Ventas, Inc.

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ventas 2022 Third Quarter Results Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to B.J. Grant, SVP of Investor Relations. Please go ahead.

Thanks, Audra. Good morning, everyone, and welcome to the Ventas third quarter financial results conference call. Yesterday, we issued our third quarter earnings release, supplemental investor package, and presentation materials, which are available on the Ventas website at ir.ventas.com. As a reminder, remarks made today may include forward-looking statements in other matters. Forward-looking statements are subject to risks and uncertainties, and a variety of factors may cause actual results to differ materially from those contemplated by 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 reconciliation of these measures to the most closely comparable GAAP measures, please refer to our supplemental posted on the Investor Relations website. And with that, I'll turn the call over to Deborah A. Cafaro, Chairman and CEO.

Thanks, BJ, and good morning to all of our shareholders and other participants. Welcome to the Ventas Third Quarter 2022 Earnings Call. We're very pleased with our enterprise and property results this quarter, led by our shop growth. Let's begin with some highlights. Normalized FFO per share was 76 cents, right in line with our forecast, with 13% shop growth, led by an outstanding 9% increase in year-over-year revenue, and nearly 5% total company year-over-year same-store cash NOI growth. Our 71-cent normalized FFO, ex-HHS grants, grew 3% from last year's comparable period. We are very pleased that we have delivered on our guidance once again, and more importantly, that we continue to realize sustained growth in our senior housing business that is accelerating. With year-over-year shop growth of 9% in the second quarter, 13% this quarter, and 15% to 21% projected in the fourth quarter, this is what we have been waiting for. Our strong numbers validate our longstanding commentary that we are at the start of a multi-year recovery and growth period in senior housing, driven by positive and improving supply-demand fundamentals, and propelled by the actions and decisions we've taken, Justin and the team's experience, accuracy, insights, and credibility, and, of course, our operators' efforts. I'd like to take this opportunity Opportunity to thank them. Looking ahead to the fourth quarter, in addition to shop growth, our normalized FFO guidance of 71 cents at the midpoint represents 4.5% growth versus Q4 2021, excluding material unusual items, overcoming the macro, interest rate, and FX headwinds that we and virtually all other real estate companies are experiencing. Turning to capital allocation, we continue to focus on our priorities of life science, research and innovation, and select senior housing, and working with long-time partners. We are driving and expanding our differentiated life science, research and innovation investment business. We have $2.3 billion in R&I projects recently delivered and in progress. Recently, we delivered core and shell of our new state of the art 400,000 square foot lab building in Philadelphia's premier life science ecosystem at one U City Square. It is on time and on budget and currently over 90% leased or committed to leading gene and cell therapy companies and a premier research university. We are very proud of what we and our partner Wexford have created in service of the major universities, research companies, and innovators in this growing life science market. We own significant additional land in One U City available to meet robust demand. Recently, we also began a new 255,000 square foot lab building to be anchored by the University of Maryland Baltimore. UMB, part of the University of Maryland system, is rated AA+, and they rank in the top 15 of U.S. universities for R&D spend. The project enhances our existing position in a market with the nation's most favorable ratio of current life science tenant demand to under-construction lab space. The project is projected to produce a stabilized cash yield of 7.5%, and open in 2024. Universities, which represent half of our consolidated R&I portfolio tenancy, continue to demonstrate significant demand for lab space, and our portfolio is well located and positioned to capture it. Before I wrap up, I'd also like to highlight two strategic investments we've made that demonstrate value creation in unique ways, connected to our core real estate investments as we've built valuable businesses and aligned with quality partners. Notably, we've seen the success of our Ventas Investment Management, or VIM, platform, which is Ventas' third-party institutional capital management business with over $5.5 billion of AUM. VIM has proven to be an effective strategy to continue to grow in attractive asset classes and build a valuable business and create a recurring revenue stream. We expect to earn the first promote revenue from VIM, approximating one cent per share, in the fourth quarter of this year. We intend to continue growing our VIM business, which provides strategic benefits to our public shareholders and leverages our platform and industry expertise. Second, our $1.4 billion strategic investment in Ardent, a high-quality health system, has been very successful. In addition to our well-performing Ardent real estate, we have a $50 million investment in a 10% equity stake in the Ardent Opco alongside Sam Zell's EGI. Recently, EGI entered into an agreement to sell a minority equity investment in Ardent to new investors, at a valuation representing over a four-time equity return. As a 10% owner, we expect to sell a 2.5% stake. Because the transaction remains subject to regulatory review, we have not included any potential gains in our guidance. ARDN demonstrates the importance of creating valuable partnerships and carefully choosing successful operating partners. Finally, we believe we are in an advantage position to succeed. Demographic demand fuels all our asset types, and senior housing supply-demand fundamentals are highly favorable and improving. While we, like most companies across the real estate space, are affected by higher interest rates, we are happy to be in a business that has pricing power, upside from occupancy and margin expansion, and has been historically resilient in a variety of economic environments. Thank you, and I'll now turn the call over to Justin.