Ventas Reports 2019 First Quarter Results

CHICAGO–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24VTR&src=ctag” target=”_blank”gt;$VTRlt;/agt;–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:
 
  Same-Store Cash NOI
Q1 2019
Reported Growth
 
Triple-Net (“NNN”) 2.2%
Seniors Housing Operating Portfolio (“SHOP”) (2.2%)
Office 3.8%
Total Company 1.1%
 
  • 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 Middle
      Atlantic 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:

 
FY 2019 Guidance
Per Share
Low     High
 
Net Income Attributable to Common Stockholders $1.23 $1.38
Nareit FFO $3.70 $3.82
Normalized FFO $3.75 $3.85
 
FY 2019 Projected
Same-Store Cash NOI Growth
Low High
 
NNN 0.5% 1.5%
SHOP (3%) 0%
Office 1.5% 2.5%
Total Company 0% 1%
 

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.

         
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
 
March 31, December 31, September 30, June 30, March 31,
2019 2018 2018 2018 2018
 
Assets
Real estate investments:

Land and improvements

$ 2,116,086 $ 2,114,406 $ 2,115,870 $ 2,124,231 $ 2,135,662
Buildings and improvements 22,609,780 22,437,243 22,188,578 22,065,202 22,078,454
Construction in progress 335,773 422,334 395,072 408,313 380,064
Acquired lease intangibles 1,279,490 1,502,955 1,506,269 1,510,698 1,532,223
Operating lease assets 359,025          
26,700,154 26,476,938 26,205,789 26,108,444 26,126,403
Accumulated depreciation and amortization (6,570,557 ) (6,383,281 ) (6,185,155 ) (5,972,774 ) (5,789,422 )
Net real estate property 20,129,597 20,093,657 20,020,634 20,135,670 20,336,981
Secured loans receivable and investments, net 496,344 495,869 527,851 526,553 1,212,519
Investments in unconsolidated real estate entities 48,162   48,378   48,478   101,490   102,544  
Net real estate investments 20,674,103 20,637,904 20,596,963 20,763,713 21,652,044
Cash and cash equivalents 82,514 72,277 86,107 93,684 92,543
Escrow deposits and restricted cash 57,717 59,187 62,440 64,419 71,039
Goodwill 1,050,876 1,050,548 1,045,877 1,034,274 1,035,248
Assets held for sale 5,978 5,454 24,180 15,567 62,534
Other assets 796,909   759,185   782,386   727,477   580,102  
Total assets $ 22,668,097   $ 22,584,555   $ 22,597,953   $ 22,699,134   $ 23,493,510  
 
Liabilities and equity
Liabilities:
Senior notes payable and other debt $ 10,690,176 $ 10,733,699 $ 10,478,455 $ 10,402,897 $ 11,039,812
Accrued interest 81,766 99,667 76,883 93,112 77,764
Operating lease liabilities 214,046
Accounts payable and other liabilities 1,063,707 1,086,030 1,134,898 1,133,902 1,134,570
Liabilities related to assets held for sale 947 205 14,790 896 60,023
Deferred income taxes 205,056   205,219   236,616   240,941   244,742  
Total liabilities 12,255,698 12,124,820 11,941,642 11,871,748 12,556,911
 
Redeemable OP unitholder and noncontrolling interests 206,386 188,141 143,242 149,817 132,555
 
Commitments and contingencies
 
Equity:
Ventas stockholders’ equity:
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued
Common stock, $0.25 par value; 358,387; 356,572; 356,468; 356,412;
and 356,317 shares issued at March 31, 2019, December 31, 2018,
September 30, 2018, June 30, 2018, and March 31, 2018, respectively
89,579 89,125 89,100 89,085 89,062
Capital in excess of par value 13,160,550 13,076,528 13,081,324 13,068,399 13,080,220
Accumulated other comprehensive loss (12,065 ) (19,582 ) (7,947 ) (10,861 ) (14,474 )
Retained earnings (deficit) (3,088,401 ) (2,930,214 ) (2,709,293 ) (2,529,102 ) (2,413,440 )
Treasury stock, 0; 0; 6; 11; and 11 shares at March 31, 2019,
December 31, 2018, September 30, 2018, June 30, 2018, and March 31,
2018, respectively
    (345 ) (573 ) (553 )
Total Ventas stockholders’ equity 10,149,663 10,215,857 10,452,839 10,616,948 10,740,815
Noncontrolling interests 56,350   55,737   60,230   60,621   63,229  
Total equity 10,206,013   10,271,594   10,513,069   10,677,569   10,804,044  
Total liabilities and equity $ 22,668,097   $ 22,584,555   $ 22,597,953   $ 22,699,134   $ 23,493,510  

Contacts

Juan Sanabria
(877) 4-VENTAS

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