Q4 2024 Ventas Inc Earnings Call
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Gail: Thank you for standing by. My name is Gail, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ventus Fourth Quarter and Full Year 2024 Earnings Results Conference Call.
Gail: All lines have been placed on mute to prevent any background noise.
Gail: After the speaker's remarks, there will be a question and answer session.
Gail: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.
Speaker Change: If you would like to withdraw your question, kindly press star 1 again. Thank you very much. I will now turn the call over to B.J. Grant, Senior Vice President of Investor Relations. Please go ahead.
B.J. Grant: Thank You Gail and good morning everyone and welcome to the Ventos fourth quarter and full year 2024 results conference call.
B.J. Grant: Yesterday, we issued our full year and fourth quarter 2024 earnings release, presentation materials and supplemental information package, which are available on the VENTAS website at ir.ventasre.com.
B.J. Grant: 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.
B.J. Grant: For a more detailed discussion of those factors, please refer to our earnings released for this quarter and to our most recent SEC filings, all of which are available on the Ventos website.
Speaker Change: 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 Information Package posted on the Industrial Relations website. And with that, I'll turn the call over to Debra A. Cafaro, Chairman and CEO of Ventos.
Speaker Change: Thank you, BJ. I want to welcome all of our shareholders and other participants to the Ventas fourth quarter and full year 2024 earnings call.
Speaker Change: Ventas really delivered in 2024. Today I'm happy to discuss our strong results, investment activity, and growth powered by our increasing participation in the unprecedented multi-year growth opportunity in senior housing.
Speaker Change: With our momentum, I'm also pleased to introduce our favorable expectations for 2025.
Speaker Change: We continue to focus on creating value for our stakeholders from our advantaged position within the longevity economy as we enable exceptional environments that benefit a large and growing aging population.
Speaker Change: The company effectively executed on its 1-2-3 strategy in 2024 and I'd like to thank my colleagues for their commitment and excellence.
Speaker Change: During the year, we took advantage of the unprecedented multi-year growth opportunity in senior housing. We delivered significant senior housing NOI growth from our portfolio, made value-creating investments focused on senior housing, and drove cash flow throughout our portfolio.
Speaker Change: Let's discuss 2024 results. Ventas delivered full year normalized FFO per share of $3.19 above the high end of our guidance range.
Speaker Change: Shop Same Store Cash NOI grew nearly 16%, the third year in a row of double-digit growth.
Speaker Change: As Justin forecast at the beginning of the year, 2024 was a year of occupancy outperformance, with year-over-year occupancy increasing 300 basis points in our same-store communities.
Speaker Change: Compelling secular demand, de minimis supply, well-positioned communities and favorable markets, and Ventas' advantage platform came together to deliver results.
Speaker Change: I also want to recognize the care providers for their outstanding service to residents and their families, including their extraordinary actions during the recent California fires.
Speaker Change: In 2024, we also completed over $2 billion in accretive investments focused on senior housing.
Speaker Change: These investments met our well-defined operational and financial criteria and were selected from a much bigger pipeline of opportunities using our competitive advantages in senior housing which include data analytics, operator relationships, and our experienced knowledgeable team.
Speaker Change: These investments, funded with equity, increased our participation in the multi-year growth opportunity.
Speaker Change: Through expansion of our senior housing portfolio, they added accretion, improved our FFO per share growth rate, accelerated deleveraging, and created value.
Speaker Change: As a result of both organic and external growth in SHOP in 2024, our scale grew significantly to $2.2 billion in annualized EBITDA.
Speaker Change: Shop reached 43% of our NOI, and our leverage improved to enter our long-term targeted range, all by year-end.
Speaker Change: With nearly 8% total company same-store cash NOI growth in 2024, we also achieved the third prong of our strategy, driving cash flow growth throughout the portfolio.
Speaker Change: compounding NOI growth from outpatient medical research and our triple net lease portfolios supplemented our strong shop performance.
Speaker Change: We also increased our Ventas Investment Management Platform, or VIM, during the year.
Speaker Change: Started in 2020, VIM has over five billion dollars in assets under management.
Speaker Change: Looking forward, we are excited about the opportunities ahead. To create value for stockholders, we intend to continue to drive shop growth and expand our shop footprint with accretive investments focused on senior housing.
Speaker Change: As a result, we expect our shop business to represent over 50% of our NOI by year end.
Speaker Change: Our 2025 guidance anticipates normalized FFO per share growth of 7% at the midpoint led by SHOP.
Speaker Change: If achieved, this profile would put us in the upper echelon of REITs.
Speaker Change: And, even as we focus on growth, we also expect to further enhance our financial strength and flexibility during the year.
Speaker Change: All the while, we'll maintain our commitment to enabling exceptional environments that benefit a large and growing aging population.
So, our value proposition for investors in 2025 is clear.
Speaker Change: deliver top-tier 2025 FFO per share growth, property NOI growth, and investment growth, further improve our balance sheet, and top it off with a 7% increase in our quarterly dividend.
Speaker Change: We are optimistic about 2025 and beyond. Conditions remain favorable for our continued success, and the company continues to build its competitive advantages.
We are in it to win it!
Speaker Change: We are still in the early innings of this multi-year growth opportunity in senior housing. As the over 80 population is surging, construction starts have fallen to historic lows, and new developments generally are not feasible.
