Ventas - Earnings Call - Q3 2025

Executive Summary

• Q3 delivered broad-based strength: total revenues rose to $1.49B, GAAP diluted EPS was $0.14, and Normalized FFO/share increased 10% YoY to $0.88; SHOP Same-Store Cash NOI grew 16% YoY with 200 bps margin expansion.
• Results beat Wall Street: GAAP EPS of $0.121 beat consensus $0.092; revenue of $1.501B beat consensus $1.436B; continued estimate-positive trajectory across Q1–Q3 2025 (S&P Global).
• Guidance raised: FY25 Normalized FFO/share midpoint lifted to $3.47 (from $3.44); Nareit FFO/share midpoint to $3.45; net income/share midpoint to $0.51; total company Same-Store Cash NOI midpoint to 7.5%.
• Balance sheet and growth catalysts: Net Debt/Further Adjusted EBITDA improved to 5.3x, liquidity of $4.1B; senior housing investment volume target increased to $2.5B, with $2.2B closed YTD—positioning SHOP to ~50% of the business.

What Went Well and What Went Wrong

• What Went Well

  • SHOP demand and pricing drove outperformance: “We expect 2025 to be our fourth year of double-digit SHOP NOI growth,” with Q3 U.S. SHOP Same-Store NOI +19% and average occupancy +340 bps YoY; margin reached 28% with ~50% incremental margins.
  • Guidance and leverage improved: FY25 Normalized FFO/share midpoint raised to $3.47; Net Debt/Further Adjusted EBITDA improved by one full turn YoY to 5.3x.
  • External growth pipeline accelerating: $2.2B of senior housing acquisitions YTD; 2025 investment guide raised to $2.5B; “private pay U.S. senior housing is the company's number one capital allocation priority”.

• What Went Wrong

  • Research segment headwinds: Research Same-Store Cash NOI was ~$0.4M lower YoY in Q3 due to rent resets on Innovation Flex Space tenants, highlighting ongoing credit normalization in a small portion of NOI (8%).
  • Higher net interest expense remains a partial offset: Company flagged higher net interest expense as a drag in FY25 guidance composition despite growth from SHOP and investments.
  • NNN Same-Store Cash NOI declined 2.1% YoY in Q3; underlying mix and straight-lining/non-cash rental income adjustments weighed on segment trends.

Transcript

Speaker 2

Thank you for standing by. My name is Van and I will be your conference operator today. At this time I would like to welcome everyone to the Ventas third quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question, press STAR one again.

Thank you.

I would now like to turn the call over to BJ Grant, Senior Vice President of Investor Relations. Please go ahead.

Thank you.

Speaker 0

Good morning everyone and welcome to.

The Ventas third quarter 2025 results conference call. Yesterday we issued our third quarter 2025 earnings release, presentation materials, and supplemental information package, which are available on the Ventas website at ir.ventasreit.com. As a reminder, remarks today may include forward-looking statements and other matters. Forward-looking statements are subject to risks and uncertainties, and a variety of topics may cause actual results to differ materially from those contemplated in such statements. For a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, all of which are available on the Ventas website. Certain non-GAAP financial measures will also be discussed on this call, and for a reconciliation of these measures to the most closely comparable GAAP measures, please refer to our supplemental information package posted on the Investor Relations website. With that, I'll turn the call.

Over to Debra A. Cafaro, Chairman and CEO of Ventas.

Speaker 4

Thank you, BJ. I'd like to welcome all of our shareholders and other participants to the Ventas third quarter 2025 earnings call. Building on our momentum, Ventas delivered excellent performance and growth in the quarter as we continue to execute on our 1, 2, 3 strategy. Our strategy is based on the megatrend of longevity. As one of the world's largest owners and acquirers of private pay senior housing, we are positioned to capitalize on the sustained growth and demand from a large and expanded aging population. Our strategy emphasizes growing our private pay SHOP business organically and by investing in senior housing. We are doing both as we expect 2025 to be our fourth year of double-digit SHOP NOI growth, and we anticipate closing $2.5 billion of private pay U.S. senior housing investments during the year.

Most importantly, we foresee at least another decade of accelerating demand for senior housing. The Ventas strategy, organization, and team have been built to meet this moment and capitalize on the favorable external demand backdrop. Over the past several years, we have added expertise, acquired over $4 billion of senior housing communities, converted communities from triple net to SHOP, expanded our SHOP operator base, made significant strategic dispositions, increased our scale, and improved our financial profile. As a result, our enterprise is now delivering $2.5 billion of net operating income. Our SHOP percentage of NOI has increased nearly 2,000 basis points to represent half our business. We are working with over 40 SHOP operators. We have created significant occupancy and NOI upside potential in our 85% occupied U.S. SHOP portfolio through our deliberate portfolio composition, and our leverage has improved by two full turns.

These actions and outcomes are designed to take advantage of powerful secular tailwinds in senior housing, where supply and demand are tipped strongly in our favor, and we have the scale, platform, and financial strength to win. Demographic demand is accelerating as baby boomers are starting to turn 80 this coming year, and more people than ever are choosing senior housing for the valuable benefits it provides. The over-80 population is expected to surge into the coming decade and grow 28% just in the next five years. Yet senior housing supply is at record lows in both inventory growth and the number of new construction starts, with just over 1,200 units started in the third quarter. Our strategy is producing strong results, increasing our enterprise growth rate and building financial strength. Let's now turn to the highlights of our quarterly results and latest 2025 guidance.

