Welcome to the 4:15 P.M. session at Citi's 2022 Global Property CEO Conference. I'm Michael Bilerman. I'm here with Nick Joseph. We are extraordinarily pleased to have with us Debbie Cafaro, the CEO of Ventas, along with her management team. This session is for investing clients only. If media or other individuals are on the line, please disconnect now. Disclosures are available up here on the webcast, on the webcast as well up here. For those joining us in person, I think you know the drill. You can stand up to the mic, or you can just enter your questions into live Q&A. Those of us that are joining on the webcast, you can do the same, and those will come directly to Nick and myself. So with that introduction right on time, I'm going to turn the mic over to Debbie to introduce the management team that's with her today, as well as the company, and then Nick and I will get going with questions. There's not any news, so it'll be a very short session. That was a joke. Atleast, people should have a little bit of, I think they're already on. Am I on? You're on. Okay. Fantastic, well, there is news because it's great to be here at Citi again, and I'm very pleased to be joined by my Ventas colleagues, Bob Probst, our CFO, Justin Hutchens, our head of senior housing, and it's just a thrill to be with our investors here again after such a long absence, so Ventas, as you know, is a $34 billion S&P 500 company. We own over 1,200 properties in the senior housing, medical office, life science, and other healthcare arenas. The properties are really unified by serving a large and growing aging demographic in the U.S., and that demand is here, and it's growing, and really, the assets that we own, the services provided therein, the care, the research, are all really designed to help individuals live longer and healthier lives. So we're pleased to be here to address questions that Michael and Nick may have, as well as questions that our shareholders may have. So take it away. Great. So the first question we've been asking every CEO is, what are the top three reasons an investor should buy Ventas stock over any other listed property company? Yes. Well, certainly the number one reason is that the senior housing recovery is underway, and we have about half of our business in senior housing. We are seeing incredible sustainable demand. We're at the point where the over 80 population is growing at 3% a year finally here. And we're seeing leads like we've never seen before, pricing, occupancy growth, revenue growth, and it's very exciting. And so we're seeing this double possibility of recovery, both cyclical as well as just the secular aging demographic. So that's number one. We also have low supply. I'm happy to report as well. So senior housing recovery is number one. In addition to organic growth, we expect to continue our long history of external growth. We continued that last year with over $3.7 billion of investment activity that was accretive. That was categorized really 70% senior housing to capture this recovery, 20% in our growing life science area that's been very value accretive over the last five years since we entered the segment, and 10% kind of bolt-on medical office to our existing strong platform. So that's number two. And the third is really valuation and great experience amongst the team. Maybe we can start just going reverse order on valuation. How do you sort of look at where the enterprise should trade given the multiple verticals that you're in, your own cost of capital to have that external growth? Just how do you sort of put it into context of being discounted? Bob, do you want to take that? It really starts with a relative comparison, Michael, in terms of our closest peer in the view of our relative performance, our relative assets, and our relative growth prospects, and therefore the value creation opportunity of getting in now for Ventas. That's kind of the first place to start. Within that, appreciation perhaps of our life science portfolio, I would add, which has really continued to grow, is world-class in many ways, and I think underappreciated. And is there elements in that value construct of ways that you can highlight that value more to what's going to effectively close that gap? Right? Is it just execution, or is there ways to finance differently or sell assets or do more joint ventures to help the investors sort of get that value? I mean, one of the most important things that we could do is really highlight our performance, and certainly execution is a big part of it, but I think a little-known aspect that we need to do a better job communicating is really the strong performance from our senior housing portfolio, and it really has, the recent performance has been industry-leading, we grew revenue and occupancy and rate in the fourth quarter, and I think our ability to highlight not only the actual performance, but also the opportunity for NOI recapture to pre-pandemic levels, and then really above those levels, potentially out into the future, I think is the most important thing we can do, and then, as Bob said, really highlighting the value creation from our life science business in both ground-up development as well as really the, we're in five of the six cluster markets now, and highlighting that. Maybe we start on the senior housing side and the opportunity there. As you think about that recovery of NOI, right, even just getting back to pre-COVID levels, what's your current thought on the timing? As caseload has come down, obviously, you put that in kind of the investor presentation. I would think part of it's occupancy, part of it's the rate growth that you've already been able to achieve. But how are you thinking about kind of the total bucket of NOI? And then we can get into kind of the line items. Justin? The timing is as soon as possible. There's about $300 million of NOI recapture that we have from the existing portfolio. There's another $100 million of upside that we've created through transitioning assets to SHOP and also acquisitions. So there's a lot to go after. One thing that we're probably