Welltower Inc.
Q2 2021 Earnings Call Transcript

Published: 30 Jul 2021

[Operator:]

Good day and thank you for standing by. Welcome to the Q2 2021 Welltower Inc. Earnings Conference Call. Please be advised that today's conference is being recorded.

[Matt McQueen:]

Thank you, and good morning. As a reminder, certain statements made during this call may be deemed forward-looking statements in the meaning of the Private Securities Litigation Reform Act. Although Welltower believes any forward-looking statements are based on reasonable assumptions, the company can give no assurances that its projected results will be attained. Factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company's filings with the SEC. And with that, I'll hand the call over to Shankh for his remarks. Shankh?

[Shankh Mitra:]

Thank you, Matt, and good morning, everyone. I hope that all of you and families are safe and healthy. Before I make some introductory comments on the state of senior housing, and on capital allocation environment, I want to welcome John Burkart, our Chief Operating Officer to this call. John joined Welltower last week after illustrious 25 year career to Essex. We believe he will make a tremendous long-term impact on our platform. Following my remarks, as usual, Tim will walk you through our operating and financial results. We're cautiously optimistic on the senior housing business as occupancy is starting to build and we're encouraged by nearly 200 basis points of spot to spot occupancy growth in second quarter, which clearly exceeded our expectations. Momentum in US continued to be strong, with lead generation returning to pre COVID levels, resulting in a 280 basis points occupancy gain in the quarter and the UK remain resilient despite the rise in the Delta variant cases being driven by the younger cohorts. Though, we are monitoring the situation closely we have seen very little impact to the portfolio so far as UK case counts more broadly appear to be decreasing rapidly after recent spike. While Canada was a drag on occupancy, we are witnessing some green shoots following a material decline in COVID cases. In fact, tours almost doubled in June from April and May in Canada, as provinces have removed moving restrictions and are now permitting in person tours. For our overall portfolio, June was particularly impressive month with move in exceeding 2019 level for the first time since the beginning of pandemic. I'm also encouraged that our operators were able to achieve these occupancy gains, while holding rate reflecting the need based nature of our asset class, and strong value proposition of this business. Year-over-year same store revPAR is up 3.2% across our assisted living properties, 2.8% across our independent living properties, and 5.3% across our wellness housing communities.

[Tim McHugh:]

Thank you, Shankh. My comments today will focus on our second quarter 2021 results, the performance of our investment segments in the quarter, our capital activity, and finally, balance sheet liquidity and update in addition to our outlook for the third quarter. The time of our last earnings call on April 29, we were six weeks into an occupancy recovery in our senior housing operating portfolio, which has seen total portfolio occupancy increased 67 basis points on March 12 lows or an average increase of 11 basis points per week. In the 13 weeks that have followed, we've seen the occupancy recovery accelerate, adding an additional 204 basis points through July 23, an average pace of 16 basis points per week, bringing the portfolio wide occupancy recovery since March 12 to 271 basis points.

[Shankh Mitra:]

Thank you, Tim. I wanted to conclude by expanding on a team that I mentioned before, we're engaged in two small transactions with two other REITs our sector, that are not material to any company that involved. We are buying a handful of assets in one transaction and selling a handful of assets in other transaction. Those dollars involved are too small to be mentioned on this call, but I bring them up as I think they reflect a new era of collaboration amongst public REIT. Both of these transactions which will result in favorable outcomes for all of our respective shareholders on a transactional basis. But what's important to focus is an emerging theme amongst public REIT, the life doesn't have to be a zero sum game. With that the operator we will open it up for questions.

[Operator:]

Our first question comes from the line of Vikram Malhotra from Morgan Stanley.

[VikramMalhotra:]

Thanks so much and good morning, everyone. I guess Shankh and Tim. The one thing that sort of surprised me was the revPAR growth that you saw on a like for like basis. I think most people would have anticipated in this period of still occupancy recovering and low occupancy, there'll be more discounting. So I guess just on the expense side, two questions. One, did this surprise you? And what drove that? And second, if this revPAR continues into kind of the next few quarters, what does that say about sort of the margin and the cash flow recovery into '22? Thanks.

