Q3 2024 Senior Housing REIT Report

Earnings Recap & Forward Momentum: Q3 2024

The senior housing REITs recently wrapped up their earnings calls for the third quarter of 2024 and gave their insights into where they are heading into the final quarter of the year. Many of the REITs raised their guidance outlook for the year as senior housing operating portfolios (SHOP) continue to achieve occupancy levels surpassing pre-pandemic levels. Welltower saw revenue increases yet again driven by 310 bps of year-over-year average occupancy growth. During the quarter, Welltower converted or reached agreements to convert 52 triple-net lease properties to SHO (RIDEA) structures. This allowed them to directly participate in the underlying cash flow growth of the communities. Ventas saw their SHOP NOI grow 15% year-over-year and was fueled by occupancy growth of 350 basis points.

Ventas intends to convert forty-four select large-scale senior housing communities in attractive markets to the Company’s SHOP platform with proven operators and meaningfully expand its SHOP footprint and expected growth rate. Welltower anticipates funding an additional $247 million of development in 2024 relating to projects underway as of September 30, 2024. Year to date, Ventas has closed on approximately $1.4 billion of senior housing investments. This includes an additional $300 million of senior housing investments under contract and expected to close by year end. Sabra reported that their same store operating portfolio saw RevPOR at $4,140 and an 84.7% occupancy.

As previously announced, in the third quarter of 2024, Sabra closed on the $75.8 million acquisition of two managed senior housing communities operated by the Leo Brown Group, with an initial expected cash yield of 8.1%. REITs are going to continue to capitalize on the senior housing market with high demand, low supply, and limited inventory continuing to be the driving factors in REIT activity.

 

Omega Healthcare Investors (OHI) also had a very active quarter with $440 million in third quarter investments. This activity consisted of $390 million in real estate acquisitions. National Health Investors (NHI) continued to see success in their SHOP as with NOI totaling $3.0 million which is $0.7 million, or 30.4%, higher than the same period in the prior year due primarily to increased revenues from higher occupancy in the Company’s SHOP activities in the current period. NHI closed on $205.6 million in new investments in 2024 with an average initial yield of 8.4%.

LTC properties reported a net income of $29.17 million and committed to fund a $26.1 million mortgage loan for the construction of a 116-unit independent living, assisted living and memory care community in Illinois. CareTrust is continuing to capitalize on triple-net skilled nursing opportunities as they reached a JV agreement to acquire a portfolio of 31 SNF assets for a purchase price of $500 million of which CareTrust will invest $442 million. American Healthcare REIT (AHR) continues to see success with increased total portfolio Same-Store NOI growth guidance from a range of 12.0% to 14.0% to a revised range of 15.0% to 17.0%. They also acquired a 24% minority membership interest in Trilogy Holdings, becoming the sole owner of Trilogy.

 

Year to date, Invesque has sold over $160 million in assets and made significant progress on de-levering. Recent asset sales included a $16.5 million skilled nursing facility in Illinois and seven senior housing assets for $65.4 million. The company believes its strategic sales and refinancings will provide sufficient liquidity to meet obligations for the next 12 months. Diversified Healthcare also expanded its disposition program, with agreements or letters of intent to sell 28 properties for $348.1 million. This includes the previously announced sale of 18 NNN senior living communities for $135 million.

 

In conclusion, the senior housing REITs are seeing continued growth and success. This growth is fueled by strong demand, higher occupancy levels, and strategic investments. Many REITs, including Welltower, Ventas, and Omega Healthcare Investors, are expanding their portfolios. Welltower and Ventas focusing on converting properties to SHO structures to capitalize on cash flow growth. Sabra and National Health Investors have seen notable growth in their SHOP activities. In contrast, CareTrust is pursuing acquisitions in the skilled nursing space. With an active quarter and significant investments across the sector, REITs are well-positioned to capitalize on the favorable market conditions. Invesque and Diversified Healthcare are making progress on asset sales and de-leveraging, ensuring liquidity and stability for the future. The sector is expected to continue benefiting from the high demand, limited supply, and strategic moves that REITs are making to expand their senior housing portfolios.

 

Welltower

Portfolio Performance

• Reported net income attributable to common stockholders of $0.73 per diluted share.
• Reported quarterly normalized funds from operations attributable to common stockholders of $1.11 per diluted share, an increase of 20.7% over the prior year.
• Reported total portfolio year-over-year same store NOI (“SSNOI”) growth of 12.6%, driven by SSNOI growth in Seniors Housing Operating (“SHO”) portfolio of 23.0%.

