Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ventas First Quarter 2023 Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to BJ Grant, Senior Vice President of Investor Relations. Please go ahead.

Bill (“BJ”) Grant — Senior Vice President, Investor Relations

Thanks, Regina. Good morning, everyone, and welcome to the first — Ventas First Quarter Financial Results Conference Call. Yesterday, we issued our first quarter earnings release, supplemental investor package and presentation materials which are available on the Ventas website at ir.ventasreit.com. As a reminder, remarks today may include forward-looking statements and other matters. Forward-looking statements are subject to risks and uncertainties, and a variety of factors may cause actual results to differ materially from those contemplated in such statements.

For a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, all of which are available on the Ventas website. Certain non-GAAP financial measures will be also discussed on this call and for a reconciliation of these measures to the most closely comparable GAAP measures, please refer to our supplemental posted on the Investor Relations website.

And with that, I’ll turn the call over to Debra A. Cafaro, Chairman and CEO.

Debra A. Cafaro — Chairman and Chief Executive Officer

Thanks, BJ, and good morning to all of our shareholders and other participants. Welcome to the Ventas First Quarter 2023 Earnings Call. I’m excited to speak with you today as we recap an outstanding first quarter underscore the momentum we have across our large and diverse enterprise and reaffirm our full year normalized FFO guidance of $2.90 to $3.04 per share. Our diversified business is unified in serving a large and growing aging population. Within commercial real estate, we are highly advantaged due to favorable demographic demand, the unprecedented organic growth opportunity we are already starting to realize and our scale, liquidity and access to capital. As a team, we are enthusiastic about the future and focused on delivering superior performance.

The success we achieved in the first quarter was powered by our high-quality shop business, where the U.S. communities grew 22%, bolstered by the growth of our highly occupied Canadian communities. Our other asset classes are also contributing reliable compounding growth. With MOBs outperforming and our university centered life science R&I business benefiting from strong tenant mix. With significant demand from universities, health systems, investment-grade companies and government institutions. The multiyear growth and recovery cycle in senior housing is well underway. We have already started to capture the significant NOI upside opportunity in our current results. Looking forward, we project an incremental $300-plus million of additional NOI opportunity available from simply reaching pre-pandemic margins and occupancy of 88% in the portfolio.

Beyond that target, we believe that above 90% occupancy and higher margins are also attainable because current supply-demand conditions are materially more favorable than they were during the last peak period. With 99% of our shop communities located in markets without competing new supply barriers to new construction starts and our senior housing team using operational insights to collaborate with operators and drive results. These conditions present a compelling multiyear growth opportunity. Turning to capital. The $30-plus billion scale of our platform, our liquidity and our diverse geographic footprint and business model give us access to multiple sources of attractive capital. We remain committed to a strong balance sheet and our BBB+ ratings.

Our third-party institutional capital management business, VIM, is also a competitive advantage for Ventas. With over $5 billion in assets under management, VIM provides a way for us to capitalize on attractive investments through cycles. In the current environment, VIM provides us and our VIM stakeholders with interesting investment opportunities. Overall, on the investment front, we’re focused on assets with outsized embedded growth at or below replacement cost pricing and high-quality stabilized assets and portfolios with good risk reward in a variety of economic conditions. Now let me spend a minute on results. First quarter normalized FFO was $0.74 per share with year-over-year total company same-store cash NOI growth of over 8%. Our performance was fueled by significant property NOI growth led by SHOP.

Pete Bulgarelli and his team once again delivered excellent MOB performance, generating our seventh consecutive quarter of year-over-year occupancy growth and industry-leading NOI margin. As well as extending our track record of over 3% same-store NOI growth to six of the last seven quarters. Now let me touch on some other key highlights of our enterprise. Our non-property strategic investments continue to generate value. We just closed on the partial sale of our equity investment in Ardent Health Services, yielding approximately $50 million in total proceeds. This transaction is a testament to our partner, Sam Zell’s ability to make outstanding investments, attract quality investors, and find excellent management teams. The price represents a greater than four times equity multiple on Ventas’ original investment basis. We retained an approximately 7.5% stake in Ardent with an implied valuation of $150 million.

On May 1, we completed our previously announced plan to take ownership of the Santerre portfolio, consisting of MOBs, shop communities and triple net leased health care facilities. We believe that the conversion of our cash pay Mezzanine Loan into real estate ownership should produce FFO within our previously announced guidance range and that the value of the assets at March 31 approximated $1.5 billion, which is the sum of the debt stack. Our experienced team is now focused on maximizing both the value and the NOI of the portfolio over time. It’s important to realize that the expected FFO contribution we are forecasting from this loan to own is substantially consistent with what we would have generated if our Mezz Loan had been paid in full at maturity, and we reinvested the proceeds and debt pay down.

