Ventas (VTR) Q3 2026 Earnings Call Transcript

Ventas is 1 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 markets 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.

US 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 3-prong strategy is cap 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 a 120 basis points sequentially. Driven by Ventas OI. This continues a multiyear trend of materially outpacing industry benchmark. 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 multiyear 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 multiyear improvement trend as we ended the quarter with net debt to EBITDA of the low 4x. 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 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. And 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 5 years and remain elevated for over a decade. Yet construction starts of new senior housing units hover at record lows. With a paltry 1 thousand units being started in the quarter.

With at least a 3-year start to finish development cycle, and increased construction cost. We should enjoy these powerful tailwinds supporting our growth, 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 growth rate, Our investment momentum is strong, and year to date, we have closed more than $5 billion of SHOP investments. Which are expected to produce double digit to mid teens unlevered IRRs and year-1 average yields in the mid-6s.

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 thousand senior housing communities, we have built a significant competitive moat including our relationship, 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 multiyear 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. And now I am pleased to turn the call over to Justin.

James Justin Hutchens: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 4 areas. Our shop results, the Oi platform supporting them, 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 a 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 1.2 thousand basis points over the next few years. And 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.

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 a 130 basis points sequentially. We have consistently beat the market. Since the first quarter of 23, 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 US SHOP portfolio is just 89% occupied, which leaves a 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 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 team's 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 3-quarters of our operators. This includes our top 5 operators who together represent over 60% of our SHOP NOI. I am 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. Year to date, we have closed $5.2 billion of total investments, focused on senior housing across 37 different transactions. This brings our total external growth since the beginning of 2024 to over $10 billion at cost. Which represents more than a 35% expansion of our SHOP footprint.

Our recently closed senior housing investments feature an attractive mix of communities that provide various combinations of in place cash flow yields and growth. There are multiple levers to drive outsized growth in these deals. Examples include communities with significant occupancy upside, value add investments with both occupancy and rate supported by planned near term CapEx investments, and communities that are local market leaders with demonstrated multiyear track records of high rate growth, These and other factors contribute to generating the projected double digit to mid teens 10 year unlevered IRRs underwritten in each of our deals. From an initial pricing standpoint, our expected year-1 yields on our senior housing investments are in an attractive 6.6% overall.

These investments are expected to benefit from the various growth drivers I have described contributing to accretive enterprise growth. On average, senior housing investments year-to-date have a basis of approximately $346 thousand per unit. were acquired at significant discounts to estimated replacement costs. The U.S. senior housing market is setting new transaction volume records this year and our pipeline remains very robust. We are 1 of the largest acquirers of luxury senior housing communities in the U.S. market and are also engaged in numerous off market discussions with potential sellers and operators on a wide range of attractive opportunities.

Our relationship based approach to sourcing investments which accounts for over 90% of our investment volume, provides meaningful competitive advantages, as current and prospective partners are attracted to the Ventas OI platform. And our way of doing business. Operators want to work with us. We are also encouraged that the recent movements in the price pricing of debt capital should reinforce our competitive positioning and create further investment opportunities. To summarize, we continue to offer an attractive value proposition for our residents. We are delivering strong organic growth in SHOP.

Adding to our footprint through market leading acquisitions with upside, outperforming industry occupancy benchmarks, and continuously elevating the fully deployed Ventas OI platform and the outlook for new investments continues to be as strong as ever. We are confident in our strategy and our team. Now I will hand it over to Rob.

Robert F. Probst:Thank you, Justin, and good morning, everyone. I will start with our third quarter financial performance, then discuss our balance sheet, and conclude with our improved outlook for 2026. I am pleased to report another quarter of strong enterprise performance. Normalized FFO was $0.99 per share, representing 10% increase year over year. Driving the growth was total company same store performance, which increased 11% year over year led by shop growth of 16%. I note that the 11% same store growth rate for the company is a record high. Is driven both by the attractive mid teens growth rate in shop and also by SHOP comprising an ever larger proportion of our overall business. Consistent with our 3-prong strategy.

Our outpatient medical and research portfolio, or OMAR, delivered 2.5% same store cash NOI growth in the third quarter, led by outpatient medical, which grew 4%. Outpatient medical occupancy increased 10 basis points year over year, marking its ninth consecutive quarter of occupancy growth. Tenant retention remains strong supported by tenant satisfaction scores at the 95th percentile. Our research portfolio, represents a small portion of our NOI, experienced a modest decline in the third quarter as expected. Our triple net portfolio generated over 8% same store cash NOI growth in the third quarter and was driven by negotiated rent increases. Turning to the balance sheet.

Our net debt to EBITDA of 4.4x is our strongest leverage level in well over a decade. And represents nearly a full turn of improvement year over year. The strengthening of our credit profile is a result of organic property growth as well as equity funded investments. I would note that this improvement was achieved while delivering attractive normalized FFO per share growth. Year to date, we have already closed $5.2 billion of investments focused on senior housing. Above the $4.5 billion contemplated in our prior full year guidance. We have funded this investment activity with $4.7 billion of equity capital, together with dispositions and assumed debt.