 

Guidance

• Net income attributable to common stockholders guidance has been revised to a range of $1.75 to $1.81 per diluted share from the previous range of $1.52 to $1.60 per diluted share.
• Increased the guidance range of full year normalized FFO attributable to common stockholders to a range of $4.27 to $4.33 per diluted share from the previous range of $4.13 to $4.21 per diluted share.
• Expect average blended SSNOI growth of 11.5% to 13.0%, which is comprised of the following components:
  • Seniors Housing Operating approximately 22.0% to 24.0%
  • Seniors Housing Triple-net approximately 4.0% to 5.0%
  • Outpatient Medical approximately 2.0% to 3.0%
  • Long-Term/Post-Acute Care approximately 2.0% to 3.0%

 

SHOP & NNN Performance

• SHO portfolio year-over-year same store revenue increased 8.9% in the third quarter, driven by 310 basis points (“bps”) of year-over-year average occupancy growth and Revenue Per Occupied Room (“RevPOR”) growth of 4.9%.
• SHO portfolio year-over-year SSNOI margin expanded by 300 bps in the third quarter driven primarily by strong RevPOR growth, which continued to meaningfully outpace Expense per Occupied Room (“ExpPOR”) growth.

 

Investment Activities

• Completed $2.4 billion of pro rata gross investments, including $2.2 billion in acquisitions and loan funding and $203 million in development funding in the third quarter. completed pro rata property dispositions and loan repayments of $384 million.
• Reached agreements to convert 52 triple-net leased properties to Seniors Housing Operating (RIDEA) structures, allowing direct participation in the underlying cash flow growth of the communities. Completed the conversion of 41 of these properties in the third quarter.
• Anticipate funding an additional $247 million of development in 2024 relating to projects underway as of September 30, 2024. Expect pro rata disposition proceeds of $899 million at a blended yield of 8.4% in the next twelve months.

 

Capital Activity & Liquidity

• During the third quarter, net debt to consolidated enterprise value improved to 13.1% as of September 30, 2024 from 20.9% as of December 31, 2023.
• Improved net debt to Adjusted EBITDA to 3.73x at September 30, 2024 from 5.14x at September 30, 2023.
• Had approximately $8.8 billion of available liquidity inclusive of $3.8 billion of available cash and restricted cash and full capacity under our $5.0 billion line of creditmillion. The transaction is expected to close later in the year.

 

Ventas

Portfolio Performance

• Reported Net Income Attributable to Common Stockholders per share of $0.05.
• Total Company Net Operating Income year-over-year growth of 4.9% and Total Company Same Store Cash NOI year-over-year growth of 7.6%.
• On a Same-Store Cash NOI basis, the senior housing operating portfolio (“SHOP”) grew 15.3% year-over year and was led by average occupancy growth of 350 basis points.

 

Guidance

• Net income attributable to common stockholders guidance has been revised to a range of $.09 to $.13 per share from the previous range of $.07 to $.13 per share.
• Normalized FFO attributable to common stockholders has been revised to a range of $3.14 to $3.18 per share from a previous range of $3.12 to $3.18.

 

SHOP & NNN Performance

• The third quarter SHOP Same-Store portfolio grew average occupancy by 350 basis points year-over-year. When combined with rate growth, total revenue grew 8.7%. The SHOP Same-Store portfolio delivered year-over-year. Same-Store Cash NOI growth of over 15% in the third quarter.
• Third quarter average occupancy growth in the SHOP Same-Store portfolio was led by the U.S. at 400 basis points year-over-year. Canada average occupancy grew 200 basis points year-over-year, reaching a new record of 96.5% in the third quarter.
• Ventas intends to convert forty-four select large-scale senior housing communities in attractive markets to the Company’s SHOP platform with proven operators and meaningfully expand its SHOP footprint and expected growth rate.

 

Investment Activities

• Year to date, the Company closed on approximately $1.4 billion of senior housing investments, with an additional $300 million of senior housing investments under contract and expected to close by year end.
• Attractive investment basis $261k per unit, significant discount to replacement cost with a 7 – 8% expected Year-One NOI yield.
• Expect to dispose of assets for $330M in net proceeds.

 

Capital Activity & Liquidity

• Leverage continues to improve, with Net Debt to Further Adjusted EBITDA of 6.3x as of 9/30/24, a 60 basis point improvement since year-end 2023.
• As of September 30, 2024, the Company had $4.0 billion in liquidity.

