Ventas is a diverse enterprise, and in each of our business lines, as evidenced by our strong first quarter earnings results. At the end of the first quarter, we were beset by the novel coronavirus, and we've adopted an extensive array of actions as a result of the virus, really keeping Ventas safe and stable and strong, and really, as we looked at our business, we have been prioritizing health and safety, certainly the health and safety of our own employees, as well as the health and safety of frontline care workers at our 1,200 healthcare sites, as well as those of residents, physicians, scientists, and others who use our buildings. We took a lot of aggressive and thoughtful capital markets activity. We've prized financial strength and flexibility, and particularly our liquidity position is extremely strong.
And now we enter into really the operational phase of the virus and the economic conditions that go with it. And we've published a very interesting deck that's very up-to-date that shows the trends across our businesses. And I'm very pleased to report that we've built a big, strong, diversified business. We're seeing the power and the benefits of that diversification. You can see in our office and healthcare businesses a very strong performance in April and into May. And then, of course, when we look at our senior housing business, which has been particularly hard hit by the impact of the virus, we are starting to see some positive developments, albeit off a materially lower base of occupancy.
Those green shoots really are encouraging, but certainly not definitive, as we continue to see cautionary signs as well in terms of the virus and its activity across different jurisdictions, the economic conditions with a high unemployment rate, and government policies which continue to change and evolve, so we are here really to give you the benefit of our latest thoughts from our team, and we look forward to engaging with Mike, who will, I'm sure, ask all the questions that you are interested in.
I'm going to push the button a second, Link. So I'll just do a quick introduction one more time and then go straight to the Q&A. I'm Mike Carroll of RBC Capital Markets, and this is the Ventas presentation, and with me, we just heard from Debbie Cafaro, CEO of the company. I also have Justin Hutchens, EVP, of Senior Housing, Bob Probst, CFO, and also Sarah Whitford, IR. So I guess real quick, Debbie, I know we'll go talk about Senior Housing, which has probably been under most people's minds recently, and thank you for putting out the deck this morning and kind of highlighting that we're in the second phase of going into the recovery. Can you describe what that means and what will it take to get into the revitalization or the recovery phase or the next phase, the Phase III that you guys kind of highlighted?
Let me. I'm going to turn the question to Justin. First of all, we've introduced our own framework to help investors and analysts think about the senior housing business. It's characterized by three segments, the first of which is really highly restricted and taking deposits, and the second of which, where 70% of our communities are, which is where we're admitting residents under strict protocols. Just with that background, Justin, do you want to speak broadly about the operational trends that we see in senior housing?
Debbie, thank you. Let me start. If you have our deck, you can look at Page 8. And I'll start on the bottom right-hand part of the slide. And you'll notice that we've circled our occupancy. Our occupancy has dropped quite a bit. It's at 79%. It has been down almost 500 basis points since the beginning of April. We do highlight that the speed of that decline has actually slowed towards the end of May. One thing I'd like to point out, though, is that as you look at these trends, we're talking about weeks, not months. So there is definitely. This is a very early look. And we tend to think about trends over a period of months, not weeks. But given the pandemic, it's important to really dig in and look to see what's happening. And there are some green shoots that we can point to.
If you go to the top left, you'll notice that the lead activity is starting to climb again. Around earnings time, we were running 50% of our prior year lead volume. Now we're at around 65%, so it is encouraging when you consider the fact that our communities are allowing move-ins, but the residents that move in are actually still isolated in the rooms, and they're getting room service delivered, and they don't have the access to the broader community and the lifestyle that we offer within senior living, that the demand is still there. In fact, demand is growing again, although it's only at 65%, so to Debbie's point, as we look to categorize our group of communities, we do highlight that 70% are in this recovering segment two, and what that means is that a resident will move in. They're in the room in isolation.
They can have room service. They're being served with a caregiver that has a full PPE. They would have gone through a testing requirement before moving in. They would have had two negative tests. So there is a lot of restriction still that's associated with that segment two, as we call it. And then in the segment one, that's a group of communities that either had a high-risk geography in which they're located or a resident population that's high acuity or more vulnerable. That group of communities has basically taken no move-ins. They've made a decision early to close their doors completely, and they're now making plans to move in to be a segment two community. Then a very, very small number of communities, around 10 communities that happen to be independent living, are in segment three now.
