Ensign counts down another record quarter as he makes progress on a new structure for his own estate

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The skilled nursing giant Ensign Group (Nasdaq: ENSG) continues to see patient flows return to normal as reinforced first quarter employment continues in the second quarter.

An ISP based in San Juan Capistrano, California, said Wednesday:record operating results for the second fiscal quarter ending June 30 – with adjusted earnings of 89 cents per share.

Ensign leaders are not overly concerned about current difficulties, considering some of these obstacles to be temporary. And they are determined to grow, including in the segment of their own real estate.

As of the end of July 27, the Ensign operated 240 facilities, including 209 skilled nursing facilities, 9 communities for the elderly, and 22 on-campus facilities. Own real estate constituted about 35% of the portfolio.

While Ensign has a history of spinning off subsidiaries, there are no plans to spin off its own real estate portfolio into a separate government entity. But the company is working on a structure that will provide better visibility into property values.

Employment Growth, Vigilance Option

Markets in Arizona and Colorado have already returned to pre-COVID employment levels, but the company remains “vigilant” in light of the potential resurgence of the delta variant virus, Ensign CEO and Director Barry Port said during a conference call on Thursday.

The federal government’s extension of the public health emergency to October 18, which retains regulatory forms of care for skilled nursing facilities, will help clinical teams, Port said, along with vaccine availability, testing, infection control procedures and treatment protocols.

Ensign raised its earnings forecast from $ 3.55-3.67 per share to $ 3.54-3.66 per share after quarterly revenue of $ 638.5 million, up 9% in Q2 2020 …

“We are particularly pleased that we have achieved consistent growth and utilization from Q1 to Q2, which is particularly impressive given that we always expect a seasonal deep decline in utilization in the summer months,” Port said.

Occupancy in the same stores increased 170 basis points from the first quarter of 2021, while community occupancy increased by 150 basis points during the transition.

“As the pent-up demand for medical services in our markets continues to increase our managed care, skilled work days and average managed care, the daily census improved again for an impressive fourth straight quarter,” added Port.

Lack of plans to allocate investments in the real estate segment

In the fourth quarter of 2020, the Ensign created a new reporting segment that consists of Ensign-owned RNs and nursing homes leased to Ensign affiliates and other operators, including 31 senior housing developments leased by The Pennant Group (Nasdaq : PNTG).

Pennant Group separated from the ensign in October 2019 in an effort to separate the home health, hospice, and nursing housing companies.

Keetch considers the Ensign real estate segment a “key differentiator” in the market.

“We envision a structure that will not only improve the visibility of the demonstrable value of our own property, but also provide us with an effective tool for future property acquisitions that can be managed by Ensign affiliates or other third parties,” Kitsch added. during a conversation.

The branch allows Ensign to grow through transactions with potential third-party operators that the company would not have considered in the past, Kitsch said.

In the second quarter of 2021, Ensign reported rental income of $ 16 million and cash flow from operations (FFO) in the real estate segment of $ 13.7 million. FFO represents an increase of 10.5% over the previous year’s quarter.

Kitsch said the Ensign real estate segment is not expected to go public, adding that the company “dot the i and cross all the dots” to create a structure that increases shareholder visibility and access to both. public and private markets in the future.

“During the quarter, we have made significant progress in our efforts to create a structure that will enable us to better demonstrate the growing value of our own properties,” he said.

Trade flow is expected to increase

The flow of deals is expected to pick up at the end of the year and into 2022, Kitsch said, and distressed properties will hold out a little longer with the federal government’s extension of the state of emergency.

This is because the owners want to close the deal before the end of the tax year.

In the second quarter of 2021, Ensign acquired eight spent nuclear fuel in Texas, Washington DC and Colorado in the second quarter, the largest of which is the 140-bed Boulder Canyon Hospital and Rehabilitation Center in Boulder, Colorado.

Keetch expects another handful of promising deals to close this year, and more opportunities to emerge in the fall.

“As we mentioned yesterday about our issue, we have over $ 340 million in free capital,” he said. “In addition, we have 75 fully unsecured properties. We continue to work to increase the value of capital in our small number of non-financial real estate assets with long-term, fixed-rate HUD funding. ”

Acquisition rates in the second quarter of 2021 have exceeded Stifel analysts’ expectations, and they are optimistic about what lies ahead.

“We are confident in investment flow and performance, which will add to future growth as new acquisitions recover,” they wrote in a note released Wednesday.

Personnel expectations

Staffing problems have worsened throughout the aged care industry, with a shortage of workers among pain points. The Port considers childcare issues and the temptation to increase unemployment benefits to be “temporary factors” when it comes to hiring and retaining nursing home workers.

“Some of these pressures [are] is canceled in states that have ended certain unemployment benefits, such as Arizona, where operators have noticed an almost immediate rise in the talent pool, ”Port said.

The Ensign’s internal nursing education program has recruited 150 Certified Nursing Assistants (CNA) in the past five months, Port said. The company promoted 22 nurses to the position of director of nursing through its nursing leadership development programs.

“The tremendous potential in our existing portfolio and the tremendous acquisition opportunities on the horizon give us confidence that we are well positioned not only to get back on the path we took before COVID, but to accelerate our growth.” – said Port.

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