Ventas, Inc. Q4 2025 earnings call

Thank you, Jeannie. Good morning, everyone, and welcome to the Ventas Fourth Quarter and Full Year 2025 Results Conference Call. Yesterday, we issued our fourth quarter and full year 2025 earnings release, presentation materials, and supplemental information 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. With that, I'll turn the call over to Deborah A. Cafaro, Chairman and CEO of Ventas.

Thank you, BJ. I want to welcome all of our shareholders and other participants to the Ventas Fourth Quarter and Full Year 2025 Earnings Call. 2025 was an outstanding year for Ventas. We delivered strong results from the execution of our 1, 2, 3 strategy focused on senior housing. As secular demand from a large and growing aging population strengthens and supply remains constrained, we are intent on the significant value creation opportunity ahead. We plan to use our advantage, position, proprietary Ventas Operational Insights Platform, financial strength, and industry relationships to capture the unprecedented multi-year growth opportunity in senior housing, while we also help individuals live longer, healthier, and happier lives. In 2025, we drove growth at scale.

Our normalized FFO per share increased by 9%, and our same-store SHOP cash net operating income grew 15%, our fourth consecutive year of double-digit SHOP NOI growth. Our enterprise value exceeded $50 billion, and our fourth quarter annualized NOI and SHOP NOI reached $2.5 billion and $1.3 billion, respectively. We raised $7 billion of capital from a wide array of sources at attractive prices during the year. Our investment activity also accelerated as we closed $2.5 billion of high-quality senior housing investments that enhance our enterprise growth. By year-end, we owned over 83,000 SHOP units, and 53% of our NOI was generated by our SHOP communities.

Our investors were rewarded in 2025 as Ventas delivered total shareholder returns of 35%, significantly outperforming our industry benchmarks by wide margins and the S&P 500 in a year when it reached record highs. The Ventas team has been outstanding in its commitment to each other and to excellence as we've worked together to deliver value and performance across our stakeholder base. We are keenly focused on the multi-year NOI growth and value creation opportunities ahead. Let's start with the durable and powerful demand trends in senior housing. This year marks a historic demographic inflection point when baby boomers start to turn 80. This cohort of nearly 70 million individuals is the wealthiest generation ever. As the baby boomers age, the over 80 population should grow 28% in the next 5 years and double in 2 decades.

Today, more people than ever are choosing senior housing for the valuable benefits it provides at an affordable cost that is comparable to the cost of staying at home. Senior housing is a consumer-driven, private pay business that provides important support, socialization, and safety benefits to residents. We were once again reminded of the value of senior housing during the recent winter storms, when care providers across the country kept residents safe, warm, and well cared for in our communities, while many seniors living alone lost power and heat. Meanwhile, the new supply of senior housing continues to hover around all-time lows. To put this in context, there were only about 2,500 new senior housing units started in the fourth quarter of 2025, while we expect over 2 million people to turn 80 in 2026. Both sides of this demand-supply imbalance are weighted strongly in our favor...

Ventas is exceedingly well positioned to capitalize on this unprecedented opportunity. With a long runway ahead, we intend to continue executing our strategic vision of, 1, delivering outsized senior housing organic growth. 2, making value-creating investments focused on senior housing. And 3, driving cash flow throughout our portfolio. We also want to extend our trajectory of enhanced financial strength and flexibility. Ventas has built a scale platform to drive outperformance. Our experienced team, proprietary analytics tools, strong balance sheet, data capture, and industry relationships give us a competitive moat in senior housing that continues to expand. With our vision, strategy, and market positioning in place, I'll close on our 2026 operating guidance, investment activities, and dividend increase. In 2026, we expect to deliver high single-digit growth in normalized FFO per share, led by SHOP.

