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    VTR
    Earnings call· Mar 2025(Q1 FY25)

    Ventas Q1 FY25 earnings call VTR

    May 1, 2025 Source

    Executive summary

    Ventas Q1 FY25 — Strong SHOP NOI Growth and Increased Investment Guidance

    Ventas delivered strong Q1 FY25 results, primarily driven by robust performance in its senior housing operating portfolio (SHOP) due to favorable demand-supply dynamics. The company increased its full-year investment guidance for senior housing acquisitions, leveraging its advantaged platform and strong balance sheet to capitalize on multi-year NOI growth opportunities. Management reaffirmed its FY25 normalized FFO per share growth target, emphasizing continued focus on organic growth and strategic investments.

    Highlights

    5

    • Normalized FFO per share increased by approximately 8% to $0.84 in Q1 FY25.

    • SHOP same-store NOI grew 14% year-over-year in Q1 FY25, driven by occupancy and rate increases.

    • Full-year investment guidance for senior housing acquisitions raised from $1 billion to $1.5 billion.

    • Net Debt to EBITDA improved by 30 basis points sequentially to 5.7x in Q1 FY25.

    • Total company same-store cash NOI grew by 7% in Q1 FY25.

    Concerns

    2

    • Experienced some seasonality with elevated clinical move-outs in March, resulting in a slightly lower occupancy starting point for Q2 FY25.

    • Research portfolio same-store cash NOI contracted modestly year-over-year in Q1 FY25 due to 30 basis points lower occupancy.

    Guidance & targets

    8
    CategoryTargetConfidence
    Normalized FFO per share growth
    7%
    high materiality
    High
    SHOP Same-Store Cash NOI Growth
    11% to 16%
    high materiality
    High
    Full-year Senior Housing Investment Volume
    $1.5 billion
    high materiality
    High
    OMAR Same-Store Cash NOI Growth
    2% to 3%
    medium materiality
    High
    Normalized FFO per share
    $3.41
    high materiality
    High
    FFO contribution from incremental investments
    minimal
    low materiality
    High
    Leverage improvement
    further improvement
    medium materiality
    High
    SHOP NOI as % of total NOI
    over half
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    SHOP (Senior Housing Operating Portfolio)
    Delivered double-digit NOI growth for the 11th consecutive quarter. Revenue growth led by occupancy and rate, with internal rent increases averaging 7%. Experienced elevated clinical move-outs in March, impacting Q2 starting occupancy.
    Same-store cash NOI growth: 13.6%Revenue growth: 7.4%Occupancy growth: 290 bps YoYU.S. Occupancy growth: 330 bps YoYU.S. NOI growth: 16%Incremental margin: ~50%
    		————
    OMAR (Outpatient Medical and Research)
    Overall solid performance, with outpatient medical growing by 3% (adjusted for fees).
    Same-store cash NOI growth (adjusted for cash fees): 2.5%
    		—1.3%——
    Outpatient Medical
    Fundamentals remain solid, benefiting from outsized increases in the over-65 age group and trends favoring lower-cost care settings.
    Occupancy increase: 30 bps YoYNew leasing increase: 9% in Q1Tenant retention: 85% in Q1
    		—3%——
    Research
    Smallest segment, with a modest contraction in NOI due to lower occupancy. Strong leasing pipeline, including from universities, is expected.
    NOI reduction: $200,000Occupancy: 30 bps lower
    		—contracted modestly——

    Operational metrics

    46
    Normalized FFO per share
    $0.84up approximately 8% YoY
    Q1 FY25

    Powered by senior housing operating portfolio.

    Total company same-store cash NOI growth
    7%
    Q1 FY25

    Led by SHOP increasing approximately 14%.

    Net Debt to EBITDA
    5.7x30 bps sequential improvement from YE24
    Q1 FY25

    Expected further improvement in the balance of the year.

    Available liquidity
    $3.6 billion
    April 2025

    Bolstered by $750 million increase in revolving credit facility.

    Revolving credit facility capacity
    $3.5 billionincreased by $750 million
    April 2025

    Robust subscription from bank group.

    Senior notes repaid
    $1 billion
    Q1 FY25

    Utilized proactive senior notes issued in September last year at approximately 5%.

    Internal rent increases (SHOP)
    7%
    Q1 FY25

    Supported solid underlying pricing.

    SHOP expense growth
    5%
    Q1 FY25

    Roughly in line, labor expenses favorable.

    SHOP portfolio occupancy
    79%
    Q1 FY25

    Positioned with significant upside opportunity.

    SHOP portfolio occupancy
    84%
    Q1 FY25

    Positioned with significant upside opportunity.

    SHOP portfolio occupancy
    95%
    Q1 FY25

    Includes lease-up communities outside same-store.

