Ventas Reports 2017 First Quarter Results
- More than $1 Billion in Excellent Investments
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Increased Liquidity and Improved Pricing On Upsized $3 Billion
Revolving Credit Facility - Attractive Property Level Performance and Cash Flow
-
2017 Guidance Consistent with Previously Announced Company
Expectations
CHICAGO–(BUSINESS WIRE)–$VTR–Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today announced
strong results for the first quarter ended March 31, 2017:
-
Income from continuing operations per diluted common share for the
first quarter 2017 grew 22 percent to $0.44 compared to the same
period in 2016. The increase from the first quarter 2016 was
principally due to strong property performance and lower depreciation
and amortization, partially offset by the impact of dispositions and a
higher share count. -
Normalized Funds From Operations (“FFO”) per diluted common share and
reported FFO per diluted common share, as defined by the National
Association of Real Estate Investment Trusts (“NAREIT FFO”), each
totaled $1.03 for the first quarter 2017. The modest decrease from the
first quarter 2016 for both items was principally due to the same
reasons as described above for income from continuing operations per
diluted common share, excluding the impact of depreciation and
amortization.
Ventas Advantage Fuels Excellent Start to 2017
“The year is off to an excellent start, as we delivered strong results
on the back of attractive property performance in the first quarter,”
said Debra A. Cafaro, Ventas Chairman and Chief Executive Officer.
“These results were achieved while executing on our strategic priorities
of enhancing our liquidity and financial profile, making excellent
investments, increasing our development and redevelopment pipeline and
executing successfully in the capital markets. Notably, we scaled our
leading university-based research and life science platform, adding
state-of-the-art facilities and expanding our partnerships with top
research universities, and funded Ardent’s acquisition of high-quality
acute care hospitals to expand its business to $3 billion in annual
revenues.
“Our highly productive team also successfully increased our revolving
credit facility, expanding its capacity to $3 billion from $2 billion,
improving pricing and extending maturities. Finally, we are also pleased
to confirm our outlook for the year.”
Portfolio Performance
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The Company’s first quarter 2017 same-store total portfolio (1,175
assets) cash NOI growth was 3.9 percent compared to the same period in
2016. Same-store cash NOI growth by segment follows:-
The triple net leased portfolio increased 4.7 percent, driven
principally by in-place lease escalations; -
The seniors housing operating portfolio (“SHOP”) grew 2.9 percent,
driven by growth in high-barrier markets; and -
The medical office building (“MOB”) portfolio rose 3.7 percent,
driven by rate growth and the receipt of lease termination fees in
the quarter.
First Quarter 2017 Highlights
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The Company invested more than $1 billion in the first quarter 2017,
including:-
The approximately $130 million purchase of a high-quality life
science, research and medical complex in Providence, Rhode Island,
consisting principally of a 269,000 square foot historic
renovation of South Street Landing (“SSL”). SSL, which is nearly
complete, includes state-of-the-art medical teaching labs and
simulation facilities. It is 100 percent pre-leased by Brown
University and the Nursing Education Center and is expected to be
fully occupied by late 2017. The Company also acquired other sites
for future development and redevelopment. -
Providing a secured credit facility consisting principally of a
$700 million term loan to fund Ardent Health Services’ (“Ardent”)
acquisition of LHP Hospital Group, making Ardent the second
largest private, for-profit hospital operator in the United States
with $3 billion in annual revenues. The acquired assets have
significant market share, strong margins, excellent payor mix,
significant synergy opportunities and benefit from outstanding
relationships with not-for-profit and academic medical centers. As
part of the transaction, Ardent also received a significant equity
contribution from its majority owner, an affiliate of Equity Group
Investments.
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Ventas committed to funding approximately $80 million of development
and redevelopment projects, including an attractive ground-up life
science development associated with Washington University in St.
