- Record 2015 First Quarter Normalized
FFO Grows Eight Percent to $1.18 Per Diluted Share
- Total 2015 First Quarter Investments
Exceed $3.5 Billion
- Increases 2015 Normalized FFO
Guidance to $4.67 to $4.75 Per Diluted Share
Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today
reported that normalized Funds From Operations (“FFO”) for the
quarter ended March 31, 2015 increased 20 percent to $387.5
million, from $323.4 million for the comparable 2014 period.
Normalized FFO per diluted common share grew eight percent to $1.18
for the quarter ended March 31, 2015, as compared to $1.09 for the
comparable 2014 period. Weighted average diluted shares outstanding
for the first quarter of 2015 increased to 329.2 million, compared
to 296.2 million in 2014.
Record Results, Value Creating
Acquisitions and Innovative Transactions
“Once again, we are pleased to report record results, in line
with our expectations, driven by accretive acquisitions,
well-executed capital markets transactions and active asset
management of our diverse, high-quality portfolio,” Ventas Chairman
and Chief Executive Officer Debra A. Cafaro said. “Our recently
announced spin-off of most of our skilled nursing portfolio into a
pure-play REIT and our pending Ardent hospital acquisition will
create two focused higher growth companies and enhance our leading
position in healthcare and senior living real estate.”
Net income attributable to common stockholders for the quarter
ended March 31, 2015 was $120.4 million, or $0.37 per diluted
common share. Net income attributable to common stockholders for
the quarter ended March 31, 2014 was $121.0 million, or $0.41 per
diluted common share. Net income attributable to common
stockholders for the quarter ended December 31, 2014 was $107.2
million, or $0.36 per diluted common share.
FFO, as defined by the National Association of Real Estate
Investment Trusts (“NAREIT”), for the first quarter of 2015 was
$358.8 million, or $1.09 per diluted common share. NAREIT FFO for
the first quarter of 2014 was $309.8 million, or $1.05 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 costs in both periods in normalized FFO,
consistent with the Company’s guidance and historical practice.
First Quarter 2015 Highlights
- Same-store cash net operating income
(“NOI”) growth for the Company’s total portfolio (1,344 assets) was
3.2 percent, expressed in constant currency, for the quarter ended
March 31, 2015 compared to the same period in 2014.
- Total seniors housing operating
portfolio (“SHOP”) NOI was $148.6 million, an increase of 21
percent over the comparable 2014 period. Same-store SHOP NOI grew
0.9 percent, expressed in constant currency, for the 234 same-store
properties over first quarter 2014 results. The year earlier period
benefited from $2.2 million in real estate tax credits; without
such credit, same-store NOI growth would have been 2.7%.
- In January 2015, the Company completed
its previously announced 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 made investments totaling $3.6
billion during the first quarter of 2015, including five care homes
in the U.K., twelve skilled nursing facilities and development and
redevelopment fundings approximating $33.5 million.
- 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.
- During the first quarter of 2015,
Ventas issued and sold a total of 3.8 million shares of common
stock for aggregate proceeds of approximately $290 million (before
sales commissions) under its “at the market” (“ATM”) equity
offering program. Ventas replaced its expiring shelf registration
statement during the quarter and in conjunction therewith replaced
its prior ATM program with a new ATM program. The Company has not
issued any shares under the new ATM program.
- Year-to-date, Ventas has sold 45
properties and received final repayment on loans receivable for
approximately $474 million in aggregate proceeds. The GAAP yield on
the dispositions and loan repayments was seven percent.
Recent Developments
- In April 2015, Ventas announced its
plan to spin off (the “Spin-Off”) most of its skilled nursing
facility (“SNF”) portfolio into an independent, publicly traded
REIT named Care Capital Properties, Inc. (“CCP”). The transaction
is expected to be completed in the second half of 2015 and is
intended to qualify as a tax-free distribution to Ventas
shareholders. CCP filed its Form 10 registration statement relating
to the Spin-Off with the Securities and Exchange Commission on
April 23, 2015.
- Ventas also announced in April 2015 its
plan to acquire privately-owned Ardent Medical Services, Inc. (with
its affiliates, “Ardent Health Services”), one of the ten largest
for-profit hospital companies in the U.S. The accretive
transaction, which is expected to close mid-year 2015, will also
consist of (a) a buy-out of a minority partner interest for
incremental investment, (b) the separation of Ardent Health
Services’ hospital operations from its owned real estate and (c)
the sale of these hospital operations to one or more newly formed
entities (collectively, “Ardent”), to be owned by current
management of Ardent Health Services, other equity sources, and up
to 9.9 percent by Ventas. Ventas and Ardent will enter into
pre-agreed long-term triple-net leases with an expected going in
cash yield exceeding 7 percent on a projected $1.4 billion net real
estate investment value. The transaction is subject to the
satisfaction of certain specified closing conditions, including
receipt of regulatory approvals.
