Senior Housing Report | REIT Update
Earnings Recap & Forward Momentum for Senior Housing
The senior housing REITs recently wrapped up their earnings calls for the second quarter of 2024 and gave their insights on what they expect for the back half of the year. Many REITs raised their guidance outlook for the year as senior housing operating portfolios (SHOP) achieve occupancy levels surpassing pre-pandemic levels. Welltower increased its senior housing operating portfolio occupancy to 82.8%, up from 79.6% in the second quarter of 2023. During the quarter, Welltower converted or reached agreements to convert 47 triple-net leased
properties to SHO (RIDEA) structures, allowing them to directly participate in the underlying cash flow growth of the communities. Ventas saw SHOP grow 15.2% year-over-year, led by occupancy growth of 320 basis points. REITs still see many future opportunities in acquisitions due to strong demographic demand and low construction rates in the senior housing space. Welltower is anticipating funding an additional $328 million of development and entered into an agreement in July to acquire a portfolio for $900 million. Furthermore, Ventas completed $300 million in investments in the second quarter, with an additional $400 million in investments in the pipeline. Sabra saw its SHOP NOI increase by 17.7% year-over-year, primarily fueled by three-quarters of its operators with occupancy rates of 85% or higher. Sabra closed on a $75.8 million acquisition of two senior housing communities owned by Leo Brown Group. REITs will continue to capitalize on the senior housing market as current development would have to increase 3.5 times the current pace in order to meet the current demand.
Omega Healthcare Investors (OHI) also had a very active quarter with 3 separate transactions totaling 34 facilities for $114.7 million. They have already turned around and leased the facilities to an existing operator and two new operators. National Health Investors (NHI) continued to see success in their SHOP with a 39.9% year-over-year NOI growth. NHI acquired a 110-unit assisted living facility in Sussex, Wisconsin. LTC Properties (LTC) reported a net income of $19.2 million in the second quarter and acquired 17 new facilities, which were all sale-leaseback transactions through ALG Senior Living. CareTrust continues to capitalize on triple-net skilled nursing opportunities as it announced a current $270 million pipeline focused on this sector. American Healthcare REIT (AHR) continues to see success in its first year as a publicly traded company with SSNOI growth of 15.7% compared to Q2 2023. AHR’s main goal for the rest of the year is to fully buy out its operating partner, Trilogy Health Services. Trilogy currently makes up around 65% of AHR’s portfolio. These triple-net properties continue to see improvements with their operators as they improve their EBITDAR coverage levels signifying further ability to meet rent payments. Omega saw its operators reach a coverage of 1.42 times, up from 1.33 times at the end of 2023. American Healthcare saw their Triple-Net properties reach a coverage of 1.29 times, up from 1.25 times in the previous quarter.
Invesque and Diversified Healthcare Trust were the two REITs that reported a loss in the quarter. Invesque reported a net loss of $15.8 million, while Diversified Healthcare Trust reported a net loss of $97.9 million. Invesque seems to be primarily focused on dispositions with management confident in its ability to find suitable buyers to purchase assets at fair market prices. DHC did see positive performance in its SHOP with an NOI increase of 17.3%. Diversified Healthcare is currently in the process of marketing properties for sale that include 1,100 units at an estimated value of $80-$100 million.
