Q2 2023 Ventas Inc Earnings Call
Hello, and welcome to the Ventas reports 2023 second quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star one on your telephone keypad.
I'll turn the conference over to B J Grant Senior Vice President of Investor Relations. Please go ahead.
Thank you Sarah good morning, everyone and welcome to the Ventas second quarter financial results Conference call Yes.
Yesterday, we issued our second quarter earnings release supplemental investor package and presentation materials, which are available on <unk> website at IR <unk> fantastic Dot com.
As a reminder remarks today may include forward looking statements 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 in such statements.
For a more detailed discussion of those factors. Please refer to our earnings release for this quarter and to 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 and for a reconciliation of these measures to the most closely comparable GAAP measures. Please refer to our supplemental posted on the Investor Relations website.
And with that I'll turn the call over to Debra Cafaro, Chairman and CEO . Thank.
Thank you BJ and good morning, all of our shareholders and other participants we want to welcome you to the <unk> second quarter 2023 earnings calls.
We are pleased with our enterprise results each quarter of normalized <unk> of 75 cents per share.
This strong result reflects broad based property NOI growth across our diverse portfolio.
With all segments contributing positively and same store year over year cash NOI growth of 7%.
Our shop communities led the way as we continue to benefit from the multiyear growth in recovery cycle underway in senior housing.
Notably our U S assisted living portfolio grew NOI, 32% year over year.
Our outpatient medical and research and our Triple net lease portfolios complemented the shop growth.
We are also reaffirming our full year normalized <unk> per share outlook, we provided to you earlier in the year.
At the midpoint of $2.97 per share our guidance reflects 5% year over year growth and the sixth consecutive quarter of year over year growth.
At a high level the key drivers of our normalized <unk> per share for the year are consistent with those we shared originally.
That is significant property related growth approximating 29 cents, partially offset by a 16 cent impact of higher interest rate.
I'd like to unpack for you some of the recent developments and share some key highlights.
We are off to a strong start with the portfolio of 153 properties. We took ownership of a may one by converting our fans here a mezzanine loan to equity.
The portfolio consists of over 40% outpatient medical buildings over 40% Triple net healthcare facilities and the balance shop community.
There are three key components of our improved outlook for the portfolio.
First we've increased our expectations for annualized NOI from the portfolio to 104 million from about 93 million.
This improved outlook is the result of our intense focus our team's experience and capabilities searching positive operating trends and strong early returns.
We believe the timing for taking ownership is advantageous and that our experience will help us maximize cash flow from this portfolio over time.
Second valuation, we stated last quarter that we believe the portfolio was worth about one and a half million dollars equal to the debt stack third party independent valuation experts now value it at 4% above that level.
At our one and a half billion dollar cash investment basis, the per pound valuation on the portfolio is below replacement cost.
Third we replaced the $1 billion senior secured loan in the portfolio with a permanent capital structure at an attractive all in rate further enhancing the portfolio F. F O contribution and demonstrating another way advantage strengths can drive cash flow improvements on the poor.
Folio overtime.
In addition, as previously indicated we are also selectively starting to dispose of certain of the assets and expect to sell about $60 million in snaps later this year at a cash cap rate.
So while we have more work to do we've had good success, so far and our cross functional teams are intensely focused on maximizing the value and the NOI of the portfolio.
Looking at our broader enterprise in shop, we continue to strongly believe in an experienced a demand driven multiyear growth in recovery cycle.
We have runway in front of us to recapture about $300 million of NOI as we return to pre pandemic margins and occupancy.
Perhaps exceed that level, because you have favorable and improving supply demand fundamentals, we expect over the next three to five years.
With virtually no construction starts in our markets and industry starts at the lowest level since 2011 to over 80 population is set to grow 24% over the next five years.
Thus, we are well positioned to continue to enjoy outsized growth.
Demand continues to be strong our shop performance in the quarter was led by U S. Assisted living we benefited from strong revpar growth and moderating expense growth as anticipated and are highly occupied Canadian portfolio continued to shine.
Occupancy in our holiday U S independent living portfolio lagged our expectations during the quarter.
These are good assets in good markets and Jeff and his team are taking significant steps to drive performance utilizing that proven Ventas Oh I play book. It has been so successful since Justin joined Us.