- The Company’s net debt to Adjusted Pro
Forma EBITDA (as defined herein) at March 31, 2015 is 5.7x. Current
debt-to-enterprise value now stands at 32 percent.
- The Company currently has a strong
liquidity position, with approximately $1.7 billion available under
its revolving credit facility, as well as $71 million of cash on
hand.
- The Company paid a dividend of $0.79
per share during the first quarter, in two installments, a nine
percent increase over the first quarter of 2014.
Increasing 2015 Normalized FFO
Guidance
Ventas currently expects its 2015 normalized FFO per diluted
share to increase to a range between $4.67 and $4.75. This updated
guidance range represents four to six percent growth in normalized
FFO per share over 2014. Second quarter 2015 normalized FFO per
diluted share growth is expected to be below this full-year growth
range due to timing of dispositions, reinvestments and fee income.
Ventas currently expects its 2015 NAREIT FFO per diluted share to
range between $4.47 and $4.59, due principally to deal costs
related to its investment activity.
The Company’s expectations include its pending acquisition of
Ardent Health Services, funded on a leverage neutral basis, upon
the terms and timing discussed above. This guidance does not take
into account any impact from the Spin-Off of CCP. The Company’s
guidance assumes about $600 million in property dispositions and
receipt of loan repayments, substantially all of which were
completed and received in the first quarter of 2015, with mid-year
reinvestment of net proceeds into the Ardent acquisition. No
further investment or disposition activity is included in the
Company’s guidance range.
Same-store cash NOI is forecast to grow 2.5 to 3.5 percent in
2015, which is consistent with previous guidance.
A reconciliation of the Company’s guidance to the Company’s
projected GAAP earnings is included in this press release.
FIRST 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) 700-6293 (or
(617) 213-8835 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 31511307, beginning at approximately 2:00 p.m. Eastern
Time and will remain available 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.
A comprehensive listing of the Company’s properties is available at
www.ventasreit.com/our-portfolio/properties-by-location.
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. These statements include, but are not limited to,
statements regarding the expected timing of the completion of the
proposed transaction with Ardent Health Services and the Spin-Off,
the benefits of the proposed transaction with Ardent Health
Services and the Spin-Off, including future financial and operating
results, statements regarding plans, objectives, and expectations
relating to the proposed transaction with Ardent Health Services
and the Spin-Off and other statements that are not historical
facts. In addition, 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, 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 medical office buildings
(“MOBs”) are located; (f) the extent of future or pending
healthcare reform and regulation, including cost containment
measures and changes in reimbursement policies, procedures and
rates; (g) increases in the Company’s borrowing costs as a result
of changes in interest rates and other factors; (h) the ability of
the Company’s 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; (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; (aa) the inability to complete the acquisition
of Ardent Health Services and the separation and sale of Ardent
Health Services’ hospital operations on terms acceptable to Ventas
or at all; (bb) the failure to satisfy any conditions to completion
of the Ardent Health Services transaction on terms acceptable to
Ventas or at all; (cc) the occurrence of any event, change or other
circumstances that could give rise to the termination of the Ardent
Health Services purchase agreement or any other agreement relating
to the transaction; (dd) the risk that the expected benefits of the
Ardent Health Services transaction, including financial results,
may not be fully realized or may take longer to realize than
expected; (ee) risks related to disruption of management’s
attention from ongoing business operations due to the proposed
Ardent Health Services transaction; (ff) the effect of the
announcement of the proposed Ardent Health Services transaction on
Ventas’s or Ardent Health Services’ relationships with their
respective customers, tenants, lenders, operating results and
businesses generally; (gg) uncertainties as to the completion and
timing of the Spin-Off; (hh) the failure to satisfy any conditions
to complete the Spin-Off, (ii) the expected tax treatment of the
Spin-Off, (jj) the inability to obtain certain third party consents
required to transfer certain properties in connection with the
Spin-Off; and (kk) the impact of the Spin-Off on the businesses of
Ventas and CCP. Many of these factors are beyond the control of the
Company and its management.