[ShankhMitra:]

Vikram, I'll try to take a stab at that. So did it surprise us? Yes, it did. If you think about last quarter call, I said despite all the noise of discounting another so when I said that our operators have a very special product and a very special value proposition that just they're not willing to discount. And but having said that, I didn't expect this kind of pricing strength yet. It was entirely driven by our highest end luxury product in coastal markets, as I said; do we expect it to continue? Yes, we do. In fact, we, as Tim pointed out in his prepared remarks; we expect that to accelerate into Q3. And so look, I mean, from the perspective of the stage is set by a very powerful recovery of margin and cash flow increase as we come through, but we're very, very excited about what's going on. And at the same time there's a lot of uncertainty, we're not in this for next quarter next month. This is a long term business. We're excited about what we're seeing. But most importantly, as Tim pointed out, we think that we're increasingly getting to a point that is really validating our belief that the business which is frankly, it was when we said this last year, around this time, that is validating our belief that the product is needed, and the consumers will be back and we're seeing that.

[Operator:]

Our next question comes from the line of Amanda Sweitzer from Baird.

[AmandaSweitzer:]

Thanks. Good morning. I wanted to start with a quick clarification on your occupancy guidance. When think about your spot occupancy guidance versus where average occupancy will end up for the quarter, it looks like it might be a different setup from recent quarters, and average occupancy could actually end up exceeding spot occupancy in the third quarter. Is that the right way to think about it?

[TimMcHugh:]

That's correct, Amanda. The right way to think about is using about 1Q and 2Q. And the first quarter, because of the decline in occupancy, we saw that lasted for two and a half months of the quarter, we actually finished for spot occupancy was below average occupancy in 1Q, we have the opposite effect in 2Q where the increase typically in June has driven spot occupancy above average for the second quarter. So thinking about our spot occupancy, guidance to 190 basis points on kind of a spot basis and equates to 210 basis points on an average change from 2Q to 3Q.

[Operator:]

Our next question comes from the line of Joshua Dennerlein from Bank of America.

[JoshuaDennerlein:]

Yes, good morning, everyone. Just kind of curious to hear about your MOB pipeline. And then just aspect how there are other sharpshooters out there you'd be interested in working with?

[ShankhMitra:]

Josh, thank you for that question. And our MOB pipeline, if you're asking about acquisition, that pipeline is zero. And if you're asking about development pipeline, it's actually a million plus square feet fully leased, 100% leased pipeline, we continue to believe that the pricing that we're seeing in MOB market doesn't make any sense of our long term perspective. So we remain out of the market. We did this transaction specifically, because we see a very significant growth opportunity with Chris and his team. And are we willing to partner with more sharp -- local sharp protests? Absolutely, yes. But it’s purely on a transactional basis. We have not a lot of interest in that space right now. We think what we are seeing the opportunity to flood capital and make significant amount of return for our shareholders in the senior housing space is compelling. And that's where the capital deployment opportunities in the near term will be focused on.

[Operator:]

Our next question comes from the line of Steve Sakwa from Evercore ISI.

[SteveSakwa:]

Yes, thanks. Good morning. Shankh, I was just wondering if you could talk about what your operator policies are with respect of activation. So there's been a lot written about healthcare workers, so some not wanting to get it. And I just wonder, does this create any kind of hang up in terms of move in or when you're marketing assets, so maybe just kind of provide around the horn or kind of broad update on kind of where your operator stand and whether you've seen any issues?

[TimMcHugh:]

Yes, Steve, it certainly differs across operators. I'd say as far as the question around, hang up and move ins, the effectiveness of the vaccine and the lack of cases we've seen in the buildings across all three of our geographies, this point is really prompt the marketing around the operator policies. That being said, a large majority of our employees, the property level are vaccinated along with 90%, upper 90% of our residents. So the highly vaccinated at a facility environment across the board.

[Operator:]

Our next question comes from the line of Michael Carroll from RBC Capital Markets.