Our outpatient medical and research portfolio, which is about a third of our business had another outstanding quarter with nearly 4% year over year same store cash NOI growth.
Both outpatient medical and research contributed equally to this good growth and performance, which has been impressive and consistent under Peter's leadership.
Outpatient medical has now delivered year over year same store cash NOI growth of over 3% and seven of the last eight quarters and year over year same store occupancy growth for eight consecutive quarters.
New leasing in the second quarter was up 35% over the prior year.
Across our large 10 million square foot research portfolio, our University centered portfolio continues to benefit from a credit worthy tenant mix and a robust pipeline of leasing demand from universities and government institution with 600000 square feet leased in the first half.
Two high quality tenants.
And we are actively engaged in late stage conversations with multiple large users for over half a million square feet.
Finally quality tenant interest continues to be high and our 425 million dollar atrium health Wake Forest University School of Medicine development in Charlotte North Carolina.
With recent activity, we are closing in on 80% pre leasing even though we are still in the early stages of construction.
Moving on to capital raising we continue to prioritize our liquidity financial strength and flexibility.
We had significant successes in raising $2.4 billion in capital across diverse markets. So far this year.
These transactions evidenced the competitive advantage of our scale and their skill and discipline, we have in sourcing attractively priced capital even during dynamic market periods I'm.
I'm pleased that we're now in a net cash position with over $3 billion of liquidity. Thanks, Bob.
We also have an active pipeline of investment opportunities both for a fantastic portfolio and under the umbrella of Ventas as third party institutional capital management platform and.
In particular, we expect to complete about a quarter billion dollars of investment within them. Later this year focused on core outpatient medical buildings and stabilized growing senior housing community.
With its existing capacity and investment objectives, then provides a competitive advantage for us as we use our platform to capture opportunities in a disrupted market for high quality assets.
Overall on the investment front, we remain focused on assets with outsized embedded growth potential and high quality stabilized assets and portfolios with good risk reward characteristics cap rates continue continue to show a wide dispersion even within asset classes.
Depending upon the credit profile growth potential and price per square foot or unit.
We see some high quality outpatient medical buildings with strong hospital systems, and good credit and life science assets trading in the mid to low fives, while other assets with more garden variety characteristics of risk profiles have gapped out.
There is a significant opportunity in front of us to lean into the senior housing growth and recovery story as good assets with challenged financing profiles look for solutions.
We are heading into the peak years for senior housing loan maturities through 2025 with over $20 billion in debt coming due.
With occupancy still about 500 basis points below pre pandemic levels and rising interest rates, we're beginning to see significant opportunities to generate higher returns on quality senior housing assets.
We are well placed to capture these opportunities with our Ventas O I tools and analytics, our team our ability to raise capital and our expanding group of operator relationships.
Against the dynamic macroeconomic backdrop, we remain advantage given our size liquidity and the strong fundamentals across our portfolio.
Our asset classes benefit from a compelling demand outlook.
While the external environment. This year has been unpredictable and volatile at fantastic. We have been laser focused on execution performance and growth and delivering returns for our shareholders. Our team has really accomplished a lot across our enterprise and handled every macro and specific challenge that come our way with <unk>.
And enthusiasm I greatly appreciate their commitment to venkat and our stakeholders.
Our enterprise momentum is strong we're capitalizing on the large and growing demographically driven demand across our business and the unprecedented organic multiyear growth opportunity and shop and we're pleased to confirm our enterprise normalized <unk> outlook for the balance of the year Justin.
Thank you Debbie.
I'll start by covering the Q2 shop performance.
The demand story remains strong at the top of the sales funnel, including leads and move ins are consistently performing above pre pandemic and prior year levels.
Our shop portfolio continues to deliver double digit same store cash NOI growth in line with our expectations for the quarter.
Shop, NOI was led by the U S with 32% growth and 14% overall.
Margin expanded 160 basis points, notably.
The U S led the way with 18, 5% growth.
And 230 basis points margin expenses expansion respectively.
The assisted living results.
Driven by our legacy strong performers, including Atria and Sunrise.
And our regional assisted living operator relationships that have joined us to transition communities over the past year and a half are delivering exceptional results as our strategy committed to ensuring we are in the right markets with the right assets and right operators is working.
