- Expects to Achieve 2016 Normalized
FFO per Share Approximating the High-End of Previous Guidance
Range
- Issues Preliminary 2017
Outlook
- Same-Store Cash Flow Growth,
Portfolio Enhancement and Financial Strength Expected to Continue
in 2017
Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”), in
conjunction with its presentation at the J.P. Morgan Healthcare
Conference (the “J.P. Morgan Conference”) today, announced that it
expects to achieve normalized Funds From Operations (“FFO”) per
share for the full year 2016 approximating the high-end of its
previously announced guidance range of $4.10 to $4.13.
“Our diversified and advantaged portfolio continues to perform
well and we expect to achieve strong 2016 results, with 4 to 5
percent FFO per share growth for the year,” Ventas Chairman and
Chief Executive Officer Debra A. Cafaro said. “In 2016, we exceeded
our strategic disposition targets and enhanced our financial
position. We increased our dividend by 6 percent and delivered 16
percent total shareholder return. As the leading capital provider
to high-quality senior living, healthcare and life science research
institutions, our aligned, cohesive team remains focused on
delivering value to shareholders and our leading operators.
“Our 2017 forecast reflects our continued strategic actions to
create short- and long-term shareholder value, including:
disposition of nearly $1 billion in assets, including substantially
all of our skilled nursing portfolio at a premium valuation;
redeploying proceeds into investments in high-quality hospitals and
attractive life science and innovation centers; and strengthening
our balance sheet through longer debt maturities,” concluded Ms.
Cafaro. “While these actions will affect year-over-year growth, we
are confident that improving our portfolio quality and asset mix
while enhancing our credit profile are the right steps for Ventas
to continue our long track record of excellence and leading market
position.”
2016 Expectations
- The Company expects normalized FFO per
diluted share for the full year 2016 to approximate the high-end of
its previously announced guidance range of $4.10 to $4.13.
- The Company’s full year 2016 same-store
cash NOI growth is expected to be within its prior guidance of 2.5
to 3 percent. Individual segment same-store full year 2016 growth
rates should remain within previously disclosed ranges.
- Proceeds from accelerated dispositions
and receipt of loan repayments in 2016 exceeded $600 million
compared to prior guidance of $500 million. Fourth quarter proceeds
approached $350 million and included:
- Asset sales of nearly $240 million at 7
percent cash and GAAP yields, resulting in a significant net
gain.
- Repayment of well-secured and
structured loan investments previously made by the Company at par
plus a premium (8 percent cash and GAAP yield).
- Ventas continued to strengthen its
healthy balance sheet and financial position, with Net Debt to
Adjusted Pro Forma EBITDA expected to improve to a range of 5.7x to
5.8x at year end 2016 compared to 6.1x at year end 2015.
The Company’s full year 2016 guidance is based on a number of
assumptions that are subject to change and many of which are
outside the control of the Company. The Company has not completed
its year-end financial and accounting procedures for the fiscal
year-ended 2016 and the Company’s independent registered public
accounting firm has not audited, reviewed, compiled or performed
any procedures with respect to 2016 results. If actual results for
full year 2016 vary from these assumptions, the Company’s actual
financial results may be materially different from its current
estimated guidance. There can be no assurance that the Company will
achieve these results. A reconciliation of the Company’s full year
2016 guidance is included in this press release.
Preliminary 2017 Outlook
Ventas’s 2017 forecast reflects the continued execution of its
plan to create shareholder value including optimizing its portfolio
through the strategic disposition of substantially all its skilled
nursing portfolio; investing for future growth; and enhancing its
financial profile and liquidity. In 2017, Ventas also expects to
continue to grow its overall same-store cash NOI. The Company’s
preliminary expectations for 2017 include:
- 2017 normalized FFO per diluted share
of $4.12 to $4.18.
- Total Company full year 2017 same-store
cash NOI growth of 1.5 to 2.5 percent, with each segment expected
to contribute positively to same-store cash NOI growth. Same-store
reported GAAP growth from the portfolio is expected, as is
typically the case, to be lower than same-store cash NOI growth due
principally to the straight-lining impact of certain of the
Company’s leases, and the impact of the extension of substantially
all of the Company’s long-term acute care hospital leases with
Kindred Healthcare, Inc.