[MichaelCarroll:]

Yes. Thanks. I wanted to go back to the revPAR growth. I know that your operators have done a good job driving modest growth, even at these occupancy levels. I mean, how does this dynamic change when occupancy gets back to the high 80% range? I guess I'm trying to understand how much does this rate growth vary, I mean are changes generally more muted both on the downside or upside? Or can we expect the total portfolio to generate significantly stronger revPAR growth once occupancy comes back to stabilization?

[ShankhMitra:]

Mike, that's a very, very good question. Now you're asking me to speculate. So I will speculate, but it's speculation nonetheless but if you think about the occupancy as we get back, sort of to the more stabilized occupancy level, you just call it high 80%, I think you will see significant pricing power, even above what you have seen sort of these quarters or this particular quarter, let me remind you through the supply cycle, sort of call it from '15 to '19, when our occupancy has gone down, we have still raise rate about 4%, right, in face of a supply cycle, which I expect the setup is completely different. This cycle or this decade forward where you have better demand and probably in a better environment for supply as well. So is it -- should we see once stabilization happens, greater pricing power, we absolutely should. But it remains to be seen, as I will tell you one of the things that we interestingly watch, is that very tight correlation of housing price appreciation, and pricing power in senior housing industry. And we have seen a significant increase in a record household sort of wealth growth. And that hasn't really translated so far into senior housing pricing. We probably starting to see some of that this quarter, but it will come through.

[Operator:]

Our next question comes from the line of Rich Anderson from SMBC.

[RichAnderson:]

Thanks. Good morning. So when you take into account the embedded NOI that you go through in the deck, and you hold everything else constant, you're kind of 50% shop and 20% senior housing adjusted for all of that, I know, that's not absolutely precision, but you're clearly focused on the senior housing business. And I know your thesis has always been your IRR investors and you think more about that than certain asset classes, but you're the REIT, senior housing REIT relative to your peers like it or not, at least for now. I'm curious as your underwriting deals and kind of tethering yourself to the business. What are you thinking about in terms of the next supply cycle? We've seen that to be the risk for this business in the past, lumber prices are coming back down. I'm wondering how you're underwriting the future for supply and how you're making sense of the growth in this side of the business.

[ShankhMitra:]

Thank you, Rich. That's a very, very good question. So we continue to believe as I said before, that you will see some supply but you will not see this cycle. We believe that supply will chase demand instead of demand chasing supply, like you've seen last decade if we see no supply, we have bigger issues, right, that says that we're the only people who actually see the business. Everybody else is missing, that's not how many is going to happen. But I wouldn't react to short term, high frequency data on these things. Because these data is obviously comes with a lot of errors and noises, the similar types of data that you have been supplied would have told you that occupancy for us for the quarter would be down with negative pricing, that clearly didn't happen. So I wouldn't react too much to the high frequency data from one or two providers, I will tell you that forget about what others are doing. We are looking at a lot of development. And they're very, very hard to pencil; they are very hard to pencil, given feasibility rent remains between 20% and 30% below depending on different markets. And that just a question of how much rents have sort of cost has gone down, cost has gone up. And a high frequency indicator like lumber price on a Bloomberg screen doesn't tell you that it has changed significantly, you got to look at our long term average and people's ownership of that than sitting in the warehouse, and it hasn't shown up yet. Will it show up? Probably it will show up at some point. But that's it. At the same time, you're seeing a lot of other products, cost is going up, the country is significantly undersupplied on overall housing, and you will see housing starts will continue to go up with the demand of different materials. So I think that a lot of lessons have been learned on the bank side, losing a lot of money in this space, a lot of equity has lost a lot of money, clearly, you can see why we're buying new products at significantly below replacement cost. And the gap between where we're buying, call it $0.60 on the dollar and the $1 if somebody lost a lot of money, right. And so it was obviously these lessons will be remembered in the near term as the demographic catch on. But we are very much aware of what you are saying this is why we're so focused on price per unit. And that's why I made the point I made during my prepared remarks that we're not willing to buy anything and everything, even if we think it's a decent deal. Because in many cases, a lot of these things as a long term investor in the space, a lot of these things need to go right over a period of time for us, our shareholders to make money. And that's not the kind of investment I do make.