What that looks and feels like is a little bit more like the normal setting before the pandemic, where you can access the communal areas and the dining room, and you can get visitation from relatives. Although still restricted, the lifestyle improves dramatically. As we think about demand for this setting, it's the access to that lifestyle that we think is going to be most important in terms of driving that lead volume up and that move-in volume up. You can see in the lower left that we've run about 32% of our prior year run rate in terms of move-ins. If you're just looking at that segment two, it's around 50%. Then our move-outs were down a bit because there's less discretionary move-outs.
And so as we move ahead, although we feel comfortable that the trending is it does have some green shoots, we're going to be looking at government policy. We'll be looking to the behavior of the virus, which is still a factor. And then the operators will make decisions in terms of the ability to open safely and to offer a lifestyle to the residents and that'll be the big driver.
Okay. Justin, I guess the customer leads that have improved over the past several weeks that you just highlighted, which is, I guess, pretty encouraging. I know you kind of touched on this a little bit, but kind of digging a little deeper, what is driving that improvement? Is it just simply moving from that Phase I to Phase II and then we'll conceivably get back up to that 100% once you can start fully reopening? Is that a good way to think about it?
There's two things. One was just, to your point, opening the doors and allowing for move-ins. And then two, there has been a little bit more promotion and advertising around move-ins as well. Because if you're in the segment two, you're partially open. And we do have operators that are trying to encourage people to move in. And there's a lot of talk about the fact that one thing we may have been concerned about early is that the perception of the spread of infection in assisted living would have been an issue. But what we found is that, in fact, it's been very well managed. And so that's a message that's being delivered. The other message that's being delivered to prospective residents is around testing. And the Ventas communities, particularly in Atria and ESL, have done a great job getting ahead of testing by testing 12,000 employees.
We've done this with our relationship with the Mayo Clinic, which obviously has tremendous credibility. That gives our prospective residents and families great comfort that we are less risky in terms of the potential spread of infection. In fact, the positive hit rate on that group was less than 1%. There are actions that are underway that will help to develop the leads and to help to develop move-ins over time.
Okay. And how should we think about the pent-up demand within this phase? Obviously, when the communities were closed, you couldn't accept any new residents, so you had a little bit of a bigger book. When those communities reopen, does that pent-up demand come more quickly within the portfolio? And has that been in part one of the driving forces that helped mitigate some of the occupancy loss? Or are there other factors?
We're still at, as Justin said, about 65% of last year's move-in rate, Mike, and so we're still building back to a normalized move-in level. And of course, as he also said, we're showing improved move-out rates, which is what's improving the second derivative in May, and so where you're seeing what I might call pent-up demand is where these segment one communities are taking deposits, and we have about 380 of those, and that's increased since earnings call, and those are the communities where you would expect to see people who would have moved in and will move in, hopefully, whenever the community is ready to move into the second segmentation, so that's where you're still seeing some demand that has not yet been fulfilled.
Okay. And are you seeing, or I guess, when should we see those deposits start to translate to increased occupancy? Is it when the community actually reopens? Or do families need to decide to move their loved ones into one of these communities once it reopens to translate that into a new move-in?
This is with the communities at this stage, and you have to give them some credit because they're not open. They would like to try to maintain their lead bank, though. So they've started a deposit program, and 90% of those, we mentioned on the earnings call, there's about 300 leads. 90% of those are still in play. Plus, to Debbie's point, the deposits have actually grown overall. So it's not going to be really the resident or family. It's going to be the operator that says, "Okay, we're ready to open," and then they'll start the testing, and they'll start the moving in. But these residents that have deposited are ready to move in whenever the operator is ready.
Okay. Great. Let's talk a little bit about, I guess, some of your assets. I know one of the big investments that you did last year, Le Groupe Maurice in Canada. How has that been trending? And has it been a little bit different than the rest of the portfolio?
It's been going well. There's a really excellent operator there in Quebec. And the population of the communities is younger and healthier. And as a result, the length of stay is longer. And so we have been seeing good performance there, although certainly affected by the virus as well, but certainly good performance. And again, it really shows the benefits of different types of diversification across the portfolio.
Okay. And then I guess another question too, I guess, within the seniors' housing space. Obviously, there's been a lot of disruption that's been going on. I mean, how has that impacted new construction activity? Where has that trended? And is it reasonable to assume that supply is going to get a bit easier as we go into 2021 and beyond?