We maintain excellent liquidity of $4.5 billion, which gives us flexibility to pursue our robust pipeline of investment opportunities. Last, I will turn to our updated earnings outlook. Given our strong year to date performance and investment execution, we are once again increasing our earnings outlook for the year. We have raised our net income guidance to $0.64 to $0.67 per share or $0.66 per share at the midpoint. We are increasing our full year normalized FFO per share guidance to now range from $3.87 to $3.90 per share. Which represents year over year growth of 9% to 10%.

The $0.01 improvement in our new guidance midpoint is primarily driven by $0.02 from 2026 senior investment activity partially offset by $0.01 from the impact of higher interest rates in FX. We are reaffirming our same store cash NOI guidance for each segment and for the total company. A few comments on our fourth quarter. Our investment pipeline is strong. And our guidance only includes closed investments of $5.2 billion at this later stage in the year. I would note that our guidance assumes we refinance maturing debt in the coming months. And finally, we expect the majority of our disposition and loan repayment guidance of $700 million at a 7% yield to close in the fourth quarter.

For additional assumptions supporting our guidance, please refer to our Q3 supplemental earnings presentation posted to our website. To close, we are very pleased with our performance year to date. Our strategy is producing consistent growth, and we remain focused on creating long term value for our shareholders. And with that, I will turn the call back to the operator.

Operator:We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the q and a roster. Your first question comes from the line of Nick Joseph with Citi. Your line is open. Please go ahead.

Nicholas Joseph:Thank you. You talked about the robust acquisition pipeline. Obviously, we have seen that come through. In activity year to date as well as the current pipeline. Was hoping you could touch on competition and as interest rates have moved, how that has actually changed kind of your expectation of competition going forward?

James Justin Hutchens:Hi. it is Justin. Yeah. We have had a really active year and that is representative of our existing pipeline as well. And our approach has really been to. First of all, we have very intensive screening of the pipeline. Secondly, we tend to lean in where we have competitive advantages. And those advantages are oftentimes relationship driven. We have a very high growth rate with repeat sellers. We have a high growth rate with repeat operators. And that is led to some really attractive acquisition opportunities of luxury senior housing. And so that is how we have been winning. You know, there is certainly competition in the market. Not everything's the right fit for us.

It may be a better home for it. There is the impact of interest rates that you mentioned. That could slow down private buyers. That would be. It put us in an advanced position. And then, you know, we will also just see how cap rates settle over time.

Nicholas Joseph:You mentioned the relationship driven deals. How much do changes in interest rates impact those conversations?

James Justin Hutchens:Well, they. it is the interest in sellers to transact you know, is ongoing. 1 of the things that happens, and I. It tends to lag a bit, So we are not really seeing a lot of activity around these types of discussions yet. Is there will be discussion around price and what, you know, what a-- the right cap rate is and the current market. But it is still pretty early.

Nicholas Joseph:Thank you.

Operator:Your next question comes from the line of Farrell Granath with Bank of America. Your line is open. Please go ahead.

Analyst:Good morning. Thanks for taking my questions. First, I wanted to just circle back on the comment that you had made about the 7% RevPAR growth and your 95% occupied units, I was curious how much of the NOI or which segments do you currently stand at that 95 level?

James Justin Hutchens:it is a lot. We have a large portion of our portfolio in that category. We have NOI growth, really across the operating metrics that 95% band outperforms the broader portfolio. We also look at it in another way, which is communities that are 100% occupied And we talked about in the last quarter that we had 10% of our portfolio that was at or near a 100% That number now is 15% of the portfolio. And that group of communities has outsized RevPAR growth as well. So we are particularly excited about our hypothesis playing out.

Which communities which is that communities can go all the way to 100% occupied, can deliver higher pricing opportunity at the high occupancy levels. And that we can do it at scale. And so that the movement and the underlying portfolio is really exciting. But I think it is also really important to note that we have built our portfolios to have a long runway of occupancy opportunity. The U.S. occupancy is only 89% occupied. So we have this runway ahead and into the demand that Debbie mentioned, that really has not even played out yet, where we can continue with strong occupancy and rate growth. Great.

And I guess on that point also, I am just trying to bridge between. Especially now obviously, at that 95, we are seeing 7% or you are seeing over 7% RevPOR or around 7%. But where the. About 92% same store occupancy in RevPOR is still around 5%. Can you just bridge between expectations for rate growth, I guess, moving forward as maybe that occupancy continues to grow as you fill up more of your communities? Yeah. Yep. So you have all the kind of levers of rate include the in house rent increases, You have street rates as well. And then ultimately what your move in rents are.

