Q3 2021 Ventas Inc Earnings Call
[music].
Good day, and thank you for standing by welcome to the Penthouse third quarter 2021 earnings conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your host today Sara Whitford. Please go ahead.
Thank you Alicia.
Good morning, and welcome to the Vantiv <unk> third quarter financial results Conference call earlier. This morning, we issued our third quarter earnings release supplemental and Investor presentation. These materials are available on the Ventas website at IR Dot Ventana Street Dot Com as a reminder, our remarks made today may include forward looking statements, including.
Certain expectations related to COVID-19, and other matters forward looking statements are subject to risks and uncertainties and a variety of factors may cause actual results to differ materially from those contemplated by such statements for a more detailed discussion of those factors. Please refer to our earnings release for this quarter into our most recent SEC filings.
All of which are available on the Ventas website.
Certain non-GAAP financial measures will also be discussed on this call for a reconciliation of these measures to the most closely comparable GAAP measures. Please refer to our supplemental posted on the Investor Relations section of our website.
Thanks, Sarah and good morning to all of our shareholders and other participants and welcome to the Ventas third quarter 2021 earnings call.
I'm, so happy to be hosting this call in person with my trusted colleagues for the first time since early 2020.
Fantastic delivered positive results in the third quarter, So outstanding sequential shop average occupancy growth benefited from its large medical office life Science and health care Triple net businesses.
<unk> executed on its investment priorities.
Delivering 73 cents of normalized <unk> per share, which is in the upper half of our guidance range. Our same store shop portfolio increased rate and grew occupancy at record levels in Q3, despite the high incidence of COVID-19, and the broader environment.
Occupancy in this portfolio has now increased for eight consecutive months through October.
[noise] demonstrating powerful demand our U S same store shop portfolio has increased occupancy 750 basis points since mid March 2021 lifting the entire same store shop portfolio nearly 600 basis points during the same period.
I'm also encouraged that our year over year shop occupancy turning positive for the first time since the onset of the pandemic.
So a robust senior housing recovery is well underway, but as we stated it may not progressed in a straight line.
Consistent with macro trends and as we anticipated in our last call with you. The pandemic has created a tight labor market, resulting in labor cost pressures that accelerated in September.
Looking ahead, we expect to see meaningful revenue increases in the first quarter of 2022 and improving pricing power.
At a macro level, many economists forecast that labor force participation will expand from its current low rate for a variety of reasons.
These factors should cause current conditions to ease considerably over time.
Even more importantly, Dr. Scott Gottlieb, who has been consistently the most accurate expert throughout the pandemic stated today that the COVID-19 pandemic is effectively behind us in the U S. Given all the tools, we now have to combat it including Pfizer's new treatment.
Yeah.
It's Scott continues to be right. It is a momentous day for all of us.
We continue to be delighted that one third of our business consists of medical office outpatient and life Science research and innovation.
Our operational initiatives in medical office, and aggressive capital deployment and life science are providing reliable growth and value creation for our enterprise and stakeholders.
Turning to capital allocation, we have been high reactive with $3 $7 billion of investments announced or closed year to date.
Our current capital allocation focus remains senior living selective private medical office building opportunities and life Science RNA.
Let me highlight a few new investments we've made.
We've completed two and a half billion dollars in independent living investments, including our accretive acquisition of new Senior's hundred class independent living communities at an attractive valuation well below replacement cost.
And the sixth community Canadian's senior living portfolio with one of the new senior operators Hawthorne.
In medical office, we've completed or announced $300 million of investments.
First establishing a new relationship with industry leader eating recovery Center, we acquired a class a asset under a long term lease in this rapidly growing sector.
Second by acquiring our partner Pmt's interest in this center Van Ness Trophy MLB in downtown San Francisco, We now own 100% of this asset at a 6% yield.
With 92% of the M O b already leased we intend to capture additional NOI growth and value.
Finally, we intend to expand our relationship with Arden health care by acquiring 18 of the 100% leased medical office buildings for $200 million by year end.
On our third capital allocation priority, we are delighted to announce that we have commenced development of a 1 million square foot life Science project anchored by Premier Research University, UC Davis with our exclusive partner Wexford.
