “an extremely strong operator, so we see that as real upside,” Matros said. The company is public, he added, which means more transparency than with a private tenant. “So we think that’s an added plus,” he said.
Transitioning the four Washington properties to Avamere is a good fit for Avamere’s market needs and “provides some really terrific opportunities for them from a managed care contracting perspective,” Matros said.
The North American transition, he said, “was a unique situation, and it had a lot to do with the [North American] board’s involvement and the changes in management and their reevaluation of the portfolio.”
“Sometimes things happen that are unique and you don’t anticipate, but you shouldn’t extrapolate,” Matros continued. “No one should extrapolate this to any other aspect of the portfolio.”
Welltower completed $1.1 billion of pro rata gross investments, including $850 million in acquisitions and loan funding as well as $203 million in development funding, in the third quarter, according to a press release issued in conjunction with Tuesday’s earnings call.
The Toledo, OH-based real estate investment trust acquired three newly constructed rental communities and three entrance-fee communities from Oakmont Management Group for $312 million.
Welltower also expanded its relationship with Brighton, MI-based StoryPoint Senior Living by acquiring 33 communities throughout Michigan, Ohio and Tennessee under an aligned RIDEA 3.0 contract, according to the press release.
Also during the third quarter, the REIT acquired a 187-unit senior housing property in the San Francisco Bay area for a pro rata purchase price of $114 million.
Looking toward the fourth quarter, the company expects to see average blended same-store net operating income growth of 8.5% to 10.5%. The senior housing operating portfolio is expected to contribute approximately 18.5% to 23.5% of that growth; the seniors housing triple-net lease portfolio, approximately 5% to 6%; and long-term/post-acute care, approximately 2.5% to 3.5%.
Read more coverage of the earnings call in McKnight’s Senior Living.