most encouraged about is the fact that at a relatively low occupancy, we're achieving pricing power. So at around 80% occupancy, we pushed through 8% rent increases in January. We're seeing a re-leasing spread narrow. We're going to continue to push that, asking rents so that we can see that continue as well. And the fact that it's a little bit unheard of, and it's unusual to have low occupancy and pricing power go together. And what that speaks to is just the underlying demand for the service, which has been strong. It's the strongest we've seen in February, which is counter-seasonal, by the way. So we're bullish on the revenue. And we also like the opportunity over time to price in inflationary expense increases as well. And then just to finish with this, that in a backdrop where you've had new supply just crater. So there's this window of opportunity for net absorption in the sector, and there's early signs that the recovery is underway, and we're well-positioned to capture that upside. How do you think about that window of opportunity? Right? So we had elevated supply pre-COVID. It's obviously come down meaningfully, but you paint a picture of a lot of forward NOI growth. When does construction start to pick back up to meet that future demand? I mean, the window that we have in the near term while this demographic demand is really starting to hit is kind of, I would say, a minimum of two to three years and could be longer, depending upon inflationary factors that affect construction and supply chain delays. And so it's a good window, even if things get started now. And so I haven't really felt this good about senior housing for a while, so I'm happy to think about that. How about on the expense side? Right? Is that more transitory, or is that a long-term impact on the margin? Bob, why don't you take that? Sure. Yeah. I mean, there are a couple of areas of expense increases we've seen recently. And most notably and much discussed is the contract labor phenomenon, which is really driven by the clinical situation in our communities, Omicron. That is improving. Right? We are, though, starting to see some of the inflationary impacts on things like utilities, repairs, and maintenance, general underlying inflation coming through in our communities. And so the question really is a macro question, Nick. How do you feel about the inflationary environment? How do you feel about the labor market? Are folks going to come back to the labor market? We've seen some early signs of that with the labor report recently, but that's not my call. That's a much bigger question. The really good news, though, is pivot back to the idea of price. If we do see that cost inflation, we're seeing increasing confidence on the price side. How are the operators thinking about employee recruitment today in this market? I mean, how many of those employees do you think have left the market versus maybe it's more of a labor burnout? So there's a trend that I'll point to, and that is several months of positive net hiring that we've seen among our operators. That even occurred throughout this recent COVID stint that we had with Omicron, but it was overshadowed by the fact that we had workforce that was out sick. And so that's what brought some of that agency expense into the system. But operators are absolutely retooling their recruitment approach, and I'll name just a couple of examples. One is they're using technological applicant tracking systems, which are generally used historically in the sector. They're recruitment management and are now geared towards line staff. So you've centralized line staff recruiting. You've reduced the time to apply for a job. Applicants these days don't want to spend a half hour applying for a job. They want to click three times and know they've got an interview. So, there's been a lot of work on speed to interview and speed to hire. And then offering flexible staffing options as well. And the activities is picking up a bit. And so I do think there's room to perform better within this macro backdrop. But to Bob's point, it's ultimately going to come down to what happens in the macro picture. You've made investments into Ventas OI, right? So your data analytics platform. How is that being received by the operators and kind of the sharing of best practices? We've had operators recently in our meetings tell us that they were the most value-add meetings they've ever had with a capital partner, and the reasons for that is because we're putting the strength of Ventas behind the operating analytics and the benefit of our operating experience as well, mine plus the team that we've assembled plus the greater Ventas enterprise, and a lot of data and the opportunity to get out of kind of the high-level picture and into very specific opportunities to create value and actions that can be taken to drive the business forward, and it's valuable, and one of our goals is we want senior-level management in our operating companies as close to the field as possible. One way to get them there is to show them where the opportunities are. So it's off to a good start, and we used aspects of it a lot throughout 2021 to help make decisions. And so what type of decisions has it been forming from an operator perspective? Is it on the pricing side? Is it on kind of future acquisition opportunities? Where's the most value-add? I'd say sales is probably number one, and that's the development of the lead bank. It's the conversion of certain lead sources. It's the actual conversion rate and having strategies around driving that. I'd say number two is pricing. And then three is labor management and where you can, we have like communities that share markets that are having different experiences in terms of agency, for instance. So why is that, and what can we do to dig in and make improvements in those communities? Has it been received well across all the operators? I mean, you have, what, 30-plus operators at this point. Does that inform your decision on which operators to invest with going forward? We've used these analytics to help the investment