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Ventas Inc  (NYSE:VTR)
Q4 2018 Earnings Conference Call
Feb. 08, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Q4 2018 Ventas Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the call over to Juan Sanabria. You may begin.

Juan Sanabria -- Vice President, Investor Relations

Thanks, Michelle. Good morning and welcome to the Ventas conference call to review the Company's announcement today regarding its results for the year and quarter ended December 31, 2018. As we start, let me express that all projections and predictions and certain other statements to be made during this conference call may be considered forward-looking statements within the meanings of the federal securities law.

The Company cautions that these forward-looking statements are subject to many risks, uncertainties and contingencies, and stockholders and others should recognize that actual results may differ materially from the Company's expectations, whether expressed or implied. Ventas expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any changes in expectations.

Additional information about the factors that may affect the Company's operations and results is included in the Company's annual report on Form 10-K for the year ended December 31, 2017 and the Company's other SEC filings. Please note that quantitative reconciliations between the non-GAAP financial measures referenced on this conference call and its most directly comparable GAAP measures, as well as the Company's supplemental disclosure schedule are available on the Investor Relations site on our website www.ventasreit.com.

I will now turn the call over to Debra A. Cafaro, Chairman and CEO of the Company.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thank you, Juan. We're very happy to have you join us on this side of the table for your first call. And good morning to all of our shareholders and other participants, and welcome to the Ventas year-end 2018 earnings call.

I am delighted also to be joined on today's call by my outstanding Ventas colleagues. In 2018, Ventas extended its two-decade track record of sustained excellence. We delivered positive total return to our shareholders, substantially outperforming both the REIT Index and the S&P 500. We increased our dividend, harvested proceeds from successful investments that we redeployed to enhance balance sheet strength and invest in future growth. We added selective premier private pay assets to our portfolio and we built a high-quality research and innovation development pipeline, exceeding $1.5 billion with leading research universities. Importantly, we also enhanced and expanded our relationships with key industry partners, Wexford, PMB, Ardent, Atria and Sunrise during the year. And we crafted new beneficial arrangements with care providers, including Brookdale and ESL.

In addition to achieving these strategic objectives, we also delivered on our financial goals. 2018 normalized FFO per share was $4.07 at the high-end of our improved expectations on a best-in-class balance sheet. During the year, we were gratified that our team and our Company were recognized repeatedly for our track record of outperformance, our significant contributions to the industry where we have a major presence, and for our leadership and environmental, social and governance matters. Along the way, our Ventas team remains strong, smart and unified. While I'd love to elaborate on our 2018 accomplishments, they are well described in today's release. Instead, allow me to outline our expectations for 2019, highlight some of our key opportunities for the year and describe our commitment to returning to growth.

We entered 2019 on a strong foundation. We expect 2019 normalized FFO to range between $3.75 and $3.85 per share, assuming no acquisition activity. We also anticipate that our diversified portfolio will grow same-store cash net operating income year-over-year. We expect 2019 to be a pivot year in our transition back to growth following a multi-year period of strategic improvement in our portfolio quality index from the disposition and receipt of loan repayments, totaling $8 billion. We used the proceeds of these transactions to substantially improve our portfolio and tenant mix and replace lower-quality assets and tenants with high-quality health systems, and research and innovation properties with highly rated leading university.

While the specific timing of our return to growth following 2019 is difficult to predict, the building blocks are clear, deliver organic portfolio growth when senior housing operating conditions improve as other business lines continue to grow, capture the benefits of our research and innovation business and development pipeline, utilize our financial strength and flexibility, and reignite our long-standing history of completing successful accretive acquisitions.

Let's talk about those building blocks in turn. First, looking at senior living trends nationally, we are very encouraged by the recently reported continued improvement in senior living starts, which have reached their most favorable points since the third quarter of 2012. As starts continued to moderate, demand for our product ramped to its highest level ever in 2018. The 75 to 81-year-old contingent is growing 4% per year for the next five years and 82 to 86-year-old cohort begins to grow over 3% per year after 2019. Assuming these trends continue, we anticipate a bottoming in senior housing so that the supply demand equation moves in our favor in the future, creating a powerful cyclical upside. Potential increases in the penetration rate would incrementally improve this picture.

Second, we've enjoyed significant growth in our university based research and innovation business to date from the original portfolio we acquired in late 2016 and the delivery and lease up of additional properties. We expect research and innovation growth to continue in 2019. Building on our momentum, we have today announced the extension of our collaborative partnership with Wexford until 2029 and the creation of a strong development pipeline exceeding $1.5 billion in projects with the lead research universities that will accelerate our growth in this high-quality sustainable space.

The pipeline cements our leading position in the market and demonstrates again our ability to acquire and grow a differentiated value creating business. Our robust pipeline of developments with top-tier research institutions contains about 10 expected projects, roughly half with existing university relationship and half with new ones.

Pro forma for the announced development pipeline, our investment in high quality new real estate leased by leading research institutions will exceed $3.5 billion, more than doubling our original 2016 investment. And NOI from research and innovation investments would represent about 10% of Ventas NOI. The pipeline projects have excellent risk adjusted return with expected unlevered yields of between 6.5% and 8% at stabilization and significant pre-leasing creditworthy tenants and long-term leases.

Today, we announced the first development in our pipeline, a $77 million project with Arizona State University, a highly rated public research university and a new relationship for Ventas and Wexford. The project will be fully lab-enabled and principally used for biomedical discovery and innovation and health outcomes. It is 50% pre-leased to ASU and should open by the end of 2020. With best-in-class developer and manager Wexford, we look forward to meeting the needs of leading universities, who want powerful knowledge communities on their campuses to supercharge research, innovation and economic activity.

Our third building block of future growth stems from our financial strength and flexibility.

During 2018, we paid down and refinanced debt totaling $3.4 billion. So we enter 2019 with an industry-leading credit profile, limited near-term debt maturities, terrific liquidity and capital access.

Finally, current market conditions are becoming more conducive for accretive external growth. Our team continues to evaluate investments across our vertical. Our strong relationship in all our business lines provide a competitive edge in acquisitions. And we intend to be proactive and opportunistic to increase investment activity. However, because investment timing and volume are unpredictable, consistent with our historical practice, we have not built any acquisition activity into our projections for 2019.

