Oh, all right. Good morning, everyone. Thank you for joining us for the 9:30 A.M. session on day one of the REITw orld 2020 Virtual Investor Conference. My name is Jonathan Hughes. I'm one of the real estate analysts with Raymond James, and I'm pleased to be talking with a few members of the Ventas team, all of whom are healthy, and I hope the same for our listeners and their families. Joining me on this webcast is Debra Cafaro, Chairman and CEO, Bob Probst, CFO, Justin Hutchens, VP Seniors Housing North America, as well as the Ventas IR team. So I think most are familiar with Ventas, but it's one of three S&P 500 healthcare REITs with a diversified portfolio of seniors' housing, research and innovation, and healthcare properties located throughout the U.S., Canada, and the U.K.
The focus today is, understandably, on managing the impact of the global pandemic, but historically has been about both internal and external growth via prudent capital allocation. At Raymond James, our stance towards healthcare REITs overall is constructive in the context of the broader REIT universe, as current valuations and powerful long-term demographic trends are very attractive and we believe present compelling investment opportunities. So I will now turn it over to Debbie to give an overview of the company and strategy in her words, and then we'll discuss some of the key topics and current issues for the company. So with that, Debbie, I'll let you take it from here.
Thank you, Jonathan, and welcome, and before I begin, I really want to wish everyone a really happy and safe Thanksgiving and express my gratitude for my Ventas colleagues, some of whom are here today, and also just all the support that we've received, all the relationships that we've built, and all the success that Ventas has had for over two decades. Thank you all. Turning to the overview of Ventas, I'd like to make a handful of key points as we begin. First of all, Ventas has followed a consistent strategy of diversification, and we're seeing the power of that strategy really shining through over the past year.
First of all, our business has been really led by more than half of our business, led by medical office and life science, as well as some of our healthcare businesses that have enabled us to really deliver good results and keep the company strong, steady, and stable during the pandemic. We also, in senior housing, which is a business that we deeply believe in, have really shown the value proposition for senior housing that operators provide to older Americans and their families. And we reported just recently in our third quarter results that we have seen incredible sustained demographic demand in that asset class from April, and that was consistent really every month of increasing move-ins to our senior living business through October, and we're very heartened to see that. We also built a life science business really from scratch over the last four years.
We've gone from zero to almost 9 million sq ft in that research and innovation business, we call it, and it's really composed now of being in two of the key cluster markets, Cambridge and South San Francisco, and also aligned with major research universities in the United States, all of the leading research universities, and it's really been an incredible blessing to have entered this business, which is one of the hottest asset classes, and to be able to continue to find ways to grow that business and increase value for our stakeholders. In the course of the last year, we've also really created an incredible tool for ourselves in a third-party capital management business. There are lots of strategic and financial benefits to our shareholders from growing and originating this business.
We started a core fund in March and now have nearly $2 billion and nearly 2 million sq ft in assets under management. It's certainly one of the most successful real estate open-end funds that's ever been launched, and we're only six months in. We now have almost $3 billion in total of assets under management with our recently announced joint venture with GIC as well, which is also helping us drive our research and innovation business forward in our nearly 1.5 million sq ft under development, so we're excited about that.
When we look at macro trends, we're very, very heartened, as we anticipated on our earnings call two weeks ago, that the early results from two of the vaccines have been very promising, and there is an opportunity for distribution, hopefully, of those vaccines starting in December, and that older Americans in our communities are going to be prioritized for the vaccine. So that is the most encouraging development that's occurred since our earnings call. In the meanwhile, obviously, operators continue to grapple with the spread of COVID-19, and obviously, the here and now statistics have continued to be well known, and we are hopeful that the vaccine quickly wins the tug-of-war between these two macro factors and that we can begin really to stabilize and grow occupancies in our senior living business safely.
And that really takes me to my last point, Jonathan, which is we are working hard every day so that Ventas can win the recovery. We've put the whole weight of our firm behind getting through this pandemic in good stead, in a strong and steady way, prioritizing health and safety, continuing to benefit from our diversified model, continuing to maintain financial strength and flexibility, continuing to drive the hot areas of our business, like life science, forward, diversifying our capital sources so that we will be ready to win the recovery as soon as it comes. So with that, I'll turn it back to you and my colleagues so we can answer some of your questions.
