Ventas, Inc. (VTR) Q2 2026 Earnings Report, Transcript and Summary

Thank you for standing by. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to today's Ventas Second Quarter 2026 Earnings Call. [Operator Instructions]. I'd now like to turn the call over to BJ Grant, Senior Vice President, Investor Relations. BJ, you have the floor.

Thank you, Greg. Good morning, everyone, and welcome to the Ventas second quarter 2026 results conference call. Yesterday, we issued our second quarter 2026 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 those 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, and happy birthday. Good morning to all of our shareholders and other participants. I'm pleased to welcome you to the Ventas second quarter 2026 earnings call. Ventas delivered excellent results in the quarter, powered by strong growth in our senior housing operating portfolio and accelerating senior housing investment activity. With a decade of powerful demographic demand ahead, we intend to capture the unprecedented multiyear NOI growth and value creation opportunity by growing our SHOP footprint organically and externally and increasing our company growth rate. Since we adopted our 1-2-3 strategy in late 2023, our team has executed it with commitment and excellence to deliver outstanding returns and build our financial strength. We've made enterprise-wide investments in our innovative platform and team to drive our performance and elevate our industry. The results are clear. This quarter, we delivered 10% total company same-property NOI growth. U.S. SHOP led the way with 18% NOI and 360 basis points of occupancy growth year-over-year as we continue to outperform the industry. Our second quarter FFO per share of $0.97 represented 9% year-over-year growth. For the full year, we are again raising our normalized FFO expectations to $3.85 to $3.90 per share, equating to 8% to 10% growth, primarily because of our increased investment activity. The Ventas investment engine is firing on all cylinders. We now expect to complete $4.5 billion of 2026 investments focused on senior housing from $3 billion previously. We are executing at significant scale, and we've completed over $8 billion in investments since the beginning of 2024, adding more than 23,000 units across 174 communities to our SHOP portfolio. Our investment success has been enabled by the integration of our Ventas OI platform with our capital allocation decisions under Justin's leadership. Our #1 capital allocation priority remains U.S. senior housing, particularly acquisitions that combine attractive growth, yield and risk-adjusted return potential. Our investment pipeline is active and actionable, and we're using our competitive advantages to win deals that meet our strategic and financial criteria, including double-digit to mid-teens unlevered IRRs and and discounts to replacement costs. The private to public arbitrage opportunity for Ventas and senior housing is compelling, and we intend to use the power of our franchise to aggressively build on our investment momentum. Our investment activities and outlook, of course, are based upon the unprecedented demographic demand for senior housing. The leading edge of the nearly 70 million baby boomers has just begun turning 80 this year, ushering in a decade where the growth rate of the senior population more than doubles. Yet new starts remain at record lows. With demand expected to substantially outrun supply and the persistence of elongated construction time lines and high cost, we foresee an exceptional opportunity for outsized growth and value creation in the coming years. We also expect to make more dispositions of nonstrategic assets in the back half of this year to improve our growth rate and expand our senior housing footprint. The combination of more SHOP investments, strong SHOP internal NOI growth and increased dispositions should make SHOP 60% of our $60 billion enterprise by year-end. In closing, as you look across the investment landscape, Ventas offers investors an attractive combination of hard assets and growth from need-based secular demand, not correlated with the AI economy. With strong property and earnings growth, investment momentum, scale, financial strength and our differentiated platform, we are focused on delivering outperformance and winning together, while advancing our mission of helping people live longer, healthier, happier lives. Our whole Ventas team is in it to win it. And as Justin likes to say, the best is yet to come. Now Justin, I'm pleased to turn the call over to you.