Increase our outsized organic growth in our senior housing operating portfolio and our active and increasing investment activities. Normalized FFO per share grew 10% year over year and total company same store cash NOI increased 8%. SHOP once again powered our results, enjoying a strong key selling season. We saw broad-based demand for our communities and excellent RevPOR and revenue strength. Our U.S. communities led the way with 19% same store cash NOI growth and 340 basis points of occupancy growth. I want to extend a sincere thanks to our operators and the Ventas team who delivered this performance while helping seniors live longer, healthier, and happier lives. We're pleased once again to increase our full year guidance driven by our SHOP performance and increased senior housing investment activity.

We now expect year over year growth of 9% in normalized FFO per share and 7.5% total company same store cash NOI at the midpoint of our improved guidance. These growth rates will put us in the top tier of companies across the REIT landscape if achieved. On the investment front, we are seeing a strong upward trend in transaction activity and our pipeline continues to grow with quality investment opportunities in senior housing. We are accelerating our senior housing investment activities to expand the Ventas SHOP portfolio and increase our enterprise growth rate. Private pay U.S. senior housing is the company's number one capital allocation priority. The environment is highly favorable. Private to public arbitrage opportunities are increasing. Our strong and broad-based industry relationships are generating significant deal flow and our capabilities, track record, and financial strength provide meaningful competitive advantages.

We've already closed $2.2 billion of senior housing acquisitions in the U.S. year to date and we've increased our 2025 investment guidance to $2.5 billion. We intend to build on our momentum following our right market, right asset, right operator framework. We are prioritizing investment opportunities in private pay senior housing that have different combinations of growth and yield to produce attractive risk-adjusted returns for our shareholders. Next, I'd like to highlight a key SHOP growth initiative. The previously announced transactions relating to 121 triple net leased senior housing communities are well underway. We've already converted from triple net to SHOP 27 of the 45 senior housing communities slated for management transitions by year end. We continue to expect to achieve significant occupancy and NOI upside in these communities over time.

For the 65 communities remaining under the lease, cash rent will increase 33% beginning in 2026 and the disposition of the remaining 11 assets is in progress with sale proceeds to be retained. A final note on our research portfolio, which is generating only 8% of our enterprise NOI. Our portfolio has been constructed in a unique way within this small portion of our business. About three quarters of our base rents are from creditworthy institutional leaders in medicine, pharma, and research, with a weighted average lease term of over nine years, making this portion of our NOI relatively well insulated from current market challenges. Importantly, only about 10% of our research portfolio is leased to pre-revenue or co-working tenants. We have no ground up development in progress and we continue to see institutional demand in new and renewal leasing from university, medical, and global pharma tenants.

In conclusion, we have built Ventas to meet this moment and capitalize on the secular demand from a large and growing aging population. We are executing our strategy to grow senior housing and delivering outstanding results, and we are well positioned to increase our deal activity. The future is bright as we use our many competitive advantages to deliver value for stakeholders and seize the unprecedented multi-year growth opportunity ahead. The entire Ventas team is in it to win it and now I'm happy to turn the call over to Justin.

Speaker 0

Thank you, Debbie. I'm excited to share an update on how 2025 has been progressing as we continue to execute on our strategy and to drive both organic and external growth in our senior housing business. Let's start with SHOP. Our SHOP same store portfolio delivered 16% NOI growth year over year in the quarter, led by the U.S. with 19% growth. Margin grew 200 basis points to 28%, driven by over 50% incremental margin. Revenue grew 8% due to strength in both occupancy and pricing. We saw broad-based contributions to SHOP performance across our operating partners, delivering exceptional care and services to our senior population and very strong financial results, with Sunrise and Atria leading the way. RevPOR grew 4.7% as our dynamic pricing continues to strike the balance between price and volume. Average occupancy grew 270 basis points year over year, led by the U.S.

at 340 basis points, with a particularly strong contribution from our independent living communities. We had industry-leading sequential occupancy growth of 160 basis points overall and 200 basis points in the U.S. Furthermore, we expect sequential average occupancy growth to continue into the fourth quarter. Moving on to SHOP guidance, I am pleased to raise SHOP guidance again with an NOI growth range of 14% to 16%. We continue to anticipate occupancy growth of 270 basis points and higher RevPOR, driven by strong pricing as move-in rents and in-house rates are both increasing year over year. I'd like to turn your attention to page 12 in the earnings presentation. On the left side of the page, you'll note we have consistently outperformed the NIC top 99 markets. The third quarter resulted in 120 basis points of outperformance versus NIC top 99 both year over year and sequentially.

On the right side of the page, you can see the key selling season was excellent with 230 basis points growth, representing our best key selling season performance in a number of years. Now I'll comment on portfolio strategy. Our portfolio strategy, executed through our Ventas OI platform, is centered on what we call the right market, right asset, right operator approach. It's a disciplined framework that ensures every investment we make and every partnership we pursue enhances long-term value creation. We've spent years building a platform that's ready for this wave of demand in senior housing. We now have sophisticated data analytics and the ability to deliver those insights directly to our operators. Through our Ventas OI platform, we've enhanced our CapEx management, optimized dynamic pricing, and developed broader platform capabilities needed to effectively drive performance and support 40 operators managing our communities, and that number continues to grow.

