News Details

CHICAGO--(BUSINESS WIRE)--Apr. 26, 2019-- Ventas, Inc. (NYSE: VTR) today announced its results for the first quarter ended March 31, 2019.

“Ventas delivered a strong start to 2019, consistent with our expectations. We achieved solid property-level growth from our high quality real estate, with our expanding university-based Research & Innovation portfolio going from strength to strength as we invest in this dynamic business. And with excellent capital markets execution, we further enhanced our robust balance sheet,” said Debra A. Cafaro, Ventas Chairman and CEO.

“Our collaborative, skilled and cohesive team is intently focused on executing on our 2019 strategy and our pivot to growth,” Cafaro added.

First Quarter 2019 Company Performance

• Net income attributable to common stockholders per diluted share for first quarter 2019 was $0.35 compared to $0.22 in the same period in 2018. The year-over-year improvement from 2018 was due principally to lower transactions costs in the current period, and improved results from unconsolidated entities in 2019 due to a non-cash impairment charge to a joint venture, subsequently sold, containing primarily skilled nursing facilities in the first quarter of 2018.
• Reported FFO per share, as defined by the National Association of Real Estate Investment Trusts (“Nareit FFO”) was $0.98 compared to $0.96 in the same period in 2018. The change from 2018 results was largely due to lower transactions costs in the current period.
• Normalized Funds From Operations (“FFO”) per share for first quarter 2019 was $0.99 compared to $1.05 in 2018. The change from 2018 was principally due to the dilutive impact of using the proceeds derived from 2018 loan repayments and asset dispositions to reduce debt and invest in development and redevelopment projects.

First Quarter 2019 Portfolio Performance

• For the first quarter 2019, the Company’s quarterly same-store total property portfolio (1,139 assets) cash net operating income (“NOI”) grew 1.1 percent compared to the same period in 2018. Same-store cash NOI performance by segment for the first quarter 2019 is as follows:

• First quarter year-over-year changes in the Company’s same-store property results, which were in line with our expectations, were driven by:
  • NNN portfolio: Growth was due to in-place lease escalations and fees received in the quarter.
  • SHOP portfolio: The same-store SHOP communities benefitted from strong January rent increases from in place residents, offset by the anticipated impact of continued elevated new community openings in select markets, which affected rate and occupancy. The year-over-year occupancy change in the first quarter was (20) basis points and absorption in the quarter was robust.
  • Office portfolio: Growth was principally due to excellent performance in our university-based Research & Innovation (“R&I”) properties, driven by strong leasing trends and a first quarter termination fee paid by a vacating tenant replaced by Yale University.

