Senior housing shares are set to take off because the American inhabitants ages, in response to Financial institution of America. Ventas is a type of names poised to profit, analyst Joshua Dennerlein mentioned in a notice Monday. As an actual property funding belief, it additionally returns revenue to traders. It presently has a dividend yield of about 3.4%. Dennerlein reiterated his purchase score on the inventory and raised his worth goal to $66 from $54, suggesting 25.8% upside from Friday’s shut. Shares are up greater than 5% yr to this point. “The COVID 19 occupancy restoration in senior housing will proceed to be quicker than the market expects and demographic traits have shifted from a headwind to a tailwind,” he wrote. The trade was hit arduous in the course of the pandemic , however has been on the street to restoration as occupancy improves. Demand is growing, whereas new development slowed as a result of well being disaster. On the similar time, People are rising grayer . By 2030, all child boomers, which incorporates these born between 1946 and 1964, will likely be 65 or older, in response to the U.S. Census Bureau . Ventas’ portfolio contains senior housing communities, medical workplace buildings and different health-care amenities. Financial institution of America sees “important” senior housing working margins upside forward, pushed by cyclical and secular progress. The financial institution initiatives margins to hit 31.7% in 2028, however an evaluation reveals Ventas may obtain senior housing working margins of 35.8% given its present portfolio combine, Dennerlein mentioned. As compared, these margins have been 25.1% in 2023 and hit a pre-pandemic excessive of 33.8% in 2016, he identified. VTR 1Y mountain Ventas’ one-year efficiency The corporate also needs to see progress with its leases to Brookdale Senior Dwelling, which operates unbiased residing, assisted residing, reminiscence care and persevering with care retirement communities, he mentioned. Brookdale operates a portfolio of 121 properties in Ventas’ web lease construction, making up 7.4% of complete web working revenue, he famous. Dennerlein thinks Brookdale, whose lease with Ventas expires in 2025, may train its renewal possibility and money lease might enhance as a lot as 10%. Nonetheless, a nonrenewal and a conversion of the properties to Ventas’ senior housing working portfolio would offer a further 1.2% enhance to web working revenue, he mentioned. That mentioned, Ventas just isn’t the one senior housing REIT that Financial institution of America likes. Welltower and American Healthcare REIT are additionally on its purchase listing. Each names are dividend payers, with Welltower posting a yield of two.3%, and American Healthcare REIT touting a yield of greater than 6%.
