NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—DESCRIPTION OF BUSINESS
Ventas, Inc. (together with its subsidiaries, unless otherwise indicated or except where the context otherwise requires, “we,” “us” or “our”), an S&P 500 company, is a real estate investment trust (“REIT”) with a highly diversified portfolio of seniors housing and healthcare properties located throughout the United States, Canada and the United Kingdom. As of
March 31, 2017
, we owned approximately
1,300
properties (including properties owned through investments in unconsolidated entities and properties classified as held for sale), consisting of seniors housing communities, medical office buildings (“MOBs”), life science and innovation centers, inpatient rehabilitation and long-term acute care facilities, general acute care hospitals and skilled nursing facilities (“SNFs”), and we had
eight
properties under development, including
one
property that is owned by an unconsolidated real estate entity. Our company was originally founded in 1983 and is headquartered in Chicago, Illinois.
We primarily invest in seniors housing and healthcare properties through acquisitions and lease our properties to unaffiliated tenants or operate them through independent third-party managers. As of
March 31, 2017
, we leased a total of
582
properties (excluding MOBs and including properties owned through investments in unconsolidated entities) to various healthcare operating companies under “triple-net” or “absolute-net” leases that obligate the tenants to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and we engaged independent operators, such as Atria Senior Living, Inc. (“Atria”) and Sunrise Senior Living, LLC (together with its subsidiaries, “Sunrise”), to manage
299
seniors housing communities (including
one
property owned through an investment in unconsolidated entities) for us pursuant to long-term management agreements.
Our
three
largest tenants, Brookdale Senior Living Inc. (together with its subsidiaries, “Brookdale Senior Living”), Kindred Healthcare, Inc. (together with its subsidiaries, “Kindred”) and Ardent Health Partners, LLC (together with its subsidiaries, “Ardent”) leased from us
140
properties (excluding
six
properties owned through investments in unconsolidated entities and excluding
one
property managed by Brookdale Senior Living pursuant to a long-term management agreement),
68
properties (excluding
one
MOB included within our office operations reportable business segment) and
ten
properties, respectively, as of
March 31, 2017
.
Through our Lillibridge Healthcare Services, Inc. (“Lillibridge”) subsidiary and our ownership interest in PMB Real Estate Services LLC (“PMBRES”), we also provide MOB management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. In addition, from time to time, we make secured and other loans and investments relating to seniors housing and healthcare operators or properties.
NOTE 2—ACCOUNTING POLICIES
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. Operating results for the
three months ended March 31, 2017
are not necessarily indicative of the results that may be expected for the year ending
December 31, 2017
. The accompanying consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended
December 31, 2016
, filed with the SEC on February 14, 2017. Certain prior period amounts have been reclassified to conform to the current period presentation.
Principles of Consolidation
The accompanying consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries and the joint venture entities over which we exercise control. All intercompany transactions and balances have been eliminated in consolidation, and our net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.
GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb
the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; and (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. We consolidate our investment in a VIE when we determine that we are its primary beneficiary. We may change our original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affects the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary.
We identify the primary beneficiary of a VIE as the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. We perform this analysis on an ongoing basis.
As it relates to investments in joint ventures, GAAP may preclude consolidation by the sole general partner in certain circumstances based on the type of rights held by the limited partner(s). We assess limited partners’ rights and their impact on our consolidation conclusions, and we reassess if there is a change to the terms or in the exercisability of the rights of the limited partners, the sole general partner increases or decreases its ownership of limited partnership interests, or there is an increase or decrease in the number of outstanding limited partnership interests. We also apply this guidance to managing member interests in limited liability companies.
We consolidate several VIEs that share the following common characteristics:
•
VIEs in the legal form of a limited partnership (“LP”) or limited liability company (“LLC”);
•
The VIEs were designed to own and manage their underlying real estate investments;
•
Ventas (or a subsidiary thereof) is the general partner or managing member of the VIE;
•
Ventas (or a subsidiary thereof) also owns a majority of the voting interests in the VIE;
•
A minority of voting interests in the VIE are owned by external third parties, unrelated to us;
•
The minority owners do not have substantive kick-out or participating rights in the VIEs; and
•
Ventas (or a subsidiary thereof) is the primary beneficiary of the VIE.
We have separately identified certain special purpose entities that were established to allow investments in life science projects by tax credit investors (“TCIs”). We have determined that these special purpose entities are VIEs and that Ventas is the primary beneficiary of the VIEs, and therefore we consolidate these special purpose entities. Our primary beneficiary determination is based upon several factors, including but not limited to the rights we have in directing the activities which most significantly impact the VIEs’ economic performance as well as certain guarantees which protect the TCIs from losses should a tax credit recapture event occur.
In general, the assets of consolidated VIEs are available only for the settlement of the obligations of the respective entities. Unless otherwise required by the LP or LLC agreement, any mortgage loans of the consolidated VIEs are non-recourse to us. The table below summarizes the total assets and liabilities of our consolidated VIEs as reported on our Consolidated Balance Sheets.
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March 31, 2017
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December 31, 2016
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Total Assets
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Total Liabilities
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Total Assets
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Total Liabilities
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(In thousands)
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NHP/PMB L.P.
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$
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628,544
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$
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193,398
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$
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639,763
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$
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199,674
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Ventas Realty Capital Healthcare Trust Operating Partnership, L.P.
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—
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—
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2,143,139
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162,426
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Other identified VIEs
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1,926,041
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343,431
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1,882,336
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354,034
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Wexford tax credit VIEs
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1,101,000
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240,089
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981,752
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234,109
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Investments in Unconsolidated Entities
We report investments in unconsolidated entities over whose operating and financial policies we have the ability to exercise significant influence under the equity method of accounting. Under this method of accounting, our share of the investee’s earnings or losses is included in our Consolidated Statements of Income.
We base the initial carrying value of investments in unconsolidated entities on the fair value of the assets at the time we acquired the joint venture interest. We estimate fair values for our equity method investments based on discounted cash flow models that include all estimated cash inflows and outflows over a specified holding period and, where applicable, any
estimated debt premiums or discounts. The capitalization rates, discount rates and credit spreads we use in these models are based upon assumptions that we believe to be within a reasonable range of current market rates for the respective investments.
We generally amortize any difference between our cost basis and the basis reflected at the joint venture level, if any, over the lives of the related assets and liabilities and include that amortization in our share of income or loss from unconsolidated entities. For earnings of equity method investments with pro rata distribution allocations, net income or loss is allocated between the partners in the joint venture based on their respective stated ownership percentages. In other instances, net income or loss is allocated between the partners in the joint venture based on the hypothetical liquidation at book value method (the “HLBV method”). Under the HLBV method, net income or loss is allocated between the partners based on the difference between each partner’s claim on the net assets of the joint venture at the end and beginning of the period, after taking into account contributions and distributions. Each partner’s share of the net assets of the joint venture is calculated as the amount that the partner would receive if the joint venture were to liquidate all of its assets at net book value and distribute the resulting cash to creditors and partners in accordance with their respective priorities. Under this method, in any given period, we could record more or less income than the joint venture has generated, than actual cash distributions received or than the amount we may receive in the event of an actual liquidation.
Redeemable OP Unitholder and Noncontrolling Interests
We own a majority interest in NHP/PMB L.P. (“NHP/PMB”), a limited partnership formed in 2008 to acquire properties from entities affiliated with Pacific Medical Buildings LLC. We consolidate NHP/PMB, as our wholly owned subsidiary is the general partner, who is the primary beneficiary of this VIE. As of
March 31, 2017
, third party investors owned
2.7 million
Class A limited partnership units in NHP/PMB (“OP Units”), which represented
27.5%
of the total units then outstanding, and we owned
7.2 million
Class B limited partnership units in NHP/PMB, representing the remaining
72.5%
. At any time following the first anniversary of the date of their issuance, the OP Units may be redeemed at the election of the holder for cash or, at our option,
0.9051
shares of our common stock per OP Unit, subject to further adjustment in certain circumstances. We are party by assumption to a registration rights agreement with the holders of the OP Units that requires us, subject to the terms and conditions and certain exceptions set forth therein, to file and maintain a registration statement relating to the issuance of shares of our common stock upon redemption of OP Units.
Prior to January 2017, we owned only a majority interest in Ventas Realty Capital Healthcare Trust Operating Partnership, L.P. (“Ventas Realty OP”) and we consolidated this entity, as our wholly owned subsidiary is the general partner, and was the primary beneficiary of this VIE. In January 2017, third party investors redeemed the remaining
341,776
limited partnership units (“Class C Units”) outstanding for
341,776
shares of Ventas common stock, valued at
$20.9 million
. After giving effect to such redemptions, Ventas Realty OP is our wholly owned subsidiary.
As redemption rights are outside of our control, the redeemable OP Units and Class C Units (together, the “OP Unitholder Interests”) are classified outside of permanent equity on our Consolidated Balance Sheets. We reflect the redeemable OP Unitholder Interests at the greater of cost or fair value. As of
March 31, 2017
and
December 31, 2016
, the fair value of the redeemable OP Unitholder Interests was
$160.5 million
and
$177.2 million
, respectively. We recognize changes in fair value through capital in excess of par value, net of cash distributions paid and purchases by us of any OP Unitholder Interests. Our diluted earnings per share (“EPS”) includes the effect of any potential shares outstanding from redemption of the OP Unitholder Interests.
Certain noncontrolling interests of other consolidated joint ventures were also classified as redeemable at
March 31, 2017
and
December 31, 2016
. Accordingly, we record the carrying amount of these noncontrolling interests at the greater of their initial carrying amount (increased or decreased for the noncontrolling interests’ share of net income or loss and distributions) or the redemption value. Our joint venture partners have certain redemption rights with respect to their noncontrolling interests in these joint ventures that are outside of our control, and the redeemable noncontrolling interests are classified outside of permanent equity on our Consolidated Balance Sheets. We recognize changes in the carrying value of redeemable noncontrolling interests through capital in excess of par value. In March 2017, certain joint venture partners redeemed all (or a portion) of their interests for
$15.8 million
.
Noncontrolling Interests
Excluding the redeemable noncontrolling interests described above, we present the portion of any equity that we do not own in entities that we control (and thus consolidate) as noncontrolling interests and classify those interests as a component of consolidated equity, separate from total Ventas stockholders’ equity, on our Consolidated Balance Sheets. For consolidated joint ventures with pro rata distribution allocations, net income or loss is allocated between the joint venture partners based on their respective stated ownership percentages. In other cases, net income or loss is allocated between the joint venture partners based on the HLBV method. We account for purchases or sales of equity interests that do not result in a change of control as
equity transactions, through capital in excess of par value. In addition, we include net income attributable to the noncontrolling interests in net income in our Consolidated Statements of Income.
Accounting for Historic and New Markets Tax Credits
For certain life science assets, we are party to certain contractual arrangements with TCIs that were established to enable the TCIs to receive benefits of historic tax credits (“HTCs”) and/or new market tax credits (“NMTCs”) for certain properties owned by Ventas. As of
March 31, 2017
, we own
twelve
properties (
two
of which were in development) that had syndicated HTCs or NMTCs, or both, to TCIs.
In general, capital contributions are made by TCIs into special purpose entities that invest in entities owning the subject property that generates the tax credits. The TCIs receive substantially all of the tax credits and hold only a noncontrolling interests in the economic risk and benefits of the special purpose entities.
HTCs are delivered to the TCIs upon substantial completion of the project. NMTCs are allowed for up to
39%
of a qualified investment and are delivered to the TCIs after the investment has been funded and spent on a qualified business. HTCs are subject to
20%
recapture per year beginning one year after the completion of the historic rehabilitation of the subject property. NMTCs are subject to
100%
recapture until the end of the seventh year following the qualifying investment. We have provided the TCIs with certain guarantees which protect the TCIs from losses should a tax credit recapture event occur. The contractual arrangements with the TCIs include a put/call provision whereby we may be obligated or entitled to repurchase the ownership interest of the TCIs in the special purpose entities at the end of the tax credit recapture period. We anticipate that either the TCIs will exercise their put rights or we will exercise our call rights.
