Q2 2024 Ventas Inc Earnings Call
Bailey: Thank you for standing by. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ventas second quarter 2024 earnings call. All lines have been placed on mute to prevent background noise.
Thank you for standing by my name is Barry and I will be your conference operator today.
At this time I would like to welcome everyone to the very tough second quarter 2024 earnings call.
All lines have been placed on mute to prevent background noise.
Bailey: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again press star and 1. I would now like to turn the call over to B.J. Grant, Senior Vice President of Investor Relations. You may begin.
After the Speakers' remarks, there'll be a question and answer session.
Speaker Change: Would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star and one.
Speaker Change: I would now like to turn the call over to B J Grant Senior Vice President of Investor Relations you may begin.
B.J. Grant: Thank you, Bailey. And good morning, everyone.
Speaker Change: Thank you Billy and good morning, everyone and welcome to the Ventas second quarter 2024 results conference call Yes.
B.J. Grant: And welcome to the Ventas second quarter 2024 results conference call. Yesterday, we issued our second quarter 2024 results, a release presentation materials, and supplemental investor package, which are all available on the Ventas website at ir.ventasreit.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.
Speaker Change: Yesterday, we issued our second quarter 2024 results.
Speaker Change: Release presentation materials, and supplemental investor package, which are all available on <unk> website at IR Dot Ventana III Dot com.
Speaker Change: 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 topics may cause actual results to differ materially from those contemplated in such statements.
For more detailed discussion of those factors. Please refer to our earnings release for this quarter and to our most recent SEC filings.
B.J. Grant: 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 on-gap financial measures will also be discussed on this call, and for a reconciliation of these measures to the most closely comparable gap measures, please refer to our Supplemental Investor Package posted on the Investor Relations website. And with that, I'll turn the call over to Debra A. Cafaro, Chairman and CEO of Ventas. Thank you.
Which are available on <unk> website.
Debra Cafaro: 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 investor package posted on the Investor Relations website, and with that I'll turn the call over to Debra Cafaro, Chairman and CEO of Ventas.
Debra A. Cafaro: Thank you, BJ. On behalf of all my colleagues, I want to welcome our shareholders and other participants to the Ventas second quarter 2024 earnings call. It's an exciting time for our business. We are driving performance in the early stages of an unprecedented multi-year NOI growth opportunity fueled by powerful demographic demand and the most favorable fundamentals ever in the senior housing industry. Ventas plays an essential role in the longevity economy, serving a large and growing aging population.
Debra Cafaro: Thank you BJ on behalf of all my colleagues I want to welcome our shareholders and other participants to the Ventas second quarter 2024 earnings call.
Debra Cafaro: It's an exciting time for our business, we are driving performance in the early stages of an unprecedented multiyear NOI growth opportunity.
Debra Cafaro: By powerful demographic demand and the most favorable fundamentals ever in the senior housing industry.
Speaker Change: <unk> plays an essential role in the longevity economy, serving a large and growing ageing population.
Debra A. Cafaro: With over half our business in senior housing, this creates a compelling near and long-term growth and value creation opportunity. Today, I'll discuss Ventas' strong results and our latest increase in our 2024 expectations. As we generate outperformance in our senior housing operating portfolio, increase shop investment activity, optimize net operating income throughout our portfolio, and improve our financial strength. Let's start with results.
Speaker Change: With over half our business in senior housing.
Debra Cafaro: This creates a compelling near and long term growth and value creation opportunity.
Speaker Change: Today, I'll discuss fantastic strong results and our latest increase in our 2024 expectations as we generate outperformance in our senior housing operating portfolio increase shop investment activity optimize net operating income throughout our portfolio and improve our financial strength.
Speaker Change: Let's start with results, we began 2024 with momentum which continued in the second quarter.
Debra A. Cafaro: We began 2024 with momentum, which continued in the second quarter. Our enterprise delivered $0.80 of normalized FFO per share, reflecting 7% year-over-year growth. The Shop led the way, with same store cash and OI growth of over 15%. Total company, same store cash, and OI grew nearly 8%, and our balance sheet is trending positively with 50 basis points of leverage improvement already year to date. We are pleased to once again raise our 2024 normalized FFO per share guidance and our total company same store NOI expectations on the strength of this performance.
Debra Cafaro: Our enterprise delivered 80 cents of normalized <unk> per share, reflecting 7% year over year growth.
Speaker Change: Shopped led the way with same store cash NOI growth of over 15%.
Debra Cafaro: Total company same store cash NOI grew nearly 8% and our balance sheet is trending positively with 50 basis points of leverage improvement already year to date.
Speaker Change: We are pleased to once again raise our 2020 for normalized <unk> per share guidance.
Debra Cafaro: And our total company same store NOI expectations on the strength of this performance.
Debra A. Cafaro: Our growth expectations and value creation opportunity put us in the top cohort of companies across the REIT landscape. We're executing on our FOCUS strategy, designed to deliver growth and value to our stakeholders. As a reminder, there are three prongs to the Ventas strategy.
Debra Cafaro: Our growth expectations and value creation opportunity put us in the top cohort of companies across the REIT landscape.
Speaker Change: We're executing on our focused strategy designed to deliver growth and value to our stakeholders.
Debra Cafaro: As a reminder, there are three pronged to the Vantiv strategy.
Debra A. Cafaro: Deliver profitable organic growth in our senior housing portfolio. Capture value through investments focused on senior housing and drive cash flow throughout our portfolio. Here are some key updates in each of those areas.
Debra Cafaro: Deliver profitable organic growth in our senior housing portfolio capture value through investments focused on senior housing and drive cash flow throughout our portfolio.
Here are some key updates in each of those areas.
Debra A. Cafaro: In shop, we have now delivered eight consecutive quarters of double-digit, year-over-year, same-store, organic cash NOI growth. More importantly, we see a durable, multi-year NOI growth opportunity ahead of us, powered by occupancy gains and revenue growth. Senior Living provides invaluable benefits to residents and their families.
Speaker Change: In shop, we have now delivered eight consecutive quarters of double digit year over year same store organic cash NOI growth.
Debra Cafaro: More importantly, we see a durable multiyear NOI growth opportunity ahead of us powered by occupancy gains and revenue growth.
Speaker Change: Senior living provides invaluable benefits to residents and their families.
Debra A. Cafaro: In the quarter, occupancy grew 320 basis points year-over-year, significantly outperforming industry benchmarks, and revenue expanded 8 percent. Data-driven decisions, enabled by talented operators, enabled our communities to attract more than our fair share of the strong demographic demand for senior living. Remember that our prior senior housing occupancy peak was 92%. Currently, our portfolio has trended to 84% occupancy and 27% margin. There is an additional $140 million in incremental NOI opportunity simply by getting to 88% occupancy and 30% margins in the portfolio when the shop NOI would approximate $1 billion a year.
Speaker Change: In the quarter occupancy grew 320 basis points year over year significantly outperforming industry benchmarks and revenue expanded 8%.
Speaker Change: Our data driven decisions and enable execution by talented operators enabled our communities to attract more than our fair share of the strong demographic demand for senior living.
Speaker Change: Remember that our prior senior housing occupancy peak was 92%.
Speaker Change: Currently our portfolio has trended to 84% occupancy and 27% margin.
Speaker Change: There is an additional $140 million incremental NOI opportunity.
Speaker Change: By getting to 88% occupancy and 30% margins in the portfolio when shop, NOI would approximate $1 billion a year.
Debra A. Cafaro: From there, we expect our portfolio, operators, and communities to shoot for, and potentially beyond, that 92% prior occupancy rate because surging demand and suppressed senior housing construction are creating such favorable conditions, particularly in our market. The resident base we serve, primarily the over 80 population, should grow by over 24% in the next five years. This population is increasing rapidly each year, from about half a million people annually now to over 800,000 individuals starting in 2027, as the leading edge of the gigantic baby boomer cohort turns 80. Yet, there were only about 1,300 units of senior housing started in the second quarter, and construction as a percent of inventory is only one percent, both the lowest on record.
Speaker Change: From there, we expect our portfolio operators and communities to shoot for and potentially beyond that 92% prior occupancy peak, because surging demand and suppressed senior housing construction are creating such favorable condition, particularly.
Debra Cafaro: In our market.
Debra Cafaro: This sharp resident base, we serve primarily the over 80 population should grow by over 24% in the next five years. This population is increasing rapidly each year from about half a million people annually now to over 800000 individuals starting in 2027.
As the leading edge of the gigantic baby Boomer cohort turns 80.
Speaker Change: Yes, there were only about 1300 units a senior housing started in the second quarter and construction as a percentage of inventory is only 1% both the lowest on record.
Debra A. Cafaro: Equally important, the duration of new construction continues to elongate, and we expect deliveries to be constrained for years to come. This favorable supply-demand backdrop provides powerful tailwinds and a long and unprecedented runway for growth. Justin will explain how our actions, platform, data, and insights, together with our operators, deliver value to seniors and their families and position Ventas to outperform a strong market. We are also increasing our investment activity focused on senior housing as we execute on the second prong of our strategy. We're on track to close about $750 million in investments this year.
Speaker Change: Equally important the duration of new construction continues to elongate and we expect deliveries to be constrained for years to come.
Speaker Change: This favorable supply demand backdrop provides powerful tailwind and along and unprecedented runway for growth.
Speaker Change: Justin will explain how our actions platform data and insights together with our operators deliver value to seniors and their families and positioned <unk> to outperform a strong market.
Justin: We are also increasing our investment activity focused on senior housing as we execute on the second prong of our strategy.
Speaker Change: We're on track to close about $750 million of investments this year.
Debra A. Cafaro: Given the favorable market conditions and the strength of our pipeline for quality acquisitions, we are committed to ramping up our investment activity. Ventas is one of the country's largest owners of senior housing, and we are excited about the external growth opportunities we see in the market. Rarely in my career have investment conditions been as constructive. We can invest in senior housing assets with high single-digit going-in yields and substantial near-term NOI growth prospects. Replacement costs, net absorption projections, and affordability remain key criteria in our investment approach.
Speaker Change: The favorable market conditions, and the strength of our pipeline for quality acquisitions, we are committed to ramping up our investment activity.
Speaker Change: Fantastic one of the country's largest owners of seniors housing and we are excited about the external growth opportunities, we see in the market rare.
Speaker Change: Rarely in my career have investment conditions, then as constructive we can invest in senior housing assets with high single digit going in yields and substantial near term NOI growth prospects.
Speaker Change: Replacement cost net absorption projections and affordability remain key criteria in our investment approach.
Debra A. Cafaro: These senior housing investments expand our shop footprint, increase our enterprise growth rate, and reinforce our consistent commitment to financial strength. Third, we're also focused on driving cash flow and value creation throughout our portfolio. Our outpatient medical and research portfolio once again contributed complementary compounding growth for Ventas, powered by our competitively advantaged Lillibridge operating platform that excels in tenant satisfaction and retention. We also want to provide you with greater clarity on the 23 LTACHs operated by Kindred with the least maturity of April 30, 2025.
Speaker Change: These senior housing investments expand our shop footprint increase our enterprise growth rate and reinforce our consistent commitment to financial strength.
Speaker Change: Third we're also focused on driving cash flow and value creation throughout our portfolio.
Speaker Change: Our outpatient medical and research portfolio. Once again contributed complementary compounding growth for Ventas powered by our competitively advantaged lillibridge operating platform that excels in tenant satisfaction and retention.
Speaker Change: We also want to provide you with greater clarity on the 23 hour tax operated by kindred with the lease maturity of April 32025.
Debra A. Cafaro: These long-term acute care hospitals represent about 5% of our NOI, or $110 million annually. We've made a lot of progress since we last updated you. Currently, we are in advanced discussions with Kindred regarding a lease resolution for these properties. However, a deal is not done, and terms could change. We and Kindred are close to a transaction that would result in a 25-30% full year rent reduction on these 23 LTCHs starting May 1, 2025. About two-thirds of that amount would be reflected in calendar year 2025.
Speaker Change: These long term acute care hospitals represent about 5% of our NOI or $110 million annually.
Speaker Change: We've made a lot of progress since we last updated you.
Speaker Change: Currently we are in advanced discussions with kindred regarding our lease resolution for these properties.
Speaker Change: While the deal is not done and terms could change we and kindred are close to a transaction that would result in a 25% to 30% full year rent reduction on these 23 out tax starting may one 2025.
Speaker Change: Two thirds of that amount would be reflected in calendar year 2025.
Debra A. Cafaro: We'll be happy to share more with you if and when a deal is concluded. We continue working toward a positive lease resolution that optimizes Ventas' value and the NOI from these 23 properties, strengthens the master lease, and supports Kindred's future success. There are two final items that represent our approach to thoughtful investing and the creation of win-win outcomes with our operators over time. First, Ardent recently completed its successful IPO, and we congratulate the management team and our partners. Ardent has done it right, focusing on patients, quality clinical care, employees, and communities.
Speaker Change: We'll be happy to share more with you if and when a deal is concluded we continue working toward a positive lease resolution that optimizes fantastic value and the NOI from these 23 properties strengthens the master lease and supports kindred future success.
Speaker Change: There are two final items that represent our approach to thoughtful investing and creation of win win outcomes with our operators over time.
Speaker Change: First art and recently completed its successful IPO and we congratulate the management team and our partners.