Our strong ESG practices also drive value for Ventas’ stakeholders. We were proud to receive the 2023 ENERGY STAR Partner of the Year Sustained Excellence in Energy Management Award, the highest honor awarded by ENERGY STAR. We are also committed to best-in-class corporate governance practices and are proud of the excellence independence and diversity of our Board. Finally, we were honored to recently celebrate Ventas’ 25-year anniversary. I want to publicly thank all my Ventas colleagues and Board members, past and present, partners and stakeholders, including those of you listening today, who have made the significant milestone possible. With our momentum and a cohesive experience team at Ventas, we are optimistic about the prospects for our next 25 years.

And now I’ll turn the call over to Justin.

J. Justin Hutchens — Executive Vice President, Senior Housing and Chief Investment Officer

Thank you, Debbie. I’ll start by covering our shop trends in the first quarter. Our SHOP portfolio continues to deliver exceptional results, exceeding our expectations with strong year-over-year growth driven by pricing power and cost control. SHOP NOI grew 17.4% as margin expanded 200 basis points. Notably, the U.S. led the way with 22.4% growth, attributable to strong performance in our legacy Atria and Sunrise portfolios and our transition communities with assisted living being the biggest contributor to the growth. Our Canadian portfolio, which grew 5%, continues to be a beacon of stability and high performance with exceptional margins and consistently high occupancy above 90% and in each and every quarter since the first quarter of 2019.

This portfolio remains a reliable source of growing cash flow, buoyed by Le Groupe Maurice performance. The revenue growth in our portfolio remains strong. With a notable 8% year-over-year increase, the revenue growth was largely driven by the continued acceleration of RevPOR, which is a testament to the strength of our business model and our operators’ unwavering commitment to delivering exceptional value to their residents. Our pricing power continues to be a driving force behind our success. In fact, we’ve experienced the strongest year-over-year RevPOR growth we’ve seen in the last 10 years, with an impressive 6.8% increase. This growth was primarily due to in-house rent and care increases as well as improving re-leasing spreads.

In addition, we also saw a robust sequential RevPAR growth of 4.1% in spite of the fact that one of our large operators pulled forward their rent increases to the fourth quarter, which causes a less favorable comp. These results are a testament to our continued efforts to optimize pricing. Occupancy grew 80 basis points year-over-year and was down 90 basis points sequentially, in line with typical seasonality as expected. Moving on to expenses. Operating expenses grew 5% year-over-year, which is in line with expectations. Within opex, labor, which is 60% of the spend is playing out as expected. As the permanent employee base is increasing and replacing contract labor. That hiring has continued its positive trend for six consecutive quarters, causing contract labor to reduce by 59% year-over-year.

We believe there is still room for improvement in this area, which will result in cost reduction and also improve the consistency and quality of care delivery. At Ventas, we’ve been committed to staying ahead of the curve when it comes to optimizing our portfolio and executing on our strategy through our right market, right asset, right operator approach, which is anchored by Ventas OI, our best-in-class data analytics platform and informed by experiential insights. Through this approach, we’re leveraging data and insights to select the most promising markets for capital investments and operational improvement by carefully selecting communities are well positioned for success within those markets, identifying specific operational improvements and partnering with the right operators to drive exceptional performance.

For instance, let’s take a closer look at the strong performance in the U.S. I’d like to highlight that NOI growth of 22.4% was broad-based across the U.S. I’ll discuss this in the context of our legacy portfolio which contains 234 long-held communities representing 71% of the U.S. same-store shop NOI and our transition portfolio, which contains 200 communities that have transitioned to new operators since the beginning of 2021 and represents 29% of the U.S. same-store shop NOI. A legacy portfolio had strong growth at 20% and our transition portfolio delivered an even better NOI growth rate of 30% on a lower NOI base. Our meticulous and strategic approach in selecting the right operators for the group of transition assets is backed by our Ventas OI methodology and capex investments, which is paying off and generating outstanding NOI growth.

Notably, Discovery Senior Living, Sedalis and Priority Life Care are among the numerous operators that contributed significantly to the growth in the first quarter. And the future growth prospects for this group of communities across all of our operators are truly exciting. I’ll double-click on Discovery as an example of the value creation thus far backed by Ventas OI. We transitioned 16 assisted living communities to them in the fourth quarter of 2021. These communities are located in a tight geographic area and in existing discovery markets. When comparing the first quarter of 2022 to 2023, their portfolio achieved 770 basis points of occupancy growth, and grew NOI by many multiples thus far. We completed 13 of the 15 planned NOI-generating capex projects in this portfolio in the fourth quarter of 2022.