Our NOI generated Capex program continues as we have now completed over 100 projects with 70 more plan to complete this year and our U S. A L. In IL portfolios and the early returns are excellent. These.
These projects are all part of our Capex budget that we established at the beginning of the year.
Our highly stabilized high quality Canadian portfolio reached 94% occupancy in the second quarter and NOI grew 2%.
Yes.
The revenue growth and our portfolio remains strong.
Revenue grew six 7% year over year, driven largely by Revpar growth of six 6%.
Led by an exceptional U S revpar growth of seven 4%.
Operating expenses grew approximately 4% year over year, which was better than our expectations.
Within Opex labor was better than expected as contract labor continued its downward trend and partially offset by an increase in regular labor expense.
The key selling season is well underway and.
And we had a strong ramp in June driving 50 basis points of spot occupancy growth during the quarter.
However, we didn't see the strong performance at month end that we expected in independent living.
Occupancy grew 10 basis points year over year, which was disappointing.
And driven by softness in our holiday by Atria U S IL portfolio.
We have identified 38 communities.
Our particularly lagging occupancy performance adjusting for these 38 communities. The total shop same store portfolio would've achieved 17, 3% NOI growth year over year.
Versus 14% reported in the second quarter in the U S would have grown 24%.
Versus 18, 5% reported.
These communities will benefit from executing the more aggressive measures in our Oi playbook, including operator transitions and comprehensive Redevelopments and these plans are already underway.
First.
We will ensure we have the right operator in place by transitioning 26 holiday by atria communities to existing Ventas manage their relationships in Florida, Texas and California.
These regional operators have demonstrated strong performance robust sales management and they have had a solid geographic overlap with the transition asset markets. Next we will continue our successful NOI generating Capex program. We have completed several of these projects and our holiday by atria portfolio there.
They bring very good results, we have another round of projects planned to complete in our holiday portfolio by year end.
Finally, we will ensure that we are utilizing our full O I approach, which has proven to be very successful in communities that are transitioned to new operators by collaborating with the right operators in combining their intense local market focus and execution with our respective operating expertise best in class data.
X align management agreements portfolio management and capital investments, we are driving performance.
Our best proof point of the successful execution is the transition 90 portfolio, where we completed the transition of 90 assisted living communities in early 2022.
In regional clusters to seven different operators, we sold and closed nine of those communities and invested capex across the portfolio.
This portfolio has experienced net move in growth in 13 of the past 15 months and delivered year over year occupancy improvement of 370 basis points.
Revpar growth of eight 2%.
And therefore NOI has it had extraordinary growth in a relatively short period of time with all seven operators contributing.
These newly appointed operators have demonstrated they are the recipe for success and delivering on the value proposition for their respective residents. In these markets. This is a prime example of performing on our right markets right asset and right operator philosophy, we have the playbook.
We are executing and we expect to continue to drive performance across our broader shop portfolio.
Finally for our same store portfolio NOI, we are reaffirming our shop same store growth range of 15% to 21% extra 38 assets. We expect full year occupancy growth of 80 to 120 basis points, which is approximately consistent with the first half of the year performance.
In closing we remain very confident in the multiyear recovery in senior housing as the table is set for net absorption across the sector.
Bob.
Thanks, Justin I'll share some highlights of our Q2 performance discuss our balance sheet and close with our updated 2023 guidance.
Starting with 20 with Q2 total enterprise performance, we reported second quarter attributable net income of 26 per share.
There are notable positive net income and NAREIT <unk> impacts in the quarter arising from the acquisition of the mezzanine loan and the sale of approximately 24% of our shareholding in ardent.
These impacts were excluded from normalized <unk> as previously communicated.
Normalized <unk> per share of <unk> 75 for the second quarter was ahead of our expectations and increased 4% year over year.
While total company same store cash NOI increased 7% year over year with all segments contributing to that growth.
In our <unk> loan portfolio had a strong start.
A few comments on the proactive steps we've taken this year to raise capital at attractive rates and to manage our balance sheet.
Backdrop is challenging with rates continuing to increase in the 10 year Treasury currently well over 4%.
We've leveraged our access to diverse sources of capital, having raised $2 $4 billion at a compelling four 6% cash rate with.
With near term line of sight to a further $600 million in H two.
We tapped into multiple capital markets and geographies, including the U S and Canada, raising secured unsecured bank debt and convertible debt across multiple maturities.