Purpose built for clinical research. This project will be 60% pre leased to U C. Davis and total project costs are expected to be half a billion dollars.
Turning to our robust investment pipeline, our team remains busy evaluating attractive opportunities.
In fact, we've now reviewed more deal volume this year than we saw in all of 2019 over 40 billion and we continue to pursue those that meet our multifactor investment framework.
Capital continues to flow into our sectors as global institutional investors agree with our thesis on the favorable trends benefiting all of our asset classes.
These strong capital flows are also supporting our intention to recycle $1 billion of capital this year to enhance both our balance sheet and our portfolio.
Our diversified business model continues to provide significant benefits are early and aggressive investments into medical office and life science are creating significant value.
We are also proud to be associated with so many leading care providers operators and developers in all our business lines and to be establishing new platforms for growth through both our investment and our portfolio actions.
In closing the U S is in the midst of an impressive economic recovery that together with demographic demand for our asset classes gives us confidence and optimism in our future.
We believe that the more widespread administration of vaccines and new efficacious treatments for COVID-19 will benefit both the broader economic recovery and our company.
Our aligned and experienced team continues to be focused on capturing the double upside in senior housing from both pandemic recovery and the projected growth in the senior population and also to continuing our long track record of external growth.
Justin.
Debbie.
I'll start by saying it is very exciting to see the strong supply demand fundamentals supporting occupancy growth in the senior housing sector. We have been busy taking actions through acquisitions dispositions and transitions to ensure we are strongly positioned during this period of sector recovery.
Our industry, leading operators are successfully driving revenue growth in the early stages of the recovery and taking actions to address elevated labor costs driven by the macro backdrop.
Moving onto third quarter performance in shop, leading indicators continue to trend favorably during the quarter as leads and move ins Easter past, 100% of 2019 levels, while move outs remain steady strong sales activity has now driven eight consecutive months of occupancy growth inclusive of October.
In the third quarter average occupancy grew by 230 basis points over the second quarter led by the U S with growth of 290 basis points, and 110 basis points in Canada, which is over 93% occupied.
October leading indicators remained solid as leads and move ins continue to perform above pre pandemic levels and move outs remained relatively stable.
Turning to shop operating results same store revenue in the third quarter increased sequentially by $13 6 million or three 1% driven by strong occupancy growth and slight rate growth regarding rate growth. Our operators have proposed rent increases to the residents of 8% in the U S and 4% in Canada.
We're trying to a blended basis is approximately 200 basis points higher than the historical levels. We also continue to see improvement in our releasing spreads which are trending close to pre pandemic levels.
Operating expenses increased sequentially by $16 7 million or five 4% of which approximately half is due to overtime and agency costs, Although we largely anticipated the additional labor costs September spiked. It represented approximately half of the sequential agency expense increase.
We carried the elevated September cost forward in our Q4 guidance, which Bob will cover shortly.
Despite the higher agency and overtime costs. Our operators are now witnessing net positive hiring and are actively addressing labor challenges through a number of initiatives. These include centralized recruitment of line staff implementation of applicant tracking systems delivering on the increased demand by employers.
Please for flexible schedules and other workplace improvements to become more competitive.
For the sequential same store pool shop generated $106 7 million of NOI in the third quarter, which represents a sequential decrease of $3 7 million or three 4%.
Moving onto portfolio actions are.
Our new senior acquisition closed on September 21st.
The portfolio consists of 103 independent living communities located in attractive markets with favorable demand characteristics integration efforts have gone extremely smoothly and we are on track to realize our expected synergies. We are pleased with the performance and operating trends of the portfolio, It's third quarter.
Spot occupancy grew 110 basis points sequentially, the same store pool, which excludes the 33 communities that transitioned to new operators. This year grew 180 basis points in the third quarter and then another 10 basis points in October marking occupancy growth in six out of the past seven months. We have also reached.
We closed on an acquisition in Canada, which includes five independent living and one assisted living communities.
These acquisitions expand our independent living exposure to 59% of NOI on a stabilized basis, we believe the structural benefits of the independent living model present attractive opportunities to further strengthen our senior housing NOI margin through less intensive staffing requirements longer resident length of stay.
