Ventas Reports 2018 Fourth Quarter and Full Year 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 fourth
quarter and full year ended December 31, 2018.

“Ventas extended its two decade track record of sustained excellence in
2018, highlighted by delivering positive total return to shareholders,
increasing our dividend and continuing to invest in our future growth.
We also expanded our forward university-based research and innovation
development pipeline to over $1.5 billion, enhanced our financial
strength and flexibility, harvested proceeds from profitable investments
and added high-quality assets to our portfolio,” said Debra A. Cafaro,
Ventas Chairman and CEO.

“As a result of these successful activities, we enter 2019 with a strong
foundation. We are sharply focused on returning to year-over-year
growth, and we expect 2019 to be the pivot year in our transition. Our
collaborative and cohesive team is committed to delivering growth across
our diversified businesses segments,” Cafaro added.

2018 and Fourth Quarter Performance

  • Net income attributable to common stockholders per diluted share for
    the full year 2018 was $1.14 compared to $3.78 in 2017. The change
    from 2017 results was largely due to the following factors: i) the
    cumulative net impact of asset dispositions and resulting lower
    property income, in addition to higher gains on real estate
    dispositions in 2017 of $1.87 per share due to such disposition
    activity; ii) $0.17 per share of higher debt extinguishment costs
    associated with proactively refinancing near-term debt to manage
    future interest rate risk and extend the Company’s debt maturity
    schedule; and iii) $0.15 per share of higher natural disaster expenses
    in 2018 principally due to non-cash impairments. For the fourth
    quarter 2018, net income attributable to common stockholders per
    diluted share was $0.17 compared to $1.09 in the same period in 2017.
    The main drivers of the year-over-year change in fourth quarter 2018
    results were the same as those listed above.
  • Reported FFO per share, as defined by the National Association of Real
    Estate Investment Trusts (“Nareit FFO”) for the full year 2018 was
    $3.64 compared to $4.22 in 2017. The change from 2017 results was
    principally due to the factors set forth above for net income,
    excluding gains on sale of real estate. Fourth quarter 2018 Nareit FFO
    per share was $0.81 compared to $1.13 in the same period in 2017.
  • The Company’s fourth quarter and full year 2018 per share net income
    attributable to common stockholders and Nareit FFO are consistent with
    the Company’s previously published expectations, excluding the fourth
    quarter impact of natural disasters that affected several of the
    Company’s properties and increased non-cash impairments during the
    quarter and year. The Company believes there is sufficient insurance
    coverage to mitigate the impact of these natural disasters, and any
    recoveries will be recognized in future periods, although there can be
    no assurance regarding the amount or timing of any such recoveries.
  • Normalized Funds From Operations (“FFO”) per share for the full year
    2018 was $4.07 compared to $4.16 in 2017. The change from 2017 was
    principally due to the cumulative net impact of asset dispositions and
    resulting lower property income. Fourth quarter normalized FFO per
    diluted common share was $0.96 compared to $1.03 in the same period in
    2017.
  • For the full year 2018, the Company’s same-store total property
    portfolio (1,041 assets) cash net operating income (“NOI”) grew 1.2
    percent compared to 2017, above the midpoint of the Company’s
    published guidance range of 0.75 to 1.5 percent.
  • For the fourth quarter 2018, the Company’s same-store total property
    portfolio (1,064 assets) cash NOI grew 0.2 percent compared to the
    same period in 2017.
  • Same-store cash NOI growth by segment for the full year and fourth
    quarter 2018 is as follows:
    2018 Same-Store Cash NOI
Full Year 2018   Q4 2018
Reported Growth Reported Growth
 
Triple-Net (“NNN”) 3.6% 2.1%
Seniors Housing Operating Portfolio (“SHOP”) (2.1%) (3.5%)
Office 1.7% 1.9%
Total Company 1.2% 0.2%
 
  • Fourth quarter year-over-year changes in the Company’s same-store
    property results were driven by:

    • NNN portfolio: Growth was due largely to in-place lease
      escalations.
    • SHOP portfolio: Performance was in-line with expectations
      and driven by the elevated number of new community openings in
      select markets.
    • Office portfolio: Growth was principally due to continued
      strength in Research & Innovation (“R&I”) properties. In the
      Medical Office Building (“MOB”) segment, in-place lease
      escalations and strong tenant retention were offset by lower
      occupancy from elevated 2018 lease expirations and the timing of
      new leasing.