In conclusion, with nearly 20 years of 23% compound annual return to shareholders, we are happy with our 2018 accomplishments and financial performance; we are introducing 2019 guidance that is consistent with our previous statements to you; and most importantly, we are confident in our positioning for another 20 years of growth and success.

Now, I'm happy to turn the call over to our CFO, Bob Probst.

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Thank you, Debbie. I'm happy to report another solid year of performance from our high-quality portfolio of healthcare, seniors housing and office properties. Our total property portfolio delivered same-store cash NOI growth of 1.2% for the full-year 2018, above the midpoint of total Company same-store guidance. In 2019, we expect our total portfolio same-store NOI growth to range between 0% and 1%, benefiting from diversification of asset class operator, geography and business model.

Let me detail our 2018 performance and 2019 guidance for our properties at a segment level, starting with Triple-Net. We were very pleased by the performance of our Triple-Net portfolio, which grew same-store cash NOI by an excellent 3.6% for the full-year 2018. In the fourth quarter, Triple-Net same-store cash NOI increased to solid 2.1%. Across our total Triple-Net lease portfolio, trailing 12-month EBITDAR and cash flow coverage for the third quarter of 2018, the latest available information, was stable from the prior quarter at 1.5 times. Within that, seniors housing remained flat at 1.2 times, while IRFs and LTACs remained consistent at 1.4 times. As we predicted, performance at the assets for our Kindred LTACs improved in the second half of 2018 with operational strategies taking hold to mitigate LTAC criteria.

We expect this improvement to continue in 2019. Also Medtech (ph) just recommended a rate increase for LTACs recognizing their value in the healthcare delivery system. Meanwhile, Ardent's third quarter 2018 results were strong and the fourth quarter showed continued momentum. Ardent recently filed for an IPO. Ardent's rent coverage remained robust at 2.9 times and hospital Medicare rates increased approximately 3% effective in the fourth quarter of 2018. As we look at 2019, Triple-Net same-store NOI is projected to grow, albeit at a more modest rate. Rent escalators are assumed to be partially offset by expected lease modifications with certain smaller senior housing operators, where rent coverage and credit is challenged. So we have multiple potential approaches to these situations, including operator and business model transitions, our guidance at this stage assumes a $10 million NOI reduction in our Triple-Net same-store pool, equating to 130 basis point year-over-year same-store impact.

In addition, the lapping of the 2018 Brookdale lease modification lowers triple net same-store NOI growth by 70 basis points in 2019. On these assumptions, we forecast that our overall Triple-Net portfolio same-store cash NOI will increase between a 0.5% and 1.5% in 2019. I would highlight that guidance does not include any lease modifications for our portfolio of 26 communities managed by Holiday. These assets represent only 3% of our Company's NOI with approximately $60 million in annual contractual rent, which is fully current. Holiday has recently entered into a variety of transactions with its other landlords. In our case, we have a wide array of possible options and many tools and previous experiences at our disposal to obtain an optimal outcome if we believe the transaction is appropriate. Importantly, we believe that in any transaction we'd be made substantially economically whole and any impact would be immaterial to Ventas.

Moving on to our Senior Housing Operating Portfolio. To summarize, our 2018 SHOP results were in line with our expectations, both for the fourth quarter and full year. For -- in 2019, our SHOP guidance at the midpoint represents a year-over-year improvement relative to 2018. So we continue to work through the near-term supply demand mismatch. And as we look beyond 2019, we're excited about the powerful upside opportunity in Seniors Housing and our excellent market position.

Let me unpack each of these topics in turn. In 2018, our SHOP full-year same-store NOI growth was minus 2.1%. Full-year same-store occupancy in 2018 declined by 80 basis points versus 2017, driven by the cumulative impact of new deliveries in select markets. RevPAR growth for the year was 1.9%. Operating expenses rose 2.5% with wage growth partially offset by cost controls. Positively, the year-over-year occupancy gap continued to narrow to minus 10 basis points in the fourth quarter though new deliveries continue to pressure rate. Q4 expenses were up 3%. At the bottom line, Q4 same-store SHOP cash NOI declined 3.5%, in line with our range of expectations.

Turning to 2019 guidance. As we previewed on our Q3 call, we expect full-year 2019 SHOP same-store cash NOI to range from minus 3% to flat. At the midpoint, this represents a 60 basis point improvement in year-on-year performance in 2019. Please note our 2019 same-store pool now includes 74 assets operated by ESL. We forecast same-store occupancy in 2019 will range from flat to down 50 basis points for the full year. We expect new deliveries in 2019 to be at a similar level to 2018, as we digest the high level of inventory initiated several years ago.

In terms of rate, we continue to see healthy increases on in-place rent and care for existing residents. Encouragingly, the majority of the 2019 rate letters have gone out with increases that exceed 5%. That said, price competition for new residents is expected to result in negative rent releasing spreads in the high single-digits range. Overall, we expect RevPAR growth for the year to approximate 1%. We forecast operating expenses to increase in the 2% to 3% range, with continued wage pressure, partially offset by strong cost controls and more modest incentive management fees.

The early read in Q1 of 2019 suggests the flu impact to be more modest than 2018 severely levels. Extreme weather conditions in many part of the country at the start of the year may also affect the first quarter. Finally, as we look beyond 2019, we're excited about the very positive trend in new construction starts, together with accelerating demand. The implication for positive occupancy and NOI gains from this data supports a powerful upside we expect in Seniors Housing.

To finish up the segment discussion, let's turn to our Office reporting segment, which represents approximately 27% of Ventas' NOI. For the full-year 2018 Office same-store cash NOI increased by 1.7%. Within Office, the R&I portfolio performed very strongly in 2018 and reached the high end of our guidance range by delivering full-year same-store cash NOI growth of 4%. Average revenue per square foot increased 4.9% and occupancy was an exceptional 96%. For the same-store pool in the fourth quarter, R&I increased same-store NOI by an outstanding 8.6%, driven by continued execution on our lease-up assets. In 2019, we expect attractive full-year same-store Research & Innovation NOI growth in the range of 3% to 4% and total R&I portfolio NOI growth to exceed 7%. With the number of new developments coming online in 2019, we expect the R&I portfolio NOI to really begin to accelerate into 2020 and beyond.