- Strategic dispositions to further
optimize the portfolio and redeployment of capital into higher
quality investments, with dispositions effected at a cost of
capital that approximates the rate of new investments:
- Strategic dispositions totaling $900
million, including $700 million in proceeds in the second half of
the year through the potential sale of 36 skilled nursing
facilities owned by Ventas. If achieved the Company would realize a
gain exceeding $600 million. However, the Company does not control
whether and when these assets will be sold; and
- Redeployment of disposition proceeds
into new investments exceeding $1 billion, mainly to expand the
Company’s platforms with Ardent Health Services (“Ardent”) and
Wexford Science + Technology, LLC (“Wexford”). These investments
include providing $700 million in secured debt to fund Ardent’s
acquisition of LHP Hospital Group, expected to close late in the
first quarter of 2017; and closing $300 million of new
acquisitions, including high-quality life science and innovation
centers operated by Wexford.
- Funding two new attractive ground-up
developments with Wexford that expand existing life science and
innovation centers associated with the University of Pennsylvania
and Washington University.
- The carryover impact of 2016
deleveraging activities and dispositions, higher interest rates and
enhancement of the Company’s credit profile through refinancing
approximately $1 billion of current debt in order to lengthen the
Company’s weighted average maturity schedule.
- In 2016, Ventas benefitted from profits
from various transactions and fees, which are not projected to
recur in 2017.
The Company’s 2017 preliminary outlook 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 full year 2017
results vary from these assumptions, the Company’s actual financial
results may be materially different from its current preliminary
outlook. There can be no assurance that the Company will achieve
these results. A reconciliation of the Company’s full year 2017
preliminary outlook to the Company’s projected 2017 GAAP earnings
is included in this press release.
Fourth Quarter and Full Year 2016
Release and Earnings Call
Ventas expects to report final results for the fourth quarter
and full year ended December 31, 2016 on Friday, February 10, 2016.
The earnings conference call is scheduled for 10 a.m. Eastern Time
on this date, and investors can access the conference call by
calling (844) 776-7841 (or (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 (404) 537-3406 for international callers), passcode
50587913, beginning at approximately 2:00 p.m. Eastern Time and
will remain for 36 days.
J.P. Morgan Conference
Presentation
Today a presentation regarding the Company will be made by
Company management at the J.P. Morgan Conference in San Francisco,
California at 12:00 p.m. pacific time. The presentation will be
webcast and may be accessed through the Company’s website at
www.ventasreit.com/investor-relations for a limited period of time
following the event. A presentation containing supplemental
information regarding today’s announcement, including quantitative
reconciliations between each non-GAAP financial measure referenced
in this release and its most directly comparable GAAP measure, in
addition to any written materials relating to the Company’s
meetings with certain investors at the J.P. Morgan Conference can
be accessed at the Company’s website and will remain archived for a
limited period of time at www.ventasreit.com/investor-relations.
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, life
science and innovation centers, 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 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 Company’s ability to obtain
the financial results expected from its development and
redevelopment projects; (w) the impact of market or issuer events
on the liquidity or value of the Company’s investments in
marketable securities; (x) 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; (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; and
(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.
Historical cost accounting for real estate assets implicitly
assumes that the value of real estate assets diminishes predictably
over time. However, since real estate values historically have
risen or fallen with market conditions, many industry investors
deem presentations of operating results for real estate companies
that use historical cost accounting to be insufficient by
themselves. For that reason, the Company considers FFO, normalized
FFO, FAD and normalized FAD to be appropriate supplemental measures
of operating performance of an equity REIT. In particular, the
Company believes that normalized FFO is useful because it allows
investors, analysts and Company management to compare the Company’s
operating performance to the operating performance of other real
estate companies and between periods on a consistent basis without
having to account for differences caused by 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 attributable to common stockholders (computed in
accordance with GAAP) excluding gains (or losses) from sales of
real estate property, including gain (or loss) 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) the financial impact of
contingent consideration, severance-related costs and charitable
donations made to the Ventas Charitable Foundation; (e) gains and
losses for non-operational foreign currency hedge agreements and
changes in the fair value of financial instruments; (f) gains and
losses on non-real estate dispositions related to unconsolidated
entities; and (g) expenses related to the re-audit and re-review in
2014 of the Company’s historical financial statements and related
matters. Normalized FAD represents normalized FFO excluding
non-cash components, straight-line rental adjustments and deducting
capital expenditures, including tenant allowances and leasing
commissions. FAD represents normalized FAD after subtracting
merger-related expenses, deal costs and re-audit costs.
