Ventas Inc (VTR) — Q3 2023 Earnings Call Transcript

Thank you, Manny. 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.ventasreit.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 Debra A. Cafaro, Chairman and CEO of Ventas.

Thank you, BJ. Good morning to all of our shareholders and other participants. I'm happy to welcome you to the Ventas third quarter 2023 earnings call. We're pleased to deliver a strong quarter of normalized FFO of $0.75 per share, representing 6% year-over-year growth and total company same-store cash NOI growth of nearly 8%. Our results reflect both the actions we have taken to drive performance and the powerful demand across our diversified portfolio that is unified in serving the needs of a large and growing aging population. We are also pleased to raise our full year 2023 normalized FFO guidance midpoint to $2.98 per share. Our senior housing operating portfolio fueled our performance, proving the significant benefits that our communities and operators provide to residents and their families. Same-store year-over-year cash NOI growth exceeded 18%, driven by Ventas' operational insights platform in collaboration with our operators. Our Canadian SHOP communities ended the quarter at nearly 96% occupancy and delivered 6% year-over-year NOI growth. Across the SHOP business, move-ins significantly exceeded 2019 levels and the portfolio experienced broad-based occupancy gains in both assisted and independent living. Spot occupancy accelerated in the third quarter, gaining 180 basis points from the beginning to the end of the quarter. The multiyear growth in recovery cycle in senior housing is in full swing. In addition, our outpatient medical and research portfolio continued to distinguish itself by delivering solid compounding consistent growth in the third quarter. As we step back and look across commercial real estate, we continue to believe that Ventas occupies an advantaged position. Here are five key reasons why. First, because our portfolio is unified in serving the needs of the nation's large and growing aging population, demand is strong and getting stronger. By 2030, 20% of the US population, more than 70 million individuals, will be 65 or older. The over 80 population alone is expected to grow 24% in the next five years. All of our asset classes benefit from these demographic demand trends and provide powerful tailwinds to our enterprise in a variety of economic scenarios. In senior housing, we're facing the most favorable supply-demand fundamentals the industry has ever experienced. Senior housing starts are at cyclical lows and likely to go lower due to tightening credit conditions. In our SHOP markets, we have virtually no new starts. This favorable supply-demand relationship creates a compelling backdrop for multiyear growth ahead in senior housing occupancy and rate, particularly in light of the affordability of senior housing and the value proposition it provides. Second, investment opportunities continue to grow in the senior housing space, and we are well-positioned to capitalize on these opportunities. There is a huge pool of quality senior living communities with attractive return profiles that are coming to market as a result of debt maturities and higher debt service costs. These communities tend to have meaningful runway for occupancy and NOI growth in the hands of well-capitalized, experienced, and knowledgeable owners like Ventas. This trend should accelerate in 2024 and 2025. We have the scale, team, relationships, capital access, analytical and operational insights, and experience to expand our senior housing portfolio and create NOI growth. Third, we've continued to build out our Ventas Investment Management, or VIM platform. VIM provides Ventas another way to expand the opportunity set that benefits our institutional investors and public shareholders alike. This quarter, we invested over $200 million through our open-end fund. Fourth, Ventas has assembled the nation's leading business at the intersection of medicine, research, and universities. Our high-quality outpatient medical portfolio is well occupied and affiliated with leading healthcare systems across the country. Our research business represents a differentiated credit-driven model centered on serving the nation's top universities, and our excellent internal property management and leasing function enables us to deliver an outstanding experience to our tenants and drive leasing activity. We continue to see meaningful institutional demand in our university-based research portfolio. And I'd like to give you just a few recent examples. Atrium Health Wake Forest Baptist recently announced its intention to create a new 160,000 square-foot Eye Institute at our redevelopment site in the innovation quarter at Wake Forest. At Arizona State University, the National Institutes of Health recently leased space for medical research, demonstrating the desirability of our site and creating a magnet for other researchers. In addition, Siemens Medical Solutions recently leased space at our $0.5 billion Charlotte, North Carolina project, which is already 80% pre-leased. And last, we are pleased to welcome Dr. Drew Weisman, recent Nobel Laureate to our Penn site at One University City later this year. We are proud to serve these world-class medical and scientific leaders as they pursue life-changing discoveries. Fifth and finally, we continue to demonstrate access to multiple capital markets at attractive pricing to maintain financial strength and flexibility. We have raised nearly $3 billion year-to-date in various capital markets ahead of the recent rise in interest rates. These actions enhance our liquidity and underscore the competitive advantages Ventas has because of our size, scale, and diversified enterprise. Across Ventas, we are laser-focused on maximizing fundamental performance and generating superior total returns for shareholders by enabling exceptional environments that meet the needs of individuals, families, and communities. In closing, we are pleased to improve our 2023 outlook and to see that while we certainly have more work to do. Our total returns to shareholders over the last one and three-year periods and since the beginning of 2022 have outperformed both the healthcare REIT and the REIT indices. The whole Ventas team remains intent on delivering outsized value to its shareholders and other stakeholders. Now, I'm happy to turn the call over to Justin.