The portion of the TCI’s capital contribution that is attributed to the put is recorded at fair value at inception in accounts payable and other liabilities on our Consolidated Balance Sheets, and is accreted to the expected put price as interest expense in our Consolidated Statements of Income over the recapture period. The remaining balance of the TCI’s capital contribution is initially recorded in accounts payable and other liabilities on our Consolidated Balance Sheets and will be relieved upon delivery of the tax credit to the TCI, as a reduction in the carrying value of the subject property, net of allocated expenses. Direct and incremental costs incurred in structuring the transaction are deferred and will be recognized as an increase in the cost basis of the subject property upon the recognition of the related tax credit as discussed above.
Accounting for Real Estate Acquisitions
On January 1, 2017 we adopted ASU 2017-01, Clarifying the Definition of a Business (“ASU 2017-01”) which narrows the FASB’s definition of a business and provides a framework that gives entities a basis for making reasonable judgments about whether a transaction involves an asset or a business. ASU 2017-01 states that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the acquired asset is not a business. If this initial test is not met, an acquired asset cannot be considered a business unless it includes an input and a substantive process that together significantly contribute to the ability to create output. The primary differences between business combinations and asset acquisitions include recognition of goodwill at the acquisition date and expense recognition for transaction costs as incurred. We are applying ASU 2017-01 prospectively for acquisitions after January 1, 2017.
Regardless of whether an acquisition is considered a business combination or an asset acquisition, we record the cost of the businesses (or assets) acquired as tangible and intangible assets and liabilities based upon their estimated fair values as of the acquisition date. Intangibles primarily include the value of in-place leases and acquired lease contracts.
We estimate the fair value of buildings acquired on an as-if-vacant basis, or replacement cost basis and depreciate the building value over the estimated remaining life of the building, generally not to exceed
35
years. We determine the fair value of other fixed assets, such as site improvements and furniture, fixtures and equipment, based upon the replacement cost and depreciate such value over the assets’ estimated remaining useful lives as determined at the applicable acquisition date. We determine the value of land either by considering the sales prices of similar properties in recent transactions or based on internal analyses of recently acquired and existing comparable properties within our portfolio. We generally determine the value of construction in progress based upon the replacement cost. However, for certain acquired properties that are part of a ground-up development, we determine fair value by using the same valuation approach as for all other properties and deducting the estimated cost to complete the development. During the remaining construction period, we capitalize project costs until the development has reached substantial completion. Construction in progress, including capitalized interest, is not depreciated until the development has reached substantial completion.
The fair value of acquired lease-related intangibles, if any, reflects: (i) the estimated value of any above and/or below market leases, determined by discounting the difference between the estimated market rent and in-place lease rent; and (ii) the
estimated value of in-place leases related to the cost to obtain tenants, including leasing commissions, and an estimated value of the absorption period to reflect the value of the rent and recovery costs foregone during a reasonable lease-up period as if the acquired space was vacant. We amortize any acquired lease-related intangibles to revenue or amortization expense over the remaining life of the associated lease plus any assumed bargain renewal periods. If a lease is terminated prior to its stated expiration or not renewed upon expiration, we recognize all unamortized amounts of lease-related intangibles associated with that lease in operations at that time.
We estimate the fair value of purchase option intangible assets and liabilities, if any, by discounting the difference between the applicable property’s acquisition date fair value and an estimate of its future option price. We do not amortize the resulting intangible asset or liability over the term of the lease, but rather adjust the recognized value of the asset or liability upon sale.
We estimate the fair value of tenant or other customer relationships acquired, if any, by considering the nature and extent of existing relationships with the tenant or customer, growth prospects for developing new business with the tenant or customer, the tenant’s credit quality, expectations of lease renewals with the tenant, and the potential for significant, additional future leasing arrangements with the tenant, and we amortize that value over the expected life of the associated arrangements or leases, including the remaining terms of the related leases and any expected renewal periods. We estimate the fair value of trade names and trademarks using a royalty rate methodology and amortize that value over the estimated useful life of the trade name or trademark.
In connection with an acquisition, we may assume rights and obligations under certain lease agreements pursuant to which we become the lessee of a given property. We generally assume the lease classification previously determined by the prior lessee absent a modification in the assumed lease agreement. We assess assumed operating leases, including ground leases, to determine whether the lease terms are favorable or unfavorable to us given current market conditions on the acquisition date. To the extent the lease terms are favorable or unfavorable to us relative to market conditions on the acquisition date, we recognize an intangible asset or liability at fair value and amortize that asset or liability to interest or rental expense in our Consolidated Statements of Income over the applicable lease term. We include all lease-related intangible assets and liabilities within acquired lease intangibles and accounts payable and other liabilities, respectively, on our Consolidated Balance Sheets.
We determine the fair value of loans receivable acquired by discounting the estimated future cash flows using current interest rates at which similar loans with the same terms and length to maturity would be made to borrowers with similar credit ratings. We do not establish a valuation allowance at the acquisition date because the estimated future cash flows already reflect our judgment regarding their uncertainty. We recognize the difference between the acquisition date fair value and the total expected cash flows as interest income using an effective interest method over the life of the applicable loan. Subsequent to the acquisition date, we evaluate changes regarding the uncertainty of future cash flows and the need for a valuation allowance, as appropriate.
We estimate the fair value of noncontrolling interests assumed consistent with the manner in which we value all of the underlying assets and liabilities.
We calculate the fair value of long-term assumed debt by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings, which we approximate based on the rate at which we would expect to incur a replacement instrument on the date of acquisition, and recognize any fair value adjustments related to long-term debt as effective yield adjustments over the remaining term of the instrument.
Impairment of Long-Lived Assets
We periodically evaluate our long-lived assets, primarily consisting of investments in real estate, for impairment indicators. If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying operations. In performing this evaluation, we consider market conditions and our current intentions with respect to holding or disposing of the asset. We adjust the net book value of leased properties and other long-lived assets to fair value if the sum of the expected future undiscounted cash flows, including sales proceeds, is less than book value. We recognize an impairment loss at the time we make any such determination.
If impairment indicators arise with respect to intangible assets with finite useful lives, we evaluate impairment by comparing the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset. If estimated future undiscounted net cash flows are less than the carrying amount of the asset, then we estimate the fair value of the asset and compare the estimated fair value to the intangible asset’s carrying value. We recognize any shortfall from carrying value as an impairment loss in the current period.
We evaluate our investments in unconsolidated entities for impairment at least annually, and whenever events or changes in circumstances indicate that the carrying value of our investment may exceed its fair value. If we determine that a decline in the fair value of our investment in an unconsolidated entity is other-than-temporary, and if such reduced fair value is below the carrying value, we record an impairment.
We test goodwill for impairment at least annually, and more frequently if indicators arise. We first assess qualitative factors, such as current macroeconomic conditions, state of the equity and capital markets and our overall financial and operating performance, to determine the likelihood that the fair value of a reporting unit is less than its carrying amount. If we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we proceed with the two-step approach to evaluating impairment. First, we estimate the fair value of the reporting unit and compare it to the reporting unit’s carrying value. If the carrying value exceeds fair value, we proceed with the second step, which requires us to assign the fair value of the reporting unit to all of the assets and liabilities of the reporting unit as if it had been acquired in a business combination at the date of the impairment test. The excess fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied value of goodwill and is used to determine the amount of impairment. We recognize an impairment loss to the extent the carrying value of goodwill exceeds the implied value in the current period.
Estimates of fair value used in our evaluation of goodwill (if necessary based on our qualitative assessment), investments in real estate, investments in unconsolidated entities and intangible assets are based upon discounted future cash flow projections or other acceptable valuation techniques that are based, in turn, upon all available evidence including level three inputs, such as revenue and expense growth rates, estimates of future cash flows, capitalization rates, discount rates, general economic conditions and trends, or other available market data. Our ability to accurately predict future operating results and cash flows and to estimate and determine fair values impacts the timing and recognition of impairments. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results.
Assets Held for Sale and Discontinued Operations
We sell properties from time to time for various reasons, including favorable market conditions or the exercise of purchase options by tenants. We classify certain long-lived assets as held for sale once the criteria, as defined by GAAP, has been met. Long-lived assets to be disposed of are reported at the lower of their carrying amount or fair value minus cost to sell and are no longer depreciated. We report discontinued operations when the following criteria are met: (1) a component of an entity or group of components has been disposed of or classified as held for sale and represents a strategic shift that has or will have a major effect on an entity’s operations and financial results; or (2) an acquired business is classified as held for sale on the acquisition date. The results of operations for assets meeting the definition of discontinued operations are reflected in our Consolidated Statements of Income as discontinued operations for all periods presented. We allocate estimated interest expense to discontinued operations based on property values and our weighted average interest rate or the property’s actual mortgage interest.
Fair Values of Financial Instruments
Fair value is a market-based measurement, not an entity-specific measurement, and we determine fair value based on the assumptions that we expect market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, GAAP establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).
Level one inputs utilize unadjusted quoted prices for identical assets or liabilities in active markets that we have the ability to access. Level two inputs are inputs other than quoted prices included in level one that are directly or indirectly observable for the asset or liability. Level two inputs may include quoted prices for similar assets and liabilities in active markets and other inputs for the asset or liability that are observable at commonly quoted intervals, such as interest rates, foreign exchange rates and yield curves. Level three inputs are unobservable inputs for the asset or liability, which typically are based on our own assumptions, because there is little, if any, related market activity. If the determination of the fair value measurement is based on inputs from different levels of the hierarchy, the level within which the entire fair value measurement falls is the lowest level input that is significant to the fair value measurement in its entirety. If the volume and level of market activity for an asset or liability has decreased significantly relative to the normal market activity for such asset or liability (or similar assets or liabilities), then transactions or quoted prices may not accurately reflect fair value. In addition, if there is evidence that a transaction for an asset or liability is not orderly, little, if any, weight is placed on that transaction price as an indicator of fair value. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
We use the following methods and assumptions in estimating the fair value of our financial instruments.
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Cash and cash equivalents -
The carrying amount of unrestricted cash and cash equivalents reported on our Consolidated Balance Sheets approximates fair value due to the short maturity of these instruments.
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Escrow deposits and restricted cash
- The carrying amount of escrow deposits and restricted cash reported on our Consolidated Balance Sheets approximates fair value due to the short maturity of these instruments.
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Loans receivable -
We estimate the fair value of loans receivable using level two and level three inputs: we discount future cash flows using current interest rates at which similar loans with the same terms and length to maturity would be made to borrowers with similar credit ratings.
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Marketable debt securities -
We estimate the fair value of corporate bonds, if any, using level two inputs: we observe quoted prices for similar assets or liabilities in active markets that we have the ability to access. We estimate the fair value of certain government-sponsored pooled loan investments using level three inputs: we consider credit spreads, underlying asset performance and credit quality, and default rates.
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Derivative instruments -
With the assistance of a third party, we estimate the fair value of derivative instruments, including interest rate caps, interest rate swaps, and foreign currency forward contracts, using level two inputs: for interest rate caps, we observe forward yield curves and other relevant information; for interest rate swaps, we observe alternative financing rates derived from market-based financing rates, forward yield curves and discount rates; and for foreign currency forward contracts, we estimate the future values of the two currency tranches using forward exchange rates that are based on traded forward points and calculate a present value of the net amount using a discount factor based on observable traded interest rates.
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Senior notes payable and other debt -
We estimate the fair value of senior notes payable and other debt using level two inputs: we discount the future cash flows using current interest rates at which we could obtain similar borrowings. For mortgage debt, we may estimate fair value using level three inputs, similar to those used in determining fair value of loans receivable (above).
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Redeemable OP Unitholder Interests -
We estimate the fair value of our redeemable OP Unitholder Interests using level one inputs: we base fair value on the closing price of our common stock, as OP Units (and previously Class C Units) may be redeemed at the election of the holder for cash or, at our option, shares of our common stock, subject to adjustment in certain circumstances.