Great. Thank you very much for that overview. I think we're definitely all interested to hear your thoughts on what the vaccine news from a week ago and also yesterday, but what that means for your business, most notably seniors' housing. Reaction to that announcement has been incredibly positive, but how do you see that impacting fundamentals for your seniors' housing portfolio over the next six to 12 months?
Again, we anticipated hopeful news in our call. We are really excited about the Pfizer and Moderna news. There are two other vaccines right behind it, as well as myriad others that we also think can be effective. I think the importance of people understanding that there is an end in sight. We continue to be in the middle of the pandemic, but there is an end in sight. We do understand the psychology that we will be able to protect people through a highly efficacious vaccine that will also be delivered to our seniors in our communities, all of which have signed up with pharmacy providers, mostly Walgreens and CVS, to bring the vaccine at no cost to the communities.
I mean, that is a powerful change in psychology, and we simply have to work our way through to the point where everyone is protected, the workers and the seniors, so that we can continue to stabilize occupancy, as I said, and start to grow occupancy moving forward.
Got it. Okay. What does this pandemic—what opportunities has it created? Can you specifically talk about what you see in healthcare, life science, seniors' housing, your interest level in these different types of asset classes, and how you might be taking advantage of that interest?
As I mentioned in the overview, certainly getting into the life science business in 2016, that asset has continued to significantly appreciate in value, and we've continued to find ways to grow that business. It has been a compelling opportunity and one where we have allocated significant capital, and we're very glad that we have. A decade before that, of course, we got into the medical office business, and we have over 20 million sq ft there, and that business has performed incredibly reliably. Certain of our other asset classes, like the long-term acute care hospitals with Kindred and our Ardent investment, have also continued to perform well. We really like the senior housing business. We believe in it, and we believe in the value it brings, and we look forward to having that business recover again post-pandemic, post-vaccine.
Okay. Maybe a question for Bob here. Could you talk about the financial side of the business? Give us an update on the balance sheet and liquidity as it stands today.
Sure. Happy to. Let's talk about liquidity and leverage. So liquidity is strong. We've got $3.2 billion of capacity between the revolver and cash. We have very limited near-term debt maturities with only $400 million coming due next year. And importantly, we've demonstrated particularly this quarter our access to diversified capital sources. And as an important form of liquidity, whether it be JV partnerships, the fund, debt or equity, and public markets, all have been open to us. So we feel very good about the liquidity position. Leverage has clearly been affected by the pandemic and the impact of the pandemic, particularly on senior housing. That is, therefore, something we're keeping a careful eye on.
We demonstrated how we funded, for example, our portion of the fund through asset sales and some modest ATM usage as a way to show the balanced approach to managing the balance sheet, which has been our trademark for 20 years, frankly. The financial strength and flexibility will continue to be ever important for us. But we have the access, and we have the liquidity, and we feel like we're in a good position.
Okay. Any changes as a result of the pandemic to how you plan to run the balance sheet in the future, maybe potentially even lower leverage to kind of mitigate any black swan events like, unfortunately, what we're dealing with this year?
The short answer is no, Jonathan. The diversified model, as Debbie started, having been the strategy for a long time, having served us well for a long time, the equal partner of that is on a strong balance sheet and ensuring financial flexibility. And we've done that for many, many years. We'll continue to do that and show that in the third quarter and subsequently. And so we'll continue that bias. Obviously, the pandemic creates unique challenges, but again, back to my previous comments, we've got multiple clubs in our bag to try to manage through.
Okay. Maybe we can talk about the portfolio and down the road, maybe external growth outlook. We have seen investments made over the past five years in various types of healthcare real estate. Debbie, you talked about those earlier. We've seen hospitals, R&I, or life science, as some call it. A recent large investment about 18 months ago expanding the Canadian seniors' housing portfolio. What's the strategy going forward? You've talked about the diversification benefits. Do you see a preference for one over the other when the potential for external growth maybe returns?
Yep. I mean, we have great embedded upside, as I've described, in our senior housing business, and we look forward to the recovery in that space. One of the good capital allocation decisions we have made, you mentioned, in addition to the life science investments, but also in our Canadian senior housing portfolio, and those investments continue. I'm going to ask Justin Hutchens here to talk about the 30% of our SHOP portfolio that is in Canada and because of the public health response in Canada has been performing well and the continued investments we are making in high-quality senior housing with Le Groupe Maurice.
