Invesque’s Portfolio Shift to Senior Living Progresses with Sales, Operator Transitions

Invesque (TSE: IVQ.U) has taken further steps toward accomplishing its long-term portfolio plan of shifting toward private-pay senior living and away from skilled nursing.

Approximately 35% of its current pro forma net operating income (NOI) comes from skilled nursing, executives with Invesque said Thursday on the company’s Q3 2021 earnings call. That’s a drop from the 75% mark at the time of the company’s IPO back in 2016.

Invesque Chairman and CEO Scott White said that he is proud of where the current portfolio is at.

“Shifting to a majority private-pay portfolio has been a long-term goal for our team,” White said on the earnings call. “Our strategic reposition has also shifted the balance of our portfolio to be predominantly private [pay].”

In keeping with the long-term goal, Invesque announced the closure of a series of transactions that netted the company more than $20 million.

One such sale transitioned ownership in four communities to Inspirit, which operates the properties. The deal netted more than $15 million and closed the relationship with Inspirit.

“The transaction was a win-win,” Invesque CFO Scott Higgs said. “We achieved strong pricing for the properties and Inspirit was able to accelerate their strategy to own more of their own real estate.”

The proceeds from the deal were used to de-lever the company’s balance sheet, according to White.

Inspirit was not the only operator relationship that Invesque closed out in the third quarter.

The company transitioned management of two New York seniors housing communities from Premier Senior Living to affiliates of Hearth Management.

This move expands Invesque’s relationship with Hearth to five total communities.

Another transaction included the sale of a community in Richmond, Virginia which had been previously operated by Invesque subsidiary Commonwealth Senior Living, netting the company more than $3 million.

Invesque also sold five skilled nursing communities in Pennsylvania for about $2.7 million. Saber previously operated the communities.

Currently, Saber operates two skilled nursing facilities owned by Invesque, both of which are subject to a revised NNN master lease, which the company adjusted for the sale.

Transactions and labor outlook

Several senior housing investors have deployed or intend to deploy $5 billion or more in the capital, Higgs said.

Invesque estimates per-unit prices around $200,000, a number which he said is above historic norms.

With this as the backdrop, Invesque intends to take advantage of current valuations by disposing of non-core assets in the coming months. At the same time, the firm will continue to transition properties to strengthen alignment with key operating partners and pursue acquisitions to grow its private-pay senior living holdings.

“In the coming months, you can expect to see additional transactions to further push us towards senior housing,” Higgs said.

Also in the coming months, Invesque expects issues with the current labor shortage to persist.

White noted that this shortage is not exclusive to the senior housing space. When asked when he could see the shortage stabilizing, White said that it is difficult to project but it’s not going to happen very quickly.

“Yes, Covidcases are down substantially and yes, occupancy is growing considerably,” White said. “But… I think we’re going to be grappling with this labor issue for quite some time.”

That said, he is encouraged by recent occupancy trends, with Commonwealth gaining 140 basis points sequentially. Since its pandemic lows in March 2021, Commonwealth has added about 5.5% in occupancy, CEO Earl Parker told SHN last month.

Still, forecasting pace of recovery is complicated, because margin, occupancy, and overall operating costs are all rebounding at different rates, and could be affected by dynamic market conditions in the months ahead.

Some people have gone on record as saying they expect 2023 to be the year that we’ll return to pre-Covid levels; I don’t want to go on the record as reflecting on a certain time,” White said. “I think what I will say is that, it’s not going to be quick, it’s not going to be this year, it’s not going to be early in the new year — I do see a lot of positive momentum on occupancy … and the labor issue, it’s a big issue.”