CONSOLIDATED BALANCE SHEETS As of March 31, 2015,
December 31, 2014, September 30, 2014, June 30, 2014 and March 31,
2014 (In thousands, except per share amounts)
March 31, December 31,
September 30, June 30, March 31, 2015
2014 2014 2014 2014
Assets Real estate investments: Land and improvements $
2,252,402 $ 1,956,128 $ 1,937,888 $ 1,848,922 $ 1,867,146 Buildings
and improvements 21,933,742 19,895,043 19,664,973 18,591,786
18,658,616 Construction in progress 134,195 120,123 116,975 93,629
71,862 Acquired lease intangibles 1,300,654 1,039,651
1,039,949 1,009,474 1,014,711 25,620,993
23,010,945 22,759,785 21,543,811 21,612,335 Accumulated
depreciation and amortization (4,202,334 ) (4,025,386 ) (3,833,974
) (3,657,541 ) (3,515,868 ) Net real estate property 21,418,659
18,985,559 18,925,811 17,886,270 18,096,467 Secured loans
receivable and investments, net 773,773 829,756 407,551 414,051
376,074 Investments in unconsolidated entities 95,147 91,872
88,175 89,423 90,929 Net real estate
investments 22,287,579 19,907,187 19,421,537 18,389,744 18,563,470
Cash and cash equivalents 120,225 55,348 64,595 86,635 59,791
Escrow deposits and restricted cash 223,772 71,771 78,746 75,514
76,110 Deferred financing costs, net 71,386 60,328 64,898 63,399
59,726 Other assets 1,736,909 1,131,537 1,021,389
1,175,494 943,671
Total assets $
24,439,871 $ 21,226,171 $ 20,651,165 $
19,790,786 $ 19,702,768
Liabilities and
equity Liabilities: Senior notes payable and other debt $
11,603,925 $ 10,888,092 $ 10,469,106 $ 9,602,439 $ 9,481,051
Accrued interest 77,359 62,097 69,112 56,722 61,083 Accounts
payable and other liabilities 1,016,592 1,005,232 965,240 975,282
938,098 Deferred income taxes 371,785 344,337 361,454
256,392 252,499 Total liabilities 13,069,661
12,299,758 11,864,912 10,890,835 10,732,731 Redeemable OP
unitholder and noncontrolling interests 257,246 172,016 163,080
169,292 160,115 Commitments and contingencies Equity:
Ventas stockholders' equity: Preferred stock, $1.00 par value;
10,000 shares authorized, unissued — — — — — Common stock, $0.25
par value; 330,913; 298,478; 294,359; 294,358; and 294,346 shares
issued at March 31, 2015, December 31, 2014, September 30, 2014,
June 30, 2014 and March 31, 2014, respectively 82,718 74,656 73,603
73,602 73,599 Capital in excess of par value 12,616,056 10,119,306
9,859,490 9,849,301 9,858,733 Accumulated other comprehensive
income 4,357 13,121 16,156 26,255 18,464 Retained earnings
(deficit) (1,660,856 ) (1,526,388 ) (1,398,378 ) (1,294,048 )
(1,218,967 ) Treasury stock, 32; 7; 32; 0; and 3 shares at March
31, 2015, December 31, 2014, September 30, 2014, June 30, 2014 and
March 31, 2014, respectively (2,385 ) (511 ) (2,075 ) — (162
) Total Ventas stockholders' equity 11,039,890 8,680,184 8,548,796
8,655,110 8,731,667 Noncontrolling interest 73,074 74,213
74,377 75,549 78,255 Total equity
11,112,964 8,754,397 8,623,173 8,730,659
8,809,922
Total liabilities and equity $
24,439,871 $ 21,226,171 $ 20,651,165 $
19,790,786 $ 19,702,768
CONSOLIDATED
STATEMENTS OF INCOME For the three months ended March 31,
2015 and 2014 (In thousands, except per share amounts)
For the Three Months Ended March 31,
2015 2014 Revenues: Rental income: Triple-net
leased $ 266,206 $ 237,846 Medical office buildings 136,990
115,223 403,196 353,069 Resident fees and services 446,914
371,061 Medical office building and other services revenue 10,543
6,300 Income from loans and investments 22,899 10,767 Interest and
other income 472 273 Total revenues 884,024 741,470
Expenses: Interest 106,590 87,841 Depreciation and
amortization 247,441 193,594 Property-level operating expenses:
Senior living 298,362 248,295 Medical office buildings 42,349
39,345 340,711 287,640 Medical office building
services costs 6,918 3,371 General, administrative and professional
fees 34,330 32,866 Loss (gain) on extinguishment of debt, net 21
(259 ) Merger-related expenses and deal costs 35,172 10,760 Other
5,296 5,229 Total expenses 776,479 621,042
Income before (loss) income from unconsolidated entities,
income taxes, discontinued operations, real estate dispositions and
noncontrolling interest 107,545 120,428 (Loss) income from
unconsolidated entities (251 ) 248 Income tax benefit (expense)
