Ventas reported its third quarter results, and despite average census dropping below 80% for the first time, it remained on firm financial footing thanks to both federal relief grants and earlier moves to bolster its liquidity.
In fact, Ventas improved its cash NOI from $402 million in the second quarter of 2020 to $545 million in the third quarter. Much of the gain came from its triple-net portfolio and mostly as a result of the agreement made with Brookdale Senior Living to reduce the provider’s annual cash rent to $100 million in return for consideration of approximately $235 million (including $162 million in cash) up-front. All of the $235 million in consideration is being amortized in Ventas’ GAAP results over the 5.5-year remaining life of the Brookdale lease, but the $162 million in up-front cash was included in the third-quarter cash NOI.
Meanwhile, the SHOP portfolio reported stable cash NOI of $109 million, roughly the same as in Q2:2020. That came despite a drop in occupancy, decline in revenue per occupied room and increase in operating expenses. But Ventas did apply for about $35 million in grants under Phase II of HHS’ Provider Relief Fund on behalf of the SHOP’s assisted living communities.
Ventas also further improved its liquidity in the third quarter, paying down substantially all of its borrowings under its $3.0 million revolving credit facility and using existing cash on hand to retire $236 million of the 3.25% senior notes due in 2022. The company also has about $300 million in cash and cash equivalents on hand and no commercial paper outstanding.
Census-wise, Ventas was in much the same boat as the rest of the industry, with its average occupancy in September across its SHOP falling to 79.6%, or 130 basis points lower than the average June occupancy of 80.9%. The rate of decline did improve as the summer went along, but as we pointed out in this month’s issue of The SeniorCare Investor, the road to recovery will be a long one. On a bright note, leads and move-ins both showed improving trends and were 85% and 94%, respectively, compared with last year. That could have certainly been worse.
On the COVID front, 93% of Ventas’ SHOP communities have either never had a confirmed COVID-19 resident case or had just one in the last 14 days, which is impressive. Also, 96% of Ventas’ communities are open to new resident move-ins, and we hope that continues despite the rising number of cases in areas across the country.
