Ventas Reports 2016 First Quarter Results

  • First Quarter 2016 Normalized FFO Grows 7 Percent on a Comparable
    Basis to $1.04 Per Diluted Share
  • Company Reaffirms 2016 Normalized FFO Guidance of $4.07 to $4.15
    Per Diluted Share

CHICAGO–(BUSINESS WIRE)–Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today announced
that normalized Funds From Operations (“FFO”) per diluted common share
was $1.04 for the quarter ended March 31, 2016. Normalized FFO for the
quarter ended March 31, 2016 was $351.7 million. Weighted average
diluted shares outstanding for the first quarter 2016 increased to 339.2
million, compared to 329.2 million in the first quarter 2015.

Prior period reported results include in discontinued operations
normalized FFO from the 355 properties that are now owned by Care
Capital Properties, Inc. (“CCP”) (NYSE:CCP). The spin-off of CCP as an
independent, publicly traded company (the “Spin-Off”) was successfully
completed on August 17, 2015. Ventas’s full year 2015 reported results
include normalized FFO from those properties for the period January 1 to
August 17, 2015.

Normalized FFO for the quarter ended March 31, 2016 grew 7 percent on a
comparable basis (“Comparable”), which adjusts all prior periods for the
effects of the Spin-Off as if the Spin-Off were completed January 1,
2014.

Track Record of Excellence

“We are pleased to extend our long track record of excellent performance
in the first quarter, delivering 7 percent Comparable normalized FFO per
share growth from our high quality, diverse portfolio,” Ventas Chairman
and Chief Executive Officer Debra A. Cafaro said.

“Ventas is situated at the exciting intersection of healthcare and real
estate. Benefiting from the powerful trend of longevity, Ventas is
uniquely positioned to deliver consistent growth and income for our
shareholders by leveraging our leading people, platforms and
properties,” Cafaro added.

First Quarter Net Income & NAREIT FFO

Reported net income attributable to common stockholders for the quarter
ended March 31, 2016 was $149.0 million, or $0.44 per diluted common
share. Reported net income attributable to common stockholders for the
quarter ended March 31, 2015 was $120.4 million, or $0.37 per diluted
common share.

Reported FFO, as defined by the National Association of Real Estate
Investment Trusts (“NAREIT FFO”), for the quarter ended March 31, 2016
was $356.9 million, or $1.05 per diluted common share. NAREIT FFO for
the first quarter 2015 was $358.8 million, or $1.09 per diluted common
share. The decrease from the first quarter 2015 is principally due to
the inclusion in the prior period of results from the properties that
were spun off to CCP, partially offset by lower merger related expenses
and deal costs, higher net operating income (“NOI”) due to accretive
investments and improved property performance in the first quarter 2016.

Portfolio Performance & Optimization

  • Same-store cash NOI growth for the Company’s total portfolio (1,069
    assets) was 2.9 percent excluding certain items referenced below in
    the respective 2016 and 2015 periods and 1.7 percent on a reported
    basis for the quarter ended March 31, 2016. Reported results by
    segment follow:

    • The seniors housing operating portfolio (“SHOP”) same-store NOI
      grew 2.9 percent. The current first quarter period incurred
      unplanned real estate tax expenses relating to prior periods of
      $1.2 million.
    • Triple net portfolio same-store cash NOI declined 0.3 percent. The
      comparable 2015 period included $5.2 million in fee income.
    • Medical office building (MOB) portfolio same-store cash NOI grew
      4.2 percent. First quarter 2016 results benefited from a lease
      termination fee with a net value of $2.3 million.
  • On April 4, 2016 the Company announced it had entered into
    collaborative agreements to improve the quality and productivity of
    the long term acute care hospital (“LTAC”) portfolio leased by Ventas
    to Kindred Healthcare, Inc. (NYSE: KND), while retaining full current
    rent. The transactions are expected to better position the Kindred and
    Ventas portfolio to succeed.