7,250 (3,433 ) Income from continuing operations 114,544
117,243 Discontinued operations (423 ) 3,031 Gain on real estate
dispositions 6,686 1,000 Net income 120,807 121,274
Net income attributable to noncontrolling interest 365 227
Net income attributable to common stockholders $ 120,442
$ 121,047
Earnings per common share: Basic:
Income from continuing operations attributable to common
stockholders, including real estate dispositions $ 0.37 $ 0.40
Discontinued operations (0.00 ) 0.01 Net income attributable
to common stockholders $ 0.37 $ 0.41 Diluted: Income
from continuing operations attributable to common stockholders,
including real estate dispositions $ 0.37 $ 0.40 Discontinued
operations (0.00 ) 0.01 Net income attributable to common
stockholders $ 0.37 $ 0.41
Weighted average
shares used in computing earnings per common share: Basic
325,454 293,875 Diluted 329,203 296,245 Dividends declared
per common share $ 0.79 $ 0.725
QUARTERLY CONSOLIDATED
STATEMENTS OF INCOME (In thousands, except per share
amounts) 2015 First
2014 Quarters Quarter Fourth Third
Second First Revenues: Rental income:
Triple-net leased $ 266,206 $ 245,599 $ 244,206 $ 242,726 $ 237,846
Medical office buildings 136,990 116,907 116,598
114,890 115,223 403,196 362,506 360,804
357,616 353,069 Resident fees and services 446,914 411,170 396,247
374,473 371,061 Medical office building and other services revenue
10,543 11,124 7,573 4,367 6,300 Income from loans and investments
22,899 15,734 14,043 14,625 10,767 Interest and other income 472
3,453 368 173 273 Total revenues
884,024 803,987 779,035 751,254 741,470
Expenses:
Interest 106,590 99,031 98,469 91,501 87,841 Depreciation and
amortization 247,441 241,275 201,224 190,818 193,594 Property-level
operating expenses: Senior living 298,362 273,563 265,274 249,424
248,295 Medical office buildings 42,349 38,715 41,147
39,335 39,345 340,711 312,278 306,421 288,759
287,640 Medical office building services costs 6,918 7,527 4,568
1,626 3,371 General, administrative and professional fees 34,330
28,108 29,466 31,306 32,866 Loss (gain) on extinguishment of debt,
net 21 485 2,414 2,924 (259 ) Merger-related expenses and deal
costs 35,172 7,943 16,749 9,599 10,760 Other 5,296 13,604
15,229 4,863 5,229 Total expenses
776,479 710,251 674,540 621,396 621,042
Income before (loss) income from unconsolidated
entities, income taxes, discontinued operations, real estate
dispositions and noncontrolling interest 107,545 93,736 104,495
129,858 120,428 (Loss) income from unconsolidated entities (251 )
(688 ) (47 ) 348 248 Income tax benefit (expense) 7,250
13,552 1,887 (3,274 ) (3,433 ) Income from continuing
operations 114,544 106,600 106,335 126,932 117,243 Discontinued
operations (423 ) (411 ) (259 ) (255 ) 3,031 Gain on real estate
dispositions 6,686 1,456 3,625 11,889
1,000 Net income 120,807 107,645 109,701 138,566 121,274 Net
income attributable to noncontrolling interest 365 455
569 168 227 Net income attributable to
common stockholders $ 120,442 $ 107,190 $ 109,132
$ 138,398 $ 121,047
Earnings per
common share: Basic: Income from continuing operations
attributable to common stockholders, including real estate
dispositions $ 0.37 $ 0.36 $ 0.37 $ 0.47 $ 0.40 Discontinued
operations (0.00 ) (0.00 ) (0.00 ) (0.00 ) 0.01 Net income
attributable to common stockholders $ 0.37 $ 0.36 $
0.37 $ 0.47 $ 0.41 Diluted: Income from
continuing operations attributable to common stockholders,
including real estate dispositions $ 0.37 $ 0.36 $ 0.37 $ 0.47 $
0.40 Discontinued operations (0.00 ) (0.00 ) (0.00 ) (0.00 ) 0.01
Net income attributable to common stockholders $ 0.37
$ 0.36 $ 0.37 $ 0.47 $ 0.41
Weighted average shares used in computing earnings per common
share: Basic 325,454 294,810 294,030 293,988 293,875 Diluted
329,203 297,480 296,495 296,504 296,245
CONSOLIDATED
STATEMENTS OF CASH FLOWS For the three months ended March
31, 2015 and 2014 (In thousands) 2015
2014 Cash flows from operating activities: Net income
$ 120,807 $ 121,274 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
(including amounts in discontinued operations) 247,453 193,876
Amortization of deferred revenue and lease intangibles, net (6,603
) (5,383 ) Other non-cash amortization (519 ) (1,965 ) Stock-based
