Ventas (VTR 2.58%), a healthcare-focused real estate investment trust (REIT), has been one of the most beaten-down REITs during the COVID-19 pandemic. Even after today's rally, shares are still 60% off their 52-week high.
While healthcare is typically a recession-resistant type of real estate, the problem is that senior housing is in trouble. Move-in rates have fallen to virtually zero due to stay-at-home orders and virus concerns, and there's no telling when demand will come back to pre-pandemic levels. With 55% of its portfolio in senior housing, it's no wonder Ventas' stock price has been under pressure.
But after reporting first-quarter earnings, it appears investors might be a bit more optimistic about the company's future. Ventas stock finished the trading day higher by about 11%.
In Ventas' senior housing operating properties, occupancy declined by 330 basis points in the month of April alone, and move-ins were about 25% of typical levels.
But the news isn't all bad. Of the 405 senior housing communities that it operates, just one-fourth have had any residents test positive for COVID-19, and the company estimates that it is past the peak. And Ventas may not be as financially affected as you might expect. In its senior housing triple-net leased portfolio (facilities leased to operators), the company says it collected "substantially all" of its rent through May 7.
And the rest of the portfolio is doing quite well. Ventas received all of its expected rent from its medical office tenants during the first quarter and 96% of April rent.
On the bottom line, Ventas' normalized funds from operations (the REIT equivalent of earnings) fell by just 2% year over year to $0.97 per share, which was significantly higher than the $0.87 analysts had been expecting. In a nutshell, Ventas just showed investors that while things aren't going great for its business, it's not as bad as many investors had feared.