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Revenue Recognition
Triple-Net Leased Properties and Office Operations
Certain of our triple-net leases and most of our MOB and life science and innovation center (collectively, “office operations”) leases provide for periodic and determinable increases in base rent. We recognize base rental revenues under these leases on a straight-line basis over the applicable lease term when collectibility is reasonably assured. Recognizing rental income on a straight-line basis generally results in recognized revenues during the first half of a lease term exceeding the cash amounts contractually due from our tenants, creating a straight-line rent receivable that is included in other assets on our Consolidated Balance Sheets. At
March 31, 2017
and
December 31, 2016
, this cumulative excess totaled
$250.1 million
(net of allowances of
$112.0 million
) and
$244.6 million
(net of allowances of
$109.8 million
), respectively (excluding properties classified as held for sale).
Certain of our leases provide for periodic increases in base rent only if certain revenue parameters or other substantive contingencies are met. We recognize the increased rental revenue under these leases as the related parameters or contingencies are met, rather than on a straight-line basis over the applicable lease term.
Senior Living Operations
We recognize resident fees and services, other than move-in fees, monthly as services are provided. We recognize move-in fees on a straight-line basis over the average resident stay. Our lease agreements with residents generally have terms of
12
to
18
months and are cancelable by the resident upon
30
days’ notice.
Other
We recognize interest income from loans and investments, including discounts and premiums, using the effective interest method when collectibility is reasonably assured. We apply the effective interest method on a loan-by-loan basis and recognize discounts and premiums as yield adjustments over the related loan term. We recognize interest income on an impaired loan to the extent our estimate of the fair value of the collateral is sufficient to support the balance of the loan, other receivables and all related accrued interest. When the balance of the loan, other receivables and all related accrued interest is
equal to or less than our estimate of the fair value of the collateral, we recognize interest income on a cash basis. We provide a reserve against an impaired loan to the extent our total investment in the loan exceeds our estimate of the fair value of the loan collateral.
We recognize income from rent, lease termination fees, development services, management advisory services, and all other income when all of the following criteria are met in accordance with SEC Staff Accounting Bulletin 104: (i) the applicable agreement has been fully executed and delivered; (ii) services have been rendered; (iii) the amount is fixed or determinable; and (iv) collectibility is reasonably assured.
Allowances
We assess the collectibility of our rent receivables, including straight-line rent receivables. We base our assessment of the collectibility of rent receivables (other than straight-line rent receivables) on several factors, including, among other things, payment history, the financial strength of the tenant and any guarantors, the value of the underlying collateral, if any, and current economic conditions. If our evaluation of these factors indicates it is probable that we will be unable to recover the full value of the receivable, we provide a reserve against the portion of the receivable that we estimate may not be recovered. We also base our assessment of the collectibility of straight-line rent receivables on several factors, including, among other things, the financial strength of the tenant and any guarantors, the historical operations and operating trends of the property, the historical payment pattern of the tenant and the type of property. If our evaluation of these factors indicates it is probable that we will be unable to receive the rent payments due in the future, we provide a reserve against the recognized straight-line rent receivable asset for the portion, up to its full value, that we estimate may not be recovered. If we change our assumptions or estimates regarding the collectibility of future rent payments required by a lease, we may adjust our reserve to increase or reduce the rental revenue recognized in the period we make such change in our assumptions or estimates.
Recently Issued or Adopted Accounting Standards
On January 1, 2017 we adopted ASU 2016-09,
Compensation - Stock Compensation
(“ASU 2016-09”) which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. Adoption of this ASU did not have a significant impact on our consolidated financial statements.
In 2014, the FASB issued ASU 2014-09,
Revenue From Contracts With Customers
(“ASU 2014-09”, as codified in “ASC 606”), which outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASC 606 states that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” While ASC specifically references contracts with customers, it may also apply to certain other transactions such as the sale of real estate or equipment. ASC 606 is effective for us beginning January 1, 2018 and we have evaluated all revenue streams to identify any differences in the timing, measurement or presentation of revenue recognition. Based on a review of our various revenue streams, we believe the following line items in our Consolidated Statements of Income are subject to ASC 606: office building and other services revenue, as well as certain elements of our resident fees and services. More specifically, our office building and other services revenues are primarily generated by management contracts where we provide management, leasing, marketing, facility development and advisory services. Included within resident fees and services are revenues generated through services we provide to residents of our seniors housing communities that are ancillary to the residents’ contractual rights to occupy living and common-area space at the communities such as care, meals, transportation and activities. While these revenue streams are subject to the application of ASC 606, we believe that the recognition of income will be consistent with the current accounting model because currently the revenues associated with these services are generally recognized on a monthly basis, the period in which the related services are performed. We do not expect its adoption to have a significant impact on our consolidated financial statements. Remaining implementation matters include evaluating quantitative impacts and implementing changes to internal control policies and procedures, if any. We plan to adopt ASC 606 using a modified retrospective method.
In February 2016, the FASB issued ASU 2016-02,
Leases
(Topic 842) (“ASU 2016-02”), which introduces a lessee model that brings most leases on the balance sheet and among other changes, eliminates the requirement in current GAAP for an entity to use bright-line tests in determining lease classification. The amendments in ASU 2016-02 do not significantly change the current lessor accounting model. ASU 2016-02 is not effective for us until January 1, 2019, with early adoption permitted. We are continuing to evaluate this guidance and the impact to us, as both lessor and lessee, on our consolidated financial statements.
NOTE 3—CONCENTRATION OF CREDIT RISK
As of
March 31, 2017
, Atria, Sunrise, Brookdale Senior Living, Kindred and Ardent managed or operated approximately
21.8%
,
10.8%
,
7.7%
,
1.7%
and
4.9%
, respectively, of our real estate investments based on gross book value (excluding properties classified as held for sale and properties owned through investments in unconsolidated entities as of
March 31, 2017
). Because Atria and Sunrise manage our properties in exchange for the receipt of a management fee from us, we are not directly exposed to the credit risk of our managers in the same manner or to the same extent as our triple-net tenants.
Seniors housing communities constituted, based on gross book value, approximately
24.9%
of real estate investments in the triple-net leased properties reportable business segment and
35.1%
of real estate investments in the senior living operations reportable business segment (excluding properties classified as held for sale and properties owned through investments in unconsolidated entities as of
March 31, 2017
). MOBs, life science and innovation centers, inpatient rehabilitation and long-term acute care facilities, general acute care hospitals, SNFs and secured loans receivable and investments collectively comprised the remaining
40.0%
. Our properties were located in
46
states, the District of Columbia,
seven
Canadian provinces and the United Kingdom as of
March 31, 2017
, with properties in
one
state (California) accounting for more than
10%
of our total revenues and total net operating income (“NOI,” which is defined as total revenues, excluding interest and other income, less property-level operating expenses and office building services costs) (in each case excluding amounts in discontinued operations) for the three months then ended.
Triple-Net Leased Properties
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
2017
|
|
2016
|
Revenues
(1)
:
|
|
|
|
Kindred
|
5.0
|
%
|
|
5.3
|
%
|
Brookdale Senior Living
(2)
|
4.7
|
|
|
4.8
|
|
Ardent
|
3.1
|
|
|
3.1
|
|
NOI
(3)
:
|
|
|
|
Kindred
|
8.7
|
%
|
|
9.2
|
%
|
Brookdale Senior Living
(2)
|
8.2
|
|
|
8.3
|
|
Ardent
|
5.3
|
|
|
5.3
|
|
|
|
(1)
|
Total revenues include office building and other services revenue, revenue from loans and investments and interest and other income (excluding amounts in discontinued operations).
|
|
|
(2)
|
Excludes one seniors housing community included in senior living operations.
|
|
|
(3)
|
Excludes amounts in discontinued operations.
|
Each of our leases with Brookdale Senior Living, Kindred and Ardent is a triple-net lease that obligates the tenant to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and to comply with the terms of the mortgage financing documents, if any, affecting the properties. In addition, each of our Brookdale Senior Living, Kindred and Ardent leases has a corporate guaranty. Brookdale Senior Living and Kindred have multiple leases with us and those leases contain cross-default provisions tied to each other, as well as lease renewals by lease agreement or by pool of assets.
The properties we lease to Brookdale Senior Living, Kindred and Ardent accounted for a significant portion of our triple-net leased properties segment revenues and NOI for the three months ended
March 31, 2017
and
2016
. If either Brookdale Senior Living, Kindred or Ardent becomes unable or unwilling to satisfy its obligations to us or to renew its leases with us upon expiration of the terms thereof, our financial condition and results of operations could decline and our ability to service our indebtedness and to make distributions to our stockholders could be impaired. We cannot assure you that Brookdale Senior Living, Kindred and Ardent will have sufficient assets, income and access to financing to enable them to satisfy their respective obligations to us, and any failure, inability or unwillingness by Brookdale Senior Living, Kindred or Ardent to do so could have a material adverse effect on our business, financial condition, results of operations and liquidity, our ability to service our indebtedness and other obligations and our ability to make distributions to our stockholders, as required for us to continue to qualify as a REIT (a “Material Adverse Effect”). We also cannot assure you that Brookdale Senior Living, Kindred and Ardent will elect to renew their respective leases with us upon expiration of the leases or that we will be able to reposition any non-renewed properties on a timely basis or on the same or better economic terms, if at all.
Senior Living Operations
As of
March 31, 2017
, Atria and Sunrise, collectively, provided comprehensive property management and accounting services with respect to
267
of our
299
seniors housing communities (including
one
property owned through an investment in unconsolidated entities), for which we pay annual management fees pursuant to long-term management agreements.
We rely on our managers’ personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our senior living operations efficiently and effectively. We also rely on our managers to set appropriate resident fees and otherwise operate our seniors housing communities in compliance with the terms of our management agreements and all applicable laws and regulations. Although we have various rights as the property owner under our management agreements, including various rights to terminate and exercise remedies under the agreements as provided therein, Atria’s or Sunrise’s failure, inability or unwillingness to satisfy its respective obligations under those agreements, to efficiently and effectively manage our properties or to provide timely and accurate accounting information with respect thereto could have a Material Adverse Effect on us. In addition, significant changes in Atria’s or Sunrise’s senior management or equity ownership or any adverse developments in their businesses and affairs or financial condition could have a Material Adverse Effect on us.
Our
34%
ownership interest in Atria entitles us to certain rights and minority protections, as well as the right to appoint
two
of
six
members on the Atria Board of Directors.
Brookdale Senior Living, Kindred, Atria, Sunrise and Ardent Information
Each of Brookdale Senior Living and Kindred is subject to the reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Brookdale Senior Living and Kindred contained or referred to in this Quarterly Report on Form 10-Q has been derived from SEC filings made by Brookdale Senior Living or Kindred, as the case may be, or other publicly available information, or was provided to us by Brookdale Senior Living or Kindred, and we have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you of its accuracy. We are providing this data for informational purposes only, and you are encouraged to obtain Brookdale Senior Living’s and Kindred’s publicly available filings, which can be found at the SEC’s website at www.sec.gov.
Atria, Sunrise and Ardent are not currently subject to the reporting requirements of the SEC. The information related to Atria, Sunrise and Ardent contained or referred to in this Quarterly Report on Form 10-Q has been derived from publicly available information or was provided to us by Atria, Sunrise or Ardent, as the case may be, and we have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you of its accuracy.
NOTE 4—ACQUISITIONS OF REAL ESTATE PROPERTY
We acquire and invest in seniors housing and healthcare properties primarily to achieve an expected yield on investment, to grow and diversify our portfolio and revenue base, and to reduce our dependence on any single tenant, operator or manager, geographic location, asset type, business model or revenue source.
During the three months ended
March 31, 2017
, we acquired
eleven
triple-net leased seniors housing communities (including
six
assets previously owned by an equity method investee) and
one
life science, research and medical campus (reported within our office operations reportable business segment) for an aggregate purchase price of
$353.4 million
. Each of these acquisitions was accounted for as an asset acquisition.
