The SeniorCare Investor: Second Quarter Census Preview–

Some Clues As to What Is Happening In Seniors Housing
 Only a few companies have reported their second quarter earnings results, and in one case we get a partial story on a company’s operating performance.  But NIC MAP has come out with its preliminary numbers on second quarter occupancy and unit pricing trends, and the story seems to be a mixed bag.  Based on the top 31 metropolitan markets (not the full 100 markets which should come out soon), average assisted living occupancy in the second quarter increased by 20 basis points from the first quarter to 88.3%, and increased by 50 basis points from the year-ago quarter.  That is all good news, even though the current occupancy is slightly below that of the fourth quarter last year.
 On the independent living side, the story is not as positive for the industry.  Average occupancy in the 31 metro markets has steadily declined from 88.2% in the fourth quarter last year to 87.9% in the first quarter of 2010 to 87.4% in the second quarter.  And occupancy in the second quarter is 60 basis points below the second quarter of 2009, when it was 88.0%.  Rents are still growing, although not at the pace of past years, but that could be expected.  The good news, at least for future occupancy and supply/demand dynamics, is that new development is still near recent lows, although there appears to be a small uptick recently.
 On the public company side, only Five Star Quality Care (NYSE: FVE) has reported its second quarter results and Ventas (NYSE: VTR) has reported the results of its large portfolio of Sunrise Senior Living (NYSE: SRZ) properties.  In both cases, they seem to be beating the NIC MAP top 31 metro market performance, at least on trends.  Five Star doesn’t separate out its independent living results from its assisted living properties, so on a combined basis occupancy increased from 86.2% in the first quarter to 86.6% in the second quarter, and the recent quarter was 20 basis points higher than the year-ago quarter, which was 86.4%.  That’s not so bad considering the IL performance in the NIC data, which when combined with assisted living would have resulted in an overall occupancy decline from both the fourth quarter of last year and the first quarter of this year.
 
 For the Sunrise portfolio owned by Ventas, the 78 stabilized assisted living facilities posted a 120 basis point increase in occupancy in the second quarter to 88.4%, compared with 87.2% in the second quarter a year ago.  The first quarter of this year was also 88.4%, so nothing has changed this year, except that the net operating income for these 78 properties increased by nearly $2.0 million from the first to the second quarter, based on lower expenses.  This was before a $2.3 million payment from Sunrise in the second quarter attributable to community  expense overages.  Looks like someone has been keeping a close eye on things recently.     Want to read more? Click here for a free trial and download the current issue today