Like most companies, average occupancy for the seniors housing operating portfolio (SHOP) of Ventas declined in the first quarter of 2021. Same-community census average 76.5%, a decline of 260 basis points from the fourth quarter, but a little better than predicted by management. This represents the U.S. and Canadian portfolio combined. Net move-in trends started improving during the quarter as well, and move-ins during April totaled 1,880 residents, the highest number since June 2019.
Average weekly spot occupancy for the U.S. portfolio hit bottom in the week ended March 11 at 69.9% and then steadily rose 170 basis points to average 71.6% during the last week of April. But from the mid-March low of 69.8% it rose to 72.6% at the end of March for a 280-basis point gain.
The Canadian portfolio has not seen the same level of recovery, but its performance has been much stronger during the pandemic. Average occupancy for the week ended March 25 was 91.6% and has stabilized at 91.7% for the last week of April. Just having an occupancy rate above 90% is somewhat calming. Even though the Canadian SHOP portfolio is much smaller than the U.S. portfolio, because census has remained so high it brings the total average up to 77.1% for the last week of April.
While the occupancy bleed has stopped, it will take a while for operating margin to kick in since there is usually a lag after census growth. When asked whether the SHOP portfolio will get back to the 29% to 30% margin in 2019, the response was volume (meaning census) was the first priority, followed by pricing increases and then margin. Management did not think the surge in April move-ins was pent-up demand, however, something that many observers (and providers) have been hoping for; it was “organic” demand.
Ventas is expecting about $1.0 billion in sales proceeds from its medical office building portfolio and seniors housing by the end of the year. Asked about selling SHOP assets now or waiting for improvements, the response was that they would sell those assets with less future potential, that were not a good fit and which would be better off with another operator. That seems to be a good description of the Eclipse Senior Living portfolio, which had been in decline when Ventas removed the previous owner/operator a few years ago and as far as we know, has never really improved. It is a tough portfolio, and while they do not break out the results, we have to assume it did not fare well during the pandemic. Rumor has it they are midway through a sales process, having tapped Eastdil to sell it, which is a bit surprising since they are not active in seniors housing.
The recent results for Ventas are just further confirmation that the market hit bottom across the sector in the first quarter and is on its way back. How fast and for how long are still open for debate.
