Us for the presentation of Ventas. I'm Dave Rogers, one of the Senior REIT Analysts here with Raymond James. Thanks for joining us. With me today, I'm excited to announce that the management team of Ventas is here. Chairwoman and CEO Debra Cafaro is here. Justin Hutchens, who is EVP of Operations, and Senior Housing, and I have it written down here.
Let me go back. EVP of Senior Housing and Chief Investment Officer, that's the one I was forgetting, and then BJ Grant, SVP of Investor Relations. Thanks for being here, and we'll get started. Debbie, I'm gonna turn it over to you really to introduce Ventas, and maybe even more than just an introduction of the company you know, wrap it into what's the value, and kind of opportunity with Ventas today.
Okay. Well, thanks so much for being here. Thanks for hosting us. Ventas is an S&P 500 company focused on the mega trend of longevity. We serve a large and growing aging population, principally through the growth engine of senior housing. We've delivered 19% annual returns since the year 2000.
We really are excited about everything that we've accomplished, particularly in the last several years since Justin has been here, and more importantly, looking forward over the next decade. There are three key things that we really wanna talk about. One is the macro tailwinds of secular demand and limited supply that underpin the excitement we feel about the next, you know, decade.
The second is really the machine that we've built at the company, the business that we've built, the platform that is designed to enable Ventas to outperform at scale and really capitalize on these unprecedented favorable macro trends fueled by the aging population. The third is our role as a consolidator and how all of those things together create a really compelling multiyear NOI growth opportunity as we look forward and a value creation opportunity for our shareholders.
Let me touch on the first, the tailwinds. Justin came six years ago to the day. We focused on 2026 because that is the year that the baby boomers start to turn 80, and that wave of growth is inexorable. Its demand is strong and getting stronger as the population continues to grow looking forward, and at the same time, supply is incredibly muted.
It's at historic lows. There were about 2,000 units of senior housing started in the fourth quarter. It's at least a three-year cycle to delivery, yet 2 million people are gonna have their eightieth birthday in 2026. Very excited. Supply-demand very strongly kinda tipped in our favor.
Our U.S. portfolio of senior housing or senior housing business, again, the engine of growth is over half of our business and growing obviously. We're in the fifth year, we believe, in 2026 of double-digit NOI growth, we expect that, you know, trend to continue. These tailwinds are tipped strongly in our favor on both the demand and the supply side. We have 86% occupancy in the U.S., we see lots of room to run on occupancy rate, margin expansion, and NOI.
We've built the machine that Justin will talk about to capitalize on these trends, data analytics, team, industry relationships, AI, technology, all designed to help us outperform at scale and deliver alpha with the beta of these macro trends. Finally, we have acquired about $5 billion of senior housing investments over the past couple of years.
We're leaning hard into the market. It's one of the best, if not the best, private-to-public arbitrage opportunities I've seen in my long career, we're able to use this to further enhance our earnings growth per share, our dividend growth, our really delivery of value to shareholders. The way we're funding the investments, we are also improving our balance sheet. These investments are meeting our market asset operator framework, they're delivering outstanding financial returns.
Low teens unlevered IRRs are expected from these investments, so very, very attractive way to build on the engine of internal organic growth through consolidation. Again, it all comes together really so that we hope to outperform at scale, continue delivering TSR, continue to growing to deliver multiyear NOI growth and value creation. That's the Ventas story, and now we'll be happy to take your questions.
Great. Thanks, Debbie. Let's dive in on a couple of those key points that you just talked about, around operations. You mentioned 86% occupancy, and I think you also said more than three years of double-digit SHOP NOI growth that you've experienced. Talk about what you've done over the last handful of years to begin that engine of growth, and then at 86% occupancy, presume there's a little bit more growth in front of you as well. Talk about that opportunity, if you could.
Sure. You had. Started to introduce me as an operations person, it happens to be that a lot of my background is operations and senior housing, running large operating companies. I always refer to myself as an operator in reclothing. You can make that my title any time you choose. I think it's a good fit, potentially.
