Justin Hutchens
Executive Vice President, Senior Housing and Chief Investment Officer at Ventas
Thank you, Debbie. I'll give updates on our strategy to deliver profitable organic growth in our senior housing portfolio and execute on value-creating external growth. We had a very exciting and successful year-on both fronts, starting with organic growth. 2024 marked the third year in a row of double-digit same-store shop NOI growth. I'm very happy with the execution of our Ventas OI-driven shop platform initiatives and collaborative relationships with our high-performing operators. Our occupancy-led results were delivered by contributions across geographies and asset types. Total shop same-store cash NOI growth was 16%, which is at the high-end of the guidance range. Full-year same-store shop occupancy grew by 300 basis-points versus our initial guidance of 250. In the fourth quarter, our US same-store NOI grew 20% and occupancy grew 370 basis-points. We are outperforming our markets in occupancy growth. Our US shop communities in the Top 99 markets grew 350 basis-points, beating the NIC benchmark by 140 basis-points. These results were broad-based across assisted-living and independent living. Moving forward, we are highly optimistic about our senior housing business across multiple dimensions. The supply-and-demand dynamics in our sector are exceptionally favorable. Over the next five years, the US will experience an unprecedented surge in the senior population as the baby boomer generation begins turning 80. This 80-plus age group is projected to grow by 28% during this period, driving significant demand for senior housing. Meanwhile, new construction in our markets remains constrained with inventory growth at the lowest number on record and new construction starts at an all-time low. These combined factors create an extraordinary net absorption opportunity in the upcoming years, unlike anything we have seen before. We just finished the first lap of a long race as supply-demand characteristics are projected to remain compelling over the next several years. Ventas is in a strong position to continue to drive growth in our shop portfolio. We have favorable competitive positioning driven by OI with proprietary data analytics and experiential insights, which underscore portfolio actions and optimizes performance. Our expanding network of 29 shop operators has consistently delivered tremendous growth while capturing market-share in their respective regions. We are committed to working closely together with them to capture the immense opportunities ahead. We offer a differentiated approach through collaboration and the aligned goal of delivering exceptional care, services and performance. We continue to execute on our community refresh program, improving the living and working environments of our communities and therefore improving competitive positioning. We have completed 228 projects at year-end, including over 150 refreshed employee break rooms and over 4,500 modernized resident units. We are on pace to complete another 50 refresh projects by the key selling season this year, which should further enhance our ability to drive NOI. Speaking of driving NOI, as previously-announced, we are excited to expand our shop portfolio by converting 45 large-scale senior housing communities comprising of about 5,700 units from the triple-net structure to shop. This is a great opportunity to reposition low occupied communities that are located in-markets with strong projected net absorption. We have plans to transition these communities to five proven high-performing operators with a strong track-record of both transitioning and improving operating performance. We plan to execute the Ventas OI playbook to drive occupancy, pricing, environmental improvements and ultimately double the NOI of the 77% occupied portfolio. Assuming this conversion occurs by the end-of-the year, we project our shop footprint to increase by 8% in number of units and our shop portfolio to increase to account for over 50% of our enterprise NOI. Looking-forward to 2025, we are excited to continue our multi-year growth trajectory as we embark on our fourth consecutive year of double-digit NOI growth in our same-store shop portfolio. Same-store shop is expected to grow NOI 11% to 16%. The midpoint of our range is driven by revenue growth of about 8%, average occupancy growth of about 270 basis-points and continued strength in pricing driving RevPOR of around 4.5%. Furthermore, we expect operating expense growth of 5%. Per usual, the results will be highly dependent on a successful key selling season and we are assuming a relatively stable inflationary outlook. Once again, we are expecting the US to be the growth engine with continued accelerating occupancy performance with over 300 basis-points of growth. January occupancy is off to a strong start. Summarizing our organic shop growth, we are coming off a strong year of occupancy-driven results and we are excited about the opportunities ahead as we continue to unleash the power of our Advantage Shop platform. Moving on to part two of our strategy, we continue to execute on value-create and external growth-focused on senior housing in the fourth quarter and throughout 2024. For the full-year, we closed on $1.9 billion of senior housing investments, including $1.4 billion in the fourth quarter alone. These investments fit squarely within our investment criteria, including 7% to 8% expected year-one NOI yield, low-to mid-teens unlevered IRRs and a significant discount to replacement cost. This investment activity meaningfully expands our shop portfolio with the addition of 52 new communities and markets with strong projected net absorption and communities are high-performing with upside, including average in-place occupancy of 90%. Even with this accelerated pace of external growth, we are maintaining our underwriting discipline. In 2024, we reviewed approximately $18 billion of senior housing opportunities, pursuing approximately $5 billion and ultimately closing on nearly $2 billion. We have a rigorous data-driven process that ensures we are pursuing the best deals for Ventas and investing within our right market, right asset, right operator framework. Our experienced team remains focused on executing our external growth plans and we intend to expand the team. We expect our pipeline will continue to present a large set of compelling investment opportunities with potential deals coming from a range of owners and a variety of reasons for selling, including debt and fund maturities. Our investment activity also includes a range of seller profiles with transactions coming from a balanced mix of owner-operators, private-equity, developers and other institutional capital. Looking-forward to 2025, we expect to keep our external growth momentum, including line-of-sight on $1 billion of senior housing investments, which are already in advanced stages and we expect to be weighted in the first-half of the year. Ventas is a senior housing partner of choice with sellers, brokers and the entire investment community. This remains true even as there may be more competition for assets as others are seeing the favorable risk-reward in senior housing. Our industry experience, platform capabilities to manage scale, data science and transaction track-record should help to propel our growth prospects moving forward. Our investment team capabilities are second to none and we are continuously building on our strengths. With that in mind, I'm very excited to announce Alex Russo, joining our team as Senior Managing Director of Investments. During his 18-year career at Lazard, Alex has demonstrated exceptional financial and investment acumen, and I expect he will be an instrumental addition to the team as we continue to execute on our value-creating external growth-focused on senior housing. Now, I'll hand the call to Bob.
