Ventas REIT Making Bigger Bets Abroad

| April 27, 2014

Ventas, Inc. (NYSE:VTR) plans to strengthen its hospital and senior housing investments in the United Kingdom as it looks to build upon more than $100 million already invested in U.K. properties this year, company executives said during an earnings call Friday.

The Chicago-based real estate investment trust (REIT) invested $208 million in the first quarter of 2014—$183 million of which was invested in three private hospitals leased by Spire Healthcare, the second largest private hospital operator in the U.K., under long-term triple-net leases.

The deal marked the company’s largest investment for the quarter ended March 31, 2014, during which Ventas reported a 7% year-over-year increase in normalized funds from operations (FFO) of $323.4 million, as well as a 6% increase in FFO per diluted share of $1.09 compared to the same quarter in 2013.

Though the U.S. and the U.K. may be two “different animals” altogether in terms of opportunities for investment, the company sees considerable potential for growth across the Atlantic, Ventas Chairman and CEO Debra Cafaro said during Friday’s earnings call.

“We intend to build on our investment in the U.K. over time, because the healthcare and senior housing real estate market there is highly active and evolved,” Cafaro said. “The healthcare and senior housing investment market has ramped up significantly and we have our hands full reviewing potential transactions.”

The opportunities on Ventas’ radar range from multi-billion dollar portfolios to single asset acquisitions across all of Ventas’ segments, Cafaro said.

“Our job is to sort through a very large pipeline and allocate capital to the right segments, right geographies, at the right time in the cycle in good risk adjusted return transactions that create value for Ventas’ shareholders,” she added.

The company currently has more than $100 million of additional investments under contract that it expects to close in the second quarter but declined to specify further on the property types beyond noting they are “ordinary course.”

Ventas anticipates a 6%-7% yield on the investments, which include senior housing and not additional hospital acquisitions, according to remarks made by Cafaro during the Q&A portion of the call.

Occupancy in Ventas’ current senior housing portfolio stood at 90.6% for the first quarter, slightly above the industry average rate of 89.8% in the 31 primary markets, according to data compiled by the National Investment Center for the Seniors Housing & Care Industry (NIC).

The company’s medical office building (MOB) segment also performed well during the quarter, reporting cash net operating income and the 296 same-store consolidated MOBs increasing 3.6% year-over-year.

“We continue to push rates, manage expenses, drive bottom-line growth in our MOB portfolio,” said Ventas President Raymond Lewis. “Additionally, we started to see leasing activity pickup in the first quarter, we’re issuing more letters of intent, signing more new leases and commencing new leases than we have in the past year.”

Looking ahead, Ventas projects same-store NOI growth for its MOB portfolio of between 3%-4% in 2014.

Ventas reaffirmed its 2014 guidance and continues to expect normalized FFO per diluted share to range between $4.31 and $4.37, excluding the impact of unannounced acquisitions, divestitures and capital transactions.

Written by Jason Oliva


Companies:

Category: Acquisitions, Finance and Development, REIT, Senior Housing, Senior Living

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