The operator welcomes everyone to the Ventas Second Quarter 2024 earnings call and introduces the speakers. Bill Grant, Senior Vice President of Investor Relations, reminds listeners of the risks and uncertainties associated with forward-looking statements. Debra Cafaro, Chairman and CEO, highlights the company's strong performance and its role in the longevity economy, specifically in the senior housing industry.

Ventus is experiencing strong growth and expects to continue this trend in the near and long-term. They have raised their 2024 expectations and are focused on delivering growth and value to their stakeholders through a three-pronged strategy. This includes delivering organic growth in their senior housing portfolio, making strategic investments, and increasing cash flow throughout their portfolio. They have seen significant growth in their senior housing portfolio, with eight consecutive quarters of double-digit NOI growth and improvements in occupancy and revenue.

Ventas has been able to attract a strong demand for senior living through data-driven decisions and talented operators. With a current occupancy of 84% and 27% margins, there is potential for an additional $140 million in NOI by reaching 88% occupancy and 30% margins. The growing population of seniors over 80 years old, combined with low construction rates, provides a favorable supply-demand backdrop for continued growth. Ventas is also increasing its investment activity in senior housing as part of their strategy.

Ventas, one of the country's largest owners of senior housing, plans to increase their investment activity due to favorable market conditions and a strong pipeline for quality acquisitions. They are focused on driving cash flow and value creation throughout their portfolio, including their outpatient medical and research properties. They are also in discussions with Kindred regarding a lease resolution for 23 long-term acute care hospitals, which could result in a 25-30% rent reduction starting in 2025. The goal is to reach a positive lease resolution that benefits both Ventas and Kindred.

Ardent's successful IPO and Ventas' ownership stake in the company have resulted in a positive investment for Ventas. The company has also monetized some of its Brookdale warrants, further increasing its profits. Ventas is optimistic about its future in the aging population market, as its business is highly advantaged in the current economic climate.

During the call, Justin Hutchens reported on the strong performance of Ventas' shop portfolio and the company's improved outlook. The macro backdrop is favorable, leading to strong execution from operators and support from Ventas' OI platform initiatives. The key selling season has delivered strong results, with leading indicators and occupancy performing well. Net move-in volume has significantly increased compared to last year, driven by various portfolios. In the second quarter, same-store shop revenue grew 8% and occupancy grew by 320 basis points, with the U.S. leading at 380 basis points. Le Groupe Maurice in Canada has consistently delivered stellar performance. The gains in occupancy were broad-based, with assisted living and independent living both seeing significant growth.

The company experienced strong spot occupancy in their communities compared to the market, with a 450 basis point year-over-year growth and a 150 basis point sequential growth. This resulted in 8% revenue growth and 15.2% NOI growth, with a healthy spread between RevPOR and OpExPOR. The company credits their operating partners for their success and has raised their full-year guidance expectations. They also mention their Ventas Operational Insights platform, which is aimed at driving organic growth in their shop portfolio.

Ventas has a platform that combines analytics and operating expertise to provide insights and drive decision-making for operators. The platform has real-time data and has helped increase occupancy and NOI through initiatives such as NOI generating CapEx and price volume optimization. The company has completed 215 projects, resulting in a 530 basis point increase in occupancy and 6.5% growth in RevPOR. They also monitor pricing on a monthly basis to optimize move-ins.

Ventas has successfully used their automated monthly rent roll consolidation process to analyze historical data and identify price opportunities, resulting in improved sales momentum for several operators. They have also implemented digital marketing initiatives to drive higher move-ins and have completed over 1,000 OI engagements to share insights and data with operating partners. In terms of investments, they are focused on capturing value-creating external growth opportunities in senior housing, which is currently experiencing high yield and high growth potential. This has resulted in strong execution in the second quarter.

Ventas had a successful second quarter, with $300 million in investments in senior housing communities and a strong pipeline for future investments. They have a focus on expanding their SHOP portfolio and have seen over 3% same store cash NOI growth in their Outpatient Medical & Research Segment. Their leverage and liquidity remain strong, and their guidance has been updated and improved.

