Is It Wise To Hold Ventas (VTR) In Your Portfolio Now?

We have updated our research report on Ventas, Inc. (NYSE:VTR) on Sep 2, 2016.

Just a couple of days ago, the Chicago, IL-based real estate investment trust (“REIT”) closed the acquisition of significantly all of the life science and medical real estate assets of Wexford Science & Technology, LLC. from the affiliates of Blackstone (NYSE:BX) Group LP for $1.5 billion. The transaction is expected to be accretive to the company’s normalized funds from operations (“FFO”) immediately. Also, this buyout marks the company’s foray into the thriving university-affiliated life science real estate business. It offers a solid diversification to the company.

Earlier on Jul 29, 2016, Ventas reported second-quarter 2016, normalized FFO of $1.04 per share, in-line with the Zacks Consensus Estimate.

Ventas is mainly engaged in the acquisition and ownership of seniors housing and healthcare properties, and leasing them to unaffiliated tenants or operating them through independent third-party managers. The company’s diverse healthcare portfolio with all types of facilities allows it to capitalize on opportunities in different markets based on individual market dynamics. Further, the growing senior citizen population, triple net lease agreements and strong balance sheet augur well for it.

However, a substantial portion of Ventas’ revenues is generated from a few tenants, which raises concentration risks. Further, stiff competition and any rise in interest rates are concerns before it.

For Ventas, the Zacks Consensus Estimate for 2016 and 2017 remained stable at $4.12 and $4.32, respectively, over the past seven days.

Currently, Ventas carries a Zacks Rank #3 (Hold).

Investors interested in the REIT sector can consider some better-ranked stocks like Alexandria Real Estate Equities, Inc. (NYSE:ARE) , Arbor Realty Trust Inc. (NYSE:ABR) and CareTrust REIT, Inc. (NASDAQ:CTRE) . All these stocks hold a Zacks Rank #2 (Buy).

Note: All EPS numbers presented in this write-up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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