So, you know, on that note, when I joined exactly six years ago, Debbie had a vision to really turbocharge the senior housing business and reposition it in a way that would put us in the, you know, into a great position as we are today to capitalize on these macro trends. There was, you know, a handful of opportunities to do that. One was to really make sure that we had a platform that was positioned to deliver outsized performance.
You think about this being an operating business, and yet we're relying on managers to manage the day-to-day business for us. How can we capitalize on the strengths we have in our platform that are complementary to the strengths that the operators have? The first place we looked to was data. Historically, we had financial data.
Now we have operational data that helps us to, instead of looking backwards, we're looking forwards and drive revenue trends, including sales and pricing-related trends. There's an entire OI platform that I'm sure we'll get into that I'll describe that has positioned us to outperform. To your exact question, around 86% occupied, the other thing we wanna do is ensure that we're well-positioned in our markets to deliver growth.
The first thing we had to do is make sure we're in the right markets, and that's part of our market, asset, and operator framework that Debbie described. We're in markets that have a strong aging demographic and strong affordability, and we've handpicked them. Anything we didn't wanna be in, we're out of it, and we had 100 dispositions, and over 200 acquisitions as we've been positioning within these markets.
The asset needs to be well-positioned within those markets to be competitive. Where needed, we've been investing into our communities. Operator selection has been a key part of the plan because we've gone from 10 operators to over 40 operators now that we manage through our platform. Along the way, we found opportunities as we've been growing NOI and occupancy.
We've had four years in a row of double-digit NOI growth in our SHOP portfolio. We have another one planned for this year, five years in a row. We've also been positioning ourselves for a longer runway of growth with lower relative occupancy. How do we do that? Well, we've been transitioning from the triple net structure of our portfolio over to the SHOP structure.
There's been 150 communities that have come over in that fashion at a lower relative occupancy that were generally under-managed, in a lot of cases under-invested, and had lower than market occupancy. We call it the double upside opportunity, which is the opportunity to outpace market and get back to market occupancy or beyond. That's the opportunity in the SHOP portfolio. That'll be a key contributor to our growth.
The number you mentioned is that our U.S. occupancy through those actions is only 86% occupied at a time when demand has really had a big step function increase. That's the excitement we have, is just to take advantage of that opportunity.
You mentioned the OI platform, Ventas Operational Insights. I have two questions around that, maybe a two-part single question. Talk about that platform, but I guess talk about it both from the context of how it's helping you operate better and select operators and maybe too, what you had mentioned a moment ago, is how has it allowed you to buy assets better?
Yeah. The, you know, you know, everything's important. You know, you have the market asset operator framework. The data that we use to make decisions organically within our portfolio from a market standpoint is equally useful on the investment side and the capital allocation side. We're underwriting 50-minute drive times, and we have numerous data sources we use to determine that those particular markets we're entering are the right market for near, mid, and long-term success. You know, within the, you know, when you consider operators, you know, we look at everything within an operator, you know, head to toe.
We look at their, you know, their relative capabilities in terms of running the day-to-day business, and that's really underwriting a track record, underwriting their experience in the respective markets and the states in which they operate, the type of product, because we have an unregulated independent living, we have a regulated assisted living memory care product.
We wanna make sure that the operators have, you know, are really running the right type of community for us and in the right markets. What's the management team? You know, what are their management team's capabilities? It's important to understand in senior housing that half the industry is operated by operators that have 10 or fewer assets. Some of the smaller companies will have really good management teams that are focused on the day-to-day business, but they're not big enough yet to have every single professional discipline covered.
They'd be maybe outsourcing, maybe be leaning into certain areas like clinical and risk management and sales. Maybe they're not as strong in procurement yet, for instance. We're evaluating those capabilities, and then we're also making a judgment call about where can the Ventas OI platform plug in and be complementary. That's important that we understand that.
I can tell you that through the acquisitions that we find that there's a lot of revenue opportunity really across the board in the acquisitions that we're making, both from a occupancy and price standpoint. One of the first priorities is to plug in with the operators and put plans in place to really drive revenue, which, given the operating leverage in the business, leads to the margin expansion opportunity. We had 10 operators four years ago.