As well as raising equity and selling assets.
And we held down our all in costs through 10 year Treasury interest rate hedges at 337%.
And two year pay fixed hedges on floating rate debt at 388%.
We executed post the SBB collapse.
All of these hedges are significantly in the money.
The use of these capital sources as refinancing 2023, and 2024 debt maturities.
Most notably paying down in full the $1 billion santerre senior secured debt.
Thereby replacing 2024 maturing debt with a longer duration more permanent capital structure that is accretive to ventas.
As a result of all these efforts our balance sheet is in a strong spot. We're in a net cash position with near term liquidity exceeding $3 billion, which covers our limited maturing debt through 2024 by nearly two five times.
And floating rate exposure is at 10%.
The low end of our targeted range.
These are strong proof points of our advantaged access to attractive capital.
Our skill in using that access to the benefit of our shareholders.
Finally, our net debt to EBITDA in Q2 improved to seven <unk> times versus the seven two times, we anticipated following the acquisition of the Mezz.
We are committed to triple B, plus balance sheet, and we expect that the multi year sharp recovery will continue to further improve our leverage metrics over time.
I'll conclude with our updated outlook for 2023.
After a good first half of the year, we are reaffirming and narrowing our initial February normalized <unk> guidance of $2 97 per share at the midpoint for full year 2023.
On a year over year basis, our normalized <unk> at the midpoint continues to represent 5% growth on an adjusted basis.
Bridging versus our initial guidance, we now expect a positive <unk> <unk> impact from the <unk> loan portfolio together with the outpatient medical and research and Triple net segments.
Offset by minus <unk> sharp impact driven by U S IL occupancy.
A final step in the bridge is a positive <unk> from proactive capital raising.
Offsetting a <unk> <unk> headwind from a higher forward interest rate curve and incremental dispositions now included in guidance.
Net total company same store cash NOI year over year growth is now expected to reach 8% at the midpoint 50 basis points above our initial guidance.
Please see our investor presentation, and supplemental disclosure posted to our website for further guidance assumptions.
To close we are pleased with the results for the first half of the year and we are committed to delivering performance and value for our shareholders in the second half and beyond.
For Q&A, we ask each caller to stay to one question to be respectful to everyone on the line.
And with that I'll turn the call back to the operator.
Thank you if you have a question. Please press star one on your telephone keypad. If you are in the queue and wish to withdraw your question simply press Star One again as a reminder, please limit yourself to one question before rejoining the queue.
Your first question comes from the line of Michael Carroll of RBC capital markets. Your line is open.
Yes. Thanks.
Jonathan can you talk a little bit about how widespread the seniors housing weakness was in the IL portfolio I know in your prepared remarks, you sounded like it made it sound like the atria by holiday portfolio was largely impacted but 38 assets, where we're where most of it was is that a fair comment.
That's a great question.
To be a little more specific about it.
We have.
All of our independent living communities in the U S that are not holiday by atria are doing great.
They have double digit NOI growth occupancy growth, that's consistent with more consistent with the assisted living growth that we've seen.
The the issues really narrowed down to holiday and let me describe that a little bit for you.
We will have 85 communities with atria their holiday communities moving forward.
Over half of those by the end of the year well has benefited from the <unk> program that I mentioned in our prepared remarks.
17, or 18 of those are done already we have many more planned throughout the year. So the plan with those communities are staying with atria is to continue the readout program, which is generating very good results. The communities that are transitioning or going to operators that have a great track record in their respective states and they've had an excellent track.
A record for us thus far thus far in the Ventana relationship was 26 of those.
They were particularly underperforming.
We're confident we're putting them in good hands and we have an action plan in place to to get those on track. So so I would say, yes, it's really not an IL issue, it's more of a holiday by atria issue and we have plans in place to address it.
Your next question comes from the line of Joshua <unk> with Bank of America. Your line is open.
Yeah, Hey, guys.
Thanks for your time on the fence here portfolio.
Looks like it kind of was a.
Positive versus the initial guide.
What in particular in the portfolio is driving that outperformance.
Uh huh.
So this is debbie thanks for the question I.
I would say we are off to a strong start there.
We are the NOI expectations have been increased and that's principally the reason.
And that's really from this intense kind of focus on.