Justin: positive operating leverage as occupancies rise, and a terrific, experienced team whose ranks continue to grow with top talent. With that, I'll turn it over to Justin.
Thank you, Debbie.
Justin: I'll give updates on our strategy to deliver profitable organic growth in our senior housing portfolio and execute on value creating external growth.
Justin: We had a very exciting and successful year on both fronts.
Starting with organic growth.
Justin: 2024 marked the third year in a row of double-digit same-store shop NOI growth.
Justin: I'm very happy with the execution of our Ventos OI-driven shop platform initiatives and collaborative relationships with our high-performing operators.
Total shop same-store cash NOI growth
Justin: Full year, same-store shop occupancy grew by 300 basis points versus our initial guidance of 250.
Justin: In the fourth quarter, our U.S. same-store NOI grew 20% and occupancy grew 370 basis points.
Justin: We are outperforming our markets in occupancy growth. Our U.S. shop communities in the NIC TOP 99 markets grew 350 basis points.
beating the NIC benchmark by 140 basis points.
These results were broad-based across assistive living and independent living.
Justin: Moving forward, we are highly optimistic about our senior housing business across multiple dimensions.
Justin: The supply and demand dynamics in our sector are exceptionally favorable.
Justin: Over the next five years the U.S. will experience an unprecedented surge in the senior population as the baby boomer generation begins turning 80.
Justin: This 80 plus age group is projected to grow by 28% during this period, driving significant demand for senior housing.
Justin: Meanwhile, new construction in our markets remains constrained, with inventory growth at the lowest number on record, and new construction starts at an all-time low.
Justin: These combined factors create an extraordinary net absorption opportunity in the upcoming years, unlike anything we have seen before.
Justin: We just finished the first lap of a long race, as supply-demand characteristics are projected to remain compelling over the next several years.
Justin: Ventas is in a strong position to continue to drive growth in our shop portfolio.
Justin: We have favorable competitive positioning driven by events SOI with proprietary data analytics and experiential insights, which underscore portfolio actions and optimizes performance.
Justin: Our expanding network of 29 shop operators has consistently delivered tremendous growth while capturing market share in their respective regions.
Justin: We are committed to working closely together with them to capture the immense opportunities ahead. We offer a differentiated approach through collaboration and the aligned goal of delivering exceptional care, services, and performance.
Justin: We continue to execute on our Community Refresh Program, improving the living and working environments of our communities, and therefore improving competitive positioning.
Justin: We have completed 228 projects at year-end, including over 150 refreshed employee break rooms and over 4,500 modernized resident units.
Justin: We are on pace to complete another 50 refreshed projects by the key selling season this year, which should further enhance our ability to drive NOI.
Justin: Speaking of driving NOI, as previously announced, we are excited to expand our SHOP portfolio by converting 45 large-scale senior housing communities comprising of about 5,700 units from the triple net structure to SHOP.
Justin: This is a great opportunity to reposition low-occupied communities that are located in markets with strong projected net absorption.
Justin: We have plans to transition these communities to five proven, high-performing operators with a strong track record of both transitioning and improving operating performance.
Justin: Assuming this conversion occurs by the end of the year, we project our shop footprint to increase by 8% in number of units and our shop portfolio to increase to account for over 50% of our enterprise NOI.
Justin: Looking forward to 2025, we are excited to continue our multi-year growth trajectory as we embark on our fourth consecutive year of double-digit NOI growth in our same-store-shop portfolio.
Same store shop is expected to grow NOI
Justin: The midpoint of our range is driven by revenue growth of about 8%, average occupancy growth of about 270 basis points, and continued strength in pricing, driving Rep4 of around 4.5%.
Furthermore, we expect operating expense growth of 5%.
Justin: Per usual, the results will be highly dependent on a successful key selling season and we are assuming a relatively stable inflationary outlook.
Justin: Once again, we are expecting the U.S. to be the growth engine with continued accelerating occupancy performance with over 300 basis points of growth.
January Occupancy is off to a strong start.
Justin: Summarizing organic shop growth, we are coming off a strong year of occupancy driven results and we are excited about the opportunities ahead as we continue to unleash the power of our Advantage Shop platform.
Moving on to part two of our strategy.
Justin: We continue to execute on value-creating external growth focused on senior housing in the fourth quarter and throughout 2024. For the full year, we closed on $1.9 billion of senior housing investments, including $1.4 billion in the fourth quarter alone.
Justin: These investments fit squarely within our investment criteria, including 7 to 8 percent expected year one NOI yield, low to mid-teens on labored RRs, and a significant discount to replacement costs.
Justin: Even with this accelerated pace of external growth, we are maintaining our underwriting discipline. In 2024, we reviewed approximately $18 billion of senior housing opportunities, pursuing approximately $5 billion, and ultimately closing on nearly $2 billion.
Justin: We have a rigorous, data-driven process that ensures we are pursuing the best deal for Ventos and investing within our right market, right asset, right operator framework. Our experienced team remains focused on executing our external growth plans, and we intend to expand the team.
Justin: We expect our pipeline will continue to present a large set of compelling investment opportunities with potential deals coming from a range of owners and a variety of reasons for selling, including debt and fund maturities.
Justin: Our investment activity also includes a range of seller profiles, with transactions coming from a balanced mix of owner-operators, private equity, developers, and other institutional capital.
