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REIT Report – Life sciences are a hit for Ventas

REIT says it had a strong Q3, fueled by same-store NOI growth in all property types

By John B. Mugford

Chicago-based Ventas Inc. (NYSE: VTR) had a strong third quarter (Q3) of 2017, company officials say, because of the continued diversification of its portfolio, the strength of the properties it owns and operates, the partnerships it has formed and continues to form, and its exit from the skilled nursing facility (SNF) sector.

Highlighting the quarter was the strong performance of the company’s same-store net operating income (NOI), causing the real estate investment trust (REIT) to increase its full-year expectations for that category by 25 basis points to 2 percent to 2.5 percent.

“We are very pleased with our results this quarter, our prospects for the full year and the accelerated execution on our strategic priorities,” said Debra Cafaro, Ventas’ chairman and CEO, during an Oct. 27 conference call with analysts.

“Our financial strength improved as well, with enhanced liquidity and even better credit stats sequentially.”

One of Ventas’ strategic priorities has been to grow its rather new life science facility portfolio. The company entered the sector in September 2016 with its $1.5 billion purchase of the 4.1 million square foot Wexford Science & Technology portfolio from New York-based The Blackstone Group.

“We have already expanded (our life sciences) business by over a third and our pipeline of attractive opportunities continues to grow,” Ms. Cafaro said during the earnings call. “University-based life science and innovation centers remained a number one capital allocation priority.”

Robert Probst, executive VP and chief financial officer, reported that the company’s life sciences portfolio is 97.5 percent occupied, with 75 percent of rent revenues coming from investment grade tenants of companies with more than $1 billion in equity market capitalizations.

Ventas continues to increase its exposure to the sector, as officials said the REIT is in the process of making a large acquisition and has broken ground on a future $62 million life sciences building in Providence, R.I., affiliated with Brown University.

The company also reported that its medical office building (MOB) portfolio continues to perform well, as its same store cash NOI increased 1.5 percent in Q3, “supported by lease escalations and a strong tenant retention.” As a result of the strong performance of its MOB portfolio, Ventas “raised the midpoint of our guidance by 25 basis points to a range of 1.5 percent to 2 percent for a same-store medical office assets in 2017.”

Disclaimer: The author has no financial position in the companies mentioned and this article does not constitute an investment recommendation.

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