Asset management and integration and making sure we're taking all the steps, we can to maximize cash flow and value.
Sorry.
Also just as a reminder of the systems that are associated with these medical office buildings.
67% of those overlap with the systems from our legacy portfolio.
Medical office buildings seven.
75% of them are sitting in the same msas as we have existing medical office buildings to our integration efforts are.
Much easier to do and I'd tell you we've been really busy when using the lillibridge playbook, we've done and the engineering assessment for each one of the buildings, we have a strategic asset plans for each one of the buildings.
We've approved and are beginning to spend capital to improve the safety efficiency and curb appeal of the buildings, we're transitioning opex contracts like cleaning an elevator maintenance and so forth. We think we've identified about 400000 square feet of.
$400000 worth of savings for our attendance just by transitioning contracts.
We've done a tenant satisfaction survey and we received received the results and are working on.
Action plans.
And finally, we have transitioned some of the property management to these buildings. We've transitioned six this week to lillibridge, which brings the total since may to 18 and.
And the good news is in the MLB portion we are about $500000 ahead of our pro forma for this portfolio.
Your next question comes from the line of Jim Mccormick with Evercore ISI. Your line is open.
Thank you.
The horse and sandwiches.
All earnings drag associated with the repositioning to be repositioned assets.
What portion of that would be maybe like transactional.
Legal and other just sort of contrast questions that you may not recoup versus you can you get all four cents of earnings power more back post transition I'm, just trying to better understand thank you.
Hi, it's Justin.
The <unk>.
We view is recoverable through performance improvements and it's really all captured in.
The holiday portfolio action plans at <unk>.
Described yes, we want to get the <unk> back and then a lot more.
Your next question comes from the line of Michael Griffin with Citigroup. Your line is open.
Thanks, just going back to those assets do you expect the transition I mean, it was the underperformance, mainly due to kind of occupancy declines labor issues that you saw at those facilities any kind of color around that would be helpful.
Sure Yeah. The biggest issued with this portfolio has been occupancy.
We've had where we've had some successes where we invested capex and that's been a good driver of pricing NOI, particularly occupancy remains a focus really across this portfolio and especially in those markets that were transitioning the operators are transitioning to have proven to have a robust sales management.
Form.
And have executed quickly and.
And the communities that they've managed for us so far so we're really excited.
For them to get started.
Your next question comes from the line of.
Jonathan Hughes with Raymond James Your line is open.
Hi, good morning.
Why is this job transition portfolio being done now and not before these headwinds became what what seems to be pretty severe and then the second one wide raised the relatively small amount of equity given the organic delevering visibility from the shop NOI recoveries are expected to drive leverage down nearly a full turn.
Thanks.
Hi, It's Justin Fair question I'll take the first part.
So.
The holiday.
Portfolio was an acquisition by atria they had.
Acquired the manager holiday.
And they've been integrating for a period of time.
We saw those integration efforts come to conclusion at the end of 2022.
At that stage, we were really looking forward to the key selling season to see proof points that the merger integration have been working.
And like I said in prepared remarks that they felt short so some of the actions we're already underway, which includes the readouts.
We're doing a more comprehensive readouts in several communities as I mentioned and they were transitioning to new operators, we're taking action.
We had.
Good visibility into the merger integration and now that.
We are at this stage, it's time to step up our ROI activities.
I'll take the second one John on the equity.
Thanks ill start with the.
The commitment we have to our triple B plus balance sheets, which you know is real.
Lee the sand here.
Acquisition is 30 basis points levering cetera, Paribus, we highlighted last earnings call.
As we also emphasize we're putting a permanent capital structure on that on that <unk> investment and that's what we've been doing and that includes equity includes asset sales that includes a variety of debt and so it's really.
All part of balance sheet management in <unk>.
And liquidity and leverage and that's the rationale.
Your next question comes from the line of Mike Mueller with Jpmorgan. Your line is open.
Yes, hi, as it relates to the full year shop same store NOI guidance are you expecting a second half of the year acceleration or did you consider pulling the top end of the range down.
In regards to the guidance really.
I'll just run through it so we're looking at cash NOI of 15% to 21%.
That really preserve the existing mid point and we have good visibility that that that's the runway.
Occupancy.