We look forward to more successful performance as these communities have benefited from a strong operational turnaround and should also benefit from the repositioning in their markets moving forward. We’ve seen similar results in the Priory Life and Sedalis portfolios. These are great examples of Ventas OI in collaboration with an operator with a strong regional focus delivering excellent results. We invested in the right markets with the right operators and ensure the assets are positioned well for success. We’ve also shared a few community-specific examples in our earnings deck. We are pleased to announce, as expected, that we are delivering over 100 NOI-generating capex projects in our SHOP portfolio, which when combined with the operational improvements that are already well underway, will significantly enhance the market position of our communities in terms of rate and occupancy over time.

We are already seeing excellent early returns, which is a testament to the effectiveness of our strategy and our commitment to delivering exceptional value creation, and we have more attractive opportunities planned in the near future. With the right investments and strategic focus, we believe that we have an extraordinary opportunity to drive NOI recovery in the SHOP portfolio that Debbie mentioned with the potential to generate over $1 billion in NOI when the portfolio reaches 88% occupancy and a 30% margin. While there is still work to be done to realize this potential, we’re pleased with the progress we’ve made so far. In the first quarter of this year, our annualized run rate for NOI in the SHOP portfolio was $682 million, continuing a trajectory of growth and success.

Looking ahead, we are reaffirming our full year guidance of 15% to 21% NOI growth in our year-over-year SHOP same-store pool. We expect a significant occupancy ramp throughout the year, supported by an accelerating aging demographic and muted new supply. As we approach the key selling season, which starts now. We are encouraged by very strong lead volume year-to-date and the quarter is off to a good start. Now I’ll comment on investment activity. Our pipeline remains active, and our team is evaluating a select group of potential investments. high-quality, stable assets and those trading below replacement costs with growth potential are still commanding relatively low cap rates of 5% to 6%.

We are seeing market disconnects as asset pricing is not fully reflecting the rising cost of capital. We are, however, seeing recent examples where the bid-ask spread is tightening, especially in Class A senior housing. We are prioritizing smaller, high-quality, high-performing relationship-oriented transactions. NOI generating capex remains our highest and best use of capital as we continue to drive the SHOP recovery.

With that, I’ll hand over to Bob.

Robert F. (Bob) Probst — Executive Vice President and Chief Financial Officer

Thanks, Justin. I’m happy to report a strong start to the year with results ahead of our expectations. I’ll share some highlights of our Q1 performance, discuss our balance sheet and close with our reaffirmed 2023 normalized FFO guidance. Starting with some highlights from our office segment. Our medical office business outperformed once again in the first quarter with same-store cash NOI growth of 3.1%. Ventas’ MOB NOI growth and margins are best-in-class. Meanwhile, our university-based R&I same-store cash NOI increased over 3%, adjusting for $1 million of holdover rent received in the prior year. In terms of overall enterprise performance, we reported first quarter attributable net income of $0.04 per share.

Normalized FFO per share in Q1 was ahead of our expectations at $0.74, led by property strength across the business, with total company same-store cash NOI increasing 8.1%. Q1 normalized FFO increased 4% year-over-year, adjusting for HHS funds received in the prior year. The year-over-year growth is largely explained by excellent SHOP NOI growth, partially offset by higher interest rates. Excluding the year-over-year impact of higher interest rates on floating rate debt, grew 11% in the first quarter. Now a few comments on our continued focus on financial strength and flexibility. We have the benefit of scale, liquidity and access to diverse forms of attractive capital. And we have an enviable multiyear organic cash flow growth opportunity. These strengths were evident in significant proactive measures taken so far this year. Some examples.

We’ve raised nearly $1 billion already this year from diverse capital sources at attractive rates through a combination of senior loans, secured financing and asset sales, and have already substantially completed our 2023 refinancing requirements. We’ve now turned our focus to forward maturities. Last month, we proactively tapped the Canadian bond market upsizing after strong demand to a CAD600 million, five-year senior note issuance at 5.398%, with proceeds principally used to repurchase our first tranche of debt maturing in April 2024. In addition to raising new funds, we’re actively managed interest rate risk in a dynamic rate environment. Notably, in March, we executed $400 million of pay fixed, two-year interest rate swaps and at an attractive rate of 3.79%, improving our floating rate debt exposure by 160 basis points to approximately 10% in Q1 at the low end of our 10% to 20% target range.

We have robust liquidity of $2.4 billion, increasing to over $2.6 billion when including additional asset sales expected in 2023. Our leverage at Q1 was 6.9 times net debt to adjusted EBITDA, which was consistent with the prior quarter. Cash flow growth from our unprecedented organic NOI growth opportunity remains the most powerful driver to return to our pre-COVID five to 6 times leverage target. A few comments on our capital plans vis-a-vis Santerre. We expect to fund repayment of the nonrecourse senior loan which has been extended through June of 2024 on a long-term basis over time through a variety of capital sources, including asset sales. We remain committed to a strong balance sheet and our BBB+ credit rating. I’ll conclude with our 2023 outlook. We are reaffirming our previously issued normalized FFO guidance for full year 2023 and at $2.90 to $3.04 per share or $2.97 per share at the midpoint.

