Welltower came out of the blocks first with its third quarter results, and it was quite impressive. The second largest healthcare REIT, Ventas, reported at the end of last week, and while the results were not quite as good as Welltower’s, it was close, and Ventas should be happy with the continued improvement.
For Ventas, same-community occupancy in its SHOP portfolio increased sequentially by 30 basis points and year-over-year by 110 basis points to 83.6%, helped by its Canadian portfolio at 95%. Even though Welltower posted larger same-community sequential and year-over-year increases of 120 basis points and 220 basis points, respectively, its overall occupancy is lower at 81.7%.
Same-community NOI at Ventas jumped by 18.2% year-over-year (Welltower +26.1%) and the operating margin increased by 230 basis points to 25.1% (Welltower +330 basis points to 25.6%). On a sequential basis it was a different story, with Ventas’ NOI and margin dropping by 0.50% and 50 basis points, respectively, while Welltower was up sequentially by 4.5% and 40 basis points, respectively. Perhaps coincidentally, the operating margins at the two REITs are quite similar.
When breaking out the various markets in which Ventas’ operating partners are in, average RevPOR in the Primary Markets was $6,709, compared with $4,837 and $4,232 in the Secondary Markets and “Other U.S Markets,” respectively. That is a huge disparity, and occupancy in the Primary Markets is the lowest overall at 78.7% compared with 80.3% and 80.2%, respectively, in the Secondary and Other U.S. markets.
Cash NOI growth was lower in the Primary Markets at 19.4% year-over-year, compared with 31.8% and 27.3%, respectively, in the Secondary and Other U.S. Markets. Canada, with 82 communities, posted a small year-over-year increase in NOI of 6.0%. But when occupancy is steady at 95%, and with RevPOR of just $2,809, you are not going to see large increases.
Despite some of the differences between the two REITs, it is great to see that both continue to recover and expect better times ahead. The CEOs of Ventas and Welltower were on the stage together at the recent NIC Conference in Chicago, and while many were expecting to see some fireworks between them, it did not happen. What was disappointing was that the moderator did not press them to explain their different philosophies and approaches to today’s market environment, and how that may impact future growth and profitability. Maybe next year.
In the opening minutes of trading last Friday, the shares of Ventas jumped by 1.8% on the earnings results and continued increasing for a gain of 3.7% by midday, but ended with just a 0.25% increase.