Speaker Change: Arden has done it right focusing on patient quality clinical care employees and communities.
Debra A. Cafaro: Arden's current equity value exceeds $2.5 billion, and, as Sam Zell used to say, liquidity is value. With $1.6 billion invested in assets operated by Arden, Ventas has always been happy with Arden's financial stability, its operational acumen, and its steady growth. The company's IPO has further enhanced this positive investment. In addition, Ventas has an ownership stake in Arden, currently valued at about $170 million, over four times our original investment. And we believe there's additional upside in Arden's business and its valuation.
Speaker Change: Arden's current equity value exceeds $2 $5 billion and as Sam Zell used to say liquidity is value.
Speaker Change: With $1 $6 billion invested in assets operated by origin Santos has always been happy with Arden financial stability, it's operational acumen and its steady growth.
Speaker Change: The company's IPO has further enhanced its positive investment.
Speaker Change: In addition, Santos has an ownership stake in Oregon currently valued at about $170 million over four times our original investment.
Speaker Change: And we believe there's additional upside and Arden business and its valuation.
Debra A. Cafaro: Also, in the second quarter, we monetized about 10% of our Brookdale warrants for $6 million in cash profits. We received these warrants as part of the successful lease arrangements we concluded with Brookdale in 2020. The warrants provide upside sharing in Brookdale's success and take advantage of the positive macro conditions in senior housing. Our current in-the-money value of our Brookdale warrants is about $70 million.
Speaker Change: Also in the second quarter, we monetized about 10% of our Brookdale warrants for $6 million in cash profit.
Speaker Change: We received these warrants as part of the successful lease arrangements, we concluded with Brookdale in 2020.
Speaker Change: The warrants provide upside sharing and brookdale success and take advantage of the positive macro conditions in senior housing.
Speaker Change: Our current in the money value of our Brookdale warrants is about $70 million.
Debra A. Cafaro: Stepping back, we are optimistic about the future of our business, which is centered on helping a large and growing aging population live longer, healthier, and happier lives. As the broader economy shows significant signs of slowing down and the labor market softens, Ventas' business, with over half in senior housing, is highly advantaged across the REIT space. All our asset classes benefit from inelastic, need-driven, demographically-driven demand, and most benefit from a softer employment backdrop.
Speaker Change: Stepping back we are optimistic about the future of our business, which is centered unhealthy a large and growing aging population live longer healthier and happier lives.
Speaker Change: As the broader economy showed significant signs of slowing down and the labor market softens than Texas business with over half in senior housing is highly advantage across the REIT space.
Speaker Change: All our asset classes benefit from any lasting need driven demographically driven demand and most benefit from a softer employment backdrop.
Debra A. Cafaro: As a result, we have an unprecedented multi-year growth opportunity right in front of us. With favorable results this quarter and our improved outlook, our team is focused on doing everything we can to execute our strategy and continue to drive Ventas' performance and return. With that, I'm happy to turn the call over to Jessica.
Speaker Change: As a result, we have an unprecedented multiyear growth opportunity right in front of us.
Speaker Change: With favorable results this quarter and our improved outlook. Our team is focused on doing everything we can to execute our strategy and continue to drive fantastic performance and returns.
Speaker Change: With that I'm happy to turn the call over to Justin.
Justin: Thank you Debbie.
Jessica: I'm happy to report on another good quarter for our shop portfolio and another guidance raise led by As Debbie mentioned, the macro backdrop is very supportive from a supply-demand standpoint. I'm pleased that part one of our strategy, which is to deliver profitable growth in senior housing, is off to a good start, as we are seeing very strong execution from our operators with support from our VentasOI platform initiative. The key selling season is delivering strong results so far in May, June, and July, as leading indicators and occupancy are all performing really well, building on our best-in-class occupancy performance.
Justin: I'm happy to report on another good quarter for our shop portfolio and another guidance raise led by occupancy.
Justin: As Debbie mentioned the macro backdrop is very supportive from a supply demand standpoint, I am pleased that part one of our strategy, which is to deliver profitable growth in senior housing is off to a good start as we are seeing very strong execution from our operators with support from our Ventas Oi platform initiatives.
Speaker Change: The key selling season is delivering strong results. So far in May June and July as leading indicators and occupancy are all performing really well building on our best in class occupancy performance.
Jessica: I'd also like to highlight that our net move-in volume year-to-date was 13 times higher than last year, contributing to our outperformance. Driven by our Atria and Holiday portfolios, as well as Sinceri, Priority Life, and Discovery Senior Living. The second-quarter same-store shop revenue grew 8%, and occupancy grew by 320 basis points, led by the U.S., with 380 basis points year-over-year and 90 basis points sequentially, leading to an absolute occupancy of 85.6%, led by Canada at almost 96%, and an overall operating margin of 27.4%.
Speaker Change: I'd also like to highlight that our net move in volume year to date.
Speaker Change: Was 13 times higher than last year contributing to our outperformance driven by our atria and holiday portfolios as well as in Syria priority life and discovery senior living.
Speaker Change: The second quarter same store shop revenue grew 8% and occupancy grew by 320 basis points led by the U S with 380 basis points year over year, and 90 basis points sequentially, leading to an absolute occupancy of 85, 6% led by Canada at almost 96%.
Speaker Change: <unk>.
Speaker Change: And then overall operating margin of 27, 4%.
Jessica: All of which are industry-leading metrics. I'd like to spotlight Le Group Maurice, who operates full-service active adult communities for us in Quebec and represents nearly 60% of our NOI in Canada. They have consistently delivered stellar performance.
Speaker Change: All of which are industry leading metrics.
Speaker Change: I'd like to spotlight Le Groupe Maurice who operates full service active adult communities for us in Quebec and represents nearly 60% of our NOI in Canada.
Speaker Change: They have consistently delivered stellar performance.
Jessica: The 380 basis points of occupancy gains in the U.S. were driven by broad-based performance across our portfolio, with growth of 400 basis points in assisted living and 340 basis points in independent living year over year. Spot occupancy was particularly strong in our communities compared to the market. The U.S. spot occupancy grew 450 basis points year-over-year in the top 99 markets, which is 200 basis points faster than the NIC average. Furthermore, the U.S. fat occupancy grew 150 basis points sequentially in the top 99 markets, almost three times faster than the NIC average. 88% of our total shop NOI is included in our same store portfolio.
Speaker Change: The 380 basis points of occupancy gains in the U S was driven by broad based performance across our portfolio with growth of 400 basis points in assisted living and 340 basis points in independent living year over year.
Speaker Change: Spot occupancy was particularly strong in our communities compared to the market.
Speaker Change: You asked about occupancy grew 450 basis points year over year in the top 99 markets, which is 200 basis points faster than the Nic average fares.
Speaker Change: Furthermore, the U S about occupancy grew 150 basis points sequentially in the top 99 markets almost three times faster than the Nic average.
Speaker Change: 88% of our total shop NOI is included in our same store portfolio.
Jessica: We were pleased to achieve 8% revenue growth in our eighth consecutive quarter of double-digit NOI growth at 15.2% year-over-year. The spread between REV-4 growth at 4% and OPEX-4 growth at 1% remains very healthy at about 300 bases. The key driver of value creation will continue to be occupancy growth due to the high operating leverage in the business. Margin expansion will increase as occupancy ticks higher, and particularly in communities that are over 90% occupied.
Speaker Change: We were pleased to achieve 8% revenue growth and our eighth consecutive quarter of double digit NOI growth at 15, 2% year over year.
Speaker Change: The spread between Revpar growth of 4% in Opex for growth at 1% remains very healthy at about 300 basis points.
Speaker Change: The key driver of value creation, we will continue to be occupancy growth due to the high operating leverage in the business.
Speaker Change: Margin expansion will increase as occupancy ticks higher in particularly in communities that are over 90% occupied.
Jessica: I'd like to thank our operating partners; there are too many to mention, as there are so many strong contributors taking great care of people and delivering excellent operating results. Given the outperformance in the first half, we are happy to raise our full-year guidance expectations again on our same-store-shop portfolio by 50 basis points to 14.5% at the midpoint. Our average occupancy growth expectations have increased to about 280 basis points, up from 270. The remaining key assumptions that drive the midpoint of our range remain in line with what we previously communicated.
Speaker Change: I'd like to thank our operating partners there are too many to mention as there are so many strong contributor is taking great care of people and delivering excellent operating results.
Speaker Change: Given the outperformance in the first half we are happy to raise our full year guidance expectations again on a same store shop portfolio by 50 basis points to 14, 5% at the midpoint, our average occupancy growth expectations have increased to about 280 basis points up from $2 70.
Speaker Change: The remaining key assumptions that drive the midpoint of our range remains in line with what we previously communicated.
Jessica: Now I'll give an update on our Ventas OI platform and initiatives. We continue to advance our Ventas Operational Insights Platform, which was formally launched in 2022. This platform is designed to drive outperformance in this multi-year occupancy growth opportunity and is the cornerstone of Part 1 of our strategy, which is to drive organic growth in our shop portfolio. It enables us to combine our best-in-class analytics with our operating expertise to drive thoughtful conversations and actionable insights with our operators to quickly make informed decisions on critical areas of the business.
Speaker Change: Now I'll give an update on our Ventas Oi platform and initiatives.
Speaker Change: We continue to advance our Ventas operational insights platform, which was formally launched in 2022.
Speaker Change: This platform is designed to drive outperformance in this multiyear occupancy growth opportunity and is the cornerstone of part one of our strategy, which is to drive organic growth in our shop portfolio.
Speaker Change: This platform enables us to combine our best in class analytics with our operating expertise to drive thoughtful conversations and actionable insights with the operators to quickly make informed decisions on critical areas of the business.
Jessica: The increased availability of real-time data through systems and reporting automation has allowed our operating partners to benefit from key insights across a wide variety of initiatives. Our platform has enabled deep analysis into sales and price optimization, market positioning, targeted NOI generating CapEx, and digital marketing, to name a few. I'll cover some proof points on how we have driven occupancy and NOI with VentasOI. I'll start with NOI generating capital.
Speaker Change: The increased availability of real time data through systems and reporting automation have allowed our operating partners to benefit from key insights across a wide variety of initiatives. Our platform has enabled deeper analysis into sales and price optimization market positioning targeted NOI generated in capex in digital.
Speaker Change: Marketing to name a few.
Speaker Change: I'll cover some proof points on how we have driven occupancy and NOI with Ventas Oi I'll start with NOI generating capex and.
Jessica: In assessing which communities should receive refreshed capital investments, we analyze the community's position in the market and prioritize those where investment would most improve occupancy and rates relative to the competitive set. We further analyze overall market characteristics, including forward-looking net demand. Home Values, Net Worth, [inaudible] We have completed 215 projects since the start of this program in late 2022, of which 133 are at least six months post-project completion. This group has grown occupancy by over 530 basis points and outperformed their respective markets by 350 basis points of growth. RevPoor has also grown 6.5%, demonstrating the effectiveness of this reDev program.
Speaker Change: In assessing which communities receive refresh capital investments, we analyze the community is positioned in the market.
Speaker Change: And prioritize those where investment would most improve occupancy and rate relative to the competitive set we further annualize overall market characteristics, including a forward looking net demand home values net worth affordability among other data points to support our position that capital.
Speaker Change: Drive robust NOI growth and generate outsized returns.
Speaker Change: We have completed 215 projects since the start of this program in late 2022 of which 133 or at least six months post project completion. This group has grown occupancy by over 530 basis points and outperformed their respective markets by 350 basis.
Speaker Change: Points of growth Revpar has also grown six 5% demonstrating the effectiveness of this reader program.
Jessica: Next, price volume optimization. We continue to collaborate with operators on a monthly basis, monitoring street rate pricing on nearly all units in our U.S. shop portfolio relative to our proprietary market data to ensure pricing is set to optimize move-ins. Our automated monthly rent roll consolidation process enables us to efficiently analyze over eight million rows of historical street rate pricing data to better understand market positioning and proactively identify price opportunities. We've executed this process and successfully optimized price and volume, resulting in improved sales momentum through the second quarter across several operators. Including Sunrise, Atria Holiday, and Priority Life Care.
Speaker Change: Next price volume optimization.
Speaker Change: We continue to collaborate with operators on a monthly basis monitoring street rate pricing on nearly all units and our U S shop portfolio relative to our proprietary market data to ensure pricing is set to optimize move ins.
Speaker Change: Our automated monthly mineral rent roll consolidation process enables us to efficiently analyze over 8 million rows of historical street rate pricing data to better understand market positioning and proactively identify price opportunities. We've executed this process and successfully optimized pricing.
Speaker Change: <unk>, resulting in improved sales momentum through the second quarter across several operators.
Speaker Change: <unk> Sunrise atria holiday in priority life care.
Jessica: These operators have improved their move-in performance by 25%. Next, digital marketing. We've also executed digital marketing initiatives focused on driving higher move-ins. Improving the attractiveness of the website for Google search, for instance, and user experience improvements have allowed potential residents and families to easily gather information to learn about the living, service, and care options available in our community. Our focus on digital marketing has produced double-digit improvement in move-ins derived from website referrals. Summary of Ventas OI.
Speaker Change: These operators have improved their move in performance by 25%.
Speaker Change: Next digital marketing.