 

Sabra

Portfolio Performance

• Reported net operating income of $29.79 million, or $.13/share for the three months ended September 30,2024.
• Same store managed senior housing Cash NOI increased 17.8% on a year-over-year basis. RevPOR in the third quarter of 2024 had robust growth of 4.2% year-over-year, while exPOR was nearly flat for the same period.

 

Guidance

• Reported the following updated 2024 Guidance (per share):
  • Net Income: $0.48 – $0.49
  • FFO: $1.35 – $1.36
  • Normalized FFO: $1.39 – $1.40
  • AFFO: $1.41 – $1.42
  • Normalized AFFO: $1.43 – $1.44

 

SHOP & NNN Performance

• Occupancy for the company’s same store SHOP portfolio is up 90 points. Occupancy in the company’s triple-net senior housing portfolio has been hovering around 90% for four quarters running now.
• For the three months ended September 30, 2024 Cash NOI for the company’s managed portfolio was $19.5 million with a 26.5% Cash NOI Margin.
• The company’s same store operating portfolio saw RevPOR at $4,140 at an 84.7% occupancy. This resulted in a $20.4 million Cash NOI and 30.1% margin.

 

Investment Activities

• As previously announced, in the third quarter of 2024, Sabra closed on the $75.8 million acquisition of two managed senior housing communities operated by the Leo Brown Group, with an initial expected cash yield of 8.1%.
• Additionally, subsequent to quarter end, Sabra closed on another managed senior housing community operated by the Leo Brown Group for $24.0 million with an initial expected cash yield of 8.6%.
• As previously announced, in the third quarter of 2024, Sabra closed on the disposition of four skilled nursing facilities for gross proceeds of $34.9 million with a trailing twelve-month cash yield of 4.0%.

 

Capital Activity & Liquidity

• As of September 30, 2024, Net Debt to Adjusted EBITDA was 5.30x.
• As of September 30, 2024, company had approximately $947.8 million of liquidity, consisting of unrestricted cash and cash equivalents of $63.0 million, available borrowings under our revolving credit facility of $847.4 million and $37.4 million related to shares outstanding under forward sale agreements.

 

Omega

Portfolio Performance

• Net income for the quarter of $115 million, or $0.42 per common share, compared to $94 million, or $0.37 per common share, for Q3 2023.
• Revenues for the quarter ended September 30, 2024 totaled $276.0 million, an increase of $34.0 million over the same period in 2023.
• Net income for the quarter ended September 30, 2024 totaled $114.9 million, an increase of $21.0 million over the same period in 2023.

 

Guidance

• The Company increased its expected 2024 Adjusted FFO range to be between $2.84 to $2.86 per diluted share from the previous range of $2.78 to $2.84 per diluted share.

 

SHOP & NNN Performance

• The company’s skilled nursing portfolio accounted for $183.42 million or about 66% of the portfolio revenue.
• The senior housing portfolio accounted for 24.6% of revenue at approximately $67.89 million.
• For the twelve months ended June 30, 2024 operating census was at 80.9% with majority of the payor mix coming from Medicaid at 53.2%.

 

Investment Activities

• Completed $440 million in Q3 new investments consisting of $390 million in real estate acquisitions, which includes the assumption of a $243 million mortgage loan, and $50 million in real estate loans.
• Through October 30, 2024, the Company has completed $834.3 million in new investments in 2024, excluding investments in construction-in-progress and capital expenditures.
• In the third quarter of 2024, the Company sold six facilities for $23.9 million in cash, recognizing a loss of $0.2 million.

 

Capital Activity & Liquidity

• As of September 30, 2024, the Company had $4.9 billion in outstanding indebtedness with a weighted-average annual interest rate of 4.6%.
• As of September 30, 2024, total cash and cash equivalents were $342.4 million, and the Company had $1.45 billion of undrawn capacity under its unsecured revolving credit facility.

 

National Health Investors (NHI)

Portfolio Performance

• Net income attributable to common stockholders per diluted common share for the three months ended September 30, 2024 was $0.65 compared to $0.68 during the same period in the prior year.
• NHI reported an 8.3% return on invested capital on a TTM basis.

 

Guidance

• NHI is updating its 2024 annual guidance range which includes the following:
  • NAREIT FFO per diluted common share to a range of $4.39 -$4.41 from $4.50 – $4.54
  • Normalized FFO per diluted common share to a range of $4.43 – $4.44 from $4.52 – $4.56
  • Normalized FAD to a range of $201.8 million – $202.5 million from $200.1 million – $201.8 million

 

SHOP & NNN Performance

• As of September 30, 2024, the portfolio consisted of 95 NNN senior housing properties. This portion of the portfolio was responsible for $38.72 million or 54.6% of adjusted NOI.
• The company’s SHOP is still sitting at 15 properties. The SHOP was responsible for just $3.03 million or 4.6% of adjusted NOI.
• The 15 SHOP properties resulted in RevPOR of $2,989 at an 88.6% occupancy. The portfolio operated at a 22.0% NOI margin.

