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Ventas Reports 2019 Fourth Quarter and Full Year Results and Provides 2020 Outlook

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Ventas, Inc. (NYSE:VTR) (the "Company") today announced its results for the fourth quarter and full year ended December 31, 2019.

"In 2019, we benefitted from our diverse high-quality portfolio, earnings accretion from external growth and effective capital markets execution to deliver solid enterprise results. Our Medical Office, Healthcare and Research & Innovation portfolios grew and performed well. While our Senior Housing business experienced challenges, we are taking actions to improve performance and position Ventas for success and growth," said Debra A. Cafaro, Ventas Chairman and CEO.

"As we enter 2020, our team is sharply focused on achieving our goals and delivering value for our stakeholders. As we look ahead, we are well-positioned to benefit from the expected improvement in senior housing fundamentals, the opening and lease-up of our exciting Research & Innovation ground-up developments, reliable performance from our Office and Healthcare portfolios and the positive impact of investments and capital markets activities," Cafaro added.

Full Year and Fourth Quarter 2019 Results

For the full year and fourth quarter 2019, the Company delivered on its enterprise expectations. Fourth quarter 2019 Normalized Funds from Operations ("FFO") per share included $0.01 of fees and a cash tax refund that will not carry over into 2020. Reported per share results were:

 

Year Ended December 31, 2019

 

2019

 

2018

 

$ Change

 

% Change

Net income attributable to common stockholders

$1.17

 

$1.14

 

$0.03

 

2.6%

Nareit FFO

$3.88

 

$3.64

 

$0.24

 

6.6%

Normalized FFO

$3.85

 

$4.07

 

($0.22)

 

(5.4%)

 

 

Quarter Ended December 31, 2019

 

2019

 

2018

 

$ Change

 

% Change

Net income attributable to common stockholders

$0.03

 

$0.17

 

($0.14)

 

(82.4%)

Nareit FFO

$0.94

 

$0.81

 

$0.13

 

16.0%

Normalized FFO

$0.93

 

$0.96

 

($0.03)

 

(3.1%)

Full Year and Fourth Quarter 2019 Property Results

For the full year 2019, the Company's same-store total property portfolio (1,096 assets that qualified as same-store for the full 2018 to 2019 years) cash net operating income ("NOI") was stable compared to the same period in 2018. ­For the fourth quarter 2019, the Company's quarterly same-store total property portfolio (1,102 assets, representing 93 percent of the company's consolidated assets) cash NOI declined 0.6 percent compared to the same period in 2018. Reported full year 2019 same-store cash NOI performance, for each segment and the Company's overall portfolio, was in line with the Company's most recently provided guidance ranges. Same-store cash NOI results for the quarter and year follow:

 

 

 

Same-Store Cash NOI (Constant Currency)

 

 

 

Q4 2019

Full Year 2019

 

 

 

Reported

Reported

 

Guidance Range

 

 

 

 

 

 

 

NNN

 

 

2.1%

2.2%

 

2.0 – 2.5%

SHOP

 

 

(7.5%)

(4.4%)

 

(5.0) – (4.0%)

Office

 

 

3.8%

2.6%

 

2.0 – 2.5%

Total Company

 

 

(0.6%)

0.0%

 

0.0 - 0.3%

For the full year and fourth quarter 2019, same-store performance was driven by:

  • Triple-Net ("NNN") portfolio: Full year and fourth quarter 2019 same-store growth was driven by in-place lease escalations, particularly in the Company's growing NNN Healthcare portfolio of acute and post-acute assets.
  • Senior Housing Operating Properties ("SHOP") portfolio: Full year and fourth quarter 2019 same-store SHOP NOI performance was driven by the cumulative impact of new competition, which affected SHOP occupancy and rate. As anticipated:
    • Results in the fourth quarter 2019 were negatively impacted by the third quarter revenue trajectory. Excluding Eclipse Senior Living ("ESL"), which experienced unique performance issues, same-store performance for the Company's remaining SHOP same-store portfolio (92 percent of its quarterly same-store SHOP NOI) declined 4 percent in the fourth quarter.
    • Excluding ESL properties for the full year 2019, the Company's SHOP same-store NOI declined 3.1 percent.
  • Office portfolio: In 2019 and accelerating into the fourth quarter, the Office portfolio continued to post attractive growth, led by the Company's university-based Research & Innovation ("R&I") portfolio and complemented by steady growth in the Company's Medical Office Building ("MOB") portfolio.