Equally important, we have tremendous respect and appreciation for the critical role our operators play in delivering care and services to seniors and achieving market-leading performance. Having walked in their shoes, we understand the importance of what they do, and we place the quality of our relationships with our operators among our highest priorities. This level of readiness doesn't happen overnight. It's a result of a deliberate multi-year evolution of our platform that positions us to capture the significant opportunities ahead. We have taken numerous actions over the past five years to ensure success in our senior housing business. Those actions include 215 acquisitions, 116 dispositions, 295 transitions to new managers, 307 community refreshes, and 157 conversions of low-occupied communities from triple net to SHOP. The net result is a much larger and well-positioned SHOP portfolio fueling double-digit NOI growth with embedded occupancy upside.

This framework drives our underlying decision-making in our senior housing business. Why our portfolio is well positioned to grow: it's a focused, data-driven approach, and it's working. For example, I'd like to refer you to page 9 of the earnings presentation where we lay out our Ventas OI performance management strategy. I want to make it clear that our SHOP portfolio is well positioned for occupancy growth as our U.S. portfolio is only 85% occupied due primarily to our deliberate actions converting underperforming communities from the triple net structure to SHOP. Our U.S. portfolio is well positioned to achieve substantial upside in markets that offer significant net demand over the next several years and will benefit from operational enhancements driven through our Ventas OI platform.

As we've been expanding our SHOP footprint to half of the company's NOI, our Ventas OI capabilities continue to evolve, and we have been deliberate in positioning the portfolio for significant occupancy and NOI upside. Our most recent example of the triple net to SHOP conversion is the 45 communities, which are 78% occupied, converting from the Brookdale lease to SHOP and transitioning to five aligned, proven, high-performing, local market-focused operators with significant transition experience and track records of delivering excellent results. This transition is well underway. We have completed 27 of the transitions through October, and we expect to be finished by the end of the year. The communities have performed well year to date, with both occupancy and NOI growth. We have already made progress with the REDEF plans, with a significant number of the projects expected to complete by the key selling season of 2026.

We continue to expect greater than $50 million of NOI upside over time as the new operators execute, and we invest NOI-generating CapEx of around $2 million per building. Senior housing is a high-touch business, and I'm pleased to report that in the communities that have already transitioned, there's a strong level of engagement between local management teams and the new operators, along with a great deal of enthusiasm. I'd like to note that this transition is occurring with the full cooperation and support of Brookdale, which is greatly appreciated. Furthermore, we look forward to collaborating with Brookdale on the 65 assets where the lease has been renewed.

Moving on to investments, we continue to build on our momentum in our relationship-driven capital allocation plan targeting private pay senior housing in the U.S., and we have now completed $4.1 billion of senior housing investments since the middle of last year, of which $3.5 billion closed during the past four quarters. We have closed $2.2 billion of senior housing acquisitions year to date. We have a robust pipeline that continues to expand, and our latest guidance for 2025 is now $2.5 billion. Our senior housing flow business is in full swing as our year to date senior housing investments total 20 transactions for 50 communities with approximately 6,200 units across 15 states. The average deal size is $110 million, including a range of singles, doubles, true triples, together with select larger portfolio deals.

These properties improve our SHOP portfolio quality, increase the company's enterprise growth rate, and are located in attractive markets that are poised for outperformance due to favorable supply and demand dynamics. We continue to have an advantaged position to source and close meaningful and attractive senior housing transactions, and the opportunity set is growing at an accelerating rate. We look for a range of senior housing investment opportunities, each with its own balance of growth and yield, so we can deliver attractive returns that align with our targeted low to mid teens unlevered IRRs. It has become clear that Ventas is a senior housing partner of choice across our many transactions. Our growing stable of strong operator relationships provides us with preferred access and the opportunity to win deals. Our transaction execution track record has also created opportunities for repeat business with sellers.

In summary, we have conviction in our strategy, and we are intensifying our efforts to drive outperformance in our senior housing business, and the best is yet to come. I'm confident in our ability to execute and create value for our stakeholders in senior housing and investments execution, including a valuable living experience for residents, valuable workplace experience for the tens of thousands of dedicated community staff, and ultimately leading to significant value creation for our shareholders. Now I'll hand the call to Bob.

Speaker 3

Thank you, Justin. I'll start with our third quarter performance, highlight our balance sheet, and conclude with our improved guidance for the year. Starting with our enterprise performance, Ventas delivered normalized FFO per share of $0.88 in the third quarter, which represents a 10% increase year over year. Driving the strong year over year growth was total company same store cash NOI of 8%, led by SHOP growth of 16%. Our Outpatient Medical and Research business, or OMAR, reported same store cash NOI growth of 3.7% year over year, led by Outpatient Medical. Outpatient Medical third quarter occupancy improved 50 basis points year over year to 90.6%, a 20 basis point sequential increase versus the second quarter. TTM tenant retention was a strong 87% in the third quarter, an increase of 200 basis points year over year, reflecting tenant satisfaction scores in the 95th percentile.

Our research business represents 8% of our NOI. In the third quarter, research same store cash NOI was $400,000 lower year over year, driven by lower rents on certain Innovation Flex Space tenants as previously discussed. Next, turning to our balance sheet and liquidity, our net debt to EBITDA of 5.3 times in the third quarter represents a full turn improvement from the third quarter of 2024. This leverage reduction was driven by a combination of organic growth and equity-funded senior housing investments consistent with our strategy. I would note that this significant improvement in leverage was achieved while delivering normalized FFO per share growth in the top echelon of REITs. We've already fully equity-funded our $2.5 billion investment guidance for 2025 with $2.6 billion of equity raised, including half a billion of unsettled equity forwards.