 

Investment Activities

• NHI has closed on $205.6 million in new investments in 2024 with an average initial yield of 8.4%. They have signed LOIs for another $59.8 million with an average yield of approximately 8.8% and are evaluating a pipeline of approximately $350.0 million, excluding portfolio deals.
• In October 2024, NHI acquired a portfolio of ten assisted living and memory care communities located in North Carolina for a total purchase price of $121.0 million, excluding $0.3 million in closing costs.

 

Capital Activity & Liquidity

• As of September 30, 2024, the Company had $1.1 billion in net debt including $319.0 million outstanding on its $700.0 million revolving credit facility.
• NHI continues to maintain a strong financial profile, with a net debt to adjusted EBITDA ratio that is well within the Company’s target range of 4.0x – 5.0x.

 

LTC REIT

Portfolio Performance

• Total revenue for the three months ended September 30, 2024 was $55.78 million compared to $49.30 million in the same period prior year.
• Net income available to common stock holders was reported at $29.17 million (.66/share) compared to $22.05 million (.54/share) in the same period prior year.

 

SHOP & NNN Performance

• The company’s owned portfolio accounted for $112.01 million of revenue, approximately 63% of total.
• The assisted living portion of the portfolio reported $49.12 million of rental income, making up 27.6% of revenues.
• The skilled nursing portion of the portfolio reported $61.82 million of rental income, making up 34.7% of revenues.

 

Investment Activity

• As previously announced, committed to fund a $26.1 million mortgage loan for the construction of a 116-unit independent living, assisted living and memory care community in Illinois. The borrower contributed $12.3 million of equity to initially fund the construction. The equity is expected to be fully drawn in early 2025, then LTC will begin funding the commitment. The loan term is approximately six years at a current rate of 9.0% and an IRR of 9.5%.

 

Capital Activity & Liquidity

• At September 30, 2024, LTC’s liquidity was $229.5 million, including $35.0 million of cash on hand, $184.9 million available under the Company’s unsecured revolving line of credit.
• LTC reported a debt to gross asset value of 34.5% which is a decrease from 39.5% in 2023.

 

Invesque

Portfolio Performance

• The Company reported funds from operations of $0.02 an $0.09 per Common Share for the three- and nine-months ending September 30, 2024.
• Adjusted funds from operations was reported at $0.02 and $0.07 per Common Share for the three- and nine-months ending September 30, 2024.
• Invesque reported $42.38 million in revenue and a net loss of ($7.52) million for three months ending September 30 compared to $46.74 million and $5.92 million in the same period prior year.

 

SHOP & NNN Performance

• As of September 30, 2024, the portfolio was reported at $711.10 million in assets including 28 properties compared to $828.28 million in assets including 66 properties at the end of 2023.

 

Investment Activity

• Year to date, Invesque has sold over US$160 million of assets, and made substantial progress de-levering.
• As previously announced, on September 23, 2024, the Company sold a skilled nursing facility in Illinois for US$16.5 million. Proceeds from the sale were used to reduce borrowings under the KeyBank credit facility.
• As previously announced, on October 15, 2024, the Company sold seven seniors housing assets that were previously managed by Commonwealth Senior Living for $65.4 million.
• As previously announced, the Company has entered into a definitive agreement to sell its interest in twenty seniors housing assets currently managed by CSL and the Company’s interests in the CSL management company.

 

Capital Activity & Liquidity

• The Company believes, subject to the completion of the strategic sales of assets and refinancings, that it will have sufficient available liquidity to meet its minimum obligations as they come due and to comply with required financial covenants for a period of at least 12 months from September 30, 2024.

 

Diversified Healthcare Trust

Portfolio Performance

• Reported a net loss of $98.7 million, or $0.41 per share for the three months ended September 30, 2024.
• Normalized FFO of $4.0 million, or $0.02 per share.