Over 40 now, we've been growing in the U.S. We're the number one acquirer of senior housing in the U.S. in 2025. We were number two in 2024. You know, it's all really kinda coming together at a point in time where the demand's picking up.
OI stands for Operational Insights. I wanted to call it AI so our stock would go up. I was shut down on that. It's Operational Insights. It's the real marriage of Justin and his team's operating experience with kind of technology-based and data-fueled insights. You may not know, but in our business, we operate our assets, we get the P&L benefits for our shareholders, but we do it through these operators of senior housing, and that's part of the business.
Operational Insights, the platform that, again, is designed to help us outperform at scale, it's taking all of the resources that Ventas has at this kinda top side, all the data, and kind of giving it to the managers on a as-needed basis, customized to each manager, to each market, to each community to drive that performance.
They have not heretofore had access to that kind of sophisticated data, thinking, experience, technology, and that's why when you look at our deck, you'll see that the proof has been in the pudding that the portfolio that we own that they manage has outperformed on occupancy for many years running now, and also NOI. That's what it is. I just didn't wanna skip kinda the foundational piece for you.
That's really helpful. Thanks. I wanted to continue to talk about external growth acquisitions. You mentioned 100 assets sold, 200 acquired. It's been over $5 billion of investments in the last 5 quarters. What does that outlook look like in terms of the opportunity set in front of you to continue to acquire, across the landscape of the different businesses you're in, but particularly in seniors housing?
Yeah. You know, we've had, like I said, you know, a good run of, you know, being a top acquirer of senior housing in the U.S. The platform is well-positioned to be competitive for a number of reasons. One is our financial strength and flexibility is near the top of all potential, you know, acquirers of senior housing.
The platform that we've been describing we're the only one that has a platform that's operational focused in the way that we've described. We have a track record where 70% of our deals have come from, you know, repeat business with existing operators, 40% with repeat sellers, which is important because we're obviously good citizens and, you know, and we, our handshake is delivered upon when we do deals, and that's resulted in repeat opportunities.
We've reviewed $35 billion of senior housing investments last year. In the fiscal year, we delivered $2.5 billion, if you started in late 2024 to early 2026, it's $4.6 billion during that period, that indicates some momentum that's been picking up. We've already closed $800 million this year.
We have a guide out at $2.5 billion. You know, there's more interest in the space, it's also, you know, it would take many, many years to put the platform together the way we've done it and to be able to play and compete in the space in the way which we do, which is really required given the fragmented nature of the industry.
We're very confident that we're well-positioned to continue to compete and find external opportunities. Key point on those opportunities is that they're accretive initially because the year one yield has been really attractive. The opportunities deliver growth, and that's the opportunity that Debbie mentioned earlier, where we just haven't seen this in our career, where you have the opportunity, you have the accretion at the level we've had it, plus growth. That's delivering on those unlevered IRRs of low to mid-teens given the, you know, the growth profile of the beta growth profile opportunity, our opportunity to turbocharge that and outperform within our markets.
Competition is rising. We hear that all the time. You've still been successful, and you addressed that a little bit. We can go down that road a little bit further, but also talk about the net lease conversions that you've done, the opportunity you see there. Is that something both within the portfolio and maybe in acquisitions that you see as a potential for conversion from net lease to operating business?
Regardless of structure, you know, we're really looking for being in the right markets with the right asset with the right operator. We have 125 communities that are still in the triple net structure, you know, within Ventas. Those are well-covered leases. I would say that, you know, we've probably picked most of the low-hanging fruit in that regard, so there may not be as much to go for internally.
We're looking externally, most of what we're buying is going to be owned by friends and family equity or private equity or pension, and therefore, a good fit for our SHOP structure. Initially, we're not really seeing a triple net to SHOP conversion opportunity in the market.
Okay.
We are seeing opportunity to make an acquisition, have a well-aligned management agreement with the managers, which is compensating for both NOI and revenue growth and paying for outperformance, and then layering on the OI platform, and we're off to the races.
In the, I do want to emphasize that in the, these conversions as we call it, where you take an asset that's in the right market, and you get rid of the triple net lease, and you move it to this within our platform, you know, that's where we're getting the outsized growth. I'll just give you one example, and that's all still in front of us.