We have over $4 billion of liquidity as of September 30th, which supports Ventas growth and financial flexibility. I'll close with our updated and improved 2025 guidance. We expect net income attributable to common stockholders to range from $0.49 per share to $0.52 per share. We are also improving our full year normalized FFO guidance midpoint by $0.03 to $3.47 per share. This improved 2025 guidance midpoint represents 9% year over year growth in normalized FFO per share. Approximately two-thirds of our $0.03 guidance increase at the normalized midpoint can be explained by our improved SHOP performance and senior housing investments completed year to date, with the final third representing improvements across the balance of the enterprise.

We've also raised our total company same store cash NOI growth by 50 basis points to 7.5% year over year, led by the SHOP same store NOI midpoint improving by 100 basis points to 15%. In our updated guidance, with the 45 Brookdale conversions now underway, we are reflecting the shift in NOI from these conversions from our triple net segment to our SHOP segment. Because cash rent on these 45 conversion assets approximates current NOI at the assets, the net impact on 2025 FFO is de minimis. I would point you to our earnings presentation deck and Supplemental for more detail on these and other assumptions underpinning our guidance to close. We are pleased with the results both in the quarter and so far this year. The entire Ventas team is determined to build on our momentum and to continue delivering superior performance for our shareholders.

With that, I'll turn the call back to the operator.

Speaker 2

At this time I would like to remind everyone, in order to ask a question, press star the number one on your telephone keypad. Please limit your question. Oh, sorry, there's no limit to other questions.

Speaker 0

Sorry for that.

Speaker 2

Our first question comes from the line of Jonathan Hughes, Raymond James. Please go ahead.

Speaker 0

Hi, good morning. Thank you for the prepared remarks and commentary. I was hoping you could talk more about underwriting criteria. I know the acquisition volume guidance is $2.5 billion from $1 billion at the start of the year, and you've been very consistent on buying properties with 7% yield. With the lower cost of capital today, it seems like you'd now be able to make the math work to buy some lower initial yielding properties that come with higher growth but still low to mid teens IRRs, I guess. Are there any plans to lower those initial yield requirements? Maybe get more aggressive to buy properties with more growth?

You know, given the outlook for senior housing supply and demand is so strong.

Over the next five to ten years.

Speaker 4

Good morning, Jonathan, it's Debra. We are certainly going to be ambitious in our goals to grow our senior housing business as we have over the last couple of years and build on our momentum.

Speaker 0

Hi, it's Justin. Yeah, like I said in my prepared remarks, $3.5 billion of the $4.1 billion have been over the past four quarters. The volume's been accelerating. We have momentum in our pipeline and the execution on that pipeline, and we're really happy with the returns we've been getting. The primary metric we target are unlevered IRRs. Everything's been in the range of low to mid teens, and there's a variety of ways to getting there, and it's really yielding growth. We've seen the opportunity to buy assets that are delivering significant growth potential, and that's where we're leaning in. We're using the market asset operator framework to help determine where to focus. We've had plenty to do, and we look forward to doing as much more of it as we possibly can. Okay, I'll ask one more if I can on the leverage.

It's great to see that improvement. Can you just remind us of the.

Target leverage, how you weigh equity and.

Debt to fund this external growth, especially given that cost of equity capital today is really attractive.

Speaker 3

Yeah, I'll take that, Jonathan. We're really pleased with the leverage improvement. 5.3 for the quarter. That's a full turn. The strategy that we set out quite a while ago now of organic growth plus equity funded investments given the returns has really been working. We're going to continue to run that play as long as the market gives us the opportunity, and we are obviously trending favorably in terms of leverage. I would expect that to continue should the market conditions exist. That just gives us more flywheel and more opportunity to continue to invest. That's the strategy and that's the approach. We are clear eyed that equity is very precious and therefore making sure that we're investing in the best assets as Justin described. We're really pleased with the way the playbook is working.

Speaker 0

All right, thanks everyone for the time.

Speaker 4

Thank you.

Speaker 2

Our next question comes from the line of Michael Carroll, RBC Capital Markets. Please go ahead.

Speaker 3

Yeah, thanks.

Speaker 0

I wanted to quickly touch on the Brookdale SHOP transitions and the revenue-generating CapEx that Ventas plans to be putting into these assets.

Can you give us a few examples?

On what type of investments these will be and how disruptive will that be to current results? Just trying to get these done before the key selling season and that's just the key to minimize this disruption. Yeah. I'm going to start with kind of the plans we have in place to help ensure smooth transitions. First thing, just to reiterate something I said and that is that the performance has been really good. We're receiving the communities in a place where they've had really good occupancy and NOI growth over the past year.

There's been a very high touch approach with my team, our team here at Ventas, but also the operators, the CEOs of the operators and personally engaged in the communities on the ground right away assessing the situation and the opportunity to improve on operations and also help us to solidify our plans to invest the refresh CapEx. The types of projects that we're focused on are mainly kind of, I call them like routine refreshes where we're repositioning through common area refresh, paint, paper, furniture, fixtures. We refresh all the lighting, first impression type investments, and we've become pretty expert at doing this with as little disruption as possible. There's a few projects that are much larger that we have. We have The Hallmark in Chicago, which will get a full readout.

That's a really exciting high rise that has been a market leader for years, and we're going to take it to a new level with the new operations and the investment. Most of them are pretty routine projects that we have immense experience delivering. Okay, great. Then just lastly for me, another SHOP portfolio, at least on the same store side, has really delivered some good margin expansions of what, 200 basis points every year? I mean, just given that occupancy now for the same store portfolio is 89%.

Presumably next year it's going to get above 90%.