Thank you, Debbie. I'm pleased to join you today to discuss another quarter of strong execution in shop and investments. Ventas has never been better positioned to capture the multiyear growth opportunity in senior housing. With a differentiated platform, strong balance sheet, outstanding operators and talented team, we remain focused on creating value for residents, operators, team members and shareholders. Our second quarter results reflect the strength of our portfolio the effectiveness of our active asset management platform and the growing contribution of our senior housing acquisitions. Starting with SHOP. We delivered another great quarter. Same-store SHOP NOI increased 16% year-over-year, representing one of the strongest quarterly growth rates in our recent history. NOI growth in the quarter was led by the U.S. with 18%. Occupancy remains the primary driver of our performance. During the second quarter, same-store average occupancy increased 300 basis points year-over-year led by the U.S., which continues to deliver excellent growth with 360 basis points. Within the NIC Top 99 markets, Ventas same-store communities achieved approximately 150 basis points of occupancy outperformance versus industry averages, demonstrating the benefits of our focused operating execution and differentiated platform. More broadly, the key selling season is progressing well. As always, the May through September period remains the most important operating window of the year for senior housing. We started the year strong raise the occupancy guide from 270 bps growth to 300, and now we've entered the key selling season, which is on track so far. RevPOR increased 5% year-over-year and pricing strength was realized across both in-place rent increases and move-in rents led by our highly occupied communities. The combination of the occupancy and RevPOR growth drove nearly 9% same-store revenue growth across the portfolio, at the same time, expense growth moderated. Same-store operating expenses increased 5%, contributing to margin expansion. NOI margins expanded 210 basis points year-over-year to 31% and incremental margin flow-through reached 55%, highlighting the operating leverage embedded in the business as occupancy continues to rise. These results are the outcome of the work being done every day by our operators and the continued execution of the Ventas OI active asset management platform, which is fully deployed across our SHOP portfolio, and we are positioning our AI-ready tech stack to improve the execution of our insights. I'd like to give a special thanks to our operating partners who continue to deliver great results as they embrace our culture of winning together. Atria and Sunrise are leading the U.S. and the Group Maurice continues to lead the way in Canada. Over the last several years, we have built a scalable operating framework that combines data analytics, benchmarking, active asset management and close collaboration with operators to drive performance at the community level. Our teams continue to focus on initiatives with our operators that can create incremental value across hundreds of communities simultaneously. Those efforts include refreshed capital investments, dynamic pricing insights, sales culture enhancements and benchmarking programs throughout our portfolio. One example is our relentless focus on driving occupancy in our portfolio, which is a long runway ahead. Our U.S. senior housing portfolio is 87% occupied of which our non-same store is only 83% by design. We are well positioned in markets with a projected 1,200 basis points of net demand over the next few years. Our Ventas OI platform is deployed across our portfolio where we utilize real-time leading indicators to occupancy growth in partnership with our operators to drive price volume optimization contributing to our occupancy outperformance in the U.S. On the other end of the spectrum is our cultural commitment to achieving 0 lost revenue days in our communities. Working alongside our operators, we are implementing a playbook design to drive occupancy in highly occupied communities by improving execution around resident retention and move-in timing. Today, approximately 10% of our SHOP communities are operating at or near 100% occupancy with 2/3 located in the U.S. This demonstrates both the demand characteristics in our markets and our ability to translate that demand into operating results. It also provides the proof point for the lack of frictional vacancy in senior housing communities. We are currently seeing outperformance in our higher occupied cohort. The community is currently 90% or more occupied delivered 25% NOI growth. This includes about half of our U.S. same-store communities. They have pushed price, occupancy and margin expansion. This performance demonstrates the long runway ahead of reaching stabilization, the top line growth potential and margin expansion opportunities in highly occupied communities as our portfolio continues to grow occupancy. Wrapping up SHOP, I'm pleased to reaffirm our same-store SHOP guidance of 16% NOI growth at the midpoint. As a reminder, the slope and timing of the key selling season is the main determinant to the full year results, and we are in the middle of it right now. Turning to investments. Based on the strength of our closed activity and the attractive senior housing acquisitions that we currently have under contract, we are raising our full year 2026 investment guidance, again, from $3 billion to $4.5 billion. Strong senior housing investment momentum is further expanding our SHOP footprint. Year-to-date, we have completed over $3 billion of investments focused on senior housing across 27 transactions. Further expanding the quality, reach and earnings power of our SHOP portfolio. All of our year-to-date senior housing investments were underwritten to double-digit to mid-teens unlevered IRRs. Together, they have an average expected year 1 yield of 6.6% and required at significant discounts to replacement costs with an average price per unit of $358,000. The senior housing transaction market remains active, and our pipeline continues to offer a broad set of compelling opportunities. While interest in the sector continues to grow among both new and existing sources of capital. Ventas is demonstrating the power of our differentiated competitive approach. Our relationships continue to be a defining advantage. More than 90% of our year-to-date investments were relationship-driven, including off-market transactions and marketed processes involving repeat sellers, existing operating partners or both. These relationships create real process advantages, including the ability to preempt opportunities and compete effectively at the finish line. Each investment is selected through our right market, right asset, right after our framework with a clear focus on enhancing portfolio quality and positioning Ventas for durable long-term growth. Our underwriting is benefiting from our substantial Ventas OI data analytics and allowing for a very efficient close process, which is approximating around 2 months start to finish, which is among the most efficient in the industry. Looking ahead, the senior housing investment opportunity set remains robust. We will continue to use our platform, relationships, data and execution capabilities to source and close attractive investments at scale. In closing, I'm energized by the opportunities ahead. We continue to deliver strong organic growth as we expand our portfolio through accretive investment activity. We are doing so against the backdrop of powerful demographic tailwinds and historically limited new supply, while exercising the strength of our Ventas AI platform to drive outperformance. I couldn't be more excited as we create environments where residents choose to live and enjoy the valuable benefits of senior housing. Bob?