[Operator:]

Our next question comes from the line of Jonathan Hughes from Raymond James.

[JonathanHughes:]

Hey, good morning. I do agree with Rich you are the seniors housing REIT, but I want to ask about the health system portfolio. And what happened to EBITDA coverage there. I see it's one and a quarter turns now from 1.9 last quarter. And then could you also maybe talk about exposure to operators at less than one times EBITDA coverage without naming names? Are there any ongoing discussions with operators for maybe the rate deferrals or transitions across your triple-net segments? Thank you.

[ShankhMitra:]

Thank you, Jonathan. So first, coverage came down for obvious reasons, right you are -- you're still remember the NOI has trough last quarter is still coming down right from an trailing four quarter basis is how you report coverages, which means the better quarters are getting out of numbers. And worst quarters are getting in the numbers due mostly speaking in a normalized in a stabilized environment, coverage should give you the state of the business at inflection points like this, where you've got sharp decrease and sharp increases, it will not give you the state of the business. There's just like our other offers that you're seeing in shop, part of the portfolio, the fundamentals have trough last quarter, and it's actually getting better. So for example, let's just talk about ProMedica. I don't want to get into this because frankly speaking for our investors, ProMedica overage is a huge element metric because as I told you before, that ProMedica rent is guaranteed by the health system, the mother ship at the top end, right. So it's really is irrelevant metric for our investors. However, having said that let me make some observations about that topic. The revenue if you think about versus second quarter was the highest actually for ProMedica for that specific business for was the highest in last five quarters. They have seen significant increase sequential increase in occupancy, just this quarter, about 400 basis points in that skilled nursing business. And you know what is going on is there is Midlock as we and ProMedica in Midlock selling a bunch of asset, right? And those asset base is going through -- has a negative EBITDA as I talked about before when we announced the deal, and that still flowing to the number and creating significant noise on the number side. So that is absolutely is sort of going to create a lot of issues. And also on the same side, you were seeing, we add a nine Powerback building that is getting integrated. So you have a lot of noise. I will tell you, let's take a step back and think about what the business is trending. Business as I said, the second quarter revenue was the highest actually in last five orders. Business is getting better. ProMedica team, senior care team is doing exactly what we laid it out that they will happen, which is you're creating new partnership with different system, we announced it, they announced a new partnership MetroHealth in Cleveland, there's another one they signed a joint venture, which I'm not at the liberty naming name right at this point is a premier system in the country, business is moving forward. But as far as wealth of our shareholders are concerned that rent is guaranteed by the mother ship, which obviously is a very significant system with two plus billion dollars of cash and material in a $7 billion of revenue. So I don't want to get into that conversation. Remember, at this point in Jonathan, just not just talking about ProMedica but any triple-net leases will not reflect the state of the business because of the fourth quarter trailing nature of how we report coverages. From a standpoint of your second question, I think Tim touched on it. I will still say again, we have told you before that we believe that our leases are backed by material amount of credit and assets that we own in joint ventures and other assets owned by the operators, we do not believe there will be significant disruption of earnings and cash flow coming out of that. And our belief, that statement is getting stronger and stronger every day. That's how much I'm willing to talk about any specific operator at this call. Thank you.

[Operator:]

Our next question comes from the line of Mike Mueller from J.P. Morgan.

[MikeMueller:]

Oh, hi. My question was just answered. Thanks.

[Operator:]

Our next question comes from the line of Juan Sanabria from BMO Capital Markets.

[JuanSanabria:]

Hi, thanks for the time. Just curious on the acquisition pipeline, you guys have done a tremendous amount of work and heavy lifting and kudos to you. But the markets always about what come next. So just curious on your views of what's in the pipeline going forward? And how long do you think you can take advantage of this COVID dislocation and for the deals that you're striking now, how should we think about when those were negotiated? I'm not sure you could talk to Holiday more broadly about when those deals were really struck versus just to think about that the runway for future discounted replacement cost opportunities.