Turning to our highly valuable Medical Office Business. MOB same-store cash NOI increased by 1.1% for the full-year 2018. Tenant retention in 2018 was strong at 80% and same-store occupancy improved sequentially in the fourth quarter. In 2019, we expect 1% to 2% cash NOI growth from our same-store MOB portfolio. Guidance assumes occupancy increases through new leasing, continued strong retention rates and less square footage expiring than prior year. The total MOB portfolio is expected to benefit from the opening in 2019 of our new MOB development in downtown San Francisco, which is now over 80% pre-leased to Sutter Health.

On a combined basis, our same-store Office portfolio of Research & Innovation properties and MOB assets is expected to grow cash NOI in the range of 1.5% to 2.5% for the full-year 2019.

Now on to our overall Company financial results. In 2018, we delivered normalized FFO of $4.07 per share, matching the high end of our guidance range. Adjusted for Q4 natural disaster impacts, our GAAP net income and NAREIT FFO results were also in line with expectations. Meanwhile, we successfully recycled $1.3 billion in capital and built a balance sheet that is the strongest in our sector. In 2018, we proactively refinanced near-term debt to manage future interest rate risk and increased average debt duration by nearly one year to seven years. At year-end, net debt to adjusted EBITDA was 5.6 times, fixed charge coverage an exceptional 4.6 times, and net debt to enterprise value was 34%.

We have also enhanced our supplemental disclosure package to incorporate feedback from investors and analysts, as well as industry best practices. We welcome your ongoing feedback.

I'll close out the prepared remarks with our full-year 2019 guidance for the Company. The key components of our guidance are as follows; Net income is estimated to range between $1.23 per fully diluted share and $1.38 per fully diluted share, normalized FFO is forecast to range from $3.75 per diluted share to $3.85 per fully diluted share, we expect portfolio same-store cash NOI will range from 0% to 1%, and net debt to adjusted pro forma EBITDA is expected to stay flat at 5.6 times by year-end 2019.

Last quarter, we highlighted that 4Q 2018 guidance annualized of $3.76 per share in normalized FFO was a good run rate for 2019. Today's 2019 official guidance is in line with our first REIT (ph) discussed last quarter, but the 2019 range of $3.75 per share to $3.85 per share were $3.80 at the midpoint. The 2019 normalized FFO guidance is explained by three drivers. First, underlying total property NOI is expected to grow modestly with solid organic growth in multiple asset classes, largely offset by the impacts of the supply demand cycle in Senior Housing. Second, we expect to recycle $500 million in asset dispositions and receipt of loan repayments into funding $500 million of developments and redevelopments, principally behind the R&I pipeline. This capital recycling is dilutive in 2019, but delivered strong future growth in value creation. And third, we expect higher interest expense in 2019 from higher rates and incorporate $0.02 in incremental leasing expenses from a change in lease accounting standards effective starting in 2019.

Finally, as discussed, (inaudible) guidance does not include new acquisitions and also assumes approximately 361 million weighted average fully diluted share. In conclusion, we are pleased with our performance in 2018. However, the Ventas team is intently focused on together delivering on our 2019 commitments and on our return to growth.

With that, I'll ask the operator to please open the call for questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question comes from Nick Joseph of Citi. Your line is open.

Nick Joseph -- Citi -- Analyst

Thanks. What's assumed in guidance for the timing of the asset sales and the loan repayments?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Sure, Nick.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Good morning.

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Good morning. The $500 million in dispositions and loan repayments is really back-end weighted. The loan repayments opened really beginning in the summer. So our guidance is really midpoint of that back half -- at the midpoint.

Nick Joseph -- Citi -- Analyst

Okay, thanks. And then as you think about 2019 being a pivot year, globally you enter 2020 on a run rate basis from a quarterly FFO perspective. Obviously, the midpoint suggests $0.95 a quarter, but it will be variable given this loan repayments and contribution from development and redevelopment?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Yes. So you were right to point out. In terms of phasing for the year, quarter-to-quarter, we certainly would expect in the second half sequentially to see lower FFO per share and that is indeed the case here. I wouldn't say wildly different, but it does trend down over the course of the year based on the timing of dispositions, which again are uncertain. So it's hard to say exactly quarter-by-quarter what that's going to look like.

Nick Joseph -- Citi -- Analyst

Thanks. Is the return to growth more of a 2021 comment than 2020?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Nick, as we said that we're intently focused on returning to our historical growth, and the timing is not easily predictable within a specific quarter or so, but we know we're going to get there. We know what we have to do and we know how to do it. So, I feel good about that.

Nick Joseph -- Citi -- Analyst

Thanks.

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Thank you.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Josh Dennerlein of Bank of America. Your line is open.

Joshua Dennerlein -- Bank of America Merrill Lynch -- Analyst

Hey. Thank you, guys. You mentioned that your...

Debra A. Cafaro -- Chairman and Chief Executive Officer

Good morning.

Joshua Dennerlein -- Bank of America Merrill Lynch -- Analyst

Good morning. You mentioned that your team has been underwriting acquisitions. I know you have nothing in guidance. Any -- where would -- where is the team most active, is it Senior Housing, MOBs, those segment?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Well, clearly, we've been very busy building this great Research & Innovation pipeline, and I thank John Cobb and his team for that. In terms of looking forward, I would say there is a combination of -- across our verticals, a combination of regular-way type potential investments, as well as more opportunistic type things that may come into focus over time.

Joshua Dennerlein -- Bank of America Merrill Lynch -- Analyst

Okay. And then on the Wexford, the 10 projects you've identified, is that over the kind of the lifespan of the contract being extended to 2029 or is it kind of just what you have in the near term kind of lined up?

John D. Cobb -- Executive Vice President and Chief Investment Officer

Yeah, this is John. It's in the near term. It's not in the next 12 months.

Debra A. Cafaro -- Chairman and Chief Executive Officer

It's in the next couple of years.