First Quarter 2016 Highlights, Liquidity &
Balance Sheet

  • The Company made $154 million in investments in the first quarter
    2016, including a $140 million secured debt investment in class-A life
    science properties located principally in Cambridge, MA, San
    Francisco, CA and San Diego, CA.
  • The Company funded $37 million of high-quality development and
    redevelopment projects during the quarter of its approved and active
    pipeline totaling over $500 million.
  • To fund these new investments, since its year-end 2015 earnings
    release on February 12, 2016, Ventas issued and sold a total of 1.6
    million shares of common stock for aggregate gross proceeds of $101
    million at an average price of $62.30. Year-to-date, Ventas has issued
    3.3 million shares of common stock for aggregate gross proceeds of
    $193 million under its “at the market” equity offering program.
  • During and immediately following the quarter, the Company sold 7
    properties for aggregate gross proceeds of approximately $69 million.
  • The Company further strengthened its credit profile at quarter-end,
    including: a sequential improvement in the Company’s net debt to
    EBITDA ratio to 6.0x as a result of disposition activity and the
    previously mentioned equity-funded investments; fixed charge coverage
    of 4.6x; and debt to total capitalization of approximately 34 percent.
  • The Company currently has a strong liquidity position, with $1.8
    billion available under its revolving credit facility, and $53 million
    of cash or cash equivalents.

Company Reaffirms 2016 Guidance Range for
Normalized FFO of $4.07 to $4.15 Per Diluted Share

Consistent with previous guidance, Ventas currently expects its 2016
reported normalized FFO per diluted share to range between $4.07 and
$4.15, representing 3 to 5 percent growth over 2015 on a Comparable
basis. Ventas currently expects its 2016 NAREIT reported FFO per diluted
share to be between $4.13 and $4.21.

Total reported Company same-store cash NOI is forecast to grow 1.5 to 3
percent in 2016, which is also consistent with previous guidance.

The Company expects continued sale of assets, estimating $500 million in
2016 dispositions, including sales closed year-to-date. The net proceeds
are assumed to be reinvested in approximately $200 million of additional
acquisitions and debt repayment.

Consistent with its practice, the Company’s guidance does not include
any further material investments, dispositions or capital activity. A
further modest reduction in leverage in 2016 as a result of continued
net disposition activity and strong cash flow generation is also assumed
in its guidance. A reconciliation of the Company’s guidance to the
Company’s projected GAAP earnings is included in this press release.

The Company’s guidance is based on a number of other assumptions that
are subject to change and many of which are outside the control of the
Company. If actual results vary from these assumptions, the Company’s
expectations may change. There can be no assurance that the Company will
achieve these results.

FIRST QUARTER 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) 700-5192 (or (617) 213-8833 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 15382774, beginning at approximately 2:00 p.m. Eastern Time and
will remain for 36 days.

Ventas, Inc., an S&P 500 company, is a leading real estate investment
trust. Its diverse portfolio of approximately 1,300 assets in the United
States, Canada and the United Kingdom consists of seniors housing
communities, medical office buildings, skilled nursing facilities,
specialty hospitals and general acute care hospitals. Through its
Lillibridge subsidiary, Ventas provides management, leasing, marketing,
facility development and advisory services to highly rated hospitals and
health systems throughout the United States. More information about
Ventas and Lillibridge can be found at www.ventasreit.com
and www.lillibridge.com.

Supplemental information regarding the Company can be found on the
Company’s website under the “Investor Relations” section or at www.ventasreit.com/investor-relations/annual-reports—supplemental-information.
A comprehensive listing of the Company’s properties is available at www.ventasreit.com/our-portfolio/properties-by-stateprovince.

This press release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
All
statements regarding the Company’s or its tenants’, operators’,
borrowers’ or managers’ expected future financial condition, results of
operations, cash flows, funds from operations, dividends and dividend
plans, financing opportunities and plans, capital markets transactions,
business strategy, budgets, projected costs, operating metrics, capital
expenditures, competitive positions, acquisitions, investment
opportunities, dispositions, merger or acquisition integration, growth
opportunities, expected lease income, continued qualification as a real
estate investment trust (“REIT”), plans and objectives of management for
future operations and statements that include words such as
“anticipate,” “if,” “believe,” “plan,” “estimate,” “expect,” “intend,”
“may,” “could,” “should,” “will” and other similar expressions are
forward-looking statements.
These forward-looking statements are
inherently uncertain, and actual results may differ from the Company’s
expectations.
The Company does not undertake a duty to update
these forward-looking statements, which speak only as of the date on
which they are made.