decisions we've made. It helps development decisions that we're making, dispositions. Clearly, that's been backing those decisions. And then the big goal moving forward, obviously, is operational improvement. And I'd say, yes, it's going really well. From an industry perspective, how are you thinking about kind of moving the penetration rate? That seems like the big opportunity, just given the demographics, right? But if you can move it 1%, it's pretty meaningful. Yeah. So the one thing that came out of the pandemic was the use of digital sources for leads. Referral agencies have always been there. Companies now have invested into their own digital platforms. So SEO investment has been a huge focus. We are seeing that lead source at 150% of pre-pandemic levels. And what that means is that you're casting a wider net. There's also, combined with the fact that some of the traditional lead sources, for instance, healthcare professional referrals are still relatively low, we see some upside there for a wider net. And I think that's one way to drive penetration rate is just to cast that wider lead net. Debbie, maybe we can go back on the value side and some of the things that have been happening overnight in terms of putting a new board member on and having a long-term board member step off. You obviously outlined a lot in your letter, and the shareholders put out a lot of other things. Can you just talk a little bit about the current situation and how you're approaching it? Happy to. So I really believe that a great board is an asset to a company, and that Ventas has always been a leader in ESG and in governance. We really value an independent board and a very functional board that's working to benefit shareholders. I know that firsthand from talking to your board, and as you evaluate new candidates, of how much care you've taken to get the right people with the right experience and a diverse set of experience with your board. Yes. And so we engage in a rigorous refreshment process really throughout the years to make sure that we're benefiting from the continuity of existing members, but then bringing in fresh voices. And so when we approached a long-standing healthcare board member who's been on the board for 20 years, he is going to rotate off at the annual meeting. He's been a very valuable board member, helped us decide to spin off Skilled Nursing. I mean, very, very insightful individual, but he's been on for 20-plus years, so he's going to roll off at the annual meeting. We identified, based on what we really thought would help the company at this time, a skill set. And we do have a skills matrix that we publish in the proxy of what we were looking for. We really wanted to have strong investor insight in the boardroom to add to Roxanne Martino, who already is a great investor who founded a fund of funds. So we wanted an investor voice, someone who is an experienced director, ideally who would have healthcare and/or REIT experience. So yesterday, as you refer, we appointed Michael Embler to our board. Michael was the Chief Investment Officer at Franklin. He has served on both healthcare and REIT boards, including Kindred, one of our largest tenants for many years. And he came up through the distress side. And so we're very excited about that. It was a very thoughtful process, a very inclusive process, and the board unanimously agreed to appoint Michael. And we're very excited, and you as shareholders should be very excited as well. I know Michael also stepped on the Taubman board in 2018 when they had some activism going on, and I recognize Wachtell is both advising Taubman and advising you. I wasn't sure if that was where it came from or if you had a relationship with Michael from when he sat on Kindred's board and just how it came about that he rose to that position. Well, we take input from a variety of sources when we look for board members, and he was identified to us. Again, he was on the Kindred board, and that's really an important characteristic. And again, a very experienced, well-regarded director. He's on the American Airlines board as well. So that's how he came to our attention, and he fit the criteria that we think, as we're carefully curating a board that will be most effective for shareholders, he fit the bill. In your letter last night, you talked about a lot of the performance over the long term. And you've been at the helm of this company for a long time and have had tremendous success over that time period. In the opening comments, where you talked about value, you also talked about this discount to your closest peer. And I would say the more recent performance has lagged. Why didn't you sort of bring that up more in the letter to acknowledge that, look, since 1999, you've grown the enterprise from $250 million to what it is today across five different asset classes from one single tenant and a single property type, which you're not even in anymore, I should point out. Exactly. So what do you think? And by the way, your peers are different today too. And by the way, your peers have gone through multiple CEOs and multiple opportunities to flush things away. So how do you, I guess, why didn't you acknowledge more of the more recent underperformance about what may be driving that? And we did reference it. I'll be the CEO of Ventas for 23 years as of tomorrow. And it continues to be an honor and a privilege. And every day, I wake up and think about how we can move the ball forward for shareholders and create value. That is who we are. And COVID, obviously, we have been at the epicenter of COVID. Half the business is senior housing. I think we've performed. It has had an effect, a significant effect on the business, and the valuation has been affected as well. From a relative basis, I would say our fundamental performance has been consistent, but the TSR has not most recently. And that's the opportunity for us. Not only can we recapture senior housing in OI, but we can recapture that TSR. And that more recent period is what affects multiple periods, obviously, because it's a point-to-point comparison. So