 

SHOP & NNN Performance

• As of September 30, 2024 the portfolio consisted of 232 SHOP and 27 NNN senior housing properties.
• Year-over-year third quarter SHOP occupancy increased 100 basis points to 79.4% and average monthly rates increased by 5.4%, resulting in a 6.4% increase in SHOP revenues.
• Consolidated SHOP NOI increased 32.6% year-over-year to $27.4 million, including a margin increase of 170 basis points.
• The NNN portfolio resulted in $5.2 million in NOI which is 8.2% of the total portfolio NOI.

 

Investment Activity

• Expanded disposition program and currently have under agreements or letters of intent to sell 28 properties for gross proceeds of $348.1 million, including the previously announced sale of 18 NNN senior living communities for $135 million, or more than $150,000 per unit.

 

Capital Activity & Liquidity

• Approximately $261.4 million of cash and cash equivalents and restricted cash.
• For the three months ended September 30, 2024, net debt to total assets was reported at 38.6% compared to 33.8% for the same period prior year.

 

CareTrust REIT

Portfolio Performance

• For the three months ended September 30, 2024 CareTrust reported the following:
  • Net income of $33.4 million and net income per share of $0.21.
  • Normalized FFO of $60.9 million and normalized FFO per share of $0.38.
  • Normalized FAD of $61.9 million and normalized FAD per share of $0.39.
• Year-over-year market cap growth of approximately 123%.

 

Guidance

• The Company updated guidance for 2024, with projections on a per-diluted weighted-average common share basis net income of approximately $0.83 to $0.84, normalized FFO of approximately $1.49 to $1.50, and normalized FAD of approximately $1.53 to $1.54.

 

SHOP & NNN Performance

• The portfolio is comprised of primarily 217 NNN assets with 159 SNF facilities and 29 senior housing facilities.
• The skilled nursing sector resulted in rental payments of $164.81 million, making up 66% of total. Current yield on these assets was reported at 10.4%.
• The senior housing sector resulted in rental payments of $17.33 million, making up 6% of total. Current yield on these assets was reported at 11.1%.

 

Investment Activity

• CareTrust, together with a joint venture investor, has entered into a binding agreement to acquire a portfolio of 31 SNF assets for a purchase price of $500 million of which CareTrust will invest $442 million.

 

Capital Activity & Liquidity

• As of quarter end, CareTrust reported net debt-to-annualized normalized run rate EBITDA of 0.08x, which is below the Company’s target leverage range of 4.0x to 5.0x, and a net debt-to-enterprise value of approximately 0.4%.
• CareTrust currently has approximately $234 million in cash on hand.

 

American Healthcare REIT

Portfolio Performance

• Reported GAAP net loss of $(3.1) million and GAAP net loss attributable to common stockholders of $(0.03) per diluted share for the three months ended September 30, 2024.
• Reported Normalized Funds from Operations attributable to common stockholders (“NFFO”) of $0.36 per diluted share for the three months ended September 30, 2024.

 

Guidance

• The Company is increasing total portfolio Same-Store NOI growth guidance from a range of 12.0% to 14.0% to a revised range of 15.0% to 17.0%, for the year ending December 31, 2024.
• The Company is increasing NFFO guidance from a range of $1.23 to $1.27 to a revised range of $1.40 to $1.43 for the year ending December 31, 2024.

 

SHOP & NNN Performance

• The company’s SHOP segment is comprised of 69 properties made up of over 5,300 senior housing units and 95 SNF beds. The segment reported a 61.8% Same-Store NOI growth from the previous year Q3.
• SHOP segment reported the following:
  • Average Occupancy: 85.2%
  • Cash NOI/Margin: $11.23 million/16.8%
  • RevPOR: $5,006
• NNN segment reported the following:
  • Average Occupancy: 91.4%
  • Cash NOI/Margin: $12.28 million/96.2%

 

Investment Activities

• Acquired a senior housing portfolio in Washington for a total consideration of approximately $36.2 million of assumed debt, plus closing costs.
• As previously announced, on September 20, 2024, the Company acquired a 24% minority membership interest in Trilogy Holdings, becoming the sole owner of Trilogy. The Company acquired the interest for an all-cash purchase price of approximately $258 million.
• Subsequent to quarter end, on October 1, 2024, the Company acquired a SHOP asset located in the Atlanta MSA consisting of 90 units for approximately $7.5 million, reflecting a price per unit of approximately $83,750.

 

Capital Activity & Liquidity

• As of September 30, 2024, the Company’s total indebtedness was $1.90 billion, and it had approximately $1.07 billion of total liquidity, comprised of cash, restricted cash and undrawn capacity on its lines of credit.
• The Company’s Net-Debt-to-Annualized Adjusted EBITDA as of September 30, 2024, was 5.1x.