Ventas (VTR) Q4 FY25 earnings call: guidance and Q&A

Clarification on the long-term growth assumption for the triple-net business, beyond the current 4% due to Brookdale rent bump.

Management clarified that the average escalator for triple-net is more like 3%, with the January Brookdale increase being an outsized event.

“Yes, Jim, I would say more like 3% on average for escalators. Obviously, the January Brookdale increase is outsized, but that would be a run rate assumption outside of that.”

asked by James Kammert · answered by Robert Probst

Inquiring about the market dynamics given the $2.5 billion acquisition guidance, the strong start to the year, and increased competition for assets.

Management highlighted an active pipeline, momentum in executing deals, and leveraging advantages like a strong track record, deep operator relationships, and off-market sourcing to navigate increased competition.

“When it comes to the type of deals we do, we do a number of off-market deals. For instance, the $800 million that we've closed already, half of that, was off market. When it comes to marketed deals, there is increased competition.”

asked by Nicholas Joseph · answered by J. Hutchens

Questioning the impact of the disruptive flu season on occupancy and how mitigation efforts have evolved post-COVID.

Management noted minimal flu impacts on their portfolio, attributing it to improved infection control practices post-pandemic, including increased use of protective equipment and heightened awareness.

“There's a -- so therefore, I'd say, a heightened awareness around any kind of infection in our communities and the management of that is much better than it was at one point in time. Having said that, we're also experiencing minimal flu impacts.”

asked by Nicholas Joseph · answered by J. Hutchens

Seeking insight into the immediate growth drivers for the Brookdale transitions and how the Ventas OI platform aids in improving performance.

Management explained that capital refresh projects and new experienced operators are key immediate drivers, with significant NOI doubling potential in 2027 and beyond. Ventas OI helps operators focus on day-to-day execution and identifies improvement opportunities.

“Those communities are -- have a lot of advantages. They're large scale. They're in markets that have strong net absorption. We have 5 new operators in place. All of those operators have experienced transitioning. We have CapEx planned.”

asked by Julien Blouin · answered by J. Hutchens

Asking about the difficulty of buying assets at or below replacement cost given improved private market valuations and the current discount.

Management stated they consistently buy under replacement cost, though newer, high-quality assets might be closer. They aim to stay at or below replacement cost, noting that rents still need significant growth to justify new construction.

“We've had -- we've been buying consistently under replacement cost. There's been some that have been a little closer to replacement cost, and it's really just a function of the age of the property usually.”

asked by Michael Carroll · answered by J. Hutchens

Requesting a breakdown of the FFO guidance, particularly regarding higher interest expense and G&A, which might explain why FFO growth is below same-store and acquisition numbers.

Management attributed the difference to the $0.04 impact from Brookdale noncash amortization expiration and higher net interest expense from refinancing $2.2 billion of maturing debt. G&A growth is due to investments in the platform.

“So there are 2 key drivers as you look at the year-over-year growth of 8% outside of the tremendous growth in SHOP and external growth. And that is, first and foremost, the expiration of the noncash Brookdale amortization we disclosed that ad nauseam. That's $0.04 year-over-year.”

asked by John Kilichowski · answered by Robert Probst

Expressing concern about potential oversupply in senior housing, similar to past cycles, given current strong rent growth and demand.

Management believes the current demand-supply imbalance is sustainable due to the 'absolute explosion' of the over-80 population (28% growth in 5 years) overwhelming any incremental new supply, despite rising rents. Development costs and a 3-year cycle also limit new starts.

“And so the demand overwhelms or should overwhelm any incremental new supply. So that's how we're looking at it. And you've referred to earlier periods. The senior population growth was very flat to low single digits. We expect it to be 28% over the coming 5 years.”

asked by Richard Anderson · answered by Debra Cafaro

Inquiring about broad-based trends in labor costs and CapEx per unit.

Management expects normal inflation for labor costs per hour, with the 5% OpEx guide reflecting volume growth. FAD guidance is up from $300 million to $400 million, driven by more units and some inflation.

“So on labor costs, we're assuming effectively just on a per hour basis, kind of normal inflation. Nothing unusual there. And we are seeing, of course, significant volume growth when you look at the 5% OpEx guide, that is really a function of the volume, but that would be a good proxy for per hour on wages specifically.”

asked by Ronald Kamdem · answered by Robert Probst