Ventas, Inc. (VTR) Earnings Call Transcript & Summary

Welcome to Citi's 2026 Global Property CEO Conference. I'm Nick Joseph here with Seth Bergey with Citi Research. I'm pleased to have with us Ventas and CEO, Debra Cafaro. The session is for Citi clients only and disclosures have been made available at the corporate access desk. To ask a question, you can raise your hand or go to liveqa.com and enter code GPC26 to submit any questions. Debbie, I'll turn it over to you to introduce the company and team, provide any opening remarks, tell the audience the top reasons an investor should buy your stock today, and then we'll get into Q&A.

Thank you, Nick. We're delighted to be here at Citi this year. Thank you all for coming. I will provide some introductory remarks. I'm happy to be joined by my colleagues here who will participate in the Q&A. Ventas is an S&P 500 company focused on the longevity economy, which means we serve a large and growing aging population. We have scale with $50 billion plus of enterprise value and about 1,400 properties that serve that large and growing aging population. Senior housing, which is more than half of our business, is the engine of our growth, and we are projecting the fifth consecutive year of double-digit NOI growth in our SHOP or senior housing operating portfolio this year. So what's really interesting is that Ventas provides a compelling multiyear NOI growth and value creation opportunity for investors, while we, at the same time, help people live longer, healthier and happier lives. Let me break down a little bit how we will deliver that multiyear NOI growth and value creation opportunity. First, the macro tailwinds are strong and getting stronger. Let me start with demand. Baby boomers are turning 80 starting in 2026. This year, we expect 2 million baby boomers to have a birthday of 80 years in 2026. That demand is secular, it's strong, and it's going to get stronger as we look forward over the next decade. At the same time, in senior housing, supply is at historic lows. We saw only about 2,000 units of senior housing started in the fourth quarter of '25. So we have really unprecedented tailwinds favoring our business. More importantly, at Ventas, we've kind of built the business and a platform to capitalize on these tailwinds. And Justin will talk more about the platform that we've spent the last 5 years building really to meet this moment and enable the company to outperform at scale and we'll talk more about that in the presentation. When you think about those characteristics, the engine of Ventas' growth is organic growth from the senior housing portfolio. And we've done a lot. I mentioned we're in, hopefully, the fifth year of double-digit NOI growth, and we think that the fundamentals support a long runway for growth in the future. Secondly, we are a consolidator. We are adding incrementally to that internal growth by acquiring multiple billions of senior housing assets, which is our #1 capital allocation priority. Those investments are really interesting. It is a unique -- and in my experience, one of the best private to public arbitrage opportunities we have seen -- I've seen in my long career. And so those acquisitions are driving growth in the enterprise, driving earnings growth per share. They're accretive going in, and they provide significant growth with low to mid-teens unlevered IRRs expected. So organic growth, inorganic growth. And then as you look forward, you can say that we basically have the scale to compete. We have competitive advantages. We have the team, the data analytics, the platform really to outperform, and that's giving us that multiyear NOI growth opportunity. So the 3 reasons really to own our stock are the macro tailwinds, the business we've built to capitalize on those tailwinds and really the consolidation opportunity that remains one of the best that we've seen and we're leaning into.

That's great. Thank you. Well, why don't we dive into each of those different topics, but it feels like the #1 question that we get, I think most people see the strong growth in senior housing right now. They see the next few years as being incredibly strong. But the question is always when will supply come back. And ultimately, it's when would oversupply come. And you talked about the demand and the number of people turning 80, so we can certainly frame it in terms of the amount of stock that's needed. But how do you think about just broadly across senior housing, kind of the building blocks of what would bring supply back? And how far away are we from that actually occurring?

I'll start and Justin will elaborate. So in the U.S., Ventas has occupancy in our senior housing portfolio of 86%. So that gives us this multiyear NOI growth going forward, that's based on occupancy growth, rate growth and margin expansion. What that would tell you is that rents have to go up 20% to 40% in our estimation to make most developments pencil. Developments generally take at least 3 years start to finish, sometimes more. So it's very clear in this near to intermediate-term window that the supply/demand is tipped strongly in our favor. And again, we have the competitive advantages to really outperform in that market, so take advantage of those tailwinds and outperform. So we -- I'll turn it over to Justin to talk about -- the sheer numbers of demand are just overwhelming, and that is really the big takeaway from the macro. And I'll turn it to Justin to talk about how we think about it at Ventas.