Days and accessible price points, all underpinned by exposure to a large and growing middle market.
This is in combination with our existing portfolio positions us well to capture demographic demand with the 80 plus population expected to grow over 17% over the next five years, while facing less new supply versus historical levels.
I'd also like to note, our previously announced transition of 90 assisted living and memory care communities is off to a solid start as 65 communities have already transitioned and the rest are planned by year end.
We believe the enhanced oversight provided by the experienced Midmarket midsize assisted living operators will improve the execution of local market strategy and with increased accountability.
I have long standing relationships and familiarity with the incoming Ceos and I can say, they're really fired up about the new portfolios. They are actively engaged with personal site visits to their communities and transition planning.
Ventas has 37, operator relationships, including seven of the top 10 largest operators in the sector.
And eight new relationships added this year.
We look forward to the opportunity to grow our relationships with these companies over time.
In summary, the senior housing sector is benefiting from a strong macro supply demand backdrop.
We are actively positioning ourselves for success through portfolio actions and our operators are driving revenue and managing the elevated labor situation.
We look forward to forging ahead during a very exciting time of sector recovery.
Bob.
Thanks, Justin.
Close out our prepared remarks by quickly touching on our third quarter office and enterprise results discussing our recent balance sheet and capital activities and laying out our fourth quarter expectations.
Our life science, and MLB businesses led by people who really.
Represent nearly one third of our company's NOI once again delivered robust and reliable growth in the third quarter. These.
These businesses taken together increased same store NOI by four 2% year over year and increased one 2% sequentially on an adjusted basis.
Mob NOI grew three 2% year over year and R&R increased seven 1%.
Some stats of interests that underpin the strong performance.
And it'll be occupancy is up 130 basis points year to date.
Same store occupancy of 91, 3% is at its highest point since the first quarter of 2018.
MLB tenant retention was 91% in the third quarter and then it will be new leasing increased 43% versus prior year.
<unk> occupancy remains outstanding at 94, 4% and improved 50 basis points sequentially due to exciting demand for lab space.
<unk> expenses increased less than 1% year on year as a result of completed energy conservation projects and sourcing initiatives.
And for the second year in a row, we ranked in the top quartile of our peer group for tenant satisfaction as measured by Kingsley Associates 20.
<unk> 2021 rankings for each major key performance indicator increased when compared to 2020.
At the enterprise level, we delivered 73 cents of <unk> <unk> per share in the third quarter.
This result is at the higher end of our 70 to 74, St guidance range and benefited from the stable performance of our diversified portfolio.
As well as a force in ardent bond prepayment fee that was included in our guidance.
We were also very active in the third quarter, managing our balance sheet and capital structure.
With our prior 1 billion disposition guidance, we now have $875 million of disposition proceeds in the bank with $170 million of senior housing and it won't be portfolios under contract and expected to close in the fourth quarter.
These dispositions have enhanced and reshaped our portfolio and we've used these proceeds to reduce $1 1 billion of near term debt. So far this year.
We also issued $1 4 billion of equity in the third quarter, including 800 million for new senior and $600 million in ATM issuance at $58 a share.
As a result, our net debt to EBITDA ratio, excluding new senior improved sequentially to $6 nine times, well, including new senior Q3 leverage was better than forecast at seven two times.
As an administrative side note, we plan to enter into a new ATM program, replacing our 2018 2018 program, which.
Is nearly complete.
Turning to Q4 guidance.
We expect fourth quarter net income will range from a penny to five per fully diluted share.
Q4 normalized <unk> is expected to range from 67 to 71 cents per share.
The Q4 <unk> midpoint of 69 cents can be bridged from Q3 of <unk> 73.
By one cent net impact of tenant fees.
The impact of capital recycling for debt reduction and pre funding of new investments as <unk>.
And various items roundup to explain the last penny.
Our shop portfolio NOI is estimated to be flat sequentially.
Key fourth quarter assumptions underlying our guidance are as follows starting with our shop same store expectations.
