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Thank you for standing by. My name is Van and I will be your conference operator today. At this time, I would like to welcome everyone to the Ventas Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to BJ Grant, Senior Vice President of Investor Relations. Please go ahead.
Thank you, Van. Good morning, everyone, and welcome to the Ventas Third Quarter 2025 Results Conference Call. Yesterday, we issued our third quarter 2025 earnings release, presentation materials and supplemental in formation package, which are available on the Ventas website at ir.ventasreit.com. As a reminder, remarks today may include forward-looking statements and other matters.
Forward-looking statements are subject to risks and uncertainties, and a variety of topics may cause actual results to differ materially from those contemplated in such statements. For a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, all of which are available on the Ventas website. Certain non-GAAP financial measures will also be discussed on this call, and for a reconciliation of these measures to the most closely comparable GAAP measures, please refer to our supplemental information package posted on the Investor Relations website.
And with that, I'll turn the call over to Debra A. Cafaro, Chairman and CEO of Ventas.
Thank you, BJ. I'd like to welcome all of our shareholders and other participants to the Ventas Third Quarter 2025 Earnings Call. Building on our momentum, Ventas delivered excellent performance and growth in the quarter as we continue to execute on our 1-2-3 strategy. Our strategy is based on the megatrend of longevity.
As one of the world's largest owners and acquirers of private pay senior housing, we are positioned to capitalize on the sustained growth in demand from a large and expanding aging population. Our strategy emphasizes growing our private pay SHOP business organically and by investing in senior housing. We are doing both as we expect 2025 to be our fourth year of double-digit SHOP NOI growth, and we anticipate closing $2.5 billion of private pay U.S. senior housing investments during the year. Most importantly, we foresee at least another decade of accelerating demand for senior housing.
The Ventas strategy, organization and team have been built to meet this moment and capitalize on the favorable external demand backdrop. Over the past several years, we have added expertise, acquired over $4 billion of senior housing communities, converted communities from Triple-Net to SHOP, expanded our SHOP operator base, made significant strategic dispositions, increased our scale and improved our financial profile. As a result, our enterprise is now delivering $2.5 billion of net operating income. Our SHOP percentage of NOI has increased nearly 2,000 basis points to represent half our business.
We are working with over 40 SHOP operators. We have created significant occupancy and NOI upside potential in our 85% occupied U.S. SHOP portfolio through our deliberate portfolio composition, and our leverage has improved by 2 full turn. These actions and outcomes are designed to take advantage of powerful secular tailwinds in senior housing where supply and demand are tipped strongly in our favor, and we have this scale, platform and financial strength to win.
Demographic demand is accelerating as baby boomers are starting to turn 80 this coming year and more people than ever are choosing senior housing for the valuable benefits it provides. The over-80 population is expected to surge into the coming decade and grow 28% just in the next 5 years. Yet senior housing supply is at record lows in both inventory growth and the number of new construction starts with just over 1,200 units started in the third quarter. Our strategy is producing strong results, increasing our enterprise growth rate and building financial strength.
Let's now turn to the highlights of our quarterly results and latest 2025 guidance increase, our outsized organic growth in our senior housing operating portfolio and our active and increasing investment activities. Normalized FFO per share grew 10% year-over-year, and total company Same-Store Cash NOI increased 8%. SHOP once again powered our results, enjoying a strong key selling season. We saw broad-based demand for our communities and excellent RevPOR and revenue strength.
Our U.S. communities led the way with 19% Same-Store Cash NOI growth and 340 basis points of occupancy growth. I want to extend a sincere thanks to our operators and the Ventas team to deliver this performance while helping seniors live longer, healthier and happier lives. We're pleased once again to increase our full year guidance, driven by our SHOP performance and increased senior housing investment activity. We now expect year-over-year growth of 9% in normalized FFO per share and 7.5% total company Same-Store Cash NOI at the midpoint of our improved guidance.
These growth rates will put us in the top tier of companies across the REIT landscape, if achieved. On the investment front, we are seeing a strong upward trend in transaction activity and our pipeline continues to grow with quality investment opportunities in senior housing. We are accelerating our senior housing investment activities to expand the Ventas SHOP portfolio and increase our enterprise growth rate. Private pay U.S. senior housing is the company's #1 capital allocation priority.
The environment is highly favorable, private to public arbitrage opportunities are increasing, our strong and broad-based industry relationships are generating significant deal flow, and our capabilities, track record and financial strength provide meaningful competitive advantages. We've already closed $2.2 billion of senior housing acquisitions in the U.S. year-to-date and we've increased our 2025 investment guidance to $2.5 billion. We intend to build on our momentum. Following our right market, right asset, right operator framework, we are prioritizing investment opportunities in private pay senior housing that have different combinations of growth and yield to produce attractive risk-adjusted returns for our shareholders.
Next, I'd like to highlight a key SHOP growth initiative. The previously announced transactions relating to 121 Triple-Net lease senior housing communities are well underway. We've already converted from Triple-Net to SHOP, 27 of the 45 senior housing communities slated for management transitions by year-end. We continue to expect to achieve significant occupancy and NOI upside in these communities over time.