NOTE 5—DISPOSITIONS
2017 Activity
During the
three months ended
March 31, 2017
, we sold
five
triple-net leased properties for aggregate consideration of
$85.0 million
and we recognized a gain on the sale of these assets of
$43.3 million
.
Real Estate Impairment
We recognized impairments of
$5.2 million
and
$10.3 million
, respectively, for the
three months ended
March 31, 2017
and
2016
, which are recorded in depreciation and amortization in our Consolidated Statements of Income.
Assets Held for Sale
The table below summarizes our real estate assets classified as held for sale as of
March 31, 2017
and
December 31, 2016
, including the amounts reported on our Consolidated Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
|
|
Number of Properties Held for Sale
|
|
Assets Held for Sale
|
|
Liabilities Held for Sale
|
|
Number of Properties Held for Sale
|
|
Assets Held for Sale
|
|
Liabilities Held for Sale
|
|
|
(Dollars in thousands)
|
Office Operations
|
|
9
|
|
|
60,173
|
|
|
1,389
|
|
|
7
|
|
|
53,151
|
|
|
1,462
|
|
Senior Living Operations*
|
|
—
|
|
|
1,810
|
|
|
—
|
|
|
—
|
|
|
1,810
|
|
|
—
|
|
Total
|
|
9
|
|
|
$
|
61,983
|
|
|
$
|
1,389
|
|
|
7
|
|
|
$
|
54,961
|
|
|
$
|
1,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Includes one vacant land parcel classified as held for sale as of March 31, 2017 and December 31, 2016.
|
NOTE 6—LOANS RECEIVABLE AND INVESTMENTS
As of
March 31, 2017
and
December 31, 2016
, we had
$1.5 billion
and
$754.6 million
, respectively, of net loans receivable and investments relating to seniors housing and healthcare operators or properties. The following is a summary of our net loans receivable and investments as of
March 31, 2017
and
December 31, 2016
, including amortized cost, fair value and unrealized gains or losses on available-for-sale investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Amount
|
|
Amortized Cost
|
|
Fair Value
|
|
Unrealized Gain
|
|
(In thousands)
|
As of March 31, 2017:
|
|
|
|
|
|
|
|
Secured/mortgage loans and other
|
$
|
1,343,173
|
|
|
$
|
1,343,173
|
|
|
$
|
1,361,388
|
|
|
$
|
—
|
|
Government-sponsored pooled loan investments
(1)
|
55,244
|
|
|
54,128
|
|
|
55,244
|
|
|
1,116
|
|
Total investments reported as Secured loans receivable and investments, net
|
1,398,417
|
|
|
1,397,301
|
|
|
1,416,632
|
|
|
1,116
|
|
|
|
|
|
|
|
|
|
Non-mortgage loans receivable, net
|
54,630
|
|
|
54,630
|
|
|
55,218
|
|
|
—
|
|
Total investments reported as Other assets
|
54,630
|
|
|
54,630
|
|
|
55,218
|
|
|
—
|
|
Total loans receivable and investments, net
|
$
|
1,453,047
|
|
|
$
|
1,451,931
|
|
|
$
|
1,471,850
|
|
|
$
|
1,116
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016:
|
|
|
|
|
|
|
|
Secured/mortgage loans and other
|
$
|
646,972
|
|
|
$
|
646,972
|
|
|
$
|
655,981
|
|
|
$
|
—
|
|
Government-sponsored pooled loan investments
(1)
|
55,049
|
|
|
53,810
|
|
|
55,049
|
|
|
1,239
|
|
Total investments reported as Secured loans receivable and investments, net
|
702,021
|
|
|
700,782
|
|
|
711,030
|
|
|
1,239
|
|
|
|
|
|
|
|
|
|
Non-mortgage loans receivable, net
|
52,544
|
|
|
52,544
|
|
|
53,626
|
|
|
—
|
|
Total investments reported as Other assets
|
52,544
|
|
|
52,544
|
|
|
53,626
|
|
|
—
|
|
Total loans receivable and investments, net
|
$
|
754,565
|
|
|
$
|
753,326
|
|
|
$
|
764,656
|
|
|
$
|
1,239
|
|
(1)
Investments in government-sponsored pool loans have contractual maturity dates in 2023.
2017 Activity
In March 2017, we provided secured debt financing to a subsidiary of Ardent to facilitate Ardent’s acquisition of LHP Hospital Group, Inc. (“LHP”), which included a
$700 million
term loan and a
$60.0 million
revolving line of credit feature (of which
$15.0 million
was outstanding at
March 31, 2017
). The LIBOR-based debt financing has a
five
-year term with a weighted average interest rate of approximately
8.9%
and is guaranteed by Ardent’s parent company.
In April 2017, we received
$5.8 million
as a partial prepayment of a secured loan receivable.
NOTE 7—INVESTMENTS IN UNCONSOLIDATED ENTITIES
We report investments in unconsolidated entities over whose operating and financial policies we have the ability to exercise significant influence under the equity method of accounting. We are not required to consolidate these entities because our joint venture partners have significant participating rights, nor are these entities considered VIEs, as they are controlled by equity holders with sufficient capital. At
March 31, 2017
, we had ownership interests (ranging from
5%
to
25%
) in joint ventures that owned
33
properties, excluding properties under development and properties classified as held for sale. We account for our interests in real estate joint ventures, as well as our
34%
interest in Atria and
9.9%
interest in Ardent (which are included within other assets on our Consolidated Balance Sheets), under the equity method of accounting.
With the exception of our interests in Atria and Ardent, we provide various services to each unconsolidated entity in exchange for fees and reimbursements. Total management fees earned in connection with these entities were
$1.6 million
and
$1.7 million
for the
three months ended March 31, 2017
and
2016
, respectively (which is included in office building and other services revenue in our Consolidated Statements of Income).
In February 2017, we acquired the controlling interest in
six
triple-net leased seniors housing communities for a purchase price of
$100.0 million
. In connection with this acquisition, we re-measured the fair value of our previously held equity interest, resulting in a gain on re-measurement of
$3.0 million
, which is included in income (loss) from unconsolidated entities in our Consolidated Statements of Income.
NOTE 8—INTANGIBLES
The following is a summary of our intangibles as of
March 31, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
|
Balance
|
|
Remaining
Weighted Average
Amortization
Period in Years
|
|
Balance
|
|
Remaining
Weighted Average
Amortization
Period in Years
|
|
(Dollars in thousands)
|
Intangible assets:
|
|
|
|
|
|
|
|
Above market lease intangibles
|
$
|
188,684
|
|
|
7.3
|
|
$
|
184,993
|
|
|
6.9
|
In-place and other lease intangibles
|
1,343,682
|
|
23.3
|
|
1,325,636
|
|
|
23.6
|
Goodwill
|
1,033,484
|
|
N/A
|
|
1,033,225
|
|
|
N/A
|
Other intangibles
|
35,797
|
|
|
11.9
|
|
35,783
|
|
|
11.3
|
Accumulated amortization
|
(793,927
|
)
|
|
N/A
|
|
(769,558
|
)
|
|
N/A
|
Net intangible assets
|
$
|
1,807,720
|
|
|
21.2
|
|
$
|
1,810,079
|
|
|
21.5
|
Intangible liabilities:
|
|
|
|
|
|
|
|
Below market lease intangibles
|
$
|
361,388
|
|
|
13.8
|
|
$
|
345,103
|
|
|
14.1
|
Other lease intangibles
|
40,343
|
|
|
39.0
|
|
40,843
|
|
|
38.5
|
Accumulated amortization
|
(140,822
|
)
|
|
N/A
|
|
(133,468
|
)
|
|
N/A
|
Purchase option intangibles
|
3,568
|
|
|
N/A
|
|
3,568
|
|
|
N/A
|
Net intangible liabilities
|
$
|
264,477
|
|
|
15.6
|
|
$
|
256,046
|
|
|
15.9
|
N/A—Not Applicable.
Above market lease intangibles and in-place and other lease intangibles are included in acquired lease intangibles within real estate investments on our Consolidated Balance Sheets. Other intangibles (including non-compete agreements, trade names and trademarks) are included in other assets on our Consolidated Balance Sheets. Below market lease intangibles, other
lease intangibles and purchase option intangibles are included in accounts payable and other liabilities on our Consolidated Balance Sheets.
NOTE 9—OTHER ASSETS
The following is a summary of our other assets as of
March 31, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
March 31,
2017
|
|
December 31,
2016
|
|
(In thousands)
|
Straight-line rent receivables, net
|
$
|
250,083
|
|
|
$
|
244,580
|
|
Non-mortgage loans receivable, net
|
54,630
|
|
|
52,544
|
|
Other intangibles, net
|
7,484
|
|
|
8,190
|
|
Investment in unconsolidated operating entities
|
43,003
|
|
|
28,431
|
|
Other
|
162,083
|
|
|
184,619
|
|
Total other assets
|
$
|
517,283
|
|
|
$
|
518,364
|
|
NOTE 10—SENIOR NOTES PAYABLE AND OTHER DEBT
The following is a summary of our senior notes payable and other debt as of
March 31, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
|
(In thousands)
|
Unsecured revolving credit facility
(1)
|
$
|
170,731
|
|
|
$
|
146,538
|
|
1.250% Senior Notes due 2017
|
300,000
|
|
|
300,000
|
|
2.00% Senior Notes due 2018
|
700,000
|
|
|
700,000
|
|
Unsecured term loan due 2018
(2)
|
200,000
|
|
|
200,000
|
|
Unsecured term loan due 2019
(2)
|
372,042
|
|
|
371,215
|
|
4.00% Senior Notes due 2019
|
600,000
|
|
|
600,000
|
|
3.00% Senior Notes, Series A due 2019
(3)
|
300,503
|
|
|
297,841
|
|
2.700% Senior Notes due 2020
|
500,000
|
|
|
500,000
|
|
Unsecured term loan due 2020
|
900,000
|
|
|
900,000
|
|
4.750% Senior Notes due 2021
|
700,000
|
|
|
700,000
|
|
4.25% Senior Notes due 2022
|
600,000
|
|
|
600,000
|
|
3.25% Senior Notes due 2022
|
500,000
|
|
|
500,000
|
|
3.300% Senior Notes due 2022
(3)
|
187,815
|
|
|
186,150
|
|
3.125% Senior Notes due 2023
|
400,000
|
|
|
400,000
|
|
3.100% Senior Notes due 2023
|
400,000
|
|
|
—
|
|
3.750% Senior Notes due 2024
|
400,000
|
|
|
400,000
|
|
4.125% Senior Notes, Series B due 2024
(3)
|
187,815
|
|
|
186,150
|
|
3.500% Senior Notes due 2025
|
600,000
|
|
|
600,000
|
|
4.125% Senior Notes due 2026
|
500,000
|
|
|
500,000
|
|
3.25% Senior Notes due 2026
|
450,000
|
|
|
450,000
|
|
3.850% Senior Notes due 2027
|
400,000
|
|
|
—
|
|
6.90% Senior Notes due 2037
|
52,400
|
|
|
52,400
|
|
6.59% Senior Notes due 2038
|
22,973
|
|
|
22,973
|
|
5.45% Senior Notes due 2043
|
258,750
|
|
|
258,750
|
|
5.70% Senior Notes due 2043
|
300,000
|
|
|
300,000
|
|
4.375% Senior Notes due 2045
|
300,000
|
|
|
300,000
|
|
Mortgage loans and other
|
1,717,529
|
|
|
1,718,897
|
|
Total
|
12,020,558
|
|
|
11,190,914
|
|
Deferred financing costs, net
|
(64,086
|
)
|
|
(61,304
|
)
|
Unamortized fair value adjustment
|
19,708
|
|
|
25,224
|
|
Unamortized discounts
|
(32,447
|
)
|
|
(27,508
|
)
|
Senior notes payable and other debt
|
$
|
11,943,733
|
|
|
$
|
11,127,326
|
|
|
|
(1)
|
$152.7 million
and
$146.5 million
of aggregate borrowings are denominated in Canadian dollars as of
March 31, 2017
and
December 31, 2016
, respectively.