Yes. And just to elaborate some of the other considerations as it pertains to new development. So rents need to be 20% to 40% higher. The lender appetite from a development standpoint is very low. [ Nick ] tracks the lender sentiment and lenders are very -- still not interested in pursuing funding of development senior housing. There's not really been a large-scale developer in the space. The only 2 I can really think of were building communities 20 and 30 years ago. There was a homogenous product by Sunrise and by Holiday. That's long gone -- those capabilities are long gone. So it's hard to really imagine any big development player making a big move into senior housing. You're going to see more kind of one-off local small developers and regional operators that are trying to establish themselves again in that -- from that perspective. The fundamentals are phenomenal. And so therefore, the need will be there. And whenever this need does get delivered, they'll be hitting this wall of demand that is -- will be the best we've seen. If you think about 3 to 5 years from now, the demand is just now picking up where the baby boomers is turning 80 this year. It will be even better in the upcoming years. So I think we're well positioned to continue to have the strong organic growth we've had in senior housing, invest into that platform to get -- to capture even more potential growth and then absorb supply if -- not really if, but when it does enter the sector again.

That's helpful. And so it sounds like at least for the, let's say, for at least the next 3 years and just given the margin expansion as occupancy grows and you hit 90% in a lot of these communities, your current kind of same-store kind of organic growth could look similar, if not accelerate from here?

Well, taking it a year at a time, we've had 4 years in a row now of double-digit NOI growth. This year, we've projected 15% NOI growth at the midpoint, and that's being flattered by even stronger growth in the U.S., 270 basis points of occupancy growth, 5% of RevPOR, 5% expense, which is just a continuation of what's been a really good run we've been on from an organic growth standpoint. And like Debbie said, we've constructed the portfolio to have an occupancy runway by positioning ourselves for lower occupied communities, a lot of which came from our triple net structure that we converted to SHOP. We grew occupancy 370 basis points last year in the U.S. and we're considering a similar run rate as part of that 270 guide this year. So we're really anticipating more opportunity. And we'll talk about '27 and beyond when we get there.

And then you put out a deck for the conference and then just the quarter-to-date kind of what you're seeing out there. Can you just walk us through kind of that and what you're kind of seeing in terms of demand for the first quarter?

Sure. Yes. So we had a good start to the year on occupancy. We reaffirmed all of our guidance that Justin just highlighted, only 2 months in at this stage. But seasonally, you'll know, oftentimes in the first quarter, it can be softer in terms of demand. We've seen continued demand strength broad-based, again, notable in independent living, which has been a trend. As expected and incorporated in our guidance, we have seen some higher expenses due to weather, the severe weather events in the first quarter, but that's embedded in our guidance. So a good start to the year and especially on the occupancy side.

And then maybe just going to Ventas OI and kind of the operating platform that you've invested in. What's the current penetration rate across the portfolio? How quickly when you acquire a new asset, can you roll that out to the asset? And then just in terms of stages of where we are, are we in early stages? Is there still opportunity that you see to kind of grow the platform and drive operating margins for the business? Can you just touch on all that with Ventas OI?