How much faster can that margin expand? Because I know, Justin, you've always talked about that you get more incremental margins as occupancy improves. What's a good kind of ballpark of?

How much that could pick up?

Yeah, it's one of our favorite topics, you know, margin expansion and incremental margin. We've experienced really over the past full two years, 50% incremental margin in our SHOP performance. That's a rule of thumb that we've articulated many times. That rule of thumb really applies for that journey from 80% to 90% occupancy. Once you start getting over 90% on your way to 100%, you start to see a higher incremental margin, closer to 70% because that operating leverage has really kicked in. That will be an opportunity.

Speaker 2

Just.

Speaker 0

Simply through operating leverage and growing occupancy to have market expansion. The other opportunity is through price. You have heard so far in our prepared remarks, you know, we have good experience in terms of RevPAR growth that's driven by underlying rent increases and move-in rents. In both cases, the higher occupancy you get, the stronger that result is. We get two times the RevPAR growth. We get two times the move-in rents in communities that are over 90% occupied versus the rest of the portfolio. That will create opportunities to help push margin as well.

Speaker 3

Okay, great.

Speaker 2

Thank you.

Speaker 4

Thanks, Mike.

Speaker 2

Our next question comes from the line of Farrell Graniff from Bank of America. Please go ahead.

Speaker 4

Good morning. Thank you for taking my question. I first wanted to address the comment in the opening remarks about occupancy is expected to increase sequentially or at least quarter over quarter. I was just wondering if that has to do with anything coming into the same store at a higher occupancy or if you're seeing things in market trend right now.

Speaker 0

This is about just a strong end to the third quarter and that carrying into the fourth quarter, and we have good visibility into that obviously so far. It's an organic outcome driven by, you know, strong demand and strong move-in volume that we're seeing.

Speaker 4

Thanks, Darren. Thank you. I also wanted to ask about, as your pipeline right now is all U.S. SHOP, what's your comfortability of potentially expanding that into the UK or in other areas as well? Great question. I'm sitting here with Justin, who I think is the only REIT executive who actually ran a UK large senior living company. I'll let him take that question.

Speaker 0

Yeah, so I would say our first, second, and third priorities are to invest in private pay senior housing in the U.S. We like the footprint we have in Canada, don't have meaningful plans to expand there. The U.K. is interesting. One thing we did do there is set up our SHOP platform early this year with a new operator, CCG, who's been delivering excellent results so far. We'll look forward to expanding our footprint in the U.K. over time. The U.S. is where all the action is.

Speaker 4

Okay, thank you so much.

Speaker 2

Our next question comes from the line of Vikram Malhotra from Mizuho. Please go ahead. Morning. Congrats on the strong results. I just have two questions. I guess one, you know, a lot of your peers are engaging in, I guess, strategic portfolio shifts, whether it's selling MOBs or some MOBs or moving into the U.K., and by peers, I mean, you know, just the broader healthcare set. I'm wondering, sort of as you think of the portfolio today with, you know, the lifestyle, university exposure, medical office, but then this outsized growth in SHOP, like is there thinking about, like, bigger picture change in the portfolio, number one. Then just going back to, you know, specifically on Canada, you've had really good results there, but what's the appetite to sort of monetize the investment and the returns, maybe into a fund or just outright selling. Thanks.

Speaker 4

Thanks, Vikram. Of course, we're always willing to consider and we're always evaluating different portfolio actions that we think will create long-term value for the company. You've seen us do that over the years. We'll continue to actively monitor our portfolio for those types of actions. Currently, our main focus, which I'm sure is coming across, is really in aggressively growing our private pay SHOP business, which we've increased 2,000 basis points to half the company over the last couple of years. We're going to continue to try to rapidly expand that business from internal and external investment activity. Hello.

Speaker 2

Thank you, Vikram.

Speaker 3

Okay.

Speaker 2

Our next question comes from the line of Michael Goldsmith from UBS. Please go ahead.

Good morning. Thanks a lot for taking my questions. You raised your SHOP RevPAR growth guidance from 4.5% to greater than 4.5%. It seems like every quarter we see less and less supply growth. Can you just talk about the change to greater than 4.5% and how much visibility you have into 2026 given pricing power should strengthen as occupancy increases? Further, do you think higher RevPAR growth can somewhat offset any slower occupancy growth in the future?

Sure.

Speaker 0

We have been really pleased with our underlying pricing both in terms of rent increases this year as well as the move-in rent trends, which are up year over year. They are working together through our dynamic pricing approach with our operators to deliver that result. One of the things we are equally as pleased about is that we are striking a really good balance of also driving occupancy and price together, which is what this dynamic pricing approach is designed to do in terms of the opportunity moving forward. We are not going to really get into 2026 right now. Some of the things I mentioned earlier are really relevant, and that is that in higher occupied communities we have seen better price outcomes both in-house and through move-in rents. Obviously, demand has been really good, and we have more scarcity value across our portfolios.

Over time, that should create an opportunity. When it is time to get into 2026, we will do that, but this is not the time yet.

I appreciate the response. As a follow up, you acquired $2.2 billion of stabilized senior housing year to date, added 10 new local focused operator relationships. It appears these are good operators because occupancy is already at 91%. Can you talk about what you look for when assessing whether a new operator fits the Ventas platform, and then the average price per unit on the year to date activity was $381,000. Is that still a discount to replacement cost, and if so, how much, if you had to estimate things?

