Hello and thank you for joining us. My name is Regina, and I will be your conference operator today. I would like to welcome everyone to the Ventas First Quarter 2023 Earnings Conference Call. All lines have been muted to avoid background noise. Following the speakers' remarks, we will have a question-and-answer session. I will now hand the conference over to BJ Grant, Senior Vice President of Investor Relations. Please continue.

Thanks, Regina. Good morning, everyone, and welcome to the Ventas First Quarter Financial Results Conference Call. Yesterday, we released our first quarter earnings, supplemental investor package, and presentation materials, all of which can be found on the Ventas website. Please note that today’s remarks may include forward-looking statements and other matters. These forward-looking statements are subject to risks and uncertainties, and various factors could lead to actual results differing significantly from those projected. For a detailed discussion on these factors, you can refer to our quarterly earnings release and the latest SEC filings available on the Ventas website. We will also cover certain non-GAAP financial measures during this call. For a reconciliation of these measures to the most comparable GAAP measures, please check our supplemental materials on the Investor Relations website. Now, I will turn the call over to Debra A. Cafaro, Chairman and CEO.

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 a 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 in 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, our senior housing team is 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 4x 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 healthcare 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 mezzanine loan had been paid in full at maturity, and we reinvested the proceeds in 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 this significant milestone possible. With our momentum and a cohesive experienced team at Ventas, we are optimistic about the prospects for our next 25 years. And now I'll turn the call over to Justin.

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% 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's performance. The revenue growth in our portfolio remains strong, with a notable 8% year-over-year increase, 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 releasing spreads. In addition, we also saw a robust sequential RevPAR growth of 4.1% despite the fact that one of our large operators pulled forward their rent increases to the fourth quarter, which caused 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 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 are paying off and generating outstanding NOI growth. Notably, Discovery Senior Living, a Dallas-based company, and Priority Life Care are among the numerous operators that contributed significantly to the growth in the first quarter. 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 Sedaris 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 ensured 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.

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, normalized FFO 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 we 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 managing interest rate risk in a dynamic rate environment. Notably, in March, we executed $400 million of pay-fixed, two-year interest rate swaps 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 6.9x 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 5x to 6x leverage target. A few comments on our capital plans vis-à-vis Center: 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 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 2023. 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.

At this time, I'd like to remind everyone in order to first question comes from the line of Michael Griffin with Citi. Please go ahead.

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?

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 the team's expert oversight. We think there's upside there. On the SHOP, we would expect those assets, which are mostly large-scale communities, to benefit from the multiyear recovery and also the application of OI over time. And then on the triple net healthcare, 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.

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

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?

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.

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

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.

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 AI approach, and we've made CapEx investments. I've mentioned that there are 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 a 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.

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

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

This is Debbie. Thank you for your question. We are focused on maximizing the value of the net operating income for all our assets, including that portfolio. The majority of those are skilled nursing facilities, which were impacted by COVID, but I can tell you that there are some positive trends emerging for them. Many of these skilled nursing facilities are located in states that have favorable Medicaid reimbursement increases and are typically seen as attractive markets. However, I should also mention that we have not hesitated in the past to sell nursing homes, so you can draw your own conclusions from that.

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

Quickly on the MOBs and the Santerre portfolio, there's a note in the deck referencing the Lillibridge 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?

Sure, Conor. Thanks. This is Pete. 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, and 75% affiliated with health systems. We've got a 67% overlap. We like the fact they're on campus. We like the average age and the WAL 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.

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

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 Lillibridge 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.

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?

We are focused on high-quality, high-performing relationship-oriented transactions as our top priority, which certainly includes medical office buildings. We also expect Class A senior housing to be part of that strategy. Additionally, we are interested in pursuing high-growth assets, and we foresee a market for senior housing in the coming quarters. Therefore, we are managing our pipeline broadly while maintaining a more focused approach in the short term, utilizing our diverse capital sources to target higher-quality assets.

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

So just quickly on Page 10 of the 1Q supplement, you showed the same-store trailing five-quarter comparison for the SHOP portfolio, which is helpful. And when looking at the 2Q trend last year, sequentially, you had about 70 bps sequential occupancy improvement last year from Q1 to Q2. So when thinking about the sequential trends from Q1 to Q2 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?

