Debra A. Cafaro
Chairman and Chief Executive Officer at Ventas
Thank you, BJ, and good morning to all of our shareholders and other participants. We want to welcome you to the Ventas second-quarter 2023 earnings call. We are pleased with our enterprise results this quarter of normalized FFO of $0.75 per share. This strong result reflects broad-based property NOI growth across our diverse portfolio, with all segments contributing positively and same-store year-over-year cash NOI growth of 7%. Our SHOP communities led the way as we continued to benefit from the multi-year growth and recovery cycle underway in senior housing. Notably, our U.S. Assisted Living portfolio grew NOI 32% year-over-year. Our outpatient medical and research and our triple-net leased portfolios complemented the SHOP growth.
We are also reaffirming the full-year normalized FFO per share outlook we provided to you earlier in the year. At the midpoint of $2.97 per share, our guidance reflects 5% year-over-year growth and the sixth consecutive quarter of year-over-year growth. At a high level, the key drivers of our normalized FFO per share for the year are consistent with those we shared originally. That is significant property-related growth approximating $0.29, partially offset by a $0.16 impact of higher interest rates.
I'd like to unpack for you some of the recent developments and share some key highlights. We are off to a strong start with the portfolio of 153 properties we took ownership of on May 1 by converting our Santerre Mezzanine Loan to equity. The portfolio consists of over 40% outpatient medical buildings, over 40% triple-net healthcare facilities, and the balance SHOP communities. There are three key components of our improved outlook for the portfolio. First, we've increased our expectations for annualized NOI from the portfolio to $104 million from about $93 million. This improved outlook is the result of our intense focus, our team's experience and capabilities, certain positive operating trends, and strong early returns. We believe the timing for taking ownership is advantageous and that our experience will help us maximize cash flow from this portfolio over time.
Second, valuation. We stated last quarter that we believe the portfolio was worth about $1.5 billion, equal to the debt stack. Third-party independent valuation experts now value it at 4% above that level. At our $1.5 billion cash investment basis, the per-pound valuation on the portfolio is below replacement cost.
Third, we replaced the $1 billion senior secured loan on the portfolio with a permanent capital structure at an attractive all-in rate, further enhancing the portfolio's FFO contribution and demonstrating another way that Ventas' strength can drive cash flow improvements on the portfolio over time. In addition, as previously indicated, we're also selectively starting to dispose of certain of the assets and expect to sell about $60 million in SNFs later this year at a mid-8% cash cap rate. So, while we have more work to do, we've had good success so far and our cross-functional teams are intensely focused on maximizing the value and the NOI of the portfolio.
Looking at our broader enterprise in SHOP, we continue to strongly believe in and experience the demand-driven multi-year growth and recovery cycle. We have runway in front of us to recapture about $300 million of NOI as we return to pre-pandemic margins and occupancy, and perhaps exceed that level because of favorable and improving supply demand fundamentals we expect over the next three years to five years. With virtually no construction starts in our markets and industry starts at the lowest level since 2011, the over-80 population is set to grow 24% over the next five years. Thus, we are well-positioned to continue to enjoy outsized growth.
Demand continues to be strong. Our SHOP performance in the quarter was led by U.S. Assisted Living. We benefited from strong RevPOR growth and moderating expense growth as anticipated, and our highly occupied Canadian portfolio continued to shine. Occupancy in our holiday U.S. independent living portfolio lagged our expectations during the quarter. These are good assets and good markets, and Justin and his team are taking significant steps to drive performance, utilizing the proven Ventas OI playbook that has been so successful since Justin joined us.
Our outpatient medical and research portfolio, which is about a third of our business, had another outstanding quarter with nearly 4% year-over-year same-store cash NOI growth. both outpatient medical and research contributed equally to this good growth and performance, which have been impressive consistent under Pete's leadership. Outpatient medical has now delivered year-over-year same-store cash NOI growth of over 3% in seven of the last eight quarters and year-over-year same-store occupancy growth for eight consecutive quarters. New leasing in the second quarter was up 35% over the prior year. Across our large 10 million-square-foot research portfolio, our university-centered portfolio continues to benefit from a creditworthy tenant mix and a robust pipeline of leasing demand from universities and government institutions, with 600,000 square feet leased in the first half to high-quality tenants. And we are actively engaged in late-stage conversations with multiple large users for over 0.5 million square feet.
Finally, quality tenant interest continues to be high in our $425 million Atrium Health/Wake Forest University School of Medicine Development in Charlotte, North Carolina. With recent activity, we are closing in on 80% pre-leasing, even though we are still in the early stages of construction.
Moving on to capital-raising. We continue to prioritize our liquidity, financial strength, and flexibility. We had significant successes in raising $2.4 billion in capital across diverse markets so far this year. These transactions evidenced the competitive advantage of our scale and the skill and discipline we have in sourcing attractively priced capital even during dynamic market periods. I'm pleased that we're now in a net cash position with over $3 billion of liquidity. Thanks, Bob.
We also have an active pipeline of investment opportunities both for Ventas' portfolio and under the umbrella of Ventas' third party institutional capital management platform. In particular, we expect to complete about a $0.25 billion of investment within VIM later this year, focused on core outpatient medical buildings and stabilized growing senior housing communities. With its existing capacity and investment objectives, VIM provides a competitive advantage for us as we use our platform to capture opportunities in a disruptive market for high-quality assets. Overall, on the investment front, we remain focused on assets with outsized embedded growth potential and high-quality stabilized assets and portfolios with good risk-reward characteristics. Cap rates continue to show a wide dispersion even within asset classes, depending upon the credit profile, growth potential and price per square foot or unit. We see some high-quality outpatient medical buildings with strong hospital systems and good credit and life science assets trading in the mid- to low-5, while other assets with more garden variety characteristics or risk profiles have gapped out.
There is a significant opportunity in front of us to lean into the senior housing growth and recovery story as good assets with challenged financing profiles look for solutions. We are heading into the peak years for senior housing loan maturities through 2025 with over $20 billion in debt coming due. With occupancy still about 500 basis points below pre-pandemic levels and rising interest rates, we're beginning to see significant opportunities to generate higher returns on quality senior housing assets. We are well-placed to capture these opportunities with our Ventas OI tools and analytics, our team, our ability to raise capital, and our expanding group of operator relationships.
Against a dynamic macroeconomic backdrop, we remain advantaged given our size, liquidity, and the strong fundamentals across our portfolio. Our asset classes benefit from a compelling demand outlook. While the external environment this year has been unpredictable and volatile. At Ventas, we have been laser-focused on execution, performance, and growth and delivering returns for our shareholders. Our team has really accomplished a lot across our enterprise and handles every macro and specific challenge that's come our way with focus and enthusiasm. I greatly appreciate their commitment to Ventas and our stakeholders.
Our enterprise momentum is strong. We're capitalizing on the large and growing demographically-driven demand across our business and the unprecedented organic multi-year growth opportunity in SHOP. And we're pleased to confirm our enterprise normalized FFO outlook for the balance of the year. Justin?