compensation 6,307 6,044 Straight-lining of rental income, net
(8,679 ) (7,914 ) Loss (gain) on extinguishment of debt, net 21
(259 ) Gain on real estate dispositions (including amounts in
discontinued operations) (6,686 ) (2,437 ) Income tax (benefit)
expense (7,850 ) 3,433 Loss (income) from unconsolidated entities
251 (248 ) Other 2,860 3,076 Changes in operating assets and
liabilities: Decrease in other assets 21,073 6,241 Increase in
accrued interest 15,792 6,753 Decrease in accounts payable and
other liabilities (40,058 ) (38,070 ) Net cash provided by
operating activities 344,169 284,421 Cash flows from investing
activities: Net investment in real estate property (1,072,539 )
(181,866 ) Investment in loans receivable and other (39,573 )
(1,192 ) Proceeds from real estate disposals 166,341 26,150
Proceeds from loans receivable 92,056 1,163 Purchase of marketable
securities — (25,000 ) Funds held in escrow for future development
expenditures 4,003 2,602 Development project expenditures (33,467 )
(23,948 ) Capital expenditures (21,171 ) (16,134 ) Other (4,180 )
(125 )
Net cash used in investing activities
(908,530 ) (218,350 ) Cash flows from financing activities: Net
change in borrowings under credit facility (452,897 ) 181,754
Proceeds from debt 1,092,833 — Repayment of debt (24,647 ) (67,773
) Purchase of noncontrolling interest (2,660 ) — Payment of
deferred financing costs (14,435 ) (167 ) Issuance of common stock,
net 285,327 — Cash distribution to common stockholders (254,910 )
(213,473 ) Cash distribution to redeemable OP unitholders (2,365 )
(1,402 ) Purchases of redeemable OP units (569 ) — Distributions to
noncontrolling interest (1,822 ) (2,237 ) Other 5,690 1,641
Net cash provided by (used in) financing
activities
629,545 (101,657 ) Net increase (decrease) in cash and cash
equivalents 65,184 (35,586 ) Effect of foreign currency translation
on cash and cash equivalents (307 ) 561 Cash and cash equivalents
at beginning of period 55,348 94,816 Cash and cash
equivalents at end of period $ 120,225 $ 59,791
Supplemental schedule of non-cash activities: Assets and
liabilities assumed from acquisitions: Real estate investments $
2,542,829 $ 2,952 Other assets acquired 16,711 — Debt assumed
177,857 — Other liabilities 45,736 2,952 Deferred income tax
liability 44,117 — Noncontrolling interests 87,245 — Equity issued
2,204,585 —
QUARTERLY CONSOLIDATED STATEMENTS OF CASH
FLOWS (In thousands)
2015 First 2014 Quarters Quarter Fourth
Third Second First Cash flows from operating
activities: Net income $ 120,807 $ 107,645 $ 109,701 $ 138,566 $
121,274 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization (including
amounts in discontinued operations) 247,453 241,291 201,236 192,064
193,876 Amortization of deferred revenue and lease intangibles, net
(6,603 ) (4,096 ) (4,896 ) (4,496 ) (5,383 ) Other non-cash
amortization (519 ) 304 2,312 (963 ) (1,965 ) Stock-based
compensation 6,307 4,202 5,381 5,367 6,044 Straight-lining of
rental income, net (8,679 ) (9,043 ) (12,413 ) (9,317 ) (7,914 )
Loss (gain) on extinguishment of debt, net 21 485 2,414 2,924 (259
) Gain on real estate dispositions (including amounts in
discontinued operations) (6,686 ) (1,457 ) (3,584 ) (11,705 )
(2,437 ) Gain on real estate loan investments — (1,206 ) (249 ) — —
Income tax (benefit) expense (7,850 ) (13,851 ) (1,987 ) 2,974
3,433 Loss (income) from unconsolidated entities 251 688 47 (348 )
(248 ) Other 2,860 2,140 7,105 3,418 3,076 Changes in operating
assets and liabilities: Decrease (increase) in other assets 21,073
8,623 (14,514 ) 4,967 6,241 Increase (decrease) in accrued interest
15,792 (6,877 ) 12,461 (4,379 ) 6,753 (Decrease) increase in
accounts payable and other liabilities (40,058 ) 6,025
21,256 (7,791 ) (38,070 ) Net cash provided by operating
activities 344,169 334,873 324,270 311,281 284,421 Cash flows from
investing activities: Net investment in real estate property
(1,072,539 ) (284,250 ) (912,510 ) (89,660 ) (181,866 ) Investment
in loans receivable and other (39,573 ) (432,556 ) (21,948 )
(43,296 ) (1,192 ) Proceeds from real estate disposals 166,341
5,500 60,396 26,200 26,150 Proceeds from loans receivable 92,056
17,984 49,593 4,817 1,163 Purchase of marketable securities —
