News Details

• Record 2014 Normalized FFO Grows Eight Percent to $4.48 Per Diluted Share
• Total 2014 Investments of $2.4 Billion
• Targeting 2015 Normalized FFO Range of $4.63 to $4.71 Per Diluted Share

CHICAGO--(BUSINESS WIRE)--Feb. 13, 2015-- Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today reported that normalized Funds From Operations (“FFO”) for the year ended December 31, 2014 increased nine percent to $1.3 billion, from $1.2 billion for the comparable 2013 period. Normalized FFO per diluted common share grew eight percent to $4.48 for the year ended December 31, 2014, as compared to $4.14 for the comparable 2013 period. Weighted average diluted shares outstanding for the full year increased to 296.7 million compared to 295.1 million in 2013.

Fourth quarter 2014 normalized FFO increased nine percent to $342.2 million, from $313.6 million for the comparable 2013 period. Normalized FFO per diluted common share of $1.15 grew 8.5 percent in the fourth quarter of 2014 versus $1.06 in the fourth quarter of 2013.

Record Results with Strong Performance in All Three Segments

“Our 2014 record results reflect the strength of our diversified business, with excellent results in our medical office, triple-net lease and seniors housing operating segments, and the positive impact of our value creating investments. We continue to focus on making accretive investments, raising capital efficiently and managing our assets productively, to enhance our leading position in healthcare and senior living real estate,” Ventas Chairman and Chief Executive Officer Debra A. Cafaro said. “We enter 2015 with confidence in our team, business model and momentum. We continue to see and capture opportunities to create additional wealth and value for our shareholders. Our long track record of stewardship of capital, expertise in capital markets and experience in asset management positions us well to continue our long track record of earnings and dividend growth in 2015.”

Net income attributable to common stockholders for the year ended December 31, 2014 was $475.8 million, or $1.60 per diluted common share, including discontinued operations. Net income attributable to common stockholders for the year ended December 31, 2013 was $453.5 million, or $1.54 per diluted common share, including discontinued operations. Net income attributable to common stockholders for the quarter ended December 31, 2014 was $107.2 million, or $0.36 per diluted common share, including discontinued operations. Net income attributable to common stockholders for the quarter ended December 31, 2013 was $108.4 million, or $0.37 per diluted common share, including discontinued operations.

FFO, as defined by the National Association of Real Estate Investment Trusts (NAREIT), for the full-year 2014 was $1.274 billion, or $4.29 per diluted common share. NAREIT FFO for the full-year 2013 was $1.208 billion, or $4.09 per diluted common share. NAREIT FFO per share growth was lower than normalized FFO per share growth for the same period due principally to the exclusion of transaction and re-audit related costs in both periods in normalized FFO, consistent with the Company’s guidance and historical practice.

First Quarter Dividend

Ventas’s Board of Directors declared the second installment of the first quarter 2015 dividend on the Company’s common stock in the amount of $0.5793 per share, payable in cash on March 31, 2015 to stockholders of record on March 6, 2015. On January 27, 2015, Ventas paid the first installment of its first quarter 2015 dividend in the amount of $0.2107 to stockholders of record on January 15, 2015, in connection with the Company’s acquisition of HCT. Together, these two installments total to the Company’s regular quarterly dividend of $0.79 per share and represent a nine percent increase from the dividend in the first quarter of 2014.

2014 Highlights

• Same-store cash net operating income (NOI) growth for the Company’s total portfolio (1,307 assets) was 3.9 percent, expressed in constant currency, for the year ended December 31, 2014 compared to 2013.
• Total seniors housing operating portfolio (SHOP) NOI was $516.2 million, an increase of 15 percent over the comparable 2013 period. Same-store SHOP NOI grew 4.5 percent, expressed in constant currency, for the 217 properties over 2013 results.
• Ventas closed on investments totaling $2.4 billion during 2014, including development and redevelopment investments exceeding $100 million. The first-year average NOI yield for these investments is expected to be over seven percent. The majority of the acquisitions were in seniors housing, loans and medical office buildings (MOBs).
• During 2014, Ventas issued and sold $1.3 billion aggregate principal amount of senior notes with a weighted average interest rate of 3.0 percent and a weighted average maturity of 7.0 years. The issuances were composed of $700 million aggregate principal amount of USD senior notes and CAD notes of 650 million. Ventas issued and sold a total of 3.4 million shares of common stock for aggregate proceeds of $246 million under its “at the market” (ATM) equity offering program in 2014.
• Ventas sold 22 properties and received final repayment on loans receivable for approximately $176 million in aggregate proceeds, representing a yield of ten percent.
• Ventas delivered total shareholder return of 31 percent, and delivered compound annual return to shareholders of 15.4 percent for the ten years ended December 31, 2014.
• Ventas increased its dividend by nine percent, and its dividend has grown at a compound annual growth rate of nine percent over the last ten years.
• The Company made its first investment in the United Kingdom, expanded its presence in the Canadian senior living market, and completed its inaugural senior notes issuance in Canada.
• The Company successfully re-leased or sold (or entered into contracts for sale of) the 108 post-acute assets whose leases with Kindred Healthcare, Inc. expired in 2014. In addition, Ventas and Kindred reached a mutually beneficial agreement on nine assets and on changes to existing leases, which included payment to the Company of $37 million in January 2015.

