Consider Equity REITs For Your Next Investment: Ventas

I recently wrote an article for Sure Dividend entitled “Consider Equity REITs for Your Next Investment“. In that article, I listed nine equity REITs (eREITs) for dividend investors to consider in light of the drubbing that eREIT valuations have recently taken due to fear of rising interest rates and to capitalize on the pass-through provision for REIT income included in the new tax legislation. Both of these topics are covered in some detail in the previous article.

This article provides a more complete investment thesis for Ventas, Inc., one of the nine eREITs highlighted in the previous article.

Ventas, Inc.  

Ventas (VTR) is one of the larger healthcare eREITs in the US with an enterprise value of roughly $35 billion and more than 1200 healthcare properties/assets consisting of Medical Office Buildings (MOBs), Senior Living Developments, Life Science Facilities, and Acute Care Facilities located in 32 states.

Ventas has very little exposure to Medicaid and/or Medicare payment structures with roughly 94% of its revenues generated through operators relying on private pay or private insurance reimbursement for senior housing and healthcare services. Ventas maintains a strong balance sheet with conservative use of debt and carries a BBB+ credit rating. The chart below shows four critical metrics for VTR’s balance sheet.

Source:  Ventas Investor Relations Site

The bottom two charts are particularly important as they show that VTR’s net debt including preferred stock issues is manageable with respect to EBITDA and the interest on debt and preferred dividend payments (fixed charges) is well covered by EBITDA. These are the metrics that are important to maintaining an investment grade credit rating and allows VTR to issue more debt for growth acquisitions at favorable (i.e. low) rates.

eREIT’s management grow their businesses typically by acquisition of new properties or by acquisition/merger of other eREITs. VTR has been delivering and continues to deliver value to its shareholders through investments in new properties and acquisition of other eREITs. The chart below shows VTRs investment results and its underlying principles for continued growth and value creation.