- Strong 2017 Earnings and Property
Performance
- Over $900 Million of Strategic
Dispositions in 2017 with Gains Exceeding $700 Million
- Outstanding Financial Condition and
Liquidity
- 2018 Guidance Incorporates Property
Level Growth, $1.5 Billion of Capital Recycling and Further
Enhancement of Financial Strength
Ventas, Inc. (NYSE: VTR) today announced its results for the
fourth quarter and full year ended December 31, 2017:
- Income from continuing operations per
diluted common share for the full year 2017 grew 13 percent to
$1.80 compared to the same period in 2016. For the fourth quarter
2017, income from continuing operations per diluted common share
was $0.50.
- Normalized Funds From Operations
(“FFO”) per diluted common share for the full year 2017 grew one
percent to $4.16 compared to the same period in 2016. For the
fourth quarter 2017, normalized FFO per diluted common share was
$1.03.
- Reported FFO per diluted common share,
as defined by the National Association of Real Estate Investment
Trusts (“NAREIT FFO”), for the full year 2017 grew two percent to
$4.22 compared to the same period in 2016. For the fourth quarter
2017, NAREIT FFO per diluted common share was $1.13.
- The Company recognized $717 million, or
$2.00 per share, in gains on real estate disposals in 2017, which
are included in net income but excluded from income from continuing
operations, normalized FFO and NAREIT FFO.
The Ventas Advantage: Foundation for
Lasting Excellence
“2017 was another excellent year for Ventas, as we generated
record cash flow from operations and delivered normalized FFO per
share and same-store property cash NOI growth at the high end of
our expectations,” said Debra A. Cafaro, Ventas Chairman and Chief
Executive Officer. “To further enhance our diverse portfolio, we
made nearly $2 billion in value-creating investments, including
significant expansion of our exciting university-based life science
business, profitably disposed of almost $1 billion in assets and
completed innovative deals with our leading operating partners.
“The Ventas Advantage has proven resilient through cycles for
two decades. This success is founded on solid strategic vision,
superior foresight and innovation, intelligent and timely capital
allocation decisions, rigorous execution and a cohesive, expert
team. As we enter 2018 - our Company’s 20th anniversary year - we
are confident that we will continue our long track record of
superior consistent performance as the industry leader.”
2017 Performance
- For the full year 2017, the Company’s
normalized FFO per diluted common share year-over-year growth of
one percent to $4.16 was principally due to accretive investments
and improved property performance, partially offset by the impact
of dispositions and loan repayments, higher rates on refinanced
debt and lower profits and fees from beneficial transactions.
- For the full year 2017, the Company’s
net cash provided by operating activities grew five percent to
$1.44 billion compared to the same period in 2016.
- For the full year 2017, the Company’s
same-store total portfolio (1,037 assets) cash net operating income
(“NOI”) grew 2.5 percent compared to the same period in 2016, at
the high end of previously disclosed guidance of 2 to 2.5
percent.
- For the fourth quarter 2017, the
Company’s same-store total portfolio (1,068 assets) cash NOI grew 2
percent compared to the same period in 2016.
- Same-store cash NOI growth for the
total portfolio and by segment for the full year and fourth quarter
2017 follows:
2017 Same-Store Cash NOI Full Year 2017 Q4 2017
Reported Growth 10/27/17 Guidance Reported Growth
Triple-Net 3.7% 3% ─ 3.5% 4.2% SHOP 1.3% 0.5% ─ 1.5% (0.1%) Office
2.0% 1.5% ─ 2% 1.5%
Total Company 2.5% 2% ─
2.5% 2.0%
2017 and Recent
Highlights
- 2017 New Investments: Ventas
closed on $1.8 billion of investments and new development and
redevelopment project commitments, including:
- University-Based Life Science
Growth: The Company made acquisitions or development
commitments approaching $400 million with new and existing
relationships to further scale its institutional university-based
life science business affiliated with leading research universities
and companies:
- New relationships included the
Company’s acquisitions of high-quality life science and research
properties affiliated with AA-rated Brown University (“Brown”) and
AA-rated Virginia Commonwealth University.
- Ventas also grew with existing
partners, including follow-on development projects with Brown and
Washington University in St. Louis. Ventas has grown its overall
life science footprint by 37 percent since its initial life science
acquisition in September 2016.
- High-Quality Growth with Leading
Seniors Housing Partners: Ventas acquired nearly $400 million
in high-quality seniors housing communities principally located in
coastal markets and also committed to over $275 million of
attractive development and redevelopment projects, primarily with
leading senior care providers Atria Senior Living (“Atria”) and
Sunrise Senior Living. These development projects are all part of
joint ventures with institutional capital partners.
- Scaling of Leading Health System
Platform: Ventas invested in the growth of leading healthcare
provider Ardent Health Services (“Ardent”) by funding Ardent’s
acquisition of LHP Hospital Group through a $700 million term
loan. Pro forma for the pending acquisition of East Texas Medical
Center by Ardent and the University of Texas System, Ardent will be
an over $4 billion in annual revenue private, for-profit provider
operating 31 hospitals in 7 states with average market shares of
nearly 40 percent and with valuable not-for-profit and academic
medical center relationships.
- Profitable Capital Recycling:
Ventas sold properties and received final repayments on loans
receivable in 2017 for proceeds of over $900 million, with gains
exceeding $700 million. The majority of proceeds consisted of the
Company’s completed sales of its 36 skilled nursing facilities
(“SNFs”) operated by Kindred Healthcare, Inc. (NYSE: KND)
(“Kindred”) for proceeds of $700 million, representing a seven
percent yield on cash rent and an eight percent GAAP yield.
Ventas’s percentage of aggregate NOI received from SNFs is now only
one percent.
- Focused Partnerships with Leading
Platforms: Ventas’s operators and assets continue to be highly
valued and sought after, as experienced investors made meaningful
investments in its platforms. Ventas’s support positioned its
operators for continued success and value creation, including:
recapitalization of Atria in its growth-focused capital raise with
Fremont Realty Group; establishment of a new strategic seniors
housing relationship in Eclipse Senior Living, a newly-formed
operator founded by a team of experienced senior living executives
led by industry veteran Kai Hsiao; and support of Kindred’s pending
acquisition by TPG, Welsh, Carson, Anderson & Stowe and Humana
(NYSE: HUM), which will create a separate, operationally focused
and financially strong company that will operate Ventas’s long-term
acute care and inpatient rehabilitation facilities.
- Outstanding Financial Strength and
Liquidity: The Company’s liquidity and financial flexibility
remain strong, including:
- Net debt to Adjusted Pro Forma EBITDA
of 5.7x at year-end 2017;
- Total indebtedness to gross asset value
of 38 percent at year-end 2017;
- Exceptional fixed charge coverage of
4.6x at year-end 2017;
- Dividends for 2017 totaled $3.115 per
share, representing a five percent year-over-year increase;
and
- Excellent liquidity currently with over
$2.7 billion of borrowing capacity under its revolving credit
facilities and approximately $100 million of cash on hand.
- Leadership in Environmental, Social
and Governance (ESG) Matters: Ventas accelerated its commitment
to ESG matters and was recognized repeatedly for its results and
leadership, including:
- First time inclusion in the Dow Jones
Sustainability™ North America Index, ranking in the top quartile of
real estate companies in North America across a broad spectrum of
ESG metrics;
- Recognition as NAREIT’s 2017 Health
Care “Leader in the Light,” and first place ranking among the three
listed healthcare real estate company participants in the 2017
GRESB real estate ESG assessment; and
- Being named a “Winning Company” in the
2020 Women on Boards Gender Diversity Index, which showcases
Fortune 1000 Companies with 20 percent or greater women serving on
their boards of directors. The Ventas Board of Directors is
currently 30 percent female.
- Company and Leadership
Recognition
- Ventas was named one of Fortune’s “2018
World’s Most Admired Companies” in January 2018, the only
healthcare REIT on this year’s list, recognizing the Company’s
industry leadership, exemplary stewardship and world-class
team.
