Ventas (VTR) Q2 2026 earnings call transcript

Thank you for standing by. My name is Greg and I will be your conference operator today. At this time, I would like to welcome everyone to today's Vintoss 2nd Quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad once again, star one. I'd now like to turn the call over to B. J. Grant, Senior Vice President Investor Relations. B. J. , you had the floor.

Thank you, Greg. Good morning, everyone, and welcome to the Vintoss 2nd Quarter 2026 results conference call. Yesterday, we issued our 2nd Quarter 2026 earnings release, presentation materials and supplemental information package, which are available on the Vintoss website at IR. VentossRead. com. As a reminder, remarks today may include forward-looking statement and other matters. Forward-looking statements are subject to risk and uncertainties, and a variety of topics may cause actual results to differ materially from those contemplated in such statements. For more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent FDC filings, all of which are available on the Vintoss website. Certain non-gapped financial measures will also be discussed on this call and for our reconciliation of those measures to the most closely comparable gap measures, please refer to our supplemental information package posted on the investor relations website.

And with that, I'll turn the call over to Debra A. Kefaro, Chairman and CEO, Vintoss.

Thank you, B. J. and Happy Birthday. Good morning to all of our shareholders and other participants. I'm pleased to welcome you to the Vintoss 2nd Quarter 2026 earnings call. Vintoss delivered excellent results in the quarter, powered by strong growth in our senior housing operating portfolio and accelerating senior housing investment activity. With a decade of powerful demographic demand ahead, we intend to capture the unprecedented multi-year NOI growth and value creation opportunity by growing our shop footprint organically and externally and increasing our company growth rate. Since we adopted our 123 strategy in late 2023, our team has executed it with commitment and excellence to deliver outstanding returns and build our financial strength. We've made enterprise-wide investments in our innovative platform and team to drive our performance and elevate our industry.

The results are clear. This quarter we delivered 10% total company same property NOI growth. U. S. shop led the way with 18% NOI and 360 basis points of occupancy growth year over year as we continue to outperform the industry. Our second quarter FFO per share of 97 cents represented 9% year over year growth. For the full year, we are again raising our normalized FFO expectations to $3.85 to $3.90 per share, equating to 8 to 10% growth, primarily because of our increased investment activity. The Ventos investment engine is firing on all cylinders. We now expect to complete $4.5 billion of 2026 investments focused on senior housing from $3 billion previously.

We are executing at significant scale and we've completed over $8 billion in investments since the beginning of 2024, adding more than 23,000 units across 174 communities to our shop portfolio.

Our investment success has been enabled by the integration of our Ventos OI platform with our capital allocation decisions under Justin's leadership. Our number one capital allocation priority remains U. S. senior housing, particularly acquisitions that combine attractive growth, yield, and risk adjusted return potential. Our investment pipeline is active and actionable and we're using our competitive advantages to win deals that meet our strategic and financial criteria, including double digits to mid-peens on levered IRRs and discounts to replacement costs. The private to public arbitrage opportunity for Ventos and senior housing is compelling and we intend to use the power of our franchise to aggressively build on our investment momentum.

Our investment activities and outlook, of course, are based upon the unprecedented demographic demand for senior housing. The leading edge of the nearly 70 million baby boomers has just begun turning 80 this year, ushering in a decade where the growth rate of the senior population more than doubles, yet new starts remain at record lows, with demand expected to substantially outrun supply and the persistence of elongated construction timelines and high costs. We foresee an exceptional opportunity for outsized growth and value creation in the coming years.

We also expect to make more dispositions of non-strategic assets in the back half of this year to improve our growth rate and expand our senior housing footprint. The combination of more shop investments, strong shop internal NOI growth, and increased dispositions should make shop 60% of our $60 billion enterprise by year end.

In closing, as you look across the investment landscape, Ventos offers investors an attractive combination of hard assets and growth from need-based secular demand, not correlated with the AI economy. With strong differentiated platform, we are focused on delivering outperformance and winning together while advancing our mission of helping people live longer, healthier, happier lives. Our whole Ventos team is in it to win it, and as Justin likes to say, the best is yet to come.

Now, Justin, I'm pleased to turn the call over to you.

Thank you, Debbie. I'm pleased to join you today to discuss another quarter of strong execution and shop and investments. Ventos has never been better positioned to capture the multi-year growth opportunity in senior housing. With the differentiated platform, strong balance sheet, outstanding operators, and talented team, we remain focused on creating value for residents, operators, team members, and shareholders. Our second quarter results reflect the strength of our portfolio, the effectiveness of our active asset management platform, and the growing contribution of our senior housing acquisitions.