For the 65 communities remaining under the lease, cash rent will increase 33% beginning in 2026, and the disposition of the remaining 11 assets is in progress, with sale proceeds to be retained by Ventas. A final note on our research portfolio, which is generating only 8% of our enterprise NOI. Our portfolio has been constructed in a unique way. Within this small portion of our business, about 3/4 of our base rents are from creditworthy institutional leaders in medicine, pharma and research with a weighted average lease term of over 9 years.
Making this portion of our NOI relatively well insulated from current market challenges. Importantly, only about 10% of our research portfolio is leased to pre-revenue or co-working tenants. We have no ground-up development in progress. And we continue to see institutional demand in new and renewal leasing from university, medical and global pharma tenants.
In conclusion, we have built Ventas to meet this moment and capitalize on the secular demand from a large and growing aging population. We are executing our strategy to grow senior housing and delivering outstanding results, and we are well positioned to increase our deal activity. The future is bright as we use our many competitive advantages, to deliver value for stakeholders and seize the unprecedented multiyear growth opportunity ahead. The entire Ventas team is in it to win it.
And now I'm happy to turn the call over to Justin.
Thank you, Debbie. I'm excited to share an update on how 2025 has been progressing as we continue to execute on our strategy to drive both organic and external growth in our senior housing business. Let's start with SHOP. Our SHOP Same-Store portfolio delivered 16% NOI growth year-over-year in the quarter, led by the U.S. with 19% growth.
Margin grew 200 basis points to 28% driven by over 50% incremental margin. Revenue grew 8% due to strength in both occupancy and pricing. We saw broad-based contributions to SHOP performance across our operating partners, delivering exceptional care and services to our senior population and very strong financial results with Sunrise and Atria, leading the way. RevPOR grew 4.7% as our dynamic pricing continues to strike the balance between price and volume.
Average occupancy grew 270 basis points year-over-year, led by the U.S. at 340 basis points with a particularly strong contribution from our independent living communities. We had industry-leading sequential occupancy growth of 160 basis points overall and 200 basis points in the U.S. Furthermore, we expect sequential average occupancy growth to continue into the fourth quarter. Moving on to SHOP guidance.
I am pleased to raise SHOP guidance again with an NOI growth range of 14% to 16%. We continue to anticipate occupancy growth of 270 basis points in higher RevPOR driven by strong pricing as move-in rents and in-house rates are both increasing year-over-year. I'd like to turn your attention to Page 12 in the earnings presentation. On the left side of the page, you'll note, we have consistently outperformed the NIC Top 99 markets.
The third quarter resulted in 120 basis points of outperformance versus NIC Top 99, both year-over-year and sequentially. On the right side of the page, you can see the key selling season was excellent with 230 basis points growth, representing our best key selling season performance in a number of years. Now I'll comment on portfolio strategy. Our portfolio strategy executed through our Ventas OI platform is centered on what we call the right market, right asset, right operator approach, is a disciplined framework that ensures every investment we make in every partnership that we pursue, enhances long-term value creation.
We've spent years building a platform that's ready for this wave of demand in senior housing. We now have sophisticated data analytics and the ability to deliver those insights directly to our operators through our Ventas OI platform. We've enhanced our CapEx management, optimized dynamic pricing and developed a broader platform capabilities needed to effectively drive performance and support 40 operators managing our communities and that number continues to grow. Equally important, we have tremendous respect and appreciation for the critical role our operators play in delivering care and services to seniors and achieving market-leading performance.
Having walked in their shoes, we understand the importance of what they do, and we place the quality of our relationships with our operators among our highest priorities. This level of readiness doesn't happen overnight. It's a result of a deliberate multiyear evolution of our platform that positions us to capture the significant opportunities ahead. We have taken numerous actions over the past 5 years to ensure success in our senior housing business.
Those actions include 215 acquisitions, 116 dispositions, 295 transitions to new managers, 307 community refreshes and 157 conversions of low occupied communities from Triple-Net to SHOP. The net result is a much larger and well-positioned SHOP portfolio, fueling double-digit NOI growth with embedded occupancy upside. This framework drives our underlying decision-making in our senior housing business why our portfolio is well positioned to grow. It's a focused, data-driven approach and it's working.
For example, I'd like to refer you to Page 9 of the earnings presentation where we lay out our Ventas OI performance management strategy. I want to make it clear that our SHOP portfolio is well positioned for occupancy growth as our U.S. portfolio is only 85% occupied due primarily to our deliberate actions converting underperforming communities from the Triple-Net structure to SHOP. Our U.S. portfolio is well positioned to achieve substantial upside in markets that offer significant net demand over the next several years and will benefit from operational enhancements driven through our Ventas OI platform.
