|When Debra Cafaro started as Ventas CEO in 1999, it was struggling financially. Now, it’s a $24B enterprise and the nation’s largest owner of seniors housing and MOBs. In the last 12 months, the REIT has closed on three major mergers, posted an NOI of $1.4B, and has low 28% leverage.|
Bisnow: How does the recovery look from your vantage point?
Debra: Since 2010, Ventas has re-energized its growth plan and become the largest REIT in our sector through acquisitions. In 2010, we bought MOB owner Lillibridge Healthcare Services. In 2011, we spent approximately $11B on acquisitions and so far this year, more than $1B. Given our enterprise value, NOI and low leverage, we have three investment-grade ratings.
Bisnow: What is your seniors housing growth strategy?Debra: We focus on acquiring high-end, private-pay senior living communities with excellent operators in major markets. For instance, last year in May, we spent $3.1B to buy 117 private-pay properties managed by Atria Senior Living, an outstanding brand. Locations are high-net worth zip codes on the coasts; mostly in New England, New York, and California.
Bisnow: Who are the residents at seniors living facilities like this Sunrise of La Costa in Carlsbad, Calif. that Ventas bought in 2007?
Debra: They’re people over 85; the fastest- growing demographic cohort in the country. Usually, they choose a location that’s near family members. These properties are doing very, very well because of the demand. Now, we own 686 seniors living properties in the US and Canada.
Bisnow: How is seniors living performing as investment property?Debra: Seniors housing was the best-performing real estate class during the financial crisis and will benefit from an aging population. As a long-term provider of capital to seniors living operators, Ventas has increased our dividend by 8% annually over the past eight years. Since ’06, ’07, we’ve been creating value in private pay seniors living communities as cap rates have fallen and our NOI grows in the high single digits.
Bisnow: In 2009, Ventas acquired Doctors Office Building Three (above) in Hoffman Estates, Ill., which is 100% occupied. What is Ventas’ MOB strategy?
Debra: We now own 324 MOBs and outpatient facilities in the US and we’re still buying. This year, we acquired Cogdell Spencer and its 72 medical office buildings for $765M, and in July 2011 we acquired National Healthcare Properties with its extraordinary Pacific Medical Buildings portfolio, MOB development pipeline and seniors housing for $7.6B. Demand is driven by the 79 million Baby Boomers and the goal of treating patients in the most appropriate, low-cost setting. From 2010 to 2020, MOB visits are expected to grow by 30%.
Bisnow: How did Ventas deal with the recession?Debra: We started getting conservative earlier than most, in ’07. We saw signs that the CMBS market was cracking. Large banks were taking large write-downs; spreads widened and the deals getting done were over the top with incredible underwriting expectations like Archstone’s purchase of Stuyvesant Town. It was clear evidence the bull market was ending. By May ’07, we started raising equity, selling, and stopped buying. By the nadir of the REIT market in early ’09, we had all-cash flowing assets and a fortress balance sheet.
Bisnow: John Cobb, chief investment officer, helps steer Ventas’ financial performance. When did the company get back on a growth path?
Debra: By late 2009, we became constructive about investing in real estate. We had the balance sheet and low leverage and reignited our growth plan.
Bisnow: Despite progress, CRE is still a man’s game. What advise do you have for women in the industry?Debra: Always learn new things and take intelligent risks. I was a lawyer, then president of a multifamily REIT [and mother of two children now in their early 20's]. In 1999, I took over Ventas, which was in financial distress and in a sector I wasn't familiar with. But I saw potential and was willing to fail. I had a lot of supporters, which led to opportunities. It’s proven to be a great way to advance.