Several publicly traded REITs announced their third quarter earnings results at the end of last week, and the results were a mixed bag. Welltower released some very positive occupancy news, as well as four major portfolio acquisitions, signaling its confidence in the seniors housing industry. On the flip side, WELL’s total portfolio same store NOI declined 5.3% year over year, and 7.1% from the previous quarter, while its operating margins and lease coverages continued to deteriorate. For more details on the REIT’s third quarter results, read about them here.
Ventas followed soon afterwards with its own earnings release, and there was also both good news and bad. The company reported its eight consecutive month of occupancy gains through October, with average SHOP occupancy growing 230 basis points in the third quarter. That takes average occupancy above 80% to 82.2%, largely propelled by the U.S. assets, which saw a 290-basis point increase. Since the low point in mid-March 2021, U.S. same-store SHOP properties have gained 750 bps in occupancy. Plus, leads in each month of the third quarter topped any previous month since the pandemic. The average monthly REVPOR also grew sequentially from $4,584 to $4,596. That certainly qualifies as good news.
However, looking at the end-of-month spot occupancy, the census growth appeared to wane throughout the last few months, from a high of 114 basis points from May to June to 42 basis points from July to August, and just 19 basis points from September to October. Seasonal patterns were blamed.
Total NOI across the 322 SHOP properties fell from $110 million in Q2 to $106.7 million in Q3, with the margin also dropping by 160 basis points sequentially to 23.3%. Higher revenues ($457 million in Q3 compared with $444 million in Q2) could not overcome the 5.4% increase in expenses from $311 million in Q2 to $327 million in Q3. Around 50% of the expense growth was attributed to labor, principally contract labor.
Looking forward, Ventas did state that average occupancy should grow between 80 and 120 basis points in the fourth quarter, with operating costs also rising due to the tight labor market. But with “above-average annual increases” for 55% of residents in Q1:22, something we heard was coming from several other operators at NIC, the REIT expects strong revenue growth early next year. Rents could rise by 8% in the U.S.
Ventas did reveal who was taking over its entire Eclipse Senior Living portfolio of 90 communities. They include Sinceri (21), Discovery Senior Living (19), Priority Life Care (17), Sodalis (13), American House Senior Living (13), Grace Management (4) and Sonida, fka Capital Senior Living (3). Also, during the quarter, Ventas closed its $2.3 billion acquisition of New Senior Investment Group, expected to produce $16-$18 million of “synergies” in 2022.