Recent Developments

Actions to Improve Senior Housing Performance:

  • Ventas appointed J. Justin Hutchens as Executive Vice President, Senior Housing, North America, effective April 1, 2020. Additional details can be found in a separate press release issued today.
  • Ventas initiated plans to dispose of $0.6 billion of non-strategic senior housing assets in 2020 to enhance the Company's longer-term senior housing portfolio growth profile. Proceeds of these dispositions are targeted for reinvestment in the Company's attractive R&I development pipeline.
  • The Company has taken initial steps to effectuate an institutional joint venture with respect to the ESL portfolio ("ESL JV").
  • The Company is accelerating targeted senior housing capital expenditures to strengthen its competitive position in priority markets.
  • Ventas is updating its SHOP non-GAAP policies, definitions and methodologies ("SHOP Policies") to provide enhanced consistency, transparency and comparability between companies on organic operating results and guidance, effective as of January 1, 2020. The adoption of the revised policies in 2020 reduces same-store SHOP NOI 2020 guidance by 50 to 100 basis points because certain SHOP redevelopments that are in a strong lease-up phase will be excluded from the same-store pool in accordance with the revised SHOP Policies. Ventas's updated SHOP policies may be accessed here.

New Growth Platform: The Company announced it has sponsored and formed a perpetual life vehicle (the "Fund") to enable institutional investors to invest in core and core plus life science, medical office and senior housing real estate. The Fund has a broad range of financial and strategic benefits. Additional details are available in a separate press release issued today.

2019 Company Highlights

Attractive 2019 Investments: The Company completed or committed to nearly $4 billion of new investments in 2019 at an attractive blended 6.4 percent initial cash yield (6.8 percent GAAP yield). Investment highlights included:

  • $1.8 billion investment in partnership with Le Groupe Maurice in a high-quality portfolio of senior housing communities in the attractive Quebec market.
  • Five outstanding R&I development projects affiliated with top-tier new and existing university partners totaling nearly $1 billion.

Growth in R&I Development in Thriving uCity Market, Philadelphia, PA:

  • Ventas closed a 100 percent pre-leased 450,000 square-foot build-to-suit lease (upsized from 258,000 square feet) with Drexel University to be occupied by its School of Nursing and Health Professions. With total project costs of $275 million and a 30-year lease, this attractive University-based R&I building is expected to open in 2022.
  • Ventas commenced construction at One uCity, a $271 million (400,000 square feet) R&I ground up development, where leasing activity is robust.

Financial Strength:

  • The Company enhanced its balance sheet and liquidity and funded new investments through the (a) issuance and refinancing of $1.4 billion of Company debt; (b) sourcing equity financing and attractive local currency debt for its Canadian investments; and (c) establishment of a robust commercial paper program.
  • Ventas's Net Debt to Adjusted Pro Forma EBITDA ratio was 6.0x for the full year 2019.
  • At year-end, the Company maintained a weighted average debt maturity on senior notes of nearly 8 years and improved its cost of debt to 3.5 percent. Through 2021, the Company has only approximately $700 million of debt maturities, excluding commercial paper and the revolving credit facility.
  • The Company had robust available liquidity from cash on hand and existing credit facilities totaling $2.6 billion, net of $567 million of outstanding commercial paper at the end of 2019.

Leadership & Recognition

Environmental, Social & Governance ("ESG") Leadership: The Company was repeatedly recognized for its commitment to ESG principles and its achievements, including:

  • Receipt of the 2019 Nareit Health Care "Leader in the Light" award for a third consecutive year.
  • First time inclusion in the 2020 Bloomberg Gender-Equality Index.
  • First S&P 500 REIT signatory to the United Nations Global Compact and the United Nations Women's Empowerment Principles.

Executive Leadership and Recognition:

  • The Company recently appointed Carey S. Roberts as Executive Vice President, General Counsel and Ethics and Compliance Officer. She will assume her role March 4, 2020.
  • Debra A. Cafaro, the Company's Chairman and CEO, was named one of Harvard Business Review's CEO 100 for the sixth consecutive year, Chair of the Economic Club of Chicago and 100 Most Influential People in Healthcare by Modern Healthcare magazine.

