Ventas (NYSE: VTR) is in an “enviable position” in 2025 as senior living demand grows while the rate of newly built communities stays low, according to CEO Debra Cafaro. But the company is seeing some bumps along its journey to better financial results.
Same-store occupancy for the company’s senior housing operating portfolio (SHOP) rose by 290 basis points in the first quarter of 2025, but the company ran into “seasonality” in the form of elevated clinical move-outs in March, muting its expected occupancy gains heading into the second quarter.
“It’s a sad part of our business, and in fact life, that people pass away. It’s also unpredictable,” Ventas Chief Investment Officer and Executive Vice President of Senior Housing Justin Hutchens said during the company’s first-quarter call Thursday. “Per usual, the key determinant of occupancy for the full year is the timing and slope of the key selling season, which starts today.”
So far this year, Ventas has closed almost $900 million of senior housing investments, representing almost all of its $1 billion investment guidance for the entirety of 2025. Within that total was the acquisition of 20 communities in eight states, including with three new operating partners. The company also converted 11 triple-net communities in the London area in the U.K. to SHOP and formed a relationship with turnaround operator CCG, which has 100 locations across England and Scotland.
The Chicago-based real estate investment trust (REIT) also increased its acquisition guidance to $1.5 billion for 2025.
“Both sides of the senior housing demand supply imbalance are tipped in our favor, and those conditions should improve materially over an extended time horizon,” Cafaro said. “And we are well-positioned as a preferred acquirer who will get more than our fair share of attractive investments.”
Ventas’ senior housing holdings include 850 communities, of which 664 are in its SHOP segment.
Ventas stock fell 6.48% Thursday, landing at $65.54 per share by the time financial markets closed.
Gearing up for ‘key selling season’
Ventas leaders believe their operating partners’ time to shine is during the “key selling season” in the second and third quarters of the year.
As Hutchens has noted before, senior living communities are often a fixed-cost with regard to labor, once they are fully staffed. Beyond a certain point, occupancy adds to incremental margins without growing expenses, he said.
Hutchens noted Ventas’ incremental margin “was about 50% in the first quarter driven by the “operating leverage in the business” as the company increases occupancy. Two-thirds of the communities in the Ventas SHOP portfolio are in the “low 80% occupancy range.”
“You have some variability in expenses … but it’s one of the powerful aspects of the business model,” Hutchens said. “Certainly occupancy in itself is a great opportunity, but margin expansion is as well.”
Hutchens added there was “significant occupancy upside in the portfolio” for higher margins and that the company’s operating partners have an “opportunity for outsized performance.”
Ventas’ SHOP segment carried NOI margins of 27.5% on a same-store basis in the first quarter of this year.
He touted how the company is currently refreshing communities as part of 100 projects in 2025 along with the stable of new operating partners Ventas has assembled in recent years.
“We have all these new operators that we’ve added, a lot of which are coming through acquisitions that we’re bringing in through transitions over time.”
He added that some of the company’s operating partners are still “finding their sea legs,” meaning he expects more growth as they improve with the help of Ventas’ operational playbook.
“We’re just now also getting into the strongest period of demand that the sector has ever seen, by a long shot,” he said. “The best is yet to come.”
In the first quarter, Ventas increased its same-store cash NOI by 13.6% compared to 1Q24 that was driven by 7.4% in revenue growth. Occupancy grew 290 basis points compared to the same period in 2024 led by a 330-bps increase in U.S. properties.
Hutchens noted increases in internal rent increases, supported by street rate growth, as sustaining pricing power for Ventas into the rest of 2025, noting that “it’s the strongest demand season” for Ventas in the coming months. Rate increases averaged 7% in the first quarter.
Preparing for more growth
As Ventas execs noted, the company is seeking to grow to meet demand in the months and years to come.
Ventas CEO Debra Cafaro commented that the “current macroeconomic backdrop” creates a “high degree of uncertainty.”
Her comments follow a 0.3% contraction in GDP in the first quarter across the broader U.S. economy, but Cafaro said she believed the “demand, supply imbalance” is “tipped in our favor” in the years ahead. In response to an analyst’s questions regarding her prepared remarks on the broader economic uncertainty, Cafaro doubled down on Ventas’ ability to generate meaningful gains amid economic uncertainty.
“Senior housing is one of if not the top asset classes in real estate and there’s a lot of reasons for that,” Cafaro said. “All of these trends really combine to give us a lot of optimism about this extended, multi-year NOI growth opportunity.
Ventas leaders pointed to the company’s decision to convert 45 communities managed by Brookdale Senior Living (NYSE: BKD) from triple-net leases to the company’s SHOP segment and new operators “later this year,” with an expectation of doubling NOI in these properties from $50 million to over $100 million with five operators to take part in the transition.
The company also extended its operating base from 10 operators to 33 to “grow in higher demand markets,” Hutchens said, including its new operating relationship in the United Kingdom.
In the last two and a half years, Ventas has completed 250 community renovation projects, with 100 planned by the end of this year. Ventas closed on approximately $900 million in senior housing investments and $2.8 billion since the beginning of 2024 with “most of that completed in the last six months,” Hutchens said.
Looking ahead, Hutchens said Ventas has “good line of sight” on its plans to execute $500 million more in acquisitions in 2025, but that its overall pipeline is “much bigger than that.”
“We’ve been focusing, by and large, on campuses that offer a combination of services: Independent living, assisted living, memory care,” he said.
He noted that the company’s preference for cultivating operator relationships gives it a leg up when competing for new deals.
“When we find ourselves in a competitive situation, that’s one aspect that’s helped us to win deals. Obviously, our financial strength and flexibility is another aspect, and then a track record with counter parties as an acquirer of assets is excellent,” he added. “So, we like our opportunity to continue to compete, even for the best assets.”