Starting with shop, we delivered another great quarter. Same-store shop NOI increased 16% year over year, representing one of the strongest quarterly growth rates in our recent history. NOI growth in the quarter was led by the U. S. with 18%.

Occupancy remains the primary driver of our performance. During the second quarter, same-store average occupancy increased 300 basis points a year over year, led by the U. S. , which continues to deliver excellent growth with 360 basis points.

Within the NIC top 99 markets, Ventos same-store communities achieved approximately 150 basis points of occupancy outperformance versus industry averages, demonstrating the benefits of our focused operating execution and differentiated platform. More broadly, the key selling season is progressing well. As always, the May through September period remains the most important operating window of the year for senior housing. We started the year strong, raised the occupancy guide from 270 bibs growth to 300, and now we've entered the key selling season, which is on track so far. Rev 4 increased 5% year over year, and pricing strength was realized across both in-place rent increases and move-in rents, led by our highly occupied communities.

The combination of the occupancy and rev 4 growth drove nearly 9% same-store revenue growth across the portfolio. At the same time, expense growth moderated. Same-store operating expenses increased 5%, contributing to margin expansion.

NOI margins expanded 210 basis points a year over year to 31%, and incremental margin flow-through reached 55%, highlighting the operating leverage embedded in the business as occupancy continues to rise. These results are the outcome of the work being done every day by our operators and the continued execution of the Ventos OI active asset management platform, which is fully deployed across our shop portfolio, and we are positioning our AI-ready tech stack to improve the execution of our insights. I'd like to give a special thanks to our operating partners who continue to deliver great results as they embrace our culture of winning together.

Atria and Sunrise are leading the U. S. , and the group Maurice continues to lead the way in Canada. Over the last several years, we have built a scalable operating framework that combines data analytics, benchmarking, active asset management, and close collaboration with operators to drive performance at the community level. Our teams continue to focus on initiatives with our operators that can create incremental value across hundreds of communities simultaneously.

Those efforts include refresh capital investments, dynamic pricing insights, sales culture enhancements, and benchmarking programs throughout our portfolio. One example is our relentless focus on driving occupancy in our portfolio, which is a long runway ahead. Our U. S. senior housing portfolio is 87% occupied, of which our non-same store is only 83% by design. We are well positioned in markets with a projected 1200 basis points of net demand over the next few years.

Our VentOSLI platform is deployed across our portfolio where we utilize real-time leading indicators to occupancy growth in partnership with our operators to drive price volume optimization contributing to our occupancy out performance in the U. S. On the other end of the spectrum is our cultural commitment to achieving zero lost revenue days in our communities. Working alongside our operators, we are implementing a playbook designed to drive occupancy in highly occupied communities by improving execution around resident retention and move in timing.

Today, approximately 10% of our shop communities are operating at or near 100% occupancy with two-thirds located in the U. S. This demonstrates both the demand characteristics in our markets and our ability to translate that demand into operating results. It also provides the proof point for the lack of frictional vacancy in senior housing communities. We are currently seeing out performance in our higher occupied cohort.

The communities currently 90% or more occupied delivered 25% NOI growth. This includes about half of our U. S. same store communities.

They have pushed price, occupancy, and margin expansion. This performance demonstrates the long runway ahead of reaching stabilization, the top line growth potential, and margin expansion opportunities in highly occupied communities as our portfolio continues to grow occupancy.

Wrapping up shop, I'm pleased to reaffirm our same store shop guidance of 16% NOI growth at the midpoint. As a reminder, the slope and timing of the key selling season is the main determinant to the full-year result, and we are in the middle of it right now.

Turning to investment. Based on the strength of our close activity and the attractive senior housing acquisitions that we currently have under contract, we are raising our full-year 2026 investment guidance again from 3 billion to 4.5 billion. Strong senior housing investment momentum is further expanding our shop footprint. Year to date, we have completed over 3 billion of investments focused on senior housing across 27 transactions.

Further expanding the quality, reach, and earnings power of our shop portfolio. All of our year-to-date senior housing investments were underwritten to double-digit to mid-teens unlevered IRRs. Together, they have an average expected year one yield of 6.6%. And required at significant discounts to replacement costs with an average price per unit of 358,000. The senior housing transaction market remains active, and our pipeline continues to offer a broad set of compelling opportunities.

While interest in the sector continues to grow among both new and existing sources of capital, FENTOS is demonstrating the power of our differentiated competitive approach.