New starts are pre-virus. We were heading into a period where starts in the Ventas markets were at a five-year low, so we were well positioned, we think, from a supply and demand standpoint going into this. Certainly, the virus impacts will slow that down even a little bit more, we think, and so we anticipate probably our most favorable demand characteristics as it pertains to new supply in the upcoming months, virus aside.
Okay. Okay. And then I guess let's move off right now that we've spent a little time or a lot of the presentation on the seniors' housing space. Let's move off a little bit to the medical office buildings, which has fared better in this current environment. I mean, how are the MOBs performing during the pandemic? And what's your near-term outlook going forward?
Yeah, Mike, I think I'll take that one. I'm happily the office guy today, speaking on behalf of Pete. That business has performed really well, as you alluded to, through the pandemic example in April. In office, overall, we collected 98% of our rents. In May, we're on track to collect something similar. And so we've had very resilient rent in that business. We've grown occupancy by 20 basis points since the first quarter. And though elective procedures slowed or stopped, now in our portfolio, over 98% of our NOI is in markets where that either has reopened or will reopen. So that has proven to be a very resilient business, MOB and R&I, as you look at both of the components. Through the downturn thus far, it's performed very well.
And I guess you've delivered really good rental actions within the office segment so far. But specifically with the medical office buildings, I guess how many tenants did you or are you planning on offering rent deferrals for? And what's the reason behind those deferrals?
We've provided some new segmentation, and the material is showing our decomposition of revenue within office. When you look at that, there's only a relatively small cohort that may be eligible, in our view, for deferrals. The vast majority of them are healthy investment-grade health systems and very strong institutions. It's really some of the smaller doc-type organizations where we may see some deferrals. That said, there's been very little uptake. Again, 98% in April is evidence of that.
I guess with the tenants, obviously, they continue to pay their rent, I guess, despite some of the uncertainty that we've seen. But on the operating environment side for the medical office building tenants, what will it take for that to really stabilize? I mean, are we seeing that now by just the simple removal of elective surgery restrictions? Or is there other hurdles that we're looking for?
I think you hit on the key, and that's the elective procedure opportunity. That's the activity driver, if you like, for the tenancy. And with almost 100% of our NOI in markets now, where that activity is either underway or soon to begin, that gives us confidence that we'll be not back to normal per se, but certainly getting closer to a normal condition.
Okay. I guess what type of changes has Ventas or the health system tenant have been implementing inside some of these medical office buildings? And will any of these changes be necessary in the new post-COVID environment whenever we reach that area?
There's some really tactical near-term changes, which I'll touch on, which is just, again, mindful of the health and safety of our tenants and our employees and making sure that, again, with cleaning, PPE, coordinated visitor screening, things like that, we're keeping our residents and tenants safe. At the same time, working with our tenants on ways to potentially help them as backstop capability for them, providing short-term spaces, things like that for them to work together has been something in the short term that we've been definitely supporting.
We've really stepped up, again, tactically, as Bob says. We've really stepped up the cleaning protocols, but not only that, also the communication between us and the tenants to make them understand that we're ready to help them take patients whenever they are and really working hand in glove in a really strong communication way, both to help them also get eligible for some of these government relief programs, which many of them have taken advantage of, and then now getting them ready to start making appointments again.
Again, many of the physicians who were uncertain about what was going to happen are now really dialing all their patients to ensure that they come back, and there is pent-up demand there, obviously, for cancer appointments and so on. It appears that most of our doctors, based on cars in the garages and so on, are seeing a pretty strong bounce back in visits already.
Okay. Great. Thanks, Debbie. And then I guess let's throw over to, I guess, one of the other bigger segments of the portfolio, the R&I portfolio, which obviously you've been growing over the past few years, appears to be faring also fairly well in this environment along with the MOBs. Can you talk a little bit about how those tenants are currently being impacted and what's the near-term and long-term outlook for the R&I portfolio?
It's now 7% of our NOI for our company, Mike. So we're excited about that. And the business has performed incredibly well over the last few years and continues to perform well. What's really exciting is that the tenancy in our buildings is right in the middle of conducting critical research around the pandemic. And so in that small way, by owning that real estate, we're participating. And so, 100% of the buildings are open. They're conducting that kind of activity. And that's proving really durable in terms of the activity in our building. So that's performing well. Of course, we have an active pipeline as well, which we have a number of opportunities to grow. But we're driving right now a number of those that are pre-leased, that are expected to perform well. That will just complement what is already performing really well in the operating portfolio.