And we have seen, really good trending in both in house rent increases and in move-in rents. They have been favorable. that is been supporting the 5% RevPOR growth. I mentioned in my prepared remarks that RevPOR growth over the last few years, it was 4.3%, then 4.7%, and is 5% this year. So we are on this accelerating trend of RevPOR. And that is a direct result of having higher occupied communities and also just managing price opportunity and what is in very, very strong underlying affluent markets. So we think that opportunity continues. You know, as we continue to pull those levers and outperform in a very strong market backdrop.

Analyst:Okay. Thank you.

Operator:Your next question comes from the line of James Kammert with Evercore. Your line is open. Please go ahead.

James Hall Kammert:Hi. Good morning. Thank you. You are kind of building perhaps on the prior comments, Justin, what do you think for your portfolio is your best estimate of XPOR versus RevPOR delta being?

James Justin Hutchens:Because that seems to be a big driver. Right? RevPOR is very important. Well, I mean, that is that is a good question. So they are. Both metrics are a function of occupancy growth. So in this environment, you know, as revenue has been growing, it is been driven by rate and occupancy. You know, RevPAR is around 5%. We have been consistently under 2% on the OpEx side of things. And we are expecting continued occupancy growth as we are only 89% in the U.S. And so, you know, that opportunity continues, but what is unique now is that, you know, we have more communities in the higher occupied categories that is driving rate.

So that is an exciting opportunity. And so I do not know if I have the you know, the exact answer to your question in terms of particular target in mind, but we expect that there is opportunity for that spread to widen And we also, you know, expect to see, you know, further incremental margin, you know, as we move into the upcoming years as well.

James Hall Kammert:No. Thank you. You know, I think I phrased it wrong. Yeah. The opportunity widened. that is what I was looking for. Thank you. And then just back to the acquisition environment, I guess, just being as skeptic, the cap rates still continue to compress given there is so much money out there chasing this and I do not know. Just. You know, what are you seeing that affirms your view that you can still obtain these low to mid teens double digit IRRs?

James Justin Hutchens:I am missing something. Yeah. We have we have had a really, really good run. For 3 years straight now of acquiring luxury senior housing, that has, you know, unlevered IRRs of low double digit to mid teens. And, you know, we have been achieving our underwriting, you know, which is obviously an important component. And gives us the confidence to keep going. Their, you know, cap rates will move around a bit. And, certainly, you know, with the debt cost to capital going up, that could have some impact to kind of normalized cap rates. There has been a lot of competition. We will see how that plays out in the upcoming months.

But in any event, our pipeline is really active and robust. So we are excited about-- continue to work on those opportunities and continue the external growth.

James Hall Kammert:Terrific. Thank you for your comments.

Operator:Your next question comes from the line of James Feldman with Wells Fargo. Your line is open. Please go ahead.

Analyst:Great. Thank you for taking the question. I guess just still focusing on the expense side. Your margins expanded 190 basis points year over year. They slipped 20 basis points sequentially. Despite occupancy increasing. Just can you talk more about the line item specifically? And maybe more importantly, as we think about next year, you know, it sounds like fundamentals are still very strong. Occupancy should be growing, Rev.you know, revenue should be growing. But there something on the expense line we need to be focused on that might be a bigger drag than we are thinking? Or just what is your outlook over the next 12 months or so on the expense side?

James Justin Hutchens:Yeah. Thanks for the question. I am gonna I am gonna start with you mentioned the quarter. there is a little bit of slip in margin in the quarter. Our incremental margin has been running kind of low- to mid-50s. 2 years ago, that was 43%. So, you know, we have had the, you know, the advantage of occupancy growth and the operating leverage playing out for us. it is a multiyear opportunity. You know, it is never a straight line. The quarter was impacted by. there is an extra day in the third quarter, and we had utility costs were a little bit high. You know? So that impacted margin.

But the, you know, the hypothesis remained very much in place, and that is that operating leverage benefits margin and delivers strong incremental margin growth. Which all things considered equal should only improve as we move forward in this Ladies and gentlemen, please hold while we evaluate the technical difficulties.

Operator:You hear us? Can you hear us now? Yes. Where would that cut out? Hey. We can hear you now if you would like to continue answering the question.

James Justin Hutchens:Let me go back to that. James Yeah. What was the last thing that you heard Justin say? I am just gonna summarize what I said for--are you there? Yeah. I am here. Yeah. I think he just started to answer, so maybe if you wanna start over. Okay. Alright. We will see if I do better this time. Yeah. So first of all, you know, you know, let's talk about incremental margin opportunity in the portfolio, has been running kind of low- to mid-50s. This year. 2 years ago, that was low- to mid-40s. So we have had. The hypothesis is playing out. As occupancy grows, we are benefiting from the operating leverage. We are seeing incremental margin improve.

You mentioned the quarter specifically. We had a little bit of slip in margin sequentially. That was driven by an extra day in the third quarter is also higher utility costs. But 1 thing I can tell you, even in our 17 quarters in a row of double digit NOI growth, I do not think it is ever been a perfect straight line. This is a multiyear opportunity. All the levers that we are pulling are working. We are looking forward to continue those in revenue and expense and ultimately margin. And I do not have any comments on 2027 at this stage.