Yeah, so we've consistently been buying below replacement costs. It varies. I mean it's anywhere from 10% to 50% depending on which particular investment we're talking about. One thing I want to clear up is you mentioned the word stabilized. We really don't think of 90% occupancy as being stabilized. We're sitting in markets that have net absorption projection of 1,000 basis points plus over the next few years. We have not only good operational opportunity, but a tailwind that is unprecedented that we're facing. We have the price opportunity I've reiterated that comes with that as well. We see a lot of growth ahead in these assets. Just to reiterate another strategic point I made, on top of the acquisitions, we also have had the strategy of moving our triple net communities over to SHOP. Those communities were lower occupied. The most recent example is Brookdale, 78% occupied.

What that's delivered for us is a U.S. occupancy that's 85%. We're buying these high performing communities through acquisitions. We transitioned the lower occupied communities from triple net to SHOP. We have a long runway ahead of growth opportunity with tailwinds to support it and a platform designed to deliver on that.

Thank you very much. Good luck in the fourth quarter.

Speaker 2

Thanks. Our next question comes from the line of Seth Bergy from Citi. Please go ahead.

Speaker 3

Thanks. It's Nick Joseph here with Seth. Deb, I just want to go back to the question on diversification and the benefits of being more diversified versus more of a pure play. Do you think there's synergies between the businesses? Is it just a matter of pricing and if you had the right pricing, you'd look to get more pure play? How do you think about the portfolio composition, the company composition overall, and ultimately how that attracts equity capital relative to the other healthcare companies out there?

Speaker 4

Yes, overall, as I mentioned, the company's portfolio is unified by the megatrend of longevity. Of course, the senior housing business caters to the over 80 population, which is large and growing and should be accelerating in growth over the next decade. As I mentioned, just 28% over the next five years. We are leaning heavily into our senior housing business, and that is our number one priority to grow that. By doing so, both internally and through external investments, we are increasing the growth rate of the enterprise, which we believe increases our return to shareholders. We are going to continue leaning into that strategy. We are always evaluating the merits of all of our businesses, all of our assets, and we are open minded to considering portfolio changes. We will continue to be aggressive in looking for ways to create value for shareholders.

Speaker 3

Thank you. As you think about that growth, I think you said the first, second, and third priority is in the U.S. Are you seeing different amount of competition for senior housing assets in the U.S. versus anything internationally that you do look at?

Speaker 0

Senior housing is obviously a strong performing asset class. There is new capital entering the market. We've seen more competition, we've seen a much bigger pipeline, though. It is not surprising that there'd be more interest in the asset class given the fundamentals, but we really like our ability to compete. As I mentioned, the platform's designed to manage a large number of operators. That's important because 75% of the sector is operated by operators at 50 or fewer assets. If you're going to grow at scale in this sector, you need a platform that can manage multiple operators. We do that as well as anybody. We're positioned through that, through the Ventas OI platform, as well as our transaction experience and track record and our financial strength and flexibility that has positioned us to continue to grow. We like our ability to compete whether it's the U.S.

or in other markets.

Speaker 3

Thank you.

Speaker 4

Thank you.

Speaker 2

Our next question comes from the line of Richard Anderson, Cantor Fitzgerald. Please go ahead.

Thanks. Good morning. Not to bring up what was a sore subject at the time, but back in March you had this sort of surprise uptick in deaths that caused some disruption in the transition to the following quarter. I'm wondering if that has smoothed out over the course of 2025, whereas it slowed down hopefully where the full year 2025 might look like a lot of other years. Is that playing any role in your optimism in terms of sequential occupancy growth into 2025, into the fourth quarter, or is it a normal pace now? Just wondering if that's playing a role at all.

Speaker 0

Hi, Richard, it's Justin.

Speaker 2

Yeah.

Speaker 0

The bottom line is that we never backed off our full year occupancy guidance. It was 270 the whole time. We alerted the markets to kind of an intermittent change in the occupancy run rate. We had the key selling season ahead of us. We've delivered on one of the best key selling seasons that we've had. You can see it on page 12 in the deck. We had 230 basis points of growth within the key selling season, best in the past four years. The third quarter was a leader amongst the industry versus NIC and peers in terms of sequential occupancy growth. That was driven by higher than move ins versus prior year. The move in strength has been very strong. The move outs have moderated and we're growing occupancy. It's old news and we've stuck with 270 and we're delivering on it.

Okay, fair enough. Second question. You talked about a growing investment pipeline, which is, you know, great to hear, but I'm wondering about the finiteness of the external growth story here. When I think about senior housing, I don't know, maybe there's 30 million apartment units in the U.S., but is there 2 million senior housing? I don't know. You're certainly buying as a group, as REITs, faster than product is being developed. What would you say is the timeline where you've sort of gotten to the point where you've seen and considered what you kind of want to have and that we'll start to see external growth start to materially slow down, but you've done a good job in terms of acquiring into that market.

It's such that the story transitions much more to an organic growth story, still sort of drafting off of all this aging of the population, but more of an internal growth story maybe a couple of years from now and less of an external growth story.

Speaker 4

Thanks, Rich. We feel very confident about our ability to build on our investment momentum and to accelerate investment activity, quality U.S. senior housing for the foreseeable future. We're very happy, as you mentioned, that we have a really outstanding internal growth story in this very large and growing senior housing business.

Speaker 0

Yeah, I would just say really explicitly, we're not even close to seeing the slowdown from an external standpoint. The institutional ownership, long term ownership is still in the mid teens in the sector. You have a lot of private equity and friends and family equity that own assets, that trade assets routinely, and we anticipate participating in those trades.

Okay, great. Thanks very much.

Speaker 4

Thank you.