The Company’s actual future results and trends may differ materially
from expectations depending on a variety of factors discussed in the
Company’s filings with the Securities and Exchange Commission.
These
factors include without limitation: (a) the ability and willingness of
the Company’s tenants, operators, borrowers, managers and other third
parties to satisfy their obligations under their respective contractual
arrangements with the Company, including, in some cases, their
obligations to indemnify, defend and hold harmless the Company from and
against various claims, litigation and liabilities; (b) the ability of
the Company’s tenants, operators, borrowers and managers to maintain the
financial strength and liquidity necessary to satisfy their respective
obligations and liabilities to third parties, including without
limitation obligations under their existing credit facilities and other
indebtedness; (c) the Company’s success in implementing its business
strategy and the Company’s ability to identify, underwrite, finance,
consummate and integrate diversifying acquisitions and investments; (d)
macroeconomic conditions such as a disruption of or lack of access to
the capital markets, changes in the debt rating on U.S. government
securities, default or delay in payment by the United States of its
obligations, and changes in the federal or state budgets resulting in
the reduction or nonpayment of Medicare or Medicaid reimbursement rates;
(e) the nature and extent of future competition, including new
construction in the markets in which the Company’s seniors housing
communities and medical office buildings (“MOBs”)
are located;
(f) the extent of future or pending healthcare reform and regulation,
including cost containment measures and changes in reimbursement
policies, procedures and rates; (g) increases in the Company’s borrowing
costs as a result of changes in interest rates and other factors; (h)
the ability of the Company’s tenants, operators and managers, as
applicable, to comply with laws, rules and regulations in the operation
of the Company’s properties, to deliver high-quality services, to
attract and retain qualified personnel and to attract residents and
patients; (i) changes in general economic conditions or economic
conditions in the markets in which the Company may, from time to time,
compete, and the effect of those changes on the Company’s revenues,
earnings and funding sources; (j) the Company’s ability to pay down,
refinance, restructure or extend its indebtedness as it becomes due; (k)
the Company’s ability and willingness to maintain its qualification as a
REIT in light of economic, market, legal, tax and other considerations;
(l) final determination of the Company’s taxable net income for the year
ended December 31, 2015 and for the year ending December 31, 2016; (m)
the ability and willingness of the Company’s tenants to renew their
leases with the Company upon expiration of the leases, the Company’s
ability to reposition its properties on the same or better terms in the
event of nonrenewal or in the event the Company exercises its right to
replace an existing tenant, and obligations, including indemnification
obligations, the Company may incur in connection with the replacement of
an existing tenant; (n) risks associated with the Company’s senior
living operating portfolio, such as factors that can cause volatility in
the Company’s operating income and earnings generated by those
properties, including without limitation national and regional economic
conditions, costs of food, materials, energy, labor and services,
employee benefit costs, insurance costs and professional and general
liability claims, and the timely delivery of accurate property-level
financial results for those properties; (o) changes in exchange rates
for any foreign currency in which the Company may, from time to time,
conduct business; (p) year-over-year changes in the Consumer Price Index
or the UK Retail Price Index and the effect of those changes on the rent
escalators contained in the Company’s leases and the Company’s earnings;
(q) the Company’s ability and the ability of its tenants, operators,
borrowers and managers to obtain and maintain adequate property,
liability and other insurance from reputable, financially stable
providers; (r) the impact of increased operating costs and uninsured
professional liability claims on the Company’s liquidity, financial
condition and results of operations or that of the Company’s tenants,
operators, borrowers and managers, and the ability of the Company and
the Company’s tenants, operators, borrowers and managers to accurately
estimate the magnitude of those claims; (s) risks associated with the
Company’s MOB portfolio and operations, including the Company’s ability
to successfully design, develop and manage MOBs and to retain key
personnel; (t) the ability of the hospitals on or near whose campuses
the Company’s MOBs are located and their affiliated health systems to
remain competitive and financially viable and to attract physicians and
physician groups; (u) risks associated with the Company’s investments in
joint ventures and unconsolidated entities, including its lack of sole
decision-making authority and its reliance on its joint venture
partners’ financial condition; (v) the impact of market or issuer events
on the liquidity or value of the Company’s investments in marketable
securities; (w) 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;
(x) 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 (y) 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
As of March 31, 2016, December 31, 2015, September 30, 2015, June
30, 2015 and March 31, 2015
(In thousands, except per share amounts)
         
