Ventas ramping up investments to continue expanding its senior living portfolio

With $1.7 billion of senior living investments closed or under contract year to date, Ventas expects senior living to grow to well over half of its business by year-end, Chairman and CEO Debra A. Cafaro said Thursday on the Chicago-based real estate investment trust’s third-quarter earnings call.

The REIT already ranks in the No. 2 spot of the American Seniors Housing Association’s ASHA 50 list of largest senior living owners in the United States for 2024, which was based on data as of June 30.

Cafao said she “feels great” about where the REIT is heading, saying the company’s platform and team are “driving outperformance” and capturing market share. 

The CEO said it is rare to see the combination of organic and external growth opportunities that has led the firm to ramp up its investments in senior living. To that end, she said, in addition to increasing investments in senior living, the REIT plans to drive profitable, organic growth in its senior housing operating portfolio, or SHOP.

In the third quarter, the company saw its ninth consecutive quarter of double-digit net operating income growth in its SHOP, and Cafaro said the company has a long runway for continued growth in senior living.

The CEO said that the company’s goal is to shoot for and exceed its prior peaks of occupancy over time, as demand outpaces community construction. 

“We are utilizing our Ventas OI insights, deal experience and industry relationships to identify attractive opportunities, increase our enterprise growth rate and expand our senior housing footprint,” Cafaro said. “As a result, we expect our SHOP NOI to increase by 12 percentage points and senior housing to grow to well over half of our business by year end.”

The Ventas Operational Insights, or Ventas OI, platform formally launched in 2022. It is designed to increase multi-year occupancy growth by enabling deeper analysis into sales and pricing optimization, market positioning, target NOI-generating capital expenditures and digital marketing.

The third quarter average occupancy growth in the SHOP same-store portfolio was led by US properties at 400 basis points year over year, and 140 basis points sequentially. Third-quarter US assisted living year over year average occupancy growth was 410 basis points, and independent living occupancy growth was 390 basis points.

By comparison, in Canada, average occupancy increased 200 basis points year over year, reaching a new record of 96.5% in the third quarter.

J. Justin Hutchens, executive vice president of senior housing and chief investment officer, said that leads and tours have been exceeding expectations all year and continued to do so into October. 

Rate growth is expected to be favorable next year due to demand, community positioning and the value proposition of senior living, Hutchens said.

“We are truly seeing momentum in the business,” he said, adding that the market is presenting compelling investment opportunities that Ventas is positioned to capitalize on as a large owner of senior housing. “We are effectively executing on both our organization growth priority in senior housing and value-creating senior housing investments.”

Hutchens specifically called out Atria Senior Living, its largest SHOP operator, as a consistently good performer. The Holiday by Atria independent living portfolio saw 400 basis points of occupancy growth year over year and is “checking the boxes,” he said.

Cafaro said that Ventas is enjoying opportunities now due to its scale, its Ventas OI platform data and its experience and industry relationships.

“We are in a favorable spot as we participate in this longevity economy,” Cafaro said. “We have a consumer-driven product that has significant demand, and we have the platform that is driving out performance there.”

See additional coverage of the Ventas earnings call by the McKnight’s Business Daily.