that's our focus. And it's really through execution that I believe, at the end of the day, when you deliver cash flow and you deliver performance, you will deliver TSR and dividends. And that's. Right. And from a communications standpoint, you have adjusted a number of things more recently, shifting the earnings to being after the close and putting out additional information in terms of numbers so that the street is more clear. Because I think we talked about this last year, there had been some communication guidance missteps. Either the street got too far ahead of themselves because they were run-rating numbers that shouldn't have been run-rating. I can't account for your business. I know you can't account for that. I'm interviewing your colleagues. Competitors, not colleagues. Okay. Got it. We're right. Yes. Got it. But I guess, and you've made some improvement. What else can be done from just that aspect? That's an important point. I mean, Ventas is a great company. We have grown it from basically a dumpster fire in 1999 to a really incredible S&P 500 diversified company. We acknowledge that we can always be better. We will listen to input from existing shareholders and analysts even to drive value and be excellent because that's who we are, and it's who we want to be. Keep those ideas coming. For those that we think are appropriate to roll out, I mean, we will do it. You've seen us do so already, and we'll continue to improve. A campaign is obviously time-consuming, costly. Your CEO letter to your employees just came out, right? It has a big effect on an organization. I guess, how are you managing, how will you manage through that? And how do you sort of keep the employee base focused on the business and not things that are going on? We have a great, incredibly productive, incredibly committed employee base. I'm so proud of them, and we're on it. We have been through, if you think about what this company and this management team has been through since 1999, the great financial crisis, this is the benefit of experience, okay? We're on it. We will manage it, and we will continue to move the business forward. What do you think are the couple of things that you can execute that will show investors that the value they're applying to your company is inaccurate? I mean, what do you think are the - I don't know if there's easy wins because I know nothing is easy. But are there things that you're starting to put in place that you believe people are going to start to see so that they can get more comfortable putting the right multiple? Yeah. I think certainly senior housing SHOP performance quarter to quarter. That's just going to be what we have to do, and I think we've been quite accurate the last couple of quarters, even when they've been tougher, and not to be afraid to put that out there, so it starts with SHOP, absolutely ladder that up to the enterprise, delivering on the FFO expectations, and being clear and transparent on where we're going, and it's going to be one quarter at a time, but that's what we've got to do, what runs on the board. Is there any other—just so I understand the process—the board evaluation, was that just something you were doing on your own, or that was in reaction to an activist campaign? The board rotation that you made. Board refreshment? Yeah. That's something that we do as part of our good governance. We've added four board members over the past four or five years. Good refreshment where, again, you're keeping that continuity of the directors and the institutional knowledge, but you're bringing in those new voices. That is really part of a chairman's job almost year-round in this day and age, and it's a very important process, and so we would be doing that under all circumstances. All right. Maybe we shift to external growth. And just on that point, last year in February, we appointed Maurice Smith to the board, who's the head of Blue Cross Blue Shield in five states, a healthcare expert in anticipation of this. I mean, this is a long-tailed kind of planning process. And the year before that, we were lucky enough to appoint Marguerite Nader with the real estate expertise. So. And then how do you find the capital allocation? Is there a capital allocation committee of the board? Yes. There is an investment committee of the board. It's chaired by Matt Lustig, who many of you know, who's a long-standing, incredible, thoughtful real estate banker, and he's on the board of Boston Properties as well. And that committee oversees investment and disposition activity and the funding thereof. Matt, who I know well, has been on the board for a long time too and obviously had a portfolio that sold to you. I mean, does that open up? Matt's been on the board for how long? About 10 years. So Matt came on when we bought Atria. We gave Lazard stock for the real estate as part of the agreement. He came on the board. The stock was liquidated, but he's such a good director that we kept him, and we're glad that we did. Any other board refreshment plans or you feel with the four more recent and this one coming? I think we've announced our current intentions. Maybe on external growth. I think you've averaged over $3 billion over the last decade. How do you think about the growth opportunity from here? Obviously, 2021 was a busy year. How does the pipeline look? We are busy. I mean, I think we saw $40 billion-$50 billion of potential transactions last year. The deal team is busy. The pipeline is full. The deals are kind of across asset classes and large and small. That's the way we like it. You can really rack and stack the deals based on kind of what you think the best for suggested return is and really where your focus is, which really the priorities have been, as we've said, senior housing, life science, and then kind of bolt-on MOBs. Where are the best risk-adjusted returns today? In each of those categories, but depending on the pricing, right, of any specific deal and the structuring of it. That's what you have to know before you can answer that. But there's no house view in terms of senior housing recovery. We