Ventas Reports 2016 Third Quarter Results

  • Strong Earnings, Balance Sheet and Liquidity
  • Enhanced Portfolio Through $1.5 Billion Life Science and Innovation
    Real Estate Acquisition Leased by Leading Universities, Academic
    Medical Centers and Research Institutions
  • Commitment to Grow High-Quality Hospital Business
  • Updated and Improved 2016 Guidance

CHICAGO–(BUSINESS WIRE)–$VTR–Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today announced
strong earnings for the third quarter ended September 30, 2016, driven
by the Company’s high-quality healthcare and senior living properties
and accretive investments:

  • Income from continuing operations per diluted common share for the
    third quarter 2016 grew 223 percent to $0.42 compared to the same
    period in 2015. The increase from the third quarter 2015 is
    principally due to accretive investments, improved property
    performance, and lower transaction costs.
  • Normalized Funds From Operations (“FFO”) for the third quarter 2016
    grew 5 percent to $1.03 per diluted common share on a comparable basis
    (“Comparable”), which adjusts all prior periods for the effects of the
    successful spin off (the “Spin-Off”) of Care Capital Properties, Inc.
    (“CCP”) (NYSE: CCP) completed in August 2015.
  • Reported FFO per diluted common share, as defined by the National
    Association of Real Estate Investment Trusts (“NAREIT FFO”), for the
    third quarter 2016 grew 28 percent to $1.00 compared to the same
    period in 2015.

Strong Quarter Demonstrates the Ventas Advantage

“We are delighted to report strong financial performance in the third
quarter, delivered by our excellent people, platforms and properties,”
said Chairman and Chief Executive Officer Debra A. Cafaro. “With
superior earnings growth, outstanding liquidity, financial strength,
terrific capital markets execution and disciplined capital allocation,
the Ventas team continues to deliver on our promise of producing
reliable growth and income from a high-quality diversified portfolio.
The completion of our acquisition of life science and innovation centers
leased by leading universities and our commitment to finance Ardent’s
expansion and build an excellent hospital business further solidify our
position as the premier provider of capital at the intersection of
health care and real estate. We remain confident in our ability to
continue to drive shareholder value.”

Third Quarter Portfolio Performance

Constant currency cash net operating income (“NOI”) growth for the
Company’s quarterly same-store total portfolio (1,184 assets) was 2.4
percent on a reported basis for the third quarter 2016. Reported
quarterly same-store results by segment follow:

  • The seniors housing operating portfolio (“SHOP”) same-store cash NOI
    grew 2.0 percent, fueled by growth in key markets.
  • The triple net leased portfolio same-store cash NOI grew 4.2 percent,
    benefiting from lease escalations.
  • Medical office building (“MOB”) portfolio same-store cash NOI grew 0.2
    percent, in line with expectations.

Third Quarter & Other Highlights

  • In October 2016, the Company announced that it issued a commitment to
    provide secured debt financing in the amount of $700 million to a
    subsidiary of Ardent Health Services (“Ardent”) in connection with
    Ardent’s agreement to acquire LHP Hospital Group. The transaction is
    expected to be accretive and close in the first quarter of 2017,
    pending customary regulatory reviews and approvals.
  • In September 2016, the Company completed its accretive acquisition of
    institutional-quality life science and innovation centers managed by
    Wexford Science & Technology, LLC (“Wexford”) for total consideration
    of $1.5 billion. The acquisition marks Ventas’s entry into the
    attractive life science sector with high-quality real estate leased by
    top universities, academic medical centers and research companies and
    includes a pipeline of attractive near-term development opportunities.
  • During and immediately following the quarter, to fund the Wexford
    acquisition, Ventas raised over $900 million in aggregate gross
    proceeds from the sale of common stock at an average gross price
    exceeding $73 per share through a block equity offering and “at the
    market” equity issuances. Year-to-date, total equity issuances have
    totaled 18.9 million shares and $1.3 billion in aggregate gross
    proceeds.
  • The Company issued $450 million of 3.25 percent 10-year senior notes
    in September, which represented the most attractive 10-year bond
    issuance in the Company’s history.
  • During and immediately following the quarter, the Company sold real
    estate assets and received final repayment on loans receivable for
    aggregate proceeds of $197 million. Year-to-date, the Company has sold
    14 properties and received final repayment on loans receivable for
    aggregate proceeds of $272 million.
  • The Company’s credit profile was excellent at quarter-end, including:

    • 5.8x net debt to adjusted EBITDA ratio, consistent with the prior
      quarter and a 0.3x improvement year-over-year;
    • 39 percent total indebtedness to gross asset value, an improvement
      of one percentage point from the prior quarter and three
      percentage points year-over-year; and
    • 4.7x fixed charge coverage, an improvement of 0.1x from the prior
      quarter and 0.3x year-over-year.
  • The Company currently has an outstanding liquidity position, with $1.8
    billion available under its revolving credit facility and $134 million
    of cash or cash equivalents.