We expect SHOP to produce our fifth consecutive year of double-digit same-store cash NOI growth, with occupancy, rate, and margin all showing healthy year-over-year increases. Our total company same-store cash NOI growth should be nearly 10% in 2026. On the investment front, our team and our pipeline are extremely active. Our number one capital allocation priority remains U.S. senior housing. We've already closed over $800 million in high-quality senior housing acquisitions year to date, and we are highly confident we can complete $2.5 billion of investments focused on senior housing this year. We intend to remain aggressive in expanding our senior housing business through investment activity that provides attractive risk-adjusted returns and enhances our enterprise growth rate.

Finally, I'm pleased to share that our board of directors has approved an 8% increase in our quarterly dividend on the strength of our performance and positive multiyear outlook. Earnings and dividend growth are important components of the Ventas investment thesis. The whole Ventas team is aligned and focused on continued outperformance at scale, and we're in it to win it. With that, I'm happy to turn the call over to Justin.

Thank you, Debbie. I'm pleased to share the results of a successful 2025, with both organic and external growth in our senior housing business. I'll start with SHOP. We had a really strong fourth quarter in our SHOP same-store portfolio. Revenue grew over 8%, led by occupancy growth of 300 basis points year-over-year, and 100 basis points sequentially, demonstrating strong demand and sales execution. The occupancy growth was led by the U.S. at 370 basis points, with a particularly strong contribution from our independent living communities. Furthermore, our communities in the U.S. top 99 markets outperformed NIC by 160 basis points. RevPOR grew 4.7%, even with the mixed impact of the outsized occupancy growth in our lower-priced independent living portfolio.

NOI grew 15.4% year-over-year in the fourth quarter, led by the U.S., with 18%. Margin grew 180 basis points to over 28%, driven by 50% incremental margin. A quick note, as I reflect on the full year, I'm particularly proud about the occupancy. We achieved a better-than-expected 280 basis points of average occupancy growth across the portfolio, led by the U.S., with 350 basis points. Once again, we saw broad-based contributions to SHOP performance across our operating partners, such as Sunrise, Atria, Discovery, Sinceri, Senior Lifestyle, and Le Groupe Maurice, who continue to deliver exceptional care and services to our senior population and very strong financial results. Looking ahead, we see significant opportunities for growth across multiple areas.

We have spent the past several years taking numerous actions to ensure we are ready to meet this moment of accelerating demand in senior housing. We are positioned for continued organic growth in occupancy, rate, and operating leverage across the SHOP portfolio. Our U.S. portfolio is well positioned for a long runway of growth at only 86% occupancy. We expect contributions to growth across the portfolio, and particularly, growth drivers will include our new high-quality, high-performing acquisitions, the 45 communities that were transitioned from the triple-net lease with Brookdale to SHOP, and our evolving Ventas OI execution in collaboration with our operators across the broader portfolio. With this backdrop, I'm pleased to give our 2026 guidance for SHOP.

We expect the same-store NOI growth range of 13%-17%, driven by occupancy growth of 270 basis points year-over-year, and RevPOR growth of 5%, supported by in-house rent increase assumptions of 8%, which are stronger than the past couple of years. Operating expenses are expected to grow 5% again this year as we continue to add occupancy. I'd note that we've included modestly higher expenses in the first quarter, reflecting the recent severe weather across the U.S. With these components and the positive operating leverage, we expect that margin will continue to expand in 2026. Summarizing guidance, we are looking forward to our fifth year in a row of double-digit SHOP NOI growth, with 15% at the midpoint. I'll give a quick update regarding the 45 transitions of former Brookdale communities.

They have fully converted to SHOP and are now operated by five experienced transition partners, whose senior leadership teams are highly engaged. Capital refresh projects are underway, with most expected to be completed ahead of the key selling season. While still early, we anticipate modest NOI growth in 2026 and remain confident in the long-term opportunity to double NOI across this group of communities. At the core of what we do is delivering a high-quality living experience for our residents. Our communities support safety, connection, and independence while providing the amenities, professional care, and services that enhance daily life, creating peace of mind for the families of residents. That experience is delivered at a compelling value proposition. On average, residents can afford to live in our communities almost seven times longer than the typical length of stay.