Speaker 2

Our next question comes from the line of Omotayo from Deutsche Bank. Let's go ahead.

Yeah. Hey guys, this is Sam on for Tayo.

Speaker 0

I hope I didn't miss this.

Can you guys provide an update on the performance update on the 27 assets that have been converted from triple net to SHOP?

Yeah, sure, yeah. You're referring to the transition, the triple net to SHOP transition from Brookdale. We've had 45 in total, and those communities have performed really well year over year, and their NOI really approximates the rent run rate now. That was a good outcome. There are 27 that have transitioned as of October. Everything's going really well. We've had boots on the ground from Ventas team members and, most importantly, from the senior leadership amongst the operators to ensure that there's a smooth transition underway. There's a lot of enthusiasm around the attention that the communities are getting, both from the new management and around the refresh capital that we're going to be putting in to help better position the communities and deliver occupancy growth over time.

Sorry, what was it you said after?

Since October, how many have been transitioned? I think I missed that. There's 27 that have transitioned so far.

Speaker 4

The remainder of the 45 should transition in the coming months.

Got it. That's it on my end.

Speaker 2

Thank you. Sure.

Speaker 4

Thank you.

Speaker 2

Our next question comes from the line of Juan Sanabria from BMO Capital Markets. Please go ahead.

Hi, good morning.

Speaker 0

Just hoping you could talk a little bit.

Hi.

Speaker 4

Just hoping you could talk a little.

Speaker 3

Bit about the independent living pool in the U.S. You kind of highlighted that as an outperformer. If you could just give us some color as to what's driving that and maybe as a subset of that, how.

Speaker 0

Holiday, the ex-Holiday assets or the.

Speaker 3

Now Atria by Holiday assets are performing.

Speaker 0

As a part of that. Yeah. You know, most of our independent living footprint in the U.S. is, you know, Holiday or former Holiday communities. We had 340 basis points of occupancy growth in the U.S. IL was stronger, so that was 390 basis points. We've had really good growth in that IL product and pleased that it's outperforming and as it has a long way to go too. It's part of that U.S. opportunity for occupancy growth and it's delivering and it has long runways. We're really pleased with the performance.

Speaker 3

How is the IL growth and the outperformance you've seen there impacted RevPAR growth? Is there any impact in terms of the mix there, and how should we think about that into 2026 versus.

What you've delivered year to date?

Speaker 0

Yeah, so I'm not going to get into 2026. The IL growth, because it runs at a lower RevPAR and therefore the outperformance in IL at a lower RevPAR, does cause a mixed impact on the RevPAR metric. It does pull it down, and it's a high-class problem because it means you're growing more occupancy higher and faster. It happens to be in a product that has slightly lower rent. That's all in the numbers. The goal will be to continue to grow with broad-based performance across the whole platform, both in terms of occupancy and rate.

Speaker 2

Thank you. Thanks. Our next question comes from the line of John Kielichowski from Wells Fargo. Please go ahead.

Hi, good morning out there, Justin. In last quarter we discussed kind of the building blocks of your higher occupied assets and that margin profile that we talked about earlier on the call. If we look at your Canadian portfolio, you're at mid-90s occupancy and we would kind of expect to see that, that sort of layout on margin and RevPAR. I'm just curious why that same store NOI numbers may be a little lower than we would expect given the building blocks that you walked us through. I think it would probably get us to mid-teens and we're seeing 7.4% this quarter. Is there anything to point out there?

Speaker 0

Yeah. The Canadian portfolio has very, very high occupancy, and there are some limitations around how much and where you can push pricing. There's also a mix issue that happens at times. We have a Sunrise product that's very high rev4, and if there's any volatility in those 12 communities, it can impact the operating metrics. We would really kind of view Canada as a high single-digit grower. I mean, that's what it's been for us. It's a reason why we're not looking to expand in Canada. You just don't have the same organic NOI growth opportunity in Canada. It's solid, and it's a good opportunity. The U.S. opportunity is different. You have the opportunity to really deliver a better rev4 opex poor spread in the U.S. over time. You have fewer limitations on the top end in terms of where you can push rent.

We're located in markets that have the high income and wealth demographics and very strong supply and demand in the U.S. as well. We do like that opportunity better and would expect better growth in the.

U.S. okay, that was very helpful, thank you. My second question is just on the acquisition pipeline. A couple times on the call you've said you have clear visibility on the ability to accelerate your acquisition cadence. Are there any near term risks that you're monitoring that could possibly sort of uproot that thesis? Is it pretty reasonable for investors to start expecting higher investment volumes in 2026 and in 2025?

Structurally, we don't see anything limiting us now. We have the track record, we have the platform, we have the cost of capital, and we have momentum. All of that's working together to have this accelerating investment pace that we've been delivering on, and intention is to continue that.

Very helpful, thank you.

Speaker 2

Our next question comes from the line of Ronald Camden from Morgan Stanley. Please go ahead. Ronald, your line is now open. Please go ahead. Thank you. Great.

Just two quick ones for me. Just going back to the operator conversation a little bit. You know, you've added some more operators now, you've had a lot of experience working with different operators. Was wondering if you could just talk through in terms of their ability to use data, use the platform, as well as their capacity to take on more facilities. Like where are all these operators in that journey?

Right.

Is it early innings, is it middle innings, late innings? Just trying to get a sense of the potential efficiency and upside potential over the next three to five years.