As we've been expanding our SHOP footprint to half of the company's NOI, our Ventas OI capabilities continue to evolve, and we have been deliberate in positioning the portfolio for significant occupancy and NOI upside. Our most recent example of the Triple-Net to SHOP conversion is the 45 communities which are 78% occupied converting from the Brookdale lease to SHOP and transitioning to 5 aligned, proven, high-performing local market-focused operators with significant transition experience and track records of delivering excellent results. This transition is well underway. We have completed 27 of the transitions through October, and we expect to be finished by the end of the year.
The communities have performed well year-to-date with both occupancy and NOI growth. We have already made progress with the read-out plans with a significant number of the projects expected to complete by the key selling season of 2026. We continue to expect greater than $50 million of NOI upside over time as the new operators execute and reinvest NOI-generating CapEx of around $2 million per building. Senior housing is a high-touch business, and I'm pleased to report that in the communities they have already transitioned, there is a strong level of engagement between local management teams and the new operators along with a great deal of enthusiasm.
I'd like to note that this transition is occurring with the full cooperation and support of Brookdale, which is greatly appreciated. Furthermore, we look forward to collaborating with Brookdale on the 65 assets where the lease has been renewed. Moving on to investments. We continue to build on our momentum and our relationship-driven capital allocation plan targeting private pay senior housing in the U.S., and we have now completed $4.1 billion of senior housing investments since the middle of last year, of which $3.5 billion closed during the past 4 quarters.
We have closed $2.2 billion of senior housing acquisitions year-to-date. We have a robust pipeline that continues to expand, and our latest guidance for 2025 is now $2.5 billion. Our senior housing flow business is in full swing as our year-to-date senior housing investments totaled 20 transactions for 50 communities with approximately 6,200 units across 15 states. The average deal size is $110 million, including a range of singles, doubles, triples together with select larger portfolio deals.
These properties improve our SHOP portfolio quality, increase the company's enterprise growth rate and are located in attractive markets that are poised for outperformance due to favorable supply and demand dynamics. We continue to have an advantaged position to source and close meaningful and attractive senior housing transactions and the opportunity set is growing at an accelerating rate. We look for a range of senior housing investment opportunities, each with its own balance of growth and yield, so we can deliver attractive returns that align with our targeted low to mid-teens unlevered IRRs.
It has become clear that Ventas is a senior housing partner of choice across our many transactions. Our growing stable of strong operator relationships provides us with preferred access and the opportunity to win deals. Our transaction execution track record has also created opportunities for repeat business with sellers. In summary, we have conviction in our strategy, and we are intensifying our efforts to drive outperformance in our senior housing business, and the best is yet to come.
I'm confident in our ability to execute and create value for our stakeholders in senior housing and investments execution, including a valuable living experience for residents, valuable workplace experience for the tens of thousands of dedicated community staff and ultimately leading to significant value creation for our shareholders. Now I'll hand the call to Bob.
Thank you, Justin. I'll start with our third quarter performance, highlight our balance sheet and conclude with our improved guidance for the year. Starting with our enterprise performance. Ventas delivered normalized FFO per share of $0.88 in the third quarter, which represents a 10% increase year-over-year, driving the strong year-over-year growth with total company Same-Store Cash NOI of 8% led by SHOP growth of 16%.
Our Outpatient Medical And Research business, or OMAR reported Same-Store Cash NOI growth of 3.7% year-over-year, led by outpatient medical. Outpatient Medical third quarter occupancy improved 50 basis points year-over-year to 90.6%, a 20 basis point sequential increase versus the second quarter. TTM tenant retention was a strong 87% in the third quarter, an increase of 200 basis points year-over-year, reflecting tenant satisfaction scores in the 95th percentile. Our research business represents 8% of our NOI.
In the third quarter, research Same-Store Cash NOI was $400,000 lower year-over-year driven by lower rents on certain innovation flex space tenants as previously discussed. Next, turning to our balance sheet and liquidity. Our net debt to EBITDA of 5.3x in the third quarter represents a full turn improvement from third quarter of 2024. This leverage reduction was driven by a combination of organic growth and equity funded senior housing investments consistent with our strategy. I would note that this significant improvement in leverage was achieved while delivering normalized FFO per share growth in the top echelon of REITs.
We've already fully funded -- equity funded our $2.5 billion investment guidance for 2025 with $2.6 billion of equity raised, including $0.5 billion of unsettled equity forwards. We have over $4 billion of liquidity as of September 30, which supports Ventas' growth and financial flexibility. I'll close with our updated and improved 2025 guidance. We expect net income attributable to common stockholders to range from $0.49 per share to $0.52 per share.
We are also improving our full year normalized FFO guidance midpoint by $0.03 to $3.47 per share. This improved 2025 guidance midpoint represents 9% year-over-year growth in normalized FFO per share. Approximately 2/3 of our $0.03 guidance increase at the normalized midpoint can be explained by our improved SHOP performance in senior housing investments completed year-to-date, with the final 1/3 representing improvements across the balance of the enterprise. We've also raised our total company Same-Store Cash NOI growth by 50 basis points to 7.5% year-over-year, led by the SHOP Same-Store NOI midpoint improving by 100 basis points to 15%.