Speaker Change: We've also executed a digital marketing initiatives focused on driving higher move ins improving the attractiveness of the web site to Google search for instance, and user experience improvements have allowed potential residents and families to easily gather information to learn about the living service and care options available in our communities.
Speaker Change: Our focus on digital marketing has produced double digit improvement in move ins derived from website referrals.
Speaker Change: Summarizing ventana Soi the tools, we have created for our platform have enabled us to perform and continue delivering growth as part of our Oi engagements.
Jessica: The tools we have created for our platform have enabled us to perform and continue delivering growth. As part of our OI engagements, over 1,000 of which we've completed since I started, we are proactively sharing insights, data, and benchmarks with our operating partners to align on performance expectations. Moving on to investment, where we are executing on Part 2 of our strategy, which is to capture value-creating external growth focused on senior housing. We are in a unique period of time.
Speaker Change: Over 1000 of which we've completed since I started we are proactively sharing insights data and benchmarks with our operating partners to align on performance expectations.
Speaker Change: Moving on to investments, where we are executing on part two of our strategy, which is to capture value, creating external growth focused on senior housing.
Speaker Change: We are in a unique period of time.
Jessica: The best I've seen in my career, where we have a combination of relatively high yield and high growth investment opportunities in senior housing leading to very attractive unlevered IRRs. The sector is supported by a tremendous demographic tailwind. In the second quarter, we continued our strong run of executing on attractive external growth opportunities. We closed approximately $300 million of value-creating investments in 12 senior housing communities, 10 of which are with existing Ventas operator relationships, bringing the year-to-date volume up to $350 million at a blended going-in yield greater than 8%.
Speaker Change: The best I've seen in my career.
Speaker Change: Where we have the combination of relatively high yield and high growth investment opportunities in senior housing leading to very attractive Unlevered IRR.
Speaker Change: The sector is supported by a tremendous demographic tailwind in the second quarter. We continued our strong run of executing on attractive external growth opportunities, we closed approximately $300 million of value, creating investments and 12 senior housing communities 10 of which are with existing ventas, operator relationships, bringing the year to date.
Speaker Change: <unk> volume up to $350 million at a blended going in yield greater than 8%.
Jessica: In addition to the accretive going and yield, these investments are positioned squarely within our right market, right asset, right operator framework, and now is the right time to invest in senior housing as this favorable positioning, amplified by the unprecedented supply-demand backdrop, will drive continued NOI growth resulting in unlevered IRRs and a low to mid-teens. We also continue to invest at an extremely attractive basis below replacement costs with an average per unit purchase price of $250,000. I am looking forward to it.
Speaker Change: In addition to the accretive going in yield these investments are positioned squarely within our REIT market right asset right operator framework and now is the right time to invest in senior housing as this favorable positioning amplified by the unprecedented supply and demand backdrop will drive continued on.
Speaker Change: Why growth, resulting an unlevered IRR is in the low to mid teens.
Speaker Change: We also continue to invest in an extremely attractive basis below replacement cost with an average per unit purchase price of 250000.
Speaker Change: Looking forward.
Bob: Our pipeline remains robust and filled with actionable opportunities with both existing and new operator relationships with a profile similar to the deals already closed in 2024. Specifically, we have line of sight to an incremental $400 million of senior housing investments, bringing the total 2024 senior housing investment volume to $750 million. Additionally, we are deeply engaged in executing this high-priority of expanding our shop portfolio. We continue to underwrite a large and growing pipeline of attractive, near-term opportunities and are confident in our ability to continue creating value via additional external growth going forward. Now, I'll hand over to Bob.
Speaker Change: Pipeline remains robust filled with actionable opportunities with both existing and new operator relationships with a profile similar to the deals already closed in 2024.
Speaker Change: Specifically, we have line of sight to an incremental $400 million of senior housing investments, bringing the total 2020 for senior housing investment volume to $750 million.
Speaker Change: Additionally, we are deeply engaged in executing this high priority of expanding our shop portfolio. We continue to underwrite a large and growing pipeline of attractive near term offer opportunities and are confident in our ability to continue creating value via additional external growth going forward.
Speaker Change: Yes.
Speaker Change: Now I'll hand over to Bob.
Bob: Thank you Justin.
Bob: I'll start with our second quarter performance, provide an update on our leverage and liquidity, and conclude with our updated and improved guidance. We are pleased to report that Ventas delivered strong second quarter results, led by SHOP, and with contributions across the property portfolio. In our outpatient medical and research segment, Omar.
Bob: I'll start with our second quarter performance provide an update on our leverage and liquidity and conclude with our updated and improved guidance.
Bob: Pleased to report that Ventas delivered strong second quarter results led by shop and with contributions across the property portfolio.
Omar: And our outpatient medical and research segment for Omar we.
Bob: We generated over 3% same-store cash NOI growth in the quarter, with strong margins and stable occupancy. In our outpatient medical portfolio, Pete and his team continue to build leasing momentum, executing over 800,000 square feet of new and renewal deals in the quarter, which translated to 30 basis points of sequential occupancy.
Omar: We generated over 3% same store cash NOI growth in the quarter with strong margins and stable occupancy.
Omar: And our outpatient medical portfolio, Pete and team continue to build leasing momentum.
Pete: Executing over 800000 square feet of new and renewal deals in the quarter.
Pete: Which translated to 30 basis points of sequential occupancy gains.
Bob: Further, the Equities Loan Portfolio Outpatient Medical Asset has made significant progress, increasing occupancy 450 basis points year over year to 81.5% in the second quarter. Leveraging the LulaBridge operating platform and playbook to drive growth.
Omar: Further the <unk> loan portfolio outpatient medical assets.
Pete: <unk> made significant progress increasing occupancy 450 basis points year over year to 81, 5% in the second quarter.
Omar: Leveraging the lillibridge operating platform and playbook to drive growth.
Bob: Meanwhile, our university-based research portfolio increased same-store cash NOI by 5.5% in the second quarter, with 160 basis points of occupancy growth across the same store portfolio. Our new leasing pipeline is attractive at 1.3 million square feet, with over half already leased for the Enterprise. In the second quarter, we reported net income attributable to common stockholders of $0.05 per share.
Omar: Meanwhile, our University based research portfolio increased same store cash NOI by five 5% in the second quarter.
Omar: With 160 basis points of occupancy growth across the same store portfolio.
Omar: Our new leasing pipeline is attractive at one 3 million square feet with over half already executed.
Omar: For the enterprise in the second quarter, we reported net income attributable to common stockholders of <unk> <unk> per share.
Bob: Our Q2 normalized FFO per share of $0.80 represents a 7% increase year-over-year, underpinning this result with year-over-year shop same store growth of 15% and total company same store growth of nearly We're seeing the benefit of the execution of our strategy with a 50 basis point improvement in our net debt EBITDA metrics so far this year. Organic shop growth and Equity Funded New Investments in Senior Housing are driving the improvement.
Omar: Our Q2 normalized <unk> per share of <unk> 80.
Omar: Represents a 7% increase year over year.
Speaker Change: Underpinning. This result was year over year shop same store growth of 15% and total company same store growth of nearly 8%.
Omar: We're seeing the benefit of the execution of our strategy with a 50 basis point improvement in our net debt to EBITDA metrics. So far this year.
Omar: Organic shop growth and equity funded new investments in senior housing are driving the improvement.
Bob: The multi-year growth expected in senior housing and the robust investment pipeline are expected to continue to improve our leverage ratio going forward. So far this year, we've closed on $350 million of new investments and have raised $500 million in equity. We have included in our updating guidance another $400 million in equity-funded investments focused on senior housing that are expected to close this year. Additionally, year-to-date, we completed $234 million in asset sales. And our liquidity at the end of the second quarter was strong at $3.3 billion, including over $550 million of cash on hand, and with limited remaining debt maturities in 2024.
Omar: The multi year growth expected in senior housing and the robust investment pipeline are expected to continue to improve our leverage ratio going forward.
Omar: So far this year, we've closed on $350 million of new investments.
Speaker Change: <unk> $500 million in equity.
Speaker Change: We have included in our updated guidance another $400 million and equity funded investments focused on senior housing that are expected to close this year.
Speaker Change: Year to date, we completed $234 million in asset sales.
Speaker Change: And our liquidity at the end of the second quarter was strong at $3 3 billion, including over $550 million of cash on hand and.
Speaker Change: And with limited remaining debt maturities in 2024.
Bob: I'll close with our updated and improved 2024 guidance. We've raised our outlook for net income attributable to common stockholders to now range from $0.07 to $0.13 per diluted share. We increased the midpoint of our full year normalized FFO guidance to $3.15 per share from the previous midpoint at $3.14 per share, which is an improvement for your midpoint, is driven by a two-and-a-half cent combined improvement from shop, organic, and inorganic growth, partially offset by a one and a half cent non-cash impact from potential kindred lease resolution in 2024.
Speaker Change: I'll close with our updated and improved 2020 for guidance.
Speaker Change: We've raised our outlook for net income attributable to common stockholders to now range from seven to 13.
Speaker Change: Per diluted share.
Omar: We increased the midpoint of our full year normalized <unk> guidance to $3 15 per share from the previous midpoint of $3 14 per share.
Omar: Our improved full year mid point.
Omar: Is driven by the $2.05 combined improvement from shop organic and inorganic growth.
Omar: Partially offset by a one five cent noncash impact from potential kindred lease resolution in 2024.
Bob: We've also raised our same-store cash NOI year-over-year growth midpoint expectations for each of our segments. The total Company's same-store cash NOI is now expected to grow 7.25% year-over-year. An increase of 25 basis points from our prior guidance and 100 basis points higher than our original guidance back in February. For additional 2024 guidance assumptions, please see our Q2 Supplemental and Earnings Presentation Deck posted on our website. To close, we are pleased with the results for the first half of the year, and we're committed to continued value creation in the second half and beyond. With that, I'll turn the call back to the operator.
Omar: We've also raised our same store cash NOI year over year growth midpoint expectations for each of our segments.
Omar: Total company same store cash NOI is now expected to grow seven 5% year over year.
Omar: An increase of 25 basis points from our prior guidance.
Omar: 100 basis points higher than our original guidance back in February.
Omar: For additional 2024 guidance assumptions, please see our Q2 supplemental and earnings presentation deck posted to our website.
Omar: To close we are pleased with the results for the first half of the year and we're committed.
Omar: Added to continued value creation in the second half and beyond.
Speaker Change: With that I'll turn the call back to the operator.
Operator: At this time, I would like to remind everyone in order to ask a question, press star and the number one on your telephone keypad. Your first question comes from the line of Nick Joseph of Citi. Your line is open.
Speaker Change: At this time I would like to remind everyone in order to ask a question press star and the number one on your telephone keypad.
Speaker Change: Your first question comes from the line of Nick Joseph of Citi. Your line is open.
Nicholas Joseph: Thank you. I just want to hopefully get a little more color on the potential kindred resolution. You know, as you think about resetting those rents, how do you think about rent coverage, the opportunity for growth there? And then, just in terms of the timing, when would you expect kind of a final resolution? And is it going to be for all of the facilities, or could some of them come back to you? Thanks. Good morning, Nick.
Nick Joseph: Thank you just wanted to hopefully get a little more color on the potential kindred resolution as you think about resetting those rents how do you think about rent coverage.
Speaker Change: The opportunity.
Speaker Change: For growth here.
Speaker Change: And then just in terms of the timing when would you expect kind of a final resolution and this can be for all of the facilities or could some of it come back to you.
Debra A. Cafaro: The answer to your questions is that we are in advanced discussions. We believe we're close to a transaction that applies to the 23 LTAC. Unknown Speaker, whose maturity is, April 30, 2025 And obviously, we're working for multiple goals, which is to improve Ventas' enterprise value, to get the most NOI from those properties that we can, and also to strengthen the master lease and to support Kindred's future success. So those are all factors in how we're thinking about it.
Debra A. Cafaro: Good morning, Nick. It's good to hear from you.
Speaker Change: Good morning, Nick good to hear from you.
Speaker Change: The.
Speaker Change: Answer to your question seller that we're in we are in advanced discussions. We believe we're close on a transaction that applies to the 23 L tax.
Speaker Change: Whose maturity is April 32025.
Speaker Change: And <unk>.
Speaker Change: Obviously, we're working for multiple goals, which is to.
Speaker Change: Improved ventas enterprise value to <unk>.
Speaker Change: Yet the most NOI from those properties that we can and also to strengthen the master lease and to support Kindrence future success. So those are all factors in how we're thinking about it.
Debra A. Cafaro: And then maybe just pivoting to the acquisition pipeline. Sounds like, sounds like it's starting to grow there. So just curious kind of what you're seeing are these lease-up opportunities and a more stabilized kind of just color broadly on the opportunity set that you're looking at? Yes. Sure, so we are seeing
Speaker Change: Thank you and then maybe just.
Speaker Change: Related to the acquisition pipeline sounds like sounds like it's starting to grow there. So I was just curious kind of what youre seeing are these lease up opportunities in a more stabilized kind of just color broadly on the opportunity set that you're looking at.
Speaker Change: Sure. So we are seeing a number of different opportunities.