Collaborative Agreements with Sunrise

  • In September 2016, Ventas and Sunrise Senior Living (“Sunrise”)
    reached mutually beneficial agreements that strengthen the decade-long
    relationship of the companies. These new arrangements provide Sunrise
    and its onsite employees with long-term stability, reinforcing their
    focus on caring for seniors, and align the companies behind profitable
    growth. The agreements reduce management fees paid by Ventas to
    Sunrise under existing management contracts, maintain the existing
    term of the contracts and provide Sunrise with incentives for future
    outperformance. Ventas and Sunrise have also entered into a new
    multi-year development pipeline agreement that gives Ventas the option
    to fund certain future Sunrise developments.

Continued Leadership Excellence

  • Ventas Chairman and Chief Executive Officer Debra A. Cafaro was
    recognized by the Harvard Business Review as one of “The
    Best-Performing CEOs in the World.” She is one of 30 CEOs named to the Harvard
    Business Review
     list for three consecutive years and one of only
    two women on this year’s list. Ventas’s financial performance ranked
    in the top 30 of 886 companies globally for Ms. Cafaro’s tenure, which
    exceeds 17 years.
  • Ventas Chairman and Chief Executive Officer Debra A. Cafaro was
    recognized by Modern Healthcare as one of the “100 Most
    Influential People in Healthcare” for 2016. This is the third time Ms.
    Cafaro has received this recognition, demonstrating her commitment to
    and stature in the healthcare industry.

Updated 2016 Guidance

The Company updated and improved its expectations for full year 2016
constant currency cash NOI growth for the 1,044 assets in the full year
same-store pool to now range from 2.5 to 3 percent in 2016, compared to
its previously disclosed guidance of 2 to 3 percent.

Ventas also increased its outlook for 2016 income from continuing
operations per diluted share to now range between $1.51 and $1.63. The
Company expects reported normalized FFO per diluted share to now range
between $4.10 and $4.13, an increase of nearly 3 cents at the midpoint
and now representing 4 to 5 percent per share growth over 2015 on a
Comparable basis. The Company also increased its NAREIT FFO per diluted
share expectations to range between $4.09 and $4.13.

The Company continues to expect to complete approximately $500 million
in total 2016 dispositions; it has already closed $272 million
year-to-date. Consistent with its practice, the Company’s guidance does
not include any further material investments, dispositions or capital
activity. A reconciliation of the Company’s guidance to the Company’s
projected GAAP earnings is included in this press release.

The Company’s guidance is based on a number of other assumptions that
are subject to change and many of which are outside the control of the
Company. If actual results vary from these assumptions, the Company’s
expectations may change. There can be no assurance that the Company will
achieve these results.

Third Quarter Conference Call

Ventas will hold a conference call to discuss this earnings release
today at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The dial-in
number for the conference call is (844) 776-7841 (or (661) 378-9542 for
international callers). The participant passcode is “Ventas.” The
conference call is being webcast live by NASDAQ OMX and can be accessed
at the Company’s website at www.ventasreit.com.
A replay of the webcast will be available following the call online, or
by calling (855) 859-2056 (or (404) 537-3406 for international callers),
passcode 96801614, beginning at approximately 2:00 p.m. Eastern Time and
will remain for 36 days.

Ventas, Inc., an S&P 500 company, is a leading real estate investment
trust. Its diverse portfolio of approximately 1,300 assets in the United
States, Canada and the United Kingdom consists of seniors housing
communities, medical office buildings, life science and innovation
centers, skilled nursing facilities, specialty hospitals and general
acute care hospitals. Through its Lillibridge subsidiary, Ventas
provides management, leasing, marketing, facility development and
advisory services to highly rated hospitals and health systems
throughout the United States. More information about Ventas and
Lillibridge can be found at www.ventasreit.com
and www.lillibridge.com.