In the second quarter, the company saw growth in its outpatient medical and university-based research portfolios, as well as an increase in same-store cash NOI and occupancy. Net income and normalized FFO per share also increased year-over-year, driven by organic shop growth and new investments in senior housing. The company has closed $350 million in new investments and raised $500 million in equity, with plans to close another $400 million in equity-funded investments focused on senior housing this year. Additionally, the company completed $234 million in asset sales and has strong liquidity with $3.3 billion in cash and limited debt maturities in 2024.

The company has updated its guidance for 2024, with an improved outlook for net income and normalized FFO. This is due to organic and inorganic growth, but there may be a non-cash impact from a potential kindred lease resolution. The company expects same-store cash NOI to grow and is committed to continued value creation. In a Q&A session, the CEO provided more details on the potential kindred resolution, including discussions for a transaction that would apply to 23 LTACs with a maturity date of April 30, 2025.

The speaker discusses multiple goals for the company, including improving enterprise value, maximizing NOI, and supporting the master lease and Kindred's future success. They also mention a growing acquisition pipeline and their focus on market, asset, and operator criteria. They cannot provide more information on Kindred but mention a non-cash charge in 2024.

Debra Cafaro explains that the expected cash payment that needs to be amortized this year is all non-cash and a result of a gap-related rule. Michael Carroll asks about the RevPOR target and if street rates can be pushed higher to generate better RevPOR growth in the second half of the year. Justin Hutchens clarifies that the guidance is occupancy-led and the increase in occupancy can impact RevPOR. The mix of occupancy growth also affected RevPOR in the second quarter, but there are better comps in the second half of the year.

The company is expecting to have a successful selling season and is focused on growing NOI. They have decided to leave the TILDA 5 and are looking forward to investing in senior housing. They have already closed $400 million in acquisitions this year and expect them to contribute to a 2.5 cent increase in FFO. The acquisitions are equity funded and consistent with the company's strategy. The cap rates for the acquisitions are not specified, but they are primarily in the senior housing sector.

Debra Cafaro and Justin Hutchens discuss the company's capital allocation priorities for senior housing shop investments. They mention the qualitative and financial characteristics they look for in these investments, such as strong population growth, low supply deliveries, attractive investment basis, and good margins. They also mention the importance of aligned management contracts and good operators. They have already closed deals with similar characteristics and have line of sight on another 400 million dollars worth of investments. They also mention that the company has seen a pickup in acquisitions this year, leading to an increase in guidance, and there is potential to reach a billion on an annual run rate basis.

Debbie from the company discusses the sellers of their funds and the company's interest in increasing activity. The company has not set any targets for volume, but they are prioritizing more activity due to the good fundamentals and returns. The types of sellers vary, but they are all dealing with different situations such as debt maturities or other asset classes. The company is targeting markets with great upside and the returns have been excellent. During the Q&A, Debbie also discusses the inelastic need-based profile of the senior care industry and how they educate consumers about the trade-off between staying at home and receiving senior care.

The speaker discusses the positive impact of senior housing on families and the fact that utilization rates have returned to pre-COVID levels. They also mention studies that show the benefits of moving to senior housing, including increased security and socialization, and potentially lower costs compared to staying in a suburban home. The speaker also mentions the company's exchange and how it will be accounted for in terms of potential dilution.

The operator introduces Juan Sanabria from BMO who asks a strategic question to Debbie about the potential for accelerating investments in seniors housing using capital partners. Debbie explains that they have a successful investment management business and are currently focused on capturing opportunities at the enterprise level, but have also done some senior housing assets with partners. Juan also asks about occupancy growth in the SHOP business and Debbie defers to Bob who explains that there is seasonality in senior housing and the key selling season is in Q3, with a potential moderation in Q4.

The company is experiencing strong year-over-year growth which is driving improved guidance. They are expecting a 25-30% rent reduction for their Kindred business, but have various tools to negotiate leases. The company is focused on strengthening their master lease and ensuring Kindred's success. The contracts with Atria Sunrise are aligned with operational performance, and the company is constantly looking for ways to improve operational alignment.