Justin: Looking forward to 2025, we expect to keep our external growth momentum, including line of sight on $1 billion of senior housing investments, which are already in advanced stages, and we expect to be weighted in the first half of the year.
Justin: Ventas is a senior housing partner of choice with sellers, brokers, and the entire investment community. This remains true even as there may be more competition for assets as others are seeing a favorable risk-reward in senior housing.
Justin: Our industry experience, platform capabilities to manage scale, data science, and transaction track record should help to propel our growth prospects moving forward.
Justin: Our investment team capabilities are second to none, and we are continuously building on our strengths.
Speaker Change: With that in mind, I'm very excited to announce Alex Russo joining our team as Senior Managing Director of Investments.
Justin: During his 18-year career at Lazard, Alex has demonstrated exceptional financial and investment acumen, and I expect he will be an instrumental addition to the team as we continue to execute on our value-creating external growth focused on senior housing.
Now, I'll hand the call to Bob.
Bob: Thank you, Justin. I'll share some highlights of our 2024 performance and close with our 2025 outlook.
Bob: I'll start by saying we are pleased with all we accomplished in 2024.
Bob: We finish 2044 strong with attributable net income per share of 19 cents.
Bob: 2024 normalized FFO per share of 81 cents in the fourth quarter and $3.19 for the full year represents a 7% year-over-year increase in both periods.
Bob: The result exceeded the high end of our full year normalized FFO guidance range, led by shop same-store growth and execution on our accretive senior housing investment pipeline.
Bob: Our total company's same store cash NOI grew nearly 8% year-over-year in 2024.
Bob: reflecting broad-based property NOI growth across our portfolio led by 16% growth in SHOP.
Bob: Our outpatient medical and research business delivered continued compounding growth of 3% in 2024, in line with our expectations.
Bob: for the full year. Research grew 4.6% and outpatient medical increased 2.6%.
Speaker Change: As Justin described, we closed on approximately $1.9 billion of senior housing investments, funded all equity.
Speaker Change: We raised $2.2 billion of total equity in 2024 and year-to-date 2025.
Speaker Change: including approximately $1.2 billion raised since the third quarter at an average share price of $62.90.
Speaker Change: consistent with our strategy, shop growth, and all equity-funded senior housing investments have further strengthened our balance sheet.
Speaker Change: At 6.0 times, our Q4 Net Debt-to-EBITDA is a 90 basis point improvement year-over-year and has now entered our long-term targeted leverage range of 5 to 6 times.
Speaker Change: We expect continued leverage improvement in 2025, driven by senior housing growth.
We ended 2024 with robust liquidity of nearly $4 billion.
Speaker Change: which included proceeds from our third quarter 2024 senior note issuance.
Speaker Change: which we subsequently used to pay down one billion of maturing debt in the first quarter of 2025.
Let's conclude with our full year 2025 outlook.
Speaker Change: For 2025, we expect net income attributable to common stockholders of $0.48 per share at the midpoint.
Speaker Change: We expect normalized FFO to range from $3.35 to $3.46 per share, or $3.41 per share at the midpoint, which represents 7% year-over-year growth, in line with the FFO growth we post in 2024.
Speaker Change: The $0.22 normalized FFO per share Business and accretive senior housing investment activity
Speaker Change: partially offset by higher net interest expense, FX, and dilution from a higher share price.
Speaker Change: Our 2025 Total Company Same-Store Cash NOI Guidance approximates 6.75% year-over-year growth at the midpoint, led by SHOP.
Speaker Change: Our guidance includes senior housing investments of approximately 1 billion dollars in 2025 with clear line of sight and waited to close in the first half of the year.
Speaker Change: We intend to principally equity fund these investments, and have already raised $250 million via equity forwards.
Speaker Change: For the year, we also expect to raise $200 million through capital recycling efforts.
Speaker Change: Specific to increased net interest expense, our midpoint of guidance assumes an increase of 8 cents compared to 2024 from refinancing maturing debt at a higher rate and lower cash balances year-over-year.
Speaker Change: A more fulsome discussion of our 2025 Guidance Assumptions can be found in our Q4 Supplemental and Earnings Presentation posted to our website.
To close, we are really pleased with our 2024 performance.
Speaker Change: are executing on our growth strategy and delivering advantage growth in normalized FFO per share.
Speaker Change: The entire Ventos team is determined to continue this momentum in 2025.
With that, I'll turn the call back to the operator.
Speaker Change: At this time, I would like to remind everyone that in order to ask a question, press star then the number one on your telephone keypad.
Speaker Change: Thank you. We will pause for just a moment to compile the Q&A roster.
Speaker Change: Okay, so your first question comes from the line of Omotayo Otosanya with Deutsche Bank. Please go ahead.
Thank you. Thank you. Thank you.
Yes, good morning.
Speaker Change: So, my question actually is about the medical office building side of things. Just looking at the quarter, some occupancy declines, it appears, but in your 2025 guidance, you have pretty strong same-store NOI growth. So I'm just curious.
Yeah, thanks, Tyler, for the question.
Speaker Change: You know, it really is, it started in 24, we actually
Speaker Change: did more leasing, we had 15% more leasing than the prior year, and you know, as you cycle through that, construction, and they start coming online, you start seeing meaningful results.
in your NOI.
