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Ventas (VTR) Sees Strong Demand & Occupancy Growth in 2024

Ventas, Inc. VTR recently provided an update on the performance of its portfolio. The update highlights solid performance in the Senior Housing Operating Portfolio (SHOP) with an acceleration of occupancy levels backed by strong demand.

This healthcare REIT has seen a continued acceleration of average occupancy in the first quarter of 2024, with growth of 240 bps. Supported by strong performance, Ventas expects 2024 average occupancy growth of 250 bps year over year. SHOP same-store average occupancy growth in the fourth quarter of 2023 accelerated to 170 basis points (bps) year over year compared to 110 bps in the prior quarter.

However, shares of the company witnessed a marginal decline on Tuesday’s regular trading session on the NYSE due to broader market concerns.

A reputed REIT in the healthcare real estate category — Ventas — with nearly 1,400 properties, including more than 800 senior housing properties is poised to benefit from its focus on serving a large and growing aging population with an emphasis on senior housing. With top-rated tenants and long-lease terms, its high-quality portfolio assures steady growth in cash flows.

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The total company same-store cash NOI grew 8.1% in 2023, led by SHOP. In 2024, it projects total company same-store cash NOI to grow more than 6.25%, at the midpoint of guidance range.

Led by the United States, the SHOP segment’s same-store cash NOI grew 18.3% year over year and achieved a margin expansion of 220 bps in 2023. In 2024, the SHOP segment’s same-store cash NOI is anticipated to be between 10% and 15%, led by the United States, which is estimated to grow mid-to-high teens.

Ventas’ senior housing portfolio is positioned in markets with favorable demographics, strong net absorption and affordability. Moreover, expert operators who leverage the Ventas OITM platform are expected to drive the company’s performance.

Price/volume optimization is driving occupancy acceleration in the key selling season. Its targeted capital investments in attractive markets also augur well. Moreover, the deployment of operator playbooks using past experiences and advanced analytics is expected to drive operating outperformance in transition communities.

Ventas reported normalized funds from operations (FFO) per share of $2.99 in 2023, at the high end of the guidance range of $2.96-$2.99. In 2024, the company expects to witness more than 5% growth in normalized FFO per share at the midpoint of the guidance range of $3.07-$3.18.

The company’s strategy is focused on enhancing portfolio quality and operator diversification and increasing its SHOP scale.

With $18 billion of senior housing loans maturing through 2025, Ventas sees an opportunity to buy high-quality senior housing properties with challenged capital structures.

Ventas maintains a robust liquidity position. As of Dec 31, 2023, the company had $3.2 billion of available liquidity. It has a favorable near-term debt maturity profile with a $1.2 billion maturing in 2024 (9% total debt) at an average cash rate of 3.8%.

Its access to diverse capital sources through capital recycling, third party (Ventas Investment Management), on-balance sheet financing and internal cash flow provides financial flexibility. The company’s decent financial flexibility is likely to support its growth endeavors.

Ventas also enjoys credit ratings of BBB+ stable from S&P Global Ratings and Baa1 stable from Moody’s, providing access to the debt market at favorable costs.

Over the past three months, shares of this Zacks Rank #4 (Sell) company have declined 13.2% compared with the industry’s downside of 4%.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Host Hotels & Resorts HST and Iron Mountain IRM, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for HST’s 2024 funds from operations (FFO) per share has been raised 2.6% northward over the past month to $1.97.

The consensus estimate for IRM’s current-year FFO per share has moved nearly 1% upward over the past month to $4.42.

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

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Host Hotels & Resorts, Inc. (HST) : Free Stock Analysis Report

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Ventas, Inc. (VTR) : Free Stock Analysis Report

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