First Quarter 2019 and Recent Highlights

• Expanding Research & Innovation in Cambridge Market: In April, Ventas completed a $128 million acquisition of 1030 Massachusetts Avenue, a Class A, LEED Gold, fee simple multi-tenant life science building located in Cambridge, MA. The asset is attractively located adjacent to Harvard University and Massachusetts Institute of Technology. The acquisition complements and enhances the Company’s existing university-based R&I portfolio. The Company expects additional rent growth at the asset, where market rents have increased over 10% per annum since 2015.
• Financial Strength Enhanced by Excellent Capital Markets Execution:
  • Ventas’s financial strength improved further at quarter end, including a sequential improvement to 5.5x in its sector leading net debt to Adjusted Pro Forma EBITDA ratio, and an outstanding fixed charge coverage ratio of 4.5x.
  • The Company currently has robust available liquidity from its cash on hand and existing credit facilities totaling $2.4 billion.
  • During the first quarter:
    • Ventas issued and sold under its “at the market” equity offering program a total of 1.6 million shares of common stock at an average gross issuance price of $64.15 per share, resulting in $100 million in gross proceeds, used to fund the Company’s acquisition of its Cambridge R&I asset.
    • The Company opportunistically issued $400 million of 3.50% Senior Notes due 2024 and $300 million of 4.875% Senior Notes due 2049, proceeds of which were used to retire bonds due 2043 at 5.45% and repay revolving credit facility outstanding balances.
    • Ventas established a $1 billion commercial paper (“CP”) program to cost effectively supplement the Company’s short term working capital capacity. Execution has been excellent with approximately $450 million of CP outstanding.
• Office Excellence: Ventas’s Office portfolio delivered exceptional performance and achievements year to date:
  • Sutter Van Ness MOB Opens in Downtown San Francisco: Ventas’s trophy 239,000 square foot medical office building (“MOB”) development opened in the first quarter of 2019, is currently 83% leased, and is anchored by Sutter Health (Moody’s AA3). Ventas developed this LEED-certified, world-class outpatient facility in partnership with Pacific Medical Buildings (“PMB”).
  • 3675 Market Street in Philadelphia 92% Leased: Ventas signed a 15-year lease with Amicus Therapeutics for 76,000 square feet at this exciting new project developed with Wexford Science & Technology. Amicus, a publicly traded global biotechnology company with a multi-billion dollar market capitalization, selected 3675 Market Street due to its presence in the uCity Square Knowledge Community containing University of Pennsylvania’s world-class genetics research. In March, Drexel’s College of Computing and Informatics (“CCI”) took possession of 51,000 square feet. CCI will serve as a further catalyst for attracting private companies to this market. The property is now 92 percent leased after opening in the fall of 2018.
  • Yale Increases Tenancy in R&I Portfolio: Pursuant to a new 25-year lease, Yale University is taking occupancy of 250,000 square feet at 100 College Street, expanding Ventas’s relationship with Yale, enhancing its tenant credit, extending the weighted average lease term for the building and demonstrating the attractiveness of the asset. Yale intends to use the space to support Yale’s STEM initiatives, including collaboration with the Yale School of Medicine. It is replacing Alexion Pharmaceuticals in the space, at the same rental rates and with no downtime.
  • R&I Development Milestones Achieved:
    • Ventas broke ground in February on the previously announced development at Arizona State University’s (“ASU”) Phoenix Biomedical Campus. This project is 50 percent pre-leased by ASU (Moody’s Aa2) for biomedical-focused academic and research and is expected to open in 2020.
    • Point225, a 196,000 square foot building adjacent to Brown University in Providence, RI is 80 percent pre-leased by tenants including Brown and Johnson & Johnson, and is expected to open in the second half of 2019.
  • R&I Portfolio Recognition: South Street Landing at Brown University continued to garner recognition, earning the 2019 TOBY award for the best historical building in 2019 by BOMA MiddleAtlantic Region, and was named ENR New England’s Best Renovation/Restoration in 2018.
  • MOB Redevelopment 100% Pre-Leased: The Company signed a 66,000 square foot lease with Ascension Hospital affiliate Bay Medical Sacred Heart to occupy 100% of the Ventas owned MOB to be re-built on the campus of Bay Medical Hospital, now wholly owned by Ascension. The MOB, which was damaged by Hurricane Michael in 2018, is expected to open in the second half of 2020. Cash rent will approximate $1.4 million per annum and costs to rebuild are expected to be $24 million, the majority of which has been reimbursed to Ventas.
• Triple Net Portfolio Progress and Update: Ventas continues to expect to grow its NNN same-store cash NOI in 2019 and execute on its previously announced initiatives. Highlights of its completed and anticipated activities with NNN tenants include the following:
  • In 2018, Ventas and Brookdale entered into mutually beneficial agreements (the “Brookdale Agreements”). The companies are making excellent progress in implementing initiatives under the Brookdale Agreements:
    • Ventas has agreed to fund $36 million in capital improvements for approved projects at Ventas assets to maintain or improve their competitive position in the market and improve the quality of the Ventas-Brookdale portfolio. As capital is advanced, the Company will earn incremental rent under the Brookdale-Ventas master lease of over 7 percent per annum.
    • Ventas and Brookdale are marketing a portfolio of approximately 20 senior housing communities for sale. Upon sale of individual communities, if and when they occur, Brookdale will receive a 6.25% rent credit under the Brookdale-Ventas master lease on net proceeds retained by Ventas from the sale. Expected net proceeds on this pool of assets should exceed $120 million.
  • Ventas entered into a five-year lease extension through 2026 with triple net tenant Genesis Healthcare, on identical rent and escalator terms to those in the pre-extended master lease plus a $1.6 million cash fee to Ventas received in the first quarter.
  • With respect to the Company’s triple net lease portfolio, the Company has made significant progress and continues to estimate that it will incur approximately a ($10 million) net impact from a combination of lease modifications and asset transitions. This estimate is consistent with the Company’s previous guidance.