want more senior housing exposure right now versus. We believe in the senior housing recovery, and we've put our money where our mouth is, but always in a balanced, protected way to try to stay protect the downside at the same time as we're capturing upside. How are you thinking about the ability to drive value in a higher inflationary environment on the MOB and life science side? A lot of the expenses are passed through, first of all. And so it's a very, again, risk-reward, very, very different. And if you look at the MOBs, for example, while they have escalators, they also really don't have labor or expense in any material way that is borne by our shareholders. So that's a core asset with a core profile, which is why they have a low cap rate, right? It's not about keeping up with inflation per se. The senior housing obviously has a very big recovery opportunity, but a little bit more volatility, right? And so that's part of how you look at those assets on the risk-reward side. And maybe on the life science side, I mean, yours is a bit different, university R&I versus more traditional. Right. Right. How do you think about that? We've got the two buckets. We're in with 17 of the top research universities. Those are more credit deals, long-term leases, escalators, pass-through, very limited expenses. Those are really core assets at the end of the day, right? Then you have. We're in five of the six cluster markets. Those have more pricing and tenant retention action over time. Those are much lower cap rates, right? So we're doing those mostly in our Ventas Investment Management platform where we can acquire these trophy assets at very low cap rates and also keep 20% for our public shareholders, get an asset management fee, and promote. That business has really been on fire. It is an underappreciated value creator that we are going to have that is proprietary to us. How large could that business grow? I mean, right now, VIM, as we call it, is nearly $5 billion in assets under management. I mean, that's pretty good. We just started two years ago during the pandemic. So it's a great club in the bag to use the right funding source for the right kind of assets. Is the Canadian opportunity in terms of development on the senior housing side, could that add another leg of growth? We've been pursuing that. In fact, someday we're going to do a property tour in Montreal. That is what I really want to do. We'll go to a hockey game too. Yeah. So we are investing in independent living with Le Groupe Maurice in Montreal. It's a great model, a high-end product at an affordable price. They come out of the ground. They're leased up in a very short period of time. All the services are à la carte. So people pay for dining and other kinds of services. And there's huge demand there, I mean, for the product. And the demographic is very strong. It's a rental kind of culture. So there's higher penetration in that market in senior housing because it's a rental, not a single-family-owned kind of mindset. So I hope to show you some of those assets and the great management team there as soon as we can. And those are bigger. I think what's so different about those assets relative to the U.S. market, they are much larger. So a lot more capital outlay in terms of being able to drive growth, but still a good return. They fill up way faster. Right. And then at the base of the buildings, they typically have retail, whether it's a supermarket or. I'm from Montreal, sorry. My parents went there last week, so I know a lot about this. So I guess, how big can that pipeline grow? And is there an opportunity to take that product across Canada? Is there an opportunity to bring that product to the U.S. in certain markets overall? We always said they had a special sauce, and we invested about $2 billion, and we're developing about three plus assets a year. Again, there are these big 300-unit plus assets, and so we're investing a lot of capital there. We don't know yet how transferable the magic is to other markets in Canada because, again, Quebec is different from the rest of Canada, right? Florida is different than New York, but we still have senior housing in both markets. Exactly. And we don't know how transferable it would be to the U.S. But the management team is excellent. They're excellent developers. They're excellent managers. So at some point, we may test that out in a smart way. You talked a little bit about why an investor should buy your stock. Is there an element in that discount that you believe there's a growth opportunity at Ventas that the market is just not giving you value for? I think they're not appropriately valuing the really high-quality nature and strong performance of our SHOP assets, maybe not fully valuing the life science value. I think this VIM initiative, which is now $4.5 billion, could be something someday. Right. Because that was announced pre-pandemic, right? March of 2020. Right. Exactly. Yes. It sort of. It came in handy, believe me. Right. But it didn't get all of a sudden, you become a much larger asset manager. And I guess, is there more opportunities to take your product into there? And I realize I have to get the same story in 49 seconds. Look, I mean, right now, VIM is being used to benefit our public shareholders as well as our fund investors by acquiring assets from third parties, but there always are other opportunities to use it in an appropriate way. What is your number one ESG priority for this year? Okay. ESG, again, we are a leader in the sustainability front. And our number one priority is really evaluating our commitment and timing on net carbon zero. Yep. Same story on NOI growth? Yes. Senior housing, same story on NOI for the industry overall next year, 2023. Yes. There will be. There'll be growth. How much growth? There'll be growth. The next session, we'll give 10 minutes. A range? Next question. 10-year Treasury yield a year from today? It's 1.8. Two-ish. Will the healthcare property sector have more or fewer public companies a year from now? Fewer. Great. Thank you very much. Thank you for having us.