Supplemental information regarding the Company can be found on the
Company’s website under the “Investor Relations” section or at www.ventasreit.com/investor-relations/annual-reports—supplemental-information.
A comprehensive listing of the Company’s properties is available at www.ventasreit.com/our-portfolio/properties-by-stateprovince.

This press release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
All
statements regarding the Company’s or its tenants’, operators’,
borrowers’ or managers’ expected future financial condition, results of
operations, cash flows, funds from operations, dividends and dividend
plans, financing opportunities and plans, capital markets transactions,
business strategy, budgets, projected costs, operating metrics, capital
expenditures, competitive positions, acquisitions, investment
opportunities, dispositions, merger or acquisition integration, growth
opportunities, expected lease income, continued qualification as a real
estate investment trust (“REIT”), plans and objectives of management for
future operations and statements that include words such as
“anticipate,” “if,” “believe,” “plan,” “estimate,” “expect,” “intend,”
“may,” “could,” “should,” “will” and other similar expressions are
forward-looking statements.
These forward-looking statements are
inherently uncertain, and actual results may differ from the Company’s
expectations.
The Company does not undertake a duty to update
these forward-looking statements, which speak only as of the date on
which they are made.

The Company’s actual future results and trends may differ materially
from expectations depending on a variety of factors discussed in the
Company’s filings with the Securities and Exchange Commission.
These
factors include without limitation: (a) the ability and willingness of
the Company’s tenants, operators, borrowers, managers and other third
parties to satisfy their obligations under their respective contractual
arrangements with the Company, including, in some cases, their
obligations to indemnify, defend and hold harmless the Company from and
against various claims, litigation and liabilities; (b) the ability of
the Company’s tenants, operators, borrowers and managers to maintain the
financial strength and liquidity necessary to satisfy their respective
obligations and liabilities to third parties, including without
limitation obligations under their existing credit facilities and other
indebtedness; (c) the Company’s success in implementing its business
strategy and the Company’s ability to identify, underwrite, finance,
consummate and integrate diversifying acquisitions and investments; (d)
macroeconomic conditions such as a disruption of or lack of access to
the capital markets, changes in the debt rating on U.S. government
securities, default or delay in payment by the United States of its
obligations, and changes in the federal or state budgets resulting in
the reduction or nonpayment of Medicare or Medicaid reimbursement rates;
(e) the nature and extent of future competition, including new
construction in the markets in which the Company’s seniors housing
communities and medical office buildings (“MOBs”)
are located;
(f) the extent of future or pending healthcare reform and regulation,
including cost containment measures and changes in reimbursement
policies, procedures and rates; (g) increases in the Company’s borrowing
costs as a result of changes in interest rates and other factors; (h)
the ability of the Company’s tenants, operators and managers, as
applicable, to comply with laws, rules and regulations in the operation
of the Company’s properties, to deliver high-quality services, to
attract and retain qualified personnel and to attract residents and
patients; (i) changes in general economic conditions or economic
conditions in the markets in which the Company may, from time to time,
compete, and the effect of those changes on the Company’s revenues,
earnings and funding sources; (j) the Company’s ability to pay down,
refinance, restructure or extend its indebtedness as it becomes due; (k)
the Company’s ability and willingness to maintain its qualification as a
REIT in light of economic, market, legal, tax and other considerations;
(l) final determination of the Company’s taxable net income for the year
ending December 31, 2016; (m) the ability and willingness of the
Company’s tenants to renew their leases with the Company upon expiration
of the leases, the Company’s ability to reposition its properties on the
same or better terms in the event of nonrenewal or in the event the
Company exercises its right to replace an existing tenant, and
obligations, including indemnification obligations, the Company may
incur in connection with the replacement of an existing tenant; (n)
risks associated with the Company’s senior living operating portfolio,
such as factors that can cause volatility in the Company’s operating
income and earnings generated by those properties, including without
limitation national and regional economic conditions, costs of food,
materials, energy, labor and services, employee benefit costs, insurance
costs and professional and general liability claims, and the timely
delivery of accurate property-level financial results for those
properties; (o) changes in exchange rates for any foreign currency in
which the Company may, from time to time, conduct business; (p)
year-over-year changes in the Consumer Price Index or the UK Retail
Price Index and the effect of those changes on the rent escalators
contained in the Company’s leases and the Company’s earnings; (q) the
Company’s ability and the ability of its tenants, operators, borrowers
and managers to obtain and maintain adequate property, liability and
other insurance from reputable, financially stable providers; (r) the
impact of increased operating costs and uninsured professional liability
claims on the Company’s liquidity, financial condition and results of
operations or that of the Company’s tenants, operators, borrowers and
managers, and the ability of the Company and the Company’s tenants,
operators, borrowers and managers to accurately estimate the magnitude
of those claims; (s) risks associated with the Company’s MOB portfolio
and operations, including the Company’s ability to successfully design,
develop and manage MOBs and to retain key personnel; (t) the ability of
the hospitals on or near whose campuses the Company’s MOBs are located
and their affiliated health systems to remain competitive and
financially viable and to attract physicians and physician groups; (u)
risks associated with the Company’s investments in joint ventures and
unconsolidated entities, including its lack of sole decision-making
authority and its reliance on its joint venture partners’ financial
condition; (v) the Company’s ability to obtain the financial results
expected from its development and redevelopment projects; (w) the impact
of market or issuer events on the liquidity or value of the Company’s
investments in marketable securities; (x) consolidation activity in the
seniors housing and healthcare industries resulting in a change of
control of, or a competitor’s investment in, one or more of the
Company’s tenants, operators, borrowers or managers or significant
changes in the senior management of the Company’s tenants, operators,
borrowers or managers; (y) the impact of litigation or any financial,
accounting, legal or regulatory issues that may affect the Company or
its tenants, operators, borrowers or managers; and (z) changes in
accounting principles, or their application or interpretation, and the
Company’s ability to make estimates and the assumptions underlying the
estimates, which could have an effect on the Company’s earnings.