Our relationships continue to be a defining advantage. More than 90% of our year-to-date investments were relationship-driven, including off-market transactions and marketed processes involving repeat sellers, existing operating partners, or both. These relationships create real-process advantages, including the ability to preempt opportunities and compete effectively at the finish line. Each investment is selected through a right-market, right-asset, right-off-it-er framework with a clear focus on enhancing portfolio quality and positioning VENTOS with durable long-term growth.

Our underwriting is benefiting from our substantial VENTOS OI data analytics and allowing for a very efficient close process, which is approximating around two months start to finish, which is among the most efficient in the industry.

Looking ahead, the senior housing investment opportunity set remains robust. We will continue to use our platform, relationship, data, and execution capabilities to source and a close attractive investment at scale.

In closing, I'm energized by the opportunities ahead. We continue to deliver strong organic growth as we expand our portfolio through a creative investment activity. We are doing so against the backdrop of powerful demographic tailwinds and historically limited new supply while exercising the strength of our VENTOS OI platform to drive out performance. I couldn't be more excited as we create environments where residents choose to live and enjoy the valuable benefits of senior housing.

Bob?

Thank you, Justin, and good morning, everyone. I'll begin with our second quarter financial performance, then discuss our balance sheet in capital activity, and conclude with our improved outlook for 2026, starting with our enterprise results. VENTOS delivered another quarter of strong performance and growth. Net income attributable to common stockholders was $0.14 per share.

Meanwhile, normalized FFO per share was $0.97, representing 9% year-over-year growth, driven by strong property performance across the portfolio, a creative senior housing investment activity, and the continued execution of our 1, 2, 3 strategy.

Total company, same-store cash NOI, increased 10% year-over-year. Once again, shop was the primary driver of our performance, generating 16% same-store cash NOI growth with the balance of our portfolio all contributing to double-digit growth in our overall same-store property portfolio.

Our outpatient medical and research portfolio, or OMAR, delivered 5% same-store cash NOI growth in the second quarter, led by outpatient medical.

After adjusting for cash-free income, our outpatient medical same-store cash NOI increased 3% in the second quarter. This outpatient medical performance was led by a 50 basis point occupancy improvement year-over-year, and was supported by strong tenant retention of 88%.

Our triple net portfolio generated 3% same-store cash NOI growth in the second quarter, and we expect the triple net same-store year-over-year NOI growth rate to increase in the second half of the year.

Moving on to the balance sheet, our financial position strengthened again during the quarter. Net debt to EBITDA improved to 4.7 times. Our best leverage level in well over a decade, representing a 90 basis point year-over-year improvement and 30 basis points of sequential improvement.

The continuing improvement in leverage demonstrates the power of our organic growth engine and the momentum in our equity-funded investments.

Year to date, we have completed $3.4 billion of investments and have raised $4.2 billion of equity, with $1.6 billion currently unsettled. As a result, liquidity of $4.9 billion at the end of the second quarter provides substantial financial flexibility for our investment and refinancing activity.

Last, I'll turn to our updated earnings outlook. Given our strong first-half performance and continued momentum and external growth, we're once again raising our earnings outlook for 2026.

We now expect full-year net income to range from $0.58 to $0.63 per share or $0.61 per share at the midpoint.

We are once again increasing our full-year normalized FFO per share guidance to now range from $3.85 to $3.90, which represents year-over-year growth of 8 to 10%.

Our new guidance midpoint of $3.88 is a two-cent per share improvement from our prior guidance midpoint. Bridging this improvement is a positive three-cent contribution from higher accretive senior housing investment activity that have increased capital recycling. This is partially offset by a penny from the impacts of higher interest rates and a higher share price.

A detailed discussion of our guidance assumptions can be found in our Q2 supplemental and earnings presentation posted to our website.

To close, we are very pleased with our second quarter results and our performance through the first half of the year. Ventos is benefiting from a unique combination of powerful demographic tailwinds, industry-leading operating execution, highly active investment platform, and a strong financial position.

The entire Ventos team remains focused on executing our strategy, creating value for our shareholders, and extending our track record of our performance.

And with that, I'll turn the call back to the operator.

Great, thank you. And at this time, I would like to remind everyone, in order to ask a question, please press star than the number one on your telephone keypad once again, star one. And we will pause just a moment to compile the Q&A roster.

All right, looks like our first question today comes from the line of Julian Lowen with Goldman Sachs. Julian, please go ahead.