- Ventas Chairman and Chief Executive
Officer Debra A. Cafaro was again recognized as a top global CEO
and a leader in the real estate and healthcare industries,
including being named by: Forbes as one of the “World's 100 Most
Powerful Women” for the second year; The Harvard Business Review as
one of “The Best-Performing CEOs in the World” for the fourth
consecutive year; and Modern Healthcare as one of the “100 Most
Influential People in Healthcare.”
- In the Harvard Business Review’s
ranking of “The Best-Performing CEOs,” Ventas’s financial
performance ranked in the top four percent of all companies
measured, listed at number 32 of almost 900 firms - highlighting
the superior and consistent performance of Ventas over an 18-year
period.
First Quarter Dividend
The Company’s Board of Directors declared a dividend for the
first quarter 2018 of $0.79 per share, representing a two percent
year-over-year increase. The dividend is payable in cash on April
12, 2018 to stockholders of record on April 2, 2018.
2018 Guidance
“Our 2018 forecast reflects our expectation that our
high-quality diverse portfolio will continue to grow same-store
cash NOI. It incorporates continued strategic actions to create
shareholder value over the short and long-term, including $1.5
billion in asset dispositions, inclusive of a potential joint
venture on an existing portfolio of senior housing assets and
proceeds from the repayment of nearly $850 million of highly
profitable loan investments. These disposition proceeds are
expected to be redeployed into the repayment of debt, resulting in
further improvement of our balance sheet, and investments in future
growth in our attractive university-based life science business,”
said Cafaro. “While these actions affect 2018 normalized FFO, we
are confident they position us to seize opportunities and maintain
our leading market position.”
Ventas expects 2018 income from continuing operations per share,
NAREIT FFO per share, normalized FFO per share and same-store cash
NOI growth to range as follows:
Full Year 2018 Range Per Diluted Common Share Low
High Income from Cont. Ops $1.34 ─ $1.40 NAREIT FFO $3.80 ─
$3.89 Normalized FFO $3.95 ─ $4.05 Full Year 2018
Projected Same- Store Cash NOI Growth Current Guidance Low
High Triple-Net 3% ─ 4% SHOP (4%) ─ (1%) Office 1.75% ─
2.75%
Total Company 0.5% ─
2%
Substantially all of the expected normalized FFO change in 2018
compared to 2017 results from: (a) no material unannounced
acquisitions included in 2018 guidance; (b) the impact of 2017 and
2018 disposition activity including i) the carryover impact of
nearly $1 billion of late 2017 dispositions - principally comprised
of $700 million in SNF dispositions at an eight percent GAAP yield
- and related debt reduction and ii) $1.5 billion of additional
capital recycling in 2018 at a GAAP rate of over eight percent,
including joint ventures, loan repayments and other asset
dispositions, the proceeds of which will be used principally to
retire debt; and (c) proactive balance sheet management, including
the expectation that the Company will refinance approximately $1
billion of debt during the year with longer-duration fixed rate
debt, and increased interest expense from LIBOR increases. Debt
retirement in 2018 is expected to further improve the Company’s net
debt to Adjusted Pro Forma EBITDA ratio to approximately 5.5x by
year-end 2018.
The Company’s guidance does include the funding of $425 million
in future growth through high-quality development and redevelopment
projects, mostly in Ventas’s attractive university-based life
science and medical office businesses.
Ventas expects continued positive same-store cash NOI growth in
2018 for the Company’s total property portfolio. Total portfolio
same-store cash NOI is expected to grow 0.5 to 2 percent, with
strong Office and Triple-Net portfolio growth being largely offset
by seniors housing operating portfolio (“SHOP”) performance. SHOP
same-store cash NOI is expected to be lower in 2018 due to the
cumulative impact of new seniors housing supply in certain markets
and the full year occupancy impact of a severe flu season.
Same-store NOI growth in 2018 as measured on a GAAP basis is
expected at the guidance midpoint to be 100 basis points lower than
same-store cash NOI growth for the total Company property
portfolio, with the most pronounced differential in the Office
segment.
No equity issuance is included in guidance. The 2018 outlook
assumes approximately 360 million weighted average fully-diluted
shares. A reconciliation of the Company’s guidance to the Company’s
projected GAAP measures is included in this press release.
The Company’s guidance is based on a number of other assumptions
that are subject to change and many of which are outside the
control of the Company. If actual results vary from these
assumptions, the Company’s expectations may change. There can be no
assurance that the Company will achieve these results.
Fourth Quarter and Full Year 2017
Conference Call
Ventas will hold a conference call to discuss this earnings
release today at 10:00 a.m. Eastern Time (9:00 a.m. Central Time).
The dial-in number for the conference call is (844) 776-7841 (or +1
(661) 378-9542 for international callers). The participant passcode
is “Ventas.” The conference call is being webcast live by NASDAQ
OMX and can be accessed at the Company’s website at
www.ventasreit.com. A replay of the
webcast will be available following the call online, or by calling
(855) 859-2056 (or +1 (404) 537-3406 for international callers),
passcode 2283238, beginning at approximately 2:00 p.m. Eastern Time
and will remain for 36 days.
Ventas, Inc., an S&P 500 company, is a leading real estate
investment trust. Its diverse portfolio of more than 1,200 assets
in the United States, Canada and the United Kingdom consists of
seniors housing communities, medical office buildings, life science
and innovation centers, inpatient rehabilitation and long-term
acute care facilities, health systems and skilled nursing
facilities. Through its Lillibridge subsidiary, Ventas provides
management, leasing, marketing, facility development and advisory
services to highly rated hospitals and health systems throughout
the United States. References to “Ventas” or the “Company” mean
Ventas, Inc. and its consolidated subsidiaries unless otherwise
expressly noted. More information about Ventas and Lillibridge can
be found at www.ventasreit.com and
www.lillibridge.com.
The Company routinely announces material information to
investors and the marketplace using press
releases, SEC filings, public conference calls, webcasts
and the Company’s website at www.ventasreit.com/investor-relations. The
information that the Company posts to its website may be deemed to
be material. Accordingly, the Company encourages investors and
others interested in the Company to routinely monitor and review
the information that the Company posts on its website, in addition
to following the Company’s press releases, SEC filings
and public conference calls and webcasts. Supplemental information
regarding the Company can be found on the Company’s website under
the “Investor Relations” section or at www.ventasreit.com/investor-relations/annual-reports---supplemental-information.
A comprehensive listing of the Company’s properties is available at
www.ventasreit.com/our-portfolio/properties-by-stateprovince.
This press release includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements regarding the Company’s or its tenants’,
operators’, borrowers’ or managers’ expected future financial
condition, results of operations, cash flows, funds from
operations, dividends and dividend plans, financing opportunities
and plans, capital markets transactions, business strategy,
budgets, projected costs, operating metrics, capital expenditures,
competitive positions, acquisitions, investment opportunities,
dispositions, merger or acquisition integration, growth
opportunities, expected lease income, continued qualification as a
real estate investment trust (“REIT”), plans and objectives of
management for future operations and statements that include words
such as “anticipate,” “if,” “believe,” “plan,” “estimate,”
“expect,” “intend,” “may,” “could,” “should,” “will” and other
similar expressions are forward-looking statements. These
forward-looking statements are inherently uncertain, and actual
results may differ from the Company’s expectations. The Company
does not undertake a duty to update these forward-looking
statements, which speak only as of the date on which they are
made.