The conversion may have occurred, but the NOI growth is still ahead. We took 45 assets by January 1 of this year. There's a little over $50 million of net operating income there. The occupancies are in the high 70s. There's a huge opportunity. We changed managers. We basically dispersed among five proven local-focused operators that we do business with.
We're gonna invest in the assets, and we think over time, the $50 million becomes $100 million. That's also fueling some of this multi-year opportunity that we have, and we're really just at the beginning of that.
When you look at this opportunity, two things come to mind, and often we get questions on them as well. One would be around resident affordability, and then two is where you play in the spectrum of kind of the assisted living, independent living, memory care space. I guess there's a lot of ways that you could fragment it or think about it, but what's your preferred area to play in, and how do you think about affordability for where you are?
Well, in terms of affordability, you know, first and foremost, I don't know if we've said this yet, you know, it's not lost on us the importance of delivering exceptionally good care and services within our setting. When we're considering the acquisitions or managing our existing portfolio and working with operators, it all starts there. It's a consumer-driven business.
People can take their money anywhere they want. We need to be delivering, you know, best in class care and service, as well as providing a work environment, you know, that is extremely competitive. You know, everything really starts there. Having said that, we've also made sure we entered markets that have strong aging demographic, strong affordability, plus many other characteristics, but those are the two that I'll focus on.
If you have an aging demographic, they certainly need to be able to afford your services, and we measure this by a metric that we call the affordability metric, which is really just a multiple of the length of stay that someone stays on average. That is in assisted living, two years, in independent living, three years. Our metric is 7 x in our markets at the median. It's not being flattered by, you know, high income. You know, at the average isn't being pulled up. This is a median number. That means that at the median, the 80+ population in our markets can pay for 14 years -21 years length of stay, although on average, they would only stay for two years-three years. That means easily affordable.
These are people that have living expenses at home that are very comparable to what they'll be paying in our setting as well. It's, it's really not an additional cost. It's a, it's a trade-off they're making from living at home and paying for a lot of other things like maintenance and, sometimes care and your, you know, your property tax and all your expenses you have that go away when you become a tenant, you know, in our community, and then you add on the care and services that they're purchasing. It's actually the value proposition key point is really attractive, and that's demonstrated through the demand we've had. We've also had relatively strong rent increases as demand's picked up. Even at relatively lower occupancies in the U.S., we had 8% rent increases in January.
You know, I think that's a testament to the, to the quality of the service, but also to the, to the demand in the, in our markets. In terms of the product types, we have independent living. The definitions by NIC, National Investment Center for Seniors Housing is based on majority. If you have a majority independent living units, which are unlicensed, then called independent living.
If you have a majority assisted living, which is a licensed product that delivers care and services, medication administration, activities of daily living, will also, be called assisted living. We're half and half. I think we like the mix. You know, there's different dynamics facing each of them. The independent living is the higher margin business. It's more of a discretionary decision.
It is a longer length of stay, you know, it, it serves a slightly younger resident moving in. Then assisted living is need driven. It has the benefits of being able to deliver some nursing and care delivery, activity, socialization, plus, memory care services, which are in very high need, and it's a regulated business that's regulated by the states.
Having a mix of both has really worked well for us. In this kind of earlier stage of baby boomers aging, we've seen independent living outperforming from an occupancy standpoint. As we move ahead, we'll expect really both to deliver strong performance. The combined result was 370 basis points of occupancy growth in the U.S. for us last year.
One more question from me, and then we'll turn it over to the audience. Maybe Debbie and Justin, you can kind of wrap this all up for us. What does this look like? I think you mentioned 19% annualized return over the last 26 years, if I remember right what you said, 25 years. How does this all build up into the future for Ventas to continue this kind of trend of strong total shareholder return, earnings growth, dividend growth, and the like?
