Ventas Inc (VTR) — Q3 2025 Earnings Call Transcript

Thank you, Van. Good morning, everyone, and welcome to the Ventas Third Quarter 2025 Results Conference Call. Yesterday, we issued our third quarter 2025 earnings release, presentation materials and supplemental information package, 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 information 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. I'd like to welcome all of our shareholders and other participants to the Ventas Third Quarter 2025 Earnings Call. Building on our momentum, Ventas delivered excellent performance and growth in the quarter as we continue to execute on our 1-2-3 strategy. Our strategy is based on the megatrend of longevity. As one of the world's largest owners and acquirers of private pay senior housing, we are positioned to capitalize on the sustained growth in demand from a large and expanding aging population. Our strategy emphasizes growing our private pay SHOP business organically and by investing in senior housing. We are doing both as we expect 2025 to be our fourth year of double-digit SHOP NOI growth, and we anticipate closing $2.5 billion of private pay U.S. senior housing investments during the year. Most importantly, we foresee at least another decade of accelerating demand for senior housing. The Ventas strategy, organization and team have been built to meet this moment and capitalize on the favorable external demand backdrop. Over the past several years, we have added expertise, acquired over $4 billion of senior housing communities, converted communities from Triple-Net to SHOP, expanded our SHOP operator base, made significant strategic dispositions, increased our scale and improved our financial profile. As a result, our enterprise is now delivering $2.5 billion of net operating income. Our SHOP percentage of NOI has increased nearly 2,000 basis points to represent half our business. We are working with over 40 SHOP operators. We have created significant occupancy and NOI upside potential in our 85% occupied U.S. SHOP portfolio through our deliberate portfolio composition, and our leverage has improved by 2 full turns. These actions and outcomes are designed to take advantage of powerful secular tailwinds in senior housing where supply and demand are tipped strongly in our favor, and we have this scale, platform and financial strength to win. Demographic demand is accelerating as baby boomers are starting to turn 80 this coming year and more people than ever are choosing senior housing for the valuable benefits it provides. The over-80 population is expected to surge into the coming decade and grow 28% just in the next 5 years. Yet senior housing supply is at record lows in both inventory growth and the number of new construction starts with just over 1,200 units started in the third quarter. Our strategy is producing strong results, increasing our enterprise growth rate and building financial strength. Let's now turn to the highlights of our quarterly results and latest 2025 guidance increase, our outsized organic growth in our senior housing operating portfolio and our active and increasing investment activities. Normalized FFO per share grew 10% year-over-year, and total company Same-Store Cash NOI increased 8%. SHOP once again powered our results, enjoying a strong key selling season. We saw broad-based demand for our communities and excellent RevPOR and revenue strength. Our U.S. communities led the way with 19% Same-Store Cash NOI growth and 340 basis points of occupancy growth. I want to extend a sincere thanks to our operators and the Ventas team to deliver this performance while helping seniors live longer, healthier and happier lives. We're pleased once again to increase our full year guidance, driven by our SHOP performance and increased senior housing investment activity. We now expect year-over-year growth of 9% in normalized FFO per share and 7.5% total company Same-Store Cash NOI at the midpoint of our improved guidance. These growth rates will put us in the top tier of companies across the REIT landscape, if achieved. On the investment front, we are seeing a strong upward trend in transaction activity and our pipeline continues to grow with quality investment opportunities in senior housing. We are accelerating our senior housing investment activities to expand the Ventas SHOP portfolio and increase our enterprise growth rate. Private pay U.S. senior housing is the company's number one capital allocation priority. The environment is highly favorable, private to public arbitrage opportunities are increasing, our strong and broad-based industry relationships are generating significant deal flow, and our capabilities, track record and financial strength provide meaningful competitive advantages. We've already closed $2.2 billion of senior housing acquisitions in the U.S. year-to-date and we've increased our 2025 investment guidance to $2.5 billion. We intend to build on our momentum. Following our right market, right asset, right operator framework, we are prioritizing investment opportunities in private pay senior housing that have different combinations of growth and yield to produce attractive risk-adjusted returns for our shareholders. Next, I'd like to highlight a key SHOP growth initiative. The previously announced transactions relating to 121 Triple-Net lease senior housing communities are well underway. We've already converted from Triple-Net to SHOP, 27 of the 45 senior housing communities slated for management transitions by year-end. We continue to expect to achieve significant occupancy and NOI upside in these communities over time. For the 65 communities remaining under the lease, cash rent will increase 33% beginning in 2026, and the disposition of the remaining 11 assets is in progress, with sale proceeds to be retained by Ventas. A final note on our research portfolio, which is generating only 8% of our enterprise NOI. Our portfolio has been constructed in a unique way. Within this small portion of our business, about three-quarters of our base rents are from creditworthy institutional leaders in medicine, pharma and research with a weighted average lease term of over 9 years. Making this portion of our NOI relatively well insulated from current market challenges. Importantly, only about 10% of our research portfolio is leased to pre-revenue or co-working tenants. We have no ground-up development in progress. And we continue to see institutional demand in new and renewal leasing from university, medical and global pharma tenants. In conclusion, we have built Ventas to meet this moment and capitalize on the secular demand from a large and growing aging population. We are executing our strategy to grow senior housing and delivering outstanding results, and we are well positioned to increase our deal activity. The future is bright as we use our many competitive advantages to deliver value for stakeholders and seize the unprecedented multiyear growth opportunity ahead. The entire Ventas team is in it to win it. And now I'm happy to turn the call over to Justin.