Thanks, Debbie. And as Debbie mentioned, Canada is 30% of our portfolio. We mentioned on our recent earnings call that Canada had positive NOI growth of around 10%. All three of our Canadian operators contributed to that. Le Groupe Maurice contributed the most with 13% NOI growth. And this was an investment that was made a year ago into a company that was founded in 1998. Their product is an apartment-like senior housing community that had very strong growing cash flows and 31 Class A assets. And so this investment was really into Quebec's strong senior housing market, which has high penetration. We targeted 4% NOI CAGR as part of that investment, and then we have exclusive rights to the future development pipeline. And this is a market that historically has been less impacted by new supply, so it's a high-barrier market, and it's performed quite well for us.
We look forward to continuing to support the operator, LGM, as we call it, as they continue to grow.
Yep. Okay. That's helpful. Maybe since we're on SHOP, a couple of questions in the Q&A are just on what's the mix of the SHOP portfolio between assisted living, memory care, and independent living?
Sure. Within our SHOP portfolio, we're roughly 50% majority independent living. And of course, that includes the Canadian portfolio, which I mentioned, which is entirely either apartments or independent living. And then the other half of the portfolio is majority assisted living. And much of that portfolio does include at least a portion of their communities that serve memory care residents as well as part of the overall service offering.
Okay. Thank you for that. Debbie, how does your ability to source private capital help Ventas as an enterprise?
Thank you for asking that. Obviously, our stakeholders are sitting here in this room, I hope, our public shareholders. Everything we do really over the last 20 years is geared toward creating an enterprise that is able to capture opportunities and also protect equity shareholders.
I would say that creating options and diversified capital sources is really enabling us to weather through this pandemic while at the same time continuing to move the business forward, leveraging our footprint, leveraging our expertise and brand, funding pools to be able to buy a South San Francisco asset at a cap rate that maybe wouldn't have worked were we to have to buy it on balance sheet, but now we're able to acquire an incredibly high-quality asset in the birthplace of biotechnology, South San Francisco, that we may not have been able to acquire for our shareholders without the benefit of the fund, which is a core fund. And so that is really helping us.
Similarly, with the recently announced GIC joint venture, that is helping us really accelerate a very attractive pipeline of opportunities that we have to do ground-up developments with our university partners principally and bring these projects to fruition. And it provides better balance sheet opportunities for our public shareholders, and it continues to enable us, both the fund and the GIC joint venture, frankly, enable us through market structures to gain asset management fees and other profit sharing that will drive better returns for our shareholders. And so that access to different forms of capital, particularly in markets like the market that we're in now, which is volatile and disrupted, and there continue to be very strong bids and low cap rates for all of our asset classes, which is very good for our ownership of those assets, but makes it harder to acquire on balance sheet right now.
These other tools that I think we've been very resourceful in creating and very successful in creating are enabling us to grow the business through the pandemic, positioned to win the recovery, and giving us more tools to advance the interests of our public shareholders and our enterprise.
All right. We had a question come in, and I think it's a good time to discuss it, but ESG initiatives, they are becoming increasingly more important. Can you just talk about the initiatives Ventas has taken to address these?
Yes. Thank you. I mean, Ventas has been a leader in this area. ESG, of course, stands for environmental, social, and governance. I have always thought about it as a fancy way to do what my parents taught me, which is kind of to do the right thing. And in doing the right thing, on the environmental side, we've made numerous investments in our properties that will reduce our carbon footprint and reduce our use of water and other energy. And those investments have been good for our properties. They've been good for our shareholders and obviously good for the planet. On the social side, we have been very committed to areas of diversity, equity, and inclusion for a long time.
We continue to make philanthropic investments in the communities and the areas we serve, such as ending senior hunger in Chicago, investing in an underserved neighborhood with a leadership academy in Philadelphia where our life science assets are situated, and we really believe that we've had so much good fortune in our business that sharing it with the communities that have enabled that is a really important objective, and then on governance, obviously, leading with a diverse, high-quality board and a lot of rigor around decision-making and governance of our own decisions, those are all areas that we believe in deeply. We've been leading in over the years, and we think give us a license to operate and are really good for our shareholders and our enterprise.