The Company’s actual future results and trends may differ
materially from expectations depending on a variety of factors
discussed in the Company’s filings with the Securities and Exchange
Commission. These factors include without limitation: (a) the
ability and willingness of the Company’s tenants, operators,
borrowers, managers and other third parties to satisfy their
obligations under their respective contractual arrangements with
the Company, including, in some cases, their obligations to
indemnify, defend and hold harmless the Company from and against
various claims, litigation and liabilities; (b) the ability of the
Company’s tenants, operators, borrowers and managers to maintain
the financial strength and liquidity necessary to satisfy their
respective obligations and liabilities to third parties, including
without limitation obligations under their existing credit
facilities and other indebtedness; (c) the Company’s success in
implementing its business strategy and the Company’s ability to
identify, underwrite, finance, consummate and integrate
diversifying acquisitions and investments; (d) macroeconomic
conditions such as a disruption of or lack of access to the capital
markets, changes in the debt rating on U.S. government securities,
default or delay in payment by the United States of its
obligations, and changes in the federal or state budgets resulting
in the reduction or nonpayment of Medicare or Medicaid
reimbursement rates; (e) the nature and extent of future
competition, including new construction in the markets in which the
Company’s seniors housing communities and medical office buildings
(“MOBs”) are located; (f) the extent and effect of future or
pending healthcare reform and regulation, including cost
containment measures and changes in reimbursement policies,
procedures and rates; (g) increases in the Company’s borrowing
costs as a result of changes in interest rates and other factors;
(h) the ability of the Company’s tenants, operators and managers,
as applicable, to comply with laws, rules and regulations in the
operation of the Company’s properties, to deliver high-quality
services, to attract and retain qualified personnel and to attract
residents and patients; (i) changes in general economic conditions
or economic conditions in the markets in which the Company may,
from time to time, compete, and the effect of those changes on the
Company’s revenues, earnings and funding sources; (j) the Company’s
ability to pay down, refinance, restructure or extend its
indebtedness as it becomes due; (k) the Company’s ability and
willingness to maintain its qualification as a REIT in light of
economic, market, legal, tax and other considerations; (l) final
determination of the Company’s taxable net income for the year
ended December 31, 2017 and for the year ending December 31, 2018;
(m) the ability and willingness of the Company’s tenants to renew
their leases with the Company upon expiration of the leases, the
Company’s ability to reposition its properties on the same or
better terms in the event of nonrenewal or in the event the Company
exercises its right to replace an existing tenant, and obligations,
including indemnification obligations, the Company may incur in
connection with the replacement of an existing tenant; (n) risks
associated with the Company’s senior living operating portfolio,
such as factors that can cause volatility in the Company’s
operating income and earnings generated by those properties,
including without limitation national and regional economic
conditions, costs of food, materials, energy, labor and services,
employee benefit costs, insurance costs and professional and
general liability claims, and the timely delivery of accurate
property-level financial results for those properties; (o) changes
in exchange rates for any foreign currency in which the Company
may, from time to time, conduct business; (p) year-over-year
changes in the Consumer Price Index or the UK Retail Price Index
and the effect of those changes on the rent escalators contained in
the Company’s leases and the Company’s earnings; (q) the Company’s
ability and the ability of its tenants, operators, borrowers and
managers to obtain and maintain adequate property, liability and
other insurance from reputable, financially stable providers; (r)
the impact of increased operating costs and uninsured professional
liability claims on the Company’s liquidity, financial condition
and results of operations or that of the Company’s tenants,
operators, borrowers and managers, and the ability of the Company
and the Company’s tenants, operators, borrowers and managers to
accurately estimate the magnitude of those claims; (s) risks
associated with the Company’s MOB portfolio and operations,
including the Company’s ability to successfully design, develop and
manage MOBs and to retain key personnel; (t) the ability of the
hospitals on or near whose campuses the Company’s MOBs are located
and their affiliated health systems to remain competitive and
financially viable and to attract physicians and physician groups;
(u) risks associated with the Company’s investments in joint
ventures and unconsolidated entities, including its lack of sole
decision-making authority and its reliance on its joint venture
partners’ financial condition; (v) the Company’s ability to obtain
the financial results expected from its development and
redevelopment projects; (w) the impact of market or issuer events
on the liquidity or value of the Company’s investments in
marketable securities; (x) consolidation activity in the seniors
housing and healthcare industries resulting in a change of control
of, or a competitor’s investment in, one or more of the Company’s
tenants, operators, borrowers or managers or significant changes in
the senior management of the Company’s tenants, operators,
borrowers or managers; (y) the impact of litigation or any
financial, accounting, legal or regulatory issues that may affect
the Company or its tenants, operators, borrowers or managers; and
(z) changes in accounting principles, or their application or
interpretation, and the Company’s ability to make estimates and the
assumptions underlying the estimates, which could have an effect on
the Company’s earnings.
CONSOLIDATED BALANCE
SHEETS (In thousands, except per share amounts)
December 31, September 30, June 30, March
31, December 31, 2017 2017 2017
2017 2016 Assets Real estate
investments: Land and improvements $ 2,147,621 $ 2,121,214 $
2,117,692 $ 2,123,266 $ 2,089,591 Buildings and improvements
22,177,088 21,935,860 21,827,419 21,869,961 21,516,396 Construction
in progress 343,129 306,095 281,093 213,281 210,599 Acquired lease
intangibles 1,537,995 1,536,476 1,534,173
1,532,365 1,510,629 26,205,833 25,899,645 25,760,377
25,738,873 25,327,215 Accumulated depreciation and amortization
(5,617,453 ) (5,434,772 ) (5,220,611 ) (5,123,144 ) (4,932,461 )
Net real estate property 20,588,380 20,464,873 20,539,766
20,615,729 20,394,754 Secured loans receivable and investments, net
1,346,359 1,352,434 1,395,404 1,398,417 702,021 Investments in
unconsolidated real estate entities 123,639 117,185
119,794 108,976 95,921 Net real estate
investments 22,058,378 21,934,492 22,054,964 22,123,122 21,192,696
Cash and cash equivalents 81,355 85,063 103,353 91,284 286,707
Escrow deposits and restricted cash 106,898 76,522 68,343 92,175
80,647 Goodwill 1,034,641 1,034,497 1,034,054 1,033,484 1,033,225
Assets held for sale 100,324 68,926 89,569 61,983 54,961 Other
assets 572,945 540,295 505,475 517,283
518,364
