View Of Retired Analyst, Baby Boomer And Senior Housing Resident

I began my career as a stock analyst in 1997 covering health care REITs (HCREITs) and senior housing operators (SHOs).

I established my credibility with institutional investors beginning in the year 2000 by recommending select HCREITs when over-building, a recession and changes in skilled nursing reimbursement devastated senior housing and care industry.

In 2000, I saw the HCREITs as a “once in a lifetime” investment opportunity.

Institutional and individuals investors who purchased HCREIT near the year 2000 bottom were handsomely rewarded. In the 13 years between January 1, 2000 and January 1, 2013:

• Ventas’ (VTR – $66.08 – 2.91% yield at close 2/21/202) share price increased an average annual rate of 133%
• Welltower’s (WELL – $148.58 – 1.78% yield at close 2/21/2025) share price increased at an average annual rate of 22%.

Ventas and Welltower Report Strong Growth and Optimism It Will Continue

On Wednesday February 12, 2025, The Wall Street Journal (WSJ) had a front-page chart showing about 500,000 fewer private-pay senior housing units vs. projected SH demand over the next five years. https://www.wsj.com/economy/housing/aging-boomers-are-about-to-rekindle-the-senior-housing-market-cd2ebbb5?page=1

On their 4Q04 earning calls February 11th and 12th, Ventas CEO Debra Cafaro reported 7% normalized annual FFO per share per share 2024/2023. Welltower CEO Shank Mitra reported 18.7% at WELL – see earnings summary below.

Both CEOs were confident that outsized growth would continue – driven by occupancy and rate growth in their private pay senior housing operating properties where REITs capture earning growth, and from new senior investments because large numbers of need to be refinanced from regional banks with capital constraints.

Aging of the Baby Boomers has been a Siren Call for investors

In the 25 years I analyzed and financed HCREITs, aging of the Baby Boomers alone has never been a good reason to invest in HCREITs or SHOs. Between 2013 and 2023, investors were periodically bullish on senior housing as the leading edge of the Boomers hit 65, 70 or 75. But these periods of optimism were quickly followed by disappointing growth or bad news, most recently from the COVID Pandemic, which lower occupancy and increased operating cost, particularly labor costs. It is always risky for an analyst to say “But this time it will be different”, particularly after share prices in a sector have increased. But that is exactly what I am doing.

I turn 75 in April. I am a full-fledged Baby Boomer, and my wife and I moved to a senior housing community in mid-2024.  So, I am now a true “industry insider”. I own and am positive about investing in VTR and WELL because their growth profiles have improved dramatically.

Earning growth at both VTR and Well was boosted in 2024 by higher occupancy, and higher monthly charges. Welltower management also noted that for the first time ever occupancy continued to improve in 4Q24, including over Christmas, and in 1Q25. In the typical seasonal pattern, occupancy declines in winter months when more residents die from respiratory illness and seniors and their families delay move in until after the Christmas and new years holiday.

This year, the experience of operators with high quality properties I mirrored what Welltower reported. When we joined the waiting list at the 200+ unit entrance fee CCRC where my wife and I now live in the fall of 2023, the community had mid-80% occupancy and 12 households on the waiting list. In February 2025 occupancy is 100%, with vacated units as soon as they can be refurbished and there are 104 households on its waiting list. The marketing staff attributes this to the dam opening on seniors who did not want to move during the COVID Pandemic.

Earnings growth at Ventas and Welltower results about much more than Baby Boomers turning 80 beginning in 2026 and more seniors moving post-COVID. These two large cap HCREITs have added staff with operatig expertise and systems that allow them to better assess operations at their properties, encourage best practices by their operating partners, shift properties to operators who have economies of can and outperform industry averages.

Moves in this direction started at Welltower (formerly Health Care REIT – HCN) before Shank Mitra join the company. Based on his earnings call comments, Shank and his team have developed what they believe is industry leading technology that will drive earnings even after the demographic tail winds slow. Shank’s time as a hedge fund real estate analyst has allowed him to see, appreciate and explain to investors how tech, including the current hot button AI, has benefitted other real estate sectors and can be applied to senior housing, and he and his team are committed to exploiting this advantage to benefit shareholders.