I mean, we're very, very focused as a management team on kind of winning together on you know, for our stakeholders. First and foremost among those are our investors. We've been able to deliver that through... You know, there's been a lot that's happened over the last 25 years or 26 years, and we believe in the mission of the company to serve a large and growing aging population. We have to do that well. As Justin emphasized, we have really worked hard to build the machine to capitalize on these secular demand trends, and we're constantly improving that. We're an organization of constant improvement.
We're gonna continue doing everything we can to outperform at scale, which will benefit, you know, the seniors in our communities and obviously our shareholders as we see this really unprecedented value creation opportunity as we look ahead for 10 years.
Great. Thank you. Do we have any questions from the audience?
I know you have to have some. Thank you.
What's the flow through from an independent living to assisted living? Percentage of someone enters at an independent living facility, and then what is their annual income since then?
The question is, it's kind of a question related to aging in place, and the question was regarding the flow through of independent to assisted living. I'd say the way it realistically plays out, is people stay in their existing setting as long as possible. If you're in a like a pure independent living setting, there's, you know, oftentimes a relationship with a rehab provider, so that residents can work on their physical mobility and stay active and healthy.
Sometimes there might be home health services that move in. There can be a move to assisted living, particularly that happens if it's all under the same four walls. It's not really a stat we track per se. I'd say it's actually happening less frequently than you might think. There tends to be an age in place component, and a stay in place, kind of behavior that occurs with the residents.
Could you characterize the competition about assets when you're acquiring? I guess the way that you describe the ROI for how you differentiate on the operational side, how do you differentiate yourselves when it comes to the acquiring side?
Well, we have significant competitive advantages on the acquisition side as well. I think we have the capability of both identifying assets that have the right characteristics to outperform, then once in our hands, we have the ability to help make those assets deliver the underwriting. In the market itself, I mean, We have a super active pipeline. Justin mentioned we're a top buyer, senior housing. We see all the deals. We are able to have great access to and cost to capital. We are have a reputation and a track record attractive to sellers.
You know, the, a lot of the operators who may or may not own part of the asset being sold, you know, really respect Justin and his team, respect the company, and wanna be aligned with this kind of win together platform. These are very significant competitive advantages that you still have to pay, but we're getting more than our fair share of deals that we want. If we really wanna go after something, our kind of success rate, I would say, is extremely high.
Hi, thank you very much. Any comments on challenges of finding qualified people to work in these facilities, especially for based on experiences?
Well, the market for labor on site has gotten substantially better over the last couple of years. The environment is very constructive, I would say, on the ability to find labor and the cost per unit of labor. Justin, do you wanna carry on this?
Yeah. There was, you know, if you know, rewind a few years ago when we were in that period of, you know, high inflation, the sector was. Our wages were relatively low compared to other entry-level jobs in other sectors. One of the things the industry did is we caught up with other sectors at that time, and we paid the inflation on top of that.
There was a lot of cost increase during that period, which has made us more competitive. The driving force behind that is that we were using temporary staffing, which was very expensive. There was incentive to get our wages set right so we can be competitive. That's been done. Since then, our costs have been increasing around 5% a year on 8% revenue growth. That's really volume driven. If you adjust for volume, our operating expenses on a per occupied room basis has actually been around 2%. We have no agency anymore. It has been a really constructive hiring environment for us.
The costs per hour have been going up, you know, at or below inflation. I mean, can you talk about retention?
Yeah. Yeah. I mean, there's always an ongoing emphasis on retention, and that's a natural consequence of having a part of your workforce that is, you know, kind of at the lower end of the, you know, the wage spectrum. You know, like I said, you know, we know how important it is to be delivering a high quality care and service outcome for our residents, and we're doing that, and that's one of the key, you know, proof points, that's all working for us. If that works, then all of these, the financial results we've been reporting on have come to fruition.
Part of our capital CapEx initiatives, honestly, are focused on making sure the community is a welcome place to work and can attract and retain labor, including things like focusing on break rooms and, you know, things that will make good employees want to come to work and want to work there and want to stay there.
Yeah. Great. With that, I wanna thank everybody for joining us. We'll have a breakout session afterwards. Debbie, Justin, BJ, thanks for being here, and thank you for joining us.
Thank you.
Have a great day.
Thank you. Appreciate it.