Yes, that's a good question. We're really pleased to have provided full year guidance this year, although we won't go into specifics about our performance expectations for each quarter. Last year, occupancy growth was quite solid, even stronger than the year before. I mentioned earlier that we are anticipating significant occupancy growth to support our performance expectations as we enter the key selling season now. We believe we are well positioned to take advantage of this, and we'll see how it develops.

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?

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 a much higher base.

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

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?

Great question. We are not reporting the yields, but we did provide some examples in our earnings presentation. We've highlighted a few of our early communities, particularly those with leads up 150% compared to last year, and our NOI is up 400% year-over-year. These communities have relatively low NOI but significant upside due to the operational turnaround and capital investments. We're encouraged by the early results in these areas. We expect this to be more of a longer-term driver of value creation rather than a short-term one. When we invest in communities with this type of capital expenditure, we typically look for at least a double-digit return, usually ranging from 10% to 15%. There are many variables involved in determining the actual outcome. Regarding your other question, these are included in our same-store pool and will not be taken offline, so you will see the full benefit of this execution in the same-store assessments.

As they're not particularly disruptive to the community.

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

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

Just wanted a congratulations on the 20th anniversary. Thank you.

I was here for 24 plus.

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 NFS, 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.

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

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

In terms of senior housing, the majority of the net operating income is generated from large-scale communities that are rental-based and located in strong markets. Some refer to these as rental CCRCs, while others call them senior housing communities. Regardless of the terminology, they are sizable communities with significant replacement costs, already operating with a pre-existing operator that we have. Regarding the skilled nursing facilities, there are approximately 5,000 beds in the healthcare triple-net portfolio. For coverage, we will address that at the appropriate time once we have confidence in the reported operating results, in line with our policies.

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

Yes. we better say happy birthday, happy 21st as well. Life Sciences, I'm just kind of curious, again, during the quarter, with the same-store numbers, kind of large increases in same-store apex, 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.

Sure. Thanks, Tayo. This is Pete. It's great to hear from you. From an operating perspective, there was a decline in the same-store pool. Bob mentioned that this was due to the holdover rent in the first quarter of last year, leading to an adjustment of 3.2%. Additionally, there was another factor affecting the operating expenses, which in turn impacted the NOI. Last year in the first quarter, we had a significant TIF credit, which was recorded as a contra expense. Consequently, instead of an 8.8% increase in operating expenses, it was 5.6% when viewed from a purely organic standpoint, which is below inflation. I am satisfied with that operating expense figure. When looking at NOI organically, and excluding the holdover rent and the one-time TIF credit, the same-store NOI growth was 5%, which I consider a solid achievement in the current Life Sciences environment. What I'm even more pleased with is our current leasing momentum. Leasing in the first quarter of 2023 was more than twice what it was in the first quarter of 2022 and significantly exceeded the fourth quarter of 2022 as well. Interestingly, 60% of our leasing pipeline consists of institutional clients, as our focus is on university-based life sciences markets. These markets are typically influenced by government entities, universities, and health systems. While they may not act quickly, they do progress regardless of inflation or industry conditions, making us feel optimistic about our pipeline and its implications for the future.

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?

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

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.

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

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?

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

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 disclosure that drives the change.

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 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 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.

Great. And what about...

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 is up 9% year-over-year and the street rates are 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 and are 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.

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

This is George 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?

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, it's one of the highest return opportunities that we have. So we're going to invest behind those assets.

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

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?

Yes, absolutely. First, expenses are aligning perfectly with our expectations, with a projected 5% increase in that area. Labor constitutes the largest portion, accounting for 60% of the expenses. We are encouraged to see a reduction in agency costs, now at 3.3% of total labor, which is the lowest it has ever been. Additionally, net hiring has been on the rise, leading to new hires and onboarding expenses, creating a balancing effect. When I mentioned potential for improvement, I was referring to the possibility of agency costs continuing to decline, along with moving past the phase of onboarding expenses. We will monitor how this evolves. We have not altered any guidance, and so far, we are right on target with the 5% growth overall.

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?

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. As Justin said, your care is better in your culture and your communities are better as you get a higher installed base. So I hope that answers your question.

Your final question comes from the line of Austin Worsmith with KeyBanc Capital Markets. Please go ahead.

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 Q1 surprise 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?

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 outs. Some of that I mentioned on the last earnings call were driven by 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.

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

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.

Ladies and gentlemen, that will conclude today's conference. Thank you all for joining. You may now disconnect.