In our updated guidance with the 45 Brookdale conversions now underway, we are reflecting the shift in NOI from these conversions from our Triple-Net segment to our SHOP segment. Because cash rent on these 45 conversion assets approximates current NOI at the assets, the net impact on 25 FFO is de minimis. I would point you to our earnings presentation deck and supplemental for more detail on these and other assumptions underpinning our guidance. To close, we are pleased with the results both in the quarter and so far this year.
The entire Ventas team is determined to build on our momentum and to continue delivering superior performance for our shareholders. And with that, I'll turn the call back to the operator.
[Operator Instructions] Our first question comes from the line of Jonathan Hughes, Raymond James.
Good morning. Thank you for the prepared remarks and commentary. I was hoping you could talk more about underwriting criteria. I know the acquisition volume guidance is $2.5 billion from $1 billion at the start of the year, and you've been very consistent on buying properties with 7% yields.
But with the lower cost of capital today, it seems like you'd now be able to make the math work to buy some lower initial yielding properties that come with higher growth, but still low to mid-teens IRRs. I guess, are there any plans to lower those initial yield requirements, maybe get more aggressive to buy properties with more growth given the outlook for seniors housing supply demand is so strong over the next 5, 10 years?
Jonathan, it's Debbie. We are certainly going to be ambitious in our goal to grow our senior housing business as we have over the last couple of years and build on our momentum.
It's Justin. Yes, and we -- like I said in my prepared remarks, $3.5 billion of $4 billion volumes have been over the past 4 quarters. So the volume has been accelerating. We have momentum in our pipeline and the execution on that pipeline.
And we are really happy with the returns we've been getting. The primary metric we targeted are unlevered IRRs. Everything has been in the range of low to mid-teens. And there's a variety of way to getting there, and it's really yield and growth, and we've seen the opportunity to buy assets that are delivering significant growth potential.
And that's where we're leaning in and we're using the market asset operator framework to help determine where to focus. And we've had plenty to do, and we look forward to doing as much more of it as we possibly can.
Okay. I'll ask one more, if I can. On the leverage, it's great to see that improvement. Can you just remind us of the target leverage, how you weigh equity and debt to fund this external growth, especially given that cost of equity capital today is really attractive?
Yes, I'll take that, Jonathan. We're really pleased with the leverage improvement, 5.3x for the quarter. That's a full turn and the strategy that we set out quite a while ago now of organic growth plus equity funded investments given the returns has really been working. And so we're going to continue to run that play as long as the market gives us the opportunity.
We are obviously trending favorably in terms of leverage, I would expect that to continue should the market conditions exist. And that just gives us more flywheel and more opportunity to continue to invest. So that's the strategy and that's the approach. We are clear eyed that equity is very precious and therefore, making sure that we're investing in the best assets as Justin described, but we're really pleased with the way the playbook is working.
Our next question comes from the line of Michael Carroll, RBC Capital Markets.
I wanted to quickly touch on the Brookdale SHOP transitions and the revenue-generating CapEx that Ventas plans to putting into these assets. And can you give us a few examples on what type of investments these will be? And how disruptive will that be the current results? I mean, is it just trying to get these done before the key selling season, and that's just the key to minimize this disruption?
Yes. So I'm going to start with kind of the plans we have in place to help ensure smooth transitions. First thing, just to reiterate something I said and that is that the performance has been really good. So we're receiving the communities with -- in a place where they've had really good occupancy and NOI growth over the past year.
There's been a very high-touch approach with my team, our team here at Ventas, but also the operators, the CEOs of the operators have been personally engaged in the communities on the ground right away, assessing the situation and the opportunity to improve on operations, and also help us to solidify our plans to invest the refresh CapEx. The types of projects that we're focused on are mainly kind of -- I call them like routine refreshes where we're repositioning through common area refresh, paint paper, furniture, fixture as we refresh all the lighting, first impression type investments. And we've become pretty expert at doing this with as little disruption as possible.
There's a few projects that are much larger that we have. We have the Hallmark in Chicago, which will get a full readout, that's a really exciting, high-rise that has been a market leader for years, and we're going to take it to a new level with the new operations and the investments. But most of them are pretty routine projects that we have immense experience delivering.
Okay. Great. And then just lastly for me. I know the SHOP portfolio, at least on the Same-Store side, has really delivered some good margin expansion of about 200 basis points year-over-year.
I mean just given that occupancy now for the Same-Store portfolio is 89% and presumably next year, it's going to get above 90%, how much faster can that margin expand? Because I know, Justin, you've always talked about that you get more incremental margins as occupancy improves. So like where it's a good kind of ballpark of how much that could tick up?
Yes. So it's one of our favorite topics, margin expansion and incremental margin. And we've experienced really over the past full 2 years, 50% incremental margin in our SHOP performance and that's a rule of thumb that we've articulated many times. And that rule of thumb really applies for that journey from 80% to 90% occupancy.