If you look at 24, or 25, we've already done
Speaker Change: 34% of our leasing plan, which is a terrific start for mid-February. So our plans for 2025 assume occupancy gains and the corresponding NOI growth.
clearly showing up in your results.
Speaker Change: Curious at this point is what VOI is telling you guys.
Speaker Change: a tailwind, especially now you're kind of at the point where again occupancy is getting higher and things of that sort and supply demand fundamentals clearly are in your favor.
Speaker Change: Hi, it's Justin. Yeah, so, you know, the whole basis for VentasOI is to really help us to focus on, you know, markets, assets, and operators.
disposition decisions.
Speaker Change: decisions to invest in particular assets, and the key point really is it's hyper-locally focused.
Speaker Change: and that really gives us the comfort and confidence that if we make that investment, we take certain actions, that's going to deliver growth opportunity and it's going to have sustained opportunity to perform well over time.
Speaker Change: and that's really the power of the platform. It's looking ahead, you know, near, mid, long term and ensuring that we're as well positioned.
Speaker Change: All right. Congrats on the end of the quarter of the outlook.
Speaker Change: Your next question comes from the line of Michael Griffin with CT. Please go ahead.
Speaker Change: Thanks, it's Nick Joseph here with Michael. I just want to touch base on the acquisition strategy targeting more stabilized assets. So something you could talk about kind of the return profile of those where you can kind of push rate versus the occupancy upside and what sort of kind of going and yield and stabilized IRRs you could get there.
Yeah sure so you know we
Speaker Change: Find this to be a very unique opportunity right now where you can invest in high quality assets.
Speaker Change: that have the combination of delivering yield and growth. I haven't really seen this before.
Speaker Change: There are opportunities to invest in a variety of different senior housing. We mentioned we had $18 billion that we started to look at. We only pursued $5 billion of that, and really that's because we're being extremely focused on the criteria that we set forth.
Speaker Change: which has helped us to ensure that we're getting the combination we're looking for of yield growth and then ultimately a high-quality, high-performing asset. So the asset that we're pursuing, first and foremost, it's high-performing. These are market leaders.
Speaker Change: They're 90% occupied, but that doesn't mean they don't have occupancy upside. You know, they're in markets that have strong absorption.
and there's another 10% occupancy opportunity.
Speaker Change: Plus pricing opportunity, which should only improve as scarcity value increases, and that will come as occupancy continues to grow.
Speaker Change: We're buying larger communities that have a mix of IL and AL and memory care services. We're in markets that have strong net absorption and a strong affordability.
and the unlevered IRRs are low to mid-teens.
Speaker Change: And that's factoring in, you know, obviously growth and we tend to use a constant cap rate so you can
Speaker Change: You can have an assurance that it's growth that's really driving that IRR. So we like this opportunity. We're continuing with the same investment criteria, 25, that we used last year. We mentioned the billion that we're pursuing, and that's lining up well with that criteria.
Speaker Change: Thanks, that's very helpful. And then just the impact of that, those acquisitions both identified and also potential in 2025. Could it could it meaningfully move the needle or is it more kind of future growth that that we would see it on a per share basis?
Speaker Change: Hey Nick, it's Bob. Yeah, good news. These acquisitions are accretive from the get-go, all equity funded. Last year we did nearly 1.4 billion in the fourth quarter, so a lot of the activity last year was fourth quarter weighted.
and it was 70% yields.
Speaker Change: is a creative, so that's certainly part of the 7% year-over-year growth in normalized FFO per share. The line of sight to the new billion will have lesser contribution obviously just given timing in the year, but again we'll continue to strive to do what we did last year.
Thank you very much.
Speaker Change: Your next question comes from the line of John Kalachowski with Wells Fargo. Please go ahead.
Thank you. Thank you. Thank you.
Speaker Change: Circling back to that last question and talking about the $1 billion acquisition guide, I'm curious what deal flow looks like at this point right now versus maybe this time last year and in the fourth quarter, and then maybe how the competitive environment is changing, and the room for you all to drive acquisitions in the second half of 2025.
Speaker Change: Yeah, well, first of all, the pipeline is bigger than it was this time last year.
Speaker Change: and, you know, remember we started last year's guide at $350 million, we ended up at $2 billion.
Speaker Change: this year we have confidence around a billion already so you know that that in itself kind of demonstrates the the pipeline but we're seeing more activity
Speaker Change: We're seeing more competition. There's certain new players at the table and some that have been around before coming back to the sector again, but it's important that we emphasize why we have a competitive advantage in this asset class.
Speaker Change: and there's a few reasons. One is the platform itself. You know, the Ventos OI, the data analytics, the experience.
and Capital to Well-Positioned Assets.
and then
Speaker Change: We are picking operators that have track records in their particular asset classes and in their markets.
Speaker Change: and we have the scale to manage a platform of multiple operators. It's not about how many, it's about delivering within local markets and we can manage that. So that's a differentiator.
Speaker Change: amongst most of the market that pursues senior housing. This is a platform that's taken many years to grow. It's even turbocharged, I think, in a recent period as we've reentered the competitive.
Speaker Change: and they're all looking for opportunities within senior housing. We think we'll do well and we'll look forward to continuing to execute.
