Ventas (VTR) Q1 FY26 earnings call: guidance and Q&A

What caused the mid-70% occupancy in the Revel portfolio, and how will Ventas OI improve performance, identifying short-term vs. long-term gains?

The Revel portfolio, built by Wolf Company, initially used third-party management before establishing its own platform, leading to a slow start. The assets are high-quality and were acquired below replacement cost. Ventas sees significant operational upside, with immediate sales improvements already observed. Ventas OI will focus on sales execution and price sophistication, leveraging the portfolio's momentum and facing a market with 1,200 basis points of net demand over the next few years.

“We're catching the portfolio at a time where it has pretty good momentum already we're facing a forward market that has 1,200 basis points of net demand over the next few years.”

asked by Julien Blouin · answered by J. Hutchens

Describe the current level of competition and capital in the transaction environment, and how it's affecting cap rates and Ventas's expectations.

Ventas increased its investment guidance to $3 billion despite heightened interest and new capital entering the sector. The company maintains a competitive advantage through its Ventas OI platform, ability to manage operators at scale, strong liquidity, and a track record of off-market, relationship-driven deals. Cap rates have drifted from the 7s into the 6s, with the supplemental showing 6.5% all-in (6% excluding Revel). Ventas expects high 6s for the remainder of the year, with IRRs remaining solid due to value-add opportunities.

“We printed in our supplemental around 6.5 all-in and that includes the Revel deal. It's [ 6 ] [indiscernible] without. When you look at the rest of the pipeline throughout the year, we're expecting high 6s moving forward and that includes a mix of value-add and high-performing communities with upside moving forward.”

asked by Julien Blouin · answered by J. Hutchens

Given low construction starts and acquisition pricing relative to replacement cost, when might capital shift towards new senior housing development?

Ventas believes rents are still 20% to 40% below the level needed for most new developments to be financially viable. While strong fundamentals and demand make development appealing, any new supply would likely be high-price point product, disconnected from the existing market. Therefore, significant new development does not appear to be a near-term prospect.

“We're still 20% to 40% off in terms of where rents need to be to -- for most developments to [ pencil. ]”

asked by Nicholas Joseph · answered by J. Hutchens

Given SHOP incremental margins are around 50% and occupancy is above 90% in the same-store pool, when can incremental margins improve to 60-70% or better?

The 50% incremental margin has been consistent during the journey from mid-80s to 90% occupancy, and guidance assumes it remains in the 50s this year. Ventas notes that communities at 90%+ occupancy with flat year-over-year occupancy deliver a 70% incremental margin. The U.S. portfolio is 87% occupied, indicating significant runway for occupancy growth, and the goal is to increase the number of communities in the higher-occupancy, higher-margin category.

“We know that in our portfolio that communities that are in that kind of 90% plus range of occupancy that have not had an occupancy change year-over-year. So they've had a flat occupancy, they deliver a 70% incremental margin.”

asked by Austin Wurschmidt · answered by J. Hutchens

Does 90%+ senior housing occupancy allow operators to push for higher rates, or is the strategy still primarily volume-driven?

The U.S. portfolio is 87% occupied, so the primary opportunity remains volume-driven. While Ventas is seeing good performance from both occupancy and rate, contributing to the 8.75% revenue guide, driving occupancy in the U.S. is the number one focus. Higher occupied communities do offer better opportunities for price performance, which is observed in the portfolio.

“However, volume remains the #1 focus that we do know when you have higher occupied communities, that there's better opportunity for price performance, and we see that in our portfolio. But the opportunity really is to continue to drive occupancy in the U.S.”

asked by Michael Carroll · answered by J. Hutchens

Why are sellers motivated to transact now given the positive outlook, and does Ventas anticipate more JV or OP unit deals in the future?

Sellers include private equity with limited-life vehicles, holders with exceeded holding periods, and those facing debt maturities. Ventas's platform can achieve better returns than some sellers, as running the business at a small scale is challenging. This dynamic is expected to create more opportunities for Ventas in the coming years. While the Revel deal is a JV, most expected investment activity will be 100% equity ownership by Ventas, with line management agreements being the typical approach for new operator relationships.

“This is a very difficult business to run in a just a one-off basis or in small scale. And that's why we're building this platform to be able to outperform at scale.”

asked by Richard Anderson · answered by Debra Cafaro

Given the strong focus and success in SHOP, how is Ventas thinking about the rest of its portfolio (OMAR, IRF, LTAC, health systems)? Is there an opportunity to JV or sell these assets?

Ventas's 1-2-3 strategy prioritizes growing SHOP organically and externally, which naturally leads to other portfolio segments becoming a smaller proportion of the overall enterprise. While Ventas has historically shown a willingness to modify its portfolio to create long-term value and remains open to such actions, the current primary focus and effort are dedicated to growing SHOP due to its significant value creation for stakeholders.

“by definition, the other parts of the portfolio are becoming a smaller portion of the overall enterprise. And that is all part of the strategy.”

asked by Nicholas Yulico · answered by Debra Cafaro