[ShankhMitra:]

Thank you, Juan. I completely agree with you. It's about what comes next. That's the point I was trying to make on the coverage metric, right. It's the state of what's happening now. And what's happening next, not what happened yesterday. Having said that, I'll tell you, it's important to understand when we talk about acquisition. Unlike many companies, we don't talk about what's under contract, unless it is a very large transaction that shareholders should know about. The holidays are a good example. So the $4 billion or so of COVID class is transaction that we have closed, we could have given you a significantly higher number of the transaction we have taken our hands on. So pipeline, I know you understand that. But I wanted to make a very concerted effort to make that point again, because it's very different from how most other companies report their numbers. So the pipeline, let's just talk about pipeline, which is where we have shaken hands, we have agreed on a transaction and it is going through the process. Well, it's the transactions take long time to close, as you know we're pretty quick, we are quicker than probably most other organizations that you will meet but we're also extremely thorough, right? So it takes time, we visit every property that we buy. So it takes time. So let's just talk about that pipeline, which we define as something that's under contract that's visible. That is significant, and it's under contract. So we feel very, very good about continued momentum on the acquisition side. Let's talk about the shadow pipeline, which I define as something that we're negotiating right now, that is also significant and visible. And I think you will see continued acquisitions at very, very favorable price. As I said before, going forward, as I've said before, we're driven by value of acquisition, not volume of it, right. So as long as we can create value will continue to occur. And if we see that market prices are moved to a place where doesn't make sense, we will not. And for it could be a lip service, but you can look at our history. And you will see that we have exactly done that. We have moved with market pricing, and if market pricing and got into a place where we think it doesn't make sense, we sold assets. So near term, we see tremendous amount of opportunities by this -- all this disruption in the market. And we're seeing tremendous opportunity, because there are several operators, and developers want to join our platform to access the data that we talked about for several quarters on this call. So sum it all together. I'm very, very optimistic about capital deployment opportunities, at very attractive price in coming quarters.

[Operator:]

Our next question comes from the line of Nick Joseph from Citi.

[NickJoseph:]

Thanks. Are you seeing any of your operators take additional pre emptive measures with a Delta variant? And then are you seeing any recent changes to state or local restrictions?

[TimMcHugh:]

Hi, Nick. Good question. We have not seen significant changes at state level restrictions and my comments in my script promote towards kind of the uncertainty around that going forward, there's obviously a lot of noise around kind of where things may change and where they've been the last, the most recent months. And the operator front our operators never, you think about sort of like a mask mandate, our operators never left the mask mandate. So you think about just the general facility and the way that they've been being run, there has not and likely will not be much of a change, depending on obviously the path of the virus, but to kind of what's going on in the general public last few months, because the operators continue to run a very safe, stringent environment when it comes to COVID.

[Operator:]

Our next question comes from the line of Jordan Sadler from KeyBanc Capital Markets.

[JordanSadler:]

Thanks, and Good morning, guys. So Shankh, I want to come back to your comment on moving swiftly. I know it's early, and the pandemic is not over. But your bet on seniors housing seems to be playing out better than expected. With occupancy improvements accelerating and now revPAR growth coming through, how is this impacting your underwriting of new investments? And even on the asset management side of the portfolio, how's it impacting your thinking?

[ShankhMitra:]

