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Ventas' (VTR) Q2 FFO Meets, Revenues Up Y/Y, SHOP NOI Rises

·5-min read

Ventas, Inc. VTR reported second-quarter 2022 normalized funds from operations (FFO) per share of 72 cents, in line with the Zacks Consensus Estimate. The figure was a cent lower than the prior-year quarter’s tally.

VTR clocked in revenues of $1.02 billion in the second quarter, increasing 11.3% year over year. However, it lagged the Zacks Consensus Estimate of $1.04 billion.

Results reflect growth in occupancy and improvement in pricing power for the senior housing operating portfolio (SHOP). Additionally, the office portfolio witnessed growth in same-store net operating income (NOI) while there was weakness in the triple-net leased portfolio.

Per Debra A. Cafaro, chairman and CEO of Ventas, “Our life science, research & innovation business is demonstrating significant momentum in investments, deliveries and leasing, including the announcement of two new marquee projects with major research institutions. We are experiencing accelerating demand across this portfolio from leading universities and other prominent commercial enterprises.”

Quarter in Detail

In the second quarter, same-store cash NOI growth for the total property portfolio (982 assets) increased 3.5% to $371.6 million from the prior-year quarter.

Segment-wise, the same-store cash NOI for the SHOP portfolio (321 assets) increased 8.7% year over year to $118.5 million. The rise was mainly backed by a nearly 14% NOI rise in the United States while only 1% of NOI growth was registered in Canada as it continued to witness COVID-19-related impacts in the quarter.

For the SHOP portfolio, same-store revenues increased 10% from the prior-year quarter due to the positive trends in occupancy and growth in revenue per occupied room (RevPOR). The same-store RevPOR improved 5% year over year. This was backed by solid growth in base rent and care pricing and favorable re-leasing spreads.

The same-store average occupancy expanded 390 basis points (bps) year over year to 83.7% in the second quarter of 2022 for the SHOP portfolio. The upswing was driven by strong demand, as evidenced by the positive net move-ins in each month of the second quarter.

For the office portfolio (331 assets), same-store cash NOI rose 3.2% year over year to $122.7 million. The uptick was backed by contractual escalators, strong retention, new leasing and favorable expense controls.

The triple-net leased (NNN) portfolio’s (330 assets) same-store cash NOI inched down 0.6% year over year to $130 million. This is due to the earlier mentioned lease resolutions with several smaller senior housing triple-net tenants who were materially affected by the pandemic.

Balance-Sheet Position

Ventas exited second-quarter 2022 with cash and cash equivalents of $127.1 million, down from $149.6 million as of Mar 31, 2022.

Moreover, it ended the quarter with $2.5 billion of liquidity. As of Jun 30, 2022, the net debt to adjusted pro forma EBITDA was 7.3X, up from 6.9X as of Mar 31, 2022. Also, 89% of VTR’s outstanding consolidated debt is fixed.

In June, Ventas refinanced its existing $200 million term loan with maturity in 2023 with a new $500 million term loan facility with maturity in 2027.

Further, during the quarter, S&P Global Ratings upgraded VTR’s outlook to stable from negative while maintaining the credit rating at BBB+.

Outlook

Ventas projects third-quarter 2022 normalized FFO per share in the range of 73-78 cents, up from the earlier guided range of 69-73 cents. The Zacks Consensus Estimate for the same is currently pegged at 74 cents.

The total same-store cash NOI growth is estimated between 2.5% and 5.0%. The SHOP segment same-store cash NOI is anticipated between 9% and 15% based on revenue growth driven by expected growth in occupancy of 250 bps to 300 bps and improved rates.  

The office segment same-store cash NOI is expected in the range of 1-2% while the triple-net leased same-store cash NOI is projected between -1% and 0%.

Ventas currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ventas, Inc. Price, Consensus and EPS Surprise

Ventas, Inc. Price, Consensus and EPS Surprise
Ventas, Inc. Price, Consensus and EPS Surprise

Ventas, Inc. price-consensus-eps-surprise-chart | Ventas, Inc. Quote

Performance of Other REITs

Healthpeak Properties, Inc. PEAK reported second-quarter 2022 FFO as adjusted per share of 44 cents, surpassing the Zacks Consensus Estimate by a whisker. The reported figure was up 10% from the year-ago quarter’s 40 cents.

PEAK’s quarterly performance was backed by solid top-line growth. However, weakness in the continuing care retirement communities (CCRC) portfolio was witnessed during the quarter.

Alexandria Real Estate Equities, Inc. ARE reported second-quarter 2022 adjusted FFO per share of $2.10, surpassing the Zacks Consensus Estimate of $2.06. The reported figure also compared favorably with the year-ago quarter’s $1.93.

ARE witnessed continued healthy leasing activity and rental rate growth during the quarter.

Boston Properties Inc.’s BXP second-quarter 2022 FFO per share of $1.94 beat the Zacks Consensus Estimate of $1.85. The figure also compared favorably with the year-ago quarter’s $1.72.

BXP’s quarterly results reflect growth in the bottom line. Also, it experienced strong leasing activity during the quarter.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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