Fourth Quarter Dividend

The Company's Board of Directors declared a dividend for the fourth quarter 2019 of $0.7925 per share. The dividend was paid in cash on January 13, 2020 to stockholders of record on January 2, 2020.

Full Year 2020 Guidance

Ventas expects 2020 per share Normalized FFO, Nareit FFO and net income attributable to common stockholders, and same-store cash NOI growth, assuming no new investments and approximately $1.3 billion in divestitures and receipt of loan repayments (inclusive of $0.6 billion in proceeds arising from property contributions to seed the Fund), to range as follows:

 

 

FY 2020 Guidance

 

 

Per Share

 

 

Low

 

High

 

 

 

 

 

Net Income Attributable to Common Stockholders

 

$1.61

-

$1.74

Nareit FFO

 

$3.79

-

$3.94

Normalized FFO

 

$3.56

-

$3.69

 

 

 

 

 

FY 2020 Projected

 

 

Same-Store Cash NOI Growth

 

 

Low

 

High

 

 

 

 

 

NNN

 

1.5%

-

2.5%

SHOP

 

(9.0%)

-

(4.0%)

Office

 

3.0%

-

4.0%

Total Company

 

(1.5%)

 

1.0%

Full year SHOP year over year same-store NOI growth is projected to be negative in 2020 as a result of the trajectory of the business in the second half of 2019 and the resulting lower occupancy start point in January 2020, together with the impact of cumulative supply. 2020 SHOP same-store NOI is expected to be flat at the guidance midpoint with 2019 Q4 same-store SHOP NOI annualized.

2020 Guidance Commentary

Consistent with the Company's previous communications, Normalized FFO per share in the fourth quarter of 2019, multiplied by four, represented a reasonable starting point for estimating full year 2020 Normalized FFO expectations, excluding any impact from 2020 investments, dispositions and capital transactions. The below table reconciles (a) the Company's fourth quarter 2019 Normalized FFO per share, adjusted for fourth quarter items that will not carry over to 2020, times four to annualize; with (b) the midpoint of its 2020 full year expectations for Normalized FFO per share.

 

 

Increase / (Decrease) to

Normalized FFO/sh.

 

 

2020 Guidance Midpoint

vs. 4Q19 Adjusted Annualized

4Q 2019 Normalized FFO

 

$0.93

4Q 2019 Adjustments

 

(0.01)

4Q 2019 Adjusted Normalized FFO

 

0.92

4Q 2019 Annualized Adjusted Normalized FFO

 

3.68

Senior Housing (NNN and SHOP)

 

0.00

Other Property NOI growth

 

0.04

Capital Recycling

 

(0.05)

Asset Contributions to Seed the Fund with Proceeds Used to Repay Debt

 

(0.03)

Other

 

(0.01)

2020 Normalized FFO Guidance Midpoint

 

$3.63

Compared to the fourth quarter 2019 annualized property performance, the Company expects its Office and NNN Healthcare portfolio to contribute an incremental $0.04 per share to its 2020 Normalized FFO, and the Company expects its total Senior Housing (NNN and SHOP) portfolio to contribute approximately the same amount per share of Normalized FFO in 2020 as it did in the fourth quarter 2019 annualized.

Capital recycling, including the anticipated sale of non-core senior housing assets ($0.6 billion), as well as other dispositions and loan repayments ($0.2 billion), is expected to be approximately ($0.05) dilutive to earnings in 2020. Proceeds from the dispositions will be used to fund future growth through investment in $0.6 billion of high-quality developments and redevelopment projects in 2020, principally in the Office segment.

While the Fund is expected to be accretive to Ventas earnings as it scales assets under management, it will initially be dilutive to the Company by ($0.03) per share in 2020. The initial dilution is as a result of the contribution of five R&I and MOB assets at an approximate cash yield of 4.9 percent, generating net proceeds to Ventas of $0.6 billion that will be used to repay debt and therefore be modestly deleveraging.

Consistent with historical practice, the Company's 2020 guidance does not include any new unannounced acquisitions, fees or capital markets activity. The Company's guidance also does not include the impact of an ESL JV. The 2020 outlook assumes 376 million weighted average fully-diluted shares. Ventas expects leverage to remain stable for the full year 2020.