As a reminder, this normalized FFO range represents outstanding year-over-year organic property growth led by SHOP, partially offset by higher interest rates. We’ve also reaffirmed our enterprise and segment level same-store cash NOI guidance ranges. Two points in our reaffirmed guidance that I’d like to underscore. First, our current normalized FFO guidance range on Santerre is consistent with our prior range in February, but with a different P&L composition. Taking ownership of the Santerre portfolio on May 1, has the effect of increasing NOI from the assets as well as higher interest expense from the senior debt. Second, normalized FFO guidance also now incorporates $0.02 of dilution from the proactive refinancing in Canada, which was not included in prior guidance.

A final thought on normalized FFO phasing, we expect FFO in the second quarter of 2023 to be roughly stable to the first quarter FFO of $0.73 when adjusted for the $0.01 triple net catch-up cash rent collection in Q1. Sequential growth in SHOP is offset by higher interest rates. As the key selling season and shock kicks in and interest rates plateau, FFO growth is expected to pick up in the balance of 23. To close, we began 2023 with a strong start. The entire Ventas team is enthusiastic about the future and focused on delivering superior performance. For Q&A, we ask each caller to stick to one question to be respectful to everyone on the line.

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

Question & Answers

Operator

[Operator Instructions] First question comes from the line of Michael Griffin with Citi. Please go-ahead.

Nick Joseph — Citi — Analyst

Thanks. It’s actually Nick Joseph here with Michael. Just maybe on the Santerre portfolio. You talked about maximizing value and NOI over time. Just hoping you could quantify the opportunities that you see with the portfolio and how operationally you can get there?

Debra A. Cafaro — Chairman and Chief Executive Officer

Good morning. It’s Debbie. Well, I think what you will see is the biggest part of the portfolio is really the MOBs, that have also been the most stable but are at probably 75% to 80% occupancy now. And so once we really put those under Pete and his team’s expert oversight. We think there’s upside there. On the SHOP, we would expect those assets, which are mostly for large-scale communities to benefit from the multiyear recovery and also the application of OI, again, over time. And then on the triple net health care, they’ve obviously been affected by COVID. They’re mostly SNFs, and we would expect to see those trends that you are seeing in the SNF business improve over time.

Operator

Thank you. Your next question comes from the line of Nick Yulico with Scotiabank. Please go-ahead.

Nick Yulico — Scotiabank — Analyst

Thanks, good morning, everyone. Maybe a question for Bob. I know last quarter and in the March presentation, you talked about a sequential somewhat flat FFO in the first quarter, I think, around $0.71, you did I guess, $0.74, you had that $0.01 triple net catch up, but it looks like it was about another $0.02 of additional benefit there. Just hoping to understand a little bit more what that outperformance was driven by?

Robert F. (Bob) Probst — Executive Vice President and Chief Financial Officer

Sure, Nick. Well said. So $0.74, I would definitely highlight the penny on the triple net catch-up brand. So that’s $0.02 of outperformance really across the property portfolio. It was general strength relatively across the board. And hence, the 8% same-store growth. So it was broad-based strength, which we’re feeling good about.

Operator

Your next question will come from the line of Jim Kammert with Evercore. Please go-ahead.

Jim Kammert — Evercore — Analyst

Good morning, Thinking about the progression for the SHOP NOI recovery, $300 million plus. Is that still fair to say that’s a three- to four-year type objective? And what capital might be needed to achieve that in terms of a little bit higher occupancy and margin, if any? Just trying to think about the flow-through of that NOI potential.

J. Justin Hutchens — Executive Vice President, Senior Housing and Chief Investment Officer

It’s Justin. Well, first of all, we’re really encouraged by what we consider to be this early strong performance. It should be a multiyear recovery. As Debbie mentioned, the supply-demand characteristics are extremely favorable. The execution into this has been strong thus far. So we’d expect this to continue for a period of time, and we have a lot of upside. We’re only 77% occupied in the U.S. We’ve taken actions to make sure we’re well positioned to grow operationally and supported by the Ventas OI approach, and we’ve made capex investments. I’ve mentioned that there’s been about 100 — that are really completing like right now, and so that will start benefiting us now and in the foreseeable future.

We do have more planned over time to help reposition and that’s going to be mostly focused in this pool that I mentioned, which is the transition group. We have a very well-invested very strong performing legacy group that has really strong market position, which will also contribute to the growth and would require much less capex investment. So I don’t think it’s a really big number. I think we’re spending about $1 million per community. We have 100 that have already completed, and there’s more to come, and we’ll talk about that in upcoming quarters.

Operator

Your next question comes from the line of Mike Mueller with JPMorgan. Please go-ahead.

Mike Mueller — JPMorgan — Analyst

Yeah, hi. I was curious, do you anticipate keeping everything tied to the Santerre portfolio, particularly the SNF investments?