The speaker is discussing the fees and realignment in the company. They are pleased with the agreement and have seen improvements in operations and occupancy. They have a strong focus on performance and have raised guidance twice due to early success.

The company anticipates normal seasonality in expenses and is being conservative in their projections. The first half of the year saw a 15% growth, and the guidance for the year is 14.5%. Canada has been a strong performer, with 12% growth in the second quarter driven by rate growth and higher occupancy. The company does not expect Canada to continue to be a double-digit performer, but it has been a good year. The company's guidance for expense growth is 2.5%, which is lower than their previous performance.

Debra Cafaro and Robert Probst discuss the increase in labor costs in the first two quarters of the year and attribute it to the decrease in contract labor from the previous year. They also mention the strong occupancy and rate growth in the lower price point products, which contribute to the overall growth but bring down the weighted average from a RevPOR standpoint.

During a conference call, Vikram Malhotra asks for an update on Brookdale leases that are due next year. Justin Hutchens responds by saying that the leases are well-covered and have the potential for growth. If the leases are extended, they will escalate in 2026 based on fair market value. Debra Cafaro, the CEO, thanks them and the call moves on to the next question. Later, Richard Anderson asks a question about occupancy growth and if it becomes more difficult as it gets higher.

Debra Cafaro and Justin Hutchens discuss the occupancy levels in senior housing and the challenges of filling units at different occupancy levels. Hutchens shares his passion for achieving zero lost revenue days and explains how it becomes easier to fill units as occupancy levels increase. He believes that pushing for 100% occupancy can lead to increased value and pricing.

The speaker asks if the redevelopment program in SHOP has affected the same-store results in the quarter, and the response is that the majority of the communities in the same-store results were in the process of redevelopment and any disruptions have already been absorbed. The fees reported are in the same-store pool and the redevelopments are expected to have a net gain on occupancy and price lift.

The speaker discusses the positive impact of current market demand on their transactions and mentions that most of their purchases have a combination of services, making it difficult to compare assisted living deals versus independent living. They also mention that some research assets have entered the redevelopment pool and that they expect substantial returns from these projects. However, they do not anticipate additional assets entering redevelopment in the near future.

The speaker discusses the performance of the life sciences market, stating that it is healthy and they have an opportunity to convert office space into research space, which will increase rental rates. They expect strong rate and rent growth in the coming year. The next questioner asks about the guidance for operating expenses, specifically regarding labor expenses. The speaker acknowledges that there could be some conservatism in this metric and that they are monitoring the labor market, which has been favorable. They will continue to monitor and ensure a healthy spread between key metrics to drive revenue and NOI growth.

The speaker discusses the current state of the labor market and how it may affect their company's performance. They also mention their strong execution in dispositions and how they strategically use data analytics to upgrade their portfolio.

Wesley Golladay asks for the company's thoughts on deleveraging and creating investment capacity for a bigger pipeline. Debra Cafaro and Robert Probst explain that their strategy is to increase enterprise growth, expand their shop footprint, and improve their balance sheet. They mention that organic growth in SHOP is the key driver of leverage improvement, and equity-funded investments provide additional financial flexibility. They also discuss their current focus on investing in cash flowing senior housing assets.

The company has several development projects underway, including outpatient medical and life sciences properties. They have had success in redeveloping existing properties and have a few assets that are fully occupied. They also have a number of assets under construction, including a project with Arizona State University and two properties in Philadelphia.

The company is optimistic about four assets that are under construction, with good pre-leasing rates of 60-70%. The SHOP same-store occupancy has improved sequentially in July. The initial yield for senior housing includes some expected NOI growth based on pre-COVID numbers and current performance.

The speaker discusses how occupancy rates can impact the performance of assets and mentions that in some cases, they may decrease occupancy to improve performance. They also mention that most investments have 7-8% yields with potential for growth, but the increase in performance will be modest. The call ends with a thank you to participants and a hope to meet in person soon.

This summary was generated with AI and may contain some inaccuracies.