Speaker Change: Got it. And then maybe if we could just jump to development here, how close are we in the cycle to having development really start to pencil? Like what would REV4 growth need to be in your models to get there? And then typical delivery times just so we can sketch out and maybe like a rate neutral environment when we think supply would likely inflect.
Right, so it doesn't seem like we're anywhere close.
Speaker Change: It varies by market. There's a wide range of rents that we think are needed. It could be anywhere from 20% to 50% higher depending on the market you're looking at.
Speaker Change: We were not seeing development starts. There's not really a big debt financing source for development and it's on multiple fronts and that the barriers are on multiple fronts. Anywhere from land costs
Speaker Change: labor costs, and then just the price that's needed really to justify the spend.
Speaker Change: It's a ways off, you know, based on what we're seeing now.
Thank you.
Speaker Change: Your next question comes from the line of Juan Sanabria with BMO Capital Markets. Please go ahead.
Juan Sanabria: Hi, good morning. Just hoping you could talk a little bit about the R&I business and your views on
Speaker Change: risks around NIH funding changes as a result of policies by the new administration and the impact or lack thereof on on Ventas's assets.
Speaker Change: Good morning Juan, it's Debbie. So I'll just briefly touch on that. As you know because SHOP is growing at such an accelerated pace within our enterprise
Our consolidated research portfolio is about 8% of our total.
Speaker Change: The U.S. leads the world in biomedical research, in part because of funding from the NIH. We generally feel positive about the long-term prospects.
Biomedical Research in the U.S.
and there is, as you note, some noise around.
Speaker Change: You know, any changes have been halted and therefore the grant recipients, you know, should continue to receive their full funding.
Speaker Change: a very very very very large research budget of which NIH funding is a minority portion and of that the only proposed changes are to a small portion of that.
So, that hopefully frames it up for you.
Speaker Change: Very helpful. Thank you. And then just as my follow-up, maybe you could provide a little color on...
Speaker Change: The 200 million dollars that's for capital recycling via dispositions, the strategy there, you talked about maybe selectively selling skilled nursing before, is that kind of still on the bucket and what yields we should expect on that 200 million?
Speaker Change: The skilled nursing facilities we acquired a year or two ago, and we've done quite a bit of that, and have about $150 million pending, and would expect that to be the big part of the $200 million to which Bob referred.
Thanks again.
Speaker Change: Your next question comes from the line of Vikram Malhotra with Ms. Duha. Please go ahead.
Morning. Thanks for the question. Congrats on a strong quarter.
Speaker Change: Maybe just first on the shop side, can you clarify in your guide, are you baking in sort of a typical seasonal pattern in 25, kind of dipping in 1Q and then from 3Q to 4Q, or are you baking in something different?
Speaker Change: Yeah sure, so we we do consider kind of a historically normal seasonal pattern.
Speaker Change: in our in our guide and we have set her off to a strong start in January. We'll also be the first to admit that we had very strong counter seasonal results last year.
Speaker Change: So, the new normal could change as demand is picking up, but it doesn't really change one important fact, and that is that we have a heavy reliance on the key selling season.
Speaker Change: and obviously I think we're well positioned to do well, but that's always the most important season because that's where a lot of the net moving activity happens.
Speaker Change: Got it. So just to clarify, you're baking in typical like occupancy dips and pickups, etc. as we go through the year, just as you've seen historically? Yeah, we're using historical seasonality in our underwriting.
Speaker Change: And then in the same store or the overall, I guess, shop portfolio, can you A, just give us a bit of a sense of how pricing power evolved around kind of different occupancy bands and perhaps what percent of the portfolio is, you know, less than 80% occupied today?
Speaker Change: Yeah, sure. So, I'll take the second one first. It's about 25%, below 80%. I'd like to remind people that the U.S. is 84% occupied, so we have a lot of growth opportunity in terms of occupancy within the shop portfolio in the U.S.
Speaker Change: Pricing, there's a direct relationship between higher occupancies and higher price. So we'll see, you know, the best being being 99% occupied or higher, you know, we have by far and away could be up to 900 basis points better moving rents.
Rev4 is up 30-40% in that range.
Speaker Change: The next one down, $90.99. You're seeing exceptional pricing as well.
Speaker Change: It's really that kind of below 90% occupancy category where we're not pushing pricing as much. So if you think about where we're positioned, 84%. Debbie mentioned 24 is occupancy-led. 25, we're expecting.
Speaker Change: Solid occupancy growth again with good pricing support, and as we get into higher occupancies, we fully expect that they'll have the opportunity to push pricing more over time.
Speaker Change: Gaurav, just last clarification on the fund business you have. Can you just talk about, you've talked about the overall deal volume and the pipeline for on balance sheet, but what about the fund and maybe MOBs or life sciences, senior housing, like how are you thinking about growing or tapping the fund?
Thank you.
Thanks. Our fund business has been very successful.
Speaker Change: since its inauguration and we are continuing to grow that. It's been a good performer compared to its benchmarks.
Speaker Change: you know, vent us because we are the general partner and an investor in it. So it's a nice additional tool that we have and have used to benefit the overall enterprise and the investors in the fund.
Great. Thanks and congrats again.
Thank you very much.
Richard Anderson: Your next question comes from the line of Richard Anderson with Wedbush. Please go ahead.
Hey, thanks. Good morning.
