The senior living industry pandemic recovery is underway with accelerating demand, strong rate increases and rapidly improving clinical conditions, with expectations for occupancy and revenue growth going forward, Ventas Chairman and CEO Debra Cafaro said Friday during the Chicago-based real estate investment trust’s fourth-quarter earnings call.
In between the rollout of COVID-19 vaccinations and sustained improvement in the senior living business, Cafaro said, Ventas took proactive steps to “capture the upside” in the industry recovery.
She said the company exceeded expectations in the fourth quarter based on the strength of performance in its senior living and medical office business, with additional contributions from investment activity and federal grants for its assisted living communities.
Ventas Investments
Since 2010, the REIT has averaged more than $3 billion in annual average investment activity across its asset classes. Fourth-quarter investments of $3.7 billion focused on expanding the portfolios in senior housing, life science, and research and innovation, and selectively expanding the medical office building footprint.
In February, Ventas announced the completion of a $107 million acquisition of Mangrove Bay, a senior housing community in Jupiter, FL, according to a news release. In Canada, alongside its partner Le Groupe Maurice, the company is pursuing several new development opportunities with the goal of breaking ground this year.
Cafaro said Ventas will address an “extremely robust pipeline” as it enters 2022.
Senior living
The senior living outlook remains “bright,” and Ventas expects growth in occupancy, revenue and net operating income in the first quarter, Executive Vice President of Senior Housing Justin Hutchens said.
Lead volume exceeded 16,400 in January, an all-time high since the onset of the pandemic. He said he expects robust underlying demand to support lead and occupancy growth moving forward.
“Our senior housing business is competitively positioned to capture the benefits of the ongoing sector recovery,” Hutchens said, adding that Ventas executed its pricing strategy to drive outsized price increases, led by Atria Senior Living and Sunrise Senior Living.
In the seniors housing operating portfolio, same store average occupancy grew by 200 basis points (2%) to 83.4% compared with the fourth quarter 2020. Ventas said it expects average occupancy to increase 410 basis points (4.1%) in the first quarter compared with the same quarter of 2021, outperforming normal seasonal trends and tempered by COVID-19-related effects.
Rate and revenue grew for the first time since the start of the pandemic, with same store revenue increasing 3.3% year-over-year. The REIT expects revenue to increase approximately 10% in the first quarter, with seniors housing operating portfolio net operating income expected to grow between 6% and 15% from the first quarter of 2021.
As anticipated, operating expenses increased sequentially by 2.6% to $8.7 million, driven mainly by incremental labor expenses. Ventas expects operating costs to remain elevated through the first quarter, even as COVID-19-related clinical conditions moderate.
“Our footprint is well-positioned,” Hutchens said. “I am encouraged by the fundamentals supporting our business and the opportunities for growth moving forward.”
Workforce
Although a surge in coronavirus cases in January among employees affected the availability of caregivers in an already challenging market, Hutchens said that the REIT communities continue to make progress with workforce management and efficiency initiatives.
“Net hiring trends are showing early signs of improvement as recruiting resources have been bolstered, labor monitoring capabilities have been enhanced, and targeted competitive wage increases have been executed,” he said.