Analyst:Okay. Thank you. You bet.

Operator:Your next question comes from the line of Austin Wurschmidt KeyBanc Capital Markets. Your line is open. Please go ahead.

Austin Wurschmidt:Great. Thank you. Could you just give us an update on the performance of the Brookdale transition assets? And kind of an update on the growth outlook there and when those start to enter the same store pool? Thank you.

James Justin Hutchens:Yeah. Sure. So you know, we have, you know, a non-same-store pool that includes 234 communities. That includes 130 acquisitions. there is 104 communities that are in some sort of repositioning that will set up future growth types of actions you will see you know, in that group or transitions to new operators, redevelopments, The whole non-same-store The U.S. portfolio, by the way, in SHOP, including non same store is 89% occupied. So we have a long runway ahead of growth. The portfolios in the non same store group that excluding the acquisitions are on a like for like basis. Are growing around a 120 basis points.

And so that is everything in our same store that is like for like quarter to quarter. They are growing a 120 basis points, which sequentially, which is consistent with the same store. The portfolio asked about the former Brookdale transition is on the better side of that. So we are encouraged by the momentum we are seeing in that portfolio.

Austin Wurschmidt:And then just going back to kind of the step function in RevPOR, has more of that step function occurred from in place rent increases or from street rates, And can you give us a sense how you expect in place rent increases, for the upcoming year to stack up relative to how they stacked up at the beginning of 2026? Thanks.

James Justin Hutchens:Yes. So good question. So the primary driver of our RevPOR has been in house rent increases. We have seen move in rents lifting as well, and so we are seeing both in house and move in rents working together. Particularly recently. On the move in rent side. So we are really encouraged by that trending. In terms of in house rent increases, we were around 8% last year it is a little early, but we would expect next year to be around the same or better.

Operator:Your next question comes from the line of David Rogers with Raymond James. Your line is open. Please go ahead.

Analyst:Yeah. Good morning. Wanted to shift to investments and acquisition opportunities. I know you in your prepared comments, you did describe some of that opportunity. But can you maybe go a little bit deeper in terms of the range of opportunities between occupancy recovery versus value add and some of the CapEx oriented assets that you could acquire. And what that range looks like. It seems like you are buying assets that on average look just the portfolio today. But what is that range look like? And I guess how much more volume could you do if you were to expand out into 1 direction or the other?

James Justin Hutchens:Well, let me. I. Maybe the best way to frame that up is to describe what we are buying now and what we have been buying, and that can give you a flavor for the range within that. So, you know, if we just look at this year, this year, we have had, you know, about 70% of our acquisitions have been luxury local market leaders. 20% ultra luxury premium product, and then 10% I have characterized as mid market leaders. And, you know, if you are wondering what luxury senior housing means, you know, this is highly amenitized. Communities that are in the top decile of their local market.

They have high private pay, high net worth, high home equity. High barrier markets, and a concierge level service and a resort-style setting. And we have been buying large communities with a continuum of care that offer all of these all of these amenities and high quality options for seniors in the markets. The types of markets we are entering, I will just throw out a few chest on Bill in Newton in Boston, The Woodlands in Spring in north of Houston, Tucson, Scottsdale, Palm Beach, Naples, Denver, Marietta, Georgia, which is Cobb County, the wealthiest part of Atlanta. So, you know, we are we are we are we are buying communities that are really well positioned.

They have they are 89% occupied, so they have runway of occupancy ahead. And particularly well positioned for rate growth. that is been an opportunity. The range within that, yeah, there is been. You know, we mentioned portfolio earlier this year called Revel. there is several kind of smaller 1-off communities that are similar that have occupancy runway. We have some that are in between that we would probably consider a value add just because they are still in the mid 80% occupancy range, and then we have others that are squarely in the 90% and already delivering rate growth. And our pipeline. Let me let me just say 1 other thing. Me tell you what we are not buying.

What we are not buying is value oriented senior housing. And we are not buying turnkey you know, development opportunities. And we see a lot of those. We have seen them in the U.K. primarily And the problem with Turnkey, it does offer some growth in your portfolio but you are paying a stabilized value for it. So the returns are much worse. So they just do not make sense. You know? So we have been focused on a better risk adjusted return. We have been focused on an opportunity to drive these, you know, low double digit to mid teen unlevered IRRs. And to get to your exact question, want to do more of everything I just said.

And we are seeing those opportunities in our pipeline, and we are encouraged by that. And particularly encouraged by the SHOP investment thesis playing out through our operating fundamentals in our own portfolio. So it is, you know, with better demand in the future.

Analyst:Thank you.

Operator:Your next question comes from the line of Ronald Kamdem Morgan Stanley. Your line is open. Please go ahead.

