Ventas is entering 2023 seeking to reach 2019 performance levels and then exceed them, Chairman and CEO Debra Cafaro said during Friday’s fourth-quarter and full-year 2022 earnings call.
“We believe our business is relatively advantaged because demographic demand for our assets is large, growing and resilient; we have demonstrated strong pricing power in SHOP [senior housing operating portfolio]; and softening economic conditions should benefit our operations in multiple ways,” she said.
The Chicago-based real estate investment trust began a multiyear growth and recovery cycle last year, led by its SHOP portfolio and supported by favorable supply-demand fundamentals, actions taken in the portfolio and a post-pandemic rebound, Cafaro said.
Senior housing shows “compelling supply-demand tailwinds” with the over-80 population growing at record levels and construction starts at their lowest level in five years, Cafaro noted.
To capitalize on demand led by demographics, she said, the REIT has “strengthened our team; enhanced our … analytic capabilities; rolled out the Ventas OI platform; sold, transitioned and acquired properties; and invested capital in communities with strong market fundamentals.”
Occupancy helped by demand, pricing power
Same-store average occupancy grew year over year by 140 basis points, to 82.5%, in the fourth quarter, according to J. Justin Hutchens, executive vice president of senior housing and chief investment officer. The growth, he said, was helped by increasing demand and expanded pricing power, outpacing year-over-year growth in operating expenses. The performance of the SHOP portfolio in the fourth quarter was ahead of expectations, he said.
Full-year 2022 SHOP average occupancy grew 300 basis points.
Ventas’ US SHOP portfolio had the highest fourth-quarter lead volume on record, coming in 20% above pre-pandemic levels. Demand accelerated in January, with leads continuing to climb and move-ins at 104% of 2019 levels, according to the company.
By comparison, the REIT’s Canadian same-shore SHOP average occupancy grew 110 basis points, to 95%, compared with the fourth quarter of 2021. Demand in its Canadian SHOP portfolio accelerated in January as well, with move-ins at 111% of 2019 levels.
Ventas increased in-place rents 10% in the first quarter, with street rates continuing to improve and increasing 8% year over year. Hutchens said the company anticipates strong pricing power in its 2023 outlook.
Hutchens also said that Ventas projects more resident move-ins in 2023 compared with last year, with significant occupancy increases expected throughout the year supported due to the aging population. The REIT also expects moderating inflationary expense effects and lower contract labor costs this year compared with last year, he said.
“Through the execution of initiatives to improve employee recruitment and retention, we have had five consecutive quarters of net hiring, which are providing the tailwinds needed to stabilize the workforce and support the moderation of expenses,” Hutchens said.
Investments expand senior housing portfolio
The REIT continued to expand its senior housing portfolio in 2022 by closing on $200 million in investments, including the acquisition of Mangrove Bay in Jupiter, FL. Ventas also continued development with its partner in Canada, Le Groupe Maurice, and broke ground on a new 362-unit senior housing development project in Montreal.
The company reported having more than 100 capital expense projects underway to “refresh” communities and said it is investing an average of $1 million per community.