Thanks for the question. Look, we've always taken the view that will strongly consider, you know, any transaction that we believe creates long-term value for shareholders, and we've proven that in the past with our SNF disposition and spin-off, we continue to evaluate our portfolio. Our strategy is very focused on expanding our shop footprint, and that's exactly what we're doing.

And that's how we're really thinking about strategic opportunities.

Yeah. So I mentioned my prepare remarks. I talked about this, that half of our US shop, same-store portfolio is 90% occupied or more.

That group grew in our 25% year-over-year. The rev-poor is six percent. So it's obviously bringing the average up across the portfolio in terms of NOI growth, in terms of rev-poor growth, occupancy growth was really strong in that group as well, on the better side of our average. And so, you know, I think that's really encouraging as you think about two things, one of them has a really long run way to go, where 87% occupied across shop.

And to know that when we get to that kind of the first phase, I'll call it the first destination, which is to break that 90% barrier, there's a lot of growth opportunity that we're proving is yet to come. So it's a tremendously large proof point of the growth opportunity in the 90-plus occupied group.

All right. Thank you, Julian. And our next question comes from the line of Jeff Spector with Bank of America.

Sure. So what I said, my remarks were we started the year with a 270 guide. We've raised it to 300 basis points of growth year over year. We started the year really strong. We had 310. And the first, we had 300 in the second. So that means we need around 300 for the rest of the year. We have good visibility into the key selling season. It's on track.

There's good sales activity on the ground already in the quarter. Good occupancy growth already in the quarter. And that's supporting our fully your guide expectation of around 300 basis points. With the knowledge that we have a long way to go really to get through the rest of the key selling season. But so far, so good.

I really appreciate the question because it's a mission of ours to prove that stabilization is a much higher number than what we used to think it was traditionally.

One of the proof points we talked about was the 90 plus percent occupied communities. Another one I mentioned is the 10% of our portfolio that is at or near 100% occupied. And that group is also delivering very strong and I growth is benefiting from rate growth even higher, you know, around 7% report.

And has a, you know, 20 plus around 20% and I growth as well in the US. And by the way, two thirds of those in that category are in the US. I think everyone knows we have a highly occupied Canada, but our US is demonstrating that we can get all the way to 100% occupied in our communities.

That's been a key part of our thesis as we talk about this multi year growth opportunity. And now it's really pleasing to be able to show these proof points and demonstrate the N. O. I. growth opportunity as we get into these higher occupancy bands. And just a reminder, we're still only 87%, you know, across our shop portfolio. So, and you mentioned this, you know, the part that's 83% is our non-same store.

That's about 25% of our N. O. I. right now, 75% in the same store. So the 83% has a long runway ahead, combining for 87, long runway ahead. And when we get to this destination of 90% plus, really strong potential for N. O. I. growth.

Thank you. I think it's improved everyone that in this new paradigm, we can get into the close 100% occupied over the years. Exactly.

Thanks, Jeff. And our next question comes from the line of David Rogers with Raymond James. David, please go ahead.

You bet. So one of the real positive aspects of the senior housing business model is its operating leverage. And what that really refers to is that is occupancy go higher, your expenses become more fixed. So the difference between this year and last year is we're running at a higher occupancy. You have more operating leverage you're benefiting from, and then that's producing the opportunity for the better incremental margin that we're seeing. So 55% was good. And we would expect really the opportunity, all things consider equal, the opportunity for that to be even better as we move occupancy over time.

I mean, that's our primary focus. But, you know, development is going to be needed. I mean, Debbie made the point around demand. You know, there's a need for supply over time. The reality is that there's not a lot of projects that would pencil at this current time. We think that current rents need to be up to 40% higher or even more than that in certain cases. Trended rent around 25% higher.

So we're a ways off from probably any big wave in development. There's also just construction costs and availability of labor as well as, you know, that equity cost and availability of capital. One thing on that though, it's pretty clear that because of those dynamics.

The projects that needed, that could pencil are those that are so disconnected from the market in terms of rent expectations.

That they would feel comfortable delivering and really introducing a new higher end product to a market, which is a luxury product.

And we see these in our pipeline. I mean, those are the types of projects that developers slash operators are trying to bring to market. It's a luxury product.

And our primary focus right now is really to continue this acquisition program. We've had delivered over 8 billion and it's projected to deliver 4.5 billion this year, just based on what's been closed or under contract. And really attractive returns and with a really high quality, you know, type of community that we've been acquiring. So we're going to keep that going.