But once you start getting over 90% on your way to 100%, you start to see a higher incremental margin, closer to 70% because that operating leverage is really kicked in. So that will be an opportunity just simply through operating leverage and growing occupancy to have margin expansion. The other opportunity is through price. And you've heard so far in our prepared remarks, we have good experience in terms of RevPOR growth.
That's driven by underlying rent increases and move-in rents. And in both cases, the higher occupancy you get, the stronger that result is. We get 2x the RevPOR growth. We get 2x the move-in rents in communities that are over 90% occupied versus the rest of the portfolio.
So that will create opportunities to help push margin as well.
Our next question comes from the line of Farrell Granath from Bank of America.
I first wanted to address the comment in the opening remarks about occupancy is expected to increase sequentially or at least quarter-over-quarter. I was just wondering if that has to do with anything coming into the Same-Store at a higher occupancy? Or if you're seeing things in market trends right now?
So it is -- this is about just a strong end to the third quarter and that carrying into the fourth quarter. And we have good visibility into that, obviously, so far. So it's an organic outcome driven by strong demand and strong move-in volume that we're seeing.
And I also wanted to ask about as your pipeline right now is all U.S. SHOP, what's your comfortability of potentially expanding that into the U.K. or in other areas as well?
Great question. I'm sitting here with Justin who -- I think he's the only REIT executive who actually ran a U.K. large senior living company. So I'll let him take that question.
Yes. So I would say our first, second and third priorities are to invest in private pay senior housing in the U.S. We were -- we like the footprint we have in Canada, don't have meaningful plans to expand there. The U.K. is interesting.
One thing we did do there is set up our SHOP platform earlier this year with a new operator, CCG who's been delivering excellent results so far. So we look forward to expanding our footprint in the U.K. over time, but the U.S. is where all the action is.
Our next question comes from the line of Vikram Malhotra from Mizuho.
Congrats on the strong results. Just 2 questions. I guess, one, a lot of your peers are engaging in, I guess, strategic portfolio shifts, whether it's selling MOBs or some MOBs or moving into the U.K. and our peers, I mean, just a broader health care set. I'm wondering sort of as you think of the portfolio today with the lifestyle university exposure, medical office, but then this outsized growth in SHOP, like is there thinking about like bigger picture change in the portfolio, number one?
And then just going back to specifically on Canada, you've had really good results there. But what's the appetite to sort of monetize the investment and the returns maybe into a fund or just outright selling?
Thanks, Vikram. Of course, we're always willing to consider, and we're always evaluating different portfolio actions that we think will create long-term value for the company, and you've seen us do that over the years, and we'll continue to actively monitor our portfolio for those types of actions. Currently, our main focus, which I'm sure is coming across is really in aggressively growing our private pay shop business, which we've increased 2,000 basis points to have the company over the last couple of years, and we're going to continue to try to rapidly expand that business from internal and external investment activity.
Our next question comes from the line of Michael Goldsmith from UBS.
You raised your SHOP RevPOR growth guidance from 4.5% to greater than 4.5%. It seems like every quarter, we see less and less supply growth. Can you just talk about the change to greater than 4.5% and how much visibility you have into 2026, given pricing power should strengthen as occupancy increases and further do you think higher RevPOR growth can somewhat offset any slower occupancy growth in the future?
Sure. So our -- we've been really pleased with our underlying pricing, both in terms of rent increases this year as well as the movement rent trends, which are up year-over-year. And they're working together through our dynamic pricing approach with our operators to deliver that result. And one of the things we're equally as pleased about is that we're striking a really good balance of also driving occupancy and price together, which is what this dynamic pricing as approach is designed to do.
In terms of the opportunity moving forward, it's -- we're not going to really get into 2026 right now. But some of the things I mentioned earlier, I think are really relevant. And that is that in higher occupied communities, we've seen better price outcomes, both in-house and through move-in rents. Obviously, demand has been really good, and we have more scarcity of value across our portfolio.
So over time, that should create an opportunity. And when it's time to get into 2026, we'll do that, but this isn't the time yet.
I appreciate the response. And as a follow-up, you acquired $2.2 billion of stabilized senior housing year-to-date, added 10 new local focused operator relationships. It appears these are good operators because occupancy is already at 91%. But can you talk about what you look for when assessing whether a new operator fits the Ventas platform?
And then the average price per unit on the year-to-date activity was $381,000. So is that still a discount to replacement cost? And if so, how much if you had to estimate?
Yes. So we've consistently been buying below replacement costs, and it varies anywhere from 10% to 50%, depending on which particular investment we're talking about. One thing I want to clear up is you mentioned the word stabilized, and we really don't think of 90% occupancy as being stabilized. There's -- we're sitting in markets that have net absorption projection of 1,000 basis points plus over the next few years.
So we have not only good operational opportunity, but a tailwind that is unprecedented that we're facing. We have -- and then we have the price opportunity I've reiterated that comes with that as well. So we see a lot of growth ahead in these assets. And just to reiterate another strategic point I made.
On top of the acquisitions, we also have had the strategy of moving our triple-net communities over to SHOP. And those communities were lower occupied. The most recent example is Brookdale, 78% occupied. And what that's delivered for us is a U.S. occupancy that's 85%.