Debra A. Cafaro — Chairman and Chief Executive Officer

This is Debbie. Thanks for the question. I would say that we’re really focused on maximizing the value in the NOI of all the assets, including that portfolio. As I mentioned, the vast majority of that are SNFs, they were affected by COVID, but I will tell you that they have — SNFs are having some positive trends. A lot of those SNFs are in states with good Medicaid reimbursement increases that are generally considered attractive states. But I’ll also tell you, we haven’t been shy in the past about selling nursing homes. So, you can draw your own conclusions there.

Operator

Thanks. Your next question comes from the line of Connor Siversky with Wells Fargo. Please go-ahead.

Connor Siversky — Wells Fargo — Analyst

Good morning out there. Thanks for having me on the call. Quickly on the MOBs and the Santerre portfolio. There’s a note in the deck referencing the Lillie Bridge playbook. Could you provide any indication or expectation as to how much capex could go into these assets? And then what you expect the occupancy ramp to look like?

Peter J. Bulgarelli — Executive Vice President, Office; President and Chief Executive Officer, Lillibridge Healthcare Serv

Sure, Connor. Thanks. This is Pete. We’re — we find the medical office building portfolio within Santerre to be interesting. There is a 75% overlap with the MOB, NOI in similar MSAs to ours. 75% affiliated with health systems. And we’ve got a 67% overlap. We like the fact they’re on campus. We like the average age and the wealth is about the same as ours. But as you indicated, I mean, occupancy is an opportunity. It’s 77%. Right now and also something that’s relatively low and seems like an opportunity to us is an annual escalator average of 2.2%. So we think there’s opportunity. Now both of those occupancy and escalators take time. You have to roll through the leases as they go. And so I think it’s a multiyear opportunity for us but there is significant upside in this portfolio.

Debra A. Cafaro — Chairman and Chief Executive Officer

And Pete, maybe you could just address kind of the pyramid of how you’ve attacked our portfolio to generate those industry-leading kind of margins and retention and so on. There is a playbook of a pyramid.

Peter J. Bulgarelli — Executive Vice President, Office; President and Chief Executive Officer, Lillibridge Healthcare Serv

Yes, absolutely. Yes. We view it as a pyramid. And do you have the right assets, and we feel like most of this portfolio is good for us. We need to be sure that the buildings are competitive in the marketplace. We need to be sure that the tenants are excited to be there, so we need to have high tenant satisfaction and strong relationships with the systems. We need to have a center of leasing excellence, and we need to run these buildings efficiently. And that’s a little British playbook. We’ve improved performance dramatically. In the core portfolio over the last four or five years, and we expect to do the same with Santerre.

Connor Siversky — Wells Fargo — Analyst

Okay. And then one quick follow-up, if I may. Justin had mentioned that the yields on senior housing assets are pretty sticky in the current environment. So as you’re addressing this select acquisition pipeline, I mean, could we expect to see more MOBs within that pool?

J. Justin Hutchens — Executive Vice President, Senior Housing and Chief Investment Officer

Yes, sure. So there’s — we’re interested in high-quality, high-performing relationship-oriented transactions as our first priority. That can definitely include MOBs we would expect see Class A senior housing as part of that as well. We are interested in pursuing high-growth assets as well. We anticipate there will be a market for that around senior housing in the upcoming quarters. So we’re casting a wide net in terms of managing our pipeline, but being more narrowly focused in the near term and using our wide variety of sources of capital to pursue the higher-quality assets.

Connor Siversky — Wells Fargo — Analyst

Okay, thank you for the time.

Operator

Thank you. Your next question comes from the line of Steven Valiquette with Barclays. Please go-ahead.

Steven Valiquette — Barclays — Analyst

Yeah, great, thanks, good morning. So just quickly on page 10 of the 1Q supplement. You showed the same-store trailing 5-quarter comparison for the SHOP portfolio, which is helpful. And when looking at the to 1Q — 2Q trend last year. Sequentially, you had about 70 bps sequential occupancy improvement last year for 1Q to 2Q. So when kind of thinking about the sequential trends from 1Q to 2Q for this year. Just curious if you think that 70 bps is a good proxy for sequential occupancy gains for that same-store pool this year? And also, are there any notable differences in those sequential trends that you expect in the U.S. versus Canada, thinking about that.

J. Justin Hutchens — Executive Vice President, Senior Housing and Chief Investment Officer

Yes. Sure. Good question. So we’re really pleased that we gave full year guidance this year, and we’re not getting into the descriptions around our performance expectations in each quarter. Last year, in terms of occupancy growth, it’s pretty solid. It was even more in the prior year. I did mention in my prepared remarks that we have an aggressive occupancy ramp that we’re expecting in support of our performance expectations, the key selling season starts now. So — and we’re well positioned, we think, to play within that. So we’ll see how that plays out.