Ventas was less tech-slick in discussing its use of technology on its earnings call, and did not suggest VTR is an AI play. Ventas has been increasing its operating expertise almost since in inception, when it began renegotiated leases with its largest tenant in bankruptcy. Like Welltower, it has developed strategies and systems to improve earnings growth and drive operator performance, and greatly improved it knowledge of operations since Justin Hutchens joined the company as EVP in 2020. He held senior management positions at both US and UK senior housing operators before joining Ventas.

I have known Debra Cafaro at Ventas since she joined the company in the late 1990s, and Shank Mitra since his days at Millennium. I am very positive on both management teams.

VTR and WELL have restructured leases between 2000 and following the pandemic, giving up current rent to capture a greater share of future income growth from rising occupancy and rates.

WELL has outperformed VTR recently because it is investing at a higher level, finding some large off-market transactions and, like Ventas, recently started its own fund for institutional investors to co-invest in seniors housing and healthcare real estate.

Private equity investors controls many SHOs snd other healthcare providers, such as surgery centers and physician groups. The future direction of healthcare funding and reimbursement had become much more uncertain since President Trump took office. I anticipate investment opportunities in senior housing and healthcare real will increase as private equity investors cash out and debt held by regional banks matures. VTR and WELL have the capital and the expertise to profit in this environment without taking on too much, or under-pricing the, risk.

I have known Debra Cafaro at Ventas since she joined the company in the late 1990s, and Shank Mitra since his days at Millennium. I am very positive on both management teams.

I am not making buy, sell or hold recommendations on the HCREIT or SHO sectors, but I hope to continue commenting on significant industry trends and where I see interesting opportunities. Please let me know if you find my comments useful, topics on which you would like to know my views and how I can improve the product. You can also subscribe to my blog below.

Some key data points from VTR’s and WELL’s 4Q Earnings

• On February 12, 2025, VTR reported
  • Normalized Funds From Operations per share of $3.19, an increase of approximately 7% compared to the prior year
  •  Net Operating Income* (“NOI”) growth of 7.5% YoY and Same-Store Cash (SSNOI) year-over-year growth of 7.7%
  • On a SSNOI basis, the senior housing operating portfolio (“SHOP”) grew nearly 16% year-over-year, with average occupancy growth of 300 basis points and NOI margin growth of 180 basis points
  • In 2025, the Company expects to achieve significant NOI growth in the SHOP segment and to benefit from accretive senior housing investment activity.
  • CEO Debra Cafaro guidance for 2025 Normalized FFO per share of $3.41 at the midpoint of the range this is a projected increase of approximately 7% primarily due to the benefit of NOI growth in the Company’s SHOP segment and accretive senior housing investments completed in 2024 and expected in 2025, partially offset by the impact of higher net interest expense, foreign exchange and the dilutive impact of a higher share price. The Company has included approximately $1 billion of 2025 investments focused on senior housing in its 2025 guidance.

On February 11, 2025, WELL reported:

• 2024 Normalized FFO attributable to common stockholders of $4.32, an increase of 18.7% over the prior year
• SSNOI growth of 12.8%, driven by SSNOI growth for its SHOP portfolio of 23.9%
• SHOP year-over-year same store revenue increased 8.8% in the fourth quarter, driven by 310 basis points (“bps”) of YoY average occupancy growth and Revenue Per Occupied Room(“RevPOR”) growth of 5.0%
• SHOP portfolio YoY SSNOI margin expanded by 320 bps in the fourth quarter driven primarily by strong RevPOR growth, which continued to meaningfully outpace Expense per Occupied Room(“ExpPOR”) growth.
• WELL provided 2025 guidance for normalized FFO attributable to common stockholders in a range of $4.79 4 to $4.95, indicating 13% growth at the midpoint of $4.87.