Thank you, Justin, and good morning, everyone. I'll begin with our second quarter financial performance, then discuss our balance sheet and capital activity and conclude with our improved outlook for 2026. Starting with our enterprise results. Ventas delivered another quarter of strong performance and growth. Net income attributable to common stockholders was $0.14 per share. Meanwhile, normalized FFO per share was $0.97, representing 9% year-over-year growth, driven by strong property performance across the portfolio, accretive senior housing investment activity and the continued execution of our 1-2-3 strategy. Total company same-store cash NOI increased 10% year-over-year. Once again, SHOP is the primary driver of our performance, generating 16% same-store cash NOI growth with the balance of our portfolio, all contributing to double-digit growth in our overall same-store property portfolio. Our outpatient medical and research portfolio or OM&R delivered 5% same-store cash NOI growth in the second quarter, led by outpatient medical. After adjusting for cash fee income, our outpatient medical same-store cash NOI increased 3% in the second quarter. This outpatient medical performance was led by a 50 basis point occupancy improvement year-over-year and was supported by strong tenant retention of 88%. Our triple net portfolio generated 3% same-store cash NOI growth in the second quarter, and we expect the triple-net same-store year-over-year NOI growth rate to increase in the second half of the year. Moving on to the balance sheet. Our financial position strengthened again during the quarter. Net debt to EBITDA improved to 4.7x. Our best leverage level in well over a decade, representing a 90 basis point year-over-year improvement and 30 basis point sequential improvement. The continued improvement in leverage demonstrates the power of our organic growth engine and the momentum in our equity funded investments. Year-to-date, we have completed $3.4 billion of investments and have raised $4.2 billion of equity with $1.6 billion currently unsettled. As a result, liquidity of $4.9 billion at the end of the second quarter provides substantial financial flexibility for our investment and refinancing activity. Last, I'll turn to our updated earnings outlook. Given our strong first half performance and continued momentum in external growth, we're once again raising our earnings outlook for 2026. We now expect full year net income to range from $0.58 to $0.63 per share or $0.61 per share at the midpoint. We are once again increasing our full year normalized FFO per share guidance to now range from $3.85 to $3.90, which represents year-over-year growth of 8% to 10%. Our new guidance midpoint of $3.88 is a $0.02 per share improvement from our prior guidance midpoint. Bridging this improvement is a positive $0.03 contribution from higher accretive senior housing investment activity, net of increased capital recycling. This is partially offset by $0.01 from the impacts of higher interest rates and a higher share price. A detailed discussion of our guidance assumptions can be found in our Q2 supplemental and earnings presentation posted to our website. To close, we are very pleased with our second quarter results and our performance through the first half of the year. Ventas is benefiting from a unique combination of powerful demographic tailwinds, industry-leading operating execution, a highly active investment platform and a strong financial position. The entire Ventas team remains focused on executing our strategy, creating value for our shareholders and extending our track record of outperformance. And with that, I'll turn the call back to the operator.

[Operator Instructions] All right. Looks like our first question today comes from the line of Julien Blouin with Goldman Sachs.

So we've seen others in the sector sell either full OMS portfolios or sell JV stakes in portfolios. -- just given the strength of the interest out there, is there anything holding you back from recycling capital out of outpatient medical and into senior housing -- and how do you think sort of the cap rate on your portfolio would compare to some of the ones that are out there.

Good morning, Julien and Debbie here. Thanks for the question. Look, we've always taken the view that we'll strongly consider any transaction that we believe creates long-term value for shareholders, and we've proven that in the past with our SNF disposition and spin-off, we continue to evaluate our portfolio. Our strategy is very focused on expanding our SHOP footprint, and that's exactly what we're doing. And that's how we're really thinking about strategic opportunities.

Got it. And then Justin, at what level of sort of portfolio-wide same-store shop occupancy, do you think you could start to see same-store RevPOR kind of accelerate towards maybe the 6% or 7% range, let's say, how far from a portfolio-wide sort of RevPOR acceleration do you think you are currently?

Yes. So I mentioned in my prepared remarks, I talked about this that half of our U.S. SHOP same-store portfolio is 90% occupied or more. That grew NOI 25% year-over-year. The RevPOR is 6%, so it's obviously bringing the average up across the portfolio in terms of NOI growth, in terms of RevPOR growth. Occupancy growth was really strong in that group as well on the better side of our average. And so I think that's really encouraging as you think about 2 things. One of the have a really long runway to go. We're 87% occupied across SHOP. And to know that when we get to that kind of the first phase I'll call it the first destination, which is to break that 90% barrier, there's a lot of growth opportunity that we're proving -- is yet to come. So it's a tremendously large proof point of the growth opportunity in the 90-plus occupied group.

Got it.

And our next question comes from the line of Jeff Spector with Bank of America.

I'm sorry if I missed this. Can you talk about the occupancy levels from June versus April and May? Was there an acceleration? Or did it maintain the same level of growth?

Sure. So we -- when I said in my remarks were we started the year with a 270 guide. We've raised it to 300 basis points of growth year-over-year. We started the year really strong. We had 310 in the first, we had 300 in the second. So that means we need around 300 for the rest of the year. We have good visibility into the key selling season. It's on track. There's good sales activity on the ground already in the quarter, good occupancy growth already in the quarter, and that's supporting our full year guide expectation of around 300 basis points. with the knowledge that we have a long ways to go really to get through the rest of the key selling season, but so far, so good.

Okay. Great. And then sticking with occupancy, given that has been for us at least the top incoming question from investors, I assume that's just people are debating on things topping out or not. But Justin, of course, you talked about the lift in occupancy. I think you said that the same-store today around 83%, roughly half the community is about above already above 90%. I guess, could you provide a little bit more context around your opening remarks and occupancy over the coming years. I think you also said 10% today at full occupancy, I don't know if you've talked about where you see that reaching 25% or 50% over the coming years?

I really appreciate the question because it it's a mission of ours to prove that stabilization is a much higher number than what we used to think it was traditionally. One of the proof points we talked about was the 90-plus percent occupied communities. Another one I mentioned is the 10% of our portfolio that is at or near 100% occupied. And that group is also delivering very strong NOI growth is benefiting from rate growth even higher around 7% RevPOR and has a 20-plus -- around 20% NOI growth as well in the U.S. And by the way, 2/3 of those in that category are in the U.S. We -- I think everyone knows we have a highly occupied Canada, but our U.S. is demonstrating that we can get all the way to 100% occupied in our communities. That's been a key part of our thesis as we talk about this multiyear growth opportunity. And now it's really pleasing to be able to show these proof points and demonstrate the NOI growth opportunity as we get into these higher occupancy bands. And just a reminder, we're still only 87% across our SHOP portfolio. So -- and you mentioned this the part that's 83% is our nonsame-store. That's about 25% of our NOI right now, 75% is in the same-store. So the 83% has a long runway ahead, combining for 87%, long runway ahead. And when we get to this destination of 90% plus, really strong potential for NOI growth.