Louis. Inclusive of this newly-committed development and the
Providence acquisition, the Company has made follow-on acquisitions or
development project commitments totaling more than $350 million in its
attractive university-centered life science, medical and innovation
center portfolio. -
To fund investments, refinance maturing debt and lengthen the
Company’s weighted average maturity profile, Ventas issued senior
notes with an aggregate principal balance of $800 million and a
current weighted average effective rate of 3.1 percent and a weighted
average maturity of approximately eight years. -
During and immediately following the quarter, the Company sold
properties and received final repayments on loans receivable for
proceeds of approximately $100 million, recognizing gains exceeding
$40 million. -
The Company’s credit profile and financial health were robust in the
first quarter, including:-
21 percent cash flow from operations growth in the first quarter
2017 compared to the first quarter 2016; -
Net Debt to Adjusted Pro Forma EBITDA ratio of 5.9x at quarter
end, a temporary increase until the receipt of anticipated
disposition proceeds in the second half of 2017; -
40 percent total indebtedness to gross asset value at quarter end;
and - 4.6x fixed charge coverage at quarter end.
-
Ventas paid its shareholders a quarterly dividend of $0.775 per share,
a six percent year-over-year increase.
Recent Developments and Updates
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In April, Ventas closed an upsized and extended revolving credit
facility (the “Credit Facility”), increasing its immediate borrowing
capacity to $3 billion (from $2 billion previously) at an improved
pricing spread of 87.5 basis points over LIBOR (compared to its
previous borrowing spread of 100 basis points). The Credit Facility
includes a $750 million “accordion feature” that permits the Company
to expand its borrowing capacity to a total of $3.75 billion. The
Credit Facility initially matures in April 2021 and can be extended by
the Company until April 2022. -
Currently, the Company has $2.7 billion of available borrowing
capacity and cash on hand. -
In April, Ventas repaid $300 million of 1.25 percent senior notes at
maturity. -
The Company continues to expect that it will sell 36 skilled nursing
facilities (“SNFs”) for $700 million (representing a 7.1 percent cash
yield) in the second half of 2017 (the “SNF Sale”), reducing its pro
forma percentage of NOI received from SNFs to one percent of its
aggregate NOI.
2017 Guidance Confirmed
Ventas continues to project 2017 income from continuing operations per
diluted common share to range between $1.72 and $1.78. Consistent with
previously disclosed guidance, the Company expects normalized FFO per
diluted common share to range between $4.12 and $4.18. NAREIT FFO per
diluted common share is expected to range between $4.10 and $4.19, also
consistent with previously disclosed guidance.The Company continues to expect full year 2017 same-store cash NOI
growth to range from 1.5 to 2.5 percent. Segment level same-store cash
NOI growth rates also remain consistent with previous guidance.The Company’s guidance continues to assume completion of approximately
$900 million in strategic dispositions in 2017 (of which $100 million
have closed to date), including the SNF Sale, which would produce a gain
of more than $650 million. 2017 investments included in guidance consist
principally of the $1 billion of investments completed to date.In addition, the Company expects to invest in future growth by funding
approximately $350 million in development and redevelopment projects for
the full year 2017, including attractive new ground-up medical office
and life science developments.Consistent with its practice, the Company’s guidance does not include
any further material investments, dispositions or capital activity. The
2017 outlook assumes approximately 358 million weighted average
fully-diluted shares, with no new equity issuance in 2017. A
reconciliation of the Company’s guidance to the Company’s projected GAAP
