Pennant Buys First Senior Living Real Estate Asset After Growing Occupancy, Revenue in 1Q

The Pennant Group (Nasdaq: PNTG) gathered momentum in the first quarter of 2022 as senior living occupancy and revenue went on the upswing.

Senior living services segment revenue in 1Q22 registered at $33.4 million, representing a 7.7% increase over the same quarter last year. Senior living average occupancy ticked up to 72.6% in the first quarter, an increase of 50 basis points over the same period last year and 20 basis points over the previous quarter.

Eagle, Idaho-based Pennant has 52 communities in 14 states, the majority of which are in the western U.S.

The company’s total revenue for 1Q22 was $113.9 million, an increase of $8.2 million, or 7.8%, over what the company saw during the first quarter last year. Net income for the quarter was $1 million.

Some operators in the company’s senior housing portfolio posted notable growth in the quarter. Kenosha Senior Living, which manages a Pennant community in Kenosha, Wisconsin, added 27% to its census in the last year, jumping from 78.1% average occupancy in 1Q21 to 99.3% 1Q22. The jump in occupancy led to an increase in revenue of 38.9%, according to the company’s leaders.

Pennant’s average occupancy has continued to climb since the end of the first quarter, with an increase of 80 basis points in April, Bunker told SHN.

Pennant during the quarter also acquired two assets: an 82-unit assisted living and memory care community in Twin Falls, Idaho; and a home health agency in Bozeman, Montana – a state in which Pennant already provides hospice services.

“We’ve taken a step forward … we feel really good about the opportunity we have for 2022 and beyond,” Pennant Chief Investment Officer Derek Bunker told Senior Housing News.

The Twin Falls community represents the first owned real estate asset in Pennant’s senior housing portfolio. However, the acquisition doesn’t represent an overall shift in strategy, according to Bunker.

“For us, it’s just another lever we can pull,” he said. “By tapping a revolver to fund this small transaction, we improved our financing cost and will capture the future appreciation as we continue our turnaround [in senior living].”

Still, real estate acquisitions will play a role in the company’s senior living growth plans as part of a multipronged strategy including leases and real estate acquisitions.

Looking ahead, Pennant plans to further build up its real estate portfolio — although as a smaller company, “we’ve got to take it one step at a time,” said Bunker.

“We expect to acquire real estate, but we also expect to work with landlords and real estate investment trusts to lease new operations,” he said.

Pennant’s stock jumped 14.4% on Tuesday, landing at $14.61 per share by the time financial markets closed.

For Pennant, the latest earnings period follows a fourth-quarter marked by a number of challenges in its senior housing portfolio. But with the latest results, President and CEO Danny Walker sees “a bright future” ahead.

“I’m more confident than ever, in the slate of leaders that will write that story of Pennant in the years to come,” he said during the earnings call Tuesday.

Pennant showed good progress in “ramping up new home health and hospice agencies, disposing of underperforming senior living operations, and returning to growth mode” in the first quarter of this year, according to Stifel Analyst Tao Qiu.

“While rate growth was strong and helped partially offset cost increases, the pace of occupancy recovery lags [the] industry,” Qiu wrote in a May 9 note to investors.
Pennant in January transitioned five communities to The Ensign Group (Nasdaq: ENSG), the company it spun off from in 2019.

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