March 31, December 31, September 30, June 30, March 31,
2016 2015 2015 2015 2015
 
Assets
Real estate investments:
Land and improvements $ 2,060,247 $ 2,056,428 $ 2,068,467 $ 2,016,281 $ 1,974,013
Buildings and improvements 20,395,386 20,309,599 20,220,624 19,247,902 19,049,345
Construction in progress 119,215 92,005 124,381 129,186 118,483
Acquired lease intangibles 1,343,187   1,344,422   1,347,493   1,214,702   1,197,567  
23,918,035 23,802,454 23,760,965 22,608,071 22,339,408
Accumulated depreciation and amortization (4,409,554 ) (4,177,234 ) (3,972,544 ) (3,780,388 ) (3,569,773 )
Net real estate property 19,508,481 19,625,220 19,788,421 18,827,683 18,769,635
Secured loans receivable and investments, net 1,002,598 857,112 766,707 762,312 746,793
Investments in unconsolidated real estate entities 98,120   95,707   96,208   85,461   95,147  
Net real estate investments 20,609,199 20,578,039 20,651,336 19,675,456 19,611,575
Cash and cash equivalents 51,701 53,023 65,231 60,532 120,225
Escrow deposits and restricted cash 76,710 77,896 74,491 193,960 223,772
Goodwill 1,044,983 1,047,497 1,052,321 1,058,607 947,386
Assets held for sale 54,263 93,060 152,014 2,822,553 3,012,994
Other assets 424,436   412,403   418,584   395,770   452,533  
Total assets $ 22,261,292   $ 22,261,918   $ 22,413,977   $ 24,206,878   $ 24,368,485  
 
Liabilities and equity
Liabilities:
Senior notes payable and other debt $ 11,247,730 $ 11,206,996 $ 11,284,957 $ 11,456,038 $ 11,549,062
Accrued interest 66,988 80,864 67,440 77,713 77,444
Accounts payable and other liabilities 738,327 779,380 791,556 784,547 777,595
Liabilities related to assets held for sale 12,625 34,340 48,860 225,269 222,389
Deferred income taxes 333,354   338,382   352,658   370,161   371,785  
Total liabilities 12,399,024 12,439,962 12,545,471 12,913,728 12,998,275
 
Redeemable OP unitholder and noncontrolling interests 191,739 196,529 198,832 199,404 257,246
 
Commitments and contingencies
 
Equity:
Ventas stockholders’ equity:
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued
Common stock, $0.25 par value; 337,486; 334,386; 333,027; 331,965
and 330,913 shares issued at March 31, 2016, December 31, 2015,
September 30, 2015, June 30, 2015 and March 31, 2015, respectively
84,354 83,579 83,238 82,982 82,718
Capital in excess of par value 11,758,306 11,602,838 11,523,312 12,708,898 12,616,056
Accumulated other comprehensive (loss) income (19,932 ) (7,565 ) (592 ) 10,180 4,357
Retained earnings (deficit) (2,208,474 ) (2,111,958 ) (1,992,848 ) (1,772,529 ) (1,660,856 )
Treasury stock, 1; 44; 61; 28 and 32 shares at March 31, 2016,
December 31, 2015, September 30, 2015, June 30, 2015 and March 31,
2015, respectively
(59 ) (2,567 ) (3,675 ) (2,048 ) (2,385 )
Total Ventas stockholders’ equity 9,614,195 9,564,327 9,609,435 11,027,483 11,039,890
Noncontrolling interest 56,334   61,100   60,239   66,263   73,074  
Total equity 9,670,529   9,625,427   9,669,674   11,093,746   11,112,964  
Total liabilities and equity $ 22,261,292   $ 22,261,918   $ 22,413,977   $ 24,206,878   $ 24,368,485  
 
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 2016 and 2015
(In thousands, except per share amounts)
   
For the Three Months Ended
March 31,
2016 2015
Revenues:
Rental income:
Triple-net leased $ 214,487 $ 188,557
Medical office buildings 144,136   137,060  
358,623 325,617
Resident fees and services 463,976 446,914
Medical office building and other services revenue 7,185 10,543
Income from loans and investments 22,386 22,053
Interest and other income 119   471  
Total revenues 852,289 805,598
Expenses:
Interest 103,273 82,328
Depreciation and amortization 236,387 216,219
Property-level operating expenses:
Senior living 312,541 298,362
Medical office buildings 43,681   42,437  
356,222 340,799
Medical office building services costs 3,451 6,918
General, administrative and professional fees 31,726 34,326
Loss on extinguishment of debt, net 314 21
Merger-related expenses and deal costs 1,632 30,613
Other 4,168   4,874  
Total expenses 737,173   716,098  
Income before unconsolidated entities, income taxes, discontinued
operations, real estate dispositions and noncontrolling interest
115,116 89,500
Loss from unconsolidated entities (198 ) (251 )
Income tax benefit 8,421   7,250  
Income from continuing operations 123,339 96,499
Discontinued operations (489 ) 17,574
Gain on real estate dispositions 26,184   6,686  
Net income 149,034 120,759
Net income attributable to noncontrolling interest 54   317  
Net income attributable to common stockholders $ 148,980   $ 120,442  
Earnings per common share:
Basic:
Income from continuing operations attributable to common
stockholders, including real estate dispositions
$ 0.44 $ 0.32
Discontinued operations (0.00 ) 0.05  
Net income attributable to common stockholders $ 0.44   $ 0.37  
Diluted:
Income from continuing operations attributable to common
stockholders, including real estate dispositions
$ 0.44 $ 0.32
Discontinued operations (0.00 ) 0.05  
Net income attributable to common stockholders $ 0.44   $ 0.37  
 