At the midpoint around 100 basis points is consistent with the performance we've seen year to date Rev. For the same revenue a little less than the original guide and the Opex, a little less as well so it's pretty consistent.
And there's a little bit of.
Gross and net because obviously, we've been running around in this portfolio around 17%.
So in the second quarter, so a little bit of occupancy growth and contemplated.
Your next question comes from the line of Austin, <unk> Schmidt with Keybanc capital markets. Your line is open.
Yes, Thanks, Justin did I hear you correctly that year to date growth in occupancy was around 100 basis points.
Glued the 38 assets from the same store pool, implying no real need for acceleration and then I'm curious what would same store revenue and same store NOI guidance have been had you kept the 38 assets in the same store pool and then the balance of the portfolio is that outperforming our original expectations are performing more in line.
Thanks.
Yes, so on the first point on the occupancy I basically just saying.
<unk> performed consistent with where it performed in the first half of the year in terms of growth supporting 100 basis points year over year growth in terms of the.
The differ.
Difference in tools.
468 is.
Obviously, performing a little better in the quarter and it's supporting our original full year guidance. So therefore, the natural conclusion is there is probably less performance. If you kept those communities. Then that's demonstrated in the <unk> that we've talked about earlier that four cents is really pointing to the holiday by atria portfolio.
And therefore the actions, we're taking are really to address that performance.
Your next question comes from the line of Juan Sanabria.
<unk> <unk> with BMO capital markets. Your line is open.
Hi, Good morning, two part question I guess, one just to follow up on Mikes. Austin's question. What is the same store NOI growth year to date for the recast pool and then secondly.
There's been some discussion.
On it as well about financial distress in seniors housing and sort of anecdotes about some concessions or discounting being done on the new customer rates.
Just curious what you're seeing competitively or maybe some of your operators are doing themselves on the new rate front and if there's if you've seen any of that pressure on the new customer rates.
Yeah, well, let me take the first one just the first half on this.
<unk> hundred 68, Justen described extra 38 assets.
Year over year growing in the 18 ish percent percent range, we highlighted in the materials.
The impact of the 38 assay.
Assets coming out of the pool in the second quarter, that's 330 basis points impact positively to the growth rate as you think about the full year pool, that's a good proxy of the impact.
And so hopefully that put some numbers behind it all.
In regards to pricing.
I can say within our portfolio that are releasing spreads are as good as they've ever been historically.
They have been.
Mostly positive to slightly negative even following.
Big.
Rent increases in the beginning of the year, where the key selling season now.
Clearly operators are wanting to take advantage of that so there's always some kind of price movement that occurs during this period and and.
Certainly it's something that we constantly look at and operators look at is where can we re price to make sure we're striking that balance between volume and rate.
So I would expect to see movement in certain markets amongst operators to try to compete.
Thank you.
Your next question comes from the line of Ronald Camden of Morgan Stanley . Your line is open.
Great just two parter for me as well.
So one it looks like you took out the pricing power of slide from the <unk> Jack.
Just going through right now, but can you remind us what in place rent increases are.
Hi, there trending.
Certainly.
For the back half of the year and how youre thinking about that as part one and then part two is I think others have asked this in a different way I'll give a stab at it but just trying to really hone in on what changed over a three month period right to take the shop occupancy down 50 basis points. It sounds like Youre, saying it was just the.
The peak selling season did not progress as expected, but just wondering should there have been some signs or or or.
Or something just maybe can you just hone in on just just what really changed here.
So yes. This is Justin I'll start with the second question first and that's the change in occupancy.
And as I mentioned, what we're looking for with all the integration activities.
Behind the Hollywood <unk> portfolio, we are really looking for the key selling season selling season starts in May June July August will be particularly strong months.
All eyes around June .
And you really really don't know the net impact until the end of the month.
When the end of the month came in it was disappointing.
And the way models work.
Bacon results and saw that that would flow through the.
The rest of the year as I mentioned, we have actions underway to address that trending in terms of pricing pricing still remains very strong. We then feature it.
In this deck, because it's really more of a first quarter phenomenon for us as we have highest levels of in house rent increases, we still see very strong increases on our anniversary.
Those are really not that's not a big part of our portfolio, but it's.
More independent living.
And you generally see around 7% or so.
And those increases so it's very strong.
Pricing power.