Ronald Kamdem:Great. Just the first 1, just wanted to talk a little bit more about the duration of same store NOI growth. Because there is this interplay between sort of occupancy upside and pricing. And if I look at The U.S. portfolio where occupancy has been growing faster 300 basis points per year, and you talked about being 89% occupied, so there is a lot of runway. I guess. So my question is, like, how should we expect this to play out? Is it you know, you stay at this 300 level for a couple years, then you start pushing pricing. Is it some sort of a mix? Like, what is the experience been, and how does that play out? Thanks.

James Justin Hutchens:Well, the high class problem is we get there faster. You know? So it all depends on, you know, how the lease up progresses over time. We know from recent history that an environment that had less demand, we have had very strong occupancy and rate growth. We are in a period now where we are at the very beginning of the beginning of the peak demand. And we are encouraged by what we are seeing. We are seeing improvement in our movement around the run rate. We are seeing pricing power in our high occupied communities. We are also seeing strong occupancy growth.

So if you look forward, you know, things considered equal, you would expect a similar runway ahead, but with a better demand backdrop. And you know, as certain communities, in particular, the profile that we have, we have an opportunity in our markets as market leaders to offer the value proposition to our residents and to drive you know, pricing over time.

Ronald Kamdem:Helpful. And then my follow-up was just as you think about just sort of the disposition side, any updates on maybe monetizing some of the non senior housing assets either faster or so forth? Thanks.

Debra A. Cafaro:Ronald, this is Debbie. I will take that. Yes. You know, as Bob said, we have about $700 million of disposals in our guidance this year. We are continuing to opportunistically prune the portfolio and recycle capital into SHOP investments, and we intend to continue doing that. Great. Thanks so much.

Ronald Kamdem:Thank you.

Operator:Your next question comes from the line of Mike Mueller with JPMorgan. Your line is open. Please go ahead.

Michael Mueller:Yeah. Hi. Thanks. Is there any distinction to note today between AL and IL either as it relates to acquisition opportunities or RevPOR or NOI growth potential?

James Justin Hutchens:Yeah. I mean, we have seen, you know, generally, in our existing portfolio, we have seen stronger occupancy growth in our independent living portfolio. Our footprint both existing and in what we are buying, you know, tends to be about half independent living, And then the rest is assisted living with a small portion of that serving residents that have memory care needs. And there is been strong demand really across the board. You know, we are seeing it you know, in each product type and across all of our markets. Obviously, we put a lot of work to make sure we are in the right markets. And so that is.

But our preference, though, is generally to have a continuum of care. You know, it is our preferred product to offer independent living, assisted living, and memory care on a campus. Or large scale campuses, and that might include all in independent living, for instance. And it is all tracking really well.

Michael Mueller:Got it. Okay. Appreciate it. Thank you.

Operator:Your next question comes from the line of Michael Goldsmith with UBS. Your line is open. Please go ahead.

Analyst:Thanks for taking the question. I had a question on Canada. Do you see any opportunity to JV assets there? And on UK, how do you view the opportunity there? If you can talk about a sequential drop or decline there.

Debra A. Cafaro:Did you I did not quite hear you. Did you ask about Canada? JV in Canada. Okay. And The UK? Okay. Thank you. Thanks. I could not quite hear you.

James Justin Hutchens:So first, the U.S. has been our main priority. that is where we have most of our footprint in SHOP, and that is where our acquisition activity has been you know, directed We have a really high performing portfolio in Canada, you know, that has high occupancies and delivered consistent growth. We really have not focused on expanding there. The growth profile in that market is not as attractive as The U.S. over time. So we have been steering clear of Canada. And then The U.K. is of interest, but it just has not been as big of a priority. Got it. And, is there anything in the life science segment that you would like to call out?

From the quarter? it is been. it is the smallest part of our and it is been very consistent.

Analyst:Got it. Thank you. Thank you.

Operator:Your next question comes from the line of Julien Blouin with Goldman Sachs. Your line is open. Please go ahead.

Julien Blouin:Yes. Hi. Thank you for taking my question. Austin, I think you mentioned that you are planning for similar or better in house rent increases over the next year, versus, 26. I guess, why could the range of outcomes include similar in house rent increases? I would have thought as we sort of get to these higher levels of occupancy, we might be able to push a little bit more. Is Event AutoI for the platform you know, indicating any specific factors sort of limiting your ability to push pricing further?

Debra A. Cafaro:it is early, Julien, This is Debbie. Sorry to jump in for Justin, but it is it is early. And we will be happy to talk in more specifics about it as we know more.

Julien Blouin:Okay. Great. That makes sense. And then maybe moving back to the incremental margin discussion. I think it sounds like you are seeing. I guess I wanted to know, is there a meaningful difference between the incremental margins on the 95% plus occupancy portfolio versus the rest of the portfolio? Are you seeing signs that in the higher occupancy, parts of your portfolio, you are in fact able to move up towards that 70% incremental margin I think you have mentioned in the past for nearly full properties?