Justin: Justin? Sure. So, we are seeing a number of different opportunities. Where we're leaning in is when, you know, the pipeline meets our investment criteria, and we're very focused on the market asset operator framework. We're looking for markets that have strong supply-demand fundamentals and support strong net absorption and affordability. You know, the things we do like, applying the Ventas SOI platform, we're also underwriting the strong track record in the communities and looking for, you know, generally well-invested communities as well.
Speaker Change: Where we're leaning in is when.
Speaker Change: The pipeline meets our investment criteria and we're very focused on the market asset operator framework. We're looking for markets that have strong supply demand fundamentals and support strong net absorption and affordability.
Speaker Change: The we do like.
Speaker Change: Client events Soi platform. We're also underwriting the strong track record in the communities and looking for generally well invested communities as well.
Justin: We're primarily expanding with the existing operator relationships, but we have had the opportunity to add some new relationships as well. And we're looking for campuses that, you know, include independent living and assisted living. And we're seeing those in the pipeline. The pipeline's been growing throughout the year, and we were actively engaged in it, and we like our opportunity to continue to grow.
Speaker Change: We're primarily expanding with existing operator relationships, where you have had the opportunity to add some new relationships as well and we're looking for campuses that include independent living assisted living and memory care rental campuses.
Speaker Change: And we're seeing those in the pipeline.
Speaker Change: The pipeline has been growing throughout the year and we were actively engaged in it and we like our opportunity to continue to grow.
Speaker Change: Thank you very much.
Michael Carroll: Your next question comes from the line of Michael Carroll with RBC Capital Markets. Your line is open.
Speaker Change: Your next question comes from the line of Michael Carroll with RBC capital markets. Your line is open.
Michael Carroll: Thanks. I wanted to touch on the Kindred update real quick, and I know, Debbie, you probably can't talk about too much directly related to this discussion, but in general, why would Ventas charge about a penny and a half for a non-cash charge in 2024? I mean, is there like a cash payment that's expected that needs to be amortized this year? I guess what some of the reasons that would drive that? Yeah, it's all non-cash.
Michael Carroll: Yes, Thanks, I wanted to touch on the kindred.
Speaker Change: Real quick and I know Debbie you probably can't talk about too much directly related to this discussion, but in general why would then toss record about a penny and a half noncash charge in 2024, I mean is there like a cash payment that is expected that needs to be amortized. This year I guess, what some of the reasons that would drive that yeah, yeah. It's all noncash.
Michael Carroll: I mean, it's pretty simple, but it's a gap-related, somewhat counterintuitive rule. Like, basically, if you have a lease with a tenant, and it gets extended, you basically sum up the rent over the years, and you divide by the period left, and that can pull forward an impact. And that's really all it is. And that happens.
Speaker Change: It's a pretty simple, but its a GAAP related somewhat counterintuitive rule.
Speaker Change: Basically if you have.
Speaker Change: A lease with a tenant and it gets extended you basically sum up the ran over the years and you divide by the period last and that can pull forward.
Speaker Change: An impact and that's really all it is.
Debra A. Cafaro: And that happens from the time you sign the deal. Yeah.
Speaker Change: And that happens from the time you sign the deal yes. It happens.
Debra A. Cafaro: So it's just a gap reflection of the expectations for cash rent that we have.
Speaker Change: Immediately so adjusted GAAP reflection of the expectations on cash rent that we.
Speaker Change: We gave you.
Michael Carroll: Okay, no, that makes a lot of sense. Thanks. And then just real quick on the shop guidance. I know that the Revport target is 5%, and you're tracking a little behind that in the first half of the year. I guess, are you able to push street rates higher? And if that's why you think you can generate slightly better Revport growth in the second half of the year, kind of accelerating that growth compared to the first half of the year? Well, so first of all,
Speaker Change: Okay, no that makes a lot of sense. Thanks.
Speaker Change: And then just real quick on the on the shop guidance I know that the Revpar target is 5% junior tracking a little behind that in the first half of the year.
Speaker Change: I guess are you able to push street rates higher and Thats why you think you can generate slightly better.
Speaker Change: Shop Revpar growth in the second half of the year kind of accelerating that growth compared to the first half of the year.
Debra A. Cafaro: Well, first of all, on the guidance. It's occupancy-led. We've obviously raised our occupancy expectation, and we've raised our NOI expectation as well. But we did not change the other metrics.
Speaker Change: Well, so first of all on the guidance.
Speaker Change: Its occupancy led we've obviously raised our.
Speaker Change: Occupancy expectation and we've raised our NOI expectation as well we did not change the other metrics Rev for this.
Debra A. Cafaro: REV4, you know, in this environment where you have a lot of occupancy growth, mix can be more impactful just due to the sheer volume of occupancy growth that we've had. In the second quarter, there were a couple things impacting REV4. We had a mix where we had very strong occupancy growth in our mid-price point product, so it just has an impact on the weighted average, and then there's a year-over-year comp.
Speaker Change: This environment, where you have a lot of occupancy growth.
Speaker Change: Mix can be more impactful.
Speaker Change: Just due to the sheer volume of occupancy growth that we've had.
Speaker Change: In the second quarter. There is a couple of things impacting Revpar, we had mix, where we had very strong occupancy growth in our mid price point product. So it just hasn't.
Speaker Change: In fact on the weighted average and then there's a year over year comp.
Debra A. Cafaro: You know, that's affecting it because of the very strong rent increases we had for certain operators in the first half of last year. And as we move forward, we would expect that there will be better comps in the second half of the year. We have a large part of the key selling season still ahead of us, a lot of potential volume that, as part of that, so, you know, mix will remain in focus. And so we thought leaving the tilde five was appropriate, given those facts.
Speaker Change: That's affecting that because of the very strong rent increases we had in certain operators in the first half of last year and as we move forward. We would expect that there's better comps in the second half of the year.
Speaker Change: We have a large part of the key selling season still ahead of US a lot of potential volume that as part of that so.
Speaker Change: Mix will remain in focus and so we saw it leaving the tilda five was appropriate given those facts.
Joshua Dennerlein: And, you know, look forward to growing NOI. Okay, great. Thank you. Your next question comes from the line of Joshua Dennerlein with Bank of America. Your line is open.
Speaker Change: And look forward to growing NOI.
Speaker Change: Okay, great. Thank you.
Speaker Change: Okay.
Joshua <unk>: Your next question comes from the line of Joshua <unk> with Bank of America. Your line is open.
Joshua <unk>: Yes, good morning, everyone.
Joshua <unk>: Just wanted to ask about the acquisitions that you are including in guide now I guess historically you only include what was like signed up until that point I guess why change your strategy here and then if you could maybe just.
Joshua <unk>: Let us know how much of a benefit that additional acquisitions is for 2020 for I guess I'm, just trying to get a sense of like the timing and whatnot.
Debra A. Cafaro: Hi Josh, thanks for your question. We're excited about the opportunities to invest in senior housing, and Bob will answer your impact question. And you're right to say that, you know, that started this year in February, including deals that we hadn't closed, was unusual for us, but we feel
Joshua <unk>: Josh Thanks for your question.
Joshua <unk>: Where we're excited about the opportunities to invest in senior housing and Bob will answer year impact question.
Debra A. Cafaro: And you're right to say that, you know, starting this year in February, including deals that we hadn't closed, was unusual for us, but we feel very confident given the pipeline and the team that we can execute on those deals. We started the year at 350. In our guidance, done, closed. We now have 400 million in the forecast to close this year. So doing what we said, the contribution from those is in the two and a half cents increased guidance.
Bob: You're right to say that this.
Bob: Started this year in February including deals that we hadn't closed was unusual for us, but we feel very confident given the pipeline and the team that we can execute on those deals we started the year at $3 50, and our guidance done closed.
Bob: We have now $400 million in the in the forecast.
Joshua <unk>: Those this year so doing what we said the contribution from those is in.
Speaker Change: In the two five cents increased guidance.
Debra A. Cafaro: I'm on FFO from Shop Organic and Inorganic. I would say the split of those is roughly equal, if not tipped a bit towards the new investment. So they are accretive from the get go, equity funded, and very consistent with the strategy we laid out.
Speaker Change: <unk> from shop, organic and inorganic I would say the split of those is roughly equal if not a bit towards the new investments. So they are accretive from the get go.
Joshua <unk>: Equity funded and very consistent with the strategy we laid out.
Joshua <unk>: Yes.
Speaker Change: Okay, and then I guess, maybe just the acquisitions themselves like.
Speaker Change: What kind of cap rates are you seeing and is it all senior housing.
Speaker Change: In a RIDEA structure or kind of mix of other things in there.
Justin: Josh, our capital allocation priority is focused on senior housing shop investments. And Justin will touch on, there's a series of both qualitative data-driven characteristics we're looking for as well as financial. Yep, absolutely. So, you know, starting, you know, I'll just start.
Justin: Our capital allocation priority is focused on senior housing shop investments and Justin will touch on there's a series of both qualitative data driven.
Justin: Characteristics, we're looking for as well as financial.
Justin: Yep, absolutely. So, you know, I'll just kind of highlight, for example, some metrics around the deal activity that's already closed. In those deals, we underwrote net absorption upside over a three-year period in the markets by around 1,000 basis points. Very strong population growth. Near zero new supply deliveries are expected in the next few years within the market. Very attractive investment basis at $250,000 per unit, well below replacement costs. They're about 10 years old on average.
Justin: Yeah, absolutely so starting I'll just kind of highlight for example.
Justin: Some metrics around the deal activity that's already closed.
Justin: And those those deals we underwrote net absorption upside over a three year period.
Justin: The markets of around a 1000 basis points.
Justin: Very strong population growth.
Justin: Near zero new supply.
Justin: Delivery is expected in the next few years within the markets.
Justin: Very attractive investment basis at 250000 per unit well below replacement costs. There are about 10 years old on average there are 124 units.
Ronald Kamdem: There are 124 units, offering Independent Living, Assisted Living, and Memory Care. Good margins going in, but a lot of upside, you know, going in at a margin around 28%, a lot of upside as we grow occupancy and rates over time. And aligned management contracts, you know, they're rewarding growth both for revenue and NOI outcomes for the manager. And then, you know, good operators, most of which are existing relationships, but we're, really, you know, above eight.
Justin: Offering independent living assisted living and memory care.
Speaker Change: <unk> is going in but a lot of upside going in margin around 28% a lot of upside as we grow occupancy and rate over time and align management contracts, they're rewarding growth both for for revenue and NOI outcomes to the manager.
Justin: And then.
Justin: <unk>.
Justin: Good operators, most of which are existing relationships, but we're also.
Justin: Working with with some new operators in the going in yields have been.
Justin: Really.
Justin: Above eight thus.
Ronald Kamdem: Thus far, we were targeting 7 to 8 overall, the unlevered IRRs, you know, low to mid teens. So those are the characteristics we've seen and continue to see in this this next tranche. It's very similar characteristics in this 400 million that we have a line of sight on. Thank you. Your next question comes from the line of Ronald Kamden with Morgan Stanley. Your line is open.
Justin: Thus far we were targeting seven to eight overall the unlevered IRR is low to mid teens.
Justin: So that's the that's the characteristics we've seen and continue to see in this this next tranche is.
Justin: It's very similar characteristics in this $400 million that we have line of sight on.
Speaker Change: I appreciate it thank you thanks.
Justin: Thanks.
Justin: Your next question comes from the line of Ronald Camden with Morgan Stanley. Your line is open.
Ronald Kamdem: Hey, just two quick ones for me; just stay on acquisitions.
Ronald Camden: Just two quick ones for me just stay on acquisitions.
Speaker Change: Obviously, you've seen a pickup.
Speaker Change: This year, which is why you increased the guidance, but trying to figure out is there sort of volume and opportunity that you could get to $1 billion on an annual run rate basis.
Speaker Change: As sort of question number one and number two is just can you remind us.
Speaker Change: Sellers are these all sort of bonds coming due just the nature of the sellers here. Thanks.
Debra A. Cafaro: Well, we're certainly interested in ramping up the activity. We haven't put any targets out there in terms of volume, but more is definitely a priority for sure, given the...
Speaker Change: Well, we're certainly interested in ramping up the activity, we haven't put any targets out there in terms of volume, but more and more as the priority for sure given the.
Debra A. Cafaro: The fundamentals and the returns that we're seeing in the investments, the types of sellers, there are some sellers that have debt maturities, and they're having to make a decision. Even though the fundamentals are good, do they put more capital in, or do they sell the asset and move on to other priorities? We've been able to take advantage of some of those opportunities.
Speaker Change: Fundamentals in the returns that we're seeing in the investments the types of sellers. There's some certainly sellers that have debt maturities and then having to make a decision.
Speaker Change: Even though if fundamentals are good they put more capital in or do they do they sell the asset and move on to other priorities.
Speaker Change: We've been able to take advantage of some of those opportunities theres. Other sellers that just quite frankly are dealing a fund maturities.
Debra A. Cafaro: There are other sellers that just, quite frankly, are dealing with fund maturities. And they're, you know, they're just active sellers. And then there are others that are selling senior housing a little bit reluctantly because they have other asset classes that they're dealing with, and debt and other aspects of their fund. And so, you know, we've had a wide variety. And, you know, that. What's been consistent though is, you know, good fundamentals. We're targeting markets that have really, you know... Great upside, and then the returns have been excellent.
Speaker Change: And there.