Total assets $ 23,954,541 $ 23,739,795
$ 23,855,758 $ 23,919,331 $ 23,166,600
Liabilities and equity Liabilities: Senior notes
payable and other debt $ 11,276,062 $ 11,424,145 $ 11,907,997 $
11,943,733 $ 11,127,326 Accrued interest 93,958 95,684 87,248
78,219 83,762 Accounts payable and other liabilities 1,182,552
943,800 929,573 946,674 907,928 Liabilities related to assets held
for sale 61,202 9,837 9,812 1,389 1,462 Deferred income taxes
250,092 296,272 296,822 294,057 316,641
Total liabilities 12,863,866 12,769,738 13,231,452
13,264,072 12,437,119 Redeemable OP unitholder and
noncontrolling interests 158,490 171,813 182,154 171,384 200,728
Commitments and contingencies Equity: Ventas
stockholders' equity: Preferred stock, $1.00 par value; 10,000
shares authorized, unissued — — — — —
Common stock, $0.25 par value; 356,187;
356,163;356,134; 354,863; and 354,125 shares issued atDecember 31,
2017, September 30, 2017, June 30,2017, March 31, 2017, and
December 31, 2016,respectively
89,029 89,023 89,016 88,698 88,514 Capital in excess of par value
13,053,057 13,034,527 13,019,023 12,944,501 12,917,002 Accumulated
other comprehensive loss (35,120 ) (40,780 ) (45,035 ) (53,657 )
(57,534 ) Retained earnings (deficit) (2,240,698 ) (2,351,430 )
(2,688,946 ) (2,564,936 ) (2,487,695 )
Treasury stock, 1; 0; 0; 0; and 1 shares
at December 31,2017, September 30, 2017, June 30, 2017, March
31,2017, and December 31, 2016, respectively
(42 ) — — — (47 ) Total Ventas stockholders'
equity 10,866,226 10,731,340 10,374,058 10,414,606 10,460,240
Noncontrolling interests 65,959 66,904 68,094
69,269 68,513 Total equity 10,932,185
10,798,244 10,442,152 10,483,875 10,528,753
Total liabilities and equity $ 23,954,541 $
23,739,795 $ 23,855,758 $ 23,919,331 $
23,166,600
CONSOLIDATED STATEMENTS OF INCOME (In
thousands, except per share amounts) For the
Three Months Ended For the Year Ended December
31, December 31, 2017 2016 2017
2016 Revenues Rental income: Triple-net leased $
205,176 $ 210,804 $ 840,131 $ 845,834 Office 191,826 183,846
753,467 630,342 397,002 394,650 1,593,598
1,476,176 Resident fees and services 457,101 456,919 1,843,232
1,847,306 Office building and other services revenue 3,896 4,064
13,677 21,070 Income from loans and investments 32,109 19,996
117,608 98,094 Interest and other income 5,180 84
6,034 876 Total revenues 895,288 875,713 3,574,149
3,443,522
Expenses Interest 111,951 107,739 448,196 419,740
Depreciation and amortization 232,650 232,189 887,948 898,924
Property-level operating expenses: Senior living 313,769 310,303
1,250,065 1,242,978 Office 58,279 55,165 233,007
191,784 372,048 365,468 1,483,072 1,434,762 Office
building services costs 1,683 1,034 3,391 7,311 General,
administrative and professional fees 34,930 31,488 135,490 126,875
(Gain) loss on extinguishment of debt, net (102 ) (386 ) 754 2,779
Merger-related expenses and deal costs 1,632 (438 ) 10,535 24,635
Other 3,986 1,087 20,052 9,988 Total
expenses 758,778 738,181 2,989,438 2,925,014
Income before unconsolidated entities, income taxes,
discontinued operations, real estate dispositions and
noncontrolling interests 136,510 137,532 584,711 518,508 (Loss)
income from unconsolidated entities (4,355 ) 2,207 (561 ) 4,358
Income tax benefit 46,680 2,836 59,799 31,343
Income from continuing operations 178,835 142,575 643,949
554,209 Discontinued operations (15 ) (167 ) (110 ) (922 ) Gain on
real estate dispositions 214,985 66,424 717,273
98,203 Net income 393,805 208,832 1,361,112 651,490
Net income attributable to noncontrolling interests 1,251
1,195 4,642 2,259 Net income attributable to
common stockholders $ 392,554 $ 207,637 $ 1,356,470
$ 649,231
Earnings per common share Basic:
Income from continuing operations $ 0.50 $ 0.40 $ 1.81 $ 1.61 Net
income attributable to common stockholders 1.10 0.59 3.82 1.88
Diluted:
Income from continuing operations
$ 0.50 $ 0.40 $ 1.80 $ 1.59 Net income attributable to common
stockholders 1.09 0.58 3.78 1.86
Weighted average shares
used in computing earnings per common share Basic 355,966
353,911 355,326 344,703 Diluted 359,184 357,435 358,566 348,390
Dividends declared per common share $ 0.79 $ 0.775 $ 3.115 $
2.965
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
For the Quarters Ended December
31, September 30, June 30, March 31,
December 31, 2017 2017 2017 2017
2016 Revenues Rental income: Triple-net leased $
205,176 $ 212,370 $ 213,258 $ 209,327 $ 210,804 Office 191,826
189,506 186,240 185,895 183,846
397,002 401,876 399,498 395,222 394,650 Resident fees and services
457,101 461,700 460,243 464,188 456,919 Office building and other
services revenue 3,896 3,196 3,179 3,406 4,064 Income from loans
and investments 32,109 32,985 32,368 20,146 19,996 Interest and
other income 5,180 171 202 481 84
Total revenues 895,288 899,928 895,490 883,443 875,713
Expenses Interest 111,951 113,869 113,572 108,804
107,739 Depreciation and amortization 232,650 213,407 224,108
217,783 232,189 Property-level operating expenses: Senior living
313,769 315,598 308,625 312,073 310,303 Office 58,279 60,609
57,205 56,914 55,165 372,048 376,207
365,830 368,987 365,468 Office building services costs 1,683 418
552 738 1,034 General, administrative and professional fees 34,930
33,317 33,282 33,961 31,488 (Gain) loss on extinguishment of debt,
net (102 ) 511 36 309 (386 ) Merger-related expenses and deal costs
1,632 804 6,043 2,056 (438 ) Other 3,986 13,030 1,848
1,188 1,087 Total expenses 758,778
751,563 745,271 733,826 738,181
Income before unconsolidated entities, income taxes, discontinued
operations, real estate dispositions and noncontrolling interests
136,510 148,365 150,219 149,617 137,532 (Loss) income from
unconsolidated entities (4,355 ) 750 (106 ) 3,150 2,207 Income tax
benefit 46,680 7,815 2,159 3,145 2,836
Income from continuing operations 178,835 156,930 152,272
155,912 142,575 Discontinued operations (15 ) (19 ) (23 ) (53 )
(167 ) Gain on real estate dispositions 214,985 458,280
719 43,289 66,424 Net income 393,805
615,191 152,968 199,148 208,832 Net income attributable to
noncontrolling interests 1,251 1,233 1,137
1,021 1,195 Net income attributable to common
stockholders $ 392,554 $ 613,958 $ 151,831 $
198,127 $ 207,637
Earnings per common
share Basic: Income from continuing operations $ 0.50 $ 0.44 $
0.43 $ 0.44 $ 0.40 Net income attributable to common stockholders
1.10 1.72 0.43 0.56 0.59 Diluted: Income from continuing operations
$ 0.50 $ 0.44 $ 0.42 $ 0.44 $ 0.40 Net income attributable to
common stockholders 1.09 1.71 0.42 0.55 0.58
Weighted
average shares used in computing earnings per common share
Basic 355,966 355,929 355,024 354,410 353,911 Diluted 359,184
359,333 358,311 357,572 357,435
CONSOLIDATED STATEMENTS
OF CASH FLOWS (In thousands) For the Year
Ended December 31, 2017 2016 Cash flows
from operating activities: Net income $ 1,361,112 $ 651,490
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 887,948 898,924
Amortization of deferred revenue and lease intangibles, net (20,537
) (20,336 ) Other non-cash amortization 16,058 10,357 Stock-based
compensation 26,543 20,958 Straight-lining of rental income, net
(23,134 ) (27,988 ) Loss on extinguishment of debt, net 754 2,779
Gain on real estate dispositions (717,273 ) (98,203 ) Gain on real
estate loan investments (124 ) (2,271 ) Income tax benefit (63,599
) (34,227 ) Loss (income) from unconsolidated entities 3,588 (4,358
) Gain on re-measurement of equity interest upon acquisition, net
(3,027 ) — Distributions from unconsolidated entities 4,676 7,598
Other 9,240 (1,847 ) Changes in operating assets and liabilities:
