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Ventas (VTR) Q2 FFO Tops Estimates, Senior Housing Occupancy Up

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Ventas, Inc. VTR has reported second-quarter 2021 normalized funds from operations (FFO) per share of 73 cents, outpacing the Zacks Consensus Estimate of 72 cents. However, the figure declined 5.2% from the year-ago quarter’s number.

The company generated revenues of $919.2 million in the second quarter, which marginally missed the Zacks Consensus Estimate of $919.9 million. The top line declined 2.5% year over year.

Results reflect sequential occupancy improvement in its Senior Housing Operating Portfolio (SHOP) segment as well as growth in its Office segment.

Debra A. Cafaro, Ventas chairman and CEO noted, “We have now delivered five consecutive months of growth in occupancy and leads in SHOP, with June move-ins and July leads representing the highest levels since the onset of the pandemic.”

Quarter in Detail

For the second quarter, same-store cash NOI growth for the total property portfolio (1,135 assets) increased 3.1%, sequentially. Segment wise, same-store cash NOI for the office portfolio increased 10.5% from the prior quarter. The same edged down 0.7% for the SHOP portfolio and 0.2% for triple-net leased (NNN) portfolio, on a sequential basis.

The SHOP portfolio’s second-quarter average and quarter-end occupancy were 77.5% and 79.4%, respectively. The SHOP portfolio’s approximate spot occupancy expanded 229 basis points from March end to June end. This was driven by U.S. SHOP communities. The performance was also better than the mid-point of its previous expectation of up 150-250 basis points (bps). Average SHOP occupancy advanced 110 bps in the second quarter compared to first-quarter 2021.

In the NNN portfolio, all expected second-quarter rent was received from the company’s NNN tenants.

The 10.5% rise in the office sequential cash NOI was driven by the Life Science, R&I portfolio. Moreover, the company saw stable growth of the Medical Office Building (“MOB”) business in the second quarter. There was solid customer retention of 94% as well as new leasing of 190,000 square feet. These led to the total MOB portfolio sequential occupancy expansion of 20 bps.

In June, Ventas announced entering into a definitive merger agreement through which it will acquire New Senior SNR in an all-stock deal valued at $2.3 billion, including $1.5 billion of New Senior debt.

Balance Sheet Position

Ventas exited second-quarter 2021 with cash and cash equivalents of $233.8 million, up from the $169.7 million recorded as of first-quarter 2021 end. For second-quarter 2021, net debt to adjusted pro forma EBITDA ratio was 7.0x, denoting a sequential improvement of 10 bps from the first quarter.

As of Aug 5, 2021, the company had $3.3 billion of liquidity, consisting of $0.6 billion in cash and cash equivalents on hand and $2.7 billion of undrawn revolver capacity.

Outlook

Ventas projects third-quarter 2021 normalized FFO per share in the range of 70-74 cents. The Zacks Consensus Estimate for the same is pegged at 73 cents.

The company assumes approximate spot occupancy in its sequential same-store SHOP business to advance 150-250 bps from June end to September end. Moreover, the company continues to expect $1 billion in asset sales and loan repayments in 2021.

Ventas currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ventas, Inc. Price, Consensus and EPS Surprise

Ventas, Inc. Price, Consensus and EPS Surprise
Ventas, Inc. Price, Consensus and EPS Surprise

Ventas, Inc. price-consensus-eps-surprise-chart | Ventas, Inc. Quote

We now look forward to the earnings releases of other REITs, including CoreCivic, Inc. CXW and Gladstone Commercial Corporation GOOD, which are expected to report next week.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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