Richard Anderson: So, Justin, you know, I know the focus from an acquisition standpoint is high performing, 90%-ish type of occupancy, but you're kind of jumping out of your shoes talking about the Brookdale opportunity that's 77% occupied and doubling the NOI and all that. I'm just curious why...
Richard Anderson: The focus is on, you know, sort of lower risk, if I could call it that, opportunities as opposed to more value-add activity given we are in such a sweet spot, you know, in early stages of this fundamental cycle in senior housing.
Richard Anderson: Yeah, I mean good comment. I mean really we should be looking at aggregate portfolio composition
Richard Anderson: Just like an investor would look at, you know, their aggregate portfolio to look at risk, reward, growth, etc. And so I'll turn it over to Justin.
Justin: Clearly, when you can buy things that have great risk-adjusted return...
Justin: as we've been doing, we like that. But let's talk about overall portfolio construction. Yeah, I mean, and that's exactly right, because we have a lot of upside in our existing shop portfolio from an occupancy standpoint.
Justin: And we've taken a lot of actions over the years to make sure we're well positioned within that portfolio to be ready for really what we're seeing today, which is this growing demand environment.
Like I said, we're only 84% occupied in the U.S.
Justin: through conversion. So even without Brookdale, we've already converted around 100 communities from TripleNet to SHOP, and that's really been the source for this kind of, if you want to call it a value-add opportunity, where we can really deploy the Ventos OI playbook to the fullest.
Justin: And then a nice compliment to that are these high-performing acquisitions that we're making that also have really good returns and growth.
Speaker Change: Yeah, I mean, the investments meet the unlevered IRR expectations, you know, low to mid-teens are expected to deliver that, and so that's pretty good for an asset that is well-performing already.
Speaker Change: Okay, and then my second question is, I think someone asked what percentage of your portfolio is below 80%, you said that's 25. What percentage is currently running above whatever the pre-?
Speaker Change: disruption occupancy was the high 80s I mean where do we find proof that you think that the landing point for occupancy in shop is something meaningfully greater than the starting point prior to the pandemic and so on
Speaker Change: I wonder if you can sort of give some color around that. Thanks. I mean, yeah, I mean, you can see, well, the sector is basically there, you know, so you have, you know, you have the industry that's really achieved that in the U.S., they're back to that pre-pandemic level.
Speaker Change: We have way over half of our portfolios already done that. As we've said we've been kind of moving communities in that we think have we repositioning opportunity to deliver outsized growth for us so that that's that's part of the makeup of the portfolio.
Speaker Change: and you know I think that the results we've had over the last few years is demonstrating the growth opportunity and you're seeing our occupancy grow, you've seen our margin expand.
Speaker Change: and really just as we said it it would so we're right in that but but I'll say this Debbie said it and I said it different analogies it's
Speaker Change: If I said it, we just finished like the first lap of a long race because we're just now, like really now, getting to the period where demographics become really strong.
Speaker Change: It happens to be during a period when supply is completely muted.
Speaker Change: So it's been pretty good the last few years. We're looking forward to more strength moving forward and and you know you know achieving our forecast. Yeah Rich, I use the baseball analogy for you. You're welcome. I appreciate that. Thank you very much. Yeah. I appreciate it.
Speaker Change: Your next question comes from the line of Michael Carroll with RBC Capital Markets. Please go ahead.
Michael Carroll: Yeah, thanks. Justin, can you comment on the reason why Ventas might lose a Seniors Housing Transaction? I know in the sub, in your prepared remarks, you said that Ventas bidded on $5 billion of deals and closed about $2 billion. So what are the reasons for those misses in 2024? Is it due to price or is there other reasons that Ventas decides not to move forward with that?
Michael Carroll: So there's a couple, I'm going to start with why we win deals.
Michael Carroll: And, you know, when you look at the $2 billion and the billion that's coming,
The obvious...
First thing is we're the highest bidder.
Michael Carroll: The next is that we had a unique opportunity, and a lot of these deals are owner-operator driven.
Michael Carroll: and they'll like to partner with Ventas as their next capital partner over the long term. And so that's helped us to be well positioned with certain deals that we've won.
Michael Carroll: We've had kind of quasi-off-market opportunities like that that have driven a lot of the opportunity for us.
Michael Carroll: We have other opportunities where we've transacted with the counterparty before.
Michael Carroll: So they know who they're dealing with on the other side of the table, they know that we deliver on what we say we're going to do. And that really leads to confidence in transacting with us, which helps us to win opportunities.
Michael Carroll: So, generally, if we're not winning a deal, there's obviously a disconnect in terms of what we think the value of the asset is versus the player that bought it.
So, you get outbid in certain cases.
Michael Carroll: Certain times we may even expect that will happen, because it might be a certain type of asset, but we have insights into the market that others might not have. So, we're liking our success rate.
Michael Carroll: We're usually not shocked if there's a deal that falls out on us and we usually have a lot of confidence around the deals that are the right fit.
Speaker Change: Okay, that's helpful. And who are the peers that typically beat you? Obviously, you don't have to name names, but are they like public wreaths or private players? I mean, who are the main competition that, that?
You typically can't complete a deal because they outbid you.