And just to top that off, you know, what we do know is that there were a little over 1000 starts this quarter and there's 2 million people turning 80 just in 2026 and that demographic demand wave continues for a decade. And so when we when we look ahead, the, the near to intermediate term, multi year growth and value creation opportunity is really an exceptional one for us.

All right. Thanks, David. And our next question comes from the line of Seth Berge with city.

So I'm going to start with the end part of your question pricing. You know, we've mentioned in previous calls that, you know, there's the cap rates have drifted down on a year of a year basis. But we've been really steady in the mid sixes in terms of our year one yield and then we can we've consistently been, you know, double digits and mid teens on my RIRs. And that's that continues in this in this next wave of a billion that's under contract two thirds of that the value add product with a higher growth profile.

And we're expecting similar yields and similar IRs in that group. Also, we have a pipeline that's really active. So we we have plenty under review and look forward to pressing our advantages moving forward in terms of external growth.

And then I think that might have addressed your whole question. Did I miss anything? It's kind of less fumbling through to close in terms of the numbers that you're looking at that. Yep.

There's a there's a couple factors that work. First of all, the market is bringing a lot more assets so that it is there's more coming to market and in our relationship driven pipeline. So that's really important because we have these competitive advantages that Justin mentioned, the team experience, the sophistication, the relationships. Most importantly, we are winning more than our fair share and expect to continue to.

So the increase to the guide, the bridge is is driven. This is two cents net that driven by investments up for that 3.4 billion under our belt and roughly a billion to go. We also increased our dispositions and loan repayment guidance that have blended seven. And so if you if you unpack I called it three cents net if you unpack that it's four cents investments less one for the dispositions.

And that's all happening in the back half of the year. So that's that's the biggest piece and the last piece is higher interest rates, stronger dollar and our stronger share price net a penny. I mean, you're right to say that nets out to 98 cents on average for the for the back half of the year relative to our 97 cents in the second at the midpoint.

All right. Thanks. And our next question comes from the line of Vikram Malhotra with Missuho Vikram.

Well, first of all, we just raised it last quarter. So, yeah, so we did take that step already, you know, based on the performance we saw playing out. We've proven that in the second quarter. And now we're in the key selling season and, you know, we'll see how that continues to play out. But, you know, we already did raise and now we have a lot of execution ahead of us and things are going well. And just underscore the first half was 16% year over year and a lot growth.

We're holding 16% for the year. So it's pretty straightforward. That's 16% in the back half is our assumption.

As an enterprise, this quarter is 10%. The biggest offsets to that in the past couple of years, including this year, as Bob just described is the interest rate curve and FX, et cetera, macro factors, let's call it. The hopefully get an assist from the macro in terms of, you know, the rate environment and so on. The emphasis of our strategy again, as I said, is to shop, we expect to be already 60% of a $60 billion enterprise by the end of this year and our strategy of focusing on aggressively growing that internally and externally continues. So that's how I would answer your question. In terms of Canada, just to touch on that for a minute, I would tell you that our dispositions are really focused on non-shop assets.

We are doing more, as you saw in the guide. And, you know, Canada remains a significant contributor to our enterprise growth.

All right. Well, thank you, Vikram. And our next question comes from the line of Jim Cameron with Evercore ISI.

But I think you also said it was 6% red for growth for that pool. And I'm just trying to understand how much of this is really pricing versus occupancy. I'm just trying to see, you know, we get to a steady state. I'd say you have mid-90s across a lot of your portfolio. What do you think pricing can look like on an annual basis as you run out of occupancy? Opportunity?

Well, that's going to be the question that we look forward to answering over time. I can tell you what we're seeing so far. So that the 90% plus group is half the US same store portfolio, huge sample, 6% red for the occupancy was even better than the average occupancy reported across the portfolio. So it's benefiting from occupancy and rate growth working together to drive the NOI growth and margin expansion.

We know that when we get even higher occupied, you get up into that group that's like 99% occupied plus, that I mentioned, 7% red for growth. So more pricing power, there's the scarcity values playing out. Now, it's important to note that this is all in an environment that's not as attractive as what's coming. That's one of the reasons, one of the many that we keep saying the best is yet to come because we haven't even experienced the best demographic cycle yet. That's just starting now with the baby boomers turning 80 and with deliveries down and starts way down. We have this window of opportunity we've been looking forward to and the value proposition in senior housing is pretty amazing.

And it's utilized regularly by our 90,000 plus residents, 100,000 across the whole portfolio. And we look forward to serving more seniors and we look forward to demonstrating the value proposition and with that does come a price opportunity, we think.