(Increase) decrease in other assets (15,854 ) 5,560 Increase in
accrued interest 11,068 2,604 Decrease in accounts payable and
other liabilities (35,259 ) (38,699 ) Net cash provided by
operating activities 1,442,180 1,372,341 Cash flows from investing
activities: Net investment in real estate property (380,232 )
(1,429,112 ) Investment in loans receivable and other (748,119 )
(158,635 ) Proceeds from real estate disposals 537,431 300,561
Proceeds from loans receivable 101,097 320,082 Development project
expenditures (299,085 ) (143,647 ) Capital expenditures (132,558 )
(117,456 ) Distributions from unconsolidated entities 6,169 —
Investment in unconsolidated entities (61,220 ) (6,436 ) Net cash
used in investing activities (976,517 ) (1,234,643 ) Cash flows
from financing activities: Net change in borrowings under revolving
credit facilities 384,783 (35,637 ) Proceeds from debt 1,111,649
893,218 Repayment of debt (1,369,084 ) (1,022,113 ) Purchase of
noncontrolling interests (15,809 ) (2,846 ) Payment of deferred
financing costs (27,297 ) (6,555 ) Issuance of common stock, net
73,596 1,286,680 Cash distribution to common stockholders (827,285
) (1,024,968 ) Cash distribution to redeemable OP unitholders
(5,677 ) (8,640 ) Contributions from noncontrolling interests 4,402
7,326 Distributions to noncontrolling interests (11,187 ) (6,879 )
Other 10,582 17,252 Net cash (used in) provided by
financing activities (671,327 ) 96,838 Net (decrease)
increase in cash and cash equivalents (205,664 ) 234,536 Effect of
foreign currency translation on cash and cash equivalents 312 (852
) Cash and cash equivalents at beginning of period 286,707
53,023 Cash and cash equivalents at end of period $ 81,355
$ 286,707 Supplemental schedule of non-cash
activities: Assets acquired and liabilities assumed from
acquisitions: Real estate investments $ 425,906 $ 69,092
Utilization of funds held for an Internal Revenue Code Section 1031
exchange (286,748 ) (6,954 ) Other assets (3,716 ) 90,037 Debt
75,231 47,641 Other liabilities 70,878 72,636 Deferred income tax
liability (14,869 ) 9,381 Noncontrolling interests 4,202 22,517
Equity issued for redemption of OP and Class C units 24,002 24,318
QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) For the Quarters Ended
December 31, September 30, June
30, March 31, December 31,
2017 2017 2017 2017 2016 Cash
flows from operating activities: Net income $ 393,805 $ 615,191 $
152,968 $ 199,148 $ 208,832 Adjustments to reconcile net income to
net cash provided by operating activities: Depreciation and
amortization 232,650 213,407 224,108 217,783 232,189 Amortization
of deferred revenue and lease intangibles, net (4,254 ) (5,434 )
(5,834 ) (5,015 ) (5,029 ) Other non-cash amortization 4,872 4,602
4,124 2,460 3,183 Stock-based compensation 6,620 6,527 6,695 6,701
5,073 Straight-lining of rental income, net (5,750 ) (6,229 )
(5,778 ) (5,377 ) (6,602 ) (Gain) loss on extinguishment of debt,
net (102 ) 511 36 309 (386 ) Gain on real estate dispositions
(214,985 ) (458,280 ) (719 ) (43,289 ) (66,424 ) Gain on real
estate loan investments — (120 ) (4 ) — — Income tax benefit
(47,980 ) (8,515 ) (2,959 ) (4,145 ) (3,395 ) Loss (income) from
unconsolidated entities 4,355 (750 ) 106 (123 ) (2,207 ) Gain on
re-measurement of equity interest upon acquisition, net — — —
(3,027 ) — Distributions from unconsolidated entities 767 775 754
2,380 2,024 Other 1,801 6,091 696 652 (772 ) Changes in operating
assets and liabilities: Decrease (increase) in other assets 1,744
(47,532 ) 33,648 (3,714 ) 3,807 (Decrease) increase in accrued
interest (1,620 ) 8,138 9,291 (4,741 ) 12,657 (Decrease) increase
in accounts payable and other liabilities (15,982 ) 20,601
(15,607 ) (24,271 ) (16,755 ) Net cash provided by operating
activities 355,941 348,983 401,525 335,731 366,195 Cash flows from
investing activities: Net investment in real estate property
(118,109 ) (22,625 ) (40,655 ) (198,843 ) (7,520 ) Investment in
loans receivable and other (14,086 ) (15,800 ) (16,875 ) (701,358 )
(3,686 ) Proceeds from real estate disposals 5,294 512,567 19,570 —
237,000 Proceeds from loans receivable 16,736 59,294 21,704 3,363
126,019 Development project expenditures (88,662 ) (67,154 )
(56,817 ) (86,452 ) (49,249 ) Capital expenditures (49,171 )
(27,435 ) (32,117 ) (23,835 ) (42,160 ) Distributions from
unconsolidated entities 353 5,816 — — — Investment in
unconsolidated entities (18,821 ) (3,351 ) (12,108 ) (26,940 ) (261
) Net cash (used in) provided by investing activities (266,466 )
441,312 (117,298 ) (1,034,065 ) 260,143 Cash flows from financing
activities: Net change in borrowings under revolving credit
facilities 45 20,282 341,634 22,822 (82,365 ) Proceeds from debt
53,212 29,928 231,295 797,214 16,601 Repayment of debt (143,559 )
(568,989 ) (636,040 ) (20,496 ) (105,608 ) Purchase of
noncontrolling interests — — — (15,809 ) (1,242 ) Payment of
deferred financing costs (871 ) (6,739 ) (13,303 ) (6,384 ) (408 )
Issuance of common stock, net — — 73,596 — 20,978 Cash distribution
to common stockholders — (276,320 ) (275,597 ) (275,368 ) (274,566
) Cash distribution to redeemable OP unitholders — (1,957 ) (1,827
) (1,893 ) (2,154 ) Contributions from noncontrolling interests —
2,175 125 2,102 1,400 Distributions to noncontrolling interests
(1,939 ) (5,092 ) (1,746 ) (2,410 ) (1,758 ) Other 39 841
6,405 3,297 621 Net cash (used in)
provided by financing activities (93,073 ) (805,871 ) (275,458 )
503,075 (428,501 ) Net (decrease) increase in cash and cash
equivalents (3,598 ) (15,576 ) 8,769 (195,259 ) 197,837 Effect of
foreign currency translation on cash and cash equivalents (110 )
(2,714 ) 3,300 (164 ) (409 ) Cash and cash equivalents at beginning
of period 85,063 103,353 91,284 286,707
89,279 Cash and cash equivalents at end of period $ 81,355
$ 85,063 $ 103,353 $ 91,284 $ 286,707
QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued) (In thousands) For the Quarters
Ended December 31, September 30,
June 30, March 31, December 31,
2017 2017 2017 2017 2016
Supplemental schedule of non-cash activities: Assets acquired and
liabilities assumed from acquisitions: Real estate investments $
219,135 $ 1,505 $ 16,347 $ 188,919 $ 9,426 Utilization of funds
held for an Internal Revenue Code Section 1031 exchange (201,753 )
— — (84,995 ) — Other assets 1,830 (1,450 ) (3,723 ) (373 ) 10,158
Debt 10,602 — 12,167 52,462 — Other liabilities 6,788 (1,664 )
(2,922 ) 68,676 12,190 Deferred income tax liability 1,247 64 3,384
(19,564 ) 7,102 Noncontrolling interests 575 1,655 (5 ) 1,977 292
Equity issued for redemption of OP and Class C units 1,308 335 288
22,071 1,348
NON-GAAP FINANCIAL MEASURES RECONCILIATION Funds
From Operations (FFO) and Funds Available for Distribution
(FAD)(1) (Dollars in thousands, except per share
amounts) YOY 2016 2017
Growth Q4 FY
Q1 Q2 Q3 Q4
FY '16-'17 Income from continuing
operations $ 142,575 $ 554,209
$ 155,912 $ 152,272 $
156,930 $ 178,835 $ 643,949
16 % Income from continuing operations per
share $ 0.40 $
1.59 $ 0.44
$ 0.42 $ 0.44
$ 0.50 $ 1.80
13 % Discontinued operations
(167 ) (922 ) (53 )
(23 ) (19 ) (15 )
(110 ) Gain on real estate dispositions
66,424 98,203
43,289 719 458,280
214,985 717,273
Net income 208,832 651,490 199,148
152,968 615,191 393,805 1,361,112
Net income attributable to noncontrolling interests
1,195 2,259 1,021
1,137 1,233
1,251 4,642 Net
income attributable to common stockholders $
207,637 $ 649,231 $ 198,127
$ 151,831 $ 613,958 $
392,554 $ 1,356,470 109 % Net
income attributable to common stockholders per share
$ 0.58 $ 1.86