So we're buying these high-performing communities through acquisitions. We transitioned the lower occupied communities from Triple-Net to SHOP and we have a long runway ahead of growth opportunity with tailwinds to support it and a platform designed to deliver on that.
Thank you very much. Good luck in the fourth quarter.
Our next question comes from the line of Seth Bergey from Citi.
It's Joseph here with Seth. Debbie, I just want to go back to the question on diversification and kind of the benefits of being more diversified versus more of a pure play. Is it -- do you think there are synergies between the businesses? Is it just a matter of pricing?
And if you had the right pricing, you'd look to get more pure play? What -- how do you think about kind of the portfolio composition, the company composition overall and ultimately, how that attracts equity capital relative to the other health care companies out there?
Yes. Overall, as I mentioned, the company's portfolio is unified by the megatrend of longevity. And of course, the senior housing business caters to the over 80 population, which is growing -- is large and growing and should be accelerating in growth over the next decade, as I mentioned, just 28% over the next 5 years. And so -- we are leaning heavily into our senior housing business, and that is our #1 priority to grow that.
By doing so, both internally and through external investments, we are increasing the growth rate of the enterprise, which we believe increases our return to shareholders. And we're going to continue leaning into that strategy. We're always evaluating the merits of all of our businesses, all of our assets, and we're open-minded to considering portfolio changes, and we'll continue to be aggressive in looking for ways to create value for shareholders.
And then just as you think about that growth, I think you said the first, second and third priority is in the U.S. Are you seeing different amount of competition for senior housing assets in the U.S. versus anything internationally that you do look at?
Well, I mean, senior housing is obviously a strong performing asset class. There's new capital entering the market. We've seen more competition. We've seen a much bigger pipeline though.
So we -- it's not surprising that I'd be more interested in the asset class given the fundamentals but we really like our ability to compete. As I mentioned, the platform is designed to manage a large number of operators. That's important because 75% of the sector is operated by operators that have 50 or fewer assets. So if you're going to grow at scale in this sector, you need to be -- you need a platform that can manage multiple operators.
And we do that as well as anybody, and we're positioned through that, through OI platform as well as our transaction experience and track record and our financial strength and flexibility that has positioned us to continue to grow. So we like our ability to compete, whether it's the U.S. or in other markets.
Our next question comes from the line of Richard Anderson, Cantor Fitzgerald.
So not to bring up what was a source subject at the time. But back in March, you had this sort of surprise uptick in debts that caused some disruption in the sort of the transition to the following quarter. And I'm wondering if that has sort of smoothed out over the course of 2025, whereas it sort of slowed down, hopefully, where the full year 2025 might look like a lot of other years? And is that playing any role in your optimism in terms of sequential occupancy growth into '20 -- into the fourth quarter?
Or is it sort of a normal pace now? Just wondering if that's playing a role at all.
Richard, it's Justin. Yes, so the bottom line is that we never backed off our full year occupancy guidance. It was 270 the whole time. We alerted the market to kind of intermittent change in the occupancy run rate.
We have the key selling season ahead of us. We've delivered on one of the best key selling seasons that we've had. You can see it on Page 12 in the deck. We had 230 basis points of growth within the key selling season, best in the past 4 years.
The third quarter, it was a leader amongst the industry versus Nick and peers in terms of sequential occupancy growth. That was driven by higher than move-ins versus prior year. So the move-in strength has been very strong. The move-outs have moderated, and we're growing occupancies.
So it's old news, and we've stuck with 270 and we're delivering on it.
Okay. Fair enough. Second question, you talked about a growing investment pipeline, which is great to hear. But I'm wondering about the finiteness of the external growth story here.
When I think about senior housing, I don't know, maybe there's 30 million apartment units in the United States, but is there 2 million senior housing, I don't know. And you're certainly buying as a group as the REITs faster than product is being developed. So do you -- what would you say is the time line where you've sort of getting to the point where you've seen and considered what you kind of want to have and that we'll start to see external growth start to sort of materially slow down but you've done a good job in terms of acquiring into that market. So it's such that the story transitions much more to an organic growth story, still sort of drafting off of all this aging of the population, but more of an internal growth story, maybe a couple of years from now and less of an external growth story.
Rich, we feel very confident about our ability to build on our investment momentum and to accelerate investment activity and quality U.S. senior housing for the foreseeable future. And we're very happy, as you mentioned, that we have a really outstanding internal growth story in this very large and growing senior housing business.
Yes. And I would just say, really explicitly, we're not even close to seeing the slowdown from an external standpoint. The institutional ownership, long-term ownership is still in the mid-teens in the sector. And so you have a lot of private equity -- friends and family equity to own assets that trade assets routinely. And we anticipate participating in those trades.
Our next question comes from the line of Omotayo Okusanya from Deutsche Bank.
This is Sam on for Tayo. I hope I didn't miss this, but can you guys provide an update on the performance update on the 27 assets that have been converted from Triple-Net to SHOP?