Joshua Dennerlein -- Bank of America Merrill Lynch -- Analyst

Next couple of years. Okay. So what do you think you can kind of do per year like two or three of these projects and good run rate?

John D. Cobb -- Executive Vice President and Chief Investment Officer

Yeah, the $1.5 billion, typically 24 months. 18 months, 20 months to 24 months to start to finish to open the building. And then a couple of years to stabilize from there depending on the pre-leasing. So that's how you should think about the phasing of the $1.5 billion.

Okay, OK. Great. Thank you.

Yeah.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thanks.

Operator

Our next question comes from Nick Yulico of Scotiabank. Your line that open.

Nicholas Yulico -- Scotiabank -- Analyst

Yeah. Hi, good morning everyone.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Good morning.

Nicholas Yulico -- Scotiabank -- Analyst

Just following up on Wexford, is there any -- you talked about the 18 months to 24 months start to finish. Is there a way you can get a feel for future starts you're assuming for this year and next year? And because if I guess I go back to the disposition guidance, it talks about $500 million there which would be used for development and redevelopment. And based on your current pipeline, the supplemental, you don't have that much spending. It looks like you have like another $250 million or $300 million of starts that would be maybe assumed this year. So can you just give us a little feel for that?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Just directionally, I would say some starts in 2019, but back-end weighted, and then a ramp in 2020 and some spend thereafter.

Robert F. Probst -- Executive Vice President and Chief Financial Officer

I'll build on that, Nick. In terms of the $500 million of development or redevelopment spend forecast this year call it, 70% of that is in fact development. And indeed the majority of that is behind the pipeline just announced. So really this is about accelerating that pipeline beginning in this year.

Nicholas Yulico -- Scotiabank -- Analyst

Okay, that's helpful. And then Debbie, I wanted to go back to when you're talking about external growth, you're saying current market conditions are good for accretive external growth. And I guess, I'm just wondering you had been a little bit quieter on the larger portfolio acquisitions in the last year, some of which have -- have traded. How much was your cost of equity a factor in that, and now that -- we know the stock price, where it is up significantly versus its low point in 2017. How much is that also affecting your thinking on the ability to do accretive acquisitions?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Right. And well, as I said, I mean, we're excited about the investments we're making in Research & Innovation. I do think the environment is more conducive and it really is around the fact that we may be seeing a slight upward drift in cap rates, and therefore, rewarding our patients coupled with an improved cost of capital. And then there are certain, again, more opportunistic things that come and go and where perhaps over time those could become more interesting to us. So it's a variety of factors.

Nicholas Yulico -- Scotiabank -- Analyst

Okay. Just one last question, Bob. I wanted to follow up. When you gave the Triple-Net segment guidance, you talked about some -- certain lease modifications with senior housing operators. But I think you said it -- that did not include Holiday. Is that correct?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

That is correct, yes.

Nicholas Yulico -- Scotiabank -- Analyst

Okay and then -- and I know you also talked about there's a lot of different scenarios with Holiday, but you expect to be made substantially economically whole. I guess the question I have though is that, there is some significant straight-line rent associated with lease. So I mean, is there still a chance that -- I mean, how should we think about an economic issue versus a GAAP FFO issue where there is some potential for a straight-line rent reduction if you had to restructure that lease?

Debra A. Cafaro -- Chairman and Chief Executive Officer

I'll take that one. There are -- there's again a wide array of options, many permutations. We're looking rightly, as you said, at being made substantially economically whole. We do have structured guarantor, his credit has been directionally improved as a result of the other transactions. And so, we're really looking at it from an economic basis right now and then the GAAP impacts and so on are -- will follow depending on whether we do a transaction, if so, what that looks like and that -- the GAAP will follow whatever transaction if any we do.

Nicholas Yulico -- Scotiabank -- Analyst

Okay. Thank you, Debbie.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thanks.

Operator

Our next question comes from Steve Sakwa of Evercore. Your line is open.

Steve Sakwa -- Evercore ISI -- Analyst

Thanks. I guess, I just wanted to talk maybe about some of the timing of deliveries. I think some of the delivery dates got pushed out a little bit. I mean -- just what are you seeing on the construction front and how do you sort of see the delivery timetables maybe changing over the next one to two years?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Sure, Steve. It's Bob. So in terms of deliveries, we take the NIC data and we then risk-adjust that should I say, based on our experience of how long it typically takes to deliver. And in fact that trend has been lengthening i.e. it's been taking longer than normal. I think we were pretty accurate in our forecast for '18 in terms of those deliveries. And as we looked at '19 -- as we look at '19, we expect to have similar levels in our portfolio of new deliveries as we saw in '18. Obviously, the trend-down in starts is encouraging as we said. That gives us some visibility now into '20. Of course, that -- that will be a function of timing of deliveries, but we do expect, based on the starts trend, which has been so favorable to see in 2020, a reduction in the amount of deliveries. So -- hence some of the commentary around the improving trends that we see over time in Seniors Housing.

Steve Sakwa -- Evercore ISI -- Analyst

And I guess maybe just to stay on that business, kind of the wage issues. I think you said expenses might grow 2% to 3% and embedded in that might be slightly higher wage growth. Just what kind of comfort do you have around sort of the wage component and that -- not putting upward pressure on overall expense growth in 2019?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Yeah. This has been a pretty consistent theme, Steve. I think I asked the same -- got asked the same question this time last year. Wages have clearly been under pressure, no doubt. Tight labor market, we're all aware of that, minimum wage et cetera. What the operators have done is a phenomenal job of cost control, whether that be a business model, the operating model, how they staff managing indirect costs et cetera. And so, if you look at our full year, for example 2018 operating expense grew 2.5%, that's right in the midpoint of the range we've just given for '19. Our operators believe they have continued opportunity runway for cost control. But that is certainly necessary in light of the wage pressure as you point out.

Steve Sakwa -- Evercore ISI -- Analyst

Okay. And then last question on the -- on the R&I business. I guess the ASU deal, it sounds like half of that is at least going to the university. I guess, are your expectations that the other half would go to a traditional kind of life science type tenants or would you expect university to take the other half over time, and what are your prospects or pipeline look like from leasing up the balance of that building?