FFO, normalized FFO, FAD and normalized FAD presented herein may
not be identical to those presented by other real estate companies
due to the fact that not all real estate companies use the same
definitions. FFO, normalized FFO, FAD and normalized FAD should not
be considered as alternatives to net income or income from
continuing operations (both 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 income from
continuing operations is the most comparable GAAP measure because
it provides insight into the Company’s continuing operations. The
Company believes that in order to facilitate a clear understanding
of the consolidated historical operating results of the Company,
FFO, normalized FFO, FAD and normalized FAD should be examined in
conjunction with net income and income from continuing operations
as presented elsewhere herein.
The Company considers NOI and same-store cash NOI to be
important supplemental measures to net income because they allow
investors, analysts and Company management to assess the Company’s
unlevered property-level operating results and to compare the
Company’s operating results with the operating results of other
real estate companies and between periods on a consistent basis.
The Company defines NOI as total revenues, less interest and other
income, property-level operating expenses and office building
services costs (including amounts in discontinued operations). Cash
receipts may differ due to straight-line recognition of certain
rental income and the application of other GAAP policies. The
Company defines same-store cash NOI as the NOI for properties
owned, consolidated and operational for the full period in both
comparison periods excluding the impact of non-cash items such as
straight-line rent and the impact of exchange rate movements across
the comparison periods. In certain cases, results for same-store
cash NOI may be adjusted to reflect non-recurring items and the
receipt of cash payments and fees not fully recognized as NOI in
the period. Same-store cash NOI excludes assets intended for
disposition and, for the seniors housing operating portfolio, those
properties that transitioned operators after the start of the prior
comparison period.
The Company has not provided a reconciliation of its forecasted
full year 2017 same-store cash NOI growth to its most directly
comparable GAAP measure because the Company is unable to quantify
certain amounts that would be required to be included in the
comparable GAAP measure without unreasonable efforts. For example,
an estimate of the related GAAP measure would depend on seniors
housing operator revenue and expenses and foreign exchange rate
movements, and such data are not currently available or cannot be
currently estimated with confidence. Accordingly, the Company
believes that providing a reconciliation would imply an unwarranted
degree of reliability of the assumptions underlying the estimated
GAAP measure and may be misleading to investors.
The Company believes that Net Debt to Adjusted Pro Forma EBITDA
is an important supplemental measure in evaluating the credit
strength of the Company and its ability to service its debt
obligations. For a reconciliation of Net Debt to Adjusted Pro
Forma EBITDA for the year ended December 31, 2015, please refer to
the reconciliation included in the Company’s Current Report on Form
8-K filed with the SEC on February 12, 2016, which reconciliation
is hereby incorporated by reference. The Company has not provided a
reconciliation of its forecasted full year 2016 Net Debt to
Adjusted Pro Forma EBITDA range guidance to its most directly
comparable GAAP measure because the Company is unable to quantify
certain amounts that would be required to be included in the
comparable GAAP measure without unreasonable efforts. Accordingly,
the Company believes that providing a reconciliation would imply an
unwarranted degree of reliability of the assumptions underlying the
estimated GAAP measure and may be misleading to investors.