2018 Capital Allocation and Balance Sheet
Excellence

R&I Excellence: Expanded Accretive Development Pipeline, New
Acquisition Activity, Leasing Progress and Awards

  • Expanded R&I Pipeline: As announced separately today, Ventas’s
    R&I development pipeline (the “R&I Pipeline”) with leading
    universities exceeds $1.5 billion. The R&I Pipeline will be developed
    through the Company’s exclusive relationship with leading
    university-focused developer Wexford Science & Technology, which has
    been extended for a 10-year term to 2029. The R&I Pipeline includes a
    new $77 million development commitment at highly rated Arizona State
    University (“ASU”) (Moody’s Aa2) that is 50 percent pre-leased by ASU
    for biomedical-focused academic and commercial research space. On a
    pro forma basis, including the R&I Pipeline, Ventas’s investments in
    its R&I business will reach over $3.5 billion.
  • R&I Transactions: In addition to the new ASU development
    commitment noted above, the Company acquired a $26 million R&I
    property in the University City sub-market of Philadelphia that is 100
    percent leased and principally occupied by Drexel University (Moody’s:
    A3) for lab space.
  • R&I Fourth Quarter Leasing Highlights:

    • Signed a 25-year lease with Yale University (“Yale”) for 250,000
      square feet at 100 College Street, increasing Ventas’s
      relationship with Yale, enhancing its tenant credit and extending
      the weighted average lease term of the building. Yale is replacing
      Alexion Pharmaceuticals in the space.
    • Signed a new lease with Washington University at Ventas’s 4220
      Duncan property, making it 100 percent leased within one year of
      opening.
  • R&I Development Awards: Ventas’s recently stabilized 4220
    Duncan at Washington University achieved LEED Gold status, and South
    Street Landing at Brown University was awarded the TOBY award for the
    best historical building in 2018 by BOMA Boston.

Fourth Quarter Acquisition Highlights: Ventas completed the $194
million acquisition of Brookdale Battery Park, an irreplaceable seniors
housing community in Manhattan, and acquired five MOBs, predominately on
the West Coast, with Pacific Medical Buildings (“PMB”) and Ardent Health
Services.

Full Year Capital Recycling: Ventas sold properties and received
final repayments on loans receivable in 2018 for proceeds of $1.3
billion at a blended GAAP yield exceeding eight percent, with proceeds
used to repay debt and fund investments.

Extended Exclusive MOB Relationship with PMB: Ventas extended
its exclusive MOB development relationship with PMB for a 10-year term.
PMB has nearly 50 years of experience developing world-class outpatient
facilities with top U.S. health systems. Ventas will continue to enhance
its portfolio by investing in newly developed, high-quality MOB assets
in attractive markets, as highlighted by the Company’s trophy Sutter
development in San Francisco opening in early 2019.

Mutually Beneficial Agreements with Brookdale Senior Living
(“Brookdale”)
: The Company combined and extended its leases with
Brookdale to 2026. Ventas’s triple-net seniors housing weighted average
lease term is now over eight years.

Significant Financial Strength Positioned for Growth

  • $3.4 Billion in Debt Refinancing and Repayment: Ventas
    significantly improved its maturity profile throughout 2018,
    increasing its debt duration by nearly one year to seven years. The
    Company now has only a modest 10 percent of its total debt (and only
    three percent of its debt as a percentage of enterprise value)
    maturing over the next three years. This represents a 22 percentage
    point improvement from year-end 2017 and was achieved in 2018 by:

1. Refinancing and/or repaying more than $2.5 billion in debt since
December 31, 2017

2. Renewing and extending a $900 million term loan

3. Proactively issuing $1.4 billion in 10 year senior notes

  • The Company’s financial strength was robust at quarter end, including
    a sector-leading net debt to Adjusted Pro Forma EBITDA ratio of 5.6x
    and fixed charge coverage ratio of 4.6x.
  • In January 2019, Ventas announced a new $1 billion commercial paper
    program intended to cost effectively supplement the Company’s working
    capital capacity. Ventas maintains its existing $3 billion revolving
    credit facility and other credit facilities, together providing the
    company robust liquidity to ensure financial flexibility.

People & Culture Will Drive Continued Success

  • Demonstrated Leadership Excellence, Strengthened Best-in-Class Team
    and Commitment to Environmental, Social and Governance (“ESG”)
    Principles

    • Ventas Chairman and CEO, Debra A. Cafaro, was again recognized as
      a top global CEO and leader in the real estate and healthcare
      industries in 2018. Recognitions include:

      • Harvard Business Review Top 100 Best Performing CEOs in
        the World (fifth consecutive year)
      • Modern Healthcare 100 Most Influential People in
        Healthcare, the only real estate representative on this
        prestigious list
      • Named Chair of the Real Estate Roundtable, a public policy
        organization that brings together leaders of the nation’s top
        real estate firms to address key national policy issues
        related to real estate and the overall economy
      • A Lifetime Achievement Award from The American Seniors Housing
        Association (ASHA)
    • Robert F. Probst, Executive Vice President and Chief Financial
      Officer of Ventas, was awarded the 2019 Chicago Public Company CFO
      of the Year by the Financial Executives International (FEI)
      Chicago Chapter.
    • Ventas made significant achievements in 2018 in advancing its
      leadership position and investment in ESG matters, including
      publishing its inaugural Corporate Sustainability Report. Other
      recognitions include:

      • Nareit’s 2018 Healthcare “Leader in the Light” for the second
        consecutive year and third time
      • Inclusion in the Dow Jones Sustainability IndexTM
        for North America for the second consecutive year
      • #1 ranked healthcare REIT in the GRESB real estate ESG
        assessment
  • In January, Ventas announced two key appointments to its senior
    leadership team. Bhavana Devulapally, Chief Information Officer and
    Senior Vice President, will lead Ventas’s technology team, overseeing
    the development and implementation of strategy for the Company’s
    information systems. Juan Sanabria, Vice President of Investor
    Relations, will be the principal liaison with the equity market and
    analysts.