Yes, sure. Yes. So you're referring to the transition -- the Triple-Net to SHOP transition from Brookdale. We've had -- there's 45 in total.
And those communities have performed really well year-over-year, and they've -- their NOI really approximates the run rate now. So that was a good outcome, and there's 27 that have transitioned as of October. Everything is going really well. We've had boots on the ground from Ventas team members and most importantly, from the senior leadership amongst the operators to ensure that there's a smooth transition that's underway, and there's a lot of enthusiasm around the attention that the communities are getting, both from the new management, but also around the refresh capital that we're going to be putting in to help better position the communities and deliver occupancy growth over time.
And sorry, what was you said after -- since October, how many have been transitioned? I think I missed that.
There's 27 that have transitioned so far.
And the remainder of the 45 should transition in the coming months.
Our next question comes from the line of Juan Sanabria from BMO Capital Markets.
Just hoping you could talk a little bit about the independent living pool in the U.S. You kind of highlighted that as an outperformer. If you could just give us some color as to what's driving that? And maybe as a subset of that, how holiday -- the ex Holiday assets or the now Atria Holiday assets are performing as a part of that?
Yes. So most of our independent living footprint in the U.S. is holiday or former holiday communities. We had 340 basis points of occupancy growth in the U.S. IL was stronger.
So there -- that was 390 basis points. And so we've had really good growth in that IL product and pleased that it's outperforming. And as it has a long way to go, too. It's part of that U.S. opportunity for occupancy growth and it's delivering and has a long runway.
So we're really pleased with the performance.
And how is the IL growth and the outperformance you've seen there impacted RevPOR growth? And is there any impact in terms of the mix there? And how should we think about that into '26 versus what you delivered year-to-date?
Yes. So I'm not going to get into 2026, but the IL growth because it runs at a lower RevPOR and therefore, the outperformance in IL at a lower RevPOR does cause a mix impact on the RevPOR metric. So it does pull it down. And it's a high-class problem because it means you're growing more occupancy higher and faster, but it happens to be in a product that has slightly lower rent.
So that's all in the numbers. And the goal will be to continue to grow with broad-based performance across the whole platform and both in terms of occupancy and rate.
Our next question comes from the line of John kilichowski from Wells Fargo.
Justin, in last quarter, we discussed kind of the building blocks of your higher occupied assets and that margin profile. I know we talked about it earlier on the call. But if we look at your Canadian portfolio, you're at mid-90s occupancy, and we would kind of expect to see that sort of layout on margin or -- and RevPOR. I'm just curious why that Same-Store NOI number is maybe a little lower than we would expect given the building blocks that you walked us through?
I think it would probably get us to mid-teens, and we're seeing 7.4% this quarter. Is there anything to point out there?
Yes. So the Canadian portfolio has very, very high occupancy. I mean -- and it has -- there are some limitations around how much and where you can push pricing. There's also a mix issue that happens at times.
We have a Sunrise product that has very high RevPOR. And if there's any volatility in those 12 communities, that can impact the operating metrics. But we would really kind of view Canada as a high single-digit grower. I mean that's what it's been for us.
It's a reason why we're not looking to expand in Canada. You just don't have the same organic NOI growth opportunity in Canada. So it's solid, and it's a good opportunity. The U.S. opportunity is different.
You have the opportunity to really deliver a better RevPOR OpEx per spread in the U.S. over time. You have less limitations on the top end in terms of where you can push rent. We're located in markets that have high income and wealth demographics and very strong supply and demand in the U.S. as well. So we do like that opportunity better and would expect better growth in the U.S.
Okay. That was very helpful. And then my second question is just on the acquisition pipeline. A couple of times on the call, you've said you have clear visibility on the ability to accelerate your acquisition cadence.
Are there any near-term risks that you're monitoring that could possibly sort of uproot that thesis? Or is it pretty reasonable for investors to start expecting higher investment volumes in '26 and in '25?
Well, I mean, structurally, we don't see anything limiting us now. We have the track record. We have the platform, we have the cost of capital, and we have momentum. So all of that's working together to have this accelerating investment pace that we've been delivering and we'll -- intention is to continue that.
Our next question comes from the line of Ronald Kamdem from Morgan Stanley.
Just 2 quick ones for me. Just going back to the operator conversation a little bit. You've added some more operators. Now you've had a lot of experience working with different operators.
I was wondering if you could just talk through in terms of their ability to use data, use the platform as well as our capacity to take on more facilities, like where are all these operators in that journey, right? Is it early innings? Is it middle innings? Is it late innings?
Just trying to get a sense of the potential efficiency an upside potential over the next 3 to 5 years.
That's a great question. So let me start with this. Every single one of our operators in their communities have end-to-end tech. All of them do.
It's an industry standard. And what that means is that they have tech in place for safety monitoring, care and compliance, med administration, managing their CRM, food services, maintenance delivery. All of that is managed through tech. And most of it is AI enhanced now.