Speaker Change: Well, Michael, I mean, this is Debbie. One of the things that Justin said, which I think is very important, is we may choose
Speaker Change: Part of the secret sauce, of course, is bringing these assets on and adding the OI platform and knowing what can be delivered.
Speaker Change: There are very few deals, very few, where if we want it, we don't get it.
That's a much, much smaller number.
Okay, great. Thank you.
Speaker Change: Your next question comes from the line of Ronald Candom with Morgan Stanley. Please go ahead.
Ronald Candom: Hey, I just had two quick ones. Just wondering if you could touch on expenses a little bit. Just give us a sense of what the labor market is looking at and if that's something that is a concern as we think about going forward.
Ronald Candom: In the shop business, the expense forecast really assumes kind of...
current inflationary projections
Ronald Candom: Obviously, the flow-through is very strong, which is great. Importantly, the hiring opportunity has been very good for operators. We're on a long trend now of having the ability to fill roles. Retention is strong as well.
Ronald Candom: So I'm going to knock on wood and say the labor market for us has been about as good as we've seen in some time.
Speaker Change: Great, that's helpful. And then just on the conversions, I think you talked about you've done a hundred and there's this Brookdale. Just as you look at the portfolio, how much more opportunity do you think there is in the next, you know, call it three to five years and more conversions? I know they're tricky, but trying to figure out what the sample set looks like.
Speaker Change: That's a good question, and I have to say that the lease portfolio that remains is
Very strong performing, good coverage.
Speaker Change: Good assets, tenants that are happy with their relative position, there may be some that we can...
you know, you know, jointly agree to, to, to...
Speaker Change: to repurpose into a different structure, but I think we've picked most of the opportunities and now we're really focused on execution.
Great. That's it for me. Thanks so much.
Thank you.
Speaker Change: Your next question comes from the line of Jen Opolowski with Green Street. Please go ahead.
Speaker Change: Hey, thanks for the time. My first question is on capital expenditures. The 285 million in FAD, CAPEX, it's up about 15% year-over-year. Is that...
Speaker Change: This level should we expect this level to continue for the next few years and is the Brookdale Reposition in Brookdale included in this figure or is that a separate kind of redevelopment capex bucket above the THAAD capex?
Speaker Change: Yeah, I'll take that one. It's Bob. So we were about 250 in 2024 million on FADCAPX. The guide at 285.
Call it 30 million higher.
Speaker Change: is really two-thirds more units from all the activity we just talked about whether it's investments or conversions from TripleNet.
Speaker Change: and one-third just inflation. It kind of describes the difference so I would expect as we continue to buy more assets and make conversions including the Brookdale that you know that will that will continue at a at a higher level but it's really principally volume based. More units.
Speaker Change: Okay, and then Justin, a follow-up on one data point you threw out that I missed. Was it you referenced REV4 being 30 to 40 percent higher in your higher occupancy tranche properties versus low occupancy. Is that REV4 growth rates are 30 to 40 percent higher? Did I catch that right or could you expand on that? Yes, good question. It's a REV4 growth rate.
Speaker Change: Yeah so you know there's it's it demonstrates really what we think is a very exciting opportunity around price in the future as we get our occupancy up over time.
Okay, thanks for the time.
Thank you.
Speaker Change: Your next question comes from the line of Wes Golladay with BIRD. Please go ahead.
Wes Golladay: Hey, good morning everyone. You mentioned competition may be picking up a little bit for senior housing. Are you starting to see any signs of cap rate compression?
Wes Golladay: That's a good question. You know, so, you know, we're, we're
Wes Golladay: squarely in the range that we've been targeting all through last year and so far this year that seven to eight percent you know year one yield and their unlevered RRs are basically the same and so we're still finding opportunities.
Wes Golladay: that meet that criteria and you know it's been you know so far so good focusing.
Wes Golladay: on those targeted returns. And as you know, 10-year rates are up over 100 basis points since even September, so that bears on it as well.
Wes Golladay: And that's another area of advantage for us is the access to and pricing of capital.
Wes Golladay: Fair point. One last one for me would be the Sanctuary portfolio. A few years ago you talked about having some opportunity with the MOB portfolio. Are you starting to see that kick in this year? Is that more of a 2026 thing?
Wes Golladay: Yeah, hey, thanks for the question, Wes. This is Pete. Yeah, the EOP portfolio we're really happy with. We've got 79 assets, and we continue to
Leverage the Little Bridge playbook and the Little Bridge team.
Wes Golladay: What was really solid in 24 was we we had a material impact on tenant satisfaction. We went from the lowest quartile of tenant satisfaction to the
Wes Golladay: third quartile, which is a terrific step up. We also had great retention last year of 82% TTM. Occupancy was up 210 basis points.
Wes Golladay: and also NOI was up substantially about 4% so we expect that to carry through.
Okay, thanks for the time.
Thank you. Thank you.
Speaker Change: Your next question comes from the line of Austin Wierschmidt with the Key Bank Capital Markets. Please go ahead.
Speaker Change: First one, on the Brookdale transition, are you assuming any headwind or benefit to FFO from transitioning those assets to shop from TripleNet in the back half of this year? And just curious what that assumes in the underlying...
Speaker Change: you know, NOI that you identified in the release. I think it was mid $50 million dollar range.
thanks.