Justin [indiscernible], I think, has to prove to everyone that in this new paradigm, we can get into the close to 100% occupied over the years.

Exactly.

And our next question comes from the line of David Rodgers with Raymond James.

Wanted to ask about the SHOP flow-through that's in the presentation. Obviously, you had a nice pickup in occupancy that helped drive a pretty big pickup in the flow-through from the last couple of years and even in the first quarter. you had a similar occupancy improvement, I think, from 24% to 25%, but no real pickup in flow through. So Justin, is it just that you're getting those top 10% of the assets to fold that's kind of driving the incremental component? Is there something operationally that you're doing where you continue to see that flow through improve as we go forward? Just a little bit of color on that would be helpful.

You bet. So one of the real positive aspects of the senior housing business model is its operating leverage. And what that really refers to is that as occupancies go higher, your expenses become more fixed. So the difference between this year and last year is we're running at a higher occupancy you have more operating leverage you're benefiting from, and then that's producing the opportunity for the better incremental margin that we're seeing. So 55% was good. And we would expect really the opportunity, all things considered equal, the opportunity for that to be even better as we move occupancy over time.

And then maybe a separate follow-up. With regard to investments, obviously, I'd love your opinion on where we are in the development cycle. You talked about discount to replacement costs, rents are below where they need to be to develop. I think from a new development standpoint, you haven't been particularly active. Is that something as you look out over the next couple of years that you can see that gap closing with 5% RevPOR and 300 basis point pick up in margin where you want to be ahead of that curve. So I guess, maybe talk to me about where you think we are maybe in the cycle of development for Ventas in particular?

Yes. Well, if you don't mind, I'll kind of speak to big picture first. I can talk about us because we're really focused on acquiring in place and growing cash flows. I mean that's our primary focus. But development is going to be needed. I mean Debbie made the point around demand, there's a need for supply over time. The reality is, is that -- there's not a lot of projects that would pencil at this current time. We think that current rents need to be up to 40% higher or even more than that in certain cases, trended rents around 25% higher. So we're a ways off from probably any big wave in development. There's also just construction costs and availability of labor as well as debt and equity cost and availability of capital. One thing on that, though, it's pretty clear that because of those dynamics, the projects that need -- that would -- that could pencil are those that are so disconnected from the market in terms of rent expectations that they would feel comfortable delivering and really introducing a new higher-end product to a market, which is a luxury product. And we see these in our pipeline. I mean, those are the types of projects that developer/operators are trying to bring to market. It's a luxury product. And our primary focus right now is really to continue this this acquisition program we've had delivered over $8 billion, and it's projected to deliver $4.5 billion this year, just based on what's been closed or under contract, at really attractive returns and with a really high-quality type of community that we've been acquiring. So we're going to keep that going.

And just to top that off, what we do know is that there were a little over 1,000 starts this quarter and there's 2 million people turning 80 just in 2026 and that demographic demand wave continues for a decade. And so when we look ahead, the near to intermediate-term multiyear growth and value creation opportunity is really an exceptional one for us.

And our next question comes from the line of Seth Bergey with Citi.

I guess just to start off with the kind of increased acquisition guidance and kind of the increased competition in the marketplace. -- the number of deals that you guys are kind of looking at that funnel through to something you closed on changed? And are there certain parts in terms of more stabilized versus value-add deals where you're seeing more competition? And just any color you can give on how pricing has also moved.

Sure. Yes. So I'm going to kind of start with the end part of your question. Pricing, we've mentioned in previous calls that there's -- the cap rates have drifted down on a year-over-year basis. Well, we've been really steady in the mid-6s in terms of our year 1 yield. And then we've consistently been low double digit to mid-teens unlevered IRRs. And that continues in this next wave of $1 billion that's under contract. 2/3 of that's a value-add product with a higher growth profile. And we're expecting similar yields and similar IRRs in that group. Also, we have a pipeline that's really active. So we have plenty under review and look forward to pressing our advantages moving forward in terms of external growth. And then I think that might have addressed your old question. Did I miss anything?

Just is kind of less funneling through to close? In terms of the numbers of the deals that you're looking at that.

Yes. There's a couple of factors that work. First of all, the market is bringing a lot more assets so that it is -- there's more coming to market and in our relationship-driven pipeline. So that's really important because we have these competitive advantages that Justin mentioned the team experience, the sophistication, the relationships, most importantly, we are winning more than our fair share and expect to continue to.

Great. And then maybe just a second one on the guidance. the kind of midpoint implies a second half of kind of $0.98 a quarter, and you just did $0.97 in 2Q. I guess, just is there a level of conservatism in there just given that you closed the deal in the second quarter and do you see selling season seems to be going on track? Or are there any offsets we should be thinking about?

Yes, it's Bob. So the increase to the guide, the bridge is driven to a $0.02 net driven by investments up 4 that's $3.4 billion under our belt and roughly $1 billion to go. We also increased our dispositions and loan repayment guidance at a blended 7. And so if you unpack, I called it $0.03 net, if you unpack that, it's $0.04 investments less 1 for the dispositions, and that's all happening in the back half of the year. So that's -- the biggest piece and the last piece is higher interest rates, stronger dollar and our stronger share price, net of $0.01. I mean you're right to say that nets out to $0.98 on average for the back half of the year relative to our $0.97 in the second at the midpoint.