$ 0.55 $ 0.42
$ 1.71 $
1.09 $ 3.78
103 % Adjustments:
Depreciation and amortization on real
estate assets
230,353 891,985 215,961 222,347
211,784 230,996 881,088 Depreciation on
real estate assets related to noncontrolling interests
(2,031 ) (7,785 ) (1,995
) (1,817 ) (1,911 )
(1,842 ) (7,565 ) Depreciation on
real estate assets related to unconsolidated entities
1,432 5,754 1,187 1,458 855
731 4,231 Gain on re-measurement of equity
interest upon acquisition, net — — (3,027
) — — — (3,027 ) Gain
on real estate dispositions (66,424 )
(98,203 ) (43,289 ) (719
) (458,280 ) (214,985 )
(717,273 ) Gain on real estate dispositions
related to noncontrolling interests — — —
— 18 — 18 Loss (gain) on real estate
dispositions related to unconsolidated entities 56
(439 ) 23 (82 ) (986
) (12 ) (1,057 ) Discontinued
operations: Loss on real estate dispositions —
1 —
—
— —
— Subtotal: FFO add-backs 163,386
791,313 168,860 221,187 (248,520
) 14,888 156,415 Subtotal: FFO add-backs
per share $ 0.46 $
2.27 $ 0.47
$ 0.62 $ (0.69 )
$ 0.04 $ 0.44
FFO (NAREIT) attributable to common
stockholders $ 371,023 $ 1,440,544
$ 366,987 $ 373,018 $
365,438 $ 407,442 $ 1,512,885
5 % FFO (NAREIT) attributable to common
stockholders per share $ 1.04
$ 4.13 $ 1.03
$ 1.04 $
1.02 $ 1.13
$ 4.22 2 %
Adjustments: Change in fair value of financial
instruments 134 62 23 (153 )
8 81 (41 ) Non-cash income tax
benefit (3,395 ) (34,227 )
(4,145 ) (2,959 ) (8,515
) (6,768 ) (22,387 ) Impact
of tax reform — — — — —
(36,539 ) (36,539 ) (Gain) loss on
extinguishment of debt, net (386 ) 2,779
403 47 486 (97 ) 839
(Gain) loss on non-real estate dispositions related to
unconsolidated entities — (557 ) 4
(16 ) (22 ) (5 )
(39 ) Merger-related expenses, deal costs and
re-audit costs (479 ) 28,290 3,129
7,036 2,741 1,917 14,823
Amortization of other intangibles 438 1,752
438 365 328 327 1,458 Other
items related to unconsolidated entities — —
212 280 1,207 1,489 3,188
Non-cash impact of changes to equity plan — —
999 1,711 1,372 1,371 5,453
Natural disaster expenses (recoveries), net —
— — —
9,810 1,791
11,601 Subtotal: normalized FFO add-backs
(3,688 ) (1,901 ) 1,063
6,311 7,415 (36,433 ) (21,644
) Subtotal: normalized FFO add-backs per share
$ (0.01 ) $ (0.01
) $ 0.00 $
0.02 $ 0.02
$ (0.10 ) $ (0.06
) Normalized FFO attributable to common
stockholders $ 367,335 $ 1,438,643
$ 368,050 $ 379,329 $
372,853 $ 371,009 $ 1,491,241
4 % Normalized FFO attributable to common
stockholders per share $ 1.03
$ 4.13 $ 1.03
$ 1.06 $
1.04 $ 1.03
$ 4.16 1 %
Non-cash items included in normalized FFO: Amortization
of deferred revenue and lease intangibles, net (5,029
) (20,336 ) (5,015 )
(5,834 ) (5,434 ) (4,254
) (20,537 ) Other non-cash amortization,
including fair market value of debt 3,183 10,357
2,460 4,124 4,602 4,872 16,058
Stock-based compensation 5,073 20,958
5,702 4,984 5,155 5,249 21,090
Straight-lining of rental income, net (6,602 )
(27,988 ) (5,377 )
(5,778 ) (6,229 )
(5,750 ) (23,134 ) Subtotal:
non-cash items included in normalized FFO (3,375
) (17,009 ) (2,230 )
(2,504 ) (1,906 ) 117
(6,523 ) Capital expenditures
(44,540 ) (124,621 )
(24,919 ) (33,148 )
(30,899 ) (49,812 )
(138,778 ) Normalized FAD
attributable to common stockholders $
319,420 $ 1,297,013
$ 340,901 $
343,677 $ 340,048
$ 321,314 $ 1,345,940
4 % Merger-related expenses, deal
costs and re-audit costs 479 (28,290 )
(3,129 ) (7,036 ) (2,741
) (1,917 ) (14,823 ) Other
items related to unconsolidated entities —
— (212 )
(280 ) (1,207 )
(1,489 ) (3,188 )
FAD attributable to common stockholders $
319,899 $ 1,268,723
$ 337,560 $
336,361 $ 336,100
$ 317,908 $ 1,327,929
5 % Weighted average diluted
shares 357,435 348,390
357,572 358,311
359,333 359,184
358,566 1 Per share quarterly
amounts may not add to annual per share amounts due to material
changes in the Company’s weighted average diluted share count, if
any.
Historical cost accounting for real estate assets implicitly
assumes that the value of real estate assets diminishes predictably
over time. However, since real estate values historically have
risen or fallen with market conditions, many industry investors
deem presentations of operating results for real estate companies
that use historical cost accounting to be insufficient by
themselves. For that reason, the Company considers FFO, normalized
FFO, FAD and normalized FAD to be appropriate supplemental measures
of operating performance of an equity REIT. In particular, the
Company believes that normalized FFO is useful because it allows
investors, analysts and Company management to compare the Company’s
operating performance to the operating performance of other real
estate companies and between periods on a consistent basis without
having to account for differences caused by non-recurring items and
other non-operational events such as transactions and litigation.
In some cases, the Company provides information about identified
non-cash components of FFO and normalized FFO because it allows
investors, analysts and Company management to assess the impact of
those items on the Company’s financial results.
The Company uses the National Association of Real Estate
Investment Trusts (“NAREIT”) definition of FFO. NAREIT defines FFO
as net income attributable to common stockholders (computed in
accordance with GAAP), excluding gains or losses from sales of real
estate property, including gains or losses on re-measurement of
equity method investments, and impairment write-downs of
depreciable real estate, plus real estate depreciation and
amortization, and after adjustments for unconsolidated partnerships
and joint ventures. Adjustments for unconsolidated partnerships and
joint ventures will be calculated to reflect FFO on the same basis.
The Company defines normalized FFO as FFO excluding the following
income and expense items (which may be recurring in nature): (a)
merger-related costs and expenses, including amortization of
intangibles, transition and integration expenses, and deal costs
and expenses, including expenses and recoveries relating to
acquisition lawsuits; (b) the impact of any expenses related to
asset impairment and valuation allowances, the write-off of
unamortized deferred financing fees, or additional costs, expenses,
discounts, make-whole payments, penalties or premiums incurred as a
result of early retirement or payment of the Company’s debt; (c)
the non-cash effect of income tax benefits or expenses, the
non-cash impact of changes to the Company’s executive equity
compensation plan and derivative transactions that have non-cash
mark-to-market impacts on the Company’s income statement; (d) the
financial impact of contingent consideration, severance-related
costs and charitable donations made to the Ventas Charitable
Foundation; (e) gains and losses for non-operational foreign
currency hedge agreements and changes in the fair value of
financial instruments; (f) gains and losses on non-real estate
dispositions and other unusual items related to unconsolidated
entities; (g) expenses related to the re-audit and re-review in
2014 of the Company’s historical financial statements and related
matters; and (h) net expenses or recoveries related to natural
disasters. Normalized FAD represents normalized FFO excluding
non-cash components, which include straight-line rental
adjustments, and deducting capital expenditures, including certain
tenant allowances and leasing commissions. FAD represents
normalized FAD after subtracting merger-related expenses, deal
costs and re-audit costs and other unusual items related to
unconsolidated entities.