 
 
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
           
September 30, June 30, March 31, December 31, September 30,
2016   2016 2016 2015 2015
 
Assets
Real estate investments:
Land and improvements $ 2,089,329 $ 2,041,880 $ 2,060,247 $ 2,056,428 $ 2,068,467
Buildings and improvements 21,551,049 20,272,554 20,395,386 20,309,599 20,220,624
Construction in progress 192,848 127,647 119,215 92,005 124,381
Acquired lease intangibles 1,522,708     1,332,173   1,343,187   1,344,422   1,347,493  
25,355,934 23,774,254 23,918,035 23,802,454 23,760,965
Accumulated depreciation and amortization (4,754,532 )   (4,560,504 ) (4,409,554 ) (4,177,234 ) (3,972,544 )
Net real estate property 20,601,402 19,213,750 19,508,481 19,625,220 19,788,421
Secured loans receivable and investments, net 821,663 1,003,561 1,002,598 857,112 766,707
Investments in unconsolidated real estate entities 97,814     96,952   98,120   95,707   96,208  
Net real estate investments 21,520,879 20,314,263 20,609,199 20,578,039 20,651,336
Cash and cash equivalents 89,279 57,322 51,701 53,023 65,231
Escrow deposits and restricted cash 89,521 65,626 76,710 77,896 74,491
Goodwill 1,043,075 1,043,479 1,044,983 1,047,497 1,052,321
Assets held for sale 195,252 195,271 54,263 93,060 152,014
Other assets 488,258     417,511   424,436   412,403   418,584  
Total assets $ 23,426,264     $ 22,093,472   $ 22,261,292   $ 22,261,918   $ 22,413,977  
 
Liabilities and equity
Liabilities:
Senior notes payable and other debt $ 11,252,327 $ 10,901,131 $ 11,247,730 $ 11,206,996 $ 11,284,957
Accrued interest 70,790 80,157 66,988 80,864 67,440
Accounts payable and other liabilities 930,103 735,287 738,327 779,380 791,556
Liabilities related to assets held for sale 77,608 88,967 12,625 34,340 48,860
Deferred income taxes 315,713     320,468   333,354   338,382   352,658  
Total liabilities 12,646,541 12,126,010 12,399,024 12,439,962 12,545,471
 
Redeemable OP unitholder and noncontrolling interests 209,278 217,686 191,739 196,529 198,832
 