Sure. So I'm going to step back first and get to your specific questions. We have a platform that's been in development for several years. It's become clear to us that it's a massive competitive advantage for us. And pretty certain that we own the space in this regard. There's no one else that's done this yet in terms of creating an operating platform that's designed to drive outperformance in our portfolio and capital allocation decisions and particular focus on top line revenue management, including occupancy and pricing. So I'll walk you through basically what that is. And so first of all, the framework we always look to, whether we're talking about organic growth and/or capital allocation is around the market, asset and operator. So the first thing we wanted to make sure we did is ensure that we're in strong markets. And the markets really strength are defined by a number of factors, but high level, some of the most important are the 80-plus aging demographic, the density in the market, the ability for the prospective residents in the market to pay for our care and services. And through all the actions we've taken on the portfolio, which include dispositions and acquisitions over time, we're very well positioned in that regard. We have a strong aging demographic. We have very strong affordability, which is measured by the number of length of stays that people can pay 7x at the median in the market. So it's not an average stat being flattered by the higher income people at the median, if you think about our length of stay being 2 to 3 years, regardless of what about -- whether you're talking about assisted living or independent living products, that means that a resident can stay for 14 to 21 years and afford to pay and use their income stream and their other sources of net worth to do that and the increasing aging demographic working together for us. So as we've positioned our portfolio through those actions and through acquisitions, we've improved our opportunity to perform at scale. Market positioning is critical. Asset positioning is also critical as well, and we use a data-informed approach to determine where and when to invest, refresh capital to drive outperformance. And we've had a really good opportunity given that there's been about 150 communities that we had transitioned from triple net to SHOP over time and acquisitions that we've made and some refresh in some of our legacy portfolio to go for outsized growth to literally reposition a community's respective market position and drive occupancy and price upside. And then ultimately, it's the operators that we're working with that are responsible for driving that day-to-day performance. And so probably the most powerful part of the platform is bringing to bear the data analytics and our experiential insights that we're bringing to the operators in collaboration to drive performance in areas such as occupancy, overall revenue management, pricing and expense management, benchmarking across the board, digital marketing, all designed to drive outperformance in our markets, which we've been doing for -- we've been outperforming for many years in a row now. And so the AI has been a key component in this as well. Occupancy forecasting, for instance, from the ground up is assisted by AI, which you can imagine across 750 communities from the owner's seat, is a very sophisticated forecasting process and also informing our price volume optimization in an industry that lacks price transparency where we've become really excellent at pulling both the price and volume levers and moving towards that overall revenue growth that we've achieved. So I'd say that the platform is well underway for many years. It's continually evolving. The adoption rate amongst the operators is extremely high. In fact, we're -- just a side statistic, in the $5 billion we've deployed in the U.S. in senior housing over the last 2 years, 70% of that business has been with repeat operators. The operators want to be on this platform. They want to have a Ventas relationship. That's been an advantage for us. And we'll look forward to onboarding our new operators that we've brought on through acquisition. And it can take -- there's a really strong initial push to get certain operating metrics and insights underway. And then within 6 to 9 months, our operators are fully onboarded onto the platform.

And then as you kind of have these insights that you can bring to your operators, how do you kind of structure the RIDEA contracts? And how has that kind of maybe evolved to kind of align the operators to be incentivized with Ventas?

Yes. So one thing I didn't mention yet, it's Bob's favorite topic in this regard because we partnered together to develop this data platform that we have. And that is that it's extremely flexible, meaning we can meet the operator wherever they're at in terms of systems they use and the delivery of the data to us. And then we've standardized the operational and the financial data on our side. So we made it easy for them, and then we give the information back to the operators with insights around where there's opportunity to drive performance. And so that's a key point. But what was your...

Management contract.

Yes. So the management contract -- meanwhile, the management agreements are well aligned. They're driven -- the fees are driven by a percentage of NOI and revenue, plus we pay incentives for outperformance. We have flexibility around termination and which has been useful because we're constantly looking for to make sure we have the right fit across the portfolio, the perfect manager fit. And the operators are really benefiting from this outsized NOI growth that they're helping to drive. So their management fee growth is reflecting this performance that they've been driving with us in our portfolio.

And then just can you remind us what the margin flow-through is as occupancy kind of continues to grow from here just with the inherent operating leverage within the business?

Yes. So that's one of the most powerful parts of the senior housing business is the operating leverage you get as occupancy gets higher. In the fourth quarter, we had 50% incremental margin. In our guide in '26, 15% is the midpoint for NOI growth. We'll have higher than 50% incremental margin that drives that this year. And that's just a reflection of really needing less variable cost as your occupancy goes up. And we would expect to see that number get closer to 70% as our occupancy grows between 90% and 100% occupied, and that will be a key driver of growth over time.

And has that -- just trying to get at kind of the outperformance that Ventas OI can kind of provide. But as you think about kind of the margin expansion, is there a way to kind of quantify how much of that is operating leverage versus kind of the outperformance that you're able to drive with Ventas OI?

Honestly, the easiest way to really demonstrate the outperformance we've had, there's a page in our deck, it's Page 14 of our -- for those of you that have the recent deck we put out for this conference. And it demonstrates the outperformance that we've had indexed against the NIC top 99 markets in which we're located. And it's been significant. We had 160 basis points outperformance in the fourth quarter year-over-year versus the NIC top 99, and that's consistently been happening since the beginning of 2023. So there's -- that's the best proof point I can really give.

And that's an occupancy stat.

It's an occupancy stat, right?

And then as AI tools become more accessible and maybe someone can go out and use AI to kind of develop software where previously they would have had to hire a software engineer, how do you think about the competitiveness with Ventas OI? Does your -- does the data scale you have kind of provide more of a moat? Or do you see other peers able to compete with Ventas?