So, I want to make sure I'm understanding the question. You're talking about sellers retaining ownership. Yeah, it looks like you own on your paratabases about 91% of the investment. Oh, yeah. Yeah. Yeah. So, so what you're, what you're looking at is actually, you know, remember we have our, our, our fund that's focused on core plus investments across the various asset classes.

We, we invest in 20% of what the fund invests in. And so you're seeing our share reflected in the sub.

And, you know, we have, we did do one joint venture that we talked about last quarter with Revel. We will likely do more in the future, but mostly what you're seeing, you know, is the, the share between us and the fund.

Okay. All righty. Thank you, Jim. And our next question comes from the line of one. Sanabria with BMO capital markets.

Amongst a few different operators, the group. Marines is consistently to stand out their Quebec based. And there are rent restrictions in place in Quebec. And then there's kind of social barriers around rent as well as in Ontario. So, you know, we, we do experience pretty good rep for growth there. One of the reasons it stands out is because we have an independent living product.

So you don't really have that releasing spread drag that you can experience with assist the living when the higher QD residents. Move out and lower QD residents move in. So that the independent living rep for is really more stable in rent driven. So pretty good print there, but we don't view it as the indicator for the future in the US. So what we're looking at for the future opportunity of the US are the examples that gave around the 90% plus 100% occupied communities.

Where we're already demonstrating across a huge sample size higher for growth.

Yeah, I mean, in the US, we're looking at maximizing N. O. I. growth through the calibration of rate and occupancy. That Ventus O. I. is expert at well at the same time, making sure as Justin said, we're offering that value proposition to seniors. And that's really, you know, how we've been growing the portfolio and we see that continuing as scarcity potentially develops within the US market.

Again, we've reset to 700 million. It's really outside of shop. So think the rest of the asset classes. And I would call it sort of the non strategic type assets in those asset classes, including loan repayments. And it quite a high yield.

So about 100 million or so at 11% in terms of getting a loan repaid and really strong loan. So that's the net 700 million and really focused outside of shop. Yeah, and substantially all of the 8 plus billion of investments that we've completed since beginning of 24 have been in shop consistent with the strategy. We had a small opportunity to make a well-structured investment in terms of a recycled loan capital. Because of our position in the capital structure and contractual rights and we took it.

Thanks, Juan. And our next question comes from the line of Michael Goldsmith with UBS.

Really good question that there's three communities included in that. And by the way, one of those was purchased by our core plus fund. In fact, the community had the lowest going and cap rate was there. So our share of that's reflected.

And that was a class A asset in Colorado. We have two other really core like assets, one in California, one in Arizona.

And they are really high quality strong performers and markets with really strong net demand. Good occupancy and but also high ref core and high price opportunity high price growth opportunity moving forward. And so there's a portion of if you step back and just look at the way we've been allocating capital and senior housing. Most of it's been going into either high performing with upside communities or value add.

And there's a portion though that will put into certain markets where we have these really high quality communities that we think will be market leaders for years to come. And these just happen to fall in that category. So I wouldn't read the into the six to. Yeah, we're expecting the billion under contract to deliver around a six and a half consistent with what we've been delivering so far and what we've closed this year.

Yes, I just touched on it with one, but it's just a recycling of we expect some loan repayments is Bob talked about. We've recycled the capital into a well structured loan investment, you know, based on our position in capital structure and contractual rights that we have.

Thank you very much. Thanks, Michael. And from one Michael to another, the next question is from Michael Carol with RBC capital markets.

Yeah, so it's a good question. So the key selling season time period is always made to September. There is there is kind of a, you know, every year is a little different in terms of when you have your your bigger month. We happen to have a really strong start to the year ahead of the key selling season. So that was that was what helped us to have the conference raised in 270 to 300.

And then in the second quarter we saw evidence that really supported the 300 basis points guide that we gave. And what we're seeing so far in the third quarter is good occupancy growth, good sales activity on the ground, and so far so good in terms of meeting our expectations so far with a lot, a lot to play out still.

Okay, and then should we expect going forward that the occupancy trend will start to track more in line these typical seasonal trends? I mean, albeit probably still well above what it was pre COVID. I mean, I know the second quarter sequentially is usually up less than it is in the third quarter, just given how that key selling season flow starts.

So should we expect that to happen to seems in the prior few years, we just kind of powered right through it? Are we kind of back to that typical seasonal trend of occupants again?