Thank you, Debbie. I will start by reporting our third quarter SHOP results, which were very good. Broad-based demand combined with the implementation of the Ventas OI active asset management playbook in collaboration with our operators delivered healthy top and bottom line growth in SHOP during the quarter. Our SHOP portfolio continues to deliver double-digit same-store cash NOI growth for the fifth quarter in a row. The NOI growth of 18.2% was led by the US with 24% growth and our 95% occupied Canadian portfolio contributed 6%. Occupancy accelerated throughout the quarter, with 180 basis points of spot occupancy from June to September, led by the US with 210 basis points. US SHOP occupancy growth was supported primarily by strong demand with move-ins that were 120% at 2019 levels. Furthermore, we saw 130 basis points of average sequential occupancy growth from the second quarter to the third. Revenue growth was 7.6% year-over-year, driven by the occupancy growth as well as RevPOR growth of 6.2%, which was led by the US with 6.4% as we continue to focus on optimizing price and volume to maximize NOI. RevPOR would have been 20 basis points higher if adjusted for the Sunrise Special Assessment that occurred in the quarter last year. OpEx performed well with 4% growth and margin expanded 230 basis points year-over-year. Now, I'll give an update on the holiday independent-living communities. We are pleased with the performance across this portfolio. The 75 holiday by Atria US IL communities are benefiting from the broad-based demand and saw spot occupancy increase by 190 basis points from July to September. We continue to see good performance in this more streamlined portfolio which allows for enhanced focus and with a renewed sense of urgency to execute. We will continue to closely monitor the performance. The 26 IL communities that moved to proven operators grew spot occupancy by 140 basis points from July to September. These three operators are making early improvements to service delivery and performance. Our expert approach of moving communities to new operators ensures that lead banks are transferred immediately, websites are integrated, and management, including the CEOs, have access to the communities well ahead of the transition date to enable quick execution and results. We continue to advance the OI platform and its impact on the portfolio. I'm pleased to see outsized performance in our Sunrise portfolio, where our move-in volume is exceptionally high, our transition communities are experiencing remarkable occupancy and RevPOR growth and our NOI generating CapEx program, which is delivering initial returns of about 20%. As we look to finish the year, we are expecting attractive top and bottom line SHOP same-store cash NOI growth of 17% to 19% for the full year. The key assumptions that drive the midpoint of our range are average occupancy growth of about 110 basis points and RevPOR growth of about 6%, which would total revenue growth to at least 7.5%. We expect operating expenses at around 4.5% growth due to increased occupancy. This, of course, implies continued margin expansion. Embedded in this guidance is the impact of the Sunrise Special Assessment that occurred in the third and fourth quarters of last year. Had Sunrise repeated the special assessment in 2023, our SHOP full-year NOI guidance midpoint would have been 200 basis points higher; this impact reverses out in Q1 2024 as Sunrise intends to return to the normal first quarter cadence during this rate increase cycle. We expect the fourth quarter to exhibit normal seasonal patterns and are projecting sequential and year-over-year average occupancy growth. The strong demand supporting our portfolio growth is indicative of the macro backdrop that Debbie described and most importantly, a testament to the high-quality care and services that we are offering our residents and their families. Our operating partners are focused on delivering a valuable living experience for our residents, a meaningful work experience for our employees, and a value proposition that is attractive to our residents and their families as they choose to live in our communities. Moving onto investments. We made two investments in the quarter through our VIM platform's open-ended fund. We acquired a trophy portfolio consisting of two outpatient medical facilities, totaling 281,000 square feet located in Tucson, Arizona, fully leased to AA-rated Banner Health. The purchase price was $134 million. These buildings are crucial to Banner's delivery of care and services, providing multi-specialty clinical care. We also acquired two Class A private-pay senior housing assets with 181 units in Connecticut and Massachusetts. The purchase price was $79.5 million; the assets were developed and sold by Benchmark Senior Living and two private equity firms. Benchmark is a strong regional operator with a long-standing reputation as a market leader in the Northeast. Our top investment priorities continue to be NOI generating CapEx in our existing real estate and senior housing acquisitions. Now, I'll hand over to Bob.