Speaker Change: Active sellers and then there's others that are selling senior housing a little bit reluctantly because they have other asset classes that theyre dealing with.
Speaker Change: And that in other aspects of <unk>.
Justin: Their fund and so we've we've had a wide variety.
Speaker Change: And.
Speaker Change: Thats.
Speaker Change: What's been consistent though is good fundamentals.
Justin: We're targeting markets.
Justin: Yes.
Justin: Great upside and then the returns have been excellent.
Speaker Change: Great. That's it for me thank you.
Speaker Change: Thank you.
Jim Kammert: Your next question comes from the line of Jim Kammert with Evercore ISI. Your line is...
Jim cameras: Your next question comes from the line of Jim cameras with Evercore ISI. Your line is open.
Jim Kammert: Thank you. Good morning.
Jim cameras: Thank you good morning.
Jim cameras: Certainly I appreciate it good morning, certainly appreciate your comment regarding inelastic need based profile of this industry I don't think many would disagree but you also hear at least I have that some of the arguments that staying at home is still cheaper than senior tier how do you maybe within your <unk> Your marketing initiatives. One I guess do you agree with that Steve.
Debra A. Cafaro: Certainly appreciate your comment regarding the inelastic need-based profile of this industry. I don't think many would disagree, but you also hear, at least I have, that some argue that staying at home is still cheaper than senior care. How do you maybe, within your OI or marketing initiatives, one, I guess do you agree with that statement, and two, how do you educate the consumer here? Great question.
Speaker Change: And too high.
Speaker Change: Or do you educate the consumer here.
Debra A. Cafaro: And one of the things we care a lot about is that, you know, we and the operators are offering residents and their families a really important service. And it's really valuable. Anyone who's gone through it in their families really understands that.
Justin: Yes.
Speaker Change: Great question.
Speaker Change: And then one of the things we care a lot about is the yes, we are.
Speaker Change: Operators are offering residents and their families.
Speaker Change: Really important service and it's really valuable anyone who has gone through it and their families really understands that.
Debra A. Cafaro: And penetration is back at or above that, that is, utilization by the population is at or above where it was pre-COVID. So that's trending in the right direction. The numbers are gigantic, so that dwarfs even the impact of penetration rates. And importantly, there are a lot of studies that show not only are seniors more secure and enjoy better lives when they move to senior housing from their home, that it's safer, it's more secure, it's more social, but it is also more expensive to stay in your home.
Speaker Change: And <unk>.
Speaker Change: Penetration is back at or above that as utilization by the population is at or above where it was pre COVID-19. So that's trending in the right direction.
Speaker Change: Numbers are gigantic so that dwarfs the impact even of penetration rate and importantly, there are a lot of studies that show not only our seniors more stickier.
Speaker Change: And enjoy better lives when they move to senior housing from their homes.
Speaker Change: That is safer it's more secure it's more social but also it is more expensive to stay in your home.
Debra A. Cafaro: And that the cost of replacing all those services, even if you can do it, which in many, many cases, if you live alone in a suburban home, you can't even get those services on a regular basis, that it is more economical to move to senior housing. You don't have... You know, you don't have lawn mowing and maintenance, taxes and insurance, meals, etc. So it really is a replacement for what you're spending anyway, or even better if you're requiring in-home health services.
Speaker Change: And that the cost of replacing all of those services, even if you can do it which in many many cases, if you live alone in the suburban home you can't even get those services on a regular basis.
Jim Kammert: Great. I need to do more reading. Thank you. And then there's a quick one to pick on, Bob.
Speaker Change: It is more economical to move to senior housing.
Speaker Change: You don't have.
Justin: Don't have lawn mowing and maintenance taxes and insurance.
Speaker Change: <unk> et cetera. So it really is a replacement for what youre spending anyway, or even better if you're requiring in home health services.
Bob: You know, good news is here. I think your exchangeable notes are in the money. And could you remind me, given, say, the share price, could you just remind me how the accounting for that is? I know you have the option to sell the conversion value in cash, but how will you account for that in potential dilution if, presuming the stock stays above the conversion price?
Justin: Alright, Ron you do more reading. Thank you and then a quick one to pick on Bob.
Bob: Good news is I think Youre exchangeable notes are in the money and could you remind me.
Bob: So the share price could you just remind me how is the accounting for that.
Speaker Change: I know you had the option to sell.
Speaker Change: So the conversion value in cash, but how will you account for that and potential dilution if presuming the stock stays above the conversion price.
Bob: Thanks. Yeah, Jim, it is of high quality.
Bob: Yeah, Jim, it is a high-quality situation for sure. The conversion price is just below $55. Those get accounted for in the fully diluted shares. It's a really modest impact at this stage and effectively embedded in the guidance. But I put this in the high-quality problem camp. So, de minimis as we think about the numbers this year, as it stands now.
Jim cameras: Yes, Jim.
Speaker Change: Our high quality <unk>.
Speaker Change: Tuition for sure.
Speaker Change: Conversion price is just below 55.
Speaker Change: Those get accounted for in the fully diluted shares its a really modest impact at this stage.
Justin: And effectively embedded in the guidance.
Speaker Change: But I put this in the high quality problem camp.
Speaker Change: So but de Minimis as we think about the the numbers this year.
Speaker Change: It is now.
Speaker Change: Thank you.
Speaker Change: Yes.
Juan Sanabria: Your next question comes from the line of Juan Sanabria with BMO. Your line is open.
Speaker Change: Your next question comes from the line of Juan Sanabria with BMO. Your line is open.
Juan Sanabria: Hi, good morning. Just a bigger picture strategic question for Debbie, I guess. Obviously, you're rightfully so bullish on the acquisition opportunity in senior housing, and you have a successful third-party management business. Is there an opportunity to kind of accelerate your investments in senior housing using some of the capital partners you have or maybe new ones to do stuff in a joint venture or fund format?
Juan Sanabria: Hi, good morning.
Juan Sanabria: Just a bigger picture strategic question for Debbie I guess.
Speaker Change: Obviously, even though rightfully so bullish on the acquisition opportunity in seniors housing.
Speaker Change: You have a successful third party management business.
Speaker Change: Is there an opportunity to kind of accelerate your investments in seniors housing using some of that.
Speaker Change: Capital Partners, you have or maybe new ones to do.
Speaker Change: Do stuff in a joint venture or fund format.
Speaker Change: Mhm.
Debra A. Cafaro: Hi Juan. We do have a successful Ventas Investment Management business, including an open-end fund. It is a great advantage to have that capital available to us at the present time because of our kind of footprint, experience, and platform in senior housing. We are focused on capturing those opportunities really at the enterprise level, but we have, in selective, appropriate circumstances, done a few senior housing assets with our partners. So most should be on the balance sheet, and maybe ones that have a little bit less. Growth could be appropriate for a more core-like investor base.
Speaker Change: Hi, Juan we do have a successful fantasy investment management business, including an open end fund.
Speaker Change: It is a great advantage to have that capital available to us.
Speaker Change: At the present time because of the reach.
Speaker Change: <unk> footprint and experience in platform in senior housing we are focused on capturing those opportunities really at.
Speaker Change: At the enterprise level, but we have in selective appropriate circumstances.
Dan: Dan a few senior housing assets with our partners. So most should be should be added to the balance sheet and maybe ones that have a little bit less growth could be appropriate for a more core like investor base.
Speaker Change: And then just with regards to.
Juan Sanabria: And then just with regard to the shop business and some kind of guidance. How should we think about occupancy growth going forward? You've noticed some seasonality on the REVPOR side. Is there anything equivalent on the occupancy side or any impact from changes in the pool in the second half of the year?
Speaker Change: The shop business and kind of guidance.
Speaker Change: How should we think about occupancy growth going forward you will notice some seasonality on the Revpar side is there anything equivalent on the occupancy side or any impact from changes in the pool in the second half of the year.
Bob: Yeah, good question on the timing. So, Bob, do you want to take that? Sure, there's no pool impact, Juan, that's been very consistent. February
Bob: Yes. Good question on timing so Bob do you want to take for sure. There is no pool impact one that's been very consistent since February.
Bob: Sure, there's no pool impact, Juan. That's been very consistent. If you are looking at year over year or sequentially, there clearly is seasonality in senior housing. Again, the key selling season is Q3, running into Q3, typically through September, and could bleed into October. Then typically, you'll have some moderation in the fourth on a sequential basis. But, for us, what we're seeing again is just this robust year-over-year growth that's driving the improved midpoint. But if you're modeling sequentially, you should factor that in.
Bob: Depending on whether youre looking year over year or sequentially. There clearly is a seasonality in senior housing.
Speaker Change: So again the key selling season is Q3 running into Q3 typically through September it could bleed into October.
Speaker Change: And then typically you will have you'll have some sort of moderation in the fourth on a sequential basis for.
Bob: For us what we're seeing again is just this robust year over year growth, that's driving the improved mid point, but if youre modeling sequentially you should factor that in.
Omotayo Okusanya: Your next question comes from the line of Omotayo Okusanya with Deutsche Bank. Your line is open.
Speaker Change: Your next question comes from the line of on Lasalle personnel with Deutsche Bank. Your line is open.
Omotayo Okusanya: Hi, yes, good morning, everyone. I just wanted to go back to Keynesian a little bit. So the guidance seems like you're calling for a 25 to 30 percent rent reduction. I do recall commentary that the business itself is improving fundamentally. So just curious why give up that upside by just having kind of an immediate rent reduction.
Speaker Change: Hi, Yes, good morning, everyone.
Speaker Change: Just wanted to go back.
Speaker Change: So the guidance.
Speaker Change: Calling for 25% to 30% reduction.
Speaker Change: Soon.
Nicole: Nicole commentary that.
Speaker Change: Improving fundamentally so just curious what why give up that upside.
Nicole: Kind of a new media.
Speaker Change: Kind of rent reduction.
Nicole: Okay.
Debra A. Cafaro: Good morning, Kayo. Thanks for the question. Look, we want to give our shareholders some kind of broad directional guidance on our expectations at this time for what the rent levels will be. Obviously, we have a lot of tools in our toolbox that we've used in connection with leases over the years, and that would be equally true here. And remember our goals. We do want to strengthen the master lease. We do want to capture as much NOI as we can and we want Kindred to be successful, so we put all those in the basket as we think about structuring and making decisions about a lease extension.
Nicole: Good morning, Tayo. Thanks for the question.
Speaker Change: Look we want to give our shareholders some.
Nicole: Kind of broad directional guidance of our expectations at this time on what the rent levels will be obviously.
Nicole: We have a lot of tools in our toolbox that we've used.
Speaker Change: In connection with leases over the years.
Nicole: That would be equally true here.
Nicole: And remember our goals, we do want to strengthen the master lease we do want to capture as much NOI as we can and we want tinder to be so we put all of those assets in the basket as we think about structuring.
Nicole: And making decisions about a lease extension.
Omotayo Okusanya: Okay, that's helpful. But if you could, the second question, some of your managerial contracts in Atria Sunrise, but a little bit more tied to the top line. Curious when those managerial contracts themselves expire, if they do, or, you know, the idea of being able to move this contact side more towards the bottom line, such that Ventas and the third-party managers are a little bit better aligned in terms of bottom-line performance.
Speaker Change: Okay. That's helpful.
Speaker Change: Second question.
Speaker Change: Managerial contract Etf's, sunrise, but a little bit more.
Speaker Change: Offline.
Julia: Julia will blend of managing the alpine platform.
Speaker Change: Meyer.
Nicole: Sure.
Nicole: Yes.
Speaker Change: You may begin.
Nicole: One more towards the bottom line.
Paul: Thanks, Paul.
Speaker Change: Good morning.
Nicole: The bottom line performance.
Debra A. Cafaro: Operational alignment is one of Justin's favorite topics, so...
Nicole: Yeah operational alignment is when adjusting favorite topic so it.
Justin: It is for sure. So Sunrise, we already have that's a contract we actually updated a few years ago. It's well aligned. It's really driven through revenue and NOI performance. The fees are driven through great alignment.
Nicole: It is for sure so sunrise we've already.
Nicole: That contract we actually updated.
Speaker Change: A few years ago, it's well aligned.
Nicole: Really driven through revenue and NOI performance the fees are driven through through great alignment I am very happy with with that agreement.
Justin: I'm very happy with that agreement. We have windows for the upcoming few years in the legacy Atria portfolio. That'll also be a good opportunity just to improve upon the alignment and that relationship. Everything else in the shop portfolio is on our newer agreement. But, um, you know, one thing I want to say is that, Atria, given a lot of the transition they've gone through, there's not a question in my mind in terms of the level of focus they have on operations, particularly on ours.
Speaker Change: We're we have windows in the upcoming few years and the legacy atria portfolio that will also be a good opportunity to just to improve upon.
Speaker Change: The alignment in that relationship everything else in the shop portfolio is on our newer agreements.
Nicole: But.
Nicole: One thing I want to say is that.
Nicole: Atria.
Nicole: Given a lot of the transition they've gone through.
Speaker Change: Not a question in my mind in terms of the level of focus they have on operations, particularly on ours.
Justin: There's been a number of actions that have led to a much tighter footprint, some that we've taken, some that they've taken, and other owners. And so the level of focus that we've seen with them under the new leadership and the contributions they've made to the occupancy, you know, across the board that I mentioned, and especially in independent living, where we've had 340 basis points of occupancy growth. They have our full attention, and they have our full support, so we'll look forward to ongoing good performance with them.