James Justin Hutchens:Yeah. So you know, we have talked about we kinda refer to it as a rule of thumb at 1 point in time. And that was that was talking about really the, you know, the 50% incremental margin we are seeing now is consistent with what we expected. And as you get into the higher 90% occupancy, range, you start seeing higher margin opportunity. And we know that it is not a big sample size of communities that are kind of in that occupancy band that had no occupancy change. Because we are still growing occupancy within that. That group, which is consistent with what I said about having more 100% occupied communities now.

But we know that even in that group, we are seeing around a 70% incremental margin. And, obviously, in those that are growing occupancy, it is even better. So it. it is certainly proving out and that is gonna help lift our overall incremental margin over time.

Julien Blouin:Okay. Thank you. And if I could fit 1 more in, I was wondering, how do you think a more challenging home selling environment will impact the demand from move ins in IL specifically. I get AL probably a little bit more urgent sort of need motivated move ins, I was wondering specific to IL.

James Justin Hutchens:Yeah. So we have had, you know, a really you know, consistent year in terms of, you know, moving volume and occupancy growth. And, you know, you could argue that there is a lot of potential you know, impacts in the macro environment, obviously. In every way, geopolitical, home market, consumer confidence, and we have just been operating straight through that. So, you know, we have confidence in the demand and the value proposition that we offer. And the resilience that senior housing has. And, really have not seen any impact yet.

Julien Blouin:Okay. Great. Thank you.

Operator:Your next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is open. Please go ahead.

Juan Sanabria:Hi. Good morning. Just on the expense on SHOP. Just hoping you could talk a little bit about Ventas OI and the initiatives that you have there to maybe lower the export growth, which I think is trending around 2% inclusive of management fees and kinda what the next opportunities that you are working towards may do or help with that export growth?

James Justin Hutchens:Sure. Yeah. So we have you know, it is a good opportunity just to remind everybody what Ventas OI is and how we are set up. And so I you know, it has it really focused. You know, the framework of right market, right asset, right operator is the starting point. All the decisions we make around market assets and operators are supported by our data analytics platform, and the experience that we have here at Bensauce the experience of our operators to make good decisions The approach we take on the operating side is to guide our CapEx decisions or decisions to expand assets.

We always have some pruning we are doing in our portfolio, and it helps to lead some of those decisions as well. But the part that I that I think we believe is most powerful is the support on the operating side. And we are able to take data that most of our operators do not have any visibility into, and bring to life for them opportunities on many fronts, and that is you know, sales you know, all the various revenue drivers, sources of leads, you know, digital leads, benchmarking, you know, on an itemized basis and you know, in like products.

And that is helped to really bring focus to our communities help make it easier for operators to prioritize you know, where they can really create value And expenses are part of that. So we definitely have a line item review that occurs regularly with our operators. We are always looking for any opportunity to become a more efficient but we are also very focused on the fact that we have a luxury product that we are supporting. And our residents and customers have a certain expectation you know, from us and so the.

It. there is no interest whatsoever in you know, shortcutting our service delivery and our care delivery, and that is a balance that we take, you know, as we are as we are approaching you know, the expense side of things. But there is certainly an intense focus on it.

Juan Sanabria:And maybe just a bigger picture strategic question. Question. there is a lot of opportunities out there both on the acquisition and sales side. Sounds like you are less enthusiastic about Canada. More focused on The U.S. for SHOP. There is seemingly a growing SHOP opportunity in The UK. Then there is the ability to maybe deemphasize MOBs further by sales or joint ventures. But just curious on what you would have as a key priority for the company or what you are focused on thinking strategically about different moving pieces?

Debra A. Cafaro:Juan, this is Debbie. Good morning. We. Since the inception of our 3 strategy, and our actions in acquiring, you know, $10 billion of shop assets and growing organically, we are 1, 2, and 3 are basically aggressively expanding the percentage of our business that shop, and managing that optimally as we have talked about outperforming at scale and that. The whole company really is focused and driven around those because that is what we believe will deliver the multiyear growth and value creation opportunity. Thank you. Thanks.

Operator:Your next question comes from the line of Richard Anderson with Cantor. Your line is Please go ahead.

Richard Anderson:Thanks. Good morning. I had a little bout of PS PTSD when your phone lines went out earlier. So question If it happens again, it was not on purpose. So this is admittedly splitting hairs, but I am gonna ask it because I think it is having effect on people's perception of the print this morning. For the third quarter, you did 17% same store NOI growth out of SHOP. Last quarter, it was 18%. For the third quarter, your year over year increase in margin is 190 basis points. Last quarter, it was 10.

So my point is if the third quarter is supposed to be the best quarter and Justin, to your point, things move around, it is nonlinear, I get all that. And I am kinda more of the messenger here on this question, but does this sort of indicate it that this is where we are we are we are plateauing in terms of you know, organic growth potential, margin expansion, all that sort of stuff that you know, given that this third quarter should be the best of all quarters? Or is that a little bit over a bit simplified?