FFO, normalized FFO, FAD and normalized FAD presented herein may
not be comparable to those presented by other real estate companies
due to the fact that not all real estate companies use the same
definitions. FFO, normalized FFO, FAD and normalized FAD should not
be considered as alternatives to net income or income from
continuing operations (both determined in accordance with GAAP) as
indicators of the Company’s financial performance or as
alternatives to cash flow from operating activities (determined in
accordance with GAAP) as measures of the Company’s liquidity, nor
are they necessarily indicative of sufficient cash flow to fund all
of the Company’s needs. The Company believes that income from
continuing operations is the most comparable GAAP measure because
it provides insight into the Company’s continuing operations. The
Company believes that in order to facilitate a clear understanding
of the consolidated historical operating results of the Company,
FFO, normalized FFO, FAD and normalized FAD should be examined in
conjunction with net income and income from continuing operations
as presented elsewhere herein.
NON-GAAP FINANCIAL MEASURES RECONCILIATION
EPS, FFO and FAD Guidance Attributable
to Common Stockholders 1,2
(Dollars in millions, except per share amounts)
Tentative / Preliminary and Subject to Change FY2018 -
Guidance FY2018 - Per Share Low
High Low High
Income from Continuing
Operations $484 $505
$1.34 $1.40 Gain on Real Estate
Dispositions 280 310 0.78 0.86 Other Adjustments 3 (4 ) (6 ) (0.01
) (0.02 )
Net Income Attributable to Common Stockholders
$760 $809 $2.11
$2.25 Depreciation and Amortization Adjustments 887
900 2.46 2.50 Gain on Real Estate Dispositions (280 ) (310 ) (0.78
) (0.86 ) Other Adjustments 3 — — — —
FFO (NAREIT) Attributable to
Common Stockholders $1,367 $1,399
$3.80 $3.89 Merger-Related
Expenses, Deal Costs and Re-Audit Costs 13 8 0.04 0.02 (Gain) Loss
on Extinguishment of Debt, Net 45 63 0.12 0.18 Other Adjustments 3
(3 ) (12 ) (0.01 ) (0.03 )
Normalized FFO Attributable to
Common Stockholders $1,422 $1,458 $3.95
$4.05 % Year-Over-Year Growth
(5 )% (3 )% Non-Cash Items Included in
Normalized FFO 19 17 Capital Expenditures (138 ) (148 )
Normalized FAD Attributable
to Common Stockholders $1,303
$1,327 Merger-Related Expense, Deal Costs and
Re-Audit Costs (13 ) (8 ) Other Adjustments 3 (4 ) (2 )
FAD Attributable to Common
Stockholders $1,286 $1,317
Weighted Average Diluted Shares (in millions) 360 360
1
The Company’s guidance constitutes forward-looking statements
within the meaning of the federal securities laws and is based on a
number of assumptions that are subject to change and many of which
are outside the control of the Company. Actual results may differ
materially from the Company’s expectations depending on factors
discussed in the Company’s filings with the Securities and Exchange
Commission.
2
Per share quarterly amounts may not add to annual per share amounts
due to changes in the Company's weighted average diluted share
count, if any.
3
See table titled “Funds From Operations (FFO) and Funds Available
for Distribution (FAD)” for detailed breakout of adjustments for
each respective category.
NON-GAAP FINANCIAL MEASURES
RECONCILIATION
Net Debt to Adjusted Pro Forma
EBITDA
(Dollars in thousands)
The following table illustrates net debt to pro forma earnings,
which includes amounts in discontinued operations, before interest,
taxes, depreciation and amortization (including non-cash
stock-based compensation expense), excluding gains or losses on
extinguishment of debt, consolidated joint venture partners’ share
of EBITDA, merger-related expenses and deal costs, expenses related
to the re-audit and re-review in 2014 of the Company’s historical
financial statements, net gains or losses on real estate activity,
gains or losses on re-measurement of equity interest upon
acquisition, changes in the fair value of financial instruments,
unrealized foreign currency gains or losses and net expenses or
recoveries related to natural disasters, and including the
Company’s share of EBITDA from unconsolidated entities and
adjustments for other immaterial or identified items (“Adjusted
EBITDA”).
The following information considers the pro forma effect on
Adjusted EBITDA of the Company’s activity during the three months
ended December 31, 2017, as if the transactions had been
consummated as of the beginning of the period (“Adjusted Pro Forma
EBITDA”).
The Company believes that net debt, Adjusted Pro Forma EBITDA
and net debt to Adjusted Pro Forma EBITDA are useful to investors,
analysts and Company management because they allow the comparison
of the Company’s credit strength between periods and to other real
estate companies without the effect of items that by their nature
are not comparable from period to period and tend to obscure the
Company’s actual credit quality.
Income from continuing operations $ 178,835 Discontinued
operations (15 ) Gain on real estate dispositions 214,985
Net income 393,805 Net income attributable to noncontrolling
interests 1,251 Net income attributable to common
stockholders 392,554 Adjustments: Interest 111,951 Gain on
extinguishment of debt, net (102 ) Taxes (including tax amounts in
general, administrative and professional fees) (45,678 )
Depreciation and amortization 232,650 Non-cash stock-based
compensation expense 6,620 Merger-related expenses, deal costs and
re-audit costs 1,652 Net income (loss) attributable to
noncontrolling interests, net of consolidated joint venture
partners’ share of EBITDA (3,187 ) (Income) loss from
unconsolidated entities, net of Ventas share of EBITDA from
unconsolidated entities 11,422 Gain on real estate dispositions
(214,985 ) Unrealized foreign currency losses 287 Change in fair
value of financial instruments 81 Natural disaster expenses
(recoveries), net 1,791 Adjusted EBITDA 495,056 Pro forma
adjustments for current period activity (1,195 ) Adjusted Pro Forma
EBITDA $ 493,861 Adjusted Pro Forma EBITDA annualized
$ 1,975,444 As of December 31, 2017: Total debt $
11,276,062 Debt on held for sale assets 59,221 Cash (81,355 )
Restricted cash pertaining to debt (70,753 ) Consolidated joint
venture partners’ share of debt (76,668 ) Ventas share of debt from
unconsolidated entities 90,257 Net debt $ 11,196,764
Net debt to Adjusted Pro Forma EBITDA 5.7 x
NON-GAAP FINANCIAL MEASURES
RECONCILIATION
Net Operating Income (NOI) and
Same-Store Cash NOI by Segment
(Dollars in thousands)
The Company considers NOI and same-store cash NOI as important
supplemental measures because they allow investors, analysts and
the Company’s management to assess its unlevered property-level
operating results and to compare its operating results with those
of other real estate companies and between periods on a consistent
basis. The Company defines NOI as total revenues, less interest and
other income, property-level operating expenses and office building
services costs. In the case of NOI, cash receipts may differ due to
straight-line recognition of certain rental income and the
application of other GAAP policies. The Company believes that
income from continuing operations is the most comparable GAAP
measure for both NOI and same-store cash NOI because it provides
insight into the Company’s continuing operations. The Company
defines same-store as properties owned, consolidated, operational
and reported under a consistent business model for the full period
in both comparison periods, and excluding assets intended for
disposition and for SHOP, those properties that transitioned
operators after the start of the prior comparison period. To
normalize for exchange rate movements, all same-store cash NOI
measures assume constant exchange rates across comparable periods,
using the following methodology: the current period’s results are
shown in actual reported USD, while prior comparison period’s
results are adjusted and converted to USD based on the average
exchange rate for the current period.