People & Culture Driving Continued Success

• Demonstrated Leadership Excellence and Commitment to Environmental, Social and Governance Principles:
  • Ventas Chairman and CEO, Debra A. Cafaro, was named Chair of the Board of Directors of The Economic Club of Chicago, a 91-year old independent non-partisan organization that fosters connections among Chicago’s leaders and sparks dialogue on important economic and social issues. Cafaro was separately inducted into the ASHA (American Seniors Housing Association) Senior Living Hall of Fame.
  • Ventas was announced as a top 10 constituent in two new green REIT indices, the S&P Dow Jones Green REIT Index and the FTSE EPRA Nareit Green Index.
  • Ventas was featured in The Sustainability Yearbook 2019, a showcase of the world’s best performing companies among industry peers. The yearbook identifies companies strongly positioned to create long-term shareholder value.
  • Ventas ranked in the top five percent in the 2018 CDP Survey on environmental impact of nearly 7,000 participating companies.

First Quarter Dividend

The Company paid its first quarter 2019 dividend of $0.7925 per share on April 12, 2019 to stockholders of record on April 1, 2019.

2019 Guidance Confirmed

Ventas reconfirms its previously stated expectations for 2019 per share net income attributable to common stockholders, Nareit FFO and normalized FFO, and same-store cash NOI growth, all as follows:

Assumptions included within Ventas’s 2019 normalized FFO per share guidance are largely consistent with the Company’s previously disclosed guidance, including NNN lease activity described above and $500 million of mid-year 2019 disposition transactions and receipt of loan repayments in 2019, with proceeds being used to fund approximately $500 million in development and redevelopment projects, focused on accelerating the Company’s exciting university-based R&I development pipeline. These capital recycling activities have near-term impacts on FFO growth in 2019, but will deliver high-quality and accretive long-term cash flow growth. Guidance also includes $0.02 per share in incremental leasing costs from changes in lease accounting standards principally reflected in G&A expenses.

The Company’s 2019 outlook now assumes 362 million weighted average fully-diluted shares. Ventas expects leverage, as measured by net debt to Adjusted Pro Forma EBITDA, to remain stable year-over-year in 2019. Consistent with the Company's prior statements, the Company’s guidance does not contemplate any modification of its lease with Holiday Retirement. No material unannounced investments or capital activity is included in guidance.

A reconciliation of the Company’s 2019 guidance to the Company’s projected GAAP measures is included in this press release. The Company’s 2019 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 2019 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), and the participant passcode is “Ventas.” The call will also be webcast live by NASDAQ OMX and can be accessed at the Company’s website at www.ventasreit.com. A replay of the call will be available at the Company’s website, or by calling (855) 859-2056 (or +1 (404) 537-3406 for international callers), passcode 7352119, beginning on April 26, 2019, at approximately 1:00 p.m. Eastern Time and will remain available for 36 days.

Ventas, Inc., an S&P 500 company, is a leading real estate investment trust. Its diverse portfolio of approximately 1,200 assets in the United States, Canada and the United Kingdom consists of seniors housing communities, medical office buildings, university-based research and innovation centers, inpatient rehabilitation and long-term acute care facilities, and health systems. 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. References to “Ventas” or the “Company” mean Ventas, Inc. and its consolidated subsidiaries unless otherwise expressly noted. More information about Ventas and Lillibridge can be found at www.ventasreit.com and www.lillibridge.com.

The Company routinely announces material information to investors and the marketplace using press releases, Securities and Exchange Commission (“SEC”) filings, public conference calls, webcasts and the Company’s website at www.ventasreit.com/investor-relations. The information that the Company posts to its website may be deemed to be material. Accordingly, the Company encourages investors and others interested in the Company to routinely monitor and review the information that the Company posts on its website, in addition to following the Company’s press releases, SEC filings and public conference calls and webcasts. 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 SEC.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, including the potential phasing out of the London Inter-bank Offered Rate after 2021; (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, 2018 and for the year ending December 31, 2019; (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 damage to the Company’s properties from catastrophic weather and other natural events and the physical effects of climate change; (s) 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; (t) 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; (u) 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; (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 Company’s ability to obtain the financial results expected from its development and redevelopment projects; (x) the impact of market or issuer events on the liquidity or value of the Company’s investments in marketable securities; (y) 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; (z) 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 (aa) 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.