Thank you, Justin. I'll share some highlights of the Q3 performance in our outpatient medical and research and equitized loan portfolios, turn to the enterprise results for the quarter, discuss our balance sheet, and close with our updated and improved 2023 guidance. Starting with some highlights from our outpatient medical business. Outpatient medical continued its string of 3% or greater same-store cash NOI growth in the quarter. Benefiting from operational excellence as evidenced by tenant satisfaction scores, which outperformed 97% of our peers as surveyed by Kingsley. Meanwhile, our university-based research and innovation same-store cash NOI increased 3.3%, with occupancy growing year-over-year on the back of strong demand for space from our university tenants. This demand is evidenced by our recently completed developments at Penn and Pitt, which combined are already nearly 90% leased or committed. Ventas has experienced asset management teams continue to drive performance and value across all asset classes in the recently equitized loan portfolio or ELP. Underlying NOI performance in the ELP outpatient medical, triple-net, and SHOP portfolios is trending well and our timing of taking the portfolio over is proving to be prescient. Our 2023 ELP NOI expectation remains in line with last quarter. We also pruned the ELP portfolio through the sale of 6 skilled nursing assets for a gain in the quarter at an attractive price of $60 million or $135,000 per bed. Our overall enterprise reported strong third quarter normalized FFO per share of $0.75. and representing an increase of nearly 6% year-over-year, adjusting for lapping $0.05 in prior year HHS proceeds. Total company same-store cash NOI increased 7.9% year-over-year, powered by our SHOP portfolio growth of over 18% in the quarter. In terms of the balance sheet, our liquidity is significant. We have $3.1 billion of available liquidity, which covers our 2024 maturities by over three times, with our revolver undrawn and $400 million of available cash on hand. And I'm really pleased with how we realize that liquidity, namely through proactive capital raising well ahead of our 2024 maturing debt and prior to the run-up in base rates. We first took action in Canada in April, then raised over $1.8 billion in attractive convertible, secured, and bank debt in the summer and early fall. As a result, we've now raised $2.8 billion of capital year-to-date at an average cash interest rate below 5%. We've used these proceeds to reduce our 2024 maturities, less available cash to just $800 million. We extended our debt duration. We entered pay-fixed hedges at low points in base rates, and we reduced Ventas' floating rate to just 8% from 18% earlier this year. These are strong proof points of our advantaged access to attractive capital and our skill in using that access to the benefit of our shareholders. I'll conclude with our updated and improved outlook for fiscal 2023. After another solid quarter, we are improving our full year normalized FFO guidance to now range from $2.96 per share to $2.99 per share. This guidance midpoint represents a $0.01 increase versus prior guidance and 5% growth year-over-year ex-HHS, led by broad-based property strength. As we raise our normalized FFO per share midpoint for the year, we note that 2023 is unfolding directionally as we stated at the beginning of the year, marked by significant year-over-year property NOI growth partially offset by the macro impact of higher interest rates and FX. At the full year guidance midpoint, the implied fourth quarter normalized FFO of $0.75 per share is consistent with the third quarter, with sequential property growth led by SHOP, offset by higher interest rates, FX, and back-half dispositions. Total company full year same-store cash NOI year-over-year growth is maintained at 8% at the midpoint. Please see our investor presentation and supplemental disclosure posted to our website for further guidance assumptions. To close, we are pleased with the strong quarter, improved full year guidance, and the commitment and skill of the Ventas team. For Q&A, we ask each caller to state one question to be respectful to everyone on the line. And with that, I'll turn the call back to the operator.

Yes, thanks. Good morning everybody. Justin, you highlighted the impact that the later timing on the renewal increases or the special assessments that you send to Sunrise last year is having in the portfolio. I'm curious, is there anywhere else that you dialed back either the timing or magnitude of rate increases in order to drive occupancy here recently.