John D. Cobb -- Executive Vice President and Chief Investment Officer

Sure, this is John. Historically speaking, we target the private sector like you said, but we have had a lot of -- where the university does take additional space, it just happened to us in -- at our Washington (ph) building that we just completed and successfully filled up. So we target both and our prospects are good.

Steve Sakwa -- Evercore ISI -- Analyst

Okay, thank you.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thanks.

Operator

Our next question comes from Andrew Rosivach of Goldman, Sachs. Your line is open.

Andrew Rosivach -- Goldman, Sachs & Co. -- Analyst

Great. Thanks for taking my question. Really fast, something I got this morning that I didn't know the answer to. 12% of your SHOP in the fourth quarter was outside of the same-store pool. And I think I modeled this wrong. First, you have that new line, the 16 properties intended for disposition, on page 2. I'm guessing that's outside of the same-store pool?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Yes.

Robert F. Probst -- Executive Vice President and Chief Financial Officer

That's correct.

Andrew Rosivach -- Goldman, Sachs & Co. -- Analyst

It -- any sense of how that portfolio trended in '?18

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Sure. So first of all, in terms of the same-store pool I just -- I'll just emphasize again, the ESL assets going into the full-year pool in the 2019, they're not in the full-year pool in 2018 as we transition them. So that's the biggest driver, 80% of our assets, that said, even before you are selling in same-store. We do have some assets, which are actively marketing incentive for disposition, is the term we use. Typically in Seniors Housing specifically, these may be in some higher supply markets and so the trends would mirror those types of markets.

Andrew Rosivach -- Goldman, Sachs & Co. -- Analyst

So I don't want to put words in your mouth, Bob, but probably that -- I just did look -- if you look at it, there is only $1 million of NOI and $20 million of revenue that, that was probably a portfolio or assets that were pretty tough in '18?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Yeah. Those have trended down very consistent with the market.

Andrew Rosivach -- Goldman, Sachs & Co. -- Analyst

And then my second one, you mentioned ESL. If you broke your same-store portfolio in '19 between ESL and non-ESL, would there be a difference in the expectation for performance?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Yeah, great question. And perhaps a chance as to discuss ESL little bit. The last call we mentioned, they stabilized. We saw good fourth quarter from ESL really on the cost side in particular, getting their operating model in place. So nice stabilization of performance there. In terms of the impact in '19 in the same-store pool, that's a positive impact to the overall by about 60 basis points in the same-store pool overall. So put another way, you can adjust the same-store midpoint by that amount if you excluded it.

Andrew Rosivach -- Goldman, Sachs & Co. -- Analyst

Got it. So basically -- so there is a bit of an easy comp if you will, where your SHOP can do better than kind of a generic SHOP portfolio in the US because of the ESL portfolio?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Well, we -- I would just say that, we expect this to have a positive contribution and that's what we intended when we moved the asset.

Andrew Rosivach -- Goldman, Sachs & Co. -- Analyst

Got it. Thanks a lot.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from John Kim of BMO Capital Markets.Your line is open.

John Kim -- BMO Capital Markets -- Analyst

Good morning. In your supplement, you provided what looks like new -- a new line of 8% to 12% range and stabilized returns on incremental capital.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Yes.

John Kim -- BMO Capital Markets -- Analyst

Just clarify, is that development yield or an IRR figure?

Debra A. Cafaro -- Chairman and Chief Executive Officer

It's an unlevered yield on incremental capital, John. Good morning. I'm glad people are noticing some of our good additional disclosure and I'm glad it's helpful. But that's kind of -- that's an unlevered yield on incremental invested capital at stabilization.

John Kim -- BMO Capital Markets -- Analyst

And is that pertaining just to redevelopments or does that include developments alone?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

That's the redevelopments, John. Specifically on that page, you'll see at the bottom for the redevelopments. Developments, we show expected stabilized yields specific to the projects.

John D. Cobb -- Executive Vice President and Chief Investment Officer

Got it, OK. I think previously you stated that your life science land bank can provide up to $2 billion of developments. And in today's press release, I think $1.5 billion. So, besides the ASU project, what was incrementally new as far as projects that you agreed upon?

Debra A. Cafaro -- Chairman and Chief Executive Officer

And one thing we did say is that with the 10, sort of half are with new relationships, roughly have with existing ones. I'm glad you remember that we do have a land bank with some of our better universities that could support about $2 billion of development. And to tie that altogether...

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Yeah, the half rule of thumb applies as well in terms of that land bank that we quoted going toward -- half of it roughly is going toward this new pipeline. That still remains as an opportunity.

John Kim -- BMO Capital Markets -- Analyst

Okay. And then Debbie you mentioned on an answer to previous question that opportunistic things come and go. Can you just maybe provide some more color on that, does that this specifically mean public opportunities?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Right. I mean almost by definition, opportunistic is a little bit come-and-go, to use your words. It is more expansive in terms of things where we have a unique insight or we have a unique relationship that we can employee to capture an opportunity that is unique.

John Kim -- BMO Capital Markets -- Analyst

Thank you.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Jordan Sadler of KeyBanc Capital Markets. Your line is open.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Thank you. Good morning.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Good morning.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Good morning. Could you clarify on the ESL piece? Did you say it's a 60 basis point positive contribution to the overall or just to the SHOP piece?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

To the SHOP same-store piece, not overall Company.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Okay. I thought so.

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Yeah.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

And then as it relates to SHOP NOI trending throughout the year, we were talking about sort of the sequential trend in maybe FFO, but I was kind of curious, I think, it feels like your toughest comps are probably earlier in the year and -- so I would expect some sort of gradual improvement at the year, is that how you guys are thinking about it?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Actually, we think it's likely to be pretty consistent throughout the year. Forget seasonality, I'm just seeing year-over-year performance. Some of the things notable last year in the first quarter were the flu. This year we have, as I said, an easier flu albeit above normal levels, but severe weather is kind of a new factor in the mix in Q1. But as we look out over the course of the year, I don't see anything that spikes any particular quarter, frankly on a year-over-year basis.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Okay. And then just on the acquisition (technical difficulties) opportunities, are there any particular segments that are sort of cropping up as having better or worse opportunity? Has your interest level in Senior Housing picked up at all, given sort of -- the fact that we're getting closer toward the ramp and the demos and possibilities in penetration?