And our next question comes from the line of Vikram Malhotra with Mizuho.

And congrats on the strong print overall. I guess just on that strength, I was wondering what kept you -- I know you're early in the selling season. But what's kind of kept your same-store shop guide intact? Because if you just take your assumptions, you're pretty easily hitting 16%. So I'm wondering, is it comps like in the back half of last year, you had an acceleration. Is it perhaps Canada again, facing tough comps at some with expenses. It seems like you had a very good print. So I'm wondering why not even modestly increase the SHOP guide?

Well, first of all, we just raised it last quarter. So we did take that stuff already based on the performance we saw playing out. We've proven that in the second quarter. And now we're in the key selling season, and we'll see how that continues to play out. But we already did raise. And now we have a lot of execution ahead of us and things are going well.

And just to underscore, the first half was 16% year-over-year NOI growth. We're holding 16% for the year. So it's pretty straightforward that 16% in the back half is our assumption.

Okay. I guess, just I have high expectations. So second question, you've talked a lot about the senior housing opportunity set and the flow-through that's just now beginning on the incremental margin side. So I'm wondering if you look at the next 2 years, similar to a question at [indiscernible] like positioning the overall portfolio to kind of take that 10% FFO NOI growth as you've seen overall and really translating that into 11%, 12%, 13% FFO and AFFO growth. I'm just looking for updated thoughts on like Canada, you created a lot of value. Can you monetize that medical office slow growth, asset pricing is very good in the private market. Can you monetize that? And then maybe just thoughts on Life Sciences on the university side. Like is there an opportunity set in other businesses to help take this FFO growth trajectory higher.

Vikram, it's Debbie. Let me take a couple of shots at that. First of all, we're in our fifth year of double-digit NOI growth from our SHOP portfolio and kind of the best is yet to come. We've got the last couple of years have really shown really good same property growth. As an enterprise, this quarter, it's 10%, the biggest offset to that in the past couple of years, including this year, as Bob just described, is the interest rate curve and FX, et cetera, macro factors, let's call it. And so our strategy is really to continue driving that same property growth led by SHOP. And hopefully get an assist from the -- hopefully get an assist from the macro in terms of the rate environment and so on. The emphasis of our strategy, again, as I said, is to SHOP -- we expect to be already 60% of a $60 billion by the end of this year and our strategy of focusing on aggressively growing that internally and externally continues. So that's how I would answer your question. In terms of Canada, just to touch on that for a minute, I would tell you that our dispositions are really focused on non-SHOP assets. We are doing more, as you saw in the guide. And Canada remains a significant contributor to our enterprise growth.

And our next question comes from the line of Jim Kammert with Evercore ISI.

I hope I'm not drilling -- I hope I'm not going too much on dead horse. But Justin, you mentioned again the cohort of the same-store pool is 90% plus occupied. You said certainly are driving 25% NOI growth, which is pretty impressive. But I think you also said it was 6% RevPOR growth for that pool. And I'm just trying to understand how much of this is really pricing versus occupancy? I'm just trying to see, we get to a steady state, I'd say you have mid-90s across a lot of your portfolio, what do you think pricing can look like on an annual basis as you run out of occupancy opportunity?

Well, that's going to be -- the question that we look forward to answering over time. I can tell you what we're seeing so far. So that the 90% plus group is half the U.S. same-store portfolio. Huge sample, 6% RevPOR the occupancy was even better than the average occupancy reported across the portfolio. So it's benefiting from occupancy and rate growth working together to drive the NOI growth and margin expansion. The -- we know that we get even higher occupied, you get up into that group that's like 99% occupied plus that I mentioned, 7% RevPOR growth. So more pricing power, the scarcity values playing out. Now it's important to note that this is all in an environment that's not as attractive as is what's coming. That's one of the reasons, one of the many -- we keep saying the best is yet to come because we haven't even experienced the best demographic cycle yet. That's just starting now with the baby boomers turning 80, and with deliveries down and starts way down, we have this window of opportunity we've been looking forward to. And the value proposition in senior housing is pretty amazing. And it's utilized regularly by our 90,000-plus residents, 100,000 across the whole portfolio. And we look forward to serving more seniors, and we look forward to demonstrating the value proposition. And with that, does come a price opportunity, we think.

Right. Then one small question in detail. On the acquisitions year-to-date, it looks like, on average, it's about a 9% retained interest on the seller or sellers. Is that any part of some sort of financial alignment you're trying to create with those sellers or just really idiosyncratic that they had tax or other motivations to retain a piece of what they were owning.

So I want to make sure I'm understanding the question. You're talking about sellers retaining ownership.

It looked like your own on your pro rata base is about 91% of the investment.

Yes. So what you're looking at is actually -- remember, we have our fund that's focused on core plus investments across the various asset classes. We invest in 20% of what the fund invests in. And so you're seeing our share reflected in the sub. And we have -- we did do one joint venture that we talked about last quarter with Revel. We likely do more in the future, but mostly what you're seeing is the share between us and the fund.

And our next question comes from the line of Juan Sanabria with BMO Capital Markets.

Just hoping, Justin, maybe you could talk a little bit about Canada and the RevPOR there? And if that should kind of educate us or be a lead for how the U.S. RevPOR could trend or if there's considerations, rent restrictions, whatever in Quebec that may be holding that back? And I know you talked about like the 99% occupancy communities in the U.S. in the report they've had there. But just how Canada could be a lead or not versus how -- relative to how the U.S. could perform?

