Chicago-based real estate investment trust Ventas is counting on $600 million in senior living community sales, capital improvements at properties, a new executive vice president, changes for the executive team and a new real estate fund to “put Ventas back on a winning path and to realize the upside in our senior housing portfolio,” Chairman and CEO Debra Cafaro said Thursday.
The REIT reported a 4.4% decline in full-year 2019 same-community net operating income in its senior housing operating portfolio and a 7.5% decline in the fourth quarter.
“We have been moving with a sense of urgency, intensity and purpose and have made significant strides over the past couple of months,” she said on the REIT’s fourth-quarter and full-year 2019 earnings call.
As part of the plan, Ventas plans to sell more than $600 million in senior housing properties this year to try to enhance longer-term senior housing portfolio growth. “Proceeds of these divestitures will be recycled into our exciting research and innovation pipeline with leading research universities,” Cafaro said.
New senior housing EVP starts April 1
Helping to decide which communities to sell, among other duties, will be J. Justin Hutchens, who recently stepped down from his position as CEO as Great Britain’s largest care home operator, HC-One, and will join Ventas April 1 as executive vice president, senior housing, North America.
“Justin, who will report to me and move to Chicago, will oversee our senior living business in North America, partner with our operators and focus on maximizing our position in the market,” Cafaro said. Ventas’ senior housing business includes 700 properties that are home to approximately 60,000 seniors, according to the REIT.
“His operating background will provide a strong complement to our existing capable team, and his presence will add to our senior housing bandwidth,” the CEO added. Hutchens, Cafaro said, already has relationships with most, if not all, of Ventas’ operating partners.
The incoming EVP has more than 25 years of senior housing experience, including serving as CEO, COO and president of National Health Investors from 2009 to 2015 and a position as executive vice president and chief investment officer of HCP Inc. (now Healthpeak Properties) from 2015 to 2017 before being named president in 2017. He joined HC-One later that year.
Hutchens also will join the board of Eclipse Senior Living, a company in the Ventas portfolio that “continues to find its footing” since its takeover of 76 Elmcroft Senior Living properties in January 2018, Cafaro said. Answering a question from an analyst, the CEO said a lesson to be learned from the REIT’s performance in senior housing over the past few years “is really understanding the longer transition period in the ESL portfolio.” Ventas is pursuing an institutional joint venture with the ESL portfolio, she said.
In addition to ESL, among the companies with owned or leased senior housing properties in Ventas’ portfolio are Atria Senior Living, Brookdale Senior Living, Holiday Retirement and Sunrise Senior Living.
Capital expenditures ‘significantly increased’
Cafaro said Ventas is accelerating targeted senior housing capital expenditures to improve communities in markets deemed to be priorities, “particularly on projects that are customer-facing and designed to improve the occupancy, competitive position and overall attractiveness of our communities.”
Chris Cummings, senior vice president, asset management (seniors housing), said the REIT spent approximately $2,500 per unit in 2019 and will spend close to $3,300 per unit this year.
“We are spending, in terms of customer-facing capital, about 65% more dollars in 2020 than we did in 2019, and where we are spending those dollars is primarily in those markets which we view as future-attractive from a supply / demand perspective, where we can get good outcomes from that spend,” he said.
Executives see additional responsibilities
Ventas also announced additional responsibilities for some current executive vice presidents:
- Robert F. Probst, EVP and chief financial officer, will add oversight of the tax and risk management functions to his role. He will continue to oversee the capital markets, financial planning and analysis, accounting and reporting, investor relations and information technology functions.
- John D. Cobb, EVP of investments, will continue to lead enterprise-wide investments and dispositions for the company while adding oversight of Ventas’ portfolio strategy officer and one of the managing directors of the company’s newly launched real estate fund (see below). Cobb’s team will continue to source all investments, including those to be included in the fund’s portfolio.
- Peter J. Bulgarelli, EVP of office and CEO of Lillibridge Healthcare Services, has assumed responsibility for REIT’s healthcare asset management group, which includes the company’s acute and post-acute portfolios.
Also, as previously announced, Carey Roberts will join Ventas as general counsel in March.
New real estate fund formed
Ventas also announced that it has sponsored and formed the Ventas Life Science and Healthcare Real Estate Fund, a perpetual life vehicle that will focus on investments in senior housing, life science and medical office real estate.
The REIT is expected to hold a 20% ownership stake in the fund, which is planned to launch during the first quarter with more than $700 million in assets under management and third-party equity commitments of approximately $650 million, Ventas said. The REIT will contribute five “high-quality, stabilized life science and medical office assets” to establish the fund, but future assets going into the fund will be new acquisitions, Cafaro said.
The fund “leverages our brand, team, experience and industry knowledge, extends our reach and provides us with another consistent source of capital to grow,” the CEO said.
The REIT’s investment team, led by Cobb, will source, underwrite and close investments for the fund. Fran Federman, Brian Newman and Nevin Boparai, current leaders at Ventas, will serve as managing directors of the fund.
“Over a 20-year time period, we have really focused on delivering and on excellent performance, and I think we have had a short period here where we have not met our own expectations, but we are doing everything within our power to get back on the winning path, and I am confident that the actions we are taking will do so,” Cafaro said.
