Brief clip from Sadler's lengthy double upgrade report....
VTR: Upside "SHOPportunity"
We are upgrading Ventas from Underweight to Overweight to reflect the
convincing turn in fundamentals within the seniors housing operating portfolio
(26% of NOI) and the increasing visibility of a sustainable, multiyear, above-
trend recovery in SHOP NOI growth. The positive inflection in seniors housing
occupancy that began in mid-March and continued into April appears poised
to continue for the foreseeable future, as move-ins are normalizing toward
pre-pandemic levels and move-outs remain subdued by the lower in-place
occupancy. This dynamic helped drive 190 bps of uplift in spot SHOP portfolio
occupancy off of the mid-March lows by the end of April, and mgmt. forecasts
another 80-180 bps of gains by the end of 2Q; notably, 3Q typically marks
the peak seasonal quarter of seniors housing net absorption, though visibility
remains limited. While the recovery off of the pandemic lows could drive double-
digit SSNOI growth in each of 2022 and 2023, the combination of lower
new supply (fewer starts, rising costs, etc.), a favorable housing market and
outsized growth in the target cohort should incrementally bolster seniors housing
fundamentals; labor and food inflation may be headwinds, though these could
likely be offset by price increases.
Updating Estimates. We are maintaining our 2021 and 2022 Normalized FFO/sh estimates of $2.84 and
$3.08, respectively. Our model revisions include a slight increase in SHOP NOI, reflecting higher than
expected occupancy growth in April and the uplift of management’s 2Q SHOP occupancy guidance; this
positive revision is offset by reductions in medical office / life science and triple-net revenues. We are
increasing our NAV/sh estimate by 1% to $47.05. We are also establishing an upside price target of $60