The data is proprietary, and this is -- we do have a competitive moat of data that is enabling us both to pick the markets where we want to have a presence to be able to -- once we have the assets, help drive performance. And really, it's all part of the platform. But it took years really to gain all this proprietary data that we're utilizing in order to make decisions and feed into the systems and that competitive moat is large and should grow over time.

And I'd just add to that, that our scale is a big advantage, too. There's only one other that has scale like ours in the U.S. So that's the key source of the data is having the scale that we have and the exposure across different asset classes, type -- senior housing asset classes in different markets. And then the other thing, too, is it's not just about the data, it's the delivery of the information as well. And we're using our -- we have operating expertise in-house. We're using that expertise combined with the analytics to bring to the operators, we're not just asking questions around trending. We're bringing answers to them, which is really engaging and helpful for operators to prioritize which levers to pull to drive performance quickly in a pretty sophisticated operating business that's open 24/7. And so we're trying to make this as easy as possible for our operating partners to make a difference and not just taking great care of people, but also driving great outcomes for the shareholders.

Debbie, we've seen, I guess, really over the past few years, pretty substantial changes across other health care REITs, obviously, including you, but probably more moving away from diversification moving more towards single property sector REITs or at least maybe fewer 1 or 2. You remain diversified, has benefits that probably has some drawbacks. How do you think about kind of the current portfolio composition today, why be diversified? I recognize we're asking the questions, but the whole focus is on senior housing. The growth outlook looks really good for senior housing. What's the benefit of not being more senior housing right now and maybe lightening up on some of the other asset types?

Well, several years ago, we agree that there is a significant benefit to expanding our senior housing footprint. And we announced a strategy that we've been executing to lean into the opportunity there, which is compelling and somewhat unprecedented, frankly. And we've grown our business in senior housing to be well over half our business. It's going to continue to grow significantly through organic growth and external growth where we're focused on deploying capital in the senior housing business. And so we have seen the great growth potential that's in the asset class, coupled with the machine that we have built with Justin and his team to really drive this outperformance at scale, and we are leaning in aggressively to continue to build that. And by definition, that you're sort of growing that senior housing business and the other segments are holding their own and they're contributing, but there -- senior housing is really the engine of the company and the principal reason we should continue to outperform.

So it's over 50% now. But if you had the opportunity to sell a large MOB portfolio, large life science, would that be of interest? Is there a benefit to being diversified? I understand the growth is more on the senior housing side, but it's -- still nearly 50% is not.

Yes. And again, that 50-plus percent is going to continue to grow. I think we've demonstrated over the years our intense focus on doing things that create long-term value for shareholders. And that includes, for example, the large spin-off of skilled nursing that we did. And we continue to challenge ourselves with the portfolio to consider actions that we think would create long-term value. And right now, the energy is really all around growing the senior housing business. But if something makes sense, we will absolutely consider it.

Are there synergies across the different businesses?

There is a benefit to scale in both the equity markets and the debt markets. And I mentioned at the beginning, of course, we're $50-plus billion. That really is helpful in certain areas, including making internal investments in AI and other technology and people and really attracting best and brightest and also attracting capital. And so that's how I think about the synergies. And there certainly are efficiencies internally from that scale.

Yes, there's some back office, but I'd highlight the debt scale, the importance of noncorrelated cash flows to our credit, for example. So there's clearly a benefit of scale. There's no question about it.

And we feel pretty good about giving same-store full company property growth in '26 expectation -- 10%. We feel good about that, and we're going to keep leaning into senior housing.

Makes sense. How is the transaction market changing, particularly on the senior housing side? Just are you seeing more competition? Is it different buyer types? Obviously, you're expecting to be active again this year, but you have been over the past few years. So how much has it changed?

Well, I'll repeat what I believe, which is Justin and I have been doing this probably for -- in senior housing for like 70 combined years. But it is still kind of the best private to public arbitrage opportunity that we've seen. And the pipeline is very large. It's growing. It's active. It's diverse within -- but focused on senior housing, obviously. And Justin, do you want to talk more about...?

