The “most favorable fundamentals ever” in the senior living industry are setting up Ventas for an “unprecedented” multi-year growth opportunity fueled by demographic demand, Chairman and CEO Debra Cafaro said Friday during a second-quarter earnings call.
“It’s an exciting time for our business,” Cafaro said. “We began 2024 with momentum, which continued in the second quarter.”
The Chicago-based real estate investment trust’s senior housing operating portfolio, or SHOP, has reported eight consecutive quarters of double-digit, year-over-year, same-store net operating income growth and expects “durable multi-year” NOI growth ahead of it in light of occupancy gains and revenue growth.
Occupancy in the overall portfolio increased 320 basis points year over year, landing at 84% in the second quarter. Cafaro said she expects the portfolio, operators and communities to shoot for, and potentially exceed, 92% — the prior occupancy peak before the COVID-19 pandemic. Increasing demand and suppressed construction are creating favorable conditions, she added.
Second-quarter average occupancy growth in the SHOP same-store portfolio was led by the US properties, which has seen 380 basis points of year-over-year growth to 85.6%. By contrast, average occupancy in Ventas’ Canadian portfolio grew 170 basis points year over year, approaching 96% in the second quarter.
“The favorable supply-demand backdrop provides powerful tailwinds and a long, unprecedented runway for growth,” Cafaro said.
Growing investment pipeline
Increasing investment activity focused on senior living has Ventas on track to close on $750 million of purchases for the year, the REIT reported. Year-to-date, the company has closed on $350 million of investments focused on senior living and reports a growing pipeline of additional senior living opportunities.
“Rarely in my career have investment conditions been as constructive,” she said. “All of our asset classes benefit from inelastic, needs-driven, demographically driven demand, and most benefit from a softer employment backdrop.”
Net move-in volume year-to-date has been 13 times higher than last year, driven by the Atria Senior Living and Holiday by Atria portfolio, as well as by Sinceri Senior Living, Priority Life Care and Discovery Senior Living, according to J. Justin Hutchens, the REIT’s executive vice president of senior housing and chief investment officer.
Platform advances
The firm said it also continues to advance its Ventas Operational Insights, or Ventas OI, platform. Formally launched in 2022, Ventas OI was designed to increase multi-year occupancy growth, Hutchens said.
“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,” he said.
The platform has enabled deeper analysis into sales and pricing optimization, market positioning, target NOI-generating capital expenditures and digital marketing, Hutchens said, adding that the platform is credited with second-quarter year-over-year average occupancy growth of 530 basis points and 109% of 2024 move-ins compared with the prior year.
The company has completed 215 capital expenditure projects since late 2022, 133 of which were completed at least six months ago, Hutchens said. Occupancy has increased by 530 basis points in the group of communities where the investments were made in that time, he said.
Ventas OI also has assisted with price volume optimization, particularly with Sunrise Senior Living, Atria, Holiday by Atria and Priority Life Care, all of which have improved performance by 25%, according to Hutchens.
“The tools we have created for our platform enable us to perform and continue delivering growth,” he said, who said senior living is in a “unique period — the best I’ve seen in my career.”
