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Analyst Blog

Ventas Inc. (VTR - Analyst Report) is growing through acquisitions. The company is to acquire its competitor, American Realty Capital Healthcare Trust Inc. in a stock and cash deal worth $2.6 billion, which would bring on board 143 properties – mainly medical office buildings (MOBs) and seniors housing assets – as well as a pipeline of over $250 million in potential investments to Ventas’ platform.

Also, it would purchase 29 independent living seniors housing communities from Holiday Retirement in Canada. The deals fit the company’s strategy of focusing on private pay properties, strengthening its MOB footprint and international existence. (read: Ventas to Buy ARC Healthcare for $2.6B)

Aided by higher revenues, Ventas’ first-quarter 2014 normalized FFO of $1.09 per share came nearly 2% ahead of the Zacks Consensus Estimate of $1.07 per share and 6% above the year-ago quarter figure of $1.03 per share. Total revenue during the quarter reached $741.5 million, escalating nearly 9% year over year.

Quarterly results at this healthcare real estate investment trust (REIT) were driven by strategic investments made in 2013 and solid growth in same-store seniors housing operating and triple-net leased portfolios. Results also reflect the receipt of fees and other payments. These positives were partly dwarfed by higher debt balances, rise in general and administrative expenses, asset sales and loan repayments.

We expect strategic acquisitions and decent cash flows to add momentum to the company’s growth. Yet, cut-throat competition, expected rise in interest rate in the long run and the company’s substantial exposure to long-term leased assets remain our concerns.

To gain deeper insight into Ventas, you can refer to our updated research report, which was issued on Jun 26, 2014.

Echoing similar sentiments, over the last 30 days, the Zacks Consensus Estimate for 2014 moved up 0.7% to $4.41 per share while that for 2015 climbed 0.9% to $1.94 per share. The stock now has a Zacks Rank #2 (Buy).

Stocks That Warrant a Look

Investors interested in the REIT industry may consider stocks like Chatham Lodging Trust (CLDT - Snapshot Report), The GEO Group, Inc. (GEO - Snapshot Report) and Terreno Realty Corp. (TRNO - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
 

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