Bank of America says the inventory of senior housing will surge as the U.S. population ages. Ventas is one of the companies expected to benefit, analyst Joshua Dennerlein said in a note on Monday. As a REIT, it also returns income to investors. Its current dividend yield is about 3.4%. Dennerlein reiterated a buy rating on the stock and raised his price target to $66 from $54, representing a 25.8% upside from Friday’s closing price. The company’s shares have risen more than 5% so far this year. “The recovery in senior housing occupancy from COVID-19 will continue to be faster than market expectations, with demographic trends turning from headwinds to tailwinds,” he wrote. The industry has been hit hard during the pandemic, but occupancy has continued to grow The rate has increased and it has embarked on the road to recovery. Demand is increasing while new construction has slowed due to the health crisis. At the same time, Americans’ hair is getting grayer. According to the U.S. Census Bureau, by 2030, all baby boomers (including those born between 1946 and 1964) will be 65 or older. Ventas’ portfolio includes senior housing communities, medical office buildings and other health care facilities. Bank of America believes senior housing operating margins will rise “significantly” going forward, driven by cyclical and secular growth. Dennerlein said the bank expects margins to reach 31.7% in 2028, but analysis shows Ventas’ senior housing operating margin could reach 35.8% given its current portfolio. He noted that this compares with 25.1% profit margins in 2023 and a pre-pandemic high of 33.8% in 2016. VTR 1Y mountain Ventas’ one-year results The company’s leasing of Brookdale Senior Living, which operates independent living, assisted living, memory care and continuing care retirement communities, should also see growth, he said. He noted that Brookdale operates a portfolio of 121 properties under a net lease structure in Ventas, which represents 7.4% of total net operating income. Dennerlein believes Brookdale’s lease with Ventas expires in 2025 and could exercise its renewal option, which could increase cash rent by as much as 10%. However, he said the non-renewal and conversion of the properties into Ventas’ senior housing operating portfolio would provide an additional 1.2% growth in net operating income. That said, Ventas isn’t the only senior housing REIT that Bank of America likes. Welltower and American Healthcare REIT are also on its buy list. Both companies are dividend payers, with Welltower yielding 2.3% and American Healthcare REIT yielding over 6%.
Bank of America says stock could soar 25% as population ages | Real Time Headlines
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