John D. Cobb -- Executive Vice President and Chief Investment Officer

This is John. I think it's across the board, we're seeing in all the sectors that we look at.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Is there anything that you could point to that's driving that, is it just more willing sellers or prices or...?

John D. Cobb -- Executive Vice President and Chief Investment Officer

I think we are (multiple speakers) as Debbie said earlier, I think we're seeing a little bit uptick in yields. So that's making some of it more attractive, but sometimes deals just come to market.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Okay, thank you guys.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thank you.

John D. Cobb -- Executive Vice President and Chief Investment Officer

Sure.

Operator

Our next question comes from Derek Johnston of Deutsche Bank. Your line is open.

Derek Johnston -- Deutsche Bank -- Analyst

Hi, good morning.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Good morning.

Derek Johnston -- Deutsche Bank -- Analyst

For Senior Housing, are you seeing better supply net demand dynamics in major metro markets versus secondary or suburban? And really how economically viable is Senior Housing in markets like New York City and San Fran where costs seem somewhat prohibitive?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Sure. So in terms of supply demand, we -- it's really a market by market conversation. I quoted a few in the past of the -- of the major or primary markets like Atlanta, Chicago, where we have seen a significant amount of supply demand, that continues. Secondary markets, if you just look at the segmentation in our supplemental, you can see it does have -- well, it feels a little bit like a more significant impact in terms of supply. Some of the smaller markets Salt Lake City et cetera, but it really is a market-by-market conversation. And again, I think just pivoting back to the overall trend downward, it's -- and starts is the encouraging piece that we keep wanting to point to. It's clearly as we look at 2020 kind of toward the tail-end coming down in terms of delivery expectations. So that's really good news.

Derek Johnston -- Deutsche Bank -- Analyst

Okay, got it. And just quickly from my second one. Could you just talk about the West Coast strategy and the expanded relationship or continued with PMB, and ultimately how Sutter is progressing and any updates there?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Great. This is Debbie. I would say that we are running the West Coast assets. We have been lucky enough to be partners with PMB that is a very well-known West Coast developer of high-quality medical office and outpatient and weak, we recently extended that relationship. It's been a very positive one. And they continue to have a good pipeline of development opportunities and we have an exclusive pipeline arrangement with them. Sutter as you point out is one, and it is -- I've just visited it during NAREIT, I believe and it's looking great and ready for occupancy and right across from a $2 billion new hospital that Sutter is moving into shortly. So we're excited about that one and we look forward to taking investors there as soon as we can.

Derek Johnston -- Deutsche Bank -- Analyst

Thank you, Debbie.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Chad Vanacore of Stifel. Your line is open.

Seth Canetto -- Stifel, Nicolaus & Company -- Analyst

Hey, good morning. This is Seth Canetto on for Chad.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Hi, Seth.

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Hi.

Seth Canetto -- Stifel, Nicolaus & Company -- Analyst

Hey. First question, looking at the dispositions, do you guys -- is there any update on the $30 million of rent that was associated with Brookdale, is that most of the $500 million disposition included in guidance? And have you identified those properties and any insight on timing or expected yields?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Yes. So good question. So, as you recall as early in 2018, we get a very attractive arrangement with Brookdale that extended our leases and also targeted about $30 million of rent for disposition, added 6.25% yield to Ventas. We have identified an early tranche of those potential dispositions and that is part of the $500 million to which Bob referred. And we're at the very early stage of marketing that portfolio and that's where we stand and that will continue to improve the overall quality of our portfolio and be helpful to Brookdale as well.

Robert F. Probst -- Executive Vice President and Chief Financial Officer

You know I would add, the loans are, I call it $300 million, $350 million (ph) of that overall total.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Loan repayments represent the rest of it. Yeah.

Seth Canetto -- Stifel, Nicolaus & Company -- Analyst

Got it, thanks. And then when we look at last quarter and we talked about your preliminary SHOP outlook, it was pretty much the same as '18. It seems like the upper end of that range was improved. Was that predicated on the outperformance of ESL or overall supply demand dynamics or just any more color that give you confidence that it's going to -- a possibility of improvement in '19?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Yeah, great question. I'd highlight a few things and this dramatically applies not just to '19, but as we think about '20 and beyond. One of the things we have seen is solid occupancy. And I noted 10 basis point gap versus prior year which had narrowed throughout the year in 2018. And in fact, sequentially we grew occupancy in the fourth quarter for the first time since 2015. So there is something going on that's very positive on the occupancy side. I think it's market share gains and penetration. But that's really one of the things we find very encouraging. ESL you rightly point out, is another. And then the third, I would highlight is redevelopments. We have redevelopments in our same-store pool. I mean, we are seeing some lift from the redevelopments in '19 and in the '20s. So to give you a few of the ideas that gave us that confidence and the midpoint improving in '19 and then beyond.

Seth Canetto -- Stifel, Nicolaus & Company -- Analyst

All right. Great. Thanks for taking my question.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Jonathan Hughes of Raymond James. Your line is open.

Jonathan Hughes -- Raymond James -- Analyst

Hey, good morning. Thank you for the time.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Good morning.

Jonathan Hughes -- Raymond James -- Analyst

Good morning and thanks for the added disclosure throughout the stuff, really appreciate it.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Right.

Jonathan Hughes -- Raymond James -- Analyst

On the external growth front, earlier you mentioned pricing for deals has drifted up, that was on Nick's question. Not sure if that was specific to certain healthcare real estate asset class or just a broad comment, but would you care to maybe quantify that rise with specific emphasis on the MOBs? Have they maybe moved up to 20 bips, 25 bips over the past six months, nine months?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Again, it's just -- we're starting to see a slight drift upward and it really is in several of the asset classes. And so I think you're on the right track.