Thank you, Debbie. I'm excited to share an update on how 2025 has been progressing as we continue to execute on our strategy to drive both organic and external growth in our senior housing business. Let's start with SHOP. Our SHOP Same-Store portfolio delivered 16% NOI growth year-over-year in the quarter, led by the U.S. with 19% growth. Margin grew 200 basis points to 28% driven by over 50% incremental margin. Revenue grew 8% due to strength in both occupancy and pricing. We saw broad-based contributions to SHOP performance across our operating partners, delivering exceptional care and services to our senior population and very strong financial results with Sunrise and Atria leading the way. RevPOR grew 4.7% as our dynamic pricing continues to strike the balance between price and volume. Average occupancy grew 270 basis points year-over-year, led by the U.S. at 340 basis points with a particularly strong contribution from our independent living communities. We had industry-leading sequential occupancy growth of 160 basis points overall and 200 basis points in the U.S. Furthermore, we expect sequential average occupancy growth to continue into the fourth quarter. Moving on to SHOP guidance. I am pleased to raise SHOP guidance again with an NOI growth range of 14% to 16%. We continue to anticipate occupancy growth of 270 basis points in higher RevPOR driven by strong pricing as move-in rents and in-house rates are both increasing year-over-year. I'd like to turn your attention to Page 12 in the earnings presentation. On the left side of the page, you'll note, we have consistently outperformed the NIC Top 99 markets. The third quarter resulted in 120 basis points of outperformance versus NIC Top 99, both year-over-year and sequentially. On the right side of the page, you can see the key selling season was excellent with 230 basis points growth, representing our best key selling season performance in a number of years. Now I'll comment on portfolio strategy. Our portfolio strategy executed through our Ventas OI platform is centered on what we call the right market, right asset, right operator approach, is a disciplined framework that ensures every investment we make in every partnership that we pursue enhances long-term value creation. We've spent years building a platform that's ready for this wave of demand in senior housing. We now have sophisticated data analytics and the ability to deliver those insights directly to our operators through our Ventas OI platform. We've enhanced our CapEx management, optimized dynamic pricing and developed broader platform capabilities needed to effectively drive performance and support 40 operators managing our communities and that number continues to grow. Equally important, we have tremendous respect and appreciation for the critical role our operators play in delivering care and services to seniors and achieving market-leading performance. Having walked in their shoes, we understand the importance of what they do, and we place the quality of our relationships with our operators among our highest priorities. This level of readiness doesn't happen overnight. It's a result of a deliberate multiyear evolution of our platform that positions us to capture the significant opportunities ahead. We have taken numerous actions over the past 5 years to ensure success in our senior housing business. Those actions include 215 acquisitions, 116 dispositions, 295 transitions to new managers, 307 community refreshes and 157 conversions of low occupied communities from Triple-Net to SHOP. The net result is a much larger and well-positioned SHOP portfolio, fueling double-digit NOI growth with embedded occupancy upside. This framework drives our underlying decision-making in our senior housing business why our portfolio is well positioned to grow. It's a focused, data-driven approach and it's working. For example, I'd like to refer you to Page 9 of the earnings presentation where we lay out our Ventas OI performance management strategy. I want to make it clear that our SHOP portfolio is well positioned for occupancy growth as our U.S. portfolio is only 85% occupied due primarily to our deliberate actions converting underperforming communities from the Triple-Net structure to SHOP. Our U.S. portfolio is well positioned to achieve substantial upside in markets that offer significant net demand over the next several years and will benefit from operational enhancements driven through our Ventas OI platform. As we've been expanding our SHOP footprint to half of the company's NOI, our Ventas OI capabilities continue to evolve, and we have been deliberate in positioning the portfolio for significant occupancy and NOI upside. Our most recent example of the Triple-Net to SHOP conversion is the 45 communities which are 78% occupied converting from the Brookdale lease to SHOP and transitioning to 5 aligned, proven, high-performing local market-focused operators with significant transition experience and track records of delivering excellent results. This transition is well underway. We have completed 27 of the transitions through October, and we expect to be finished by the end of the year. The communities have performed well year-to-date with both occupancy and NOI growth. We have already made progress with the read-out plans with a significant number of the projects expected to complete by the key selling season of 2026. We continue to expect greater than $50 million of NOI upside over time as the new operators execute and reinvest NOI-generating CapEx of around $2 million per building. Senior housing is a high-touch business, and I'm pleased to report that in the communities they have already transitioned, there is a strong level of engagement between local management teams and the new operators along with a great deal of enthusiasm. I'd like to note that this transition is occurring with the full cooperation and support of Brookdale, which is greatly appreciated. Furthermore, we look forward to collaborating with Brookdale on the 65 assets where the lease has been renewed. Moving on to investments. We continue to build on our momentum and our relationship-driven capital allocation plan targeting private pay senior housing in the U.S., and we have now completed $4.1 billion of senior housing investments since the middle of last year, of which $3.5 billion closed during the past 4 quarters. We have closed $2.2 billion of senior housing acquisitions year-to-date. We have a robust pipeline that continues to expand, and our latest guidance for 2025 is now $2.5 billion. Our senior housing flow business is in full swing as our year-to-date senior housing investments totaled 20 transactions for 50 communities with approximately 6,200 units across 15 states. The average deal size is $110 million, including a range of singles, doubles, triples together with select larger portfolio deals. These properties improve our SHOP portfolio quality, increase the company's enterprise growth rate and are located in attractive markets that are poised for outperformance due to favorable supply and demand dynamics. We continue to have an advantaged position to source and close meaningful and attractive senior housing transactions and the opportunity set is growing at an accelerating rate. We look for a range of senior housing investment opportunities, each with its own balance of growth and yield, so we can deliver attractive returns that align with our targeted low to mid-teens unlevered IRRs. It has become clear that Ventas is a senior housing partner of choice across our many transactions. Our growing stable of strong operator relationships provides us with preferred access and the opportunity to win deals. Our transaction execution track record has also created opportunities for repeat business with sellers. In summary, we have conviction in our strategy, and we are intensifying our efforts to drive outperformance in our senior housing business, and the best is yet to come. I'm confident in our ability to execute and create value for our stakeholders in senior housing and investments execution, including a valuable living experience for residents, valuable workplace experience for the tens of thousands of dedicated community staff and ultimately leading to significant value creation for our shareholders. Now I'll hand the call to Bob.

