Ventas Chairman and CEO Debra Cafaro
Ventas Chairman and CEO Debra Cafaro

The 121 leased Brookdale Senior Living communities that are part of Ventas’ portfolio demonstrate an “opportunity for [a] variety of positive outcomes for Ventas,” the Chicago-based real estate investment trust said Tuesday in a monthly business update.

“In Brookdale’s case, our communities are enjoying positive operating trends, and they have significant net absorption potential,” Ventas Chairman and CEO Debra A. Cafaro said in the previous update.

The Brookdale communities produce approximately 7% of the Ventas’ annualized net operating income and have a lease maturity date of Dec. 31, 2025. Brookdale has two contractual “all or nothing” 10-year extension options, according to Ventas. One can be exercised on or before Nov. 30 at the greater of escalated rent (3%) or fair market rent capped at 10% more than the prior year’s rent, the REIT noted.

According to the business update, Ventas’ Brookdale triple-net lease portfolio has “improved organic operating performance,” with 36% year-over-year growth in the fourth quarter of 2023. The communities are located in markets that support potential net absorption of approximately 1,000 basis points over next 3 years, the REIT said.

Ventas said it holds warrants exercisable through Dec. 31, 2025, for 16.3 million shares of Brookdale common
stock at an exercise price of $3 per share.

Ventas’ triple-net portfolio also includes 23 Kindred long-term acute care hospitals. The properties produce 5% of the REIT’s annualized NOI, according to the REIT, which said that lease will mature on April 30.

Ventas said it is in “active discussions with Kindred and other parties” to maximize cash NOI from Kindred after the expiration date. If Kindred does not exercise its option to renew the lease, then Ventas said it may negotiate agreements related to some or all of the properties.

“Kindred has communicated that it projects improving revenue and expense performance trends in 2024,” the REIT said.

Investment pipeline

Ventas reported that it is “actively executing” on senior living investments. The REIT said it is primarily expanding with existing operators with proven performance and is focusing on increasing its concentration in independent living / assisted living / memory care mixed communities.

According to Ventas, sellers are motivated to transact, “creating potential for numerous actionable opportunities.” Currently, the REIT has approximately $350 million in senior living transactions closed or under contract, according to the business update.