Sharp Q4 average occupancy is forecast to increase between 80, and 120 basis points versus the Q3 average.
Growing ahead of pre pandemic levels well following seasonal trends.
At the guidance midpoint spot occupancy September 30 to December 31 is expected to be approximately flat.
The resulting sequential shop revenue growth is expected to be offset by increased operating expenses due to continued elevated labor costs.
No HHS grants are assumed to be received in the fourth quarter, though our license assisted living communities have applied for qualified grants under phase four of the provider relief fund for Covid losses incurred at the communities.
Outside of shop continued stable performance as expected in the office and Triple net segments.
We expect to receive an M&A fee in Q4 of three cents for the announced kindred sale, which kindred communicated is expected to be completed in the fourth quarter subject to customary closing conditions.
We continue to expect a 1 billion in asset sales and loan repayments for the full year 2020 one.
The blended yield in the high fives.
Our fully diluted share count is now 403 million shares reflecting the equity raised to date.
I'd like to underscore that we're still in a highly uncertain environment and the pandemic impact on our business remains very difficult to predict.
To close my colleagues and I are excited for the future event us given the expected robust recovery in senior housing and the external growth opportunities both under our belt and that lie ahead.
That concludes our prepared remarks with that I'll turn the call back to the operator.
At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Your first question comes from the line of Michael Carroll RBC capital markets.
Yeah. Thanks, Doug I wanted to talk a little bit about the investment market I guess, what the Delta wave in the labor pressures have you seen an uptick in the number of investment opportunities, particularly in seniors housing.
Continuing to see that activity from year end persist over the next several months and quarters.
Good morning, Mike I mean, as I mentioned, we have just seen a tremendous volume across the board.
All year long.
More than we've ever seen and we do expect that to continue.
Your next question comes from the line of Nicholas Joseph of Citi.
Thanks, I appreciate all the comments on expenses.
Occupancy, but just as you step back and think about kind of margin once we get through some of these transitory issues.
How do you think margin long term for senior housing book compare versus pre COVID-19 levels.
Thank you Justin sure and Nick.
So just stepping back and thinking about the.
The ultimate drivers of margin you probably heard us describe a trained before.
The front of the train really is leads leads come first you know that drives move ins you know net move in activity drives occupancy a pricing certainly supports revenue growth as well.
And then there was expense management.
And over time, we certainly expect that there'll be margin expansion for two reasons. One is that the supply demand characteristics that we're facing.
Do support occupancy growth and should present opportunity for pricing power.
Clearly in the near term there's expense pressure due to the labor that we mentioned, but the macro backdrop does seem to be improving and as I mentioned, our operators are taking significant actions to address the issue.
Your next question comes from the line of Rich Anderson of F. N B C.
Hey.
Good morning.
I have a kind of a <unk>.
A question about a vaccine mandates and and you know at the property level and how that's being managed and I'm curious.
Don't know if I remember what that number is for Ventas and if you could share that I'm sure. It's someplace I'm just not remembering it right now, but who makes the call on that.
Zoom in in the shops.
Execution.
<unk> has at least to say in that maybe I'm wrong and I'm. Just curious what your thesis is are your ideas are around vaccine mandates.
At the property level, now and perhaps taking into account the Pfizer news and what you what youre thinking about it going forward. Thanks, Mhm, Hi, Rich I'll start and then turn it suggestion.
Our operators have by and large been early adopters of vaccine mandates within the community to keep the residents safe.
And you know we're at very very high level is now nearly 100% of both residents and staff.
We've been way ahead of the federal.
Requirements for vaccines, because we are carrying for vulnerable seniors and also had access early on from the vaccine rollout both employees and residents and so that has been both a moral and a business imperative. It's worked really well our operators have led on.
And they have made the decision, but with our financial support and encouragement.
Yeah.
Your next question comes from the line of Nick <unk> of Scotiabank.
Thanks. Good morning, So I was hoping you could just bring I don't think you break out labor expenses and the change. There is if you could just give us a feel for how much they did increase quarter over quarter and year over year and just how we should think about the trend of labor expenses.
Next year, because I know, there's some optimism that you think that it's.
