Ventas' Q3 2025 Earnings Call: Contradictions Emerge on Occupancy Growth, Acquisition Strategy, and Future Trends

Date of Call: October 30, 2025

Financials Results

• EPS: Normalized FFO per share $0.88 in Q3, up 10% YOY
• Gross Margin: SHOP margin 28%, up 200 bps YOY (incremental margin >50%)

Guidance:

• Normalized FFO per share midpoint $3.47 for 2025 (+9% YOY).
• Net income attributable to common: $0.49–$0.52 per share for 2025.
• Total company Same‑Store Cash NOI guidance raised to 7.5% YOY.
• SHOP Same‑Store NOI guidance 14%–16% (midpoint 15%); SHOP occupancy +270 bps; RevPOR >4.5%.
• Private‑pay U.S. senior housing investment guidance increased to $2.5B.
• Equity raised $2.6B; liquidity >$4B; net debt/EBITDA 5.3x.

Business Commentary:

* Sustainable Demand and Growth in Senior Housing: - Ventas reported 19% Same-Store Cash NOI growth in U.S. senior housing communities and a 340 basis points occupancy increase for the quarter. - This growth was driven by strong demand for senior housing due to an aging population, with the over-80 population expected to surge into the coming decade.

• Investment in Senior Housing:
• Ventas announced $2.2 billion of senior housing acquisitions year-to-date, with a pipeline of quality investment opportunities in U.S. private pay senior housing.

• The company accelerated its investment activities due to favorable market conditions, private-to-public arbitrage opportunities, and a strong track record in capital allocation and execution.

• Portfolio Strategy and Occupancy Upside:

• Ventas converted 45 Triple-Net lease senior housing communities to SHOP, with 27 transitions completed by October, aiming for significant occupancy and NOI upside.

• This strategic shift is expected to generate over $50 million of NOI upside over time, driven by read-out plans and planned CapEx of around $2 million per building.

• Improved Financial Performance and Leverage:

• Ventas achieved a full turn improvement in leverage, with net debt to EBITDA at 5.3x, due to organic growth and equity-funded senior housing investments.
• The leveraging strategy, combined with strong investment momentum, is aimed at enhancing the company's ability to deliver continued growth and financial flexibility.

Sentiment Analysis:

Overall Tone: Positive

• Management: "Delivered excellent performance..."; Normalized FFO per share +10% YOY; total Same‑Store Cash NOI +8% led by SHOP +16%; raised full‑year guidance and increased 2025 investment guidance to $2.5B; CEO: "The future is bright..." (paraphrase).

Q&A:

• Question from Jonathan Hughes (Raymond James): Are you planning to lower initial yield requirements to buy lower‑yielding assets with higher growth given lower cost of capital?
  Response: Focus remains on achieving low‑to‑mid‑teens unlevered IRRs using a market/asset/operator framework; management is leaning into growth opportunities but targets IRR rather than simply lowering initial yield.

• Question from Jonathan Hughes (Raymond James): Reminder on target leverage and how you weigh equity vs. debt to fund external growth?
  Response: Net debt/EBITDA 5.3x (one‑turn improvement); strategy is organic growth plus equity‑funded investments and will continue while market opportunities exist; equity treated as precious.

• Question from Michael Carroll (RBC): What types of revenue‑generating CapEx for Brookdale SHOP transitions and how disruptive will it be?
  Response: Mostly routine refresh CapEx (common areas, paint, FF&E, lighting) with a few larger projects; high‑touch operator engagement aims to minimize disruption and complete many projects by key selling season.

• Question from Michael Carroll (RBC): With current occupancy (~89% Same‑Store), how much faster can SHOP margin expand as occupancy rises?
  Response: Incremental margin ~50% from 80%→90% occupancy; above 90% incremental margin can approach ~70%, plus additional upside from RevPOR/pricing.

• Question from Farrell Granath (BofA): Is the expected sequential occupancy increase driven by higher occupancy entering Same‑Store or broader market trends?
  Response: It's organic—strong end‑of‑Q3 demand and move‑in volume carrying into Q4 with good visibility so far.

• Question from Farrell Granath (BofA): Comfort level expanding SHOP investment beyond the U.S. to the U.K. or elsewhere?
  Response: Priority is U.S. private‑pay senior housing; Canada footprint liked but no major expansion plans; U.K. is interesting and SHOP platform set up there, but U.S. remains the focus.

• Question from Vikram Malhotra (Mizuho): Any broader portfolio shifts contemplated (e.g., monetizing MOBs or Canada)?
  Response: Always evaluating portfolio actions, but current priority is aggressively growing private‑pay SHOP in the U.S.; open‑minded to other value‑creating moves.