Steven Valiquette — Barclays — Analyst

Okay. Just on the second part of that question, just conceptually between U.S. and Canada, anything worth calling out there one way or the other on thinking about it? Or is there nothing that sticks out at the moment?

J. Justin Hutchens — Executive Vice President, Senior Housing and Chief Investment Officer

Yes. Canada has an absolute much higher occupancy at 94% although they’re still growing. And so they do experience a key selling season similar to the U.S., but they’re working off of a much higher base.

Steven Valiquette — Barclays — Analyst

Got it, okay, all right, thanks.

Operator

Thank you. Your next question comes from the line of Michael Carroll with RBC Capital Markets. Please go-ahead.

Michael Carroll — RBC Capital Markets — Analyst

Yes, thanks,Justin, I wanted to follow up on the 100 capex projects that you mentioned over the past few quarters within the SHOP portfolio. I’m not sure if you highlighted the yields on those deals? And do you take those projects out of same store, I guess, if not, is there an earnings drag coming in through the portfolio right now as you’re doing those renovations?

J. Justin Hutchens — Executive Vice President, Senior Housing and Chief Investment Officer

Great question. We are not reporting the yields. We did give examples. Some of our early examples of communities. There’s a few that are highlighted in the earnings deck. Obviously, we picked some of the better ones where we have leads that are up 150% versus prior year, and our NOI is up 400% year-over-year. And these communities that are relatively low NOI with a lot of upside benefiting from the operational turnaround and the capital investments. We’re pleased to see the early results in communities like these.

We expect that this is not necessarily a near-term driver of value creation. We think it’s also more of a longer-term driver. When we look to invest into communities with this type of capex. We’re looking at least for a double-digit return. Usually, it’s like 10% to 15% return on that capital investment. That’s — there’s a lot of moving parts to determine what the actual outcome was when you’re measuring that. And to the other part of the question, these are in our same-store pool, and they do not come offline. So you’ll see the full benefit of this execution in the same-store pool.

Robert F. (Bob) Probst — Executive Vice President and Chief Financial Officer

As they’re not particularly disruptive to the community.

Debra A. Cafaro — Chairman and Chief Executive Officer

They’ve been carefully kind of specked out show us to minimize current disruption in cash flows and occupancy.

Operator

Thank you. Your next question comes from the line of Juan Sanabria with BMO Capital Markets. Please go-ahead.

Juan Sanabria — BMO Capital Markets — Analyst

Hi, good morning. Just wanted a congratulations on the 20th anniversary. Thank you.

Debra A. Cafaro — Chairman and Chief Executive Officer

I was here for 24 plus.

Juan Sanabria — BMO Capital Markets — Analyst

Just wanted to ask a couple of questions on Santerre. So excuse the kind of multipart question, but I guess, what is the expected leverage impact? And is that inclusive of keeping the SNF, which sounds like they may be sold? And on the SNF, can you give us a sense of the total number of units or the rent coverage there? And just the last one, if you don’t mind. Is the seniors housing or SHOP piece, is that traditional seniors housing or CCRCs because they sounded like they were chunkier assets?

Debra A. Cafaro — Chairman and Chief Executive Officer

So I’m going to get Bob to answer the first, and that’s on a status quo basis.

Robert F. (Bob) Probst — Executive Vice President and Chief Financial Officer

Status quo day one leverage is about 30 basis points impact, Juan.

Debra A. Cafaro — Chairman and Chief Executive Officer

And then in terms of the senior housing, I would say, as I mentioned, the vast majority of the NOI is coming from these large-scale communities, which are all rental based and they’re in good markets. And so those are — some people call them rental CCRCs, other people call them senior housing communities. It’s a nomenclature. But they’re very large communities with high replacement costs in good markets, with a pre-existing operator that we have. And so that’s the answer to that question. Then on the SNF, there’s about 5,000 beds in the health care triple-net portfolio and — in terms of coverage, we want to — we’ll do that at the appropriate time once we feel confident in the reported operating results and at the appropriate time, consistent with our policies.

Operator

Thank you. Your next question comes from the line of Tayo Okusanya with Credit Suisse. Please go-ahead.

Tayo Okusanya — Credit Suisse — Analyst

Yes, good morning all. Life Sciences, I’m just kind of curious, again, during the quarter, with the same-store numbers, kind of large increases in same-store opex, some occupancy pressures as well. Just kind of talk us through some of kind of what happened specifically during the quarter. I think it’s a portfolio where I think in the past few quarters have got occupancy losses. So just trying to understand exactly what’s happening and what one can expect going forward?

