Invesque (TSX: IVQ.U) CEO Scott White believes that occupancy and net operating income for his company’s senior housing operating partners will experience a quick rebound, paced by pent-up demand for senior living.
As evidence, he points to Commonwealth Senior Living, Invesque’s affiliated operator with 33 communities across four states, which recorded the highest number of move-ins in its history in March.
Invesque’s other operating partners are also reporting improvements in inquiries, tours and move-ins over the past two months, White said Thursday on the company’s Q1 2021 earnings call.
He believes that Commonwealth’s performance in March and April is indicative of the consumer interest in senior housing and the long-term viability of Invesque’s portfolio. And he credits the successful rollout of vaccines with the quick rebound.
As of May 7, there were only five positive Covid-19 cases across Invesque’s holdings, totaling over 11,000 beds. Almost all of its U.S. facilities have cycled through multiple vaccine clinics. At the pandemic’s peak, Invesque reported over 700 cases in its buildings.
The Carmel, Indiana-based company also remains committed to preserving capital while refining its portfolio through strategic operator transitions and dispositions.
Invesque reported $53.7 million in total revenues in the first quarter of 2021, a marginal decrease year over year. Funds from operations (FFO) totaled 9 cents per share, compared to 25 cents per share in Q1 2020. The company’s total blended portfolio includes 121 senior housing communities, skilled nursing facilities and medical office buildings.
Pent-up demand breaks through
Commonwealth’s move-in success follows a trend of improving occupancy among publicly traded senior housing owners and operators (REITs) during the first quarter earnings call season.
Same-store stabilized occupancy for Invesque’s triple-net and senior housing operating portfolio (SHOP) assets was 77% and 83%, respectively. As a point of reference, trailing 12-month occupancy as of December 31, 2019 was 86% for triple-net assets and 87% for SHOP, CFO Scott Higgs said.
Occupancy appears to have bottomed out in mid-February and the positive move-in velocity continued into April — Commonwealth’s occupancy for the month improved 80 basis points sequentially, and 130 basis points from its February nadir.
Invesque’s ownership structure of Commonwealth gives it access to real-time numbers and trends. White suggested during the call that pent-up demand may have played a role in Commonwealth’s performance, with families cautious about moving loved ones into senior housing earlier in the pandemic now moving forward as community restrictions are lifted and residents and staff are vaccinated.
Commonwealth CEO Earl Parker confirmed White’s theory.
“Based on feedback from our sales community sales teams, I believe these numbers reflect a significant number of families who deferred the decision to move earlier when the restrictions were greater, and feel more comfortable now with high percentages of vaccination and our re-opening of visitation, programming, and communal dining,” he sold Senior Housing News.
Improving financial position
Invesque worked to shore up its liquidity in the first quarter through targeted dispositions.
One notable transaction involved the sale of four communities operated by Inspirit Senior Living, to the operator, for $35.5 million. The deal is expected to close later in the quarter and net the company $15 million, and the proceeds will be used to further de-lever its balance sheet, Higgs said.
He classified the transaction as mutually beneficial. Inspirit — based in McLean, Virginia with 17 communities in six states — is actively expanding its wholly-owned portfolio. The pricing of the deal provides Invesque with excess liquidity.
As senior housing sales activity rebounds, Invesque will maintain a cautious approach to acquisitions and dispositions. The company will sell non-core properties if it receives favorable pricing, while doing due diligence on acquisition opportunities to expand some of its existing operator relationships.
Invesque also completed three expansion projects in Virginia within the Commonwealth portfolio; refinanced a $17.3 million mortgage on Commonwealth Senior Living at Charlottesville in Charlottesville, Virginia, at a fixed-interest rate of 2.96%; and refinanced an $8.5 million ($10.3 million CAD) mortgage on Red Oak Villa, a retirement home in Sudbury, Ontario, at a 2.17% interest rate.
The transactions reduce Invesque’s near-term debt maturity to less than 7% of its total debt over the next 12 months, and 11% of total rolling debt over the next 24 months.
Invesque stock ended trading Thursday down over 5%, closing at $2.86 CAD per share.