• Question from Michael Goldsmith (UBS): Why raise SHOP RevPOR guidance to >4.5% and what visibility do you have into 2026 pricing power?
  Response: Dynamic pricing and strong underlying rent/move‑in trends are delivering RevPOR gains; management sees better pricing in higher‑occupied communities but is not providing 2026 guidance today.

• Question from Michael Goldsmith (UBS): How do you vet new local operators and are current acquisition prices a discount to replacement cost?
  Response: Operator fit relies on track record and local focus; acquisitions have consistently been below replacement cost (varying ~10%–50%); many assets still have operational upside.

• Question from Nicholas Joseph (Citigroup): Thoughts on diversification vs. being more of a pure‑play senior housing company and how that attracts equity capital?
  Response: Portfolio unified by longevity megatrend; company is leaning heavily into senior housing as #1 priority to increase enterprise growth and shareholder returns while remaining open to portfolio optimization.

• Question from Nicholas Joseph (Citigroup): Are you seeing different competition levels for U.S. versus international senior housing assets?
  Response: Competition has increased, but pipeline is much larger and Ventas' platform and operator network provide a competitive advantage to continue winning U.S. deals.

• Question from Richard Anderson (Cantor Fitzgerald): Has the prior occupancy volatility smoothed out and is that affecting your optimism for sequential occupancy growth?
  Response: Occupancy guidance (270 bps) was maintained; strong key selling season and higher move‑ins with moderated move‑outs have driven sequential gains and affirmed guidance.

• Question from Richard Anderson (Cantor Fitzgerald): At what point might external growth slow and the story shift to primarily organic growth?
  Response: Management is not near a slowdown view; institutional ownership remains mid‑teens and a deep private market supply of tradable assets supports continued external growth for the foreseeable future.

• Question from Samuel Ademola Ohiomah (Deutsche Bank): Update on performance of the 27 Brookdale assets converted from Triple‑Net to SHOP?
  Response: 27 have transitioned and are performing well year‑over‑year with NOI approximating current run rates; remainder of the 45 expected to transition in coming months.

• Question from Juan Sanabria (BMO): Why is U.S. independent living outperforming and how are former Holiday/Atria assets contributing?
  Response: Independent living (many former Holiday assets) drove outsized occupancy gains (U.S. IL ~390 bps); IL outperformance contributes strong occupancy upside with a long runway.

• Question from Juan Sanabria (BMO): How does IL outperformance affect RevPOR mix and expectations into '26?
  Response: IL has lower RevPOR so its faster occupancy growth pulls down blended RevPOR (a mix effect); management declines to give 2026 specifics now.

• Question from William John Kilichowski (Wells Fargo): Why is Canadian Same‑Store NOI growth softer despite mid‑90s occupancy?
  Response: Canada has pricing limitations and mix effects (e.g., volatility in high‑RevPOR Sunrise communities); Canada expected to be a high single‑digit grower, U.S. offers stronger NOI upside.

• Question from William John Kilichowski (Wells Fargo): Any near‑term risks that could disrupt the plan to accelerate acquisitions into '26?
  Response: No structural constraints identified; track record, platform, cost of capital and momentum support continued elevated acquisition cadence.

• Question from Ronald Kamdem (Morgan Stanley): Where are operators in their data/technology journey and how will OI platform drive efficiency over 3–5 years?
  Response: Operators broadly use end‑to‑end tech; the Ventas OI platform ingests diverse systems, delivers granular, actionable revenue/expense insights to operators and is expected to continually enhance execution and uplift.

• Question from Ronald Kamdem (Morgan Stanley): Why hasn't more private equity flooded the space despite attractive IRRs?
  Response: Private equity already owns a large share but scaling in a fragmented sector is hard; Ventas' multi‑operator platform and relationships create barriers that complicate rapid PE scaling.

• Question from Michael Stroyeck (Green Street): How much Triple‑Net to SHOP transition opportunity remains beyond Brookdale and typical NOI upside you underwrite?
  Response: Most conversions executed (~150 moved previously; 45 Brookdale in progress); only a few high‑performing leases remain—focus now is extracting embedded organic NOI upside rather than large additional conversions.

• Question from Michael Stroyeck (Green Street): Can you quantify bad debt in research this quarter and are rent reductions temporary or permanent?
  Response: Restructurings typically reduce rents initially with climb‑backs and participation later; management characterizes these as working restructurings but did not quantify bad debt this quarter.

