Leaders with real estate investment firm Invesque (TSE: IVQ.U) hope to continue positive momentum into the end of the year as they continue to optimize the company’s senior housing portfolio in favor of senior living communities.
The Carmel, Indiana-based REIT in the second quarter of 2022 continued its pivot to private-pay senior living communities. Year to date, Invesque has sold 21 properties valued at over $190 million as part of its aggressive disposition strategy to offload medical office and skilled nursing properties.
“I think you should expect to see this trend continue in the coming quarters as we remain diligently focused on creating a private pay focused seniors housing portfolio,” Invesque Chief Financial Officer Scott Higgs said during a second quarter earnings call on Thursday.
Through the dispositions, Invesque has repaid over $104 million in consolidated debt, Higgs added.
Higgs added that he would “love” to have Invesque’s portfolio mix at 100% senior housing assets by the end of the year.
”My goal expectation is that as we get to year end, and into the new year, we’ll be substantially all seniors housing,” he said.
Invesque’s senior living management arm, Commonwealth Senior Living, reached pre-pandemic occupancy levels across its portfolio in July for the first time in over two years, according to Higgs. Of its 28 properties, Invesque saw a 500 basis point occupancy increase from Jan. 1 to June 30. As of March 31, the trailing 12-month occupancy for stabilized triple net and stabilized Senior Housing Operations Portfolio (SHOP) at 74% and 76%, respectively.
“The occupancy gains coupled with resident rate increases that went into effect on March 1 resulted in strong performance from the Commonwealth portfolio in the second quarter,” Higgs said, referencing the company’s 6.5% rental revenue increase from 1Q22.
Higgs said he expected to see “continued positive progress” from the Commonwealth for the remainder of the year and into 2023.
“So when you fast forward, or you look ahead, I do believe we’re going to continue to see increasing occupancy and I do believe we’re gonna continue to see increasing average daily rent,” Higgs said.
Invesque reported $49.7 million in revenue in 2Q22, with total revenue in the last six months as of June 30 of $98.3 million. In April, Invesque sold two senior housing communities in New York at a net sale price of $19.2 million. In June, the company closed on the sale of interests in two 55-plus communities in New York with an implied price per unit of $145,000.
Like many other senior living operators nationwide, Higgs said staffing remains a “significant challenge” for Commonwealth as expenses eat into the bottom line as wages spike and operators fight to retain workers. CEO Scott White added the labor issue was “one of the most challenging staffing environments” in the industry’s history.
“I’m optimistic about the future of the industry and believe that the demographic tailwinds we have all been discussing for the last 5 to 10 years are really starting to come to fruition,” Higgs added.
Other challenges include rising expenses that pressure margins. Rising costs of food and supplies along with maintenance and insurance costs have all impacted operators for Invesque, White said, which is directly tied to the company raising resident rates.
“We expect that our operators and most in the industry will roll out significant rate increases again in the first quarter of 2023,” White said.
For 2Q22, funds from operation (FFO) was $0.11 per share and $0.18 per common share and adjusted fundings from operations (AFFO) of $0.12 and $0.18 per common share.
The company’s stock fell 13.6% on Wednesday to rest at $1.08 per share.
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