So that's the starting point. Believe it or not, technology is widely used in senior housing. And certainly, our operators are deploying that technology to help deliver more efficient and also most importantly, high quality in care and service delivery to their residents and to manage the business better. What's really powerful about the OI platform is that we designed it to plug into any system.
It doesn't matter what they're using on the CRM side and from a financial side to get the operating metrics and the financial metrics we need, we designed our platform to be flexible. We pull the data in and then we can access and utilize the data in the OI platform. And the powerful aspect is that we then deliver that back to the operators. And what we're doing in doing so is articulating opportunities to improve across all the key metrics, revenue and expenses and in a very targeted way, and we get down literally to the unit level.
And we have price strategies, sales strategies, expense efficiency opportunities that are identified in a granular detail in a way that the operators can really take it and deliver a plan and to improve performance. And so it's a very collaborative effort. It's data-rich, but in a very focused consumable way, and that's how the OI platform plugs in. And it's only going to get much better.
One of the things that you hear me talk about the best is yet to come, and that's referring to a number of fronts. And one of those fronts is the ability to execute on performance through the OI platform will only get better over time.
Really helpful. And then my second question was just I wanted to ask the competition question sort of a different way because we've been thinking a lot about that as well. Because when I look at sort of low to mid-teens unlevered IRR, I think the demographic trends are clear. I mean I think if you could be a little bit more specific in terms of why do you think private equity specifically has not come into the space, right?
Is it that they're here and there's enough product to go out? Just like what are the reasons that this pool of capital is not coming for the sort of low to mid-ish teens unlevered IRR with a good supply-demand backdrop? Just what are you hearing?
So I mean there is private equity in the space. I mean they -- quite frankly, they own much more of the sector than the public companies do. And so they're in the space. But in terms of -- and when I said I'm referring to private equity and friends and family equity, the reality is, though, if you're an institutional private equity player and you want to enter the space and scale, everything I've described that we do that you don't flip a switch and just make that happen.
And the ideal -- it seems like the ideal private equity investment would be a lineup with a large-scale operator and help that operator to improve and expand and grow. But to grow in this space, you're usually not going to find many of those opportunities because it's a collection of smaller operators in senior housing, as I mentioned. And so our platform is designed to buy communities operated by multiple operators. It's 40 and growing.
And I do think that creates a barrier to entry issue for some private equity. Having said that, I mean, we would expect that there'll be plenty of interest from a variety of capital sources in the sector given the strong fundamentals.
Your next question comes from the line of Michael Stroyeck from Green Street.
Thanks. Can you quantify what the potential opportunity for Triple-Net to SHOP transition looks like within the current portfolio? How many more assets do you expect to transition over the next, call it, 6 to 12 months or so outside of the Brookdale portfolio? And what's the rough range of NOI upside you typically underwrite on those?
Yes. I mean we've had -- quite frankly, most of that plan has been executed. We had 150 already that we've -- plus that we've moved into SHOP from Triple-Net. That's created that awesome occupancy upside opportunity we're seeing in the U.S.
We've had -- we do have some very high-performing leases that are left. One of those is with Brookdale. I mentioned that. We don't have any plans to do anything different with that portfolio.
There's a couple of other smaller ones, one of which we just made an acquisition through one of our tenants out and bought some new really high-performing, high-quality assets as part of the pipeline and move those to SHOP. And so that was a way to leverage that relationship. But really, the plan at this point is to deliver on the organic growth opportunity that is embedded in our portfolio through all those efforts we've had in place over the past few years and continue to grow externally.
Got it. And then maybe one on the research business. Can you just quantify the magnitude of bad debt during the quarter? And are these onetime rent deferrals or more permanent rent cuts to tenants? Just help us understand how long the credit issues during the quarter may actually weigh on NOI growth in that business.
Yes. This is Pete. Thanks for the question. The typical character of some of the restructurings we've done to give people additional runway is to initially reduce their rents, have a climb back up and they have some participation opportunities later as their business improves.
And so that's the playbook we've been running. It's been working well, and it's hard to say when it's going to end, but we're pretty pleased with the results.
Our next question comes from the line of Michael Mueller from JPMorgan.
I'll just keep it to 1 here. As the 80-plus population surges, do you expect to see a widening of performance between AL memory care and the younger population IL portfolio?
I want to make sure you understand...
Yes, I think I do. So the 80-plus population, the baby boomer starts turning 80 next year. That's really our customer base in senior housing. The truth is that both AL and IL ages are relatively consistent with each other.
And so we would expect both to be benefited by this broad-based demand. It's really just a different type of resident with whatever type of needs that they have when they move into senior housing. And the age is relatively consistent between the two. You can get a little bit younger skewing in the independent living, which is one of the benefits of that asset class.
But overall, both are going to be benefiting from this broad-based and growing demand.
I will now turn the call back over to Debra Cafaro, Chairman and CEO of Ventas for closing remarks.
All right, Van. Thanks. And I want to thank everyone who joined us on a busy day for your interest in and support of Ventas. We wish you and yours a good holiday season, and we look forward to seeing you soon. Thank you.
Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.