Thank you, Justin. I'll start with our third quarter performance, highlight our balance sheet and conclude with our improved guidance for the year. Starting with our enterprise performance. Ventas delivered normalized FFO per share of $0.88 in the third quarter, which represents a 10% increase year-over-year, driving the strong year-over-year growth with total company Same-Store Cash NOI of 8% led by SHOP growth of 16%. Our Outpatient Medical and Research business, or OMAR reported Same-Store Cash NOI growth of 3.7% year-over-year, led by outpatient medical. Outpatient Medical third quarter occupancy improved 50 basis points year-over-year to 90.6%, a 20 basis point sequential increase versus the second quarter. TTM tenant retention was a strong 87% in the third quarter, an increase of 200 basis points year-over-year, reflecting tenant satisfaction scores in the 95th percentile. Our research business represents 8% of our NOI. In the third quarter, research Same-Store Cash NOI was $400,000 lower year-over-year driven by lower rents on certain innovation flex space tenants as previously discussed. Next, turning to our balance sheet and liquidity. Our net debt to EBITDA of 5.3 times in the third quarter represents a full turn improvement from the third quarter of 2024. This leverage reduction was driven by a combination of organic growth and equity funded senior housing investments consistent with our strategy. I would note that this significant improvement in leverage was achieved while delivering normalized FFO per share growth in the top echelon of REITs. We've already fully funded our $2.5 billion investment guidance for 2025 with $2.6 billion of equity raised, including $0.5 billion of unsettled equity forwards. We have over $4 billion of liquidity as of September 30, which supports Ventas' growth and financial flexibility. I'll close with our updated and improved 2025 guidance. We expect net income attributable to common stockholders to range from $0.49 per share to $0.52 per share. We are also improving our full year normalized FFO guidance midpoint by $0.03 to $3.47 per share. This improved 2025 guidance midpoint represents 9% year-over-year growth in normalized FFO per share. Approximately two-thirds of our $0.03 guidance increase at the normalized midpoint can be explained by our improved SHOP performance in senior housing investments completed year-to-date, with the final one-third representing improvements across the balance of the enterprise. We've also raised our total company Same-Store Cash NOI growth by 50 basis points to 7.5% year-over-year, led by the SHOP Same-Store NOI midpoint improving by 100 basis points to 15%. In our updated guidance, with the 45 Brookdale conversions now underway, we are reflecting the shift in NOI from these conversions from our Triple-Net segment to our SHOP segment. Because cash rent on these 45 conversion assets approximates current NOI at the assets, the net impact on 25 FFO is de minimis. I would point you to our earnings presentation deck and supplemental for more detail on these and other assumptions underpinning our guidance. To close, we are pleased with the results both in the quarter and so far this year. The entire Ventas team is determined to build on our momentum and to continue delivering superior performance for our shareholders. And with that, I'll turn the call back to the operator.