James Justin Hutchens:Thanks. I am so happy you asked that. So this is yeah. It was a good quarter. Like I said, in the 17 quarters, had double digit NOI growth. I think there is always something we thought could have been better. You know, 17 quarters in a row, we have done this. And I described really how the portfolio is built, the runway ahead, the demand that is coming, the way pricing's playing out, in incremental margin, all really as we expected. We are on this journey this growth journey. That we are on, and there is a long way to go. So we are not even you know, at all. Know, bothered about this quarter.

What we are focused on is where it is going and the trajectory is really positive. And the macro environment's solid, and the levers we can pull are proven. And we have a great team, great operators. Okay.

Richard Anderson:So related to that, so, hypothetically, let's say you your occupancy gain cadence, you know, is not 300 basis points anymore, but it is 200 or 150 or even zero eventually because you cannot go over 100%. So if that means that your rate growth, is better in a higher occupied portfolio, can you still maintain that level bottom line same store NOI growth, or does it naturally come down because if the only lever from a revenue point of view becomes rate over occupancy. So I am just curious how that math works when you consider incremental margin on new rate increases and all that sort of stuff.

If you could just sort of comment and the interplay of all that, that would be great. Thanks.

Debra A. Cafaro:Yeah. I do wanna remind you that as we sit here today, we have had 17 quarters under our belt of double digit you know, NOI growth. We have 89% occupancy in The US. We have rate and occupancy working together to drive NOI. And there is this multiyear runway ahead, as we are just not even fully into the over 80 population, starting to boom. And so that is what gives us the confidence really about the this multiyear growth and value creation opportunity ahead.

I think your kind of way down the path even though we do know that at higher occupancy levels, as Justin said, RevPOR growth is you know, significantly higher, and that is a lever that we can use as we look forward. But we are we are in it to win it at this period of time, and as we look forward, we are very optimistic about the setup for us and the competitive advantages and capabilities that the team in the platform bring to continue to try to outperform in senior housing.

James Justin Hutchens:You know? And I will just say that I am not in the business of rating questions. But the second question was better. Because I think that is a more relevant question. You know? it is like, where is this going? And I think it. it is a it is a great question. And when we get there, you know, down the road, we can have some, you know, great discussion around, you know, how that is all played out.

Richard Anderson:Fair enough. Yeah. Thanks very much. And thank you yeah, and thank you for raising it. it is it is a good conversation. Alright. I will keep doing it.

James Justin Hutchens:Yep.

Operator:Your next question comes from the line of Michael Carroll with RBC Capital Markets. Your line is open. Please go ahead.

Michael Carroll:Yeah. Thanks. I wanted to circle back on the margin flow through. I guess, Austin, where is the break line that pushed that margin from 50% to 70%? I mean, I was under the impression that was closer to the low-90% range, not the high-90% range. And you kind of look at the presentation, looks like Ventas' flow through marginally increased from 49% in 2025 to about 52% from the past 12 months even though you saw a lot of occupancy kind of jump from the high eighties to the low nineties. I mean, there anything unique in that number? I mean, are you seeing more occupancy gains in The U. S.

Portfolio that is kind of in the mid eighties is that why that increase in that margin flow through is been a little bit lower than expected.

James Justin Hutchens:Yeah. there is a couple of things. First of all, there is not a bright line. It really depends on the product type you are talking about, and it is relative price point, plays a big role. There is a distribution in our portfolio that has you know, we have a lot of runway in occupancy. You know? So that portion of our portfolio that has long runway is not delivering stronger margins. The part that is, is the highest occupied communities. So you know, that I do wanna clarify 1 point, though. I think it is playing out exactly as we expected. You know, we said low-90s, into the 50s. And so that is happening.

We would expect as more communities move up in terms of occupancy, and our portfolio grows more in terms of occupancy that we will see the incremental margin to continue to play out. The within the portfolio, we can see it so clearly. You know, the incremental margin flow through is so clearly happening at various occupancy levels. But we have a wide variety of types of communities and markets and etcetera. So do not really have a bright line for you.

Michael Carroll:Okay. that is helpful. And then And that is part of the opportunity ahead. Great. And then just switching to the same store portfolio. Can you kind of give us some color on how that could potentially change next quarter? I know do you do those deals that are coming rolling into same store, do they have better occupancy comparison numbers? I am just trying to understand how you can hit that roughly 300 basis point occupancy gain in 2026? I mean, is there some benefit in there that we can see in the current same store pool?

Robert F. Probst:Hey, Mike. it is Bob. I am gonna take that 1. I feel like a potted plant over here. So look. You saw you saw an increase in our same store pool second to third, 600 assets You call it 3 fourths of our NOI is in same store Austin earlier talked about the non same store pool and the composition. Would expect as we move forward to have more and more assets coming into same store, including in the fourth, that is contemplated when we when we give the guide overall. To get to the average for the for the full year.

But you know, you will see you will see that number continue to increase from a very large proportion already.

Michael Carroll:K. Great. Thanks.