Peter J. Bulgarelli — Executive Vice President, Office; President and Chief Executive Officer, Lillibridge Healthcare Serv

Sure. Thanks, Tayo. This is Pete. Good to hear from you. So look, from an operating perspective, in the same-store pool, there was a decline of 1%. Bob had described that because of the holdover rent in the first quarter last year. It’s adjusted for 3.2%. There’s another adjustment that you should be aware of and that affected the opex, which also affects the NOI. Last year, we — in the first quarter, we had a TIF credit, a large TIF credit, which is accounted for as a contra expense. And so as a result, as opposed to an 8.8% opex growth, it was 5.6%. If you look at it from a true organic perspective, which is below inflation.

So I’m happy with that opex number. And then if you run it through NOI, once again, organically, not thinking about the holdover rent, not thinking about the TIF onetime TIF credit, Same-store NOI growth was 5%. And I’m pretty happy with 5% NOI growth in this environment for Life Sciences. But I’m actually even more happy about is really our leasing momentum right now. Leasing in the first quarter of ’23 was well over twice what it was in first quarter of ’22, substantially ahead of fourth quarter ’22 as well.

And what’s interesting about our leasing pipeline is it is 60% institutional. And it’s really because our focus is on the university-based Life Sciences markets. So they’re dominated typically by government entities, universities, health systems, so on and so forth. And so they don’t move very quickly, but they do move and is kind of regardless of inflation either way or life industry conditions. And so we feel very good about our pipeline, and we think it bodes well for the future.

Tayo Okusanya — Credit Suisse — Analyst

Got you. And when do all these one-timers normalize out so we can get to kind of true underlying strength, and also any commentary about occupancy as well would be helpful just kind of given some of the occupancy declines in the past few quarters?

Debra A. Cafaro — Chairman and Chief Executive Officer

Yes. Without those two prior year items, it would be 5% same-store cash NOI growth.

Peter J. Bulgarelli — Executive Vice President, Office; President and Chief Executive Officer, Lillibridge Healthcare Serv

Yes. And we have had some office tenants decide either not to renew their lease or downsize. As we said in previous calls, it’s an opportunity in some cases for us to transition to lab space, and we’re seeing good momentum in those lab conversions. So we’re optimistic about that.

Operator

Thank you. Your next question comes from the line of Ronald Kamdem with Morgan Stanley. Please go-ahead.

Ronald Kamdem — Morgan Stanley — Analyst

Hey, Just a quick one. Looking through the presentation, just the two things that jumped out. One was the pricing power slide. I think you guys have 11% plus rent increases. I think last quarter, you added 10%. So number one, I might sell to take that, that pricing is actually accelerating going into the selling season? And then number two, if I may, if I look at the NOI opportunity slide, you’re talking about a potential long-term target now of $1 billion in NOI. I think previously, that number was $900 million. Maybe can you just walk us through what’s driving that delta?

Debra A. Cafaro — Chairman and Chief Executive Officer

Yes. Bob, do you want to take the chart question?

Robert F. (Bob) Probst — Executive Vice President and Chief Financial Officer

Sure. Yes. We chose to simplify the methodology, honestly, to determine what the potential is after a lot of questions around what the assumptions are and basically just say, look, pre-COVID, occupancy was 88% and margins where NOI margins were 30% on the portfolio at that time. And hence, to get to that level, what’s the NOI opportunity, and that’s the $300 million. And on the portfolio today, that equates to $1 billion of NOI. And so it’s really both simplification and aligning with some fear disclosure, frankly, that drives the change.

Debra A. Cafaro — Chairman and Chief Executive Officer

And so that’s the recovery opportunity as we think about the unprecedented kind of organic growth that could be in front of us, to get back to that level. And then as I mentioned, the conditions on the ground right now are more favorable than they were at a time prior to 2014 when occupancies go into the low 90s. And so that’s the — that’s kind of the dream scenario if we can do that and the conditions do exist on the supply-demand side to potentially overshoot the pre-COVID targets.

Ronald Kamdem — Morgan Stanley — Analyst

Great. And what about…

Debra A. Cafaro — Chairman and Chief Executive Officer

Pricing?

J. Justin Hutchens — Executive Vice President, Senior Housing and Chief Investment Officer

Yes, I can jump in, Justin. So on the pricing, you mentioned the slide we’re showing that the contributors we have rent increases over 11%. And by the way, we have over half of our residents that will have contributed to those rent increases now at this stage. So that’s great. care pricing up 9% year-over-year and the street rates up. So I mentioned RevPOR is up 6.8%. We have all of these positive contributors to that. There’s a little nuances. For instance, in care pricing. Last year, there was a big spike in agency and therefore, a move to accelerate the growth in care pricing. In response to that, we’re comparing to that number on a year-over-year basis.