|
|
|
(2)
|
These amounts represent in aggregate the
$572.0 million
of unsecured term loan borrowings under our unsecured credit facility, of which
$93.5 million
included in the 2019 tranche is in the form of Canadian dollars.
|
|
|
(3)
|
These borrowings are in the form of Canadian dollars.
|
As of
March 31, 2017
, our indebtedness had the following maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Amount
Due at Maturity
|
|
Unsecured
Revolving Credit
Facility
(1)
|
|
Scheduled Periodic
Amortization
|
|
Total Maturities
|
|
(In thousands)
|
2017
|
$
|
609,499
|
|
|
$
|
—
|
|
|
$
|
19,375
|
|
|
$
|
628,874
|
|
2018
|
1,101,879
|
|
|
170,731
|
|
|
21,206
|
|
|
1,293,816
|
|
2019
|
1,697,131
|
|
|
—
|
|
|
14,789
|
|
|
1,711,920
|
|
2020
|
1,416,913
|
|
|
—
|
|
|
11,809
|
|
|
1,428,722
|
|
2021
|
772,838
|
|
|
—
|
|
|
10,325
|
|
|
783,163
|
|
Thereafter
(2)
|
6,056,092
|
|
|
—
|
|
|
117,971
|
|
|
6,174,063
|
|
Total maturities
|
$
|
11,654,352
|
|
|
$
|
170,731
|
|
|
$
|
195,475
|
|
|
$
|
12,020,558
|
|
|
|
(1)
|
As of
March 31, 2017
, we had
$91.3 million
of unrestricted cash and cash equivalents, for
$79.4 million
of net borrowings outstanding under our unsecured revolving credit facility.
|
|
|
(2)
|
Includes
$52.4 million
aggregate principal amount of our
6.90%
senior notes due 2037 that is subject to repurchase, at the option of the holders, on October 1 in each of 2017 and 2027, and
$23.0 million
aggregate principal amount of
6.59%
senior notes due 2038 that is subject to repurchase, at the option of the holders, on July 7 in each of 2018, 2023 and 2028.
|
Unsecured Revolving Credit Facility and Unsecured Term Loans
On
April 25, 2017
, we entered into a new unsecured credit facility comprised of a
$3.0 billion
unsecured revolving credit facility, initially priced at LIBOR plus
0.875%
, that replaced our previous
$2.0 billion
unsecured revolving credit facility priced at
LIBOR
plus
1.0%
. The new unsecured credit facility also amends certain provisions within our
$200.0 million
term loan that is scheduled to mature in 2018 and our
$372.0 million
term loan that is scheduled to mature in 2019. The term loans remain priced at
LIBOR
plus
1.05%
.
The new revolving credit facility matures in 2021, but may be extended at our option subject to the satisfaction of certain conditions for
two
additional periods of
six months
each. The new unsecured credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to
$3.75 billion
.
As of
March 31, 2017
, our unsecured credit facility was comprised of a
$2.0 billion
revolving credit facility priced at
LIBOR
plus
1.0%
and a
$200.0 million
four
-year term loan and a
$372.0 million
five
-year term loan, each priced at
LIBOR
plus
1.05%
.
As of
March 31, 2017
, we had
$170.7 million
of borrowings outstanding,
$14.1 million
of letters of credit outstanding and
$1.8 billion
of unused borrowing capacity available under our unsecured revolving credit facility.
As of
March 31, 2017
, we also had a
$900.0 million
term loan due 2020 priced at
LIBOR
plus
97.5
basis points.
Senior Notes
In March 2017, we issued and sold
$400.0 million
aggregate principal amount of
3.100%
senior notes due 2023 at a public offering price equal to
99.280%
of par, for total proceeds of
$397.1 million
before the underwriting discount and expenses, and
$400.0 million
aggregate principal amount of
3.850%
senior notes due 2027 at a public offering price equal to
99.196%
of par, for total proceeds of
$396.8 million
before the underwriting discount and expenses.
Derivatives and Hedging
In January and February 2017, we entered into a total of
$275 million
of notional forward starting swaps with an effective date of April 3, 2017 that reduced our exposure to fluctuations in interest rates related to changes in rates between the trade dates of the swaps and the forecasted issuance of long-term debt. The rate on the notional amounts was locked at a weighted average rate of
2.33%
. In March 2017, these swaps were terminated in conjunction with the issuance of the
3.850%
senior notes due 2027, which resulted in a
$0.8 million
gain which will be recognized over the life of the notes using the effective interest method.
In March 2017, we entered into interest rate swaps totaling a notional amount of
$400 million
with a maturity of
January 15, 2023
, effectively converting fixed rate debt to three month LIBOR-based floating rate debt. As a result, we will
receive a fixed rate on the swap of
3.10%
and will pay a floating rate equal to three month LIBOR plus a weighted average swap spread of
0.98%
.
NOTE 11—FAIR VALUES OF FINANCIAL INSTRUMENTS
As of
March 31, 2017
and
December 31, 2016
, the carrying amounts and fair values of our financial instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
|
Carrying
Amount
|
|
Fair Value
|
|
Carrying
Amount
|
|
Fair Value
|
|
(In thousands)
|
Assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
91,284
|
|
|
$
|
91,284
|
|
|
$
|
286,707
|
|
|
$
|
286,707
|
|
Secured mortgage loans and other
|
1,343,173
|
|
|
1,361,388
|
|
|
646,972
|
|
|
655,981
|
|
Non-mortgage loans receivable, net
|
54,630
|
|
|
55,218
|
|
|
52,544
|
|
|
53,626
|
|
Government-sponsored pooled loan investments
|
55,244
|
|
|
55,244
|
|
|
55,049
|
|
|
55,049
|
|
Derivative instruments
|
3,445
|
|
|
3,445
|
|
|
3,302
|
|
|
3,302
|
|
Liabilities:
|
|
|
|
|
|
|
|
Senior notes payable and other debt, gross
|
12,020,558
|
|
|
12,173,575
|
|
|
11,190,914
|
|
|
11,369,440
|
|
Derivative instruments
|
3,049
|
|
|
3,049
|
|
|
2,316
|
|
|
2,316
|
|
Redeemable OP unitholder interests
|
160,475
|
|
|
160,475
|
|
|
177,177
|
|
|
177,177
|
|
For a discussion of the assumptions considered, refer to “
NOTE 2—ACCOUNTING POLICIES
.” The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented above are not necessarily indicative of the amounts we would realize in a current market exchange.
NOTE 12—LITIGATION
Proceedings against Tenants, Operators and Managers
From time to time, Brookdale Senior Living, Kindred, Atria, Sunrise and our other tenants, operators and managers are parties to certain legal actions, regulatory investigations and claims arising in the conduct of their business and operations. Even though we generally are not party to these proceedings, the unfavorable resolution of any such actions, investigations or claims could, individually or in the aggregate, materially adversely affect such tenants’, operators’ or managers’ liquidity, financial condition or results of operations and their ability to satisfy their respective obligations to us, which, in turn, could have a Material Adverse Effect on us.
Proceedings Indemnified and Defended by Third Parties
From time to time, we are party to certain legal actions, regulatory investigations and claims for which third parties are contractually obligated to indemnify, defend and hold us harmless. The tenants of our triple-net leased properties and, in some cases, their affiliates are required by the terms of their leases and other agreements with us to indemnify, defend and hold us harmless against certain actions, investigations and claims arising in the course of their business and related to the operations of our triple-net leased properties. In addition, third parties from whom we acquired certain of our assets and, in some cases, their affiliates are required by the terms of the related conveyance documents to indemnify, defend and hold us harmless against certain actions, investigations and claims related to the acquired assets and arising prior to our ownership or related to excluded assets and liabilities. In some cases, a portion of the purchase price consideration is held in escrow for a specified period of time as collateral for these indemnification obligations. We are presently being defended by certain tenants and other obligated third parties in these types of matters. We cannot assure you that our tenants, their affiliates or other obligated third parties will continue to defend us in these matters, that our tenants, their affiliates or other obligated third parties will have sufficient assets, income and access to financing to enable them to satisfy their defense and indemnification obligations to us or that any purchase price consideration held in escrow will be sufficient to satisfy claims for which we are entitled to indemnification. The unfavorable resolution of any such actions, investigations or claims could, individually or in the aggregate, materially adversely affect our tenants’ or other obligated third parties’ liquidity, financial condition or results of operations and their ability to satisfy their respective obligations to us, which, in turn, could have a Material Adverse Effect on us.
Proceedings Arising in Connection with Senior Living and Office Operations; Other Litigation
From time to time, we are party to various legal actions, regulatory investigations and claims (some of which may not be insured and some of which may allege large damage amounts) arising in connection with our senior living and office operations or otherwise in the course of our business. In limited circumstances, the manager of the applicable seniors housing community, MOB or life science innovation center may be contractually obligated to indemnify, defend and hold us harmless against such actions, investigations and claims. It is the opinion of management, except as otherwise set forth in this
Note 12
, that the disposition of any such actions, investigations and claims that are currently pending will not, individually or in the aggregate, have a Material Adverse Effect on us. However, regardless of their merits, we may be forced to expend significant financial resources to defend and resolve these matters. We are unable to predict the ultimate outcome of these actions, investigations and claims, and if management’s assessment of our liability with respect thereto is incorrect, such actions, investigations and claims could have a Material Adverse Effect on us.
NOTE 13—INCOME TAXES
We have elected to be taxed as a REIT under the applicable provisions of the Internal Revenue Code of 1986, as amended for every year beginning with the year ended December 31, 1999. We have also elected for certain of our subsidiaries to be treated as taxable REIT subsidiaries (“TRS” or “TRS entities”), which are subject to federal, state and foreign income taxes. All entities other than the TRS entities are collectively referred to as the “REIT” within this
NOTE 13
. Certain REIT entities are subject to foreign income tax.
Although the TRS entities and certain other foreign entities have paid minimal cash federal, state and foreign income taxes for the
three
months ended
March 31, 2017
, their income tax liabilities may increase in future periods as we exhaust net operating loss (“NOL”) carryforwards and as our senior living and other operations grow. Such increases could be significant.
Our consolidated provision for income taxes for the
three months ended March 31, 2017
and
2016
was a benefit of
$3.1 million
and
$8.4 million
, respectively. The income tax benefits for the
three months ended March 31, 2017
and
2016
, were each due primarily to operating losses at our taxable REIT subsidiaries.
Realization of a deferred tax benefit related to NOLs depends in part upon generating sufficient taxable income in future periods. The NOL carryforwards have begun to expire annually for the REIT and begin to expire in 2024 with respect to the TRS entities.
Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. Net deferred tax liabilities with respect to our TRS entities totaled
$294.1 million
and
$316.6 million
as of
March 31, 2017
and
December 31, 2016
, respectively, and related primarily to differences between the financial reporting and tax bases of fixed and intangible assets, net of loss carryforwards.
Generally, we are subject to audit under the statute of limitations by the Internal Revenue Service for the year ended December 31, 2013 and subsequent years and are subject to audit by state taxing authorities for the year ended December 31, 2012 and subsequent years. We are subject to audit generally under the statutes of limitation by the Canada Revenue Agency and provincial authorities with respect to the Canadian entities for years ended December 31, 2012 and subsequent years. We are also subject to audit in Canada for periods subsequent to the acquisition, and certain prior periods, with respect to the entities acquired in 2014 from Holiday Retirement. We are subject to audit in the United Kingdom generally for periods ended in and subsequent to 2015.
NOTE 14—STOCKHOLDERS' EQUITY
Capital Stock
We may sell from time to time our common stock under our “at-the-market” (“ATM”) equity offering program. As of
March 31, 2017
, approximately
$230.6 million
of our common stock remained available for sale under our ATM equity offering program.