• Question from Michael Mueller (JPMorgan): Will performance diverge between assisted living/memory care and younger independent living as the 80+ population grows?
  Response: Both AL and IL should benefit from the aging demographic; ages are similar across products and demand growth is broad‑based rather than favoring one product dramatically.

Contradiction Point 1

Occupancy Growth and Guidance

It involves changes in occupancy growth projections and guidance, which are critical indicators for investor expectations regarding financial performance.

What were the SHOP occupancy gains in Q2 2025, including the sequential gain compared to Q2 2024 and the year-over-year gain for July? - Michael Albert Carroll (RBC Capital Markets)

2025Q3: We achieved 190 basis points of occupancy growth in the third quarter... Occupancy is now 90.5% in the SHOP portfolio. - J. Justin Hutchens(Executive VP of Senior Housing & Chief Investment Officer)

Can you elaborate on the sequential occupancy gain for 2Q '25 compared to 2Q '24 and the year-over-year growth for July? - Michael Albert Carroll (RBC Capital Markets)

2025Q2: We achieved 120 basis points of occupancy growth in the second quarter... Occupancy is now 89.8% in the SHOP portfolio. - J. Justin Hutchens(Executive VP of Senior Housing & Chief Investment Officer)

Contradiction Point 2

Acquisition Strategy and Underwriting Criteria

It shows a shift in the company's acquisition strategy and underwriting criteria, which directly impacts investment decisions and financial performance.

What are the current underwriting criteria? Plans to lower initial yield requirements for properties with higher growth potential? - Jonathan Hughes (Raymond James & Associates, Inc., Research Division)

2025Q3: We are focused on achieving low to mid-teens unlevered IRRs, buying below replacement cost. - J. Hutchens(EVP of Senior Housing & Chief Investment Officer)

What is the yield for the $1.5 billion investment guidance? - John Kilichowski (Wells Fargo)

2025Q1: We are still buying below replacement cost, which starts with a 4, and we are focused on achieving low to mid-teens unlevered IRRs. - Justin Hutchens(EVP, Senior Housing & Chief Investment Officer)

Contradiction Point 3

Visibility into Future Occupancy Trends

It concerns the company's ability to predict future occupancy trends and financial performance, impacting investor confidence.

Can you explain the change in SHOP RevPOR growth guidance and current visibility for 2026? - Michael Goldsmith (UBS Investment Bank, Research Division)

2025Q3: Visibility into 2026 is minimal at this time; however, strong fundamentals and scarcity of value are expected to translate into favorable pricing. - J. Hutchens(CIO)

What percentage of the SHOP portfolio exceeds pre-pandemic occupancy levels? - Richard Anderson (Wedbush)

2024Q4: We're back to pre-pandemic levels. Over half of our portfolio is above those levels, with a strong positioning for future growth as occupancies rise. - Justin Hutchens(CIO)

Contradiction Point 4

External Growth Opportunities

It involves the company's expectations regarding external growth opportunities and market dynamics, which are crucial for strategic planning and shareholder expectations.

Can you outline the planned CapEx for Brookdale SHOP transitions and their potential impact on current results? - Michael Carroll (RBC Capital Markets)

2025Q3: We've got numerous communities under contract for the year, and we'll mix and match with our acquisition plans. - J. Justin Hutchens(Executive VP of Senior Housing & Chief Investment Officer)

How are the record move-ins linked to initiatives like faster turnover? - Jeffery Spector (BofA Securities)

2025Q2: We're lean[ing] very much into external growth... We've got 61 communities under contract, well over $1 billion worth of assets. - J. Justin Hutchens(Executive VP of Senior Housing & Chief Investment Officer)

Contradiction Point 5

Acquisition Strategy and Yield Requirements

It involves the company's acquisition strategy and yield requirements, which are crucial for investment decisions and financial performance.

What are your underwriting criteria? Are you considering lowering initial yield requirements for properties with higher growth potential? - Jonathan Hughes (Raymond James & Associates, Inc., Research Division)

2025Q3: We are not changing our underwriting criteria other than to align with current market conditions and our strategy to aggressively grow the senior housing business. - Debra Cafaro(CEO), J. Hutchens(CIO)

Please elaborate on your acquisition strategy focused on stabilized assets and discuss the yields and stabilized IRRs? - Nick Joseph (Citi)

2024Q4: Our strategy targets high-quality assets with yield and growth opportunities. These assets are market leaders with 90% occupancy, but there's further upside potential in occupancy and pricing. - Justin Hutchens(CIO)