Jonathan Hughes -- Raymond James -- Analyst

Okay, fair enough. And then I haven't -- I don't think we've talked about Ardent in detail yet, but in the past you really wanted to expand that platform. There was a recent acute care deal granted outside of the US, but curious if you looked at that and then maybe where you're seeing any hospital or acute-care opportunities within the US?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Great question. So as you know, high-quality health systems and I'll just point to HCA as a public example of that -- has done have the opportunity to continue to do well. We certainly have a great position within the health system market, it's a large market. And I think we would be very interested in continuing to grow that business if the right opportunities present themselves. We said at the beginning and continue to believe that we will be very selective in any investments we make in the space as we have been to-date. And we will remain opportunistic, that scenario where I think we will be disciplined and selective, but opportunities that could arise, we are in a good position to capture.

Jonathan Hughes -- Raymond James -- Analyst

Are you hoping any international acute care opportunities?

Debra A. Cafaro -- Chairman and Chief Executive Officer

We have looked at acute care opportunities abroad over time, and it obviously depends on the market and the yield after currency and taxes and whether we think it's a good risk adjusted return. But we have looked at opportunities outside the US and quality health systems over time.

Jonathan Hughes -- Raymond James -- Analyst

Okay, that's great. And then -- and then just one more from me. And I realize there were some accounting changes over the past few years, so this is a big cosmetic, but year G&A has gone up a good amount over the past few years while the asset base has remained fairly stable. And I know this is going to be impacted by accounting change again this year. But I was hoping you could maybe steer us to a good maybe growth number on last year's G&A line item, not guidance, but just a suggestion of maybe what we can kind of expect this year. Thanks

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Sure, I'll take that one. G&A in the '18 v '17 really follows the good performance that we had in '18. So it's really a function of incentives. Staffing has been quite stable and we continue to be very lean as we think about it and that's a variable therefore that moves around every year. I would start with inflationary sort of increase. On a normalized base as you point out, adjusted for accounting type impacts inflationary increases '19 v '18.

Jonathan Hughes -- Raymond James -- Analyst

Okay, that's it from me. I'll jump off. Thanks for the time.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thank you. All right. We have time for a few more questions so...

Operator

Our next question comes from Tayo Okusanya of Jefferies. Your line is open.

Tayo Okusanya -- Jefferies & Company -- Analyst

Hi. Yeah. Good morning everyone.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Good morning.

Tayo Okusanya -- Jefferies & Company -- Analyst

Yeah, same thing. Thanks for the additional disclosure. I'm going to give all credit to Bob because Juan just thought it was huge.

Robert F. Probst -- Executive Vice President and Chief Financial Officer

It's all Juan's doing.

Tayo Okusanya -- Jefferies & Company -- Analyst

Anyway I wanted to focus on SHOP a little bit this morning. The first thing is just the RevPOR trend, 1% this quarter, 1.8% last quarter, about 3.1% a year ago. I just wanted to -- could you just talk a little bit just about what's happening with pricing power? I couldn't help but fixate on your commentary about -- for new leases that is going to be a negative mark-to-market there, which seems to fly in the face of some of the data we've seen from NIC.

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Yeah, so, I love this topic, Tayo. I wouldn't focus on the NIC data, it really doesn't look at apples-to-apples, it's not actual rates and it's tough to divine certainly in our opinion. For our data, though, we can see quite clearly the trend and the RevPOR has two components as you know. It has the in-place increases were residents that have been here year-over-year. And that we continue to see very nice pricing power on it. I mentioned north of 5% for those rate letters that just went out, and so that continues to be very encouraging with very few financial move-outs, by the way. What's driving that risk that you point out, rightly in terms of RevPOR over the course of the year, is the releasing spread. That has been in the mid-to-high single digits down versus previous resident and that is a function, of course, of new competition. And so on a blended basis, we point to 2019 in the 1% range for RevPOR. It really reflects those two factors. But it's blend frankly.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thanks Tayo.

Tayo Okusanya -- Jefferies & Company -- Analyst

Okay, thank you very much.

Debra A. Cafaro -- Chairman and Chief Executive Officer

I mean -- go ahead.

Tayo Okusanya -- Jefferies & Company -- Analyst

And then just one other point in regards to just that dividend outlook going into '19. Again when we kind of take a look at your guidance, make all the adjustments to kind of get to FAD, we kind of start getting to kind of like a mid 90%s type FAD dividend payout ratio. And just in light of that, wondering how you guys are thinking about the dividend?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Yeah. Well, thank you for asking. The Board just increased the dividend in December and we feel very confident about our position relative to the dividend at the midpoint. It's in that low 80%s relative to normalized FFO. And as we said, we are committed to returning to growth and confident we can do so.

Tayo Okusanya -- Jefferies & Company -- Analyst

Okay. Thank you.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Daniel Bernstein of Capital One. Your line is open.

Daniel Bernstein -- Capital One Securities -- Analyst

Good morning.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Hi Dan.

Daniel Bernstein -- Capital One Securities -- Analyst

Hey. I think nobody said hi to Juan. So I'll say hi to Juan. I thought I'd say during the Q2 given that he was out of the way, but... maybe next time.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Go ahead. We'll work at that, go ahead.

Daniel Bernstein -- Capital One Securities -- Analyst

I'll just ask one question. So you've accelerated development on the life science side and I was wondering, did you see any potential for synergies between the MOB and life science development platforms given all of those university relationships, most of those universities have some very good hospital systems affiliated with them? Do you see any synergies to accelerate your MOB development as well?

Peter Bulgarelli -- Executive Vice President, Office; President and CEO, Lillibridge Healthcare Services

Yes, it's a great question. So this is Pete Bulgarelli. Thanks for the question, Daniel. It's really a strategic focus for us. I mean there is an incredible overlap between our Research & Innovation portfolio and the opportunities with the MOB and the medical portfolio. And kind of in-between there is the academic medical function as well. So if you think about it typical, many of these universities we're working with, they have life science research, they also have med schools and they have academic medical facilities, and usually are leading research hospital. And so if we look at the opportunities, the cross-selling opportunities and the integration that we can do with those institutions, we see a lot of clear blue water.

