Ventas’s Diversified Portfolio Is a Major Advantage
Ventas (VTR) has an office portfolio that consists of life science centers and medical offices. In 3Q17 it earned 6% of its ~$2 billion net operating income (or NOI) from its life science centers and 20% from its medical offices. Its office portfolio has contributed 21% of the annualized revenues.
It has a total of 358 medical office properties and 26 life science properties. Tenants in the medical office space are leading healthcare providers. 50% are A-rated tenants while for life centers they are AA-rated universities and investment-grade companies with a market cap greater than $1 billion.
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Office portfolio performance and future outlook
The company’s medical office portfolio has grown seven times from its initial acquisition and has earned a 7.3% yield on its invested capital of $5.2 billion. Its life science portfolio, on the other hand, has expanded 33% compared to its initial investment of $1.5 billion to $2 billion and earned 6.9%.
The 3Q17 YoY same-store growth for office properties has been 1.5%, which was supported by lease escalations and a strong tenant retention rate. VTR has increased its same-store cash NOI growth outlook from the previous range of 1% to 2% to 1.5% to 2%. Occupancy rates have improved on a YoY basis by 60 basis points, while rates have fallen from 2Q17 by 20 basis points. The occupancy rate stands at 92.9% for 3Q17. Ventas’s NOI from office properties for 3Q17 has been $117.8 in comparison to $99.4 in 3Q16, a YoY increase of 18.5%.
VTR is further planning to expand its existing university relationship and add $62 million in life science and innovation centers in collaboration with Brown University.
VTR operates in the US, Canada, and the UK, as do competitors Welltower (HCN) and HCP (HCP). The Healthcare Trust of America (HTA) is based in Scottsdale, Arizona. VTR forms 2.4% of the iShares Core U.S. REIT ETF (USRT).