And, you know, in the periods outside of the key selling season, a reason for that quite simply could be the higher demand that we're facing. So perhaps we're in a new, you know, a new paradigm. I would expect seasonality to continue and hopefully we can continue to see the muted, you know, seasons outside the key selling season. And we hope to see rip roaring key selling seasons moving forward too. So we'll see, but we certainly like our opportunity given the demand characteristics and the strength of our platform.

Appreciate it. Thank you, Michael. And our next question comes from the line of Richard Anderson with Cantor Fitzgerald.

I'm excited about 16% growth in shop. Yeah. Yeah. Yeah, we are based points of occupancy growth. I would, I understand what you're asking. And what I would say is we're seeing broad race contributions across the portfolio. Our same store shop is same store for a reason, you know, like in, you know, I'll just kind of. For example, our nonsame store is usually in a period of kind of transition or redabs or or their new acquisitions. The same store is, that's the portfolio that it's been with us for a period of time in a form that is really when it should be most competitive. We're experiencing that across the portfolio. We're seeing good, good occupancy growth and independent living, assisted living, you know, across our, our markets across our operators.

So now there's nothing within the portfolio that that that is of concern. We're really encouraged by the broad based contributions.

Yeah. So that when I talked about in my prepare remarks, this cultural commitment to zero loss revenue days, in order to get the performance we're talking about in this 90 plus group, you really have to be stretching to go full. We need as many communities that we can go to 100% occupancy. You have the best opportunity for margin expansion in that group because of the operating leverage in the business.

And it's not easy to do, but we have 10% of our portfolio that's achieving it. We have half our portfolio that's in the U. S. in the same store that's in that 90 plus group. And they are contributing a lot of growth in the contributing growth because they're reaching for that ultimate goal of being 100% occupied. So there's an opportunity in this asset class given the lack of frictional vacancy to achieve that result and we're proving it.

And the goal would be to get as many communities full as possible.

Thanks, Richard. And our next question comes from the line of John Kielichowski with Wells Fargo. John, please go ahead.

Thanks for the question. I'm very very proud and pleased at 4.7, which is our leverage as of the second quarter. And when you look at unsettled equity, which will be used to fund investments, you know, we're in the mid force. So that's well over a turn from where we were last year. And the playbook of the strategy has been.

Equitizing investments and senior housing in that is both the creative and delivering. And that has been a powerful combination. And given the market backdrop in the situation we have both in terms of investment opportunities and our cost of capital, I would expect that to continue. So without putting a number on it, we're going to keep running that playbook.

What are you seeing so far this season in terms of leads, movements and pricing? And is what you're seeing today still support the opportunity to roughly double N. O. I over time for that portfolio? Yeah, so I'll start with the end. We absolutely believe in the opportunity to double the N. O. I. and that portfolio. I want to make sure I want to put it in contact for those that might not remember what this is. So we have a non-same store portfolio of 25% of the N. O. I. and shop.

That includes acquisitions, transitions, redevs primarily. The former Brookdale communities are large scale communities that we thought would benefit from an operator change and investment in the asset to better position it. And then executing off of what was the low occupancy in markets that have strong net demand. All of those actions are underway this year and we'll expect in the future the opportunity to go after that doubling the N. O. I. We also have opportunities like that across the rest of the non-same store portfolio as well that we're working on. So those actions are underway and that will really fuel our future growth.

Thank you, John. And our next question comes from the line of rich high tower with Barclays. Rich, please go ahead.

Rich, are you there? Going once, going twice. All right, our next question comes from the line of Mike Mueller with JP Morgan.

This was as expected. There are a few tenants that didn't renew in the portfolio. It is net net net and $900,000 impact you over year. Very much in line with our expectation. I would emphasize that the second quarter in research is likely to reflect the balance of the year given that those move outs. So, you know, that's in short.

Yeah. So there's, there's, we've got the primary, secondary and other markets, obviously. You know, I mean, last year, secondary was outperforming. This year, we have really strong growth across primary and other, other does have a lot of our independent living product. That's either holiday or a holiday like community and they're delivering really strong growth for us this year.

In terms of occupancy and N. O. I. growth and so that that's been a really big contributor for us.

Thank you. Thank you, Mike. And our next question comes from the line of Michael Stroyek with Green Street.

You know, yield or so. So there's, and that's usually what we use in our assumptions. We'll run sensitivities down to seven and just to use the judgment in terms of what could happen in terms of a development actually penciling. But that's the standard we're using if you're wondering.

And I guess where do you think yields are at today? Like how far away are we from that? We're investing, you know, across the, you know, the, the four and a half billion we're, we're investing at six and a half.

