Cafaro on Taking Ventas Across the $100 Billion Threshold

As the head of one of the biggest senior housing real estate owners in the nation, Debra Cafaro is a big deal. As CEO and chairman of Ventas, Inc. (NYSE: VTR), a $26-billion-plus real estate investment trust (REIT) with a great turnaround story, Cafaro has become a high-profile leader both within and beyond the senior housing industry.

Cafaro was recently named on Forbes’ “The World’s 100 Most Powerful Women” and was the only woman from real estate to make the cut. Her appearance on the list coincides with a major designation for the REIT class, as REITs will soon be recognized as their own Global Industry Classification Standard (GICS) financial category. Created in 1999, GICS is a way of classifying businesses to help the investor community in building balanced portfolios and other endeavors; formerly classified under the Financials Sector, real estate is set to become its own standalone sector as of September 1. As part of the change, equity REITs are being separated into an independent industry from mortgage REITs.

Senior Housing news caught up with Cafaro on her Forbes honor and why senior housing has gone mainstream.

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SHN: How did you feel when you found out you made the Forbes 100 Most Powerful Women in the World list? Being the only woman from real estate, what might this designation signal?

DC: I was surprised and honored to be named to the Forbes “100 Most Powerful Women in the World” list this year. It’s a group of incredible leaders who are governing and changing the world. I consider my inclusion in the list as recognition of all Ventas has accomplished and a reflection of the excellence of our team and its hard work and record of accomplishment. The recognition also shows that Ventas plays a key role in two giant sectors of our economy—real estate and health care. As the leading capital provider at the intersection of those dynamic areas, Ventas is helping to meet the needs of a large and growing senior population.

SHN: Do you think your position on this list signals that health care, and specifically senior housing, real estate has achieved a mainstream status as an industry? Any general comment on senior housing becoming a mainstream asset class?

DC: Ventas alone is a $26 billion company. If that isn’t more than mainstream, I don’t know what is!

Senior housing and health care real estate is a core, major food group within real estate. Health care REITs now are the third largest REIT sector by equity market cap, at about $100 billion, just behind retail and residential. That’s quite a contrast to the REIT industry in 1999 when I started working at Ventas. The healthcare REIT sector then had a market cap of $6 billion and we were the seventh largest sector.

I think our sector will gain another boost in August after REITs claim our own category under the Global Industry Classification Standard (GICS®). REITS will have more visibility and appeal to a larger group of investors; generalists will find Ventas very attractive because of the power of our aging demographic demand and reliable growth and income we provide.

SHN: Where do you see Ventas in another 17 years?

DC: My vision is that Ventas becomes a globally successful $100+ billion organization that has changed the way health care owners (like senior housing and acute care providers and universities and medical centers) think about their real estate and also the way real estate investors think about senior housing, health care and research real estate.

I also hope we will have been “part of the solution” for bringing down costs to the system and providing quality sites where millions of individuals and their families can live and receive care and comfort every day. With our new entry into life science and research and development, I hope we are able to support scientists, companies and universities as they seek to cure or treat disease and chronic illness. All the while also providing superior returns for our shareholder owners, being a good partner to our customers and maintaining a great team that innovates and works with integrity.

In 17 years the last of the 79 million baby boomers will have just turned 65 –a large segment of the population will be seniors, with increasing health care and housing needs. We expect to be there to meet those needs.

SHN: 2016 has so far seen some major changes—from a shifting M&A environment for REITs and global economic disruptions. How would you characterize the first six months of this year and what are you keeping an eye on from a macroeconomic standpoint?

DC: At Ventas we continue to drive reliable growth and income. And we have great momentum. Investors realize that, with all the uncertainty and risk in the world, they can trust Ventas with their capital AND we can provide growth. That’s a potent combination.

We have a long track record of outstanding performance through cycles. Global deflationary pressures and monetary policy are keeping interest rates “lower for longer” and rates just hit their all-time lows. This has generally been good for REITs but can be a worrying sign for the economy as a whole if it persists. I believe every environment creates opportunity if you have staying power, vision, the right relationships and insights.

Written by Amy Baxter

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