NON-GAAP FINANCIAL MEASURES
RECONCILIATION
EPS, FFO and FAD Guidance Attributable
to Common Stockholders 1,2
(Dollars in millions, except per share amounts)
Tentative / Preliminary and Subject to Change
FY2016 – Guidance 2016 – Per Share Low
High Low High
Income from Continuing
Operations $525 $568
$1.51 $1.63 Gain
on Real Estate Dispositions 100 90 0.29 0.26
Other Adjustments 3
(2 ) (2 ) (0.01 ) (0.01 )
Net Income Attributable to Common
Stockholders $623 $656
$1.79 $1.89
Depreciation and Amortization Adjustments 901 870 2.59 2.50 Gain on
Real Estate Dispositions (100 ) (90 ) (0.29 ) (0.26 )
Other Adjustments 3
0 0 0.00 0.00
FFO (NAREIT) Attributable to Common
Stockholders $1,424 $1,436
$4.09 $4.13
Merger-Related Expenses, Deal Costs and Re-Audit Costs 29 31 0.08
0.09 Other Adjustments 3 (27 ) (31 ) (0.08 ) (0.09 )
Normalized FFO
Attributable to Common Stockholders $1,426 $1,436
$4.10 $4.13 % Year-Over-Year Comparable Growth
4 % 5 % Non-Cash Items
Included in Normalized FFO (16 ) (18 ) Capital Expenditures (111 )
(116 )
Normalized FAD
Attributable to Common Stockholders $1,299
$1,302 Merger-Related Expense,
Deal Costs and Re-Audit Costs (29 ) (31 )
FAD Attributable to Common Stockholders
$1,270 $1,271
Weighted Average Diluted Shares 347,897 347,897
1
The Company’s guidance constitutes forward-looking statements
within the meaning of the federal securities laws and is based on a
number of assumptions that are subject to change and many of which
are outside the control of the Company. Actual results may differ
materially from the Company’s expectations depending on factors
discussed in the Company’s filings with the Securities and Exchange
Commission.
2
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
changes in the Company's weighted average diluted share count, if
any.
3
See page 25 of the Q3 2016 supplemental for detailed breakout of
adjustments for each respective category.
NON-GAAP FINANCIAL MEASURES RECONCILIATION
EPS, FFO and FAD Preliminary Outlook
Attributable to Common Stockholders 1,2
(Dollars in millions, except per share amounts)
Tentative / Preliminary and Subject to Change
FY2017 – Preliminary Outlook 2017 – Per Share
Low High Low High
Income
from Continuing Operations $613
$633 $1.71 $1.77
Gain on Real Estate Dispositions 649 679 1.81 1.89
Other Adjustments 3 (6 ) (8 ) (0.02 ) (0.02 )
Net Income
Attributable to Common Stockholders $1,256
$1,304 $3.50
$3.64 Depreciation and Amortization
Adjustments 871 887 2.43 2.48 Gain on Real Estate Dispositions (649
) (679 ) (1.81 ) (1.89 ) Other Adjustments 3 (13 ) (15 ) (0.04 )
(0.04 )
FFO (NAREIT) Attributable to Common Stockholders
$1,465 $1,497
$4.09 $4.18
Merger-Related Expenses, Deal Costs and Re-Audit Costs 15 10 0.04
0.03 Other Adjustments 3 (3 ) (9 ) (0.01 ) (0.03 )
Normalized FFO
Attributable to Common Stockholders $1,477 $1,498
$4.12 $4.18 % Year-Over-Year Comparable Growth
0 % 1 % Non-Cash Items
Included in Normalized FFO 1 (2 ) Capital Expenditures (131 ) (141
)
Normalized FAD
Attributable to Common Stockholders $1,347
$1,355 Merger-Related Expense,
Deal Costs and Re-Audit Costs (15 ) (10 )
FAD Attributable to Common Stockholders
$1,332 $1,345
Weighted Average Diluted Shares 358,491 358,491
1
The Company’s preliminary outlook constitutes forward-looking
statements within the meaning of the federal securities laws and is
based on a number of assumptions that are subject to change and
many of which are outside the control of the Company. Actual
results may differ materially from the Company’s expectations
depending on factors discussed in the Company’s filings with the
Securities and Exchange Commission.
2
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
changes in the Company's weighted average diluted share count, if
any.
3
See page 25 of the Q3 2016 supplemental for detailed breakout of
adjustments for each respective category.
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Ventas, Inc.Ryan K. Shannon(877) 4-VENTAS
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