Speaker Change: Dave.
Dave: Theres been a number of actions that have led to a much tighter footprint, we've taken some of that they've taken and other owners and so the level of focus that we've seen with them under the new leadership.
Nicole: And the contributions they have made to the occupancy.
Speaker Change: Across the board that I mentioned, and especially in independent living where we've had 340 basis points of occupancy growth year over year.
Speaker Change: We have their full attention and they have our full support so we will look forward to ongoing good performance with them.
Speaker Change: That's helpful. Thank you.
Speaker Change: Thanks.
Austin Wurschmidt: Your next question comes from the line of Austin Wurschmidt with Key Bank City Market. Your line is open.
Speaker Change: Okay.
Austin Wurschmidt: Thank you. Your next question comes from the line of Austin Wurschmidt with Key Bank City Market. Your line is open. Great, thanks. I'm just going back to the shop guidance
Austin: Your next question comes from the line of Austin, <unk> with Keybanc, Hey, Mark Hey, Your line is open.
Austin: Great. Thanks, just going back to the shop guidance same store NOI growth for that segment implies some deceleration in the back half of the year and I guess, just given the operating leverage low towards total portfolio occupancy and just.
Speaker Change: Relative to the backdrop that you outlined in your prepared remarks, what are sort of the limiting factors in the near term impacting you from sustaining that mid teens growth that you've achieved year to date.
Debra A. Cafaro: So one of the things that's happened is we're off to a really strong start. So we've actually raised guidance twice now.
Speaker Change: So one of the one of the things Thats happened is we're off to a really strong start. So we've we've actually raised guidance twice now so and that's due to the outperformance we had early in the year.
Debra A. Cafaro: So that's due to the outperformance we had early in the year. As you get into later in the year, Bob mentioned some of the seasonality, which you can see in occupancy.
Speaker Change: As you get into later in the year, Bob mentioned some of the seasonality you can see in occupancy you can also see some seasonality in expenses.
Debra A. Cafaro: You can also see some seasonality in expenses. You know, we've assumed kind of regular inflation and expenses, that's what's driving that 2.5% OPEX poor growth. Metric that you see as part of the guidance page, and there's utilities and other seasonal impacts you can have in the second half, so you might accuse us of being a little conservative on the expense side, but we're just anticipating kind of normal seasonality. I like your words, mid-teens, because, you know, in the first half we grew 15%; our guidance for the year is 14.5%, so...
Bob: We've assumed kind of regular inflation and the expenses, that's what's driving that two 5% opex for growth.
Bob: Metrics that you see as part of the guidance page.
Speaker Change: And there is utilities and other seasonal impacts you can have in the second half so you might.
Speaker Change: Accuses me a little conservative on the expense side, but.
Speaker Change: So, we're just anticipating kind of normal seasonality.
Speaker Change: I like your words mid mid teens, because the first half we grew 15% our guidance for the year is 14, 5% so.
Speaker Change: Pretty darn consistent I would say.
Debra A. Cafaro: All pretty darn consistent, I would say. Yeah, that's fair. How does how does Canada do?
Speaker Change: Yes, that's fair.
Speaker Change: How does how does Canada affect kind of the same store NOI growth level going forward. Given you are more highly occupied in that region and what's sort of your thoughts on the remaining upside for the region. Thank you.
Debra A. Cafaro: Well, we have a page, and if you have our earnings deck, page 10 will, you know, articulate the performance of Canada. Canada grew 12% in the second quarter year-over-year. That was driven by really good rate growth, which was also mixed-driven. We had a higher price point product that outperformed Canada and drove the REVPOR up, and their occupancy is still growing by 170 basis points. Canada's 96% occupied now, and they keep growing. And so, you know, it's just a good performer, and we wouldn't expect it to continue to be a double-digit performer going forward, but it's been a good year.
Speaker Change: Well, so we have a page and if you have our earnings deck page 10.
Speaker Change: Articulates the performance of Canada, Canada grew 12%.
Speaker Change: In the second quarter year over year.
Speaker Change: That was driven by really good rate growth, which is which was also mixed driven we had a higher price point product that outperformed Canada, Andrew drove the revpar up and their occupancy still growing a 170 basis points, Canada is 96% occupied now and they keep growing occupancy.
Speaker Change: And so it's just a good performer and we wouldn't expect it to continue to be a double digit performer growing forward, but it's been a good year in Canada.
Speaker Change: Thanks for the time.
Austin: Thank you Austin.
Speaker Change: Okay.
Vikram Malhotra: Your next question comes from the line of Vikram Malhotra with Mizzou. Your line is open.
Speaker Change: Your next question comes from the line of Vikram Malhotra with Mizuho. Your line is open.
Vikram Malhotra: Good morning. In the questions, I just wanted to maybe first give you some more color. You mentioned comps or maybe even conservatism on x4 on the expense side, but you're sort of going from the ones to like, you know, the two and a half guidance you gave. So I'm wondering, is there any, any specific region, or maybe it's just labor costs you're anticipating that would drive that up so much in two quarters?
Vikram Malhotra: Good morning.
Vikram Malhotra: The question I guess I just wanted to maybe first just get some more color you mentioned the.
Vikram Malhotra: Comps or maybe even conservatism on on X or expand on the expense side.
Speaker Change: Sort of going from the ones like the two and a half guidance you gave so I'm wondering is there any.
Speaker Change: Any specific region or maybe it's just labor costs youre anticipating that will drive that up so much in two quarters.
Bob: I think the key thing to note, as you'll recall, is the contract labor or agency labor profile last year, which, as we were staffing up, really came down first half to second half. And so on a year-over-year basis in the first half, on an OPEX board, that's a good guy. You don't have that same dynamic in the back half of the year, so that's a really important part of the answer to your question.
Speaker Change: Bob is going to take.
Bob: I think the key thing to note is you'll recall is the contract Labor agency labor profile last year, which as we were as we were staffing up really came down first half to second half.
Bob: And so on a year over year basis in the first half on Opex for that's a good guy.
Speaker Change: You don't have that same dynamic in the back half of the year. So that's a really important part of the answer to your question.
Justin: Okay, that's helpful. And then you mentioned the makeshift on REF4 and obviously with Sunrise, but I'm wondering if you just segment the shop portfolio, you know, I'm sure there are markets or segments where you have like 90% occupancy. What's the distribution in terms of where you're seeing the most pricing power versus maybe what's lagging?
Speaker Change: Okay. That's helpful. And then you mentioned the mix shift on reservoir, and obviously with Sunrise, but I'm wondering if you just segment the shop portfolio.
Speaker Change: I'm sure there are markets or segments, where you have like 90% occupancy what the distribution in terms of where youre seeing the most pricing bar versus maybe what's lagging.
Justin: Yeah, so we've been seeing, you know, really broad-based growth. We've had better occupancy growth in our products that are closer to a mid or mid-high price point. We've seen better growth in the West, which is a relatively lower price point than the East. There's been better growth in lower acuity assisted living and independent living than in higher acuity products, but very strong occupancy growth. And so, you know, the mix is really just a combination of reasons why our lower price point product is outperforming.
Speaker Change: Yes, so we've been we've seen.
Speaker Change: Yes.
Speaker Change: Really broad based growth.
Speaker Change: We've had better occupancy growth in are our products that are closer to like a mid or mid high price point.
Speaker Change: We've seen better growth in the west switches, which has a relatively lower price point than the east.
Speaker Change: There has been.
Speaker Change: Better growth and lower acuity assisted living and independent living and then the higher acuity product.
Speaker Change: But very strong occupancy growth and so there is the.
Speaker Change: The mix is really just a combination of of reasons why our lower price point product is outperforming.
Justin: It also happens to be the recipient of a lot of NOI-generated CapEx, and, you know, so within that group, we have over 500 basis points of occupancy growth but also had six and a half percent of Rev-PoR growth. So within it, you know, it's a strong contributor to both occupancy and to rate, but as it's a big part of the growth story and the growth profile, you know, it brings the weighted average down from a Rev-PoR standpoint.
Speaker Change: It also happens to be the recipient of a lot of the NOI generating capex and so within that group, we had over 500 basis points of occupancy growth, but also has six 5% of revpar growth. So so within it it's a strong contributor to both occupancy and rate, but as it's a big part of the growth story and the growth profile.
Speaker Change: File it brings the weighted average down from a revpar standpoint, so I think that.
Justin: So I think that, like I said earlier, the reality is, like I said earlier, the volume is so high, mix becomes a bigger factor in the metrics, but the key takeaway is 8% revenue growth and 14.5% NOI, which is really strong.
Speaker Change: The reality is is is like I said early the volume is so high mix becomes a bigger factor in the metrics, but key takeaways, 8% revenue growth.
Speaker Change: 14, 5% NOI and really strong occupancy performance.
Vikram Malhotra: And then just a last one, can you just give us an update on the Brookdale leases that come due next year, just what the metrics are in terms of coverage or just the latest thoughts on what you might do there? All right, so it's Justin again.
Speaker Change: Makes sense and then just a last one can you just give us an update on the brookdale leases that come due next.
Speaker Change: Next year just.
Speaker Change: What the metrics are in terms of coverage or just latest thoughts on what you might do there.
Justin: All right, so it's Justin again. So, Brookdale, I'll start here. So it's a well-covered lease. You'll probably notice that if you look at the supplemental, that they've moved up a row. And so good coverage, good performer.
Speaker Change: Alright, so adjusted again, so so brookdale.
Speaker Change: Yeah.
Speaker Change: I'll start here, so it's a well covered lease youll.
Speaker Change: You'll probably notice that if you look at the supplemental that <unk>.
Speaker Change: <unk> upper row.
Speaker Change: And so good coverage good performer they have had growth in our portfolio. There end markets that we project around 1000 basis points of net absorption upside so really strong growth profile opportunities ahead of it.
Justin: They have growth in our portfolio. They're in markets that, you know, we projected around a thousand basis points of net absorption upside, so really strong growth profile opportunities ahead of them. Um, you know, so really, if this portfolio were to make its way to our shop portfolio, we'd be very happy.
Speaker Change: So really.
Speaker Change: If this.
Speaker Change: Portfolio, where to make its way to our shop portfolio would be very happy.
Justin: So we're really not concerned about an extension. Brookdale has the opportunity to extend the lease, and if they do that, they have to decide by the end of November. It's an all or nothing extension. If they do extend, then the lease will escalate by 26, at least 3% and as high as 10% based on a fair market value review. Considering the performance and the coverage that I've mentioned and the upside opportunity of the markets, we would expect that it could be on the better end of that, but we'll have to wait and see. But, you know, we love the optionality we have here and, you know, kind of worst case, you know, Brookdale extends, and you have a well-covered lease.
Speaker Change: So we're really not concerned about extension.
Speaker Change: Brookdale has the opportunity to extend the lease and if they do that they have to decide by the end of November because all or nothing extension.
Speaker Change: If they do extend than the lease will escalate in 2006.
Speaker Change: At least 3% and as high as 10% based on a fair market value review considering.
Speaker Change: Considering the performance in the coverage that I've mentioned and the upside opportunity of the markets. We would expect that it could be on the better end of that but we'll have to wait and see but.
Speaker Change: We love the Optionality, we have here.
Speaker Change: And kind of worst case, brookdale extends and you have a well covered lease.
Speaker Change: Thank you.
Speaker Change: Thank you.
Richard Anderson: Your next question comes from the line of Richard Anderson with Woodbush Securities. Your line is open.
Speaker Change: Your next question comes from the line of Richard Anderson with Wedbush Securities. Your line is open.
Richard Anderson: Hey, thanks. Good morning and nice quarter.
Richard Anderson: Good morning, and nice quarter. So my question.
Richard Anderson: A question I asked on the <unk> call and I got fully shutdown I'm going to ask you. The same question as to what you said.
Richard Anderson: So, the question I asked on the Welltower call, and I got fully shut down. I'm going to ask you the same question and see what you say. So, as occupancy gets higher, does it become increasingly more difficult to grow it from there? So, my theory is at 75% occupancy, you have the full range of unit options to offer people, but if you're at 85, you have fewer options, so it's just harder to fill that Swiss cheese effect, if I can use that. Do you agree with that, that, you know, when you get to sort of post-pandemic occupancy and then start targeting that 92% peak in your history, that that process will maybe logically take longer to achieve?
Speaker Change: So as occupancy gets higher.
Speaker Change: Does it become increasingly more difficult to grow it from there. So my theory is at 75% of occupancy you have the full range of unit options to offer people, but if you are at 85, you have fewer options. So it's just harder to fill that Swiss cheese effect. If I can use that do you agree with that when you get to.
Debra A. Cafaro: I'm going to let Mr. Zero Lost Revenue Days take that.
Speaker Change: Sort of post pandemic occupancy and then start targeting that 92% peak in your history.
Speaker Change: That process will maybe logically take longer to achieve.
Speaker Change: Im going to let Mr zero loss revenue days take that.
Justin: Go ahead.
Justin: So, Debbie's referring to my passion project, which is... encouraging our operators and communities to get to where they're achieving zero loss revenue days. We benchmark this, and we report on it every month.