Accumulated Other Comprehensive Loss
The following is a summary of our accumulated other comprehensive loss as of
March 31, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
|
(In thousands)
|
Foreign currency translation
|
$
|
(62,110
|
)
|
|
$
|
(66,192
|
)
|
Unrealized gain on marketable securities
|
1,116
|
|
|
1,239
|
|
Other
|
7,337
|
|
|
7,419
|
|
Total accumulated other comprehensive loss
|
$
|
(53,657
|
)
|
|
$
|
(57,534
|
)
|
NOTE 15—EARNINGS PER SHARE
The following table shows the amounts used in computing our basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
2017
|
|
2016
|
|
(In thousands, except per share amounts)
|
Numerator for basic and diluted earnings per share:
|
|
|
|
Income from continuing operations
|
$
|
155,912
|
|
|
$
|
123,339
|
|
Discontinued operations
|
(53
|
)
|
|
(489
|
)
|
Gain on real estate dispositions
|
43,289
|
|
|
26,184
|
|
Net income
|
199,148
|
|
|
149,034
|
|
Net income attributable to noncontrolling interests
|
1,021
|
|
|
54
|
|
Net income attributable to common stockholders
|
$
|
198,127
|
|
|
$
|
148,980
|
|
Denominator:
|
|
|
|
Denominator for basic earnings per share—weighted average shares
|
354,410
|
|
|
335,559
|
|
Effect of dilutive securities:
|
|
|
|
Stock options
|
452
|
|
|
311
|
|
Restricted stock awards
|
164
|
|
|
149
|
|
OP Units
|
2,546
|
|
|
3,183
|
|
Denominator for diluted earnings per share—adjusted weighted average shares
|
357,572
|
|
|
339,202
|
|
Basic earnings per share:
|
|
|
|
Income from continuing operations
|
$
|
0.44
|
|
|
$
|
0.37
|
|
Net income attributable to common stockholders
|
0.56
|
|
|
0.44
|
|
Diluted earnings per share:
|
|
|
|
Income from continuing operations
|
$
|
0.44
|
|
|
$
|
0.36
|
|
Net income attributable to common stockholders
|
0.55
|
|
|
0.44
|
|
NOTE 16—SEGMENT INFORMATION
As of
March 31, 2017
, we operated through
three
reportable business segments: triple-net leased properties, senior living operations and office operations. Under our triple-net leased properties segment, we invest in and own seniors housing and healthcare properties throughout the United States and the United Kingdom and lease those properties to healthcare operating companies under “triple-net” or “absolute-net” leases that obligate the tenants to pay all property-related expenses. In our senior living operations segment, we invest in seniors housing communities throughout the United States and Canada and engage independent operators, such as Atria and Sunrise, to manage those communities. In our office operations segment, we primarily acquire, own, develop, lease and manage MOBs and life science and innovation centers throughout the United States. Information provided for “all other” includes income from loans and investments and other miscellaneous income and various corporate-level expenses not directly attributable to any of our
three
reportable business segments. Assets included in “all other” consist primarily of corporate assets, including cash, restricted cash, deferred financing costs, loans receivable and investments, and miscellaneous accounts receivable.
Our chief operating decision makers evaluate performance of the combined properties in each reportable business segment and determine how to allocate resources to those segments, in significant part, based on segment net operating income (“NOI”) and related measures. We define segment NOI as NOI adjusted for income or loss from unconsolidated entities, and we define NOI as total revenues, less interest and other income, property-level operating expenses and office building services costs. We consider segment NOI useful because it allows investors, analysts and our management to measure unlevered property-level operating results and to compare our operating results to the operating results of other real estate companies between periods on a consistent basis. In order to facilitate a clear understanding of our historical consolidated operating results, segment NOI should be examined in conjunction with income from continuing operations as presented in our consolidated financial statements and other financial data included elsewhere in this Quarterly Report on Form 10-Q.
Interest expense, depreciation and amortization, general, administrative and professional fees, income tax expense and other non-property specific revenues and expenses are not allocated to individual reportable business segments for purposes of assessing segment performance. There are no intersegment sales or transfers.
Summary information by reportable business segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2017
|
|
Triple-Net
Leased
Properties
|
|
Senior
Living
Operations
|
|
Office
Operations
|
|
All
Other
|
|
Total
|
|
(In thousands)
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Rental income
|
$
|
209,327
|
|
|
$
|
—
|
|
|
$
|
185,895
|
|
|
$
|
—
|
|
|
$
|
395,222
|
|
Resident fees and services
|
—
|
|
|
464,188
|
|
|
—
|
|
|
—
|
|
|
464,188
|
|
Office building and other services revenue
|
1,205
|
|
|
—
|
|
|
1,931
|
|
|
270
|
|
|
3,406
|
|
Income from loans and investments
|
—
|
|
|
—
|
|
|
—
|
|
|
20,146
|
|
|
20,146
|
|
Interest and other income
|
—
|
|
|
—
|
|
|
—
|
|
|
481
|
|
|
481
|
|
Total revenues
|
$
|
210,532
|
|
|
$
|
464,188
|
|
|
$
|
187,826
|
|
|
$
|
20,897
|
|
|
$
|
883,443
|
|
Total revenues
|
$
|
210,532
|
|
|
$
|
464,188
|
|
|
$
|
187,826
|
|
|
$
|
20,897
|
|
|
$
|
883,443
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
—
|
|
|
—
|
|
|
—
|
|
|
481
|
|
|
481
|
|
Property-level operating expenses
|
—
|
|
|
312,073
|
|
|
56,914
|
|
|
—
|
|
|
368,987
|
|
Office building services costs
|
—
|
|
|
—
|
|
|
738
|
|
|
—
|
|
|
738
|
|
Segment NOI
|
210,532
|
|
|
152,115
|
|
|
130,174
|
|
|
20,416
|
|
|
513,237
|
|
Income (loss) from unconsolidated entities
|
3,269
|
|
|
(76
|
)
|
|
335
|
|
|
(378
|
)
|
|
3,150
|
|
Segment profit
|
$
|
213,801
|
|
|
$
|
152,039
|
|
|
$
|
130,509
|
|
|
$
|
20,038
|
|
|
516,387
|
|
Interest and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
481
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
(108,804
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
(217,783
|
)
|
General, administrative and professional fees
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,961
|
)
|
Loss on extinguishment of debt, net
|
|
|
|
|
|
|
|
|
(309
|
)
|
Merger-related expenses and deal costs
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,056
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,188
|
)
|
Income tax benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
3,145
|
|
Income from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
155,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2016
|
|
Triple-Net
Leased
Properties
|
|
Senior
Living
Operations
|
|
Office
Operations
|
|
All
Other
|
|
Total
|
|
(In thousands)
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Rental income
|
$
|
214,487
|
|
|
$
|
—
|
|
|
$
|
144,136
|
|
|
$
|
—
|
|
|
$
|
358,623
|
|
Resident fees and services
|
—
|
|
|
463,976
|
|
|
—
|
|
|
—
|
|
|
463,976
|
|
Office building and other services revenue
|
1,199
|
|
|
—
|
|
|
4,976
|
|
|
1,010
|
|
|
7,185
|
|
Income from loans and investments
|
—
|
|
|
—
|
|
|
—
|
|
|
22,386
|
|
|
22,386
|
|
Interest and other income
|
—
|
|
|
—
|
|
|
—
|
|
|
119
|
|
|
119
|
|
Total revenues
|
$
|
215,686
|
|
|
$
|
463,976
|
|
|
$
|
149,112
|
|
|
$
|
23,515
|
|
|
$
|
852,289
|
|
Total revenues
|
$
|
215,686
|
|
|
$
|
463,976
|
|
|
$
|
149,112
|
|
|
$
|
23,515
|
|
|
$
|
852,289
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
—
|
|
|
—
|
|
|
—
|
|
|
119
|
|
|
119
|
|
Property-level operating expenses
|
—
|
|
|
312,541
|
|
|
43,681
|
|
|
—
|
|
|
356,222
|
|
Office building services costs
|
—
|
|
|
—
|
|
|
3,451
|
|
|
—
|
|
|
3,451
|
|
Segment NOI
|
215,686
|
|
|
151,435
|
|
|
101,980
|
|
|
23,396
|
|
|
492,497
|
|
(Loss) income from unconsolidated entities
|
(671
|
)
|
|
337
|
|
|
(126
|
)
|
|
262
|
|
|
(198
|
)
|
Segment profit
|
$
|
215,015
|
|
|
$
|
151,772
|
|
|
$
|
101,854
|
|
|
$
|
23,658
|
|
|
492,299
|
|
Interest and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
119
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
(103,273
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
(236,387
|
)
|
General, administrative and professional fees
|
|
|
|
|
|
|
|
|
|
|
|
|
(31,726
|
)
|
Loss on extinguishment of debt, net
|
|
|
|
|
|
|
|
|
(314
|
)
|
Merger-related expenses and deal costs
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,632
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,168
|
)
|
Income tax benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
8,421
|
|
Income from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
123,339
|
|
Capital expenditures, including investments in real estate property and development project expenditures, by reportable business segment are as follows:
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
2017
|
|
2016
|
|
(In thousands)
|
Capital expenditures:
|
|
|
|
Triple-net leased properties
|
$
|
93,809
|
|
|
$
|
40,701
|
|
Senior living operations
|
21,325
|
|
|
18,994
|
|
Office operations
|
193,996
|
|
|
12,413
|
|
Total capital expenditures
|
$
|
309,130
|
|
|
$
|
72,108
|
|
Our portfolio of properties and mortgage loan and other investments are located in the United States, Canada and the United Kingdom. Revenues are attributed to an individual country based on the location of each property. Geographic information regarding our operations is as follows:
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
2017
|
|
2016
|
|
(In thousands)
|
Revenues:
|
|
|
|
United States
|
$
|
832,820
|
|
|
$
|
804,201
|
|
Canada
|
44,595
|
|
|
41,129
|
|
United Kingdom
|
6,028
|
|
|
6,959
|
|
Total revenues
|
$
|
883,443
|
|
|
$
|
852,289
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
|
(In thousands)
|
Net real estate property:
|
|
|
|
United States
|
$
|
19,325,618
|
|
|
$
|
19,105,939
|
|
Canada
|
1,036,815
|
|
|
1,037,105
|
|
United Kingdom
|
253,296
|
|
|
251,710
|
|
Total net real estate property
|
$
|
20,615,729
|
|
|
20,394,754
|
|
NOTE 17—CONDENSED CONSOLIDATING INFORMATION (Unaudited)
Ventas, Inc. has fully and unconditionally guaranteed the obligation to pay principal and interest with respect to the outstanding senior notes issued by our
100%
owned subsidiary, Ventas Realty, Limited Partnership (“Ventas Realty”), including the senior notes that were jointly issued with Ventas Capital Corporation. Ventas Capital Corporation is a direct
100%
owned subsidiary of Ventas Realty that has no assets or operations, but was formed in 2002 solely to facilitate offerings of senior notes by a limited partnership. None of our other subsidiaries (such subsidiaries, excluding Ventas Realty and Ventas Capital Corporation, the “Ventas Subsidiaries”) is obligated with respect to Ventas Realty’s outstanding senior notes. Certain of Ventas Realty’s outstanding senior notes reflected in our condensed consolidating information were issued jointly with Ventas Capital Corporation.
Ventas, Inc. has also fully and unconditionally guaranteed the obligation to pay principal and interest with respect to the outstanding senior notes issued by our 100% owned subsidiary, Ventas Canada Finance Limited. None of our other subsidiaries is obligated with respect to Ventas Canada Finance Limited’s outstanding senior notes, all of which were issued on a private placement basis in Canada.
In connection with the acquisition of Nationwide Health Properties, Inc. (“NHP”), our
100%
owned subsidiary, Nationwide Health Properties, LLC (“NHP LLC”), as successor to NHP, assumed the obligation to pay principal and interest with respect to the outstanding senior notes issued by NHP. Neither we nor any of our subsidiaries (other than NHP LLC) is obligated with respect to any of NHP LLC’s outstanding senior notes.
Under certain circumstances, contractual and legal restrictions, including those contained in the instruments governing our subsidiaries’ outstanding mortgage indebtedness, may restrict our ability to obtain cash from our subsidiaries for the purpose of meeting our debt service obligations, including our payment guarantees with respect to Ventas Realty’s and Ventas Canada Finance Limited’s senior notes.