Weighted average shares used in computing earnings per common
share:
Basic 335,559 325,454
Diluted 339,202 329,203
 
Dividends declared per common share $ 0.73 $ 0.79
 
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
         
2016 First 2015 Quarters
Quarter Fourth Third Second First
 
Revenues:
Rental income:
Triple-net leased $ 214,487 $ 208,210 $ 201,028 $ 182,006 $ 188,557
Medical office buildings 144,136   145,958   142,755   140,472   137,060  
358,623 354,168 343,783 322,478 325,617
Resident fees and services 463,976 454,871 454,825 454,645 446,914
Medical office building and other services revenue 7,185 11,541 10,000 9,408 10,543
Income from loans and investments 22,386 20,361 18,924 25,215 22,053
Interest and other income 119   333   74   174   471  
Total revenues 852,289 841,274 827,606 811,920 805,598
 
Expenses:
Interest 103,273 103,692 97,135 83,959 82,328
Depreciation and amortization 236,387 236,795 226,332 214,711 216,219
Property-level operating expenses:
Senior living 312,541 307,261 304,540 299,252 298,362
Medical office buildings 43,681   45,073   43,305   43,410   42,437  
356,222 352,334 347,845 342,662 340,799
Medical office building services costs 3,451 7,467 6,416 5,764 6,918
General, administrative and professional fees 31,726 27,636 32,114 33,959 34,326
Loss (gain) on extinguishment of debt, net 314 (486 ) 15,331 (455 ) 21
Merger-related expenses and deal costs 1,632 (2,079 ) 62,145 12,265 30,613
Other 4,168   4,009   4,795   4,279   4,874  
Total expenses 737,173   729,368   792,113   697,144   716,098  
 
Income before unconsolidated entities, income taxes, discontinued
operations, real estate dispositions and noncontrolling interest
115,116 111,906 35,493 114,776 89,500
(Loss) income from unconsolidated entities (198 ) (223 ) (955 ) 9 (251 )
Income tax benefit 8,421   11,548   10,697   9,789   7,250  
Income from continuing operations 123,339 123,231 45,235 124,574 96,499
Discontinued operations (489 ) (2,331 ) (22,383 ) 18,243 17,574
Gain on real estate dispositions 26,184   4,160   265   7,469   6,686  
Net income 149,034 125,060 23,117 150,286 120,759
Net income attributable to noncontrolling interest 54   332   265   465   317  
Net income attributable to common stockholders $ 148,980   $ 124,728   $ 22,852   $ 149,821   $ 120,442  
 
Earnings per common share:
Basic:
Income from continuing operations attributable to common
stockholders, including real estate dispositions
$ 0.44 $ 0.38 $ 0.14 $ 0.39 $ 0.32
Discontinued operations (0.00 ) (0.01 ) (0.07 ) 0.06   0.05  
Net income attributable to common stockholders $ 0.44   $ 0.37   $ 0.07   $ 0.45   $ 0.37  
Diluted:
Income from continuing operations attributable to common
stockholders, including real estate dispositions
$ 0.44 $ 0.38 $ 0.14 $ 0.40 $ 0.32
Discontinued operations (0.00 ) (0.01 ) (0.07 ) 0.05   0.05  
Net income attributable to common stockholders $ 0.44   $ 0.37   $ 0.07   $ 0.45   $ 0.37  
 
Weighted average shares used in computing earnings per common
share:
Basic 335,559 332,914 332,491 330,715 325,454
Diluted 339,202 336,406 336,338 334,026 329,203

Contacts

Ventas, Inc.
Ryan K. Shannon
(877) 4-VENTAS

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