Leading senior housing REIT Ventas Inc. (NYSE:VTR) recently gave its fourth quarter and full-year results, then provided us with some full-year guidance for 2016.
Courtesy of Google Finance.
As a stock, Ventas has been down on its luck through the latter half of 2015, mostly due to fears of looming oversupply in the senior housing market. In addition to that, competition to finance senior living properties is heating up because investment money is flooding into this market. As both a leading developer and investor, Ventas has made a point to communicate that most of its developments have name-brand operators in metropolitan areas with building opportunities, and that the company should therefore remain above the fray.
Looking at Ventas' results and forward guidance, I believe that Ventas' acquisition activity, and subsequent outsized FFO growth, is going to slow down for a while. This article looks at Ventas' results, its guidance, and of course, the company's valuation.
Full-year results
The year 2016 was a busy one for Ventas. Ventas spun off its skilled nursing facilities and acquired the real estate of Ardent Inc., a hospital system operator from Nashville, TN, for $1.3 billion. Altogether, Ventas made $5.2 billion in accretive acquisitions over the year 2015, and sold 65 properties for about $700 million. A low-cost of both equity and capital, coupled with high capitalization rates, have fueled the company's acquisitions in 2015. I highly doubt that trend will continue through this year. More on that later.
Despite the fear of looming headwinds, this was a strong year for Ventas. The company did well across the board. Normalized FFO per share grew 7% and finished a penny above high-end guidance. Not counting the spinoff, Ventas grew per share FFO by an impressive 9%.
Same-store net operating income increased 3.8% on the year. This was fueled