It's going to get a little bit better, but I'm still just not entirely clear why why you know use of contract labor and other.
Items would go down in this in this type of job market.
Bob can address the the the quantitative part of your question I think from a high level again.
<unk> known the extent is unknown, but there are multiple factors at a macro level that will support increased labor and workforce participation and notes include children back in school children vaccinated the exploration of public.
Public policy such as the Federal State then on unemployment.
And also just you know People's savings running out as a result of that and scores being open and the like and so all of those factors really play into the macro thinking around easing of current labor conditions I think.
You know again, if you just step back what's great about this recovery is that demand has sprung back not just in our business that broadly speaking it has surged and the supply chain and the labor force are still adapting and adjusting and haven't caught up yet and over time those things.
Well get more in balance.
And that's kind of what the economists forecast and that's why those are the factors that you would expect.
To improve the work force participation. So Bob do you want to talk about the specific sure and Nick page 12 of the the business update that we issued this morning could be helpful. Because it lays out the operating expense increase we saw sequentially between the second and third quarter, which is roughly $17 million and within that.
Labour representing call it half of that increase and if you've further double clicked on the labor piece call. It two for two thirds of that would be contract labor.
I reinforce the fact that our guidance for the fourth we saw this acceleration in contract labor in September we effectively assuming that to continue through the through the fourth quarter and later and later the backdrop is important to note that contract labor is at least two times as expensive as is in house labor and so these initiatives.
Justin laid out two to increase staffing reduced contract labor would have a positive mix benefit, but quantitatively that that hopefully helps you.
Your next question comes from the line of Rich Hill of Morgan Stanley.
Hey, good morning, guys and thanks for having me on the call.
Your first time caller long term long term listener I did wanted to talk through and maybe hear a little bit more about your operator contracts. One of your peers had talked about maybe half of them renewing Q1and the other half are ratably throughout the year.
I'm wondering.
If you see something similar and maybe you can unpack that for us.
Good and welcome. Yes. This is addressed also in our in our business update Justin do you want to take that sure. Yes. If you look at page 14, and the business update you'll see this and first of all the headline is that.
Our operators have proposed to our residents and 8% increase in rent in the U S and 4% in Canada. If you look to the left you'll see how this breaks down and that is a 55% of our residents are eligible for increases in the first quarter.
35% get an anniversary rent increases so those will happen throughout the rest of the year.
And then those that moved in the late in 'twenty, one obviously wouldn't be eligible for an increase yet so there's a there's a huge opportunity to grow revenue. This is a consistent process is tried and true. It's just that we're gonna pass along.
More rent increases this year and I'll just add that our operators are very careful about taking local market considerations.
Into their planning so that they're they're in line with market and they can successfully execute.
And then Theres also level of care, which is really acuity driven and that can increase throughout the year as well both in terms of how much we charge, but also the the acuity level of the resident will drive additional charges and that's just standard as part of our revenue package that operators offer.
Your next question comes from the line of Derek Johnston with Deutsche Bank.
Hi, everyone. Good morning.
Can we go into some detail on the shop transitions to the more experienced local operators in various markets, but really specifically how that may have impacted these transitions the <unk> guide, but at the same time, how the transitions.
Could benefit first Q in 2022.
Thank you, yes, I'm going to turn that so Bob and Justin.
To talk about the transition switches as Justin said are well underway.
Okay. Thank you and I'll start with <unk>.
Really just some of the rationale for why we did it and why we think this is going to be helpful to performance.
And you'll notice on page 13 on the right hand side that we highlight this we selected operators that have experience they have experienced within these markets and they have experience running regional markets.
And one thing I've been very encouraged about is that the Ceos of these companies have been actively engaged in the transitions we have a cooperative transition with the former manager so we've actually been able to get on the ground.
And to the communities start assessing getting to know people and be ready to try.
Try to get off to a strong start when the transition begins.
And you have the advantage when you have a midsized company with a regional presence is that you have senior management that is very close to the community.
So we do expect the oversight to be very strong and then these companies are excited to grow and there theres just an energy to it that's really positive and it's well assessed and we look forward to positive results.
<unk> said that.