    SHOP portfolio occupancy
    97%
    Q1 FY25

    Still delivering NOI growth even at high occupancy.

    Incremental margin (80% to 90% occupancy)
    50%
    null

    Rule of thumb for operating leverage.

    Incremental margin (90% to 100% occupancy)
    70%
    null

    Rule of thumb for operating leverage.

    Brookdale communities NOI (pre-conversion)
    $50 million
    null

    Expected to double to over $100 million post-conversion to SHOP.

    Operator base expansion
    33from 10
    null

    Enhances ability to grow in high-demand markets.

    Community refresh projects completed
    250+
    past 2.5 years

    Strengthening competitive positioning.

    Community refresh projects expected to complete
    100
    FY25

    Further strengthening competitive positioning.

    Senior housing investments closed (YTD)
    $900 million
    YTD Q1 FY25

    Part of accelerating run of value-creating external growth.

    Senior housing investments closed (since early FY24)
    $2.8 billion
    since early FY24

    Most completed in the last 6 months.

    Year 1 NOI yield on recent acquisitions
    7.2%
    Year 1

    On average for the $900 million closed YTD.

    Unlevered IRR on recent acquisitions
    low to mid-teens
    10-year

    On average for the $900 million closed YTD.

    Underwritten yield on 2024 acquisitions
    7.7%
    Q1 FY25

    Actual NOI in line with underwriting for $1.8 billion in acquisitions closed in 2024.

    Senior housing investments reviewed
    $30 billion
    since early FY24

    Active and growing pipeline.

    Senior housing investments bid on
    $9 billion
    since early FY24

    Active and growing pipeline.

    Off-market closed transactions
    75%
    since early FY24

    Relationship-driven sourcing.

    Equity raised
    $1.3 billion
    YTD FY25

    Largely funded increased investment guidance.

    Disposition activity
    $200 million
    FY25

    Previously included in guidance, expected to close in Q2.

    Research portfolio credit tenants
    75%
    null

    50% are universities with AA ratings.

    Research portfolio WALT
    9-10 years
    null

    Provides stability.

    Research portfolio early-stage biotech/innovation flex space
    12%
    null

    Mix of retail, biotech, flexible innovation space.

    Research portfolio GLA
    6 million
    null

    Total space.

    Research portfolio GLA in stressed cities
    148,000
    null

    Only 148,000 sq ft in the 3 most stressed cities.

    Average net worth of over-75 households
    $1.6 million
    null

    Indicates strong affordability for senior living.

    Senior housing units started
    1,287
    Q1 FY25

    Lowest on record.

    Over-80 population growth
    0.5 million
    FY25 and FY26

    Expected increase.

    Over-80 population growth
    900,000
    2027-2030

    Expected increase per year.

    Brookdale communities converted to SHOP
    45
    later FY25

    Expected to double NOI from $50M to $100M+.

    Brookdale communities NOI (post-conversion target)
    $100 million+
    over time

    Expected to double from $50 million.

    2023 transitions occupancy growth
    820 bps
    Q1 FY25 YoY

    Outperformed top 99 markets by 480 bps.

    2023 transitions NOI growth
    40%
    Q1 FY25 YoY

    Strong performance post-transition.

    Recent acquisitions vintage
    7 years
    null

    Average age of 20 newer vintage communities acquired.

    Recent acquisitions uncapped net demand
    1,500 bps
    over a few years

    In high-demand Texas markets.

    Recent acquisitions net absorption potential
    1,000 bps
    null

    In high-demand Texas markets.

    RevPOR growth (leap year adjusted)
    5%
    Q1 FY25 YoY

    Good pricing performance.

    NIH indirect cost cap impact
    mid-single-digit
    null

    Potential impact to overall research budget if proposal were pushed through.

    Industry KPIs

    9
    MetricValueDetails
    Exppor growth5%%
    Revpor growth7.4%%
    Coverage ratios—
    Senior housing occupancy290 bpsbps
    Revpor minus exppor spread—
    Operator tenant concentration33operators
    Same store noi growth by segment13.6%%
    Private funds management platform—
    Investment volume and sourcing mix$900 millionUSD

    Orderbook & backlog

    3
    Senior Housing Investment Pipeline (reviewed)$30 billionsince early FY24

    Represents total value of senior housing investments reviewed.

    Senior Housing Investment Pipeline (bid on)$9 billionsince early FY24

    Represents total value of senior housing investments bid on.

    Disposition Activity$200 millionFY25

    Expected to close in Q2 FY25.

    Deals & partnerships

    2
    BrookdaleConversion of 45 communities from triple-net lease to SHOP with new operators.

    5 new operators selected, highly engaged in transition process.

    CCGConversion of 11 London-area and Southeast England care homes from triple-net to SHOP.

    Operated by CCG, an operator known for redevelopment and growth. Located in strong markets like Hampton Palace area.