(50,000 ) — (21,689 ) (25,000 ) Proceeds from sale or maturity of
marketable securities — — 21,689 — — Funds held in escrow for
future development expenditures 4,003 1,988 — — 2,602 Development
project expenditures (33,467 ) (35,613 ) (26,952 ) (20,475 )
(23,948 ) Capital expenditures (21,171 ) (31,219 ) (20,709 )
(19,392 ) (16,134 ) Other (4,180 ) (5,177 ) (296 ) — (125 )
Net cash used in investing activities (908,530 ) (813,343 )
(850,737 ) (163,495 ) (218,350 ) Cash flows from financing
activities: Net change in borrowings under credit facility (452,897
) 693,887 46,267 (381,705 ) 181,754 Proceeds from debt 1,092,833 —
1,311,046 696,661 — Repayment of debt (24,647 ) (246,278 ) (632,391
) (204,953 ) (67,773 ) Purchase of noncontrolling interest (2,660 )
(5,527 ) — (3,588 ) — Payment of deferred financing costs (14,435 )
726 (8,100 ) (6,679 ) (167 ) Issuance of common stock, net 285,327
242,107 — — — Cash distribution to common stockholders (254,910 )
(235,200 ) (213,462 ) (213,479 ) (213,473 ) Cash distribution to
redeemable OP unitholders (2,365 ) (1,548 ) (1,452 ) (1,360 )
(1,402 ) Purchases of redeemable OP units (569 ) (503 ) — — —
Contributions from noncontrolling interest — 491 — — —
Distributions to noncontrolling interest (1,822 ) (2,799 ) (1,852 )
(2,671 ) (2,237 ) Other 5,690 25,153 23 (2,215
) 1,641 Net cash provided by (used in) financing activities
629,545 470,509 500,079 (119,989 ) (101,657 )
Net increase (decrease) in cash and cash equivalents 65,184 (7,961
) (26,388 ) 27,797 (35,586 ) Effect of foreign currency translation
on cash and cash equivalents (307 ) (1,286 ) 4,348 (953 ) 561 Cash
and cash equivalents at beginning of period 55,348 64,595
86,635 59,791 94,816 Cash and cash
equivalents at end of period $ 120,225 $ 55,348 $
64,595 $ 86,635 $ 59,791 Supplemental
schedule of non-cash activities: Assets and liabilities assumed
from acquisitions: Real estate investments $ 2,542,829 $ 16,746 $
299,713 $ 51,330 $ 2,952 Other assets acquired 16,711 11,597 2,049
1,634 — Debt assumed 177,857 12,926 177,035 51,115 — Other
liabilities 45,736 4,598 15,766 723 2,952 Deferred income tax
liability 44,117 641 108,961 1,126 — Noncontrolling interests
87,245 — — — — Equity issued 2,204,585 10,178 — — —
NON-GAAP
FINANCIAL MEASURES RECONCILIATION
Funds From Operations (FFO) and Funds
Available for Distribution (FAD)(1)
(Dollars in thousands, except per share amounts)
Tentative Estimates Preliminary and Midpoint
YOY Subject to Change YOY 2014
2015 Growth
FY2015 - Guidance
Growth Q1 Q2 Q3
Q4 FY Q1
'14-'15
Low High
'14-'15E
Net income attributable to common stockholders $ 121,047 $ 138,398
$ 109,132 $ 107,190 $ 475,767
$ 120,442 $
574,045
$
603,991
Net income attributable to common stockholders per share $ 0.41 $
0.47 $ 0.37 $ 0.36 $ 1.60
$ 0.37 $ 1.70
$ 1.79 Adjustments: Depreciation and
amortization on real estate assets 192,043 189,219 199,617 239,465
820,344
245,651 965,000 985,000 Depreciation
on real estate assets related to noncontrolling interest (2,644 )
(2,661 ) (2,503 ) (2,506 ) (10,314 )
(2,052 )
(8,000 ) (8,400 ) Depreciation on real
estate assets related to unconsolidated entities 1,494 1,495 1,471
1,332 5,792
1,462
5,600
6,000
Gain on real estate dispositions (1,000 ) (11,889 ) (3,625 ) (1,456
) (17,970 )
(6,686 ) (25,000 )
(35,000 ) Discontinued operations: (Gain) loss on
real estate dispositions (1,438 ) (45 ) 41 (52 ) (1,494 )
—
— — Depreciation and amortization on real estate
assets 281 1,247 12 15
1,555
12
12 12 Subtotal: FFO
add-backs 188,736 177,366 195,013 236,798 797,913
238,387
937,612
947,612
Subtotal: FFO add-backs per share $ 0.64 $
0.60 $ 0.66 $ 0.80 $ 2.69
$ 0.72
$ 2.77 $ 2.80
FFO $ 309,783 $ 315,764 $ 304,145 $ 343,988 $
1,273,680
$ 358,829 16%
$ 1,511,657
$ 1,551,603 20% FFO per share $ 1.05
$ 1.07 $ 1.03 $ 1.16
$ 4.29
$ 1.09
4%
$ 4.47 $ 4.59
6% Adjustments: Change in fair value of
financial instruments (68 ) 109 4,595 485 5,121
(46 )
500 (900 ) Non-cash income tax expense
(benefit) 3,433 2,974 (1,987 ) (13,851 ) (9,431 )
(7,850
) (25,000 ) (31,000 ) (Gain)
loss on extinguishment of debt, net (810 ) 2,924 2,414 485 5,013
21 1,000 2,000 Merger-related expenses, deal
costs and re-audit costs 10,761 9,602 23,401 10,625 54,389
