What’s Ventas’s Strongest Portfolio?
Senior housing portfolio
Ventas’s (VTR) senior housing portfolio is divided into the Senior Housing Operating (SHOP) and the Senior Housing NNN (triple net) divisions. In 3Q17, it got 30% of its ~$2 billion NOI (net operating income) from SHOP and 23% from senior housing NNN. The senior housing operating portfolio contributes 53% of its annualized revenues.
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It has a total of 284 SHOP properties and 369 senior housing NNN (triple net) properties. 70% of the SHOP NOI comes from high-barrier-to-entry coastal markets. The industry benchmark for median household income is $57,462, while for Ventas SHOP it’s $81,343. The median home value for the industry benchmark is $197,980, while for VTR it’s $441,484.
Senior housing performance and future outlook
The 3Q17 YoY same-store growth for SHOP properties has been 0.6%, which was supported by continued growth in high barrier markets, which was largely offset by the impact of new deliveries.
VTR has changed the midpoint of its same-store cash NOI growth outlook from the previous range of 0% to 2% to 0.5% to 1.5%. Occupancy rates have fallen on a YoY basis by 210 basis points and improved by 50 basis points from 2Q17. The occupancy rate stands at 88.7% for 3Q17. Ventas’s NOI from SHOP for 3Q17 is $145.4 in comparison to $145 in 3Q16, a YoY increase of 0.3%.
The SHOP absorption rate has increased from 2.6% to 3.4% from 1Q16 to 3Q17. It has a strong value proposition with only 11% market penetration. An increasing population of people over 80 could increase future demand. While ~21% of VTR’s NOI comes from high barrier SHOP markets, there is tremendous room for growth.
Below is the expected EPS of VTR and its competitors for 2018:
- Ventas (VTR): $1.89
- Welltower (HCN): $1.79
- HCP (HCP): $0.76
- Healthcare Trust of America (HTA): $1.76
VTR forms 2.4% of the iShares Core U.S. REIT ETF (USRT).