The quality of care and services we provide is reflected in strong resident outcomes across our portfolio. For instance, at Atria Senior Living, we've seen a third consecutive year of improvement in Net Promoter Scores, signaling growing advocacy among residents and their families and continued outperformance versus industry benchmarks. Le Groupe Maurice has also been recognized for the sixth consecutive year as the leading senior housing brand in Quebec, based on an independent survey evaluating safety, building quality, programming, service levels, and the quality of staff. More than 70% of Sunrise's communities earn the best senior living rating by U.S. News & World Report, further validating their strong customer engagement and ability to deliver a differentiated experience for residents and families. Furthermore, Discovery Senior Living achieved a number one J.D. Power customer satisfaction ranking, validating their ability to integrate communities, improve performance, and sustain resident experience.

It's no wonder there is increasing demand for senior housing. Today, we partner with 43 operators across our SHOP portfolio, providing meaningful coverage across the senior housing continuum of care, diverse geographies, and a wide range of price points. Importantly, as more operators and communities are integrated into the platform, our data and analytics capabilities become increasingly powerful, reinforcing the network effects that drive performance and widening our competitive moat relative to other owners of senior housing. Our ability to manage senior housing at scale is a core competitive advantage. Our differentiated platform allows us to support a broad range of operators, enabling us to match the right operator with each community in each market and capture incremental growth opportunities. Ventas' OI execution is at an all-time high.

In 2025, we significantly deepened our collaboration with operators through site visits, senior management meetings, operator summits, and active asset management. This engagement enables us to work shoulder to shoulder with our operators on key priorities such as NOI-driving CapEx, dynamic pricing, sales execution, and rigorous benchmarking across key operating metrics, all in support of our relentless pursuit of creating environments where seniors thrive and investments flourish. We plan to further elevate this engagement as we meaningfully expand the capabilities of our senior housing team and enhance our interdisciplinary approach to supporting and growing our network of high-performing operators. Furthermore, the Ventas OI platform is also technology-agnostic, meaning operators can plug into Ventas OI from a wide variety of operating systems, contributing to our ability to scale. Now, turning to investments. We concluded 2025 with $2.5 billion of senior housing acquisitions.

We really like what we've been buying. Our senior housing investments are squarely within our right market, right asset, right operator framework, improve Ventas' overall SHOP portfolio quality, are poised for outperformance due to favorable supply and demand dynamics, and increase the company's enterprise growth rate. In the aggregate, these investments have already created significant value based on the strong operating performance achieved under our ownership that is in line with our expectations. 2026 is off to a strong start, with over $800 million of wholly owned senior housing investments across 7 transactions closed already this year. This brings our cumulative senior housing acquisitions to $4.8 billion in a little over a year.

For the full year of 2026, we're providing guidance of $2.5 billion of investments focused on senior housing, and we have high confidence in achieving this amount, given the momentum we continue to see in our pipeline. While competition for senior housing assets has increased as additional capital flows into the sector, Ventas is uniquely positioned to deploy capital where we have strong conviction and where we can fully leverage our differentiated competitive advantages. Our scale, relationships, and operating expertise allow us to aggressively pursue opportunities where we believe we are best positioned to create value. We are seeing a broader and more diverse set of potential transactions in the market across a range of investment profiles....

We seek senior housing investments that combine durable in-place cash flow and growth with the potential to generate attractive risk-adjusted returns, consistent with our low double digit to mid-teens unlevered IRR targets. Our relationship-driven approach to sourcing, structuring, and executing transactions, combined with a continually expanding network of high-quality operator relationships, continues to provide Ventas with differentiated access and the ability to win compelling opportunities. Ventas remains a senior housing partner of choice for operators seeking the benefits of Ventas OI and the scale, capital, and operating support of our platform. Since 2024, over 70% of our transactions have been with pre-existing operator relationships. Sellers are equally focused on repeat business, reflecting our consistent execution and reliability as a counterparty, which in turn creates incremental opportunities for follow-on investments. Over the past year, more than 50% of our transactions were with repeat sellers.

