Despite a “challenging operating environment,” Ventas, Inc. (NYSE :VTR) remains confident in the viability of its senior housing operating (SHOP) portfolio, executives suggested on Friday.
The Chicago-based real estate investment trust (REIT) reported its second-quarter 2018 earnings on July 27. The company’s second-quarter 2018 revenue of $942.3 million beat analysts’ expectations by $32.15 million, while its second-quarter FFO of $1.08 beat analysts’ expectations by 7 cents.
Notably, several of Ventas’ senior housing markets—including Chicago, Atlanta and Texas—saw new competition emerge in the second quarter, which negatively impacted Ventas’ NOI, Ventas Chief Financial Officer Robert Probst explained during a Friday call with analysts and investors. Communities in certain markets “competed on price for lease-up,” and some operators were forced to pay more to acquire new customers, he said.
Still, in other markets, including Indianapolis, Boston and Ontario, Ventas saw NOI growth. And one of Ventas’ newest operators, Eclipse Senior Living, has grown occupancy by more than 200 basis points since late January.
There remains a “timing mismatch” between supply and demand, however.
“Starts are going down, the number of the seniors is going up and there is a timing mismatch between the deliveries and this increase in the senior population,” Ventas Chairman and CEO Debra Cafaro said during the call. “We are in the process of working our way through that, but it will be very powerful on the other side and we are well positioned to take advantage of that. That is the big picture.”
All the while, the U.S. senior housing industry is getting more worldwide attention, Cafaro noted.
“I can say without qualification that the sovereign wealth types and the pension funds that are matching long-term liabilities with assets are wildly interested in senior housing,” Cafaro said. Specifically, these groups are attracted by the senior housing space’s demographic demand, cash flow profile and resiliency over long periods of time, she added.
As of market close on Friday, Ventas’ share price had dropped 3.87% to $55.10.
Written by Mary Kate Nelson