Ventas’ Cafaro Foresees More Health Care Real Estate Going Public
09/02/2014 | by Allen Kenney

Debra Cafaro, chairman and CEO of health care REIT Ventas, Inc. (NYSE: VTR), joined REIT.com at NAREIT headquarters in Washington for a CEO Spotlight video interview.

The health care sector has witnessed a flurry of deal-making activity. Cafaro described the pace of growth in the sector as “quite heated.”

“We are in a great sector where external growth is really part of our value proposition for investors,” she said. “The market is ripe for the additional continued transition of assets from private hands to public hands as we’ve seen in the REIT sector over the past couple of decades.”

Cafaro noted that so little of the health care real estate market in the United States currently belongs to publicly traded REITs that it creates an opportunity for more growth within the sector.

Ventas is also expanding outside the United States. The company purchased assets in the United Kingdom earlier this year, its first venture abroad. The fact that the U.K. is a “well-established democracy” makes it an appealing market to begin Ventas’ international operations, according to Cafaro. By the end of the year, Ventas will earn 5 percent of its expected net operating income from international sources, according to Cafaro.

“It’s also a country where you have very efficient capital markets, so you can borrow and raise money very efficiently there,” she said. “There are a few other countries like that where we would target additional investing.”

Lastly, Cafaro discussed her approach to managing at a time when interest rates appears destined to rise. She noted that the market has been dealing with uncertainty surrounding rate hikes for “at least four years” in the wake of the financial crisis.

“Every year over the past four years, we’ve all predicted interest rates will rise,” Cafaro said. “Yet, they’ve been persistently low, defying almost all of the smart money.”

Cafaro said Ventas has taken steps to stagger its debt maturities and “opportunistically” raise money in the capital markets. By pushing down borrowing costs, Ventas is producing free cash flow for shareholders, leading to higher returns and increased dividends.

“We want to make sure that when rates do rise, which eventually they will, Ventas will be very well positioned with long-term low rates and not a lot of debt maturities coming down the pike,” Cafaro said.