Ventas Outlines Plan to Expand in Senior Housing
Looking at both the U.S. and Canadian senior housing, the company sees heavy tailwinds.
Ventas is far from a newcomer to senior housing. The company’s April business update shows that out of 1,400 properties that it owns, 800 are in senior housing. In February, the company expected to undertake $300 million in senior housing investments during the first half of 2024.
The argument the company has set out is that market conditions, compelling on a number of fronts, make further investments into senior housing unusually attractive. The average annual population growth in the 80-year-old plus cohort will be between 700,000 and 800,000 by 2030, a more than 24% growth rate. Fueling that is the leading edge of baby boomers who turn 80 in 2026. They estimate about 18 million of 65-plus aged population increase between 2010 and 2030. The 65-year-olds are estimated to live an additional 20 years.
And yet, there’s not enough senior housing. U.S. construction starts are at their lowest since 2009. Ventas estimates that about 99% of its senior housing portfolio (SHOP) is “free from competing construction starts in Q4 2023.” Practically speaking, that probably means two to three years before competing offerings could be in place.
Simultaneously, the market is entering the “peak years for senior housing loan maturities,” with approximately $18 billion of loans maturing through 2025. “Some owners lack cash flow to cover loans at today’s rates and the equity required to properly recapitalize,” they write.
While the research is heavy on the U.S. market, the company also sees Canada as critical to is strategy. Ventas has 83 total communities there, comprising 27% of its SHOP NOI. There’s been 4.1% year-over-year same-store cash NOI growth rate and 95% average occupancy in 2023.
The number of SHOP operators they have with “market expertise and experience in the full spectrum of senior housing service offerings” have grown from 11 in 2020 to 22 today.
The company plans to use its internal tools — in data analytics and operational insights — will help target potential properties and then to improve profitability.