The following pages summarize our condensed consolidating information as of
March 31, 2017
and
December 31, 2016
and for the
three
months ended
March 31, 2017
and
2016
.
CONDENSED CONSOLIDATING BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2017
|
|
Ventas, Inc.
|
|
Ventas
Realty
|
|
Ventas
Subsidiaries
|
|
Consolidated
Elimination
|
|
Consolidated
|
|
(In thousands)
|
Assets
|
|
|
|
|
|
|
|
|
|
Net real estate investments
|
$
|
1,954
|
|
|
$
|
159,621
|
|
|
$
|
21,961,547
|
|
|
$
|
—
|
|
|
$
|
22,123,122
|
|
Cash and cash equivalents
|
9,602
|
|
|
—
|
|
|
81,682
|
|
|
—
|
|
|
91,284
|
|
Escrow deposits and restricted cash
|
199
|
|
|
1,548
|
|
|
90,428
|
|
|
—
|
|
|
92,175
|
|
Investment in and advances to affiliates
|
14,790,298
|
|
|
2,938,442
|
|
|
—
|
|
|
(17,728,740
|
)
|
|
—
|
|
Goodwill
|
—
|
|
|
—
|
|
|
1,033,484
|
|
|
—
|
|
|
1,033,484
|
|
Assets held for sale
|
—
|
|
|
—
|
|
|
61,983
|
|
|
—
|
|
|
61,983
|
|
Other assets
|
38,801
|
|
|
4,831
|
|
|
473,651
|
|
|
—
|
|
|
517,283
|
|
Total assets
|
$
|
14,840,854
|
|
|
$
|
3,104,442
|
|
|
$
|
23,702,775
|
|
|
$
|
(17,728,740
|
)
|
|
$
|
23,919,331
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Senior notes payable and other debt
|
$
|
—
|
|
|
$
|
9,215,783
|
|
|
$
|
2,727,950
|
|
|
$
|
—
|
|
|
$
|
11,943,733
|
|
Intercompany loans
|
7,501,737
|
|
|
(7,009,900
|
)
|
|
(491,837
|
)
|
|
—
|
|
|
—
|
|
Accrued interest
|
—
|
|
|
60,432
|
|
|
17,787
|
|
|
—
|
|
|
78,219
|
|
Accounts payable and other liabilities
|
245,454
|
|
|
33,347
|
|
|
667,873
|
|
|
—
|
|
|
946,674
|
|
Liabilities held for sale
|
—
|
|
|
(1
|
)
|
|
1,390
|
|
|
—
|
|
|
1,389
|
|
Deferred income taxes
|
294,057
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
294,057
|
|
Total liabilities
|
8,041,248
|
|
|
2,299,661
|
|
|
2,923,163
|
|
|
—
|
|
|
13,264,072
|
|
Redeemable OP unitholder and noncontrolling interests
|
—
|
|
|
—
|
|
|
171,384
|
|
|
—
|
|
|
171,384
|
|
Total equity
|
6,799,606
|
|
|
804,781
|
|
|
20,608,228
|
|
|
(17,728,740
|
)
|
|
10,483,875
|
|
Total liabilities and equity
|
$
|
14,840,854
|
|
|
$
|
3,104,442
|
|
|
$
|
23,702,775
|
|
|
$
|
(17,728,740
|
)
|
|
$
|
23,919,331
|
|
CONDENSED CONSOLIDATING BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
Ventas, Inc.
|
|
Ventas
Realty
|
|
Ventas
Subsidiaries
|
|
Consolidated
Elimination
|
|
Consolidated
|
|
(In thousands)
|
Assets
|
|
|
|
|
|
|
|
|
|
Net real estate investments
|
$
|
2,007
|
|
|
$
|
173,259
|
|
|
$
|
21,017,430
|
|
|
$
|
—
|
|
|
$
|
21,192,696
|
|
Cash and cash equivalents
|
210,303
|
|
|
—
|
|
|
76,404
|
|
|
—
|
|
|
286,707
|
|
Escrow deposits and restricted cash
|
198
|
|
|
1,504
|
|
|
78,945
|
|
|
—
|
|
|
80,647
|
|
Investment in and advances to affiliates
|
14,258,380
|
|
|
2,938,442
|
|
|
—
|
|
|
(17,196,822
|
)
|
|
—
|
|
Goodwill
|
—
|
|
|
—
|
|
|
1,033,225
|
|
|
—
|
|
|
1,033,225
|
|
Assets held for sale
|
—
|
|
|
—
|
|
|
54,961
|
|
|
—
|
|
|
54,961
|
|
Other assets
|
35,468
|
|
|
6,792
|
|
|
476,104
|
|
|
—
|
|
|
518,364
|
|
Total assets
|
$
|
14,506,356
|
|
|
$
|
3,119,997
|
|
|
$
|
22,737,069
|
|
|
$
|
(17,196,822
|
)
|
|
$
|
23,166,600
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Senior notes payable and other debt
|
$
|
—
|
|
|
$
|
8,406,979
|
|
|
$
|
2,720,347
|
|
|
$
|
—
|
|
|
$
|
11,127,326
|
|
Intercompany loans
|
7,088,289
|
|
|
(6,209,707
|
)
|
|
(878,582
|
)
|
|
—
|
|
|
—
|
|
Accrued interest
|
—
|
|
|
65,403
|
|
|
18,359
|
|
|
—
|
|
|
83,762
|
|
Accounts payable and other liabilities
|
89,115
|
|
|
35,587
|
|
|
783,226
|
|
|
—
|
|
|
907,928
|
|
Liabilities held for sale
|
—
|
|
|
(1
|
)
|
|
1,463
|
|
|
—
|
|
|
1,462
|
|
Deferred income taxes
|
316,641
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
316,641
|
|
Total liabilities
|
7,494,045
|
|
|
2,298,261
|
|
|
2,644,813
|
|
|
—
|
|
|
12,437,119
|
|
Redeemable OP unitholder and noncontrolling interests
|
—
|
|
|
—
|
|
|
200,728
|
|
|
—
|
|
|
200,728
|
|
Total equity
|
7,012,311
|
|
|
821,736
|
|
|
19,891,528
|
|
|
(17,196,822
|
)
|
|
10,528,753
|
|
Total liabilities and equity
|
$
|
14,506,356
|
|
|
$
|
3,119,997
|
|
|
$
|
22,737,069
|
|
|
$
|
(17,196,822
|
)
|
|
$
|
23,166,600
|
|
CONDENSED CONSOLIDATING STATEMENT OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2017
|
|
Ventas, Inc.
|
|
Ventas
Realty
|
|
Ventas
Subsidiaries
|
|
Consolidated
Elimination
|
|
Consolidated
|
|
(In thousands)
|
Revenues
|
|
|
|
|
|
|
|
|
|
Rental income
|
$
|
585
|
|
|
$
|
47,819
|
|
|
$
|
346,818
|
|
|
$
|
—
|
|
|
$
|
395,222
|
|
Resident fees and services
|
—
|
|
|
—
|
|
|
464,188
|
|
|
—
|
|
|
464,188
|
|
Office building and other services revenue
|
—
|
|
|
—
|
|
|
3,406
|
|
|
—
|
|
|
3,406
|
|
Income from loans and investments
|
281
|
|
|
—
|
|
|
19,865
|
|
|
—
|
|
|
20,146
|
|
Equity earnings in affiliates
|
136,989
|
|
|
—
|
|
|
(308
|
)
|
|
(136,681
|
)
|
|
—
|
|
Interest and other income
|
343
|
|
|
—
|
|
|
138
|
|
|
—
|
|
|
481
|
|
Total revenues
|
138,198
|
|
|
47,819
|
|
|
834,107
|
|
|
(136,681
|
)
|
|
883,443
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Interest
|
(16,600
|
)
|
|
74,789
|
|
|
50,615
|
|
|
—
|
|
|
108,804
|
|
Depreciation and amortization
|
1,409
|
|
|
2,371
|
|
|
214,003
|
|
|
—
|
|
|
217,783
|
|
Property-level operating expenses
|
—
|
|
|
83
|
|
|
368,904
|
|
|
—
|
|
|
368,987
|
|
Office building services costs
|
—
|
|
|
—
|
|
|
738
|
|
|
—
|
|
|
738
|
|
General, administrative and professional fees
|
130
|
|
|
4,700
|
|
|
29,131
|
|
|
—
|
|
|
33,961
|
|
Loss on extinguishment of debt, net
|
—
|
|
|
19
|
|
|
290
|
|
|
—
|
|
|
309
|
|
Merger-related expenses and deal costs
|
1,863
|
|
|
—
|
|
|
193
|
|
|
—
|
|
|
2,056
|
|
Other
|
(349
|
)
|
|
—
|
|
|
1,537
|
|
|
—
|
|
|
1,188
|
|
Total expenses
|
(13,547
|
)
|
|
81,962
|
|
|
665,411
|
|
|
—
|
|
|
733,826
|
|
Income (loss) from continuing operations before unconsolidated entities, income taxes, real estate dispositions and noncontrolling interests
|
151,745
|
|
|
(34,143
|
)
|
|
168,696
|
|
|
(136,681
|
)
|
|
149,617
|
|
Income (loss) from unconsolidated entities
|
—
|
|
|
3,321
|
|
|
(171
|
)
|
|
—
|
|
|
3,150
|
|
Income tax benefit
|
3,145
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,145
|
|
Income (loss) from continuing operations
|
154,890
|
|
|
(30,822
|
)
|
|
168,525
|
|
|
(136,681
|
)
|
|
155,912
|
|
Discontinued operations
|
(53
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(53
|
)
|
Gain (loss) on real estate dispositions
|
43,290
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
43,289
|
|
Net income (loss)
|
198,127
|
|
|
(30,822
|
)
|
|
168,524
|
|
|
(136,681
|
)
|
|
199,148
|
|
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
1,021
|
|
|
—
|
|
|
1,021
|
|
Net income (loss) attributable to common stockholders
|
$
|
198,127
|
|
|
$
|
(30,822
|
)
|
|
$
|
167,503
|
|
|
$
|
(136,681
|
)
|
|
$
|
198,127
|
|
CONDENSED CONSOLIDATING STATEMENT OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2016
|
|
Ventas, Inc.