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, FAD and normalized FAD to be appropriate supplemental 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 non-recurring items and other non-operational 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 National Association of Real Estate Investment Trusts (“NAREIT”) definition of FFO. NAREIT defines FFO as net income attributable to common stockholders (computed in accordance with GAAP), excluding gains or losses from sales of real estate property, including gains or losses 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, the non-cash impact of changes to the Company’s executive equity compensation plan, derivative transactions that have non-cash mark-to-market impacts on the Company’s income statement and non-cash charges related to lease terminations; (d) the financial impact of contingent consideration, severance-related costs and charitable donations made to the Ventas Charitable Foundation; (e) gains and losses for non-operational foreign currency hedge agreements and changes in the fair value of financial instruments; (f) gains and losses on non-real estate dispositions and other unusual items related to unconsolidated entities; (g) expenses related to the re-audit and re-review in 2014 of the Company’s historical financial statements and related matters; and (h) net expenses or recoveries related to natural disasters. Normalized FAD represents normalized FFO excluding non-cash components, which include straight-line rental adjustments, and deducting capital expenditures, including certain tenant allowances and leasing commissions. FAD represents normalized FAD after subtracting merger-related expenses, deal costs and re-audit costs and other unusual items related to unconsolidated entities.

FFO, normalized FFO, FAD and normalized FAD presented herein may not be comparable to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. FFO, normalized FFO, FAD and normalized FAD should not be considered as alternatives to net income attributable to common stockholders (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, FAD and normalized FAD should be examined in conjunction with net income attributable to common stockholders as presented elsewhere herein.

The following table illustrates net debt to pro forma earnings before interest, taxes, depreciation and amortization (including non-cash stock-based compensation expense), excluding gains or losses on extinguishment of debt, consolidated joint venture partners’ share of EBITDA, merger-related expenses and deal costs, expenses related to the re-audit and re-review in 2014 of the Company’s historical financial statements, net gains or losses on real estate activity, gains or losses on re-measurement of equity interest upon acquisition, changes in the fair value of financial instruments, unrealized foreign currency gains or losses, net expenses or recoveries related to natural disasters and non-cash charges related to lease terminations, and including the Company’s share of EBITDA from unconsolidated entities and adjustments for other immaterial or identified items (“Adjusted EBITDA”).

The following information considers the pro forma effect on Adjusted EBITDA of the Company’s activity during the three months ended March 31, 2019, as if the transactions had been consummated as of the beginning of the period (“Adjusted Pro Forma EBITDA”).

The Company believes that net debt, Adjusted Pro Forma EBITDA and net debt to Adjusted Pro Forma EBITDA are useful to investors, analysts and Company management because they allow the comparison of the Company’s credit strength between periods and to other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual credit quality.

¹ Totals may not add due to rounding.

The Company considers NOI and same-store cash NOI as important supplemental measures because they allow investors, analysts and the Company’s management to assess its unlevered property-level operating results and to compare its operating results with those of other real estate companies and between periods on a consistent basis. The Company defines NOI as total revenues, less interest and other income, property-level operating expenses and office building services costs. In the case of NOI, cash receipts may differ due to straight-line recognition of certain rental income and the application of other GAAP policies. The Company defines same-store as properties owned, consolidated, operational and reported under a consistent business model (i.e. lease or management contract) for the full period in both comparison periods; provided, however, that the Company may include selected properties that otherwise meet the same-store criteria if they are included in substantially all of, but not a full, period for one or both of the comparison periods, and in the Company's judgment such inclusion provides a more meaningful presentation of its portfolio performance. Same-store excludes assets intended for disposition and for SHOP, those properties that transitioned operators after the start of the prior comparison period, and for office operations, those properties that incur major property-level expenditures to maximize value, increase NOI, maintain a market-competitive position and/or achieve property stabilization. To normalize for exchange rate movements, all same-store cash NOI measures assume constant exchange rates across comparable periods, using the following methodology: the current period’s results are shown in actual reported USD, while prior comparison period’s results are adjusted and converted to USD based on the average exchange rate for the current period.

¹ Represents costs expensed by one operator related to implementation of new software.