So, first of all, price volume optimization is an ongoing focus for us. You can see in our numbers that the RevPOR growth year-over-year has been solid. Obviously, there was an impact from Sunrise, so the $6.2 million would have been $6.4 million had it not been for that bad year-over-year comp. So, strong pricing power, really strong volume in the third quarter. So, we're really putting together, I think, the right balance of price and volume to drive growth.

I think it's important to note, Austin, that last year was an extraordinary situation that had never been seen before, and now we are simply returning to normal with the increases on January 1.

Yes. Thanks. Good morning. Debbie or maybe Justin, you talked about kind of growing acquisition opportunities. I'm just wondering if you could kind of frame what kind of returns you might be seeing either with going in yields or unlevered IRRs. I guess to marry that, how do you sort of think about the funding of those? Is that going to be part of them? Or is that going to be done on balance sheet with a combination of equity and debt? Thank you.

Great question. We will collaborate on that. Firstly, we do see our cost of capital aligning with the yields of senior housing investments, which we find most appealing. You mentioned several advantages we have in terms of funding. We possess liquidity and the VIM platform. Additionally, we are observing an increase in the volume of senior housing coming to market along with rising yields, which makes us optimistic about the cost of capital and the overall attractiveness of the yields. Now, I will pass it over to Justin to discuss the types of opportunities developing in the pipeline.

So, we're seeing a number of opportunities that are really building, and particularly in recent months and weeks include the number of sellers, institutional sellers that are dealing with debt maturities or fund maturities. And we're starting to see the returns become more interesting to us. We're seeing call it, 6% to 8% in place, and it really depends on the type of asset you're buying. If it's something that has more growth, it might be low to mid-6s that can grow to an 8% or better, and then a stabilized senior housing asset in the mid-7s, and we target low double digit and in some cases, even mid-double-digit unlevered IRRs.

Thanks. Maybe just following up on the acquisitions. We obviously saw a medical office M&A deal announced this week. So, I’m curious your interest in growing on the medical office side and how you’re thinking about current pricing within that space relative to the IRRs you can get in other asset types?

We really intend to lean into senior housing, where we have significant expertise and really ought to be a great owner of senior housing with our platform and our relationships. And as Justin said, double-digit to low double-digit IRR. So, we're very interested in that area. First and foremost, you saw that we did close in the VIM platform a medical office building, which has advantages for the VIM stakeholders, particularly in terms of being reliable, compounding cash flow.

Good morning. Hoping you could talk a little bit about what you're seeing with Kindred given the lease expiration coming up there? And as part of that, if you could talk a little bit about how deep the operator pool is if, in fact, there is a transition that has to happen at some point? And how we should think about the delta between EBITDARM and EBITDAR coverage? Thank you.

That was a multipart question, Juan. Good morning. So, a portion of the Kindred lease for 23 LTACs is up for renewal in 2025. We've talked about EBITDARM coverage being about 0.9, and what's most important, obviously, is what the earnings capacity of these assets is likely to be post-2025 in terms of thinking about the outcomes. Right now, you can see that Kindred has adopted some initiatives for improving the operating performance, which we know are focused really on cost savings, in particular, labor and contract labor. And we're seeing that even in the quarter to date, those are beginning to show early signs of improvement. And so that's how we're really thinking about the 2025 renewal/maturity. LTAC certainly have a pool of qualified operators across the country from publicly traded select to a variety of regional operators, and we're familiar with all of those.

Hi. I was wondering, can you talk a little bit about the pace of development leasing in the R&I portfolio that you're seeing? And has there been any material change in the past three to six months in terms of the pace?

Yes, I mean one of the things I talked about is our largest project, which is in Charlotte, North Carolina, which is really at this intersection of universities and medicine and research. It's our largest project. It's one of the fastest-growing cities, and it is already 80% pre-leased. We just had Siemens sign a large lease there. And we're really at kind of the mid-construction phase. And so that's the most significant, but we are seeing other leasing activity. We only have a couple of other developments underway, and we are seeing leasing activity there.

Last quarter, you experienced the operator transition, and it seems to be going quite well. My question is whether you have reconsidered your approach to the relationship with operators and how you assess it. How can you ensure that there won't be any unexpected issues with transitions in 2024, and do you feel confident about what lies ahead? Thank you.