Thank you, Jordan. Look, I mean, when we made last year this bet for example, I'll tell you this is exactly your one year mark, when we first have started this discussion with Oakmont how to grow this business significantly, as a partnership yesterday marked exactly one year. But the times were scary, right? I mean, there's no question about it, occupancy was falling, like a rock EBITDA obviously was going down materially given on the high operating leverage in the business. But we had unwavering belief that the product is needed and that consumers will return, right? That doesn't mean that we knew for sure that will happen. That's the bet we made. And that bet actually made sense on a risk adjusted basis. And we talked about that, over last four calls. And I am very pleased that we recognized that bet seems to be playing up. So how is it changing? Look, at the end of the day, if you -- you have to think about real estate is a game of basis, right? No matter how good the environment is, or how bad the environment is, there's a floor and ceiling of value depending on what it costs to build. So we are not going to say that it's all clear. Things are fantastic. Let's just pay prices that are above replacement cost and acquire as much asset because we can't because we have a cost of capital. That is not how we run this place. Cost to just, we have a cost of capital; our owners have given us a cost of capital, our bondholders have given us the cost of capital so that we can accrue value to our owners. Not because we want to accrue value to the sellers. And that is how we have always run this place and that is how will always run this place. There is no dearth of opportunity, we're not significantly changing our underwriting and frankly speaking we are basis investor, an IRR investor. So you might say okay, you're long term in 10 year IRR or 15 year IRR really hasn't changed, has your near term growth rates have changed? Yes, it has. But that doesn't translate into higher prices, because we're still solving for the same IRR. And we're still really focused on what the price per unit price per foot is. Hopefully that helps you to get a glimpse of how we underwrite.

[Operator:]

Our next question comes from the line of Nick Yulico from Scotiabank.

[NickYulico:]

Thanks. Just going back to the senior housing guidance for the third quarter. Tim, I Know you talked about this earlier that it's a little bit hard to predict acceleration. But I guess I'm wondering how much did the July numbers sort of impact guidance, right? Because you're -- I think you said you're up 40 basis points so far, in July, as of last week. And I guess I'm just wondering is that sort of running a little bit slower than June, at the end of the day, June is a very strong month. So I guess we're just trying to figure out kind of the sequential movement on occupancy here, which was strong in June, and then July feels like it's slowed down a little bit, maybe you're putting in some conservatism about Delta Variant, et cetera. Maybe just if you can unpack that a little bit?

[TimMcHugh:]

Thanks Nick. That's great question. And thinking about that relative to, you look at the second quarter, as you pointed out, June was a very strong month. What we've seen coming into July is actually very consistent. Indicators like leads and interest in all kinds of leading indicators that were strong in June, it continued in July. The biggest difference at this point, we'll get into July 4, Holiday was a very low moving week, which is not surprising to us looking at June. So up 40, we're a bit more than 40 relative or sorry, in July, we're a bit more than 40 month a day, at this point in July, we were mid 50s. So we called 10 plus basis points, the line kind of where we were in June. And we're 10 to 15 basis points ahead of where we were in April in May. So we're continuing to see this improvement on a trended basis. We're trying not to read too much into kind of micro trends. So I don't think July start really plays a role in our conservatism. I think you mentioned at the end, uncertainly around Delta variant, and they said a much inability necessarily forecast given still unprecedented nature of the backdrop, drive a little bit of our view and how we give the guidance there, but doesn't have as much to do with the start in July.

[Operator:]

Our next question comes from the line of Lukas Hartwich from Green Street.

[LukasHartwich:]

Thanks. I have a question for John. I know you just joined the company. But I'm curious what your key priorities are out of the gate.

[JohnBurkart:]

Thank you. Yes, it's day 10. So my key priority is to seek first to understand aspect of things, very excited to be here. But those who know me know I don't give out my playbook. So definitely not doing that. But very excited to see a lot of opportunity. Amazing people here, Shankh is obviously amazing. And that's as much as I'm going to give you today.

[Operator:]

Our next question comes from the line of Derek Johnston from Deutsche Bank.

[DerekJohnston:]

Good morning, everyone. Just back to the capital deployment front. Are you changing or getting creative with the mix specifically in Show? How are you viewing Independent Living versus assisted living opportunities? And how do the valuations vary in the private markets for each segment or versus replacement costs today. And of course, Wells appetite for each.