First Quarter Dividend

The Company’s Board of Directors declared a dividend for the first
quarter 2019 of $0.7925 per share. The dividend is payable in cash on
April 12, 2019 to stockholders of record on April 1, 2019.

2019 Guidance

Ventas expects 2019 per share normalized FFO, Nareit FFO and net income
attributable to common stockholders, and same-store cash NOI growth, to
range 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%
 

Ventas’s 2019 normalized FFO per share guidance also assumes $500
million of disposition transactions and receipt of loan repayments in
2019, including the previously announced Brookdale asset sales, with
proceeds being used to fund $500 million in development and
redevelopment projects, mostly in accelerating the Company’s exciting
university-based research and innovation 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 accounting standards.

The 2019 outlook assumes no acquisitions and 361 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.

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.

Fourth Quarter and Full Year 2018 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). 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 (855) 859-2056 (or +1 (404) 537-3406 for international
callers), passcode 3853609, 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 1,200 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, health systems and skilled nursing facilities. 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)
 
December 31, September 30, June 30, March 31, December 31,
2018 2018 2018 2018 2017
 
Assets
Real estate investments:
Land and improvements $ 2,114,406 $ 2,115,870 $ 2,124,231 $ 2,135,662 $ 2,151,386
Buildings and improvements 22,437,243 22,188,578 22,065,202 22,078,454 22,216,942
Construction in progress 422,334 395,072 408,313 380,064 344,151
Acquired lease intangibles 1,502,955   1,506,269   1,510,698   1,532,223   1,548,074  
26,476,938 26,205,789 26,108,444 26,126,403 26,260,553
Accumulated depreciation and amortization (6,383,281 ) (6,185,155 ) (5,972,774 ) (5,789,422 ) (5,638,099 )
Net real estate property 20,093,657 20,020,634 20,135,670 20,336,981 20,622,454
Secured loans receivable and investments, net 495,869 527,851 526,553 1,212,519 1,346,359
Investments in unconsolidated real estate entities 48,378   48,478   101,490   102,544   123,639  
Net real estate investments 20,637,904 20,596,963 20,763,713 21,652,044 22,092,452
Cash and cash equivalents 72,277 86,107 93,684 92,543 81,355
Escrow deposits and restricted cash 59,187 62,440 64,419 71,039 106,898
Goodwill 1,050,548 1,045,877 1,034,274 1,035,248 1,034,644
Assets held for sale 5,454 24,180 15,567 62,534 65,413
Other assets 759,185   782,386   727,477   580,102   573,779  
Total assets $ 22,584,555   $ 22,597,953   $ 22,699,134   $ 23,493,510   $ 23,954,541  
 
Liabilities and equity
Liabilities:
Senior notes payable and other debt $ 10,733,699 $ 10,478,455 $ 10,402,897 $ 11,039,812 $ 11,276,062
Accrued interest 99,667 76,883 93,112 77,764 93,958
Accounts payable and other liabilities 1,086,030 1,134,898 1,133,902 1,134,570 1,183,489
Liabilities related to assets held for sale 205 14,790 896 60,023 60,265
Deferred income taxes 205,219   236,616   240,941   244,742   250,092  

Total liabilities

12,124,820 11,941,642 11,871,748 12,556,911 12,863,866
 
Redeemable OP Unitholder and noncontrolling interests 188,141 143,242 149,817 132,555 158,490
 
Commitments and contingencies
 
Equity:
Ventas stockholders’ equity:
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued
Common stock, $0.25 par value; 356,572; 356,468; 356,412; 356,317;
and 356,187 shares issued at December 31, 2018, September 30, 2018,
June 30, 2018, March 31, 2018, and December 31, 2017, respectively
89,125 89,100 89,085 89,062 89,029
Capital in excess of par value 13,076,528 13,081,324 13,068,399 13,080,220 13,053,057
Accumulated other comprehensive loss (19,582 ) (7,947 ) (10,861 ) (14,474 ) (35,120 )
Retained earnings (deficit) (2,930,214 ) (2,709,293 ) (2,529,102 ) (2,413,440 ) (2,240,698 )
Treasury stock, 0; 6; 11; 11; and 1 shares at December 31, 2018,
September 30, 2018, June 30, 2018, March 31, 2018, and December 31,
2017, respectively
  (345 ) (573 ) (553 ) (42 )
Total Ventas stockholders’ equity 10,215,857 10,452,839 10,616,948 10,740,815 10,866,226
Noncontrolling interests 55,737   60,230   60,621   63,229   65,959  
Total equity 10,271,594   10,513,069   10,677,569   10,804,044   10,932,185  
Total liabilities and equity $ 22,584,555   $ 22,597,953   $ 22,699,134   $ 23,493,510   $ 23,954,541  
 

Contacts

Juan Sanabria
(877) 4-VENTAS

Read full story here