Yes. So it's been obviously a key area of focus. The one thing I want to mention we've been obviously very U.S. focused. We were #1 in the U.S. in 2025 in capital allocation to senior housing. We were #2 in 2024. So we've established ourselves as a market leader, investing in U.S. senior housing. What amazing opportunity it is to actually buy attractive yield, which is -- means we're going to have immediate accretion in our investment activity and have growth and be able to underwrite the low -- the kind of 10% to 15% unlevered IRRs, which are consistently there for us on our investment activity, and we're still leaning into it. And it's -- we have every strength working for us to be able to deliver on that as well. We have the financial strength and flexibility -- the -- I mentioned that we had 70% repeat business with operators. We also had 40% repeat business with sellers because we've proven to be an excellent counterparty and have positioned ourselves for repeat business. And then being one of the largest owners of senior housing in the space, having a live platform and being the operators' partner of choice has positioned us to continue to compete even in a market that's attracting a lot of new capital.

And that's why we feel confident projecting $2.5 billion of investments of that [ ilk ] that meet the market asset operator framework, meet that financial profile in 2026.

To get to that $2.5 billion, what's -- how much do you underwrite total? What percentage of what you underwrite actually gets closed?

What percentage of what?

So you're doing $2.5 billion, but you're obviously looking at a lot more. So what's the total amount you're underwriting? And then the next question is going to be, why do you pass on the deal? Like what is the reason why Ventas doesn't acquire it if -- once you're looking at it?

So we had -- we reviewed $35 billion of senior housing investments last year. We had $2.5 billion that we ultimately closed. About half of that we actually pursued with some interest. And there's -- like I said before, we're very focused on right market, right asset, right operator. And so the first -- the very first thing we look at when we screen an investment is the market and make sure that it has everything that we're looking for to drive near- and long-term success from a senior housing perspective. The asset is obviously really important. We've been buying larger assets, most of which offer a continuum of independent assisted living and memory care or a combination of at least 2 other products. And we've had a good opportunity to find those and continue to see those opportunities. And then the operator part has been an interesting area of focus, too, because we've added -- we have 43 operators now in our SHOP portfolio, and that's up from 10 4 years ago. And that's because through our acquisition activity, if we can underwrite a track record that has on a growth trajectory, and we see the opportunity to continue that growth trajectory, we're going to stay with the existing operator. And so that's led to an opportunity to build new relationships, also expand with some of those newer relationships we brought into the portfolio as well. Yes. So it's just been -- we're very well positioned, and we're going to continue to push our strengths.

I want to just get to a question that came in. I guess the question is just on employee turnover at the property level. And so are you hearing from your operators as employee -- have employee turnover rates and retention rates changed much? And how does that impact operating margins?

Well, the employment environment at the communities is very constructive at the present time. And the retention of employees has improved dramatically since, say, 2022. So those trends have been positive.

And I mentioned recently on our earnings call, the customer satisfaction results that we're getting in our portfolio amongst our various operators. which is critical. This is a private pay consumer-driven business. Our residents are relying on our employees to deliver these excellent services and care. And by their feedback, the results have been great. So we -- it is a constructive environment from a labor perspective and hiring trends have been really positive. The ultimate delivery of the care and service has been at a very high standard, and we like how we're positioned today.

And then one of your criteria is the right operator, how do you kind of evaluate which operators to partner with? You mentioned 70% of your acquisitions are with existing operators. So when you bring on those 30% that might be with a new operator, what are you looking at in terms of performance to go forward with that relationship?

Just one clarification. The 70% are technically existing, but they're repeat deals with operators. And some of those were new the first time like in '24, then we did a repeat deal with them in 2025. We have an extremely comprehensive review process of the operator that evaluates every single thing they do across the -- from a back-office standpoint, from a risk management standpoint, from a revenue management standpoint, from a technical systems standpoint. And we have -- you can imagine in a fragmented sector, we're dealing with operators that are somewhat institutional, that are large scale, and we're dealing with operators that are relatively smaller that operate 10-or-so assets and all of them are delivering great care and services. But they have a different capability from an institutional standpoint. And so we're looking for our opportunity to make sure they can deliver great results on the ground. but that we can plug in the Ventas OI platform and help to institutionalize their approach moving forward and improve upon performance. And so that's what we're looking for. And then what will happen over time is they'll kind of move up the scale in terms of our assessment of their overall capabilities.

Great. Well, we have our rapid-fire questions to end the session. What will same-store NOI growth be for senior housing overall next year in 2027?

Well, what we do know is that the secular demand from the over 80 population is strong and getting stronger as we move into 2027.

It will be hard to put into a spreadsheet. Is it about the same as this year?

You can do it. You can do it. I have confidence in you.

More or fewer of the same number of health care REITs a year from now.

I'm going to go more.

Great. Thank you very much.

Thank you very much.