Recent Developments

• In January 2015, the Company completed its acquisition of 152 healthcare and senior living assets owned by American Realty Capital Healthcare Trust, Inc. (“HCT”) in a stock and cash transaction. The transaction was funded with 28.4 million shares of Ventas common stock, 1.1 million units redeemable for shares of Ventas common stock, cash and the assumption of debt.
• Ventas also closed on additional acquisitions exceeding $300 million year to date at a first year yield of over 7.5 percent.
• In January 2015, Ventas issued and sold $1.1 billion of senior notes with a weighted average interest rate below 3.7 percent and a weighted average maturity of 15 years. The issuances were composed of $900 million aggregate principal amount of USD senior notes and CAD notes of 250 million.
• The Company also issued and sold 3.75 million shares of common stock under its ATM program for aggregate proceeds of $290 million in January.
• The Company’s net debt to Adjusted Pro Forma EBITDA (as defined herein) is expected to approximate 5.7x at the end of the first quarter 2015.
• The Company currently has a strong liquidity position, with approximately $1.5 billion available under its revolving credit facility, as well as $88 million of cash on hand. Ventas’s debt to total capitalization now stands at 31 percent.

2015 Guidance

Ventas currently expects its 2015 NAREIT FFO per diluted share to range between $4.55 and $4.66 and normalized FFO per diluted share to range between $4.63 and $4.71. The Company’s investments closed year to date, including HCT, are included in the guidance.

Same-store cash NOI is forecast to grow 2.5 to 3.5 percent in 2015. The Company’s guidance assumes over $600 million in property dispositions and receipt of loan repayments, expected mostly in the first quarter of 2015, with later year reinvestment of net proceeds. No further investment or disposition activity, other than the capital recycling forecast in the prior sentence, is included in this targeted range. A reconciliation of the Company’s guidance to the Company’s projected GAAP earnings is included in this press release.

FOURTH 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 (866) 318-8616 (or (617) 399-5135 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 (888) 286-8010 (or (617) 801-6888 for international callers), passcode 55461845, beginning at approximately 2:00 p.m. Eastern Time and will remain for 35 days.

Ventas, Inc., an S&P 500 company, is a leading real estate investment trust. Its diverse portfolio of more than 1,600 assets in the United States, Canada and the United Kingdom consists of seniors housing communities, medical office buildings, skilled nursing facilities, hospitals and other properties. 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/financial-information/supplemental-information.

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 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, including investments in different asset types and outside the United States; (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 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 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, 2014 and for the year ending December 31, 2015; (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 or manager, and obligations, including indemnification obligations, the Company may incur in connection with the replacement of an existing tenant or manager; (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, to accurately estimate its costs in fixed fee-for-service projects 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) the Company’s ability to build, maintain and expand its relationships with existing and prospective hospital and health system clients; (v) 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; (w) the impact of market or issuer events on the liquidity or value of the Company’s investments in marketable securities; (x) merger and acquisition 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. Many of these factors are beyond the control of the Company and its management.

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. However, since real estate values historically have risen or fallen with market conditions, many industry investors deem presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For that reason, the Company considers FFO, normalized FFO and FAD to be appropriate measures of operating performance of an equity REIT. In particular, the Company believes that normalized FFO is useful because it allows investors, analysts and Company management to compare the Company’s operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences caused by unanticipated items and other events such as transactions and litigation. In some cases, the Company provides information about identified non-cash components of FFO and normalized FFO because it allows investors, analysts and Company management to assess the impact of those items on the Company’s financial results.

The Company uses the NAREIT definition of FFO. NAREIT defines FFO as net income (computed in accordance with GAAP) excluding gains (or losses) from sales of real estate property, including gain on re-measurement of equity method investments, and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis. The Company defines normalized FFO as FFO excluding the following income and expense items (which may be recurring in nature): (a) merger-related costs and expenses, including amortization of intangibles, transition and integration expenses, and deal costs and expenses, including expenses and recoveries relating to acquisition lawsuits; (b) the impact of any expenses related to asset impairment and valuation allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of the Company’s debt; (c) the non-cash effect of income tax benefits or expenses and derivative transactions that have non-cash mark-to-market impacts on the Company’s income statement; (d) except as specifically stated in the case of guidance, the impact of future acquisitions, divestitures (including pursuant to tenant options to purchase) and capital transactions; (e) the financial impact of contingent consideration, severance-related costs, charitable donations made to the Ventas Charitable Foundation, gains and losses for non-operational foreign currency hedge agreements and changes in the fair value of financial instruments; and (f) expenses related to the re-audit and re-review in 2014 of the Company’s historical financial statements and related matters. FAD represents normalized FFO excluding non-cash components, straight-line rental adjustments and capital expenditures, including tenant allowances and leasing commissions.

FFO, normalized FFO and FAD presented herein may not be comparable to similar measures presented by other real estate companies due to the fact that not all real estate companies use the same definitions. FFO, normalized FFO and FAD should not be considered as alternatives to net income (determined in accordance with GAAP) as indicators of the Company’s financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of the Company’s liquidity, nor are they necessarily indicative of sufficient cash flow to fund all of the Company’s needs. The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, FFO, normalized FFO and FAD should be examined in conjunction with net income as presented elsewhere herein.