Good morning. Thank you for the prepared remarks and commentary. I was hoping you could talk more about underwriting criteria. I know the acquisition volume guidance is $2.5 billion from $1 billion at the start of the year, and you've been very consistent on buying properties with 7% yields. But with the lower cost of capital today, it seems like you'd now be able to make the math work to buy some lower initial yielding properties that come with higher growth, but still low to mid-teens IRRs. I guess, are there any plans to lower those initial yield requirements, maybe get more aggressive to buy properties with more growth given the outlook for seniors housing supply demand is so strong over the next 5, 10 years?

Jonathan, it's Debbie. We are certainly going to be ambitious in our goal to grow our senior housing business as we have over the last couple of years and build on our momentum.

It's Justin. As I mentioned earlier, $3.5 billion of $4 billion in volumes occurred over the past four quarters, indicating that volume has been increasing. We have strong momentum in our pipeline and are effectively executing on it. We are pleased with the returns we've been seeing. The key metric we focus on is unlevered IRRs, which have consistently been in the low to mid-teens. There are various strategies to achieve this, primarily through yield and growth. We have identified opportunities to acquire assets that show significant growth potential, and we are focusing on this while applying the market asset operator framework. There is plenty on our agenda, and we are eager to undertake even more as we can.

Okay. I'll ask one more, if I can. On the leverage, it's great to see that improvement. Can you just remind us of the target leverage, how you weigh equity and debt to fund this external growth, especially given that cost of equity capital today is really attractive?

