Ventas, Inc. Q3 FY2024 earnings call

• Profitable organic growth in senior housing: Ninth consecutive quarter of double-digit NOI growth from SHOP, with 15% year-over-year cash NOI growth, 8% same-store cash NOI growth. Occupancy grew 350 basis points year-over-year, revenue up ~9%, and operating margin at 26.3% (up 150 basis points year-over-year).
• Senior housing investments: $1.7 billion in senior housing investments closed or under contract, including 43 communities, 16 transactions, targeting high-performing communities with upside, purchased at attractive basis with expected year 1 NOI yield 7%-8% and low to mid-teens unlevered IRR.
• Sustainability: Released 2023-2024 Corporate Sustainability Report, detailing initiatives to benefit the aging population.
• Ventas OI platform: Leverages data and insights to drive SHOP performance, with focus on margin expansion and zero lost revenue days in highly occupied communities, where 40% of SHOP portfolio is in 90%+ occupied category with significant outperformance potential.

Ventas delivered $0.80 of normalized FFO per share in the third quarter, a 7% year-over-year increase. SHOP had 15% year-over-year cash NOI growth, with total same-store cash NOI growing nearly 8%. The Outpatient Medical & Research (OMAR) segment saw same-store cash NOI increase to 2% in Q3 and over 3% year-to-date. University-based research same-store portfolio had nearly 5% cash NOI growth in Q3 and year-to-date. SHOP contributed significantly, with year-to-date NOI up nearly 16%, and RevPOR, OpExPOR spread at 300 basis points.

• Raised 2024 normalized FFO per share guidance to $3.16 per share (midpoint).
• Increased SHOP and Total Company same-store cash NOI expectations. Midpoint of total company's same-store cash NOI expected to be ~7.4% year-over-year.
• Net income attributable to common stockholders expected to range from $0.09 to $0.13 per diluted share.
• $1.2 billion of senior housing investments closing in mid-Q4, limiting 2024 accretion.

• Supply constraints: Construction at record lows, but potential future supply if lending, costs, or rent levels change.
• Competition: Private capital may enter the space, but Ventas has competitive advantage with platform, data, and experience.
• Regulatory impacts: Potential impact on healthcare and senior housing from regulatory changes, though Ventas is positioned favorably.

Q: What are early indicators that supply could re-emerge?

A: Construction as a percentage of inventory is at record low, resident customer base growing over 500,000 annually, constrained supply including lending, costs, and rent levels needed for new construction. Long runway with lag from financial crisis, and baby boomer entry into over aging population in a few years.

Q: Seller motivation in senior housing investments?

A: About 9 of 16 transactions were developers cashing in, some repeat sellers, and a handful of PE firms selling for various reasons. Opportunities created by strong fundamentals and long runway.

Q: Brookdale lease renewal?

A: Brookdale has until November 30 to decide. Outcomes are favorable whether they renew (with potential escalators) or transition to SHOP, as assets are in markets with significant tailwinds and Ventas has the playbook to drive performance.