Ventas, Inc. 2026 Q3 Earnings Call

Good morning, everyone, and welcome to the Ventas Third Quarter 2026 Results Conference Call. Yesterday, we issued our third quarter 2026 earnings release, presentation materials, and supplemental information package, which are available on the Ventas website at ir.ventasreit.com. As a reminder, remarks today may include forward-looking statements and other matters. Forward-looking statements are subject to risks and uncertainties, and a variety of topics may cause actual results to differ materially from those contemplated in such statements. For more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, all of which are available on the Ventas website. Certain non-GAAP financial measures will also be discussed on this call, and for a reconciliation of these measures to the most closely comparable GAAP measures, please refer to our supplemental information package posted on the investor relations website.

With that, I'll turn the call over to Debra A. Cafaro, Chairman and CEO of Ventas.

Thank you, BJ. I also want to welcome all of our shareholders and other participants, including our newest Ventas colleague, Andy Wattula, to the Ventas Third Quarter 2026 Earnings Call. Ventas delivered strong enterprise results and growth in the quarter as we execute our one, two, three strategy. Our senior housing operating portfolio, now in its fifth year of double-digit organic growth, powered our results, and our significant SHOP investment activity enhanced our outlook. In an environment of rapid change, the Ventas investment thesis remains consistent and clear. Our $60 billion enterprise generates performance from nearly 1,500 physical assets, serving the need-based secular demand of a large and growing aging population. Ventas is one of the rare growthy businesses that is neither AI-focused nor AI-correlated. In addition, our strong and improving financial profile provides stability and opportunity amid volatile capital market conditions.

As a result, we are well-positioned to thrive in a variety of economic environments. Within that context, our team remains focused on using our high-quality portfolio, differentiated platform, operating expertise, deep industry relationships, and data advantages to fuel our momentum and deliver outperformance at scale. Our excellent results demonstrate the power of our enterprise and our position as the world's second-largest owner of senior housing. U.S. SHOP same-store cash NOI grew 17% in the quarter, contributing to our 11% total company same-store cash NOI growth. The first prong of our one, two, three strategy is capturing organic SHOP growth through rate and occupancy. Strong rate growth was coupled with SHOP occupancy outperformance in the quarter. Same-store average occupancy grew 120 basis points sequentially, driven by Ventas OI. This continues a multi-year trend of materially outpacing industry benchmarks.

In fact, our SHOP portfolio has grown occupancy at twice the pace of the NIC average since 2023, generating nearly 600 basis points of incremental outperformance during that period. And yet, our U.S. SHOP properties remain only 89% occupied, supporting a multi-year runway ahead for durable occupancy rate and NOI growth. I want to thank our Ventas colleagues and operators for their strong execution and commitment to outstanding senior care and services in our communities. Our third quarter normalized FFO per share of $0.99 represents 10% growth year-over-year, and our credit profile continued its significant multi-year improvement trend as we ended the quarter with net debt to EBITDA in the low four times. We are pleased to again increase our full-year FFO per share guidance to $3.89, primarily because of our 2026 investment activity. The Ventas strategy is built to capture unprecedented, durable demographic demand.

Now more than ever, individuals and their families are attracted by the benefits of safety, socialization, and support provided in our senior housing communities at a cost comparable to aging at home. The baby boomer generation, a cohort of nearly 70 million individuals and the wealthiest generation in history, began turning 80 this year. We are just now stepping into the period of enormous growth in our customer base, as the U.S. senior population is expected to expand 28% over the next five years and remain elevated for over a decade. Yet construction starts of new senior housing units hover at record lows, with a paltry 1,000 units being started in the quarter.

With at least a three-year start to finish development cycle and increased construction costs, we should enjoy these powerful tailwinds supporting our growth for the foreseeable future. Our business and team at Ventas are built to meet this moment, capitalize on these trends, and continue to outperform the industry at scale. The second prong of our strategy, of course, is to aggressively expand our SHOP footprint through attractive acquisitions designed to enhance our enterprise growth rate. Our investment momentum is strong, and year to date, we've closed more than $5 billion of SHOP investments, which are expected to produce double digit to mid-teens unlevered IRRs and year one average yields in the mid sixes. Our pipeline remains robust, and we are actively advancing actionable SHOP investment opportunities to build on our success and expand our SHOP business.

