Ventas, Inc.

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 star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star and one. I would now like to turn the call over to BJ Grant, Senior Vice President of Investor Relations. You may begin.

Thank you, Bailey, and good morning, everyone, and welcome to the Ventas Second Quarter 2024 Results Conference Call. Yesterday we issued our second quarter 2024 results, a release, presentation materials, and supplemental investor package, which are all available on the Ventas website at ir.ventasrete.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 investor package posted on the Investor Relations website. And with that, I'll turn the call over to Deborah Acufaro, Chairman and CEO of Ventas.

Thank you, BJ. On behalf of all my colleagues, I want to welcome our shareholders and other participants to the Ventas second quarter 2024 earnings call. It's an exciting time for our business. We are driving performance in the early stages of an unprecedented multi-year NOI growth opportunity fueled by powerful demographic demand and the most favorable fundamentals ever in the senior housing industry. Ventas plays an essential role in the longevity economy. serving a large and growing aging population with over half our business in senior housing. This creates a compelling near and long-term growth and value creation opportunity. Today, I'll discuss Ventas' strong results and our latest increase in our 2024 expectations as we generate outperformance in our senior housing operating portfolio, increase shop investment activity, optimize net operating income throughout our portfolio, and improve our financial strength. Let's start with results. We began 2024 with momentum, which continued in the second quarter. Our enterprise delivered 80 cents of normalized FFO per share, reflecting 7% year-over-year growth. Shop led the way with same-store cash NOI growth of over 15%. Total company same-store cash NOI grew nearly 8%. and our balance sheet is trending positively with 50 basis points of leverage improvement already year to date. We are pleased to once again raise our 2024 normalized FFO per share guidance and our total company same store NOI expectations on the strength of this performance. Our growth expectations and value creation opportunity put us in the top cohort of companies across the REIT landscape. We're executing on our focus strategy, designed to deliver growth and value to our stakeholders. As a reminder, there are three prongs to the Ventas strategy. Deliver profitable organic growth in our senior housing portfolio, capture value through investments focused on senior housing, and drive cash flow throughout our portfolio. Here are some key updates in each of those areas. In SHOP, we have now delivered eight consecutive quarters of double-digit, year-over-year, same-store organic cash NOI growth. More importantly, we see a durable multi-year NOI growth opportunity ahead of us, powered by occupancy gains and revenue growth. Senior living provides invaluable benefits to residents and their families. In the quarter, occupancy grew 320 basis points year over year, significantly outperforming industry benchmarks, and revenue expanded 8%. Our data-driven decisions and able execution by talented operators enabled our communities to attract more than our fair share of the strong demographic demand for senior living. Remember that our prior senior housing occupancy peak was 92%. Currently, our portfolio has trended to 84% occupancy and 27% margin. There is an additional $140 million incremental NOI opportunity simply by getting to 88% occupancy and 30% margins in the portfolio. when SHOP NOI would approximate a billion dollars a year. From there, we expect our portfolio, operators, and communities to shoot for and potentially beyond that 92% prior occupancy peak because surging demand and suppressed senior housing construction are creating such favorable conditions, particularly in our markets. The SHOP resident base we serve primarily the over 80 population, should grow by over 24% in the next five years. This population is increasing rapidly each year from about half a million people annually now to over 800,000 individuals starting in 2027 as the leading edge of the gigantic Baby Boomer cohort turns 80. There were only about 1,300 units of senior housing started in the second quarter, and construction as a percent of inventory is only 1%, both the lowest on record. Equally important, the duration of new construction continues to elongate, and we expect deliveries to be constrained for years to come. This favorable supply-demand backdrop provides powerful tailwinds and a long and unprecedented runway for growth. Justin will explain how our actions, platform, data and insights together with our operators deliver value to seniors and their families and position Ventus to outperform a strong market. We are also increasing our investment activity focused on senior housing as we execute on the second prong of our strategy. We're on track to close about $750 million of investments this year. Given the favorable market conditions and the strength of our pipeline for quality acquisitions, we are committed to ramping up our investment activity. Ventas is one of the country's largest owners of seniors housing, and we are excited about the external growth opportunities we see in the market. Rarely in my career have investment conditions been as constructive. We can invest in senior housing assets with high single-digit going-in yields and substantial near-term NOI growth prospects. Replacement costs, net absorption projections, and affordability remain key criteria in our investment approach. These senior housing investments expand our shop footprint, increase our enterprise growth rate, and reinforce our consistent commitment to financial strength. Third, we're also focused on driving cash flow and value creation throughout our portfolio. Our outpatient medical and research portfolio once again contributed complementary compounding growth for Ventas, powered by our competitively advantaged Lillibridge operating platform that excels in tenant satisfaction and retention. We also want to provide you with greater clarity on the 23 LTACs operated by Kindred with a lease maturity of April 30, 2025. These long-term acute care hospitals represent about 5% of our NOI, or $110 million annually. We've made a lot of progress since we last updated you. Currently, we are in advanced discussions with Kindred regarding a lease resolution for these properties. While a deal is not done and terms could change, we and Kindred are close to a transaction that would result in a 25 to 30% full-year rent reduction on these 23 LTCHs starting May 1, 2025. About two-thirds of that amount would be reflected in calendar year 2025. We'll be happy to share more with you if and when a deal is concluded. We continue working toward a positive lease resolution that optimizes Ventas value and the NOI from these 23 properties, strengthens the master lease, and supports Kindred's future success. There are two final items that represent our approach to thoughtful investing and creation of win-win outcomes with our operators over time. First, Ardent recently completed its successful IPO. and we congratulate the management team and our partners. Ardent has done it right, focusing on patients, quality clinical care, employees, and communities. Ardent's current equity value exceeds $2.5 billion, and as Sam Zell used to say, liquidity is value. With $1.6 billion invested in assets operated by Ardent, Centos has always been happy with Arden's financial stability, its operational acumen, and its steady growth. The company's IPO has further enhanced this positive investment. In addition, Centos has an ownership stake in Arden, currently valued at about $170 million, over four times our original investment. And we believe there's additional upside in Arden's business and its valuation. Also, in the second quarter, we monetized about 10% of our Brookdale warrants for $6 million in cash profits. We received these warrants as part of the successful lease arrangements we concluded with Brookdale in 2020. The warrants provide upside sharing in Brookdale's success and take advantage of the positive macro conditions in senior housing. Our current in the money value of our Brookdale warrants is about $70 million. Stepping back, we are optimistic about the future of our business, which is centered on helping a large and growing aging population live longer, healthier, and happier lives. As the broader economy shows significant signs of slowing down and the labor market softens, Ventas' business, with over half in senior housing, is highly advantaged across the REIT space. All our asset classes benefit from inelastic, need-driven, demographically-driven demand, and most benefit from a softer employment backdrop. As a result, we have an unprecedented multi-year growth opportunity right in front of us. With favorable results this quarter and our improved outlook, our team is focused on doing everything we can to execute our strategy and continue to drive FENTAS performance and returns. With that, I'm happy to turn the call over to Justin.