36,002 88,500 81,500 Amortization of other
intangibles 256 255 255
480 1,246
591
2,150 2,650
Subtotal: normalized FFO add-backs 13,572 15,864 28,678 (1,776 )
56,338
28,718 67,150 54,250 Subtotal:
normalized FFO add-backs per share $ 0.05 $
0.05 $ 0.10 $ (0.01 ) $ 0.19
$ 0.09
$ 0.20 $ 0.16
Normalized FFO $ 323,355 $ 331,628 $ 332,823 $
342,212 $ 1,330,018
$ 387,547 20%
$
1,578,807 $ 1,605,853 20% Normalized FFO per
share $ 1.09 $ 1.12 $ 1.12
$ 1.15 $ 4.48
$
1.18 8%
$ 4.67
$ 4.75 5% Non-cash items
included in normalized FFO: Amortization of deferred revenue and
lease intangibles, net (5,383 ) (4,496 ) (4,896 ) (4,096 ) (18,871
)
(6,603 ) (26,400 ) (28,400
) Other non-cash amortization, including fair market value
of debt (1,965 ) (963 ) 2,312 304 (312 )
(519 )
3,400 5,400 Stock-based compensation 6,044 5,367
5,381 4,202 20,994
6,307 22,300 24,500
Straight-lining of rental income, net (7,914 ) (9,317 )
(12,413 ) (9,043 ) (38,687 )
(8,679 ) (32,300 )
(34,300 ) Subtotal: non-cash items included in
normalized FFO (9,218 ) (9,409 ) (9,616 ) (8,633 ) (36,876 )
(9,494 ) (33,000 ) (32,800
) Capital expenditures (17,134 ) (21,445 )
(21,822 ) (32,527 ) (92,928 )
(22,148 ) (110,000
) (120,000 )
Normalized
FAD $ 297,003 $ 300,774 $ 301,385 $ 301,052 $ 1,200,214
$ 355,905 20%
$ 1,435,807 $
1,453,053 20% Normalized FAD per share $ 1.00
$ 1.01 $ 1.02 $ 1.01
$ 4.05
$ 1.08 8%
$ 4.25 $ 4.30
6%
Merger-related expenses, deal costs and re-audit costs
(10,761 ) (9,602 ) (23,401 ) (10,625 )
(54,389 )
(36,002 )
(88,500 ) (81,500 )
FAD $ 286,242 $ 291,172 $ 277,984 $ 290,427 $ 1,145,825
$ 319,903 12%
$ 1,347,307 $
1,371,553 19% FAD per share $ 0.97 $
0.98 $ 0.94 $ 0.98 $ 3.86
$ 0.97 0%
$
3.99 $ 4.06
4%
Weighted average diluted shares 296,245 296,504 296,495 297,480
296,677
329,203 338,074
338,074 1 Totals and per share amounts may not
add due to rounding. Per share quarterly amounts may not add to
annual per share amounts due to material changes in the Company’s
weighted average diluted share count, if any.
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 have historically
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 or divestitures (including pursuant to
tenant options to purchase) and capital transactions; (e) the
financial impact of contingent consideration, 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.
NON-GAAP FINANCIAL MEASURES
RECONCILIATION
Net Debt to Adjusted Pro Forma
EBITDA
The following information considers the
pro forma effect on net income, interest, depreciation and
amortization, and income tax benefit of the Company’s investments
and other capital transactions that were completed during the three
months ended March 31, 2015, as if the transactions had been
consummated as of the beginning of the period. 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, income or loss from noncontrolling interest and
unconsolidated entities, 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 on real estate
activity and changes in the fair value of financial instruments
(including amounts in discontinued operations) (“Adjusted Pro Forma
EBITDA”) (dollars in thousands):
Net income attributable to common stockholders $ 120,442 Pro
forma adjustments for current period investments, capital
transactions and dispositions (10,289 ) Pro forma net income for
the three months ended March 31, 2015 110,153 Add back: Pro forma
interest 108,403 Pro forma depreciation and amortization 260,753
Stock-based compensation 6,307 Gain on real estate dispositions
(6,686 ) Loss on extinguishment of debt, net 21 Loss from
unconsolidated entities 251 Noncontrolling interest 365 Pro forma
income tax benefit (9,246 ) Change in fair value of financial
instruments (46 ) Other taxes (185 ) Merger-related expenses, deal
costs and re-audit costs 35,893 Adjusted Pro Forma EBITDA
505,983 Adjusted Pro Forma EBITDA annualized $ 2,023,932
As of March 31, 2015: Debt $ 11,603,925 Cash,
adjusted for cash escrows pertaining to debt and debt related to
assets held for sale (140,705 ) Net debt $ 11,463,220
Net debt to Adjusted Pro Forma EBITDA 5.7 x
NON-GAAP FINANCIAL MEASURES RECONCILIATION 1, 2
NOI by Segment (In thousands)
2015 First 2014 Quarters Quarter
Fourth Third Second First