Yes. So Canada has some structural differences. First of all, it's 97% occupied. We have a really high-quality portfolio there amongst a few different operators, [indiscernible] maurices consistently to stand out. They're Quebec-based. And there are rent restrictions in place in Quebec. And then there's kind of social barriers around rent as well as in Ontario. So we do experience pretty good RevPOR growth there. One of the reasons it stands out is because we have an independent living product. So you don't really have that re-leasing spread drag that you can experience with assisted living when the higher acuity residents move out and lower acuity residents move in. So the independent living RevPOR is really more stable in rent driven. So pretty good print there. But we don't view it as the indicator for the future in the U.S. What we're looking at for the future opportunity in the U.S. are the examples I gave around the 90% plus and 100% occupied communities, where we're already demonstrating across a huge sample size, higher RevPOR growth.

Yes. I mean in the U.S., we're looking at maximizing NOI growth through the calibration of rate and occupancy that Ventas OI is expert at while at the same time, making sure, as Justin said, we're offering that value proposition to seniors. And that's really how we've been growing the portfolio, and we see that continuing as scarcity potentially develops within the U.S. market.

And then just as a follow-up. You mentioned kind of focusing on some noncore dispositions. So hoping you could talk a little bit about what's in that bucket kind of why now? And maybe as part of that, I think there was a transaction with Sian and kind of the Kindred entity and how that may fit into that bucket, if at all?

Yes. Well, I'll start with the dispo assumption. Again, we increased that to $700 million. It's really outside of SHOP. So I think the rest of the asset classes and I would call it sort of the nonstrategic type assets in those asset classes, including loan repayments at quite a high yield. So about $100 million or so at 11% in terms of getting a loan repaid a really strong loan. So that's the net $700 million and really focused outside of SHOP.

Yes. And substantially all of the $8-plus billion of -- substantially all of the $8-plus billion of investments that we've completed since beginning of '24 have been in SHOP consistent with the strategy. We had a small opportunity to make a well structured investment in terms of a recycled loan capital because of our position in the capital structure and contractual rights, and we took it.

And our next question comes from the line of Michael Goldsmith with UBS.

Can you provide some color on the subsequent investment activity in the for the third quarter. It looks like the yields are relatively healthy at 6.2%, but the price per unit is quite high at $554,000 per unit. Is that still discount or replacement, what are the occupancy at these facilities? What's the profile of these assets?

Yes. Very good question. There's 3 communities that [indiscernible] in that. And that -- by the way, one of those was purchased by our core plus fund. In fact, the community had the lowest going in cap rate was there. And so our share of that's reflected. And that was a Class A asset in Colorado. We have 2 other really core like assets, 1 in California, 1 in Arizona, and they are really high-quality, strong performers in markets with really strong net demand. Good occupancy and -- but also high RevPOR and high price opportunity -- high price growth opportunity moving forward. And so there's a portion of -- if you step back and just look at the way we've been allocating capital in senior housing, most of it's been going into either high-performing, with upside communities or value-add and there's a portion though that will put into certain markets where we have these really high-quality communities that we think will be market leaders for years to come. And -- these just happen to fall in that category. So I wouldn't read into the 6.2. We're expecting the $1 billion under contract to deliver around a 6.5, consistent with what we've been delivering so far in what we've closed this year.

Got it. And just as a follow-up. I think there was a $300 million health care loan mentioned in the press release. I don't know if we've touched on it on the call. Can you provide a little bit more details around that?

Yes. I just touched on it with one, but it's just a recycling of -- we expect some loan repayments. As Bob talked about, we've recycle the capital into a well-structured loan investment based on our position in capital structure and contractual rights that we have.

Got it. Good luck in the back half.

Thank you very much.

And from one Michael to another. The next question is from Michael Carroll with RBC Capital Markets.

Just, I'm going to turn back to the key selling season as you kind of highlighted that the occupancy gains really depends on the timing and the slope of that. So when did the occupancy slope start to inflect this year? And how does that compare versus your expectation in prior years? I mean, does the selling season start when you expected to start?

Yes. So -- it's a good question. So the key selling season time period, as always, May through September, there is kind of every year is a little different in terms of when you have your bigger months. We happen to have a really strong start to the year ahead of the key selling season. So that was what helped us to have the confidence to raise $270 million to $300 million. And then in the second quarter, we saw evidence that really supported the 300 basis points guide that we gave and what we're seeing so far in the third quarter is good occupancy growth, good sales activity on the ground. And so far, so good in terms of meeting our expectations so far with a lot to play out still.

Okay. And then should we expect going forward that the occupancy trend will start to track more in line these typical seasonal trends? I mean, albeit probably still well above what it was pre-COVID. I mean, I know the second quarter sequentially is usually up less than it is in the third quarter, just given how that key selling season slope starts. So should we expect that to happen just seems in the prior few years, we just kind of powered right through it. Are we kind of back to that typical seasonal trend of occupancy gains?

So you make a really good point. and recent seasonality has been a little different. The seasonality certainly still exists. It's just been more muted in the periods outside of the key selling season. The reason for that quite simply could be the higher demand that we're facing. So perhaps we're in a new paradigm. I would expect seasonality to continue. And hopefully, hopefully, we can continue to see the muted seasons outside the key selling season. And and we hope to see RevPOR key selling seasons moving forward, too. So we'll see. But we certainly like our opportunity given the demand characteristics and the strength of our platform.