Okay. Great. Thanks, Bob. And then I guess off of that comment, the company did pause two of their R&I developments, I guess, One uCity Square and 4210 Duncan. Can you talk a little bit why those projects were paused and what's the expectation of restarting those developments here in the near term?
Sure. Well, they were paused, first of all, as they're very early stage. And so just in the context of market uncertainty, stepping back as we look across the portfolio, really to understand what the market environment is, what the particular situation in those sub-markets are, and making sure we're very thoughtful about when and how we proceed, so though pausing, I'd say, may just be timing, but really in the context of the uncertainty of the market we're in.
Okay. So what would it take for you to restart those two developments? I mean, is it a matter of having better private capital? Would you be willing to bring in a joint venture partner to finish those? What are the key hurdles you're looking for?
Debbie, you want to take that one?
Sure. I'll be happy to. So Mike, one of the things that Bob talked about is that we have several ongoing projects that are continuing full speed ahead that are 80% pre-leased to future research universities. And so obviously, we're focused on bringing those online, having them generate NOI for our shareholders. In terms of the newer developments, I do think it's a question of, and we're continuing on many fronts to evaluate when and how we should proceed. So it's a question of leasing. It's a question of the local markets. It's a question of the financing market, certainly. And of course, these projects are very attractive to other institutional capital. So they could be projects where a partner would be interested were we to want to proceed in that direction. But it's a combination of sourcing of capital and cost of capital.
But really, the gating items are on the ground. What is the right time to begin these projects, and what are the metrics we would be looking at in terms of, as you know, the overall office market is something that we do want to see how and when people decide to come back to some of these areas, how many companies are willing to make major commitments, etc., so we will continue to evaluate because they're good projects. We'll complete the ones we have and start generating NOI and hopefully continue to grow this business that's been really great for us and very beneficial to science.
Great, Debbie. And then I guess, Debbie, can you talk a little bit about the Core Plus Fund that the company created and announced last quarter?
Yes.
How do you intend to use that fund? And what's the expectations here going forward?
That was a big accomplishment that we had. In early March, we closed a fund that's mostly a diversified fund. It was seeded with life science and MOB assets that, some of which we had acquired really to start the fund. It was filled out with very high-quality global real estate investors. We have significant dry powder in the fund that could then go on to acquire other assets even during a disrupted time. It's a great tool for Ventas to have to continue to grow in different types of environments. Obviously, we did not predict the pandemic, but we certainly understood that having, as Prologis does, for example, another way to grow assets under management and leverage our team and our brand and our expertise would be really helpful. I think it will be a great asset for us going forward.
Okay. Great. I think we have time. Got a few questions from the audience. And I guess maybe we could talk a little bit about the pent-up demand for the seniors' housing space again. When does that pent-up demand in those facilities reopen? Is it conceivable to expect that occupancy could have an uptick during specific months or quarters? Or is it still too uncertain to tell given what's going on with the virus?
Right. It's not clear to us yet that there is pent-up demand. Right now, we're just watching the lead activity grow. The demand for the services is starting to come back a bit. We're at about 65%. The move-out rate being a little lower helped us in May. But what you really need to have a quick recovery, what you actually need is we anticipate, I would share our move-out rates would get back to a normal run rate at some stage, so you need your move-ins to significantly outpace move-outs, so the first thing we're going to look for is to see our move-in pace just get back to where it was before the virus, and then we'll see what happens from there, but I do think it's a little early to predict a pent-up demand at this stage.
Okay. Great. I think we have time for one more question. So from the audience, they're asking if you could talk about the dividend policy given this uncertain environment and how do you think about that dividend rate currently going forward?
Good question. We've always understood that the dividend is an important component of shareholder return. And as we talked about on the earnings call, our typical second-quarter dividend occurs or is paid in July based on past patterns. So we've determined that our board will make that decision about the dividend in the second half of June so that we could wait and really see all of these developments both on the operating side as well as on the capital side.
And we could take all of those factors into account, and the board could make kind of the best possible decision. So we are pleased to see the operating side show some green shoots. We understand that there remains a lot of uncertainty. And so we'll look forward to communicating more about the dividend decision when the board makes it in the second half of June.
Okay. Great. I think we've run out of time, but I would like to thank the team for taking the time today presenting the story. Much appreciated.
Mike, thank you so much. We look forward to seeing everyone in person soon.