In closing, we are looking forward to an exciting 2026 as we continue to drive organic and external growth in our senior housing business. Now I hand the call to Bob.

Thank you, Justin. I'll share highlights of our fourth quarter and full year 2025 performance, our recent capital raising activities, and we'll close with our 2026 outlook. We finished 2025 strong, with 10% year-over-year growth in normalized FFO per share in the fourth quarter. This increase was driven by same-store property growth of 8%, led by SHOP, which increased 15%. Our Outpatient Medical and Research, or OMR, business grew same-store cash NOI by nearly 4% year-over-year in the fourth quarter. Outpatient medical same-store NOI increased by 4.5%. Occupancy in outpatient medical reached almost 91% in the fourth quarter, the 6th consecutive quarter of year-over-year occupancy growth. Our outpatient medical in-house property management teams have delivered 6 straight quarters of TTM retention exceeding 85% and very strong tenant satisfaction.

Meanwhile, our research portfolio, which represents 8% of total NOI, grew same-store NOI by 30 basis points year-over-year, supported by occupancy gains from university tenants. Looking at our full year results, we delivered normalized FFO of $3.48 per share, a 9% year-over-year increase, and at the high end of our guidance range. This growth was achieved through solid execution of our one, two, three strategy, led by SHOP organic NOI growth and $2.5 billion of accretive senior housing investments. Strong organic growth and equity-funded investments also worked together to improve our leverage to 5.2x in the fourth quarter, the best it's been since 2012. Since the beginning of 2025, we've demonstrated our advantaged access to multiple pools of capital.

We raised over $7 billion since the start of last year, including nearly $4 billion in bank, bonds, and mortgage debt, and $3.2 billion of equity issuance. We have $1.2 billion of unsettled equity to fund future investments. I'd highlight that our leverage pro forma for the unsettled equity is approaching 5x, and our growth outlook in 2026 suggests the trend of lower leverage is expected to continue. Let's conclude with our full-year 2026 growth outlook. For 2026, we expect net income of $0.57 per share at the midpoint. We expect 2026 normalized FFO per share to range from $3.78 to $3.88, or $3.83 at the midpoint. This guidance midpoint represents 8% year-over-year growth on a comparable basis.

The building blocks of our guidance are similar to 2025 and are driven by our strategy. The 8% growth in normalized FFO per share, or $0.27 per share, is expected to be led by SHOP by NOI growth and accretive investment activity, netted against offsets, including the expiration of non-cash rental income from Brookdale and higher net interest expense from refinancing maturing debt. Our total company same-store cash NOI guidance midpoint increase of nearly 10% year-over-year is led by SHOP at 15%. Our OMR same-store guidance midpoint of 2.5% is consistent with our growth in 2025 and is led by growth in outpatient medical. Triple-net is expected to grow over 4%, led by cash rent increases in January for Brookdale in our triple-net senior housing business.

I'd note that beginning in 2026, and as reflected in guidance, our normalized FFO will exclude non-cash stock-based compensation expense, which at $0.08 per share, impacted both 2025 and 2026, as adjusted, has no effect on our year-over-year growth rate. Our guidance also includes equity-funded investments of $2.5 billion, focused on senior housing. G&A growth in 2026 on a cash basis is generally aligned with the growth of our enterprise, or in the low $150 million range in 2026. We are investing in our organization in support of the company's increased asset base and expanding asset management initiatives. A more fulsome discussion of our guidance assumptions can be found in our Q4 supplemental and earnings presentation posted to our website. To close, we are extremely pleased with our 2025 performance.

The entire Ventas team is determined to continue to deliver outperformance at scale and superior performance for our shareholders. With that, I'll turn the call back to the operator.