Yes, I'll take that, Jonathan. We're really pleased with the leverage improvement, 5.3 times for the quarter. That's a full turn and the strategy that we set out quite a while ago now of organic growth plus equity funded investments given the returns has really been working. And so we're going to continue to run that play as long as the market gives us the opportunity. We are obviously trending favorably in terms of leverage, I would expect that to continue should the market conditions exist. And that just gives us more flywheel and more opportunity to continue to invest. So that's the strategy and that's the approach. We are clear-eyed that equity is very precious and therefore, making sure that we're investing in the best assets as Justin described, but we're really pleased with the way the playbook is working.

I wanted to quickly touch on the Brookdale SHOP transitions and the revenue-generating CapEx that Ventas plans to put into these assets. And can you give us a few examples on what type of investments these will be? And how disruptive will that be to the current results? I mean, is it just trying to get these done before the key selling season, and that's just the key to minimize this disruption?

I'm going to start by outlining our plans to ensure smooth transitions. First, I want to emphasize that our performance has been strong. We're welcoming the communities at a time when they've experienced good occupancy and NOI growth over the past year. My team and I, along with the CEOs of the operators, have been personally involved on the ground, evaluating the situation and identifying opportunities to enhance operations and solidify our plans for investment in refresh CapEx. The projects we’re concentrating on are largely routine refreshes, which include common area renovations, new paint and wallpaper, furniture, and lighting to enhance first impressions. We have refined our process to minimize disruption. Some projects are larger in scale, like the Hallmark in Chicago, which will be highlighted in full detail; it's an exciting high-rise that has been a market leader for years, and we aim to elevate it further with new operations and investments. However, most of our projects are routine, and we have extensive experience in executing them efficiently.

Okay. Great. And then just lastly for me. I know the SHOP portfolio, at least on the Same-Store side, has really delivered some good margin expansion of about 200 basis points year-over-year. I mean just given that occupancy now for the Same-Store portfolio is 89% and presumably next year, it's going to get above 90%, how much faster can that margin expand? Because I know, Justin, you've always talked about that you get more incremental margins as occupancy improves. So like where it's a good kind of ballpark of how much that could tick up?

Yes. So it's one of our favorite topics, margin expansion and incremental margin. And we've experienced really over the past full 2 years, 50% incremental margin in our SHOP performance, and that's a rule of thumb that we've articulated many times. And that rule of thumb really applies for that journey from 80% to 90% occupancy. But once you start getting over 90% on your way to 100%, you start to see a higher incremental margin, closer to 70% because that operating leverage really kicks in. So that will be an opportunity just simply through operating leverage and growing occupancy to have margin expansion. The other opportunity is through price. And you've heard so far in our prepared remarks, we have good experience in terms of RevPOR growth. That's driven by underlying rent increases and move-in rents. And in both cases, the higher occupancy you get, the stronger that result is. We get 2x the RevPOR growth. We get 2x the move-in rents in communities that are over 90% occupied versus the rest of the portfolio. So that will create opportunities to help push margin as well.

I first wanted to address the comment in the opening remarks about occupancy is expected to increase sequentially or at least quarter-over-quarter. I was just wondering if that has to do with anything coming into the Same-Store at a higher occupancy? Or if you're seeing things in market trends right now?

This reflects a strong finish to the third quarter, which is expected to carry into the fourth quarter. We have good visibility on this so far. It is an organic result driven by robust demand and an increase in move-in volume that we are currently experiencing.

And I also wanted to ask about as your pipeline right now is all U.S. SHOP, what's your comfortability of potentially expanding that into the U.K. or in other areas as well?

Great question. I'm here with Justin, who has significant experience as he's previously run a major senior living company in the U.K. I'll let him address that question.

Yes. So I would say our first, second and third priorities are to invest in private pay senior housing in the U.S. We like the footprint we have in Canada, don't have meaningful plans to expand there. The U.K. is interesting. One thing we did do there is set up our SHOP platform earlier this year with a new operator, CCG who's been delivering excellent results so far. So we look forward to expanding our footprint in the U.K. over time, but the U.S. is where all the action is.