And our next question comes from the line of Richard Anderson with Cantor Fitzgerald.

So obviously, the bar is high and the market is speaking whether you agree with it, and I'm sure you don't agree with it. It's a little exaggerated. But Justin, you described the selling season so far as being on track and perhaps the market was hoping for a better description. Is there anything underneath that comment that is sort of not particularly exciting to you? Is there anything that you're sort of monitoring? I don't know really how to ask the question more directly than that. When you say it's on track, is it -- is there some hiccups going on behind the scenes that you can talk about?

We're excited about 16% growth in SHOP.

Yes, 300 basis points of occupancy growth. I would -- I understand what you're asking, and what I would say is we're seeing broad-based contributions across the portfolio. Our same-store SHOP is same store for a reason. I'll just kind of -- for example, our non-same store is usually in a period of some kind of transition or redevs or the newer acquisitions, the same-store is -- that's the portfolio that it's been with us for a period of time in a form that is really, when it should be most competitive, we're experiencing that across the portfolio. We're seeing good occupancy growth in independent living, assisted living across our markets, across our operators. So no, there's nothing within the portfolio that is of concern. We're really encouraged by the broad-based contributions.

And fair enough, I mean, you're right about the pace of growth. I just wanted to ask the question. Second, the 25% NOI growth for the 90-plus occupancies. Was that was a U.S. portfolio observation, I assume?

That's right.

Okay. And then you said 1% of the portfolio is 100% occupied, and that's a 20% NOI growth story, again, I assume the U.S. So -- is this informing you about the efficient frontier around occupancy? Because I know you have talked about a strategy of pursuing 100% occupied campuses, but maybe this is telling you that the efficient frontier is not 100%, and you shouldn't be really shooting for that, but something in the low to mid-90s. Is that a reasonable mathematical observation? Or is this just a point in time and not -- shouldn't be overly emphasizing it.

Yes. So the -- when I talked about in my prepared remarks, this cultural commitment to 0 lost revenue days in order to get the performance we're talking about in this 90-plus group, you really have to be stretching to go full. We need as many communities that we can go to 100% occupancy. You have the best opportunity for margin expansion in that group because of the operating leverage in the business. And it's not easy to do, but we have 10% of our portfolio. It's achieving it. We have half our portfolio that's in that -- in the U.S. in the same-store that's in that 90-plus group, and they are contributing a lot of growth in the contributing growth because they're reaching for that ultimate goal of being 100% occupied. So there's an opportunity in this asset class given the lack of frictional vacancy to achieve that result and we're proving it, and the goal would be to get as many communities as full as possible.

And our next question comes from the line of John Kilichowski with Wells Fargo.

This is [indiscernible] on for John. So with leverage now down to 4.7x and the balance sheet continues to improve, as you look beyond this year's investment plan, should we assume acquisitions are still primarily equity funded? Or will the funding mix likely become more tilted more balanced, I guess, going forward?

Yes, thanks for the question. I'm very proud and pleased at 4.7x, which is our leverage as of the second quarter. And when you look at unsettled equity, which will be used to fund investments we're in the mid-4s. So that's well over a turn from where we were last year. And the playbook of the strategy has been equitizing investments in senior housing and that is both accretive and delevering and that has been a powerful combination. And given the market backdrop and the situation we have, both in terms of investment opportunities and our cost of capital, I would expect that to continue. So without putting a number on it, we're going to keep running that playbook.

Excellent. And just a separate follow-up here. With the Brookdale transition is largely complete at this point. What are you seeing so far, the selling season in terms of leads, move-ins and pricing? And is what you're seeing today still support the opportunity to roughly double NOI over time for that portfolio?

Yes. So I'll start with the end. We absolutely believe in the opportunity to double the NOI in that portfolio. I want to make sure -- I want to put it in context for those that might not remember what this is. So we have a non-same-store portfolio that's 25% of the NOI and SHOP. That includes acquisitions, transitions, redevs primarily. The former Brookdale communities or large-scale communities that we thought would benefit from an operator change and investment in the asset to better position it and then executing on -- what was a low occupancy in markets that have strong net demand. All of those actions are underway this year. And we'll expect in the future the opportunity to go after that doubling the NOI. We also have opportunities like that across the rest of the non-same-store portfolio as well that we're working on. So those actions are underway and that will really fuel our future growth.

Our next question comes from the line of Rich Hightower with Barclays. Going once, going twice. All right. Our next question comes from the line of Mike Mueller with JPMorgan.

I guess in the research portfolio, there's some chunky occupancy loss in the quarter. Can you give a little bit of color on what's happening there and what do we expect going to go forward?

Sure. This was as expected. There were a few tenants that didn't renew in the portfolio. It is net-net-net, a $900,000 impact year-over-year. Pretty much in line with our expectation. I would emphasize that the second quarter in research is likely to reflect the balance of the year given that those move-outs. So that's in short.

Got it. Okay. And then I guess looking at the U.S. SHOP portfolio, you had the biggest year-over-year occupancy gas and rev growth in the markets that you classified as other markets. So can you give a little color in perfect falls into those buckets of what's happening on the ground there that makes them relatively stronger?

Yes. So there is -- we've got the primary secondary in other markets. Obviously, I mean last year, secondary was outperforming. This year, we have really strong growth across primary and other. Other does have a lot of our independent living product that's either holiday or a holiday like community and they're delivering really strong growth for us this year in terms of occupancy and NOI growth. And so that's been a really big contributor for us.