Hi, it's Justin. First, I want to emphasize that we always begin by evaluating whether we are in the right markets. Over the past few years, we have worked extensively to ensure we are well-positioned to take advantage of the recovery. In markets where we didn't see attractive growth potential for our assets, we have made divestitures. This has been part of our strategy to ensure our assets are optimally positioned. We have also invested in our communities. Operator selection has been a consistent element of our approach, and it should not be surprising that we are refining and ensuring we have the best fit with operators to create value in our markets and assets. We are satisfied with the results we are achieving. After a recent transition, we implemented several initiatives to secure quick results, including getting management teams and CEOs on-site promptly. We secured our lead bank to begin executing on leads immediately, and we transferred the website. The initial results are promising, and we will continue to closely monitor the situation. We are very pleased with our execution so far.

Hey everyone. Good morning. I'm just kind of thinking about the SHOP business as we go forward. How are you guys thinking about pricing power? I understand the dynamic that's going on with the Sunrise timing, but just kind of thinking about just pricing power broadly.

Hi, it's Justin. So, the pricing power over the past few years has really been very, very good. We have at a relatively low occupancy, this broad-based demand is allowing for appropriate pricing really to ensure that we can cover all the costs associated with delivering care and services and to deliver growth for the business, and we remain very focused on that, both from an internal pricing standpoint and externally. And if we can get it right. We tend to look for RevPOR export spread usually around 2% to 3%. And that's where we're focused. And the price volume optimization is working because we're really getting growth in RevPOR, and we're seeing the occupancy growth as well.

Thanks. Good morning. So, I want to talk about capital. Justin, you said top priorities are senior housing investing. We went through that. And then CapEx spending. Can you talk about the cadence of how that might transpire from 2023 to 2024 in terms of the types of dollars or thinking about spending and how much more could come in 2024? Just trying to get a sort of a range to quantify that a bit? And also if you comment on the SHOP guidance of 18% at the midpoint same-store NOI guidance, how much of that is juiced by the deployment of CapEx, so you get the revenue benefit and the occupancy benefit, but you don't get the cost hit at least out of the gate. So, I'm just curious if you can comment on that. Thanks.

Why don't I start with the second part of the question and then Bob will jump in with the first part. So, we have a number of projects that are underway. We have 170 projects that should complete by the end of this year. We started on this endeavor in October of 2022. So, relatively quick execution on a number of improvements across our communities, mostly mid-market focused and also unit upgrades. We do have, obviously, the ability to measure the results. And what we do is we just simply take light communities and compare the results in those that have CapEx versus those that didn't. And where we're seeing outperformance in our communities that have benefited from the CapEx, the early results are showing a 20% plus ROI, but we're also seeing growth across the broader portfolio. We're benefiting from the broad-based demand across the portfolio. We're leaning into markets and assets where we want to improve our market position through investment, and it's all really coming together and working for us.

And it's a multiyear return as well that builds on itself.

In response to that part of the question regarding our multiyear investment, I would reference Page 20 of the investor deck. We began this investment about a year ago, in 2022, and we aim to complete around 170 projects by the end of this year. This has resulted in an increased redevelopment capital expenditure of $230 million this year. We anticipate this higher level of spending to continue next year as we finalize our opportunities, and we plan to keep investing given the returns we've mentioned. However, this will eventually normalize over time.

Hey good morning. Jesus on for Connor this morning. Thanks for having me on the call today. So, just on the equitized loan portfolio, how should we be thinking about the rest of the assets in the mix here? So, how far along has Ventas been identifying and processing the CapEx needs of the outpatient medical assets? A couple of quarters back, you were talking about using a playbook from a previous portfolio. So, I'm just wondering if you can quantify the amount and timing of these investments? And how are these leasing conversations progressing for the portfolio? And just a quick follow-up. Looks like the SNFs, you guys had some pretty favorable cash yields in the assets sold. Any color on the coverage level or remaining lease term on these assets? Thanks guys.

Good morning, Jesus. I'm going to ask Pete to talk about the opportunity in the medical office building portfolio outpatient medical that he's taken over and is deploying the Lillibridge playbook. There's a lot of opportunity, and we're obviously off to a good start there. And Pete, I'll turn that over to you.