[ShankhMitra:]

We're actually not changing the criteria; it is usually the replacement cost of assisted living for like for like, location is higher, sometimes significantly higher. But we always invest capital relative to what the replacement cost is, IRR targets are not different. I will tell you that we have a general propensity to go with a micro market with strong operators who have a stronghold on a product type. Going forward, as you think about I said this before, our portfolios has barbell approach, we want to be at a high price point high service areas, high service products in great barriers to high barriers to entry market, or we want to be on the lower sort of approachable end of lower price point, low service, right. That's kind of what our barbell approach is. And we have not changed that so there is a lot of creativity in the shop, but usually that's not around just a product selection that's around where you want to play in the capital structure high on the structure transaction that is not just one transaction and done. For example, we like to build these growth vehicles that will continue to talk about this quarter we talked about Oakmont and aspect. But as you can see go back and look at five quarters ago or six quarters ago, we probably talked about Bremner organization. And you see, this quarter we started $100 million plus of MOB piece, right. So our job is not only to see, okay, where can we get that sort of the play, state of play right now, which is the devalue end of the play, but also create these growth vehicles that creates the interchanges that growth rate through the cycle, right. That's what we are focused on. And I'll be honest with you, Derek, I'm very, very proud of this team that has created I think this company will have unprecedented growth that will be unmatched in its history. And I think it is relatively understood the cyclical sort of bounce of that. But I think it is fairly misunderstood on what the cycle can look like.

[Operator:]

Our next question comes from the line of Connor Siversky from Berenberg.

[ConnorSiversky:]

Good morning, everybody. Thanks for having me. Great quarter. A bit of an abstract question, maybe. So operating under the assumption that the target demographic for seniors has a lot of net worth tied up in home equity. If we were to potentially see a blip in the housing market, as prices maybe come off peaks, could that translate into some kind of transitory impacts on rate or revPAR? Or do you think the demand environment currently is strong enough to offset that kind of dynamic?

[ShankhMitra:]

If you believe that housing prices can come down 50%, which I think is how much it's up last few years, three to four years in many, many places, then yes, but also remember that you are talking about people who have bought their houses in the 80s and 90s, right, they're sitting on a significant amount of household sort of network, that should not impact. I will give you, go back and look at how assisted living has done senior housing in general has done in the -- during the global financial crisis, where you got a massive crash of housing prices, and see how the asset class has done. Just as a hint, I think that was senior housing was one of the best performing asset class through the global financial crisis through that housing bust. So that should give you some hint. I'm a student of history, every cycle is different. I'm not going to sit here and pontificate how much it might play out. But I will tell you that housing has an impact on many aspects of the economy. And it has a particular impact because senior housing is not an income place and assets play. And mostly it is housing type of an asset play, but remember, who is your customer? It's an 85 year old, and she's sitting on a house that probably she bought in 1988.

[Operator:]

Our last question comes from the line of Daniel Bernstein from Capital One.

[DanielBernstein:]

Good morning, I guess this one to see if we could drill down a little bit into the Canadian asset leading indicators. I mean that has trailed a little bit and your numbers would have been even better than get posted if Canada had been performed. So just wanted to see if we could drill down a little bit on what's going on with the tours, leads some of those leading indicators on the Canadian senior sales.

[ShankhMitra:]

Okay, Dan, I mentioned this on my prepared remarks April, or May, we have seen that drag that you're talking about, really populated out in June, we've seen almost doubling up in person tours, et cetera in June, Canada, by and large opened up significantly in the beginning of July. So we are seeing that is starting to reflect and we expect that Canada will catch up, right. So sort of it's a drag today, but I would expect that you will see some significant sequential improvement in Canada. As we get through the rest of the year. Tim, you want to add anything on that?

[TimMcHugh:]

Yes, I've said in July, I've mentioned tours interest; we've seen actually tours and inquiries reach 2019 levels. So if we look at how the recovery occurred in the US, there was about a month lag and for between when we kind of saw that start to happen in February end of February when we started to see occupancy turn, not saying it'll follow the same pattern. But you've seen first kind of flattening of the decrease in occupancy. And then we've seen these leading indicators move. So we're certainly hopeful that we'll start to see those fundamentals turn here in the third quarter.

[Operator:]

Thank you. This concludes our Q&A session and today's conference call. Thank you all for participating. You may now all disconnect. Everyone, have a good day.