As a long-term industry participant with nearly 1,000 senior housing communities, we have built a significant competitive moat, including our relationships, platform, data, team, financial strength, and operating experiences. These advantages, coupled with our right market, right asset, right operator framework, drive our investment decisions, keep our win rate high, and help our acquired communities and operators outperform after closing. With the recent global move in interest rates and geopolitical uncertainty, our competitive position has strengthened even further. To close, the entire Ventas team is unified and excited about the opportunities for multi-year growth and value creation ahead. We remain focused on winning together and delivering outperformance at scale as we help people live longer, healthier, and happier lives. I am pleased to turn the call over to Justin.

Thank you, Debbie. Good morning, and thank you for joining us. The third quarter reflected continued strong execution across our senior housing operating portfolio and our investment platform. I will cover four areas: our SHOP results, the OI platform supporting them, the pace and quality of our external growth, and the outlook for the business. Let me start with the SHOP results. Same store SHOP cash NOI grew 16% year-over-year, led by our U.S. portfolio of 17%. Revenue grew 8.3%, benefiting from both occupancy and rate growth. This marks the 17th consecutive quarter in a row of double-digit SHOP NOI growth. Average occupancy increased 120 basis points sequentially and 290 basis points year-over-year overall, and 320 basis points in the U.S., led by independent living, which is up 340 basis points. Growth was broad based across markets, community types, and operators. RevPOR grew 5%. This compares with 4.7% last year and 4.4% the year before.

We continue to achieve stronger pricing in communities with higher occupancy, demonstrating the value proposition to the resident. Operating leverage is also visible in the results. Same store cash NOI margin expanded 190 basis points to 30.7%. Incremental margin flow-through was 53%, which has also been trending positively. As occupancy rises, a greater share of each incremental revenue dollar converts to NOI. This performance reflects how we have built the portfolio in the right markets with the right assets and the right operators. Furthermore, our communities that are currently 95% occupied delivered 7% RevPOR growth. Our SHOP communities across 48 states, Canada, and the U.K. are weighted toward markets with favorable fundamentals, including Texas, New York, California, Florida, and North Carolina. Projected uncapped net demand in our U.S. markets is roughly 1,200 basis points over the next few years.

Residents in those markets have plenty of resources to cover the cost of their expected stay. The communities are large scale, averaging about 115 units, with a mix of roughly half independent living and the other half being assisted living and memory care. We have completed nearly 400 community refresh CapEx projects since 2020, and we work with nearly 50 operators, ranging from emerging regional names to institutional platforms, who are all locally focused. Occupancy and rate working together remain the primary driver of performance. Within the NIC Top 99 markets, our occupancy outperformed the industry by more than double, with 130 basis points sequentially. We have consistently beat the market. Since the first quarter of 2023, cumulative outperformance is nearly 600 basis points. We attribute this to our operators' execution at the community level, supported by the Ventas OI platform.

Our U.S. SHOP portfolio is just 89% occupied, which leaves substantial room to grow. We expect strong performance ahead, driven by occupancy gains, rate growth, and operating leverage as price and volume work together. We see this as a multiyear growth opportunity. Now I want to touch upon the Ventas OI Data Analytics and Insights platform, which has proven to be a significant competitive advantage. Our competitive advantage rests on our right market, right asset, right operator framework, strengthened by the Ventas OI Data Analytics and Insights platform, which is focused both on driving operational performance and investment execution. We choose operating partners for their market-leading care and service, product expertise, leadership close to the community operations, and collaborative culture. Our management agreements align our interests and support long-term investment in each community. In a highly fragmented industry, success requires managing at scale across markets, communities, and operators.

Ventas OI enables that scale through collaborative oversight, combining our teams' operating expertise with proprietary data and best-in-class analytics to inform operational upside, guide refresh capital, and refine the portfolio, all in support of delivering outperformance. We believe this combination of platform, people, and execution at scale creates a competitive moat that is difficult to replicate and essential in order to successfully grow and operate in the fragmented senior housing industry. It also strengthens relationships and opens growth opportunities for operators who deliver outperformance. We are growing in terms of number of operators and expanding existing relationships with high-performing operators. For instance, we have expanded investments and communities under management with three-quarters of our operators. This includes our top five operators, who together represent over 60% of our SHOP NOI. I'm proud of our team and grateful to our operating partners for their work every day. Now turning to investments. We continue to scale our senior housing operating portfolio through market-leading acquisitions.