Speaker Change: So Debbie is referring to my passion project, which is encouraging our operators and communities to get to where they are achieving zero loss revenue days, we benchmark. This and we report on it every month and commonly known as 100% accurate exactly but a truly 100%. So one thing I love about senior housing business is that you can truly be a 100% we.
Justin: Unknown Speaker Exactly, but a truly 100%. So one thing I love about the senior housing business is that you can truly be 100%. We do have communities already in our portfolio that literally are turning units, you know, they may have four or five out, they're turning all of them with new move-ins within the same month and having zero frequency, zero frictional vacancy. So, my point of view, Rich, is it's actually easier the higher occupied you get.
Speaker Change: Do have community is already in our portfolio that literally are turning units.
Speaker Change: I have four or five hours are turning all of them with new move ins within the same month, and having zero frequency zero frictional vacancy.
Speaker Change: So my point of view rich is it's actually easier the higher occupied you get.
Justin: And the reason for that is because you've established yourself as a strong market participant or market leader. Usually, there's an opportunity to fill the last unit or two with just extra effort. I'm not going to say it's easy, but it's much easier to fill a unit or two than to look upward at 20 units.
Speaker Change: And the reason for that is because you've established yourself as a strong market participant in a market leader.
Speaker Change: Usually there is an opportunity to fill the last unit or two with just.
Speaker Change: With extra effort, it's I'm not going to say, it's easy, but it's much easier to fill a year or two then look upward at at 20 units.
Justin: So I like the opportunity in our communities that are over 90% to push all the way to 100 or as close as they can get to it. And the other thing that comes with that, obviously, is scarcity value and price go with that. So that's the big opportunity, so I don't think I agree with you. Okay, foiled again.
Speaker Change: So I like the opportunities in our communities that are over 90% to push all the way to 100 or as close as they can get to it.
Speaker Change: And the other thing that comes with that obviously is scarcity value and price goes with it.
Speaker Change: So that's the big opportunity so I don't I don't think.
Speaker Change: I agree with you.
Speaker Change: Okay boiled again.
Richard Anderson: My next question, when you talk about the redevelopment program and SHOP, and you mentioned some of the occupancy lift that you got from that, is that factoring in at all to the same store optics or results that you got in the quarter? In other words, the 380 basis point improvement in the U.S., is there any amount of that that is benefiting from the CapEx program where you get the revenue lift and the occupancy lift, but you're still capitalizing the cost? Yeah, a good question.
Speaker Change: My next question.
Speaker Change: When you talk about the redevelopment program and shop and you mentioned some of the occupancy lift that you got from that is that factoring in at all to the same store.
Speaker Change: Optics or results that you got in the quarter in other words 380 basis point improvement in the U S is there any amount of that that is benefiting from the Capex program, where you get the revenue lift in the occupancy lift, but youre still capitalizing the cost yes. Good question I mean, one thing that's good about the way we are.
Justin: I mean, one thing that's good about the way we're showing our shop results is that the vast majority of our communities are in our same store results. And so most of those projects stay in during the redevelopment process. And, you know, we take the downs to the extent there are any during that time, and then they remain in now. And that's, that's true for almost all right, just Yep, that's right.
Speaker Change: Showing our shop results is that the vast majority of our communities are in our same store results.
Speaker Change: And so those most of those projects stay in during the redevelopment process.
Speaker Change: And we take that down to the extent there are any during that time and then they remain in.
Speaker Change: Now and that's true for almost all right, Jeff Yes, that's right. So when we are reporting on a 133 season projects. Those are all same store and they never came out they are in during the construction period and so there is although disruption we've absorbed already in our experience in the benefits.
Justin: So when we're reporting on 133 season projects, those are all same store projects. And they never came out there in, you know, during the construction period. And so, you know, there's a little disruption we've absorbed already, and now we're experiencing the benefits of, you know, the upside opportunity from the investor. There are some projects that are, you know, a bigger re-dev that do come out, those are more intrusive, and there's a lot of criteria around defining which projects qualify for that, you know, to be in the non-same-store pool, but these that we're reporting on are definitely in the...
Speaker Change: <unk>.
Speaker Change: The upside opportunity from the investment.
Speaker Change: There is some projects that are.
Speaker Change: Bigger readout that do come out those are more intrusive.
Speaker Change: All our criteria around defining which projects qualify.
Speaker Change: For that to be.
Speaker Change: In the non same store pool, but.
Speaker Change: These that were reporting on our are definitely in the pool.
Justin: So when you think about the redevelopment activity, is it a wash then, the stuff that's sort of, you know, underwhelming occupancy and the stuff that's, you know, boosting occupancy, when you net those two, the 380 in the U.S. would probably still be pretty close to 380?
Speaker Change: So when you think about the re devs activity is it a wash then the stuff that's sort of underwhelming occupancy and the stuff thats.
Speaker Change: Boosting occupancy when you when you net those two to three years in the U S would probably still be pretty close to 380.
Justin: You know, I think it's a net gainer, Rich. There is some disruption, but Honestly, you can sell the redev in many cases to the residents. You can show the plans, they can see the opportunity. And so, in advance of the completion, you see occupancy and price increases. So though there is some disruption, that's definitely a positive.
Speaker Change: I think it is a net gainer of rich.
Speaker Change: There is some disruption but.
Speaker Change: Honestly, you can sell the readout or in many cases to the residents can show the plans they can see the opportunity.
Speaker Change: So you see in advance of the completion, you see occupancy and price lifts. So although there is some disruption thats definitely a positive okay and you're trying to get them done. So that you are meeting this intensive demand thats great.
Richard Anderson: And you're trying to get them done so that you're meeting this intensive demand that's right, that's present at this time. Okay, got it. Thanks very much.
Speaker Change: And at this time so.
Richard Anderson: Ok, got it. Thanks very much. Thank you, Rick. Thank you. Your next question comes from the line of Michael Stroyeck with Green.
Speaker Change: Got it thanks very much.
Roger: Thank you Roger.
Michael Stroyeck: Your next question comes from the line of Michael Stroyeck with Green Street. Your line is open. Thanks for fitting me in. Good morning. Maybe one on the transaction market. What's a typical cap rate spread that you're seeing?
Michael <unk>: Your next question comes from the line of Michael <unk> with Green Street. Your line is open.
Michael <unk>: Thanks for fitting me in good morning.
Speaker Change: Maybe one on the transaction market.
Michael <unk>: Typical cap rate spread that youre seeing on assisted living deals versus independent living.
Justin: So we haven't really everything we've bought has had You know a combination of services, and so I really wouldn't be able to comment on a freestanding independent living cop rate, for instance, versus a freestanding assisted living. And most of what we're buying has both independent living and assisted living on the campus, along with memory care services. You know, I know historically there's been a spread because of the longer length of stay to independent living, with a little less volatility.
Speaker Change: So we haven't really everything we bought has had.
Speaker Change: A combination of services and so I really wouldn't be able to comment on a freestanding independent living cap rate for instance versus a freestanding assisted living and most of what we're buying has both independent living and assisted living on the campus along with memory care services I.
Roger: I know historically, there has been a spread because of the longer length of stay that independent living a little less volatilities, there's been like a 50 basis point spread in the past I don't know that I can really confirm that that exists today just based on the activity that we have in our pipeline.
Justin: There's been like a 50 basis point spread in the past. I don't know that I can really confirm that that exists today just based on the activity that we have in our pipeline. Okay, that makes sense.
Speaker Change: Okay that makes sense.
Speaker Change: And then it looks like a couple of research assets have entered the Readouts pool. This quarter, what sort of return are you targeting on those projects and should we expect additional research assets to enter redevelopment in the coming quarters.
Michael Stroyeck: Thanks for the question. This is Pete.
Speaker Change: Thanks for the thanks for the question this is Pete.
Speaker Change: The answer we are.
Speaker Change: We don't expect additional assets go into into redevelopment in the next foreseeable future.
Pete: Happy to answer. However, we don't expect additional assets to go into redevelopment in the foreseeable future. The return aspects will be substantial because these buildings are in really good markets. They're well located in these markets. You know, they're quality buildings, and they just need a bit of upgrading to compete in the, in the, you know, in the marketplace itself. One good example is 3711 Market in Philadelphia. It's a great market for us, performing really well.
Speaker Change: Our return aspects will be substantial these buildings are in really good markets, they're well located in these markets.
Speaker Change: Their quality buildings, and they just need a bit of.
Speaker Change: Upgrade to compete in the <unk>.
Speaker Change: In the marketplace itself.
Speaker Change: And.
Speaker Change: One. Good example is 37 11 market in Philadelphia is great market for us performing really well, it's a healthy life sciences market.
Pete: It's a healthy life sciences market. The building has about 50% office tenants. Some of those office tenants have left. We have an opportunity to turn it into research space, which will dramatically increase the rental rate that we can achieve in that building. And we're looking forward to really strong rate growth and rent growth in the next year or so from that asset.
Speaker Change: The building is about 50% office tenants some of those office tenants have left do we have an opportunity to turn it in the research space, which will dramatically increase the rental rates that we can achieve in that building.
Speaker Change: And we're looking forward to really strong rate growth and rent growth in the next year or so from net assets.
Speaker Change: Okay.
Speaker Change: Okay got it thank you.
Speaker Change: Thanks.
John Kilichowski: Your next question comes from the line of John Kilichowski with Wells Fargo. Your line is open.
Speaker Change: Your next question comes from the line of John Kelly, Chelsea <unk> with Wells Fargo. Your line is open.
John Kilichowski: So just to circle back to XCOR, I understand you get sort of the tougher comps on agency labor, but it sounds like we're hearing reports from other operators that labor expenses have started to soften recently, which matches the job reports we saw this morning. And I'm just curious if you're keeping your guide here as expressing a little bit of conservatism that there could be greater availability of labor in the second half of the year if unemployment ticks up.
John Kelly: Alright. Thank you so just to circle back to explore I understand you get sort of the tougher comps on agency labor.
John Kelly: But it sounds like we're hearing reports from other operators labor expenses have started to soften recently, which matches. The job reports. We saw this morning I'm. Just curious if you are keeping your guide here is expressing a little bit of conservatism is there could be greater availability of labor in the second half of the year, if unemployment ticks up.
Bob: Yeah, I mean, they're, they're There could be some conservatism in that metric. You know, we have tildes around everything.
Speaker Change: Yes.
Speaker Change: They are.
Speaker Change: There could be some conservatism in that metric.
Tilda: Tilda has around everything.
Bob: We were very explicit around two metrics, you know, one being occupancy and the other being NOI. The others, you know, REF-4 has some mixed considerations and then OPEX-4. And they both have year over year considerations. And the OPEX-4, you know, we have some considerations as well as just, you know, an expectation of normal inflation. So we'll just have to see how it plays out. But the labor market has been very favorable.
Speaker Change: We were very explicit around two metrics won't be an occupancy and NOI.
Speaker Change: The others Revpar has some mix considerations and then opex for and they both have year over year comp considerations and the Opex for <unk>.
Speaker Change: Have you.
Speaker Change: Have some comp considerations as well as just.
Speaker Change: And an expectation of normal inflation. So we'll just have to see how it.
Speaker Change: Plays out, but the labor market has been very favorable.
Speaker Change: You're right you're right, Yes, today's report may influence that and.
Bob: Yeah, you're right. You're right. Today's report may influence that, and we'll continue to monitor and make sure we have, you know, a healthy spread between the two key metrics to drive revenue and NOI growth.
Speaker Change: We will continue to monitor and make sure we have.
Speaker Change: A healthy spread between.
Speaker Change: The two key metrics to drive revenue and NOI growth.
John Kilichowski: I mean, would you be able to comment at all on what you've seen quarter to date from labor? Is it starting to shift in your favor, or is it the same old, same old as it was in 2Q?
Speaker Change: I mean would you be able to comment at all what you're seeing quarter to date from labor or is it starting to shift in your favor or is it same old Gen. One as it wasn't in Tokyo.
Debra A. Cafaro: Again, we should distinguish between year-over-year and, you know, sequential. I do think that, you know, what Bob said is important in the year-over-year comparisons. And then, as we look forward, the labor market is pretty dynamic right now. And so we're assuming kind of steady as she goes. But as you point out, especially based on today's report, we may see a little improvement in that going forward.
Speaker Change: Again, we should distinguish between year over year and sequential.
Speaker Change: Do think that what <unk>.
Speaker Change: Rob said is important and the year over year comparisons and then as we look forward again, the labor market is pretty dynamic right now and so.
Speaker Change: We're assuming kind of steady as she goes but as you point out, especially based on todays report, we may see a little improvement in that going forward, but its too early to say.
Speaker Change: Yes.
John Kilichowski: Got it. And then maybe just jumping to the dispositions in the quarter. It looks like really strong execution there. But is there any color you could give on what drove the low cap rates on those assets? Are these non-core and maybe lower quality where there's like a pro forma upside for the buyer, or are these high quality assets and they're just here to fund acquisitions because we're strategically rotating more in a shop?
Speaker Change: Got it and then maybe just jump into the dispositions in the quarter. It looks like really strong execution. There, but is there any color you could give on what drove the low cap rates on those assets are these noncore.
Speaker Change: And maybe lower quality, where there's like a pro forma upside for the buyer or these high quality assets and Theyre just here to fund acquisitions, because we're strategically rotating more to shop.
