Ventas (VTR) was the first one out of the block to report second quarter earnings, and while the results were about as expected, on the seniors housing and care side the turnaround has still not arrived. In fact, the second quarter was disappointing but not unexpected, given all the quiet industry talk about census, margins and staffing costs.

One caveat is that just four companies make up two-thirds of VTR’s seniors housing and care portfolio, and one can question whether they are representative of the industry. But since two of the four are Atria Senior Living and Sunrise Senior Living, we are not talking about the dregs of the sector.

For the seniors housing operating portfolio (SHOP), same-community sequential occupancy declined by 30 basis points, and by 40 basis points year over year to 86.4%. Year-over-year net operating income for the same-community SHOP assets declined by 2.9%. Most of the problem is that expenses are growing faster than revenues. The sequential same community expenses increased by 1.1% while revenues declined by 0.6%, causing EBITDAR to drop by 4.2%. This resulted in a 110-basis point drop in EBITDAR margin to 30.6%.

The Canadian portfolio, with only 41 properties, continues to outperform the U.S assets. Year-over-year occupancy increased by 90 basis points to 93.5%, with the EBITDAR margin increasing by 3.6%.  Perhaps that is why Ventas paid a healthy price per unit and low cap rate for its recent $1.8 billion acquisition in Canada. It almost seems like a safe haven for stability and growth, away from the problems encountered south of the border.

On the triple-net lease side of the business, the seniors housing lease coverage declined to 1.1x, after being steady at 1.2x for several quarters. The decrease in coverage is most likely the result of occupancy dropping by 110 basis points sequentially to 84.2%.

Meanwhile, the post-acute average lease coverage remained steady at 1.4x even though occupancy jumped by 270 basis points to 67.5%. The post-acute numbers include LTACs and inpatient rehab facilities. Apparently, 13% of VTR’s annualized NOI is derived from leases with a 1.09x coverage or less. No one is alarmed, however, because of guarantees and security deposits.

The reporting will continue in the next few weeks, but a meaningful recovery from the census and labor issues may not happen until well past the end of 2020.