Financial institution of America says the stock of senior housing will surge because the U.S. inhabitants ages. Ventas is without doubt one of the firms anticipated to profit, analyst Joshua Dennerlein stated in a observe on Monday. As a REIT, it additionally returns earnings to traders. Its present dividend yield is about 3.4%. Dennerlein reiterated a purchase score on the inventory and raised his worth goal to $66 from $54, representing a 25.8% upside from Friday’s closing worth. The corporate’s shares have risen greater than 5% thus far this yr. “The restoration in senior housing occupancy from COVID-19 will proceed to be quicker than market expectations, with demographic developments turning from headwinds to tailwinds,” he wrote. The trade has been hit arduous in the course of the pandemic, however occupancy has continued to develop The speed has elevated and it has launched into the highway to restoration. Demand is growing whereas new development has slowed because of the well being disaster. On the similar time, People’ hair is getting grayer. In response to the U.S. Census Bureau, by 2030, all child boomers (together with these born between 1946 and 1964) will probably be 65 or older. Ventas’ portfolio contains senior housing communities, medical workplace buildings and different well being care services. Financial institution of America believes senior housing working margins will rise “considerably” going ahead, pushed by cyclical and secular development. Dennerlein stated the financial institution expects margins to achieve 31.7% in 2028, however evaluation reveals Ventas’ senior housing working margin may attain 35.8% given its present portfolio. He famous that this compares with 25.1% revenue margins in 2023 and a pre-pandemic excessive of 33.8% in 2016. VTR 1Y mountain Ventas’ one-year outcomes The corporate’s leasing of Brookdale Senior Residing, which operates impartial residing, assisted residing, reminiscence care and persevering with care retirement communities, must also see development, he stated. He famous that Brookdale operates a portfolio of 121 properties underneath a web lease construction in Ventas, which represents 7.4% of whole web working earnings. Dennerlein believes Brookdale’s lease with Ventas expires in 2025 and will train its renewal choice, which may improve money lease by as a lot as 10%. Nonetheless, he stated the non-renewal and conversion of the properties into Ventas’ senior housing working portfolio would offer a further 1.2% development in web working earnings. That stated, Ventas is not the one senior housing REIT that Financial institution of America likes. Welltower and American Healthcare REIT are additionally on its purchase checklist. Each firms are dividend payers, with Welltower yielding 2.3% and American Healthcare REIT yielding over 6%.