Bob: Yeah, I'll take that one. So just some numbers, we've sold out 230 odd million, and we've got a full year guide of 300. So the majority is cash in the bank. You know, it's a very low cap rate, kind of in the two to three range, which is great.
Speaker Change: Yes, I'll take that one so.
Speaker Change: Just some numbers we've sold about 230 odd million, we've got a full year guide of 300, so the majority.
Speaker Change: As cash in the bank, it's a very low cap rate kind of.
Speaker Change: In the two to three range.
Bob: And that's led by senior housing. Your other question was, is this capital recycling, upgrading the portfolio, exiting non-strategic markets? Yes. And using the data analytics that we have to identify those those markets that may not have that opportunity to grow like the rest of the portfolio, the buyer may see that opportunity, and therein, you know, lies the transaction.
Speaker Change: Which is great and Thats, just less led by senior housing.
Speaker Change: Your other question was is this capital recycling upgrading the portfolio exiting non strategic markets yes.
Speaker Change: Using the data analytics that we have to identify those markets that may not have that opportunity to grow like the rest of the portfolio.
Speaker Change: The buyer may see that opportunity and therein lies.
John Kilichowski: And so, you know, we're pleased with that growth rate. Clearly, that's another source of capital for us while upgrading the portfolio. So, you know, we're happy with the results. And in senior housing, with data analytics, we're curating the portfolio on the buy and the sell side.
Speaker Change: The transaction and so.
Speaker Change: We're pleased with that growth rate clearly that's another source of capital.
Speaker Change: For us.
Speaker Change: Creating the portfolio so we're.
Speaker Change: We're happy with and then senior housing with the data analytics, we're curating the portfolio on the buy and the sell side.
Wes Golladay: Same, yeah, same, same approach. Yep. Got it. Thank you. Thank you. Your next question comes from the line of Wes Golladay.
Speaker Change: Yes same same approach yet.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Wes Golladay: Your next question comes from the line of Wes Golladay with Bayer. Your line is open.
Speaker Change: Your next question comes from the line of Wes Golladay with Baird. Your line is open.
Wes Golladay: Hi, Yes, good morning, everyone I just wanted to get your thoughts on that.
Speaker Change: Leveraging.
Wes Golladay: To the over advertising deals ahead of a strong cycle are you looking to create investment capacity for a much bigger pipeline are there any macro concerns that you're just waiting for the cost of desktop or just get your thoughts on that.
Debra A. Cafaro: Yeah, I mean, our whole strategy is designed to increase our enterprise growth rate and expand our shop footprint. And because of the way we are funding the assets that continue to improve our balance sheet, and you saw that year to date. Yeah, the playbook has been, first and foremost, organic growth in the shop. This is going to be the key driver of Leverage Improvement,
Speaker Change: Yes, I mean, our whole strategy.
Wes Golladay: It is designed to increase our.
Wes Golladay: Enterprise growth rate and our shop footprint and because of the way. We are funding the assets continue to improve our balance sheet and you you saw that year to date.
Bob: Yeah, the playbook has been, first and foremost, the organic growth in shops. This is going to be the key driver of Leverage Improvement, and if you just look at the numbers on that, 130 million or so in organic growth this year. That by itself is 40 basis points of leverage improvement, not that deep of a dot. And then, in addition to that, Equity Funded Investments is the gravy on top, and indeed we've been able to do both this year. We're 50 basis points lower so far from the start of this year to now, and that same playbook is going to continue to run out, and, you know, it provides financial flexibility and opportunity to go on offense. And that's why we like the five to six times the range, and we'll continue to execute on the strategy to get, Okay, and then turn into the senior housing development.
Wes Golladay: The playbook has been first and foremost the organic growth in shop is going to be the key driver.
Wes Golladay: Of leverage improvement and if you just look at numbers on that $130 million or so organic growth this year.
Speaker Change: That by itself is 40 basis points of leverage improvement net debt to EBITDA.
Speaker Change: And then in addition to that.
Speaker Change: Equity funded investments.
Speaker Change: As the gravy on top and indeed, we have been able to do both this year were 50 basis points lower so far from this.
Speaker Change: This year to now.
Speaker Change: And that same playbook is going to continue to run out and.
Speaker Change: It provides financial flexibility and opportunity.
Speaker Change: To go on offense and that's.
Speaker Change: That's why we like the $5 to $60 range and we will continue to execute on the strategy to get there.
Speaker Change: Okay, and then turning to the senior housing development is there any point, where you would want us starting new developments deliver counter cyclical in a few years from now any markets. They may be the first to get supply and then maybe look into Canada, obviously, a little bit more stabilized market, where they can start to get supply at any point.
Debra A. Cafaro: I mean, right now, our overarching capital allocation priority is to invest in cash-flowing senior housing assets that meet the characteristics that Justin outlined and provide near-term accretion even when equity-funded and immediate near-term growth that enhances our enterprise value. That could change over time, but right now, we're very, very focused on that area.
Speaker Change: I mean right now.
Speaker Change: An overarching capital allocation priority is to invest in cash flowing senior housing assets that meet the characteristics that Justin outlined and provide near term accretion even when equity funded an immediate near term growth that enhances our enterprise.
Speaker Change: Ill you.
Speaker Change: That could change over time, but right now we're very very focused in that.
Speaker Change: Area.
Wes Golladay: Okay, thanks for the time. Thank you. Your next question comes
Speaker Change: Okay. Thanks for the time.
Speaker Change: Thank you.
Speaker Change: Yeah.
Nikita Belli: Your next question comes from the line of Nikita Belli with J.P. Morgan. Your line is open.
Speaker Change: Your next question comes from the line of Nick Nikitas Belli with J P. Morgan Your line is open.
Speaker Change: Hey, Good morning, guys can you talk a little bit about your developer.
Speaker Change: Development programs, specifically <unk>.
Speaker Change: And medical and research the progress.
Speaker Change: You guys made in so Paulo conversations you're having on the remaining leasing is still have to do all that.
Speaker Change: Okay.
Pete: Yes, we can talk about those, and there are quite a few that are well underway, and Pete, can you take that? Sure, sure. There's so much for outpatient medical, you know.
Speaker Change: Yes, we can talk about.
Speaker Change: And there are quite a few that are that are well underway and Pete can you take that.
Pete: Sure, sure. So for outpatient medical, you know, we have a really fairly minor list of assets that are under redevelopment. We have, you know, subredevelopments, which are, Development. Okay, so let me just finish what I was going to say.
Pete: Sure sure so for outpatient medical.
Pete: We have really a fairly minor list of assets that are under redevelopment.
Speaker Change: We have <unk>.
Pete: Sub redevelopments, which are.
Speaker Change: Development Okay.
Speaker Change: Just finished I was going to say so redevelopment. Many times, we're looking to do is upgrade the buildings create spec suites and so forth and those have been very good returns for us.
Pete: So redevelopment, many times we're looking to do is upgrade the buildings, create spec suites, and so forth, and those have been very good returns for us. On medical office buildings, we have an outpatient medical center, we have one asset with Sutter that is 100% lease. It just came online.
Speaker Change: On medical office buildings, we have.
Speaker Change: As an outpatient medical we have one asset with with.
Pete: We're complete, and we're really excited about that asset. On the development and life sciences redevelopment, but on the development assets themselves, you have to think about them in really two different tranches. You know, we have a set of assets that are online, they're operating, and they're largely full. Examples would be Pit 1 and Pit 2, where they're 100% occupied.
Speaker Change: With Sutter that is 100% leased it just came online or were complete and we're really excited about that asset.
Speaker Change: On the we talked a bit about development in life Sciences redevelopment, but on the development assets themselves you have to think about it in really two different tranches.
Speaker Change: We have a set of assets that are that are online. They are operating and they are largely full examples would be pit one in pit to where there are 100% occupied <unk> got our asset in Phoenix with Arizona State, which has attracted National Institute of Health is a major tenant is under.
Pete: You've got our asset in Phoenix with Arizona State, which has attracted the National Institute of Health as a major tenant. It's under construction, and the tenant improvements. In Philadelphia, you've got One U City, which is 93%, and Drexel, which is 100%. We have another tranche of assets that are under development, still under construction. They're optimistic about one associated with UC Davis, two that are with Atrium Health in Charlotte, and four MLK. And they're under construction, they have good pre-leasing, 60%, 70% pre-leasing, and we're optimistic about those assets going forward.
Speaker Change: <unk> the 10 improvements in Philadelphia, you've got one new city, which is 93% and Drexel, which is 100%. We have another tranche of assets that are under development is still under construction. They were optimistic about one associated with UC Davis, two that are with atrium health in Charlotte and forum Okay.
Speaker Change: And they are under construction they have good pre leasing 60, 60%, 70% pre leasing and we're optimistic about those assets going forward.
Nick Yulico: Your next question will come from the line of Nick Yulico with Scotiabank. Your line is open.
Speaker Change: Your next question will come from the line of Nick <unk> with Scotiabank. Your line is open.
Nick Yulico: Thanks. Just a couple quick ones. For July, I want to see if we can get the shops and store occupancy to get a feel for how it's improved sequentially.
Nick Joseph: Thanks, just a couple quick ones on July I wanted to see if we can get the shop same store occupancy to get a feel of how it has improved sequentially.
Justin: What I can tell you is that I mentioned in my prepared remarks that the key selling season is off to a strong start, including July. And that's what we have for now.
Speaker Change: What I can tell you is that.
Speaker Change: And in the prepared remarks said that the key selling season is off to a strong start including in July.
Speaker Change: And.
Speaker Change: That's the way we have for now.
Justin: But I mean, any reason not to give it. I mean, multifamily self storage gives it. Why not?
Speaker Change: I mean, any reason not to give it I mean multifamily self storage gives it why not.
Ravi: Thank you Ravi.
Justin: Well, they operate their own portfolios, for one, but I think what Justin said is a good data point for now.
Speaker Change: Well they operate their own portfolios for one but.
Speaker Change: I think what Justin said this is a good is a good data point for now.
Nick Yulico: Okay, and then in terms of the investments, can you just give us a feel, I know you quote the initial yield. How much NOI growth is embedded in that assumption to get to a stabilized yield, just so we're modeling this correctly?
Speaker Change: Okay, and then in terms of.
Speaker Change: The investments can you just give us a few I know you quote the initial yield.
Speaker Change #100: So I think a year one yield.
Speaker Change: Much NOI growth is embedded in that assumption to get to stabilized yield to silver modeling this correctly.
Nick Yulico: Yeah, say that again, Nick.
Speaker Change: Say that again, Nick I think.
Nick Yulico: Yeah, I'm just trying to understand, like, in terms of the initial yield that you're quoting for senior housing, how much NOI growth is embedded in the first year to get to that initial yield? Just want to make sure we're modeling this correctly. Thanks.
Nick Joseph: Yes, I was just trying to understand like in <unk>.
Speaker Change: The initial yield that you are quoting for senior housing.
Speaker Change: How much NOI growth is embedded in the first year.
Nick Joseph: Our initial yield just want to make sure we're modeling this correctly.
Bob: Got it. I mean it gets it. It gets into our underwriting, obviously, you know, we look at the last year's, we look at pre-COVID numbers, we look at the trailing three, and where it is kind of at the time of acquisition. And we model what our expectations are going forward; given the fundamentals, you would expect that there would be some growth from, say, the trailing three or the in place in that number, typically a modest amount.
Speaker Change: Got it.
Speaker Change: Tim.
Speaker Change: It gets into our underwriting obviously, we look at the last years, we look at pre Covid numbers, we look at trailing three and where it is kind of at the time of acquisition and we model what our expectations are going forward given the fundamentals.
Speaker Change: You would expect that there would be some growth from say the trailing three or the in place and that number typically a modest amount.
Bob: And, you know, in some cases, if occupancy is 100%, we may actually diminish it a little bit. So it really depends on the asset. And most of them will have, as we talked about, given the template for the investment: 7-8% yields going in with significant near-term growth. You'll see some elevation from the, you know, closing NOI number, but it's a... It's modest, you know, but it's rising.
Speaker Change: And.
Speaker Change: In some cases.
Speaker Change: If occupancy is 100%, we may actually diminished a little bit so it really depends on the asset and but most of them will have as we talked about given the template for the investments.
Speaker Change: 7% to 8% yields going in with significant near term growth Youll see some elevation from the at closing NOI number but.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: It's modest but it's ramping.
Speaker Change: Yeah.
Speaker Change: Okay. Thanks.
Speaker Change: Yes.
Operator: There are no further questions at this time. I will turn it back over to Debra A. Cafaro, Chairman and CEO, for closing remarks.
Speaker Change: There are no further questions at this time I will turn it back over over to Debra Cafaro with our chairman and CEO for closing remarks.
Debra A. Cafaro: Bailey, thank you so much, and I want to thank all the participants on today's call for your interest and support of Ventas. We hope you have a great rest of the summer, and we look forward to seeing you in person soon. Thank you. This does conclude today's conference call. You may now disconnect.
Debra Cafaro: Barry. Thank you so much and I want to thank all the participants on today's call for your interest and support of Vantiv. We hope you have a great rest of the summer and we look forward to seeing you in person soon thank you.
Speaker Change: This does conclude today's conference call you may now disconnect.
Debra Cafaro: Okay.
Speaker Change: Yes.
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