|
|
Ventas
Realty
|
|
Ventas
Subsidiaries
|
|
Consolidated
Elimination
|
|
Consolidated
|
|
(In thousands)
|
Revenues
|
|
|
|
|
|
|
|
|
|
Rental income
|
$
|
916
|
|
|
$
|
48,725
|
|
|
$
|
308,982
|
|
|
$
|
—
|
|
|
$
|
358,623
|
|
Resident fees and services
|
—
|
|
|
—
|
|
|
463,976
|
|
|
—
|
|
|
463,976
|
|
Office building and other services revenue
|
602
|
|
|
—
|
|
|
6,583
|
|
|
—
|
|
|
7,185
|
|
Income from loans and investments
|
—
|
|
|
—
|
|
|
22,386
|
|
|
—
|
|
|
22,386
|
|
Equity earnings in affiliates
|
108,762
|
|
|
—
|
|
|
(342
|
)
|
|
(108,420
|
)
|
|
—
|
|
Interest and other income
|
29
|
|
|
—
|
|
|
90
|
|
|
—
|
|
|
119
|
|
Total revenues
|
110,309
|
|
|
48,725
|
|
|
801,675
|
|
|
(108,420
|
)
|
|
852,289
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Interest
|
(10,795
|
)
|
|
68,579
|
|
|
45,489
|
|
|
—
|
|
|
103,273
|
|
Depreciation and amortization
|
4,932
|
|
|
9,914
|
|
|
221,541
|
|
|
—
|
|
|
236,387
|
|
Property-level operating expenses
|
—
|
|
|
79
|
|
|
356,143
|
|
|
—
|
|
|
356,222
|
|
Office building services costs
|
—
|
|
|
—
|
|
|
3,451
|
|
|
—
|
|
|
3,451
|
|
General, administrative and professional fees
|
(15
|
)
|
|
4,504
|
|
|
27,237
|
|
|
—
|
|
|
31,726
|
|
Loss on extinguishment of debt, net
|
—
|
|
|
—
|
|
|
314
|
|
|
—
|
|
|
314
|
|
Merger-related expenses and deal costs
|
1,372
|
|
|
|
|
260
|
|
|
—
|
|
|
1,632
|
|
Other
|
(49
|
)
|
|
—
|
|
|
4,217
|
|
|
—
|
|
|
4,168
|
|
Total expenses
|
(4,555
|
)
|
|
83,076
|
|
|
658,652
|
|
|
—
|
|
|
737,173
|
|
Income (loss) from continuing operations before unconsolidated entities, income taxes, real estate dispositions and noncontrolling interests
|
114,864
|
|
|
(34,351
|
)
|
|
143,023
|
|
|
(108,420
|
)
|
|
115,116
|
|
Income (loss) from unconsolidated entities
|
—
|
|
|
103
|
|
|
(301
|
)
|
|
—
|
|
|
(198
|
)
|
Income tax benefit
|
8,421
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,421
|
|
Income (loss) from continuing operations
|
123,285
|
|
|
(34,248
|
)
|
|
142,722
|
|
|
(108,420
|
)
|
|
123,339
|
|
Discontinued operations
|
(489
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(489
|
)
|
Gain on real estate dispositions
|
26,184
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,184
|
|
Net income (loss)
|
148,980
|
|
|
(34,248
|
)
|
|
142,722
|
|
|
(108,420
|
)
|
|
149,034
|
|
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
54
|
|
|
—
|
|
|
54
|
|
Net income (loss) attributable to common stockholders
|
$
|
148,980
|
|
|
$
|
(34,248
|
)
|
|
$
|
142,668
|
|
|
$
|
(108,420
|
)
|
|
$
|
148,980
|
|
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2017
|
|
Ventas, Inc.
|
|
Ventas
Realty
|
|
Ventas
Subsidiaries
|
|
Consolidated
Elimination
|
|
Consolidated
|
|
(In thousands)
|
Net income (loss)
|
$
|
198,127
|
|
|
$
|
(30,822
|
)
|
|
$
|
168,524
|
|
|
$
|
(136,681
|
)
|
|
199,148
|
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
—
|
|
|
—
|
|
|
4,082
|
|
|
—
|
|
|
4,082
|
|
Change in unrealized gain on marketable securities
|
(123
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(123
|
)
|
Other
|
—
|
|
|
—
|
|
|
(82
|
)
|
|
—
|
|
|
(82
|
)
|
Total other comprehensive (loss) income
|
(123
|
)
|
|
—
|
|
|
4,000
|
|
|
—
|
|
|
3,877
|
|
Comprehensive income (loss)
|
198,004
|
|
|
(30,822
|
)
|
|
172,524
|
|
|
(136,681
|
)
|
|
203,025
|
|
Comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
1,021
|
|
|
—
|
|
|
1,021
|
|
Comprehensive income (loss) attributable to common stockholders
|
$
|
198,004
|
|
|
$
|
(30,822
|
)
|
|
$
|
171,503
|
|
|
$
|
(136,681
|
)
|
|
$
|
202,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2016
|
|
Ventas, Inc.
|
|
Ventas
Realty
|
|
Ventas
Subsidiaries
|
|
Consolidated
Elimination
|
|
Consolidated
|
|
(In thousands)
|
Net income (loss)
|
$
|
148,980
|
|
|
$
|
(34,248
|
)
|
|
$
|
142,722
|
|
|
$
|
(108,420
|
)
|
|
$
|
149,034
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
—
|
|
|
—
|
|
|
(10,668
|
)
|
|
—
|
|
|
(10,668
|
)
|
Change in unrealized gain on marketable securities
|
181
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
181
|
|
Other
|
—
|
|
|
—
|
|
|
(1,880
|
)
|
|
—
|
|
|
(1,880
|
)
|
Total other comprehensive income (loss)
|
181
|
|
|
—
|
|
|
(12,548
|
)
|
|
—
|
|
|
(12,367
|
)
|
Comprehensive income (loss)
|
149,161
|
|
|
(34,248
|
)
|
|
130,174
|
|
|
(108,420
|
)
|
|
136,667
|
|
Comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
54
|
|
|
—
|
|
|
54
|
|
Comprehensive income (loss) attributable to common stockholders
|
$
|
149,161
|
|
|
$
|
(34,248
|
)
|
|
$
|
130,120
|
|
|
$
|
(108,420
|
)
|
|
$
|
136,613
|
|
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2017
|
|
Ventas, Inc.
|
|
Ventas
Realty
|
|
Ventas
Subsidiaries
|
|
Consolidated
Elimination
|
|
Consolidated
|
|
(In thousands)
|
Net cash provided by (used in) operating activities
|
$
|
4,280
|
|
|
$
|
(32,666
|
)
|
|
$
|
364,117
|
|
|
$
|
—
|
|
|
$
|
335,731
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Net investment in real estate property
|
(198,843
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(198,843
|
)
|
Proceeds from loans receivable
|
—
|
|
|
—
|
|
|
3,363
|
|
|
—
|
|
|
3,363
|
|
Investment in loans receivable and other
|
(2,313
|
)
|
|
—
|
|
|
(699,045
|
)
|
|
—
|
|
|
(701,358
|
)
|
Capital expenditures
|
—
|
|
|
(9
|
)
|
|
(23,826
|
)
|
|
—
|
|
|
(23,835
|
)
|
Development project expenditures
|
—
|
|
|
—
|
|
|
(86,452
|
)
|
|
—
|
|
|
(86,452
|
)
|
Investment in unconsolidated operating entity
|
—
|
|
|
—
|
|
|
(14,850
|
)
|
|
—
|
|
|
(14,850
|
)
|
Other
|
—
|
|
|
—
|
|
|
(12,090
|
)
|
|
—
|
|
|
(12,090
|
)
|
Net cash used in investing activities
|
(201,156
|
)
|
|
(9
|
)
|
|
(832,900
|
)
|
|
—
|
|
|
(1,034,065
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Net change in borrowings under revolving credit facility
|
—
|
|
|
18,000
|
|
|
4,822
|
|
|
—
|
|
|
22,822
|
|
Proceeds from debt
|
—
|
|
|
793,904
|
|
|
3,310
|
|
|
—
|
|
|
797,214
|
|
Repayment of debt
|
—
|
|
|
(19
|
)
|
|
(20,477
|
)
|
|
—
|
|
|
(20,496
|
)
|
Purchase of noncontrolling interests
|
(15,809
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,809
|
)
|
Net change in intercompany debt
|
577,099
|
|
|
(800,193
|
)
|
|
223,094
|
|
|
—
|
|
|
—
|
|
Payment of deferred financing costs
|
—
|
|
|
(6,384
|
)
|
|
—
|
|
|
—
|
|
|
(6,384
|
)
|
Cash distribution (to) from affiliates
|
(298,190
|
)
|
|
27,367
|
|
|
270,823
|
|
|
—
|
|
|
—
|
|
Cash distribution to common stockholders
|
(275,368
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(275,368
|
)
|
Cash distribution to redeemable OP unitholders
|
—
|
|
|
—
|
|
|
(1,893
|
)
|
|
—
|
|
|
(1,893
|
)
|
Contributions from noncontrolling interests
|
—
|
|
|
—
|
|
|
2,102
|
|
|
—
|
|
|
2,102
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
(2,410
|
)
|
|
—
|
|
|
(2,410
|
)
|
Other
|
3,297
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,297
|
|
Net cash (used in) provided by financing activities
|
(8,971
|
)
|
|
32,675
|
|
|
479,371
|
|
|
—
|
|
|
503,075
|
|
Net (decrease) increase in cash and cash equivalents
|
(205,847
|
)
|
|
—
|
|
|
10,588
|
|
|
—
|
|
|
(195,259
|
)
|
Effect of foreign currency translation on cash and cash equivalents
|
5,146
|
|
|
—
|
|
|
(5,310
|
)
|
|
—
|
|
|
(164
|
)
|
Cash and cash equivalents at beginning of period
|
210,303
|
|
|
—
|
|
|
76,404
|
|
|
—
|
|
|
286,707
|
|
Cash and cash equivalents at end of period
|
$
|
9,602
|
|
|
$
|
—
|
|
|
$
|
81,682
|
|
|
$
|
—
|
|
|
$
|
91,284
|
|
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2016
|
|
Ventas, Inc.
|
|
Ventas
Realty
|
|
Ventas
Subsidiaries
|
|
Consolidated
Elimination
|
|
Consolidated
|
|
(In thousands)
|
Net cash provided by (used in) operating activities
|
$
|
26,413
|
|
|
$
|
(34,344
|
)
|
|
$
|
285,080
|
|
|
$
|
—
|
|
|
$
|
277,149
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in real estate property
|
(13,620
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,620
|
)
|
Proceeds from loans receivable
|
—
|
|
|
—
|
|
|
1,625
|
|
|
—
|
|
|
1,625
|
|
Investment in loans receivable and other
|
—
|
|
|
—
|
|
|
(146,214
|
)
|
|
—
|
|
|
(146,214
|
)
|
Proceeds from real estate disposals
|
11,091
|
|
|
—
|
|
|
43,120
|
|
|
—
|
|
|
54,211
|
|
Capital expenditures
|
—
|
|
|
—
|
|
|
(23,721
|
)
|
|
—
|
|
|
(23,721
|
)
|
Development capital expenditures
|
—
|
|
|
—
|
|
|
(34,767
|
)
|
|
—
|
|
|
(34,767
|
)
|
Other
|
—
|
|
|
—
|
|
|
(4,265
|
)
|
|
—
|
|
|
(4,265
|
)
|
Net cash used in investing activities
|
(2,529
|
)
|
|
—
|
|
|
(164,222
|
)
|
|
—
|
|
|
(166,751
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Net change in borrowings under revolving credit facility
|
—
|
|
|
(10,000
|
)
|
|
147,440
|
|
|
—
|
|
|
137,440
|
|
Proceeds from debt
|
—
|
|
|
—
|
|
|
145
|
|
|
—
|
|
|
145
|
|
Repayment of debt
|
—
|
|
|
—
|
|
|
(151,309
|
)
|
|
—
|
|
|
(151,309
|
)
|
Net change in intercompany debt
|
81,812
|
|
|
41,031
|
|
|
(122,843
|
)
|
|
—
|
|
|
—
|
|
Payment of deferred financing costs
|
—
|
|
|
—
|
|
|
(76
|
)
|
|
—
|
|
|
(76
|
)
|
Issuance of common stock, net
|
149,631
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
149,631
|
|
Cash distribution (to) from affiliates
|
(7,440
|
)
|
|
3,313
|
|
|
4,127
|
|
|
—
|
|
|
—
|
|
Cash distribution to common stockholders
|
(245,496
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(245,496
|
)
|
Cash distribution to redeemable OP unitholders
|
—
|
|
|
—
|
|
|
(2,323
|
)
|
|
—
|
|
|
(2,323
|
)
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
(1,743
|
)
|
|
—
|
|
|
(1,743
|
)
|
Other
|
1,893
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,893
|
|
Net cash (used in) provided by financing activities
|
(19,600
|
)
|
|
34,344
|
|
|
(126,582
|
)
|
|
—
|
|
|
(111,838
|
)
|
Net increase (decrease) in cash and cash equivalents
|
4,284
|
|
|
—
|
|
|
(5,724
|
)
|
|
—
|
|
|
(1,440
|
)
|
Effect of foreign currency translation on cash and cash equivalents
|
(8,710
|
)
|
|
—
|
|
|
8,828
|
|
|
—
|
|
|
118
|
|
Cash and cash equivalents at beginning of period
|
11,733
|
|
|
—
|
|
|
41,290
|
|
|
—
|
|
|
53,023
|
|
Cash and cash equivalents at end of period
|
$
|
7,307
|
|
|
$
|
—
|
|
|
$
|
44,394
|
|
|
$
|
—
|
|
|
$
|
51,701
|
|