We would expect to have some transition noise.
In the early going that was factored into the fourth quarter.
Then I'll hand, it over to Bob.
Yeah, that's really again back to the to the labor seem frankly, this normal noise as a function of turnover at the communities you know new staff etcetera etcetera. So that's the context. Obviously then with this tight labor market, we've assumed increases in the labor costs in the fourth for this portfolio. So that's embedded in the guidance for <unk>.
Overall shop being flat.
Once again, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Yeah.
Okay.
Your next question comes from the line of Juan Sanabria.
BMO capital markets.
Hi, good morning.
Just a question for Justin.
Asset management.
You seem to be making the transition to more smaller regional operators, which makes sense, but just curious on.
A couple of thoughts on the data analytics front, what you guys are doing and maybe some hires you've made there and the efforts that are being put forth.
Then secondly, just as we look forward should we expect more dispositions heading into 'twenty two.
Given some of the stuff that was on the market didn't transact and you haven't necessarily sold a ton of assets and our leverage is still a bit high so just curious on a.
On a go forward dispositions kind of thinking about 'twenty, two and it would be clean up there that you guys wanted to do for the portfolio kind of as we exit COVID-19.
I was just I'll start and then I'll and then Bob will jump in as well, let me start with the data analytics, we have made new hires.
We've become.
Much deeper.
And what was already a strength in terms of market analytics.
We certainly are.
Study supply and demand in great detail and have.
Really good familiarity with local markets.
And and which has helped to inform some of the decisions we've made.
But also it help to inform growth decisions, we make moving forward great team.
We've also enhanced our operational analysis through through hiring people that have experience in operating companies.
And have high analytical and strategic experience as well so that's given us insights into the business that that are extremely valuable.
And inform our decisions, but also help to inform the decisions at the operators make.
They're planning as well.
I'll take the disposition question. One you know the short answer is no. We don't as we think about 'twenty two.
Significant dispositions in senior housing, we do have $170 million yet to go under contract this year and a good chunk of that is senior housing, but beyond that no significant plans.
Your next question comes from the line of Steven <unk> of Barclays.
Oh, Hi, this is Eric Glynn on for Steve.
As the labor pressure eventually starts to subside how do you think this affects long term productivity I know one of your peers had mentioned.
It takes several quarters to reach the same level of historical productivity due the time due to the time that it takes to ramp new staff up to speed and deal with Onboarding.
Just curious if this is affecting you at all or is the actual staff turnover not really high enough to have an impact here.
Yeah, I would just say simply that you know that is a part of the labor pressure and the timing of when we would expect conditions to he's certainly the industry has experienced that onboarding, new workers and that you know that it's an industry where there is can.
System.
Shifting of Av.
On site workers and so that is the strength of the industry, but it will take some time for these conditions to abate again for a variety of factors, including kind of getting up to speed and training.
So that that is correct. It's just it's just a multi factor analysis.
Your next question comes from the line of Jordan Sadler Keybanc capital markets.
Hi, there.
I just wanted to.
Circle back on the ESL transition assets and maybe I think in the press release last month, you talked about no contribution.
Of NOI in the second quarter, So I'm curious what the progression was sequentially.
We haven't seen store numbers I'm curious what the ESL portfolio did sequentially and then I'm curious.
What the outlook would be because I would think that an operator would you know the operator transitions historically has caused some disruption so.
He was what sort of the outlook would be you know in terms of looking at the curve of the recovery and the cash flows off of that portfolio. When we should expect that to start to or at least bottom and then start to recover.
Yeah, Jordan I'll take that I wish I could I could draw. This picture in front of you because I do think you'll see some as we saw second quarter into third quarter. Some erosion in NOI in this portfolio and as I mentioned, we're expecting that to continue into the fourth given the labor cost pressures and just the normal noise the source.
With the transitions the strategy, which just was speaking to though is once these are in the hands of.
These these new operators they will employ their skill to really drive that that performance of that portfolio and you know in.
In 2022 and beyond so that's that's the goal.
And we're right in the middle of that right now.
Yeah.
Your next question comes from the line of Mike Mueller with JP Morgan.