And our next question comes from the line of Michael Stroyeck with Green Street.

Maybe going back to the development topic. I appreciate the comments on where you think rents need to go. Where do you think development yields are actually at today? And where do they need to be, in your opinion, for development to make a bit more sense.

Yes. So the kind of the standard underwriting and the development yield spread is around 150 to 200 basis points. So call it, 8% yield or sales. So there's -- and that's usually what we use in our assumptions. We'll run sensitivities down to 7 and just to use our -- the judgment in terms of what could happen in terms of development actually penciling, but that's the standard we're using, if you're wondering.

And I guess where do you think yields are at today? Like how far away are we from that 8%?

We're investing across the $4.5 billion we're investing at $6.5 billion. So if you put the -- the $150 million to $200 million on top of that. So now you're at 8% to 8.5%. And that's just the standard underwriting you'd see -- you'd expect a development yield spread of 150 to 200 basis points over the expected year 1 yields and investments?

Sorry, I guess I meant more based on where rents are today, like where do you think a development yield would be? And how far away is it from that 8% development be required...

Go ahead, Justin.

Yes. I think here's another way to get -- so another way there -- the way we would look at it is what would a developer expect in terms of return, we think that's around 8% and give or take, someone might reach for a lower yield, some might be more comfortable higher than that, but let's just call it 8%. And then it's what are the trended rents need to be in order to achieve that. And we think that's at least 25% higher, which means it's largely not achievable. The projects don't pencil to what developers would seek in terms of their they're typically underwritten yields. The exception I mentioned earlier could be a luxury product, where they're introducing a much higher price point and entering a market as a [indiscernible] leader, certain developers have land banks out there that can help that even though they're higher barrier markets. So that's the that's maybe the exception we'll see first, but we're not expecting any big waves of new development announcements. However, we are really low in terms of starts right now. So it's hard to imagine it getting much lower. So we'll see what happens.

Okay. Understood. And maybe just one on dispositions. How long should we expect elevated levels of dispositions? Is this just a second half of 2026 story? Or could we see multiple years of pruning the portfolio?

Yes. It's Bob. I would -- if you go back and look at time, $500 million is not a -- it's a normal kind of average. So we're slightly above that. But I would say it's in the neighborhood of what we would do just in terms of upgrading the portfolio and improving the overall growth rate. Good hygiene is the way I'd describe it. So this is uptake.

And our next question comes from the line of Ronald Kamdem with Morgan Stanley.

Great. I'll be quick. I know we're running long here. I just want to talk a little bit more about expenses. I think that obviously, the guidance is unchanged. Just a little color whether it's some of the labor costs. Just what do you think is the opportunity you're sort of breaking that expense curve, both the total same-store number as well as sort of expense or operating room.

Ron, yes, one thing just to note is that the portfolio is delivering about 9% revenue growth. So I do want to start there.

Yes. So yes, really good revenue growth. The expense growth that you see at 5% is really volume driven. Our OpEx [indiscernible] is around 1.5%. So you're -- and that's because of the operating leverage and that kicks in this business model. So the guide we have is 5.5%. We had a first quarter that was impacted by weather, had elevated expenses in the first quarter, 5.8%, we're back in line with moderate expense growth around 5%, and we left room in our guide for some expense growth in the second half of the year, which will be volume-driven but also very efficient to my point, because there's margin expansion that would come with that.

And then my second one is just to circle back to sort of the [indiscernible] conversation. I think the presentation said the financial impact was already contemplated in guidance. Can you just provide any color of what that financial impact is? Because it seems like a good outcome that should have been beneficial.

It is a good outcome. And the principal driver is the loan. We show the rate, the $300 million at, call it, 10.5% effective rate. So that's the key driver and that was contemplated in previous guidance, as you say.

And our final question today comes from the line of Omotayo Okusanya with Deutsche Bank.

I just wanted to go back to Rich Anderson's question, this kind of idea of kind of lost the expectation. Again, some of your peers have done some large transformative transactions to have more shop exposure to ultimately accelerate the earnings growth profile -- how do you guys kind of think about that again, things are going great. Earnings are clearly accelerating, but it feels like the market is rewarding the names who are getting bigger faster in shop, if I may use those words. I'm just kind of curious how you're thinking about that strategically.

It's Debbie. Thanks for the question. Look, Billy Jan King said pressure is a privilege. And I believe that we have high expectations of ourselves we're delivering really great results, and we have this multiyear NOI growth and value creation opportunity ahead, and we've organized the company to really capitalize on that. So we're all excited about what the future holds. We're building SHOP to be 60% of our portfolio by the end of this year on a $60 billion enterprise. The investment engine is firing on all cylinders, SHOP's delivering 16% NOI growth. We feel very optimistic about our prospects in the future and value creation for all of our stakeholders, and we're very focused on our performance at scale. So we will keep keep focused on executing the strategy with excellence and delivering outsized returns over a multiyear time horizon.

All right. Thank you for the question. And ladies and gentlemen, that does conclude the Q&A session. So I will now turn the call back over to Chairman and CEO, Debra Cafaro, for closing remarks. Debbie?

Thanks so much. I want to thank all of our participants for joining us this morning. We really appreciate your interest in and support of the company. Hope you have a great rest of the summer, and we look forward to seeing you soon.

Thanks, Debbie. And ladies and gentlemen, that does conclude today's call. Thank you all for joining, and you may now disconnect. Have a great day, everyone.