Daniel Bernstein -- Capital One Securities -- Analyst

Okay. That's all I have, given it's already 11, 11 o'clock. I'll hop off.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thank you for being considerate. We appreciate it.

Operator

Our next question comes from Michael Carroll of RBC Capital Markets. Your line is open.

Michael Carroll -- RBC Capital Markets -- Analyst

Yeah. Thanks. Bob, I wanted to touch on the $10 million rent adjustment you mentioned in your prepared remarks. Do you have the timing for those reductions and how many tenants that relates to?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Hey, Mike, it's Debbie. It's a handful of tenants and it would be throughout the year.

Michael Carroll -- RBC Capital Markets -- Analyst

And did Ventas receive anything in return, I guess for doing those rent adjustments? And was there any discussion to move that to the management portfolio?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Right. As Bob said, this has not occurred, and so this is a bit of an estimate, our best estimate, albeit regarding our expectations for '19. While we've modeled it and forecasted as just a Triple-Net roll down estimate, as Bob said, there is a whole variety of things that might happen including, as you suggest, a transition of those assets to other operators and the management contract into our asset sales. And so that's -- we expect really for it to be a combination of those things. But the easiest way to think about it, was how we put it in the numbers, which is in Triple-Net.

Michael Carroll -- RBC Capital Markets -- Analyst

Okay, great. And then last question related to the 2019 guidance, does the range include any non-recurring items similar to the Ardent prepayment fee that was recorded in 2Q '18?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

No. Thank you for asking. We do not have fees or payments from tenants as we did last year.

Michael Carroll -- RBC Capital Markets -- Analyst

Great. Thank you.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thank you. All right, we have a couple more to finish strong.

Operator

Our next question comes from Lukas Hartwich of Green Street Advisors. Your line is open.

Lukas Hartwich -- Green Street Advisors -- Analyst

Hi, good morning.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Good morning, Lukas.

Lukas Hartwich -- Green Street Advisors -- Analyst

Hi. I'll just ask one. So, can you remind us what your plans are for the Ardent stake assuming that company does go public?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Well, we have about a $50 million investment in Ardent, and given the quiet period that Ardent's in, I would prefer to defer that discussion and tell another time.

Lukas Hartwich -- Green Street Advisors -- Analyst

Fair enough. All right, thank you.

Operator

Our next question comes from Todd Stender of Wells Fargo. Your line is open.

Todd Stender -- Wells Fargo Securities -- Analyst

Hi, good morning. Thanks for squeezing me in.

Debra A. Cafaro -- Chairman and Chief Executive Officer

We're happy to do it.

Todd Stender -- Wells Fargo Securities -- Analyst

Thank you. So CapEx spend was up in Q4. Just looking at the office segment, it was about 22% of NOI, but more like 12% for the full year. Just I wanted to see what accounted for that spike in Q4. And then maybe what you're budgeting for 2019?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Yeah, Todd, it's Bob. We do see typically in the fourth quarter a ramp on FAD. We saw that again that's true across the portfolio, including our Office. We saw that again this fourth quarter. And then as we look at the guidance for '19 in terms of FAD CapEx, that reflects really some increases from -- in the Office, in particular, from lease up and (inaudible) is a consequence of that, that's the biggest driver.

Todd Stender -- Wells Fargo Securities -- Analyst

And then percentage of NOI, what's the fair number for 2019?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

For which?

Debra A. Cafaro -- Chairman and Chief Executive Officer

For the full year?

Todd Stender -- Wells Fargo Securities -- Analyst

For the full year or just for the Office segment?

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Mid-teens 15% or so.

Todd Stender -- Wells Fargo Securities -- Analyst

Okay, thank you.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thank you. All right. Last one?

Operator

And our last question comes from Michael Mueller of J.P. Morgan. Your line is open.

Michael Mueller -- J.P. Morgan -- Analyst

Thanks. For the $10 million rent reduction that's in 2019, how different is that from the full annualized amount that will carry over into '20?

Debra A. Cafaro -- Chairman and Chief Executive Officer

Again, it depends on when and how it's structured. There could be some potential carryover effect that would make it a little bit larger for '20, but immaterial basically.

Michael Mueller -- J.P. Morgan -- Analyst

Got it. Okay, that was it. Thank you.

Debra A. Cafaro -- Chairman and Chief Executive Officer

All right. Well, thank you. I just want to thank everyone for their attention to Ventas and your interest in our Company. We appreciate it greatly. Our whole businesses continues to be driven by this great demographic demand and need-based diversified resilient long-term cash flows. And our team is really in great shape and we feel good about our relationships with our partners and care providers, our balance sheet, our opportunity for growth externally and our large and growing development pipeline of terrific Research & Innovation assets. So we're feeling good and we look forward to seeing all of you soon. Thank you.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.

Debra A. Cafaro -- Chairman and Chief Executive Officer

Thank you.

Duration: 65 minutes

Call participants:

Juan Sanabria -- Vice President, Investor Relations

Debra A. Cafaro -- Chairman and Chief Executive Officer

Robert F. Probst -- Executive Vice President and Chief Financial Officer

Nick Joseph -- Citi -- Analyst

Joshua Dennerlein -- Bank of America Merrill Lynch -- Analyst

John D. Cobb -- Executive Vice President and Chief Investment Officer

Nicholas Yulico -- Scotiabank -- Analyst

Steve Sakwa -- Evercore ISI -- Analyst

Andrew Rosivach -- Goldman, Sachs & Co. -- Analyst

John Kim -- BMO Capital Markets -- Analyst

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Derek Johnston -- Deutsche Bank -- Analyst

Seth Canetto -- Stifel, Nicolaus & Company -- Analyst

Jonathan Hughes -- Raymond James -- Analyst

Tayo Okusanya -- Jefferies & Company -- Analyst

Daniel Bernstein -- Capital One Securities -- Analyst

Peter Bulgarelli -- Executive Vice President, Office; President and CEO, Lillibridge Healthcare Services

Michael Carroll -- RBC Capital Markets -- Analyst

Lukas Hartwich -- Green Street Advisors -- Analyst

Todd Stender -- Wells Fargo Securities -- Analyst

Michael Mueller -- J.P. Morgan -- Analyst

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