measures 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.First Quarter 2017 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 +1 (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 +1 (404) 537-3406 for international
callers), passcode 4581997, 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, inpatient rehabilitation and long-term acute care facilities,
general acute care hospitals and skilled nursing facilities. 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 and effect 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 ended December 31, 2016 and for the year ending
December 31, 2017; (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) March 31, December 31, September 30, June 30, March 31, 2017 2016 2016 2016 2016 Assets Real estate investments: Land and improvements $ 2,123,266 $ 2,089,591 $ 2,089,329 $ 2,041,880 $ 2,060,247 Buildings and improvements 21,869,961 21,516,396 21,551,049 20,272,554 20,395,386 Construction in progress 213,281 210,599 192,848 127,647 119,215 Acquired lease intangibles 1,532,365 1,510,629 1,522,708 1,332,173 1,343,187 25,738,873 25,327,215 25,355,934 23,774,254 23,918,035 Accumulated depreciation and amortization (5,123,144 ) (4,932,461 ) (4,754,532 ) (4,560,504 ) (4,409,554 ) Net real estate property 20,615,729 20,394,754 20,601,402 19,213,750 19,508,481 Secured loans receivable and investments, net 1,398,417 702,021 821,663 1,003,561 1,002,598 Investments in unconsolidated real estate entities 108,976 95,921 97,814 96,952 98,120 Net real estate investments 22,123,122 21,192,696 21,520,879 20,314,263 20,609,199 Cash and cash equivalents 91,284 286,707 89,279 57,322 51,701 Escrow deposits and restricted cash 92,175 80,647 89,521 65,626 76,710 Goodwill 1,033,484 1,033,225 1,043,075 1,043,479 1,044,983 Assets held for sale 61,983 54,961 195,252 195,271 54,263 Other assets 517,283 518,364 488,258 417,511 424,436 Total assets $ 23,919,331 $ 23,166,600 $ 23,426,264 $ 22,093,472 $ 22,261,292 Liabilities and equity Liabilities: Senior notes payable and other debt $ 11,943,733 $ 11,127,326 $ 11,252,327 $ 10,901,131 $ 11,247,730 Accrued interest 78,219 83,762 70,790 80,157 66,988 Accounts payable and other liabilities 946,674 907,928 930,103 735,287 738,327 Liabilities related to assets held for sale 1,389 1,462 77,608 88,967 12,625 Deferred income taxes 294,057 316,641 315,713 320,468 333,354 Total liabilities 13,264,072 12,437,119 12,646,541 12,126,010 12,399,024 Redeemable OP unitholder and noncontrolling interests 171,384 200,728 209,278 217,686 191,739 Commitments and contingencies Equity: Ventas stockholders’ equity: Preferred stock, $1.00 par value; 10,000 shares authorized, unissued — — — — — Common stock, $0.25 par value; 354,863; 354,125; 353,793; 341,055
and 337,486 shares issued at March 31, 2017, December 31, 2016,
September 30, 2016, June 30, 2016 and March 31, 2016, respectively88,698 88,514 88,431 85,246 84,354 Capital in excess of par value 12,944,501 12,917,002 12,870,566 11,961,951 11,758,306 Accumulated other comprehensive loss (53,657 ) (57,534 ) (49,614 ) (44,195 ) (19,932 ) Retained earnings (deficit) (2,564,936 ) (2,487,695 ) (2,420,766 ) (2,313,287 ) (2,208,474 ) Treasury stock, 0; 1; 1; 0 and 1 shares at March 31, 2017, December
31, 2016, September 30, 2016, June 30, 2016 and March 31, 2016,
respectively— (47 ) (78 ) — (59 ) Total Ventas stockholders’ equity 10,414,606 10,460,240 10,488,539 9,689,715 9,614,195 Noncontrolling interests 69,269 68,513 81,906 60,061 56,334 Total equity 10,483,875 10,528,753 10,570,445 9,749,776 9,670,529 Total liabilities and equity $ 23,919,331 $ 23,166,600 $ 23,426,264 $ 22,093,472 $ 22,261,292 CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) For the Three Months Ended March 31, 2017 2016 Revenues Rental income: Triple-net leased $ 209,327 $ 214,487 Office 185,895 144,136 395,222 358,623 Resident fees and services 464,188 463,976 Office building and other services revenue 3,406 7,185 Income from loans and investments 20,146 22,386 Interest and other income 481 119 Total revenues 883,443 852,289 Expenses Interest 108,804 103,273 Depreciation and amortization 217,783 236,387 Property-level operating expenses: Senior living 312,073 312,541 Office 56,914 43,681 368,987 356,222 Office building services costs 738 3,451 General, administrative and professional fees 33,961 31,726 Loss on extinguishment of debt, net 309 314 Merger-related expenses and deal costs 2,056 1,632 Other 1,188 4,168 Total expenses 733,826 737,173 Income before unconsolidated entities, income taxes, discontinued