Operator:Your next question comes from the line of Michael Stroyeck with Green Street. Your line is open. Please go ahead.

Michael Stroyeck:Morning. Thanks for the time. Maybe 1 more question on the flow through margin topic. You know, all else equal on the occupancy front, how does that flow through compare on some of your more luxury type assets relative to maybe some lower price point properties? Is there a meaningful difference?

James Justin Hutchens:Yeah. I mean, they are they are I will say that our luxury independent living has very high margin. You know? And independent living has really high operating leverage. So you are you are. You would see probably your strongest you know, incremental flow through there. Your you know, your we have very high price point assisted living as well. But some of it also delivers really high level of care. You know? So there is cost associated with that. But, generally, know, you are gonna see better margin with higher RevPOR. And, you know, there. there is certainly a relationship there. And the ultimate driver across the board is operating leverage.

I will also say that, you know, I mentioned earlier that what we are buying being 70% luxury and 20% ultra premium luxury, if there is a meaningful RevPOR uplift that is coming through the acquisitions as well.

Michael Stroyeck:Got it. Okay. And then 1 just on maybe the regulatory environment in The US. Have you seen any legislation arise across your markets, either on rent regulation or anything on the labor side? And guess, how do you think about the long term risk of the space becoming incrementally more regulated? it is just the sheer amount of seniors utilizing senior housing grows.

Debra A. Cafaro:Well, 1 of the things we have always appreciated about senior housing is that it is a consumer driven product. And that seniors and their families are choosing to live there because of the valuable benefits that it provides, And are relatively comparable to what a senior would pay living at home and having some amount of services. So we are obsessively both about our operators delivering kinda quality care, providing a great value proposition for seniors and their families. And this is the wealthiest generation in history, the baby boomers, as they start to enter our markets And so we it is a state by state matter There really has not been anything that is gained material traction.

Around really limiting access or you know, revenue opportunities. At our communities, but we are very conscious of making sure that what we are delivering is worth the price that are paying, and that is what is really important in a consumer driven product.

Michael Stroyeck:Understood. Thanks for the time. Thank you.

Operator:Your next question comes from the line of Wesley Golladay with Baird. Your line is open. Please go ahead.

Analyst:Hey, thanks for taking my question. Just 1 for me. Can you kind of talk about the opportunity for more expansion projects and how Ventas is positioning itself to participate in the next development cycle.

James Justin Hutchens:Good 1. Austin? Yeah. Yeah. Absolutely. So we have, a lot of opportunity. We are. We have been evaluating our own portfolio over the past year or so. And we have expansion projects that are planned. And, you know, some of those you know, you are just adding a structure. We have 1 yeah. I think it is highlighted in our supplemental somewhere. You know, Quincy Place. that is a pretty big project, $30 million or so. We are we are adding cottages, you know, next to a community that is now 100% occupied. And so high demand, to really just expand a winning product in a what is already proven to be a strong market.

We are looking. there is dozens of opportunities across our portfolio where we found that opportunity and that we are making plans to proceed.

Analyst:Got it. Thanks for the time. You bet.

Operator:Your next question comes from the line of Rich Hightower with Barclays. Your line is open. Please go ahead.

Analyst:Hi. Good morning, everybody. Just 1 for me as well. To keep things tight here. So Justin, I think in prepared comments, you sort of briefly alluded to the debt market potentially creating opportunities for more transaction volume in 2027. I assume that has to do with sort of the 2021 vintage, you know, of loans on a lot of these assets. Just given the growth in NOI and SHOP, you know, what is likelihood that, you know, really you would you would be competing against you know, the market for refinancing, you know, where the equity is still know, is still good, and there is no sort of compelling reason to sell necessarily next year.

Debra A. Cafaro:I am I am gonna grab that 1 just the point that we wanna make is that we have as you know, we have significant competitive advantages that we will not reprieve here in the investment market. A lot of our deals are relationship oriented among other things. And, of course, we have significant financial strength and flexibility What we are saying is the move. The global move in rates and the in the capital markets makes us an even more desirable counterparty in an acquisition because we do have that financial strength. People know we know what we are doing. We can close.

They do not have to wait for someone, a different buyer to get a mortgage or line up their financing. And so coupled with all of our other existing advantages being a long term, very knowledgeable, you know, counterparty and actor in the space. I mean, that just adds to the competitive advantages that have given us the momentum to close, you know, $5 billion so far this year. And it just makes us incrementally more popular if that were possible. So that is how I would describe what we were getting at. Alright. Thanks, Debbie. Appreciate that. Thank you. So, operator, do we have any other questioners in the queue? Okay. Alright. Well, we appreciate everyone's time this morning.

And as always, we appreciate your interest in the company. We are really glad that we were able to deliver a strong quarter, and, we very much look forward with the opportunities we have ahead and to see you in the fall. Thank you.

Operator:This concludes today's call. Thank you for attending. You may now disconnect.

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Ventas (VTR) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool