With expectations of “unprecedented demand” for senior living in 2024 and subsequent years due to the rapidly growing population of older adults, Ventas is actively working on an investment pipeline of more than $300 million, executives said as the Chicago-based real estate investment trust released fourth-quarter and full-year 2023 earnings results.
Ventas’ senior housing operating portfolio, or SHOP, saw “unprecedented organic property growth” in 2023, Chairman and CEO Debra A. Cafaro said Thursday during an earnings call with investors and analysts. Now, she said in a press release, the REIT is focused on “driving continued organic SHOP performance and investing in senior housing to expand our participation in the compelling multi-year growth opportunity that is underway.”
The REIT finished the year “on a high note” in the fourth quarter, Carfaro said, delivering $0.76 of normalized funds from operations, or FFO. Cafaro said that this represented 7% year-over-year growth.
Ventas also recorded same-store SHOP occupancy growth of 170 basis points, from the third quarter to the fourth quarter of 2023.
“We entered 2024 with momentum. Because our asset classes are benefiting from demographic demand that is strong and getting stronger, we are pleased to project another consecutive year of normalized FFO growth in the mid-single digits and the third consecutive year of same-store-shop cash [net operating income] growth in the double digits,” Cafaro noted. Ventas’ projected 2024 normalized FFO growth of 5% per share, she added, “puts us in the top 20% of all REITs that have issued guidance to date.”
Outperforming expectations
J. Justin Hutchens, executive vice president of senior housing and chief investment officer, noted that same-store SHOP communities outperformed the REIT’s expectations in the fourth quarter across all key metrics, including occupancy, revenue per occupied room, operating expenses and margin expansion.
“US occupancy growth was supported primarily by strong demand with move-ins that were 109% of prior levels in the fourth quarter,” Hutchens said.
Looking forward, Ventas expects the United States to be the “growth engine” in 2024, he said, with continued accelerating occupancy performance and increased NOI growth “in the mid to high teens year over year.”
The REIT is focused on expanding its senior living footprint, Hutchens said.
“We seek senior housing communities that are located in submarkets with compelling supply-demand profile, strong affordability and meaningful expected net absorption projections,” he added.
Ventas, Hutchens said, intends to accomplish its expansion plans through relationships with existing partners. The pipeline includes properties in the “fast-growing” space of combined independent living, assisted living and memory care communities, he said, adding that his team is actively working on more than $300 million in transactions that meet its criteria.
Brookdale, Kindred leases ending soon
Ventas has lease renewals coming up this year with Brookdale Senior Living and Kindred Healthcare.
“In Brookdale’s case, our communities are enjoying positive operating trends, and they have significant net absorption potential,” Cafaro said.
Ventas’ portfolio of Brookdale communities with triple net leases includes 121 communities that produce less than 8% of Ventas’ NOI, with lease maturity of December 2025, according to an earnings presentation posted on the REIT’s website.
“In Kindred’s situation, rent coverage remains challenged, and it’s too early to say what the ultimate outcome in 2025 will be,” Cafaro said. “Kindred remains focused on performance improvements that could benefit 2024 and 2025 financial results.”
The 23 Kindred properties produce 5% of Ventas’ NOI and have a lease maturity/renewal date of April 2025.
