Welltower recently disclosed what has been happening at its large seniors housing operating portfolio (SHOP), and we again give them credit for being transparent with investors as to the operating performance of its customers. In the second quarter through May 29, its SHOP portfolio has seen occupancy decline by 420 basis points. That’s the bad news. The good news is that the weekly declines of 50 and 60 basis points in April have been cut in half to 20- and 30-basis point weekly declines in the latter half of May, ending with a 20-basis point drop the last week of the month. That still implies an 80-basis drop for a month, which would be terrible in normal times, but it is all relative. 

The other good news is that 87% of Welltower’s SHOP properties have had zero positive COVID tests in the past trailing two weeks, or 512 communities. Only 28 properties had three or more positive cases. By our estimate, fewer than 0.5% of its residents have tested positive on a trailing two-week basis. With that number significantly trending downward since early May, the percentage of positive tests may be below 0.25% by the end of the second quarter. That means that tours and new admissions will start to see positive movement in the third quarter, perhaps significantly so.  

Meanwhile, Ventas disclosed that its SHOP occupancy at May 21 was 79.2%, down 480 basis points from 84.0% on April 2. It expects to see occupancy drop by 100 basis points a month until it reaches bottom. SHOP operating expenses are about 10% higher to combat the pandemic. Management believes that 88% of its SHOP communities are past the peak of COVID-19 mortality per day, while 90% of the leased seniors housing portfolio is past the peak. In addition, Ventas received nearly all of its April and May rents from triple-net lease seniors housing tenants. Maybe the REIT will escape a dividend cut after all.