Speaker Change: is that for the vast majority of the year, the assets remain under the triple net lease. That's the way the deal was structured. We can begin to transition them towards the end of the year, but effectively think of it as a triple net segment NOI asset for the vast majority of the year.
Speaker Change: You know where we'll really start to hopefully see some impact is on is on CapEx You know as we start to begin the transitions, so it's really more of a 26 story to be honest
is the way I would think about it.
Understood. I was thinking September, those started to transition.
Speaker Change: Just high level, Justin, you know, you started last year at 250 basis points of occupancy gains assumed in shop revenue guidance, clearly exceeded that. And this year you're starting at 270 bps of upside.
Could there be similar upside?
Speaker Change: Yeah, your question in itself almost kind of demonstrates the consideration because it's...
Speaker Change: There's a lot of what ifs in there, you know, if we outperform the winter and then we outperform the summer. And so, you know, we're, we're mindful of.
Speaker Change: Business is obtained during that key selling season, and that really drives a lot of that growth that we're projecting.
Speaker Change: Certainly, you know, we check all those boxes, you can see more, but there's a lot of the year to play out still and we'll go focus on executing and see where we can get.
Speaker Change: Your next question comes from the line of Mike Mueller with J.P. Morgan. Please go ahead.
Speaker Change: ...on the four new developments that are underway. I guess first for the atrium project that's a hundred percent leased that's being completed this year why is the stabilization in 2027 and then just kind of an update for the other three that are still leasing up?
Speaker Change: Right, so we kind of think of three projects basically and of those three projects
Speaker Change: You know, there are two buildings that are very exciting, that are in the Charlotte market, that are 80% pre-leased.
Speaker Change: And so, that's really driving the stabilization date because we're consolidating them basically. And so, one's 100 percent pre-leased and the other one's 60 percent pre-leased. So, those are going well.
Speaker Change: including Atrium Health obviously, that's the name. And so that's the update on that and the other two are kind of coming online and have significant pre-leasing as well and we're going to continue to try to achieve targeted leasing.
Speaker Change: Got it. And maybe if I could squeak one other one in there, excuse me, talked a little bit about looking at larger properties with AL, IL and memory care in there. I guess what are the high-level thoughts on entry fee communities today?
Speaker Change: yeah so you know there's I mean if you just step back you know you have an 80 plus population that is surging
Speaker Change: So everything, every service offering that's facing that should have opportunity.
Speaker Change: Invest in those currently. Clearly they have a place in the market and they've done well. I would expect that there's opportunities there. We're rental focused and obviously we've had a lot of growth and we expect really good opportunities moving ahead.
Got it. Thank you
Thank you.
Speaker Change: Your last question comes from the line of Nick Ulico with Scotiabank. Please go ahead.
Nick Ulico: Thanks. I just wanted to see if you could give us a bit of a refresher here about how to think about...
Speaker Change: The difference there, I imagine, is something on new lease pricing, and how should we think about, you know, I guess the ability for that dynamic to change?
Speaker Change: The January increases, but I'll let Justin unpack that a little bit for you. Yeah, great. It's a great question. It's a big topic Because it's not simple. So, you know, so first of all
Speaker Change: The rest of the year we'll have anniversary rent increases and usually that's, you know, kind of been in a range around six to eight percent or so.
Speaker Change: And here's how it works. And so you have a rent increase the rent increase in January is really only impacting about half the population. There's a percentage of the population that were new move ins, you know, in the fourth quarter and aren't getting an increase.
Speaker Change: And then you have anniversary increases the rest of the year, so they'll blend in over time. In assisted living and memory care, you have level of care revenue. And that level of care revenue is like 20% assisted living, 30% in memory care, grows over time during the length of stay of the resident.
When they're replaced with a new resident,
Speaker Change: that new residents coming at a lower acuity and therefore paying a lower level of care charge. And so you have that, that's kind of a, that's a drag on your potential REVPOR. Another thing that is an area that of opportunity really for the sector is to see move-in rents actually equal in-house rent increases.
Speaker Change: And, you know, we expect to see the improvement in that metric over time, but generally it lags. And so that's how you're getting to that two-thirds result that Debbie's describing. And, you know, but we think that.
Speaker Change: Having said that, there's a lot of opportunity given the affordability of the market, the demand at the doorstep, and the fact that occupancies are going up and scarcity value is being created.
Speaker Change: There is a higher share counting guidance. To be clear, should we be modeling, you know, a billion of equity raised in guidance? And then, Bob, I don't know if you have a sort of a year-end net debt to EBITDA sort of outlook?
Speaker Change: yeah so on the latter point we we definitely expect to continue to to improve not that tiba da you know we're now at the high end of the range
Speaker Change: And we're going to continue to strive to drive that even further down. And that's driven by senior housing, both organically and inorganically.
Speaker Change: So, yes, check. In terms of the funding, all equity funding, senior housing investments has been a winning formula and that is our assumption effectively in the model and as I mentioned.
Speaker Change: already 250 raised under forward, so we're in good shape in that regard, and the number on the shared count reflects that.
All right, thank you.
Speaker Change: All right, well I just want to thank everyone for joining us today. We appreciate your interest and support of Ventas and we're going to continue to try to have an excellent year in 2025.
Speaker Change: Thank you so much ladies and gentlemen. That concludes today's call. Thank you all for joining. You may now disconnect and have a nice day everyone. Thank you.