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Here's Why You Should Retain Ventas (VTR) in Your Portfolio
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Ventas (VTR - Free Report) is well-positioned to benefit from its diverse portfolio of healthcare real estate assets in the key markets of the United States and the U.K. An aging population and the rise in healthcare expenditure by senior citizens are likely to benefit the senior housing operating portfolio (SHOP).
The outpatient medical portfolio is expected to gain from favorable outpatient visit trends. Ventas’ accretive investments to expand its research portfolio are encouraging. However, competition from other industry players and dependence on a few tenants raise concerns. High interest rates add to its woes.
What’s Aiding VTR?
As per the company’s June Nareit REITweek presentation, the U.S. population aged 80 years and above is expected to grow by more than 24% through 2029. Hence, with an expectation of a rising senior citizens’ population in the years ahead and muted new supply in its markets, Ventas is well-prepared for a compelling multiyear growth opportunity.
Per its latest business update, this healthcare REIT is experiencing healthy occupancy levels, backed by an acceleration in the SHOP demand. This is expected to drive the company’s top line. Ventas expects its SHOP segment's same-store cash net operating income (NOI) to grow between 12% and 16% in 2024.
Amid favorable demographics and growing outpatient trends, VTR is committed to capitalizing on this upside within its outpatient medical and research portfolio, which includes outpatient medical buildings and research centers. The company is expecting the same-store cash NOI for this segment to grow between 2.5% and 3.25% in 2024.
Ventas is carrying out accretive investments to enhance its research portfolio, which is essential for the delivery of crucial healthcare services and research related to life-saving vaccines and therapeutics. Ventas owns research centers in life science clusters, with a presence in some of the top-tier research university campuses. With top-rated tenants and long-lease terms, its high-quality portfolio assures steady growth in cash flows.
Ventas maintains a healthy balance sheet position. It has been making efforts to enhance its liquidity position and financial strength. As of Mar 31, 2024, the company had approximately $3.4 billion of liquidity and a net debt to further adjusted EBITDA of 6.7X. It has a manageable near-term debt maturity profile, with $1.2 billion maturing in 2024. Also, Ventas enjoys credit ratings of BBB+ stable from S&P Global Ratings and Baa1 stable from Moody’s, providing access to the debt market at favorable costs. The company’s decent financial flexibility is likely to support its growth endeavors.
Over the past month, shares of this Zacks Rank #3 (Hold) company have risen 5.4% compared with the industry’s upside of 1.8%.
Image Source: Zacks Investment Research
What’s Hurting VTR?
Competition from national and local healthcare operators may weigh on Ventas. The company’s operators contend with peers for occupancy, which could limit its power to raise rents and drive profitability, as well as crack deals at attractive rates.
Further, a high interest rate environment is a concern for Ventas. Elevated rates imply high borrowing costs for the company, which would affect its ability to purchase or develop real estate. It has a substantial debt burden, and its total debt, as of Mar 31, 2024, was approximately $13.56 billion.
Ventas’ triple-net-leased property segment is exposed to tenant concentration risk, with properties leased to Brookdale Senior Living, Ardent and Kindred accounting for a significant portion of total net operating income in the three months ended Mar 31, 2024.
The Zacks Consensus Estimate for Park Hotels & Resorts’ 2024 FFO per share has been raised marginally over the past two months to $2.20.
The Zacks Consensus Estimate for Paramount Group’s 2024 FFO per share has been raised marginally over the past month to 78 cents.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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Here's Why You Should Retain Ventas (VTR) in Your Portfolio
Ventas (VTR - Free Report) is well-positioned to benefit from its diverse portfolio of healthcare real estate assets in the key markets of the United States and the U.K. An aging population and the rise in healthcare expenditure by senior citizens are likely to benefit the senior housing operating portfolio (SHOP).
The outpatient medical portfolio is expected to gain from favorable outpatient visit trends. Ventas’ accretive investments to expand its research portfolio are encouraging. However, competition from other industry players and dependence on a few tenants raise concerns. High interest rates add to its woes.
What’s Aiding VTR?
As per the company’s June Nareit REITweek presentation, the U.S. population aged 80 years and above is expected to grow by more than 24% through 2029. Hence, with an expectation of a rising senior citizens’ population in the years ahead and muted new supply in its markets, Ventas is well-prepared for a compelling multiyear growth opportunity.
Per its latest business update, this healthcare REIT is experiencing healthy occupancy levels, backed by an acceleration in the SHOP demand. This is expected to drive the company’s top line. Ventas expects its SHOP segment's same-store cash net operating income (NOI) to grow between 12% and 16% in 2024.
Amid favorable demographics and growing outpatient trends, VTR is committed to capitalizing on this upside within its outpatient medical and research portfolio, which includes outpatient medical buildings and research centers. The company is expecting the same-store cash NOI for this segment to grow between 2.5% and 3.25% in 2024.
Ventas is carrying out accretive investments to enhance its research portfolio, which is essential for the delivery of crucial healthcare services and research related to life-saving vaccines and therapeutics. Ventas owns research centers in life science clusters, with a presence in some of the top-tier research university campuses. With top-rated tenants and long-lease terms, its high-quality portfolio assures steady growth in cash flows.
Ventas maintains a healthy balance sheet position. It has been making efforts to enhance its liquidity position and financial strength. As of Mar 31, 2024, the company had approximately $3.4 billion of liquidity and a net debt to further adjusted EBITDA of 6.7X. It has a manageable near-term debt maturity profile, with $1.2 billion maturing in 2024. Also, Ventas enjoys credit ratings of BBB+ stable from S&P Global Ratings and Baa1 stable from Moody’s, providing access to the debt market at favorable costs. The company’s decent financial flexibility is likely to support its growth endeavors.
Over the past month, shares of this Zacks Rank #3 (Hold) company have risen 5.4% compared with the industry’s upside of 1.8%.
Image Source: Zacks Investment Research
What’s Hurting VTR?
Competition from national and local healthcare operators may weigh on Ventas. The company’s operators contend with peers for occupancy, which could limit its power to raise rents and drive profitability, as well as crack deals at attractive rates.
Further, a high interest rate environment is a concern for Ventas. Elevated rates imply high borrowing costs for the company, which would affect its ability to purchase or develop real estate. It has a substantial debt burden, and its total debt, as of Mar 31, 2024, was approximately $13.56 billion.
Ventas’ triple-net-leased property segment is exposed to tenant concentration risk, with properties leased to Brookdale Senior Living, Ardent and Kindred accounting for a significant portion of total net operating income in the three months ended Mar 31, 2024.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Park Hotels & Resorts (PK - Free Report) and Paramount Group (PGRE - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Park Hotels & Resorts’ 2024 FFO per share has been raised marginally over the past two months to $2.20.
The Zacks Consensus Estimate for Paramount Group’s 2024 FFO per share has been raised marginally over the past month to 78 cents.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.