Hi, I'm wondering how much did the higher labor expense piece do you think is attributable to recent REIT pressures for existing staff that may be a little bit more sticky versus the idea of just having to utilize more higher cost contract labor.
Yeah. Good good question, Justin do you want it.
Comment on that sure Yeah, Hi.
You know, it's really more around.
Just the billet availability of staff the availability to to staff.
Fully with with your existing people one thing there's kind of a series of steps that operators, taking you know the first thing. They do is they try to make sure that they're utilizing all the full time hours available for their existing staff. Most operators don't scheduled a 40 hour week and so there's always room to expand a little bit. So they'll do that first next step is they'll use over.
Time, So you have your continuity of your existing staff to deliver care and services and then the last resort is really to AD agency.
And one interesting tidbit around this is that you know, there's there's not really a certain MSA, where we're seeing agency used it is clearly a macro backdrop issue, but within msas. There are certain communities that really have an outsized amount of agency, that's being utilized which points to the opportunity for an opera.
<unk> solution. So so we have plenty of evidence that this can be managed and as I said in prepared remarks, where we're already starting to see hiring picking up across the operators.
Your next question comes from the line of Josh dinner line.
Bank of America.
Josh.
Josh Your line is open Oh, sorry, sorry, guys.
Mute there.
Uh huh.
I was looking at the Revpar growth for the same store pool, just kind of curious if you have any kind of expectations. As we go forward when it might turn to positive growth on a year over year basis.
I mean, the trends have been encouraging and Justin do you want to do you want to comment specific reinsure. Yeah. So that you know there's a few moving parts in rough 411 is mix, which is really just you know the.
Revpar.
You know the contribution of Revpar from certain product types in.
We are benefiting this year I've mentioned this before that we would benefit from the U S recovery, because we will see a higher price point product, particularly in Sunrise for instance, that's a driver of Revpar overall, so we're getting some mix shift benefit.
Probably more importantly, though is we're getting the benefit of better re leasing spreads and that's that's been consistent and we saw the underlying trends in the second quarter, we saw through the third quarter and when we get into next year.
Obviously, we have the in house rent increases that we mentioned, but the pricing power should continue to improve because what starts to happen is you're covering movement that occurred in 2020.
Came in at a relatively low rate.
And.
As the momentum picks up in the sector.
Our operators were able to charge more and so we're looking forward to a period of really improve pricing of Revpar moving ahead.
Your next question comes from the line of Michael Carroll RBC capital markets.
Yeah, and then existing seniors housing residents gender or you don't.
Don't like to to move away from the from the communities and there has been a small percentage that did elect to do that has that trend come back post COVID-19 or resident still hesitant to move in because of the pandemic our move out sorry.
Could you repeat that Mike and welcome back you you've got a short question. The first time. So can you repeat that last part.
Yeah.
Michael Please press star one again.
Okay.
Please proceed.
Yeah.
Please proceed with your question.
Yeah. So I know residents generally don't like to move out from there from their facilities on the seniors housing residents, but there was a small percentage pre COVID-19 that was willing to do that has that trend come back at all or a residence or a resident still hesitant to move out because of the pandemic.
Hi, it's Justin so there there was actually.
Since we've been in this period of recovery. There was one month I want to say it was April where you did see a little bit more move out activity than we did.
Really correlate that to people being able to make a move where they werent moving during the pandemic and they had an opportunity to move around in the month of April but you also know though is that move in activity is picking up and so I think there is youre just kind of trading seats with with other operators and so there's a lot of movement then but since then it's been very stable very consistent in terms of move out.
<unk>.
Okay.
Operator.
At this questions.
At this time there are no further questions do you have any closing remarks.
I do as I said, we have a lot of optimism and confidence and it just happened to be a momentous day with.
The advent of additional COVID-19 treatments and a real line of sight to this pandemic, possibly being over our business is doing really well.
It is diversified and benefiting from the internal and external growth avenues that we have we have a great set of partners and a great team here at <unk>. We are very appreciative as always have your interest and your support in our company and we look forward to seeing you soon thank you.
This concludes today's conference call you may now disconnect.
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