And our view is going to continue to be a big opportunity and only gets better as occupancy goes up we're not even close to having scarcity value.
But what we have as a backdrop that has supply demand dynamics. It supports net absorption in the sector and we're going to play into that with price and volume.
We think that that opportunity will continue for some time.
Your next question comes from the line of John Pawlowski with Green Street. Your line is open.
Thanks, Good morning, I just wanted to follow up on that last question. There maybe I'm misunderstanding in page 18 in the investor deck.
It looks like occupancy guy.
<unk> was reduced for the revised same store pool. So its not just the patriot issues driving the weakness in the occupancy.
Are there broader is there broader sluggishness in the IL portfolio outside of Hei.
Okay, Yes sure good.
Good that's a good opportunity to clarify something so so we are moving communities away from holiday by nature of this 26 of those we mentioned 12 readouts that we're doing.
There are also communities are remaining with atria and Theres actions underway to help improve the performance within those are still on the same store pool.
Theyre getting readouts, but theyre not the comprehensive salaried out of that that would remove them from the pool. So.
That's probably where the confusion is that remains an area of focus even within that the revised same store pool, there's holiday communities at.
That are the big opportunity to improve performance.
Your next question comes from the line of Steven Valiquette with Barclays. Your line is open.
Alright. Thanks.
Yeah. My primary question is kind of similar to some of these other ones on the reasons for the auto performance in that holiday IL portfolio or I guess just to dive in deeper on the.
Occupancy shortfall just curious on the competitive landscape. So in other words with Hollywood, just being outmaneuvered by competitors or was there just softness in those markets that hit all competitors for various reasons and it sounds like maybe pricing was not the issue, but just curious whether.
With holiday, just losing market share versus competitors or was everybody feeling the pinch in these particular markets just curious more color around that if you have been able to decipher that yet thank you.
Sure so.
I would say there is there is.
Opportunity to keep up the market.
We.
Can't really point to a big macro.
Reason or.
Even our local market reason in these markets. It really is going to come down to execution.
We were doing all we can to make it more competitive with new operators in place were putting readout capex in place that will help drive pricing NOI volume.
Atria is very focused on this the new operators refocus on this we're all over it so our intent is to get them back to market and beyond.
Okay, maybe just a quick follow up what would be the lowest hanging fruit then with the new operators coming in like what's the easiest thing to pick up as far as number one on the list to improve performance within all the things youre going to do yes.
Yes, great question, it's sales execution.
One of the things that that that I noted in the the.
The prepared remarks is that leading indicators have been strong and that's true in a lot of these communities and a lot of these markets as well, where you just need to capture that opportunity I have confidence in the new operators ability to do this they are excited and ready to get started.
Okay I appreciate the color. Thanks.
Your next question is a follow up from Austin Wichmann of Keybanc capital markets. Your line is open.
Great. Thanks for taking the follow up you guys flagged plans to sell $63 million of Sniffs. Later this year at a mid 8% cap rate I guess, what is that on a price per bed basis, and then two do you think that the mid 8% cap rates reflective of the overall sniff portfolio and.
I asked because I think we talked about at NAREIT and ability to sell some of the noncore Sniff said 80 to 120000, a bed range, which would imply a lower cap rate for.
The overall portfolio versus the mid <unk> you quoted thanks.
Yeah.
So I'm enjoying being back in the sniff business, especially as does some of the operating trends are getting a little bit better.
These are about 135 bag each have their situations within the health care chip on that portfolio that we took ownership of is a unique situation and that'll change kind of cap rate per bed.
Valuations, but yeah, we're happy with that.
Low eights and on these portfolios and there is unique.
Part of the part of the <unk>.
You add of this project is really the experience and the judgment to handle each one of these.
Uniquely and get the best outcome and with these particular sales.
But we're doing that.
Yeah.
Thank you. This concludes the question and answer session I will now turn the call over to Debra Cafaro.
Chairman and CEO for closing remarks.
Thanks, so much and I want to thank all of you again for joining us this morning.
We are excited about the opportunity ahead of us.
We remain convinced of the momentum and the multiyear growth and recovery story, and we're all aligned around achieving and capturing that so we look forward to seeing you soon and again appreciate your participation. This morning. Thank you.
This concludes today's conference call. We thank you for joining you may now disconnect your lines.
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