A reconciliation of the Company's 2020 guidance to the Company's projected GAAP measures is included in this press release. The Company's 2020 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 2019 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), and the participant passcode is "Ventas." The call will also be webcast live by NASDAQ OMX and can be accessed at the Company's website at www.ventasreit.com. A replay of the call will be available at the Company's website, or by calling (855) 859-2056 (or +1 (404) 537-3406 for international callers), passcode 3291199, beginning on February 20, 2020, at approximately 1:00 p.m. Eastern Time and will remain available for 30 days.

Ventas, Inc., an S&P 500 company, is a leading real estate investment trust. Its diverse portfolio of approximately 1,200 assets in the United States, Canada and the United Kingdom consists of senior housing communities, medical office buildings, university-based research and innovation centers, inpatient rehabilitation and long-term acute care facilities, and health systems. Through its Lillibridge subsidiary, Ventas provides management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. References to "Ventas" or the "Company" mean Ventas, Inc. and its consolidated subsidiaries unless otherwise expressly noted. More information about Ventas and Lillibridge can be found at www.ventasreit.com and www.lillibridge.com.

The Company routinely announces material information to investors and the marketplace using press releases, Securities and Exchange Commission ("SEC") filings, public conference calls, webcasts and the Company's website at www.ventasreit.com/investor-relations. The information that the Company posts to its website may be deemed to be material. Accordingly, the Company encourages investors and others interested in the Company to routinely monitor and review the information that the Company posts on its website, in addition to following the Company's press releases, SEC filings and public conference calls and webcasts. Supplemental information regarding the Company can be found on the Company's website under the "Investor Relations" section or at www.ventasreit.com/investor-relations/annual-reports---supplemental-information. A comprehensive listing of the Company's properties is available at www.ventasreit.com/our-portfolio/properties-by-stateprovince.

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

The Company's actual future results and trends may differ materially from expectations depending on a variety of factors discussed in the Company's filings with the SEC. These factors include without limitation: (a) the ability and willingness of the Company's tenants, operators, borrowers, managers and other third parties to satisfy their obligations under their respective contractual arrangements with the Company, including, in some cases, their obligations to indemnify, defend and hold harmless the Company from and against various claims, litigation and liabilities; (b) the ability of the Company's tenants, operators, borrowers and managers to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to third parties, including without limitation obligations under their existing credit facilities and other indebtedness; (c) the Company's success in implementing its business strategy and the Company's ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions and investments; (d) macroeconomic conditions such as a disruption of or lack of access to the capital markets, changes in the debt rating on U.S. government securities, default or delay in payment by the United States of its obligations, and changes in the federal or state budgets resulting in the reduction or nonpayment of Medicare or Medicaid reimbursement rates; (e) the nature and extent of future competition, including new construction in the markets in which the Company's senior housing communities and office buildings are located; (f) the extent and effect of future or pending healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates; (g) increases in the Company's borrowing costs as a result of changes in interest rates and other factors, including the potential phasing out of the London Inter-bank Offered Rate after 2021; (h) the ability of the Company's tenants, operators and managers, as applicable, to comply with laws, rules and regulations in the operation of the Company's properties, to deliver high-quality services, to attract and retain qualified personnel and to attract residents and patients; (i) changes in general economic conditions or economic conditions in the markets in which the Company may, from time to time, compete, and the effect of those changes on the Company's revenues, earnings and funding sources; (j) the Company's ability to pay down, refinance, restructure or extend its indebtedness as it becomes due; (k) the Company's ability and willingness to maintain its qualification as a REIT in light of economic, market, legal, tax and other considerations; (l) final determination of the Company's taxable net income for the year ended December 31, 2019 and for the year ending December 31, 2020; (m) the ability and willingness of the Company's tenants to renew their leases with the Company upon expiration of the leases, the Company's ability to reposition its properties on the same or better terms in the event of nonrenewal or in the event the Company exercises its right to replace an existing tenant, and obligations, including indemnification obligations, the Company may incur in connection with the replacement of an existing tenant; (n) risks associated with the Company's senior living operating portfolio, such as factors that can cause volatility in the Company's operating income and earnings generated by those properties, including without limitation national and regional economic conditions, costs of food, materials, energy, labor and services, employee benefit costs, insurance costs and professional and general liability claims, and the timely delivery of accurate property-level financial results for those properties; (o) changes in exchange rates for any foreign currency in which the Company may, from time to time, conduct business; (p) year-over-year changes in the Consumer Price Index or the UK Retail Price Index and the effect of those changes on the rent escalators contained in the Company's leases and the Company's earnings; (q) the Company's ability and the ability of its tenants, operators, borrowers and managers to obtain and maintain adequate property, liability and other insurance from reputable, financially stable providers; (r) the impact of damage to the Company's properties from catastrophic weather and other natural events and the physical effects of climate change; (s) the impact of increased operating costs and uninsured professional liability claims on the Company's liquidity, financial condition and results of operations or that of the Company's tenants, operators, borrowers and managers, and the ability of the Company and the Company's tenants, operators, borrowers and managers to accurately estimate the magnitude of those claims; (t) risks associated with the Company's office building portfolio and operations, including the Company's ability to successfully design, develop and manage office buildings and to retain key personnel; (u) the ability of the hospitals on or near whose campuses the Company's medical office buildings are located and their affiliated health systems to remain competitive and financially viable and to attract physicians and physician groups; (v) risks associated with the Company's investments in joint ventures and unconsolidated entities, including its lack of sole decision-making authority and its reliance on its joint venture partners' financial condition; (w) the Company's ability to obtain the financial results expected from its development and redevelopment projects; (x) the impact of market or issuer events on the liquidity or value of the Company's investments in marketable securities; (y) consolidation activity in the senior housing and healthcare industries resulting in a change of control of, or a competitor's investment in, one or more of the Company's tenants, operators, borrowers or managers or significant changes in the senior management of the Company's tenants, operators, borrowers or managers; (z) the impact of litigation or any financial, accounting, legal or regulatory issues that may affect the Company or its tenants, operators, borrowers or managers; and (aa) changes in accounting principles, or their application or interpretation, and the Company's ability to make estimates and the assumptions underlying the estimates, which could have an effect on the Company's earnings.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