    Capital programs

    1
    Community Refresh Programunderway
    Spent to date: 250+ projects completed in past 2.5 years

    Benefit: Strengthening competitive positioning, setting table for outsized NOI growth.

    100 more projects expected to complete by year-end FY25.

    Risks & headwinds

    3
    Seasonality and unpredictability of clinical move-outs.Q1 FY25 (impact on Q2 FY25 start)

    Elevated clinical move-outs in March, resulting in a lower occupancy starting point for Q2 FY25.

    Mitigation: Strong move-in activity expected in the key selling season (May-September); historical experience shows growth post-disruption.

    Macroeconomic uncertainty.

    high degree of uncertainty

    Mitigation: Ventas is well-positioned with strong senior housing fundamentals, limited tariff/trade impacts, access to capital, strong balance sheet, and preferred acquirer status.

    Potential NIH funding changes (indirect cost cap).

    Proposed cap at 15% could have a mid-single-digit impact on overall research budgets for leading universities.

    Mitigation: Proposal is on hold; portfolio has 75% credit tenants (50% AA-rated universities) with 9-10 year WALT, making it manageable.

    What to watch in Q2 FY25

    4

    SHOP Occupancy Growth

    Q2 FY25 and H2 FY25
    Current290 bps YoY in Q1 FY25 (U.S. 330 bps YoY)
    TargetReacceleration of occupancy growth driven by key selling season.

    Why it matters

    Occupancy growth is a primary driver of SHOP NOI growth and margin expansion, especially given the lower starting point in Q2.

    The sad part of our business and in fact, life when people pass away. It's also unpredictable. That said, per usual, the key determinant of occupancy for the full year is the timing and slope of the key selling season, which starts today. We are excited about the upcoming months as we expect strong move-ins in the second quarter.

    Q&A highlights

    6

    How does occupancy growth translate to margin expansion, specifically at 85-88% occupancy?

    Management explained that reaching 90% occupancy from 80% typically yields a 50% incremental margin, and from 90% to 100% yields a 70% incremental margin due to operating leverage and fixed costs.

    “when you get to 90% occupancy and you look backwards, you should have achieved around a 50% incremental margin during that journey from 80% to 90% occupancy. Same when you get to 100%. When you get 100% occupied and you look backwards to 90%, you'll see about a 70% incremental margin.”

    asked by James Kammert · answered by J. Hutchens

    2 min read6 chapters

    Detailed Narrative

    01

    Senior Housing Demand-Supply Dynamics

    The over-80 population is projected to increase by approximately 0.5 million people in FY25 and FY26, jumping to 900,000 between 2027 and 2030. Concurrently, new senior housing units started in Q1 FY25 were at a record low of 1,287 units, indicating persistent supply constraints due to hard cost increases and labor scarcity. This imbalance creates strong, long-term tailwinds for NOI and occupancy growth.

    02

    Portfolio Curation and Upside Potential

    Ventas has deliberately curated its senior housing portfolio through acquisitions, dispositions, and conversions to SHOP, positioning 2/3 of the portfolio in the low 80% occupancy range with significant upside. An example is the conversion of 45 Brookdale communities from triple-net to SHOP, expected to double NOI from $50 million to over $100 million over time⏳. The company has also expanded its operator base from 10 to 33, enhancing market density and investment opportunities.

    03

    Investment Strategy and Pipeline

    Ventas has closed approximately $900 million in senior housing investments year-to-date and $2.8 billion since early FY24, with 75% being relationship-driven and off-market. These investments target 7-8% year-one NOI yields and low to mid-teens unlevered IRRs, priced significantly below replacement costs (which start with a '4'). The investment pipeline is active and growing, having reviewed $30 billion and bid on $9 billion in senior housing assets.

    04

    Financial Strength and Liquidity

    The company improved its Net Debt to EBITDA to 5.7x in Q1 FY25, a 30 basis point sequential improvement and a full turn reduction year-over-year. Liquidity is robust at $3.6 billion as of April 2025, bolstered by a $750 million increase in its revolving credit facility to $3.5 billion. This strong financial position supports continued investment and growth.

    05

    Research Portfolio Resilience

    The research portfolio, while small, is built with 75% credit tenants (50% universities with AA ratings) and a 9-10 year WALT, providing stability. Only 12% of the portfolio is in earlier-stage biotech or innovation flex space. Management notes that a proposed cap on NIH indirect costs is on hold, and even if implemented, would have a manageable mid-single-digit impact on research budgets for leading universities.

    06

    Resident Affordability

    The average net worth of households in the over-75 population is $1.6 million, indicating strong affordability for senior living services. This, combined with strong demand and limited supply, underpins the company's optimism for sustained NOI growth.

    AI-generated summary of the company’s earnings call. Not investment advice.