Speaker 0

Thanks, that's a great question. Let me start with this. Every single one of our operators in their communities have end-to-end tech. All of them do. It's an industry standard. What that means is that they have tech in place for safety monitoring, care and compliance, med administration, managing their CRM, food services, maintenance, delivery. All of that is managed through tech and most of it is AI enhanced now. That's the starting point. Believe it or not, technology is widely used in senior housing and certainly our operators are deploying that technology to help deliver more efficient and also, most importantly, high quality care and service delivery to the residents and to manage the business better. What's really powerful about the Ventas OI platform is that we designed it to plug into any system.

It doesn't matter what they're using on the CRM side and from a financial side to get the operating metrics and the financial metrics we need. We designed our platform to be flexible. We pull the data in and then we can access and utilize the data in the OI platform. The powerful aspect is that we then deliver that back to the operators. What we're doing in doing so is articulating opportunities to improve across all the key metrics, revenue and expenses, and in a very targeted way. We get down literally to the unit level and we have price strategies, sales strategies, expense efficiency opportunities that are identified in granular detail in a way that the operators can really take it and deliver a plan to improve performance. It's a very collaborative effort. It's data rich, but in a very focused, consumable way.

That's how the OI platform plugs in. It's only going to get much better. One of the things that you hear me talk about is the best is yet to come. That's referring to a number of fronts. One of those fronts is the ability to execute on performance through the OI platform will only get better over time. Really helpful. Then my second question was just.

I wanted to ask the competition question sort of a different way because we've been thinking a lot about that as well. When I look at low to mid teens and levered IRR, I think the demographic trends are clear. I think if you could be a little bit more specific in terms of why do you think private equity specifically has not come into the space? Is it that they're here and there's enough product to go out? What are the reasons that this pool of capital is not coming for these low to mid teens, unlevered IRR with a good supply demand backdrop? Just what are you hearing?

Speaker 2

Thanks.

Speaker 0

There is private equity in the space. Quite frankly, they own much more of the sector than the public companies do, and they're in the space. In terms of, and when I say that, I'm referring to private equity and friends and family equity. The reality is, if you're an institutional private equity player and you want to enter the space in scale, everything I've described that we do, you don't flip a switch and just make that happen. The ideal seems like the ideal private equity investment would be to line up with a large scale operator and help that operator to improve and expand and grow. To grow in this space, you're usually not going to find many of those opportunities because it's a collection of smaller operators and senior housing, as I mentioned. Our platform is designed to buy communities operated by multiple operators.

It's 40 and growing. I do think that creates a barrier to entry issue for some private equity. Having said that, we would expect that there'll be plenty of interest from a variety of capital sources in the sector, given the strong fundamentals.

Thanks so much.

Speaker 2

Your next question comes from the line of Michael Strojek from Green Street. Please go ahead.

Speaker 0

Thanks. Good morning. Can you quantify what the potential opportunity for triple net to SHOP transition looks like within the current portfolio? How many more assets do you expect to transition over the next, call it 6 to 12 months or so, outside of the Brookdale portfolio? What's a rough range of NOI upside you typically underwrite on those? We've had, quite frankly, most of that plan executed. We had 150 plus that we've moved into SHOP from triple net that's created that awesome occupancy upside opportunity we're seeing in the U.S. We do have some very high performing leases that are left. One of those is with Brookdale. I mentioned that we don't have any plans to do anything different with that portfolio.

There's a couple other smaller ones, one of which we just made an acquisition through one of our tenants and bought some new, really high performing, high quality assets as part of the pipeline and moved those to SHOP. That was a way to leverage that relationship. The plan at this point is to deliver on the organic growth opportunity that is embedded in our portfolio through all those efforts we've had in place over the past few years and continue to grow externally. Got it. Maybe one on the research business. Can you just quantify the magnitude of bad debt during the quarter? Are these one-time rent deferrals or more permanent rent cuts to tenants? Help us understand how long the credit issues during the quarter may actually weigh on NOI growth in that business. This is Pete. Thanks for the question.

The typical character of some of the restructurings we've done to give people additional runway is to.

Speaker 2

You know.

Speaker 0

Initially reduce their rents, have a climb back up, and then have some participation opportunities later as their business improves. That's a playbook we've been running. It's been working well, and you know, it's hard to say when it's going to end, but we're pretty pleased with the results. Got it.

Thank you.

Speaker 2

Our next question comes from the line of Michael Mueller from J.P. Morgan. Please go ahead.

Speaker 3

Yeah, hi.

Speaker 2

Busy day?

I'll just keep it to one here.

Speaker 3

As the 80+ population surges, do.

You expect to see a widening of.

Performance between AL memory care and the younger population IL portfolio?

Speaker 0

I want to make sure you understand.

Speaker 4

I think I do. The 80 plus population, the baby boomers start turning 80 next year. That's really our customer base in senior housing. The truth is that both AL and IL ages are relatively consistent with each other, and we would expect both to be benefited by this broad-based demand. It's really just a different type of resident with whatever type of needs that they have when they move into senior housing, and the age is relatively consistent between the two. You can get a little bit younger skewing in the independent living, which is one of the benefits of that asset class. Overall, both are going to be benefiting from this broad-based and growing demand.

Speaker 3

Got it. Okay. Thank you.

Speaker 4

Thank you.

Speaker 2

I will now turn the call back over to Debra A. Cafaro, Chairman and CEO of Ventas, for closing remarks.

Speaker 4

All right, Van. Thanks. I want to thank everyone who joined us on a busy day for your interest in and support of Ventas. We wish you and yours a good holiday season, and we look forward to seeing you soon. Thank you.

Speaker 2

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.