Okay. All right. Thank you for that. Maybe let's go back six months ago or so to mid-summer. You did take some steps to address some issues in the seniors' housing portfolio, restructuring the Holiday and the Brookdale leases. Can you just talk about those transactions, why you took those steps, and how those were win-wins for both the operators and your stakeholders and shareholders?
Yes. I mean, we obviously took a number of steps across the company in myriad ways to make sure we could keep the company strong and stable despite the very significant impact of the COVID-19 pandemic, which we understood quite early could have significant magnitude, and two of the areas we created win-wins were really restructuring the leases that we had with two of our largest senior living tenants, Brookdale and Holiday, and the main premises of those transactions were really to, in one case, reduce the rent to a sustainable level, but then collect upfront about two and a half years of the difference between contractual rent and the reset rent level and enable us through warrant to take upside in the recovery through warrants in Brookdale stock, which has operating and financial upside as a result of the senior housing recovery.
In the Holiday case, we converted that to SHOP. We also took a significant amount of proceeds upfront in exchange for doing that, and through the SHOP structure, we believe we could have upside in those assets as we move to the recovery in senior housing and recapture occupancy and NOI in those assets, so slightly different approaches, but in both cases, we received significant upfront consideration and retained upside in the senior housing recovery.
Okay. That's great color, and then there was also another step taken in June of resetting the dividend, as several other healthcare REITs and countless others from across the REIT space did as a result of the pandemic. Can you just talk about the dividend sustainability at this level, how the board looks at returning capital to shareholders, and what can we expect on the dividend policy going forward?
I'm going to turn that one over to Bob.
Sure. And you're right to say that dividend change was one of the moves we made to ensure a strong and stable Ventas, as described. What we're very focused on at the moment, as you can probably tell, is winning the recovery, which is the catchphrase. And this strongly held belief that the upside to senior housing is powerful, the diversified model will continue to pay dividends. And by winning the recovery, it turns to growth in cash flows, which will ultimately enable returning that through the dividend to shareholders. And the board recognizes the importance of the dividend. We have a long track record of growing that dividend over time. And the focus on the here and now is on winning the recovery to put us in a position to do the same again.
Okay. Got a few minutes left. I think an interesting question that I see coming in the Q&A, I'll maybe pose to Justin or Debbie. But are you expecting stimulus help coming for your seniors' housing portfolio? I think you did talk about this on the last call, and you have a pretty helpful slide in the deck laying out the CARES Act money. But if you could talk about any potential benefit there.
One of the things I didn't mention we were grateful for, but we are, is that the federal government, for the first time during this pandemic, has recognized the critical role that senior housing plays in protecting vulnerable older Americans. I credit the senior housing industry and some of the leaders within it for making a strong evidence-based case about how important the actions that our industry has taken have been to protect seniors during a very difficult pandemic. Frankly, the clinical record that senior housing has brought is, while obviously the pandemic has affected everyone, the clinical record nonetheless has been much more favorable and positive than it has been, for example, in the skilled nursing business. That's something we continue to try to maintain and, in fact, improve as we've learned more about how to care for seniors at this time.
And so the government has provided funding under the CARES Act for senior living. We may be beneficiaries of that to mitigate the losses that we have suffered in caring for seniors and paying frontline workers. And there are some other phases of the CARES Act funding that we may be eligible for. And we will continue to make the case, which again is a sound and evidence-based one about the critical role that our industry plays for seniors in this country. And we're hopeful that that case will continue to resonate with policymakers.
Yep. Okay. All right. Well, we've got a little over a minute left, so I'll leave the last word to you, Debbie, but thanks for the time and for our listeners joining us today, and I'll turn it over to you for final remarks.
Thank you to all of our participants today and my Ventas colleagues. We really have a great team and one that is working together every day to produce results and do so in a way with integrity and protect the health and safety of all of those who work with us and all those who are served in our buildings. Again, I wish you and yours a safe and healthy Thanksgiving. We look forward to seeing you all vaccinated in person at the June Nareit.
Yep. All right. Thank you, Debbie. Thanks, everyone, for joining, and have a great day.
Thank you, Jonathan.
Thank you.
Thanks.