Q4 2024 Earnings Summary
- Ventas anticipates strong growth opportunities due to the surging 80-plus population, which is expected to drive significant demand for senior housing and related services. The company expects "really good opportunities moving ahead."
- The company has several development projects with high pre-leasing rates, including one project that is 100% pre-leased, and others at 80% and 60% pre-leased, indicating strong demand and future growth potential.
- Ventas plans to continue improving its net debt-to-EBITDA ratio, driven by growth in senior housing both organically and inorganically, and is successfully funding investments with equity, enhancing financial flexibility.
- Increased competition in senior housing investments may pressure future returns: Ventas acknowledged that competition for senior housing assets may be increasing as others recognize the favorable risk-reward in the sector. This increased competition could lead to cap rate compression, making it more challenging for Ventas to achieve its targeted returns on new investments.
- Heavy reliance on the key selling season adds risk to SHOP occupancy growth: Ventas indicated that their SHOP occupancy growth heavily depends on the key selling season. Any underperformance during this period could negatively impact their occupancy rates and NOI growth, particularly given uncertainties around changing seasonality patterns.
- Potential dilution from equity funding of acquisitions: Ventas plans to fund approximately $1 billion of senior housing investments in 2025 primarily with equity, resulting in a higher share count. This approach could dilute existing shareholders if the returns on these investments do not sufficiently enhance earnings per share.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Net Income Attributable to Common Stockholders | FY 2025 | no prior guidance | $0.48 per share at the midpoint | no prior guidance |
Normalized FFO (Funds From Operations) Per Share | FY 2025 | no prior guidance | Range: $3.35 to $3.46 per share; Midpoint: $3.41 per share; representing 7% year-over-year growth | no prior guidance |
Total Company Same-Store Cash NOI Growth | FY 2025 | no prior guidance | Approximate growth of 6.75% year-over-year | no prior guidance |
Senior Housing Investments | FY 2025 | no prior guidance | Approximately $1 billion in 2025 | no prior guidance |
Capital Recycling Efforts | FY 2025 | no prior guidance | Expected to raise $200 million in 2025 | no prior guidance |
Net Interest Expense | FY 2025 | no prior guidance | Expected to increase by $0.08 per share | no prior guidance |
Dividend | FY 2025 | no prior guidance | Quarterly dividend increased by 7% | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Net Income Attributable to Common Stockholders (EPS) | FY 2024 | $0.09 to $0.13 | 0.19(sum of quarters) | Beat |
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Acquisition Strategy & Returns
Q: What are the return profiles on stabilized asset acquisitions?
A: Ventas is capitalizing on unique opportunities to invest in high-quality senior housing assets that deliver both yield and growth. They are targeting market-leading properties with 90% occupancy, which still offer upside potential. Unlevered IRRs on these investments are in the low to mid-teens. -
RevPOR Growth Dynamics
Q: How should we think about RevPAR growth versus rent increases?
A: While January rent increases in the U.S. are 8%, RevPAR growth guidance is 4.5%. The difference arises because January increases affect only about half the residents, as new move-ins from Q4 don't receive them. Additionally, levels of care revenue reset lower with new residents, impacting RevPAR. Over time, as occupancy rises and move-in rents align with in-house rents, there's opportunity for stronger RevPAR growth. -
Capital Expenditures Outlook
Q: Will higher FAD CapEx levels continue in coming years?
A: FAD CapEx is guided to be $285 million in 2025, up from $250 million in 2024. The increase is driven two-thirds by a higher number of units due to acquisitions and conversions, including the Brookdale transition, and one-third by inflation. As Ventas continues to acquire assets and convert properties, CapEx is expected to remain at this higher level, primarily due to volume growth. -
NIH Funding Risks
Q: How might NIH funding changes affect Ventas's research assets?
A: Ventas's consolidated research portfolio constitutes about 8% of total NOI with partnerships across 18 universities. While there's current uncertainty around NIH grants, any proposed funding changes are minimal and have been halted. Moreover, NIH funding is a minority portion of these institutions' research budgets. Ventas remains positive on the long-term prospects of biomedical research in the U.S.. -
Medical Office Building Outlook
Q: How should we view MOB occupancy declines versus strong 2025 NOI growth guidance?
A: Despite some occupancy declines, Ventas increased leasing activity by 15% in 2024 compared to the prior year. As new leases commence, meaningful NOI growth is expected. Already in 2025, they've achieved 34% of their leasing plan by February, supporting assumptions of occupancy gains and corresponding NOI growth. -
Focus on High-Performing Assets
Q: Why focus on high-performing assets instead of value-add opportunities?
A: Ventas balances its portfolio by investing in both high-performing assets and those with upside potential. While high-performing acquisitions offer immediate returns and growth, they also have significant occupancy upside. Existing assets, including those converted from triple net to SHOP, like the Brookdale communities, provide value-add opportunities. Ventas aims for unlevered IRRs in the low to mid-teens on these investments.
Research analysts covering Ventas.