Ventas Identifies Operators Taking On Eclipse Assets, Cafaro Sees Robust Recovery Underway

Ventas (NYSE:VTR) is making good headway on its plan to transition 90 communities formerly operated by Eclipse Senior Living to eight other operators, with 65 already having changed hands.

Among the operators so far revealed to be taking on some former Eclipse properties is Discovery Senior Living, which is taking on 19 former Elmcroft communities. Other operators revealed Friday to be taking on Eclipse properties include:

— Sinceri Senior Living; 21 communities


— Priority Life Care; 17 communities

— American House Senior Living Communities, 17 communities

— Sodalis Senior Living; 13 communities


— Grace Management; 4 communities

— Sonida Senior Living, formerly known as Capital Senior Living (NYSE:CSU); 3 communities

Another operator taking on Eclipse properties — though not for Ventas — is Sagora Senior Living, which is slated to manage eight Elmcroft and four Embark communities.

Justin Hutchens, who is Ventas’ executive vice president of senior housing, noted that the leaders of the companies taking over the properties are “fired up” about managing the regional portfolios and driving better performance in 2022.

“These companies are excited to grow and there’s just an energy to it that’s really positive,” Hutchens said during the REIT’s third-quarter earnings call with investors and analysts Friday.

As of the third quarter, Ventas’ total senior housing holdings included 813 communities, and the REIT also has significant investments in other health care spheres such as life science and medical office.

For the third quarter of 2021, Ventas reported normalized funds from operations of 73 cents, which was roughly in line with analyst expectations. Same-store SHOP net operating income (NOI) dropped 12.7% in the third quarter compared to the same period last year, mostly due to higher labor costs.

Ventas’ share price grew by 2.23% to $53.98 per share by the time the markets closed Friday.

‘Huge opportunity to grow revenue’

The Chicago-based real estate investment trust logged its eighth consecutive month of occupancy growth in its senior housing operating portfolio (SHOP), which registered 82.2% occupancy in the third quarter. That represents a 230 basis point sequential increase, and marks the company’s first year-over-year gain in SHOP occupancy since the pandemic, began despite the rise of the delta coronavirus variant over the summer.

Leads and move-ins in October totaled 109% and 104% compared to 2019 levels, respectively.

SHOP revenue increased 3.1% in the third quarter of 2021 on higher occupancy and a sequential increase in revenue per occupied room (RevPOR) of 0.3%.

The recent gains give CEO Debra Cafaro confidence that “a robust senior housing recovery is well underway.”

“Our aligned and experienced team continues to be focused on capturing the double upside in senior housing from both pandemic recovery and the projected growth in the senior population, and also to continuing our long track record of external growth,” Cafaro said Friday.

The labor market for senior living communities remains tough, and Ventas saw its labor cost pressures accelerate in September. SHOP expenses increased 5.4% in the third quarter of 2021, with higher labor costs making up half of that increase. Still, Hutchens believes there are ways the REIT’s operating partners can manage those pressures.

“But within [metropolitan statistical areas], there are certain communities that really have an outsized amount of agency [staffing] that’s being utilized, which points to the opportunity for an operational solution,” he said.

Ventas’ latest earnings come on the heels of acquisitions and investments totaling $3.7 billion since the start of 2021.

Chief among those deals was the recent acquisition of 103 independent living communities formerly owned by New Senior for a purchase price of $2.3 billion. Ventas also during the third quarter grew its relationship with Vancouver, Washington-based Hawthorn Senior Living by acquiring five independent living communities and one assisted living community in Canada for $180 million.

Looking ahead, Hutchens sees the potential for expansion of senior living margins for two main reasons: one is that Ventas believes market supply-demand characteristics are favorable for occupancy growth; and there are signs overall that labor headwinds are easing somewhat. Ventas’ operating partners have proposed an average 8% in-place rent increase for residents in the U.S. for the upcoming year, and a 4% average increase for residents in Canada.

Furthermore, the company’s leaders expect to see significant sequential revenue growth in the REIT’s SHOP segment in 1Q22.

“So, there’s a huge opportunity to grow revenue,” Hutchens said.

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