Rating Upgrade at Ventas
Ventas Inc. (VTR), a health care real estate investment trust (:REIT), received a rating upgrade from Moody’s Investors Service, the rating unit of Moody's Corporation (MCO). The company now enjoys a senior unsecured debt rating of Baa1 that was raised from Baa2, with a stable outlook.
The uptick in the rating came on the back of Ventas’s substantial increase in unencumbered assets, adherence to a conservative balance sheet as well as operational strength. Moreover, the rating agency acknowledged the company’s capacity to enhance its market position and simultaneously sustain a sound liquidity.
The rating upgrade of Ventas is encouraging. In fact, this plays a major role in preserving investor confidence in the stock and helps boost its creditworthiness in the market.
In July, Ventas reported second-quarter 2013 normalized funds from operations (:FFO) per share of $1.01 that rose 6.3% year over year from 95 cents. Total revenue during the quarter reached $685.8 million, escalating 12.1% year over year.
Ventas’ results benefited from the strategic investments made in 2012. In particular, the company experienced an increase in net operating income in its private pay seniors housing communities, triple-net lease portfolio and medical office building segment. Ventas has raised its outlook for full-year 2013, backed by its solid business model, strategic efforts and accretive acquisitions.
We believe that going forward, the company’s diversified portfolio, strategic acquisitions and decent balance sheet would provide the tempo for riding on the growth trajectory. Yet, a large portion of its revenue originates from a few tenants, which exposes it to concentration risk.
Ventas currently has a Zacks Rank #3 (Hold). The other REITs that are performing well and deserve a look include Chesapeake Lodging Trust (CHSP) and Winthrop Realty Trust (FUR), both carrying a Zacks Rank #1 (strong Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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