Commitments and contingencies
 
Equity:
Ventas stockholders’ equity:
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued
Common stock, $0.25 par value; 353,793; 341,055; 337,486; 334,386
and 333,027 shares issued at September 30, 2016, June 30, 2016,
March 31, 2016, December 31, 2015 and September 30, 2015,
respectively
88,431 85,246 84,354 83,579 83,238
Capital in excess of par value 12,870,566 11,961,951 11,758,306 11,602,838 11,523,312
Accumulated other comprehensive loss (49,614 ) (44,195 ) (19,932 ) (7,565 ) (592 )
Retained earnings (deficit) (2,420,766 ) (2,313,287 ) (2,208,474 ) (2,111,958 ) (1,992,848 )
Treasury stock, 1; 0; 1; 44 and 61 shares at September 30, 2016,
June 30, 2016, March 31, 2016, December 31, 2015 and September 30,
2015, respectively
(78 )     (59 ) (2,567 ) (3,675 )
Total Ventas stockholders’ equity 10,488,539 9,689,715 9,614,195 9,564,327 9,609,435
Noncontrolling interest 81,906     60,061   56,334   61,100   60,239  
Total equity 10,570,445     9,749,776   9,670,529   9,625,427   9,669,674  
Total liabilities and equity $ 23,426,264     $ 22,093,472   $ 22,261,292   $ 22,261,918   $ 22,413,977  
 
 
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
         
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Revenues:
Rental income:
Triple-net leased $ 210,424 $ 201,028 $ 635,030 $ 571,591
Office 158,273   142,755   446,496   420,287  
368,697 343,783 1,081,526 991,878
Resident fees and services 461,974 454,825 1,390,387 1,356,384
Office building and other services revenue 4,317 10,000 17,006 29,951
Income from loans and investments 31,566 18,924 78,098 66,192
Interest and other income 562   74   792   719  
Total revenues 867,116 827,606 2,567,809 2,445,124
Expenses:
Interest 105,063 97,135 312,001 263,422
Depreciation and amortization 208,387 226,332 666,735 657,262
Property-level operating expenses:
Senior living 312,145 304,540 932,675 902,154
Office 48,972   43,305   136,619   129,152  
361,117 347,845 1,069,294 1,031,306
Office building services costs 974 6,416 6,277 19,098
General, administrative and professional fees 31,567 32,114 95,387 100,399
Loss on extinguishment of debt, net 383 15,331 3,165 14,897
Merger-related expenses and deal costs 16,217 62,145 25,073 105,023
Other 2,430   4,795   8,901   13,948  
Total expenses 726,138   792,113   2,186,833   2,205,355  
Income before unconsolidated entities, income taxes, discontinued
operations, real estate dispositions and noncontrolling interest
140,978 35,493 380,976 239,769
Income (loss) from unconsolidated entities 931 (955 ) 2,151 (1,197 )
Income tax benefit 8,537   10,697   28,507   27,736  
Income from continuing operations 150,446 45,235 411,634 266,308
Discontinued operations (118 ) (22,383 ) (755 ) 13,434
(Loss) gain on real estate dispositions (144 ) 265   31,779   14,420  
Net income 150,184 23,117 442,658 294,162
Net income attributable to noncontrolling interest 732   265   1,064   1,047  
Net income attributable to common stockholders $ 149,452   $ 22,852   $ 441,594   $ 293,115  
Earnings per common share:
Basic:
Income from continuing operations attributable to common
stockholders, including real estate dispositions
$ 0.43 $ 0.14 $ 1.29 $ 0.85
Discontinued operations (0.00 ) (0.07 ) (0.00 ) 0.04  
Net income attributable to common stockholders $ 0.43   $ 0.07   $ 1.29   $ 0.89  
Diluted:
Income from continuing operations attributable to common
stockholders, including real estate dispositions
$ 0.42 $ 0.14 $ 1.28 $ 0.84
Discontinued operations (0.00 ) (0.07 ) (0.00 ) 0.04  
Net income attributable to common stockholders $ 0.42   $ 0.07   $ 1.28   $ 0.88  
 
Weighted average shares used in computing earnings per common
share:
Basic 350,274 332,491 341,610 329,440
Diluted 354,186 336,338 345,352 333,210
 
Dividends declared per common share $ 0.73 $ 0.73 $ 2.19 $ 2.31

Contacts

Ventas, Inc.
Ryan K. Shannon
(877) 4-VENTAS

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