Revenues Triple-Net Triple-Net Rental Income $
266,206 $ 245,599 $ 244,206 $ 242,726 $ 237,846 Medical
Office Buildings Medical Office - Stabilized 123,211 104,171
103,780 101,795 101,259 Medical Office - Lease up 8,429 6,675 6,767
6,839 7,324 Medical Office - Other 5,350 6,061 6,051
6,256 6,640 Total Medical Office Buildings - Rental
Income 136,990 116,907 116,598 114,890
115,223 Total Rental Income 403,196 362,506 360,804 357,616 353,069
Medical Office Building Services Revenue 8,858 9,218
5,937 2,722 4,652 Total Medical Office
Buildings - Revenue 145,848 126,125 122,535 117,612 119,875
Triple-Net Services Revenue 1,136 1,136 1,136 1,145 1,148
Non-Segment Services Revenue 549 770 500 500
500 Total Medical Office Building and Other Services Revenue
10,543 11,124 7,573 4,367 6,300 Seniors Housing Operating
Seniors Housing - Stabilized 431,890 398,855 385,511 363,618
361,404 Seniors Housing - Lease up 15,024 12,083 10,109 10,227
9,018 Seniors Housing - Other — 232 627 628
639 Total Resident Fees and Services 446,914 411,170 396,247
374,473 371,061 Non-Segment Income from Loans and
Investments 22,899 15,734 14,043 14,625
10,767 Total Revenues, excluding Interest and Other Income 883,552
800,534 778,667 751,081 741,197
Property-Level Operating
Expenses Medical Office Buildings Medical Office -
Stabilized 36,807 33,331 34,807 33,641 33,545 Medical Office -
Lease up 3,242 2,509 2,738 2,733 2,783 Medical Office - Other 2,300
2,875 3,602 2,961 3,017 Total Medical
Office Buildings 42,349 38,715 41,147 39,335 39,345 Seniors
Housing Operating Seniors Housing - Stabilized 286,277 262,915
256,702 241,380 241,298 Seniors Housing - Lease up 12,085 10,421
7,972 7,473 6,420 Seniors Housing - Other — 227 600
571 577 Total Seniors Housing 298,362 273,563
265,274 249,424 248,295 Total Property-Level
Operating Expenses 340,711 312,278 306,421 288,759 287,640
Medical Office Building Services Costs 6,918 7,527 4,568
1,626 3,371
Net Operating Income Triple-Net
Triple-Net Properties 266,206 245,599 244,206 242,726 237,846
Triple-Net Services Revenue 1,136 1,136 1,136
1,145 1,148 Total Triple-Net 267,342 246,735 245,342 243,871
238,994 Medical Office Buildings Medical Office - Stabilized
86,404 70,840 68,973 68,154 67,714 Medical Office - Lease up 5,187
4,166 4,029 4,106 4,541 Medical Office - Other 3,050 3,186 2,449
3,295 3,623
Medical Office Building Services
1,940 1,691 1,369 1,096 1,281 Total
Medical Office Buildings 96,581 79,883 76,820 76,651 77,159
Seniors Housing Operating Seniors Housing - Stabilized 145,613
135,940 128,809 122,238 120,106 Seniors Housing - Lease up 2,939
1,662 2,137 2,754 2,598 Seniors Housing - Other — 5
27 57 62 Total Seniors Housing 148,552 137,607
130,973 125,049 122,766 Non-Segment 23,448 16,504
14,543 15,125 11,267
Net Operating Income $
535,923 $ 480,729 $ 467,678 $ 460,696 $
450,186 1 Amounts above are adjusted to exclude discontinued
operations for all periods presented. 2 Amounts above are not
restated for changes between categories from quarter to quarter.
NON-GAAP FINANCIAL MEASURES RECONCILIATION
(Dollars in thousands) Total Portfolio Same-Store
Constant Currency Cash NOI For the Three Months
Ended March 31, 2015 2014
Net Operating Income $ 535,923 $
450,186 Adjustments: Lease Modification Fee 5,200
—
NOI Not Included in Same-Store
(79,650 ) (15,372 ) Straight-Lining of Rental Income (8,678 )
(7,898 ) Non-Cash Rental Income (5,809 ) (4,725 ) Non-Segment NOI
(23,448 ) (11,267 ) Constant Currency Adjustment — (585 )
(112,385 ) (39,847 ) Constant Currency NOI as Reported $
423,538 $ 410,339 Percentage Increase
3.2 % NON-GAAP FINANCIAL MEASURES
RECONCILIATION (Dollars in thousands) Senior
Housing Operating Portfolio Same-Store Constant Currency NOI
For the Three Months Ended March 31,
Percentage
2015 2014
Increase
Net Operating Income $
148,552
$
122,766
Less:
NOI Not Included in Same-Store
26,637
1,306
Constant Currency Adjustment
—
585
26,637
1,891
Constant Currency NOI as Reported $ 121,915 $ 120,875
0.9
%
Less Real Estate Tax Credits
—
2,138
Constant Currency NOI Excluding Real
Estate Tax Credits
$
121,915
$
118,737
2.7
%
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Ventas, Inc.Lori B. Wittman(877) 4-VENTAS
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