Investment firm Land & Buildings has once again expressed displeasure over the performance of Ventas (NYSE: VTR) and its senior living portfolio.
In an open letter to Ventas shareholders, Land & Buildings Founder Jonathon Litt highlighted his grievances against the management of Ventas, including how it has “failed to outperform the Healthcare REIT Index,” its low valuation compared to competitor Welltower (NYSE: WELL) and “a prolonged failure of oversight.”
At the heart of the issue is the fact that Litt believes Ventas has made moves over the years that have led to consistent underperformance.
He characterized the company’s recent second-quarter earnings call, during which Ventas management shared news of “softness” in a segment of its independent living portfolio, as “history repeating itself.” Not long after its 2Q earnings call, Ventas announced three new operators for 26 of the previously troubled communities in three states.
The company’s biggest problems are “ineffective” oversight of capital allocation and operations, a lack of accountability in corporate governance and “chronically poor investor communication,” Litt wrote.
Litt also highlighted Ventas’ conversion of a $486 million Santerre mezzanine loan into equity as among “a long line of Ventas’ mistakes that we believe has led us to where we are today.”
“We have previously called for significant enhancements across each of these areas. While lip service has been paid, real change has not been enacted and shareholders continue to suffer,” Litt wrote. “Underperformance has persisted without repercussions for management, governance changes have been cosmetic, and investors continue to be routinely surprised by new problems at Ventas.”
Overall, Land & Buildings’ about $50 million holdings in Ventas represent significantly less than 1% of the company’s total share value of almost $17 billion.
Ventas management noted in a statement to Senior Housing News that the company will “remain focused on extending the company’s long track record of outperformance and strong total shareholder returns.”
“Our fundamental performance continues to be strong as we focus on capturing the significant and growing demographically driven demand across our diversified portfolio to deliver long-term shareholder value,” the company’s statement reads.
In the second quarter of 2023, Ventas management previously reported that total same-store cash NOI was 7% higher than during the second quarter of 2022, while normalized funds from operations (FFO) per share increased 4% in that period.
Ventas management also noted during the company’s second-quarter earnings call this year that the operator transitions would meaningfully turn around results at the troubled 26 communities.
Litt wrote that he hopes to continue dialogue with Ventas management to improve performance. But he maintained that “the status quo cannot continue.”
“While Land & Buildings hopes to reach a constructive resolution with Ventas, it will not hesitate to do whatever is necessary to maximize value at the company for its long-suffering shareholders,” he wrote.
This is not the first time Land & Buildings has taken aim at senior living companies. The company in 2018 accused Brookdale Senior Living (NYSE: BKD) of doing the “bare minimum to appease shareholders.” The company ultimately unsuccessfully pushed a board nominee and a real estate spinoff that never came to pass.
This is also not Litt and Land & Buildings’ first time sparring with Ventas. Last year, the company nominated Litt to Ventas’ board of directors, an effort that ultimately ended in Litt withdrawing his nomination.
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