And so it’s just normalized a bit. Street rates, these are very strong. They’re also contributing to our positive re-leasing spreads that we’ve had in the first quarter where our new move-ins are paying more than people moving out on the same unit basis, which is great. We would also point out that we continue to expect to see that improve over time. As Debbie mentioned, there’s a really strong supply/demand backdrop. And one thing that should happen in time is those street rate growth rates should start to match closer to the in-house rent increases, maybe in some cases, even getting ahead. We’re just not there yet. There’s still a lag. It’s definitely growing. The market is supporting the higher pricing at the street rate level, and we would expect that over time to become even better.

Operator

Our next question comes from the line of Vikram Malhotra with Mizuho. Please go-ahead.

George — Mizuho — Analyst

Hi, This is George [Phonetic] on for Vikram. Could you provide more color on capex for the remaining of the year? And any anecdotes of benefits to senior housing ramp from it?

Robert F. (Bob) Probst — Executive Vice President and Chief Financial Officer

Sure. So I’ll focus on redev capex because that’s really the emphasis of our SHOP investment that Justin was highlighting. We expect $230 million this year of redev spend. That’s really — not only the completion of the projects, which really started last year and are completing for the key selling season but also the pipeline of opportunities behind that we see, and that adds up to $230 million. And as a use of cash in our view, is one of the highest return opportunities that we have. So we’re going to invest behind those assets.

Operator

Your next question comes from the line of John Pawlowski with Green Street. Please go-ahead.

John Pawlowski — Green Street — Analyst

Good morning, thanks for the time. Justin, just curious what type of growth rates are you seeing your housing operators expecting this year on wage increases for the full-time employees?

J. Justin Hutchens — Executive Vice President, Senior Housing and Chief Investment Officer

Yes, sure. So we’ve — first of all, expenses are exactly on track to where we expected a 5% growth. Within that, the labor is the biggest piece is 60% of the expenses. We’re pleased to see that the agency cost has come down. That’s down to 3.3% of total labor, which is the lowest it’s been. So you have that happening. And then as you — the net hiring has been improving and you’re bringing in new people, you’re onboarding, you’re paying for the onboarding, so there’s an offset that you see.

And when I said that, there could be opportunity for improvement. Really what I’m speaking about is the opportunity for agency to continue to trend down, if it does, and then getting past the period where you have this onboarding costs. And so, we’ll see how that plays out. We certainly haven’t changed any guidance or anything like that. And so far, we’re right on track with the 5% overall.

John Pawlowski — Green Street — Analyst

Okay. But on a per FTE, I’m just trying to get a sense for kind of comp per occupied bed moving forward? What’s kind of the structural per FTE wage growth your operators are seeing this year?

Debra A. Cafaro — Chairman and Chief Executive Officer

Yes. It’s higher than the 5%. So that’s consistent with what we’re seeing in the macro environment as you look at wage inflation, which is improving, but is improving relatively slowly. And so the benefit that we’re seeing overall in labor is that the year-over-year growth rates are moderating considerably in the aggregate our ability to predict them has been very good, I would say.

And within that agency is coming out at a good pace and we’re getting that installed base, which is very positive, but we’re assuming there is reasonable wage unit inflation in that installed base. But we’re still coming out ahead, and that’s the key point. And as Justin said, your care is better in your culture and your communities better as you get a higher installed base. So I hope that answers your question. Thank you.

Operator

Thank you. Your final question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Please go-ahead.

Austin Wurschmidt — KeyBanc Capital Markets — Analyst

Great, thank you. Just wanted to hit on the SHOP occupancy again. I’m curious, I know you guys had expected some seasonality, but did the level of sequential occupancy decrease in 1Q surprised you at all given how strong the leading indicators were to start the year? And then I’m just curious if there were any move-outs concentrated with any segment or region of the portfolio or pushback related to rent increases that drove some of that?

J. Justin Hutchens — Executive Vice President, Senior Housing and Chief Investment Officer

Sure. So first of all, the first quarter occupancy was exactly as expected. We had predicted that we’d have typical seasonality. We did. So we’re right on track in that regard. To your comment, leads have been very strong. Move-ins in the first quarter were higher than the prior year and higher than 2019. There’s been move out. Some of that I mentioned on the last earnings call were driven their financially-driven move-outs, which is typical, particularly when rents were pushed as high as they were this year. So no surprises whatsoever in terms of the execution so far, and we’ll look forward to seeing how the key selling season plays out.

Austin Wurschmidt — KeyBanc Capital Markets — Analyst

Great. Thanks, Justin.

J. Justin Hutchens — Executive Vice President, Senior Housing and Chief Investment Officer

With that, I’ll turn the conference back over to management for any closing remarks.

Debra A. Cafaro — Chairman and Chief Executive Officer

Thank you, operator. And I want to say thank you very much to all of the participants for your interest in and support of our company. We’re really happy to deliver an excellent quarter on your behalf. We look forward to seeing you in person in June.

Operator

[Operator Closing Remarks]

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VENTAS INC

Q1 2023

Earnings Transcript

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