Ventas' (VTR) Q3 FFO Meets, Revenues Beat, SHOP NOI Rises

Ventas, Inc. VTR reported third-quarter 2022 normalized funds from operations (FFO) per share of 76 cents, in line with the Zacks Consensus Estimate. The figure grew 4.1% from the prior-year quarter.

Results reflect growth in same-store net operating income (NOI) for the senior housing operating portfolio (SHOP), backed by an improvement in occupancy and pricing power. Additionally, the same-store NOI for the office portfolio rose while the triple-net leased portfolio experienced some weakness.

VTR clocked in revenues of $1.04 billion in the third quarter, surpassing the Zacks Consensus Estimate of $1.03 billion. The figure increased 6.3% year over year.

Per Debra A. Cafaro, chairman and CEO of Ventas, “We are pleased to deliver third quarter growth consistent with our expectations. Our diverse portfolio demonstrated strong performance across business lines. Notably, our SHOP same-store communities grew cash NOI 13% year-over-year, benefitting from outstanding demand and pricing power.”

Quarter in Detail

In the third quarter, same-store cash NOI growth for the total property portfolio (982 assets) increased 4.8% to $373 million from the prior-year quarter.

Segment-wise, the same-store cash NOI for the SHOP portfolio (320 assets) increased 13% year over year to $118.1 million. The rise was mainly backed by a nearly 17% NOI rise in the United States.

For the SHOP portfolio, same-store revenues increased nearly 9% from the prior-year quarter due to the positive trends in occupancy and growth in revenue per occupied room (RevPOR). The same-store RevPOR improved more than 5% year over year. This reflected strong pricing power with solid growth in care pricing and move-in rates. The portfolio re-leasing spreads on rental rates continued to gain pace and were positive in the third quarter.

The same-store average occupancy expanded 260 basis points (bps) year over year to 84.7% in the third quarter of 2022 for the SHOP portfolio. The upswing was driven by robust demand, which led to net move-ins in the key selling season of 2022.

For the office portfolio (332 assets), same-store cash NOI rose 3% year over year to $123.9 million. The uptick was backed by strong performance in medical office buildings that witnessed occupancy growth of 90 bps, high tenant retention and favorable expense controls.

The triple-net leased (NNN) portfolio’s (330 assets) same-store cash NOI fell 0.1% year over year to $131 million.

Balance-Sheet Position

Ventas exited third-quarter 2022 with cash and cash equivalents of $145.1 million, up from $127.1 million as of Jun 30, 2022.

Moreover, it ended the quarter with $2.5 billion of liquidity. As of Sep 30, 2022, the net debt to adjusted pro forma EBITDA was 6.9, improving from 7.3X as of Jun 30, 2022. Also, 89% of VTR’s outstanding consolidated debt is fixed.

Outlook

Ventas projects fourth-quarter 2022 normalized FFO per share in the range of 68-74 cents. The Zacks Consensus Estimate for the same is currently pegged at 73 cents, which lies in the guided range.

The total same-store cash NOI growth is estimated to be between 6% and 9%. The SHOP segment's same-store cash NOI is anticipated between 15% and 21%, based on year-over-year revenue growth of around 8% at the midpoint of the same-store cash NOI guidance range. This, in turn, set to increase on an expected rise in occupancy of 100 bps to 150 bps and continuation in strong rate growth.

The office segment's same-store cash NOI is expected in the range of 2.5-3.5%, while the triple-net leased same-store cash NOI is projected between 1.25% and 2.25%.

Ventas currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ventas, Inc. Price, Consensus and EPS Surprise

Ventas, Inc. price-consensus-eps-surprise-chart | Ventas, Inc. Quote

Performance of Other REITs

Mid-America Apartment Communities, Inc. MAA, commonly referred to as MAA, reported third-quarter 2022 core FFO per share of $2.19, surpassing the Zacks Consensus Estimate of $2.09. The reported number improved by 23% year over year.

This residential REIT’s quarterly results were driven by an increase in the average effective rent per unit for the same-store portfolio. MAA increased its outlook for core FFO per share growth for the year.

Healthpeak Properties, Inc. PEAK reported third-quarter 2022 funds from operations (FFO) as adjusted per share of 43 cents, in line with the Zacks Consensus Estimate. The reported figure was up 7.5% from the year-ago quarter’s 40 cents.

PEAK’s performance was backed by healthy top-line growth. Moreover, improvement in same-store portfolio cash (adjusted) NOI was witnessed across the portfolio. The company revised its 2022 outlook.

Boston Properties Inc.’s BXP third-quarter 2022 FFO per share of $1.91 outpaced the Zacks Consensus Estimate of $1.87. The figure increased 10.4% year over year.

BXP’s quarterly results reflect healthy leasing activity alongside year-over-year growth in the top line. It also carried out strategic acquisitions, redevelopments and dispositions during the quarter. The company revised its 2022 outlook for FFO per share.

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

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