operations, real estate dispositions and noncontrolling interests149,617 115,116 Income (loss) from unconsolidated entities 3,150 (198 ) Income tax benefit 3,145 8,421 Income from continuing operations 155,912 123,339 Discontinued operations (53 ) (489 ) Gain on real estate dispositions 43,289 26,184 Net income 199,148 149,034 Net income attributable to noncontrolling interests 1,021 54 Net income attributable to common stockholders $ 198,127 $ 148,980 Earnings per common share Basic: Income from continuing operations $ 0.44 $ 0.37 Net income attributable to common stockholders 0.56 0.44 Diluted: Income from continuing operations $ 0.44 $ 0.36 Net income attributable to common stockholders 0.55 0.44 Weighted average shares used in computing earnings per common
shareBasic 354,410 335,559 Diluted 357,572 339,202 Dividends declared per common share $ 0.775 $ 0.73 QUARTERLY CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) For the Quarters Ended March 31, December 31, September 30, June 30, March 31, 2017 2016 2016 2016 2016 Revenues Rental income: Triple-net leased $ 209,327 $ 210,804 $ 210,424 $ 210,119 $ 214,487 Office 185,895 183,846 158,273 144,087 144,136 395,222 394,650 368,697 354,206 358,623 Resident fees and services 464,188 456,919 461,974 464,437 463,976 Office building and other services revenue 3,406 4,064 4,317 5,504 7,185 Income from loans and investments 20,146 19,996 31,566 24,146 22,386 Interest and other income 481 84 562 111 119 Total revenues 883,443 875,713 867,116 848,404 852,289 Expenses Interest 108,804 107,739 105,063 103,665 103,273 Depreciation and amortization 217,783 232,189 208,387 221,961 236,387 Property-level operating expenses: Senior living 312,073 310,303 312,145 307,989 312,541 Office 56,914 55,165 48,972 43,966 43,681 368,987 365,468 361,117 351,955 356,222 Office building services costs 738 1,034 974 1,852 3,451 General, administrative and professional fees 33,961 31,488 31,567 32,094 31,726 Loss (gain) on extinguishment of debt, net 309 (386 ) 383 2,468 314 Merger-related expenses and deal costs 2,056 (438 ) 16,217 7,224 1,632 Other 1,188 1,087 2,430 2,303 4,168 Total expenses 733,826 738,181 726,138 723,522 737,173 Income before unconsolidated entities, income taxes, discontinued
operations, real estate dispositions and noncontrolling interests149,617 137,532 140,978 124,882 115,116 Income (loss) from unconsolidated entities 3,150 2,207 931 1,418 (198 ) Income tax benefit 3,145 2,836 8,537 11,549 8,421 Income from continuing operations 155,912 142,575 150,446 137,849 123,339 Discontinued operations (53 ) (167 ) (118 ) (148 ) (489 ) Gain (loss) on real estate dispositions 43,289 66,424 (144 ) 5,739 26,184 Net income 199,148 208,832 150,184 143,440 149,034 Net income attributable to noncontrolling interests 1,021 1,195 732 278 54 Net income attributable to common stockholders $ 198,127 $ 207,637 $ 149,452 $ 143,162 $ 148,980 Earnings per common share Basic: Income from continuing operations $ 0.44 $ 0.40 $ 0.43 $ 0.41 $ 0.37 Net income attributable to common stockholders 0.56 0.59 0.43 0.42 0.44 Diluted: Income from continuing operations $ 0.44 $ 0.40 $ 0.42 $ 0.40 $ 0.36 Net income attributable to common stockholders 0.55 0.58 0.42 0.42 0.44 Weighted average shares used in computing earnings per common
shareBasic 354,410 353,911 350,274 338,901 335,559 Diluted 357,572 357,435 354,186 342,571 339,202 Contacts
Ventas, Inc.
Ryan K. Shannon
(877) 4-VENTAS -
21 percent cash flow from operations growth in the first quarter
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The approximately $130 million purchase of a high-quality life
-
The triple net leased portfolio increased 4.7 percent, driven