Thanks. We're really excited about the portfolio. So far, we have transitioned 32 buildings onto our Lillibridge platform out of 88, making significant progress in the first quarter. Regarding leasing, we have replaced about half of our leasing agents, specifically 12 out of 23, bringing in new people who we believe will effectively manage this portfolio. We started with 77% occupancy and just completed our first quarter of managing it. We achieved an 85% retention rate and have 200,000 square feet of new leasing in our pipeline, which makes us very optimistic. As a fun anecdote, we inherited a building called Eagle's Landing in suburban Atlanta. It is a 45,000 square foot building that was completely empty when we acquired it, now it is 30% leased, and we just signed a letter of intent for another 20,000 square feet in that building yesterday. We expect to reach 75% occupancy there very soon. We are optimistic about the portfolio, and we are also investing in capital to improve the infrastructure of these buildings, and that work is well underway.

Good morning. Could you provide more details about the decrease in occupancy in the MOB portfolio, including information on the types of tenants and the factors contributing to this decline? That would be helpful. Thank you.

Sure. So, look, our occupancy is at 91.7%. And we've had some really nice gains over the last couple of quarters in occupancy. We're really happy with our retention. Retention is 82%, TTM and 88% for the quarter. We got a very strong new leasing pipeline of 600,000 square feet for the OM portfolio. And we have two off-campus, non-strategic 30,000 square feet that we're considering selling. And if those were not in the portfolio, occupancy would be essentially flat.

Thanks Pete.

Thank you for your question. Considering the success you've had with the transitions at Holiday, I'm curious if there are plans to transition any additional groups. Are there any indications of incremental group performance from ABC, given the success of the transitions? Additionally, could you provide an update on the Brookdale lease, which is set to expire in a couple of years?

Okay. Hi, it's Justin. Let me start with the first question. We currently have 75 communities in our same store that are operated by Holiday by Atria. These communities have been performing relatively well, and that trend continues. They are now managing a more streamlined and focused portfolio with a strong sense of urgency. Their determination to succeed is evident. The company has been highly focused on sales execution and increasing tour conversions, which has yielded good results in the third quarter. We will remain closely engaged and closely monitor this situation, expecting to see continued positive results. Regarding Brookdale, we are pleased to see improved performance across our portfolio, which has been steadily enhancing. There is good coverage, and we anticipate further progress in that portfolio moving forward.

Thanks. I just wanted to ask a little bit more about pricing trends and how to think about going forward, particularly in the IL segment. I mean, if we're just seeing kind of broader multifamily, broader housing prices come down from an inflationary standpoint. Is there a dynamic there on pricing for independent-living that may be different versus assisted-living going forward? Any thoughts on that?

And we certainly track the resolve of markets and particularly as it pertains to independent living. But quite frankly, this price volume optimization I've been speaking to has been working for us, and we've seen really both move together price and volume moving together. And so I'd say the pricing power remains significant, and we're pleased to see the pickup in occupancy as well.

Thanks. I just want to circle back on the investments. I know that Ventas has been kind of highlighting that there's more investment opportunities. But how active can the company be, I guess, over the next year or so? I mean are there larger portfolios out there that you're interested in or tracking? Or can you actually start pursuing some smaller deals and maybe kind of lump them in with some of your current operators that might want additional scale in their specific markets?

Yes, sure. So, we are looking at smaller opportunities to really continue to expand our existing relationships and add new relationships and using a variety of different sources of capital to do that. I mentioned Benchmark. That's an exciting new relationship for us. And certainly, we have the capability to do larger transactions as well. So, we see most of what's on the market and a lot of what's not on the market, and we're very interested in expanding in senior housing.

Great. Thanks for taking the question. I just wanted to circle back on the public M&A deal this week. I know you've said now a couple of times you want to lean into senior housing. But just curious, I mean, are you underwriting that transaction? And is it something that you'd be interested in pursuing at this point?

We'd love to help you out, but we have a firm policy on not commenting on other transactions, and we have a great outpatient medical and research business, as I described, and we're really interested in investing in senior housing. And so I think you should defer those questions to the companies themselves.

Thanks so much. We're very pleased to deliver a strong quarter for our shareholders and improve our outlook. And all of us at Ventas really appreciate your attention, your interest in our company, and we look forward to seeing you in Los Angeles. Thanks.