Triple-Net Leased Properties
Senior Living Operations Office Operations All
Other Total For the Three Months Ended December 31,
2017 Income from continuing operations $ 178,835 Adjustments:
Interest and other income (5,180 ) Interest 111,951 Depreciation
and amortization 232,650 General, administrative and professional
fees 34,930 Gain on extinguishment of debt, net (102 )
Merger-related expenses and deal costs 1,632 Other 3,986 Loss from
unconsolidated entities 4,355 Income tax benefit (46,680 ) Reported
Segment NOI $ 206,301 $ 143,332 $ 134,014 $ 32,730 516,377
Adjustments: Normalizing adjustment for technology costs — 310 — —
310 NOI not included in same-store (28,931 ) (3,444 ) (8,116 ) —
(40,491 ) Straight-lining of rental income (608 ) — (5,142 ) —
(5,750 ) Non-cash rental income (3,007 ) — (351 ) — (3,358 )
Non-segment NOI — — — (32,730 ) (32,730 )
(32,546 ) (3,134 ) (13,609 ) (32,730 ) (82,019 ) Same-Store cash
NOI (Constant Currency) $ 173,755 $ 140,198 $ 120,405
$ — $ 434,358 Percentage increase 4.2 %
(0.1 )% 1.5 % 2.0 %
For the Three Months Ended December
31, 2016 Income from continuing operations $ 142,575
Adjustments: Interest and other income (84 ) Interest 107,739
Depreciation and amortization 232,189 General, administrative and
professional fees 31,488 Gain on extinguishment of debt, net (386 )
Merger-related expenses and deal costs (438 ) Other 1,087 Income
from unconsolidated entities (2,207 ) Income tax benefit (2,836 )
Reported Segment NOI $ 212,049 $
146,616
$ 130,120 $ 20,342 509,127 Adjustments: NOI not included in
same-store (39,013 ) (7,099 ) (6,547 ) —
(52,659
) Straight-lining of rental income (1,774 ) — (4,828 ) — (6,602 )
Non-cash rental income (4,782 ) — (131 ) — (4,913 ) Non-segment NOI
— — —
(20,342
)
(20,342 ) NOI impact from change in FX 330 854 —
— 1,184 (45,239 ) (6,245 ) (11,506 )
(20,342 ) (83,332 ) Same-Store cash NOI (Constant
Currency) $ 166,810 $ 140,371 $ 118,614 $ —
$
425,795
Triple-Net
Leased Properties Senior Living Operations Office
Operations All Other Total For the Twelve
Months Ended December 31, 2017 Income from continuing
operations $ 643,949 Adjustments: Interest and other income (6,034
) Interest 448,196 Depreciation and amortization 887,948 General,
administrative and professional fees 135,490 Loss on extinguishment
of debt, net 754 Merger-related expenses and deal costs 10,535
Other 20,052 Loss from unconsolidated entities 561 Income tax
benefit (59,799 ) Reported Segment NOI $ 844,711 $ 593,167 $
524,566 $ 119,208 2,081,652 Adjustments: Normalizing adjustment for
technology costs — 3,375 — — 3,375 NOI not included in same-store
(142,448 ) (32,574 ) (125,974 ) — (300,996 ) Straight-lining of
rental income (3,612 ) — (19,521 ) — (23,133 ) Non-cash rental
income (16,758 ) — (942 ) — (17,700 ) Non-segment NOI — —
— (119,208 ) (119,208 ) (162,818 ) (29,199 ) (146,437
) (119,208 ) (457,662 ) Same-Store cash NOI (Constant Currency) $
681,893 $ 563,968 $ 378,129 $ — $
1,623,990 Percentage increase 3.7 % 1.3 % 2.0 % 2.5 %
For the Twelve Months Ended December 31, 2016 Income from
continuing operations $ 554,209 Adjustments: Interest and other
income (876 ) Interest 419,740 Depreciation and amortization
898,924 General, administrative and professional fees 126,875 Loss
on extinguishment of debt, net 2,779 Merger-related expenses and
deal costs 24,635 Other 9,988 Income from unconsolidated entities
(4,358 ) Income tax benefit (31,343 ) Reported Segment NOI $
850,755 $ 604,328 $ 444,276 $ 101,214 2,000,573 Adjustments:
Modification fee 2,720 — — — 2,720 NOI not included in same-store
(158,884 ) (49,128 ) (63,015 ) — (271,027 ) Straight-lining of
rental income (15,411 ) — (12,577 ) — (27,988 ) Non-cash rental
income (20,288 ) — 1,905 — (18,383 ) Non-segment NOI — — — (101,214
) (101,214 ) NOI impact from change in FX (1,037 ) 1,293 —
— 256 (192,900 ) (47,835 ) (73,687 ) (101,214
) (415,636 ) Same-Store cash NOI (Constant Currency) $ 657,855
$ 556,493 $ 370,589 $ — $ 1,584,937
NON-GAAP FINANCIAL MEASURES
RECONCILIATION
NOI and Same-Store Cash NOI by Segment
Guidance 1,2
(Dollars in millions, except per share amounts)
FY2018 - Guidance Tentative / Preliminary and Subject to
Change NNN SHOP Office
Non-Segment Total High End
Income from Continuing Operations $ 505
Depreciation and Amortization3 881 Interest Expense, G&A, Other
Income and Expenses4 615
Reported Segment NOI5
$ 762 $ 591 $ 538
$ 109 2,001 Normalizing Adjustment for
Technology Costs6 — 1 — — 1 Non-Cash and Non-Same-Store Adjustments
(49 ) (24 ) (82 ) (109 ) (264 )
Same-Store Cash NOI5
713 568 456 — 1,738
Percentage Increase 4.0 % (1.0
)% 2.75 % NM 2.0 %
Modification Fees — — (1 ) — (1 )
Adjusted
Same-Store Cash NOI5 $ 713 $
568 $ 455 $ —
$ 1,737 Adjusted Percentage
Increase 4.0 % (1.0 )% 2.6
% NM 2.0 % Low End
Income from Continuing Operations $ 484
Depreciation and Amortization3 861 Interest Expense, G&A, Other
Income and Expenses4 615
Reported Segment NOI5
$ 755 $ 574 $ 533
$ 94 1,960 Normalizing Adjustment for
Technology Costs6 — 1 — — 1 Non-Cash and Non-Same-Store Adjustments
(49 ) (24 ) (81 ) (94 ) (248 )
Same-Store Cash NOI5
706 551 452 — 1,713
Percentage Increase 3.0 % (4.0
)% 1.75 % NM 0.5 %
Modification Fees — — (1 ) — (1 )
Adjusted
Same-Store Cash NOI5 $ 706 $
551 $ 451 $ —
$ 1,712 Adjusted Percentage
Increase 3.0 % (4.0 )% 1.6
% NM 0.5 % Prior Year
Income from Continuing Operations $ 644
Depreciation and Amortization3 888 Interest Expense, G&A, Other
Income and Expenses4 550
Reported Segment NOI
$ 845 $ 593 $ 525
$ 119 2,082 Normalizing Adjustment for
Technology Costs6 — 3 — — 3 Non-Cash and Non-Same-Store Adjustments
(161 ) (25 ) (81 ) (119 ) (386 ) NOI Impact from Change in FX 2
3 — — 5
Same-Store Cash
NOI 686 574 444 — 1,704
Modification Fees — — — — —
Adjusted Same-Store Cash NOI $ 686
$ 574 $ 444
$ — $ 1,704 2018
GBP (£) to USD ($) 1.40 USD ($) to CAD (C$) 1.25
1
The Company’s guidance constitutes forward-looking statements
within the meaning of the federal securities laws and is based on a
number of assumptions that are subject to change and many of which
are outside the control of the Company. Actual results may differ
materially from the Company’s expectations depending on factors
discussed in the Company’s filings with the Securities and Exchange
Commission.
2
See tables titled “Net Operating Income (NOI) and Same-Store Cash
NOI by Segment” for the three and twelve months ended December 31,
2017 for a detailed breakout of adjustments for each respective
category.
3
Includes real estate depreciation and amortization, corporate
depreciation and amortization and amortization of other
intangibles.
4
Includes interest expense, general and administrative expenses
(including stock-based compensation), loss on extinguishment of
debt, merger-related expenses and deal costs, income from
unconsolidated entities, income tax benefit, and other income and
expenses.
5
Totals may not add across due to minor corporate-level adjustments
and rounding.
6
Represents costs expensed by one operator related to implementation
of new software.
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Ventas, Inc.Ryan K. Shannon(877) 4-VENTAS
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