Congrats on the strong results. Just 2 questions. I guess, one, a lot of your peers are engaging in, I guess, strategic portfolio shifts, whether it's selling MOBs or some MOBs or moving into the U.K. and our peers, I mean just a broader health care set. I'm wondering sort of as you think of the portfolio today with the lifestyle university exposure, medical office, but then this outsized growth in SHOP, like is there thinking about like bigger picture change in the portfolio, number one? And then just going back to specifically on Canada, you've had really good results there. But what's the appetite to sort of monetize the investment and the returns maybe into a fund or just outright selling?

Thanks, Vikram. Of course, we're always willing to consider, and we're always evaluating different portfolio actions that we think will create long-term value for the company, and you've seen us do that over the years, and we'll continue to actively monitor our portfolio for those types of actions. Currently, our main focus, which I'm sure is coming across is really in aggressively growing our private pay SHOP business, which we've increased 2,000 basis points to have the company over the last couple of years, and we're going to continue to try to rapidly expand that business from internal and external investment activity.

You raised your SHOP RevPOR growth guidance from 4.5% to greater than 4.5%. It seems like every quarter, we see less and less supply growth. Can you just talk about the change to greater than 4.5% and how much visibility you have into 2026, given pricing power should strengthen as occupancy increases and further do you think higher RevPOR growth can somewhat offset any slower occupancy growth in the future?

We've been really pleased with our underlying pricing, which includes this year's rent increases and the upward movement in rent trends year-over-year. Our dynamic pricing strategy with our operators is effectively delivering these results. Additionally, we're striking a strong balance between driving occupancy and increasing prices, which is the goal of our dynamic pricing approach. Regarding future opportunities, we won't get into specifics about 2026 just yet, but as I mentioned earlier, higher occupied communities tend to yield better pricing outcomes, both for existing residents and new move-ins. Demand has been strong, and we are experiencing a scarcity of value across our portfolio, which should create opportunities over time. When it becomes appropriate to discuss 2026, we will, but for now, it's not the right time.

I appreciate the response. And as a follow-up, you acquired $2.2 billion of stabilized senior housing year-to-date, added 10 new local focused operator relationships. It appears these are good operators because occupancy is already at 91%. But can you talk about what you look for when assessing whether a new operator fits the Ventas platform? And then the average price per unit on the year-to-date activity was $381,000. So is that still a discount to replacement cost? And if so, how much if you had to estimate?

We have consistently purchased below replacement costs, ranging from 10% to 50%, depending on the specific investment. I want to clarify that we don't consider 90% occupancy to be stabilized. We are positioned in markets with net absorption projections of over 1,000 basis points in the coming years. This offers us significant operational opportunities along with an unprecedented tailwind. Additionally, we have a pricing opportunity that strengthens our outlook for growth in these assets. To reiterate a key strategy, alongside our acquisitions, we have been transitioning our Triple-Net communities to SHOP. These communities had lower occupancy rates, with the most recent being Brookdale at 78%. This approach has led to a current U.S. occupancy of 85%. By acquiring high-performing communities and transitioning lower occupied ones from Triple-Net to SHOP, we have a considerable growth opportunity ahead, supported by favorable conditions and a robust platform to capitalize on this potential.

Thank you very much. Good luck in the fourth quarter.

It's Joseph here with Seth. Debbie, I want to revisit the question about diversification and the advantages of being more diversified compared to focusing on a pure play. Do you think there are synergies between the businesses? Is it purely about pricing, and if the pricing were right, would you consider moving towards more of a pure play? How do you view the overall composition of the portfolio and the company, and ultimately, how does that affect attracting equity capital in comparison to other healthcare companies?

Yes. Overall, the company's portfolio is focused on the growing trend of longevity. The senior housing sector specifically targets the population over 80, which is significant in size and expected to expand rapidly in the next decade, with a projected growth of 28% over the next five years. Therefore, we are prioritizing our senior housing business and emphasizing its growth. By enhancing this area both internally and through external investments, we aim to accelerate the growth of the enterprise, which we believe will benefit our shareholders. We will continue to pursue this strategy. We consistently assess the value of all our businesses and assets, remain open to potential portfolio changes, and will actively seek opportunities to enhance value for our shareholders.