So, you know, if you put the 150 to 200 on top of that, so you know, you're at eight, eight and a half.

And that's just the standard underwriting. You'd see expected development yield spread of 150 to 200 basis points over the in, you know, the expected year one yields and investment.

I mean, I need to be required. Thank you. Justin, go ahead, Justin. Yeah, I think here's another way to get to you. So another way there. The way we would look at it is what would a developer expect in terms of return? We think that's around 8%. Give or take someone might reach for, you know, a lower yield. Some might be more comfortable higher than that, but let's just call it eight.

And then it's, what do the trended rents need to be in order to achieve that? And we think that's at least 25% higher, which means it's largely not achievable. The projects don't pencil to what developers would see in terms of their typically underwritten yields.

The exception I mentioned earlier could be a luxury product where they're introducing a much higher price point. And entering a market as a bona fide leader, certain developers have land banks out there that could help that even though they're higher barrier markets. So that's the, that's maybe the exception we'll see first, but we're not expecting any big waves of new development announcements.

However, we are really low in terms of starts right now. So it's hard to imagine it getting much lower. So we'll see what happens.

How long should we expect elevated levels of dispositions? Is this just a second half of 2026 story or do we see multiple years of pruning the portfolio?

Yeah, it's Bob. If you go back and look in time, you know, 500 million is not a normal kind of average. So we're slightly above that. But I would say it's in the neighborhood of what we would do just in terms of upgrading the portfolio and improving the overall growth rate. Good hygiene is the way I describe it. So this is of that ilk.

Thank you. And our next question comes from the line of Ronald Camden with Morgan Stanley.

You know, I think that obviously the guidance has unchanged. Just a little color, whether it's some of the labor costs. So what do you think is the opportunity or sort of breaking that expense curve, both the total same store number as well as sort of expense for operating room. Thanks.

Yeah, one thing just to note is that the portfolio is delivering about 9% revenue growth. So I do want to start there. Yeah, so yeah, really good revenue growth. The expense growth that you see at 5% is really volume driven. You know, our effects for around one half percent, you know, so you're in that because the operating leverage that kicks in in the in this business model. So the the guide we have at 5% we had a a first quarter that was impacted by weather. So it elevated expenses in the first quarter 5 a running. We're back in line with moderate expense growth around 5. And we left room in our guide for some expense growth in the in the second half of the year, which would be volume driven.

But also very efficient at to my point because there's margin expansion that would come with that. And then my second one is just just to circle back to sort of a scion conversation. I think the presentation said the financial impact was already contemplated in guidance.

You know, we we show the the rate. The 300 million that you know, call it 10 and a half. It's active rate. So that's the key driver. And that was contemplated in previous guidance, as you say.

Thanks. And our final question today comes from the line of Omotayo Okusanya with Deutsche Bank.

I just wanted to go back to risk Anderson's question. This is kind of ideal kind of lofty expectations. Again, some of the peers have, you know, done from large transformative transactions to have more shop exposure to ultimately accelerate their earnings was profile. I mean, how do you guys kind of think about that? Again, things are going great. Earnings are clearly accelerating.

But it's just feel like the market is rewarding the names who are getting bigger faster in shop. If I may use those words. I'm just kind of curious how you're thinking about that strategically.

Hi, it's Debbie. Thanks for the question. Look, Billy King King said pressure is a privilege. And I believe that we have high expectations of ourselves. We're delivering, you know, really great results. And we have this multi-year on a wide growth and value creation opportunity ahead. And we've organized the company to really capitalize on that. So we're all, you know, excited about what the future holds. We're building shop to be 60% of our portfolio by the end of this year and it's on a $60 billion enterprise.

The investment engine is firing on all cylinders, shops delivering 16% in a wide growth. We, you know, we feel very optimistic about our prospects in the future and value creation for all of our stakeholders. And we're very focused on, you know, outperform and set scale. So we will keep, keep focused on executing the strategy with excellence and delivering outside returns over a multi-year time horizon.

Thank you for the question. And, ladies and gentlemen, that does conclude the Q&A session.

So I will now turn the call back over to Chairman and CEO, Deborah Kefero for closing remarks. Debbie. Thanks so much. I want to thank all of our participants for joining us this morning. We really appreciate your interest and in support of the company. Hope you have a great rest of the summer and we look forward to seeing you soon.

Thanks, Debbie and ladies and gentlemen that conclude today's call. Thank you all for joining and you may now disconnect. Have a great day, everyone.