You raised your SHOP RevPOR growth guidance from 4.5% to greater than 4.5%. It seems like every quarter, we see less and less supply growth. Can you just talk about the change to greater than 4.5% and how much visibility you have into 2026, given pricing power should strengthen as occupancy increases and further do you think higher RevPOR growth can somewhat offset any slower occupancy growth in the future?

We are very pleased with our underlying pricing, including this year's rent increases and the movement in rent trends, which have improved year-over-year. Our dynamic pricing strategy is working effectively with our operators to achieve these results. We are also happy to find a strong balance between driving occupancy and maintaining prices, as this is the goal of our dynamic pricing model. Looking ahead, we’re not ready to discuss 2026 just yet. However, I believe the earlier points I made are still relevant. In communities with higher occupancy, we have observed improved pricing outcomes for both in-house rents and move-in rents. Demand remains strong, and we have a greater scarcity of value across our portfolio. Over time, this should present opportunities. When the time comes to discuss 2026, we will certainly do that, but it's not the right moment now.

I appreciate the response. And as a follow-up, you acquired $2.2 billion of stabilized senior housing year-to-date, added 10 new local focused operator relationships. It appears these are good operators because occupancy is already at 91%. But can you talk about what you look for when assessing whether a new operator fits the Ventas platform? And then the average price per unit on the year-to-date activity was $381,000. So is that still a discount to replacement cost? And if so, how much if you had to estimate?

We have consistently been purchasing below replacement costs, with discounts ranging from 10% to 50%, depending on the specific investment. I want to clarify that we don't consider 90% occupancy to be stabilized. We are in markets projected to have net absorption exceeding 1,000 basis points over the next few years. This provides us with solid operational opportunities, as well as an unprecedented tailwind. Additionally, we have reiterated the price opportunities that accompany this situation. We anticipate significant growth ahead for these assets. Furthermore, in addition to our acquisitions, we have been transitioning our Triple-Net communities to SHOP, which were previously lower occupied. For instance, Brookdale was at 78% occupancy, which has helped us reach an 85% occupancy rate in the U.S. We are acquiring high-performing communities and shifting lower occupied ones from Triple-Net to SHOP, which gives us a substantial runway for growth with strong support and a platform designed to achieve that.

Thank you very much. Good luck in the fourth quarter.

It's Joseph here with Seth. Debbie, I want to revisit the question about diversification and the advantages of being more diversified compared to being a pure play. Do you see potential synergies between the businesses, or is it merely a pricing issue? If the pricing were optimal, would you consider shifting to a more pure play approach? How do you view the overall composition of the portfolio and the company, and ultimately, how does that influence the attraction of equity capital in comparison to other healthcare companies?

Yes. Overall, the company's portfolio is unified by the trend of longevity. The senior housing business serves the growing population of those over 80, which is significant and expected to accelerate in growth over the next decade, with a projected increase of 28% in the next five years. Therefore, we are focusing heavily on our senior housing business as our top priority for growth. We are enhancing the growth rate of the enterprise through internal efforts and external investments, which we believe will benefit our shareholders. We will continue to pursue this strategy while evaluating the potential of all our businesses and assets, remaining open to portfolio changes and actively seeking ways to create value for our shareholders.

You raised your SHOP RevPOR growth guidance from 4.5% to greater than 4.5%. It seems like every quarter, we see less and less supply growth. Can you just talk about the change to greater than 4.5% and how much visibility you have into 2026, given pricing power should strengthen as occupancy increases and further do you think higher RevPOR growth can somewhat offset any slower occupancy growth in the future?

Sure. We've been really pleased with our underlying pricing, both in terms of rent increases this year as well as the movement rent trends, which are up year-over-year. And they're working together through our dynamic pricing approach with our operators to deliver that result. And one of the things we're equally as pleased about is that we're striking a really good balance of also driving occupancy and price together, which is what this dynamic pricing approach is designed to do.

All right, Van. Thanks. And I want to thank everyone who joined us on a busy day for your interest in and support of Ventas. We wish you and yours a good holiday season, and we look forward to seeing you soon. Thank you.