2019

 

2019

 

2019

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Real estate investments:

 

 

 

 

 

 

 

 

 

Land and improvements

$

2,283,929

 

 

$

2,280,877

 

 

$

2,128,409

 

 

$

2,116,086

 

 

$

2,114,406

 

Buildings and improvements

24,380,440

 

 

24,459,114

 

 

22,837,251

 

 

22,609,780

 

 

22,437,243

 

Construction in progress

461,354

 

 

432,713

 

 

386,550

 

 

335,773

 

 

422,334

 

Acquired lease intangibles

1,306,152

 

 

1,334,915

 

 

1,267,322

 

 

1,279,490

 

 

1,502,955

 

Operating lease assets

385,225

 

 

388,480

 

 

374,319

 

 

359,025

 

 

 

 

28,817,100

 

 

28,896,099

 

 

26,993,851

 

 

26,700,154

 

 

26,476,938

 

Accumulated depreciation and amortization

(7,088,013

)

 

(6,964,061

)

 

(6,758,067

)

 

(6,570,557

)

 

(6,383,281

)

Net real estate property

21,729,087

 

 

21,932,038

 

 

20,235,784

 

 

20,129,597

 

 

20,093,657

 

Secured loans receivable and investments, net

704,612

 

 

709,714

 

 

693,651

 

 

496,344

 

 

495,869

 

Investments in unconsolidated real estate entities

45,022

 

 

45,905

 

 

47,112

 

 

48,162

 

 

48,378

 

Net real estate investments

22,478,721

 

 

22,687,657

 

 

20,976,547

 

 

20,674,103

 

 

20,637,904

 

Cash and cash equivalents

106,363

 

 

148,063

 

 

81,987

 

 

82,514

 

 

72,277

 

Escrow deposits and restricted cash

39,739

 

 

60,533

 

 

56,309

 

 

57,717

 

 

59,187

 

Goodwill

1,051,161

 

 

1,049,985

 

 

1,050,470

 

 

1,050,876

 

 

1,050,548

 

Assets held for sale

91,433

 

 

4,520

 

 

1,754

 

 

5,978

 

 

5,454

 

Deferred income tax assets, net

47,495

 

 

 

 

 

 

 

 

 

Other assets

877,296

 

 

852,795

 

 

821,844

 

 

796,909

 

 

759,185

 

Total assets

$

24,692,208

 

 

$

24,803,553

 

 

$

22,988,911

 

 

$

22,668,097

 

 

$

22,584,555

 

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Senior notes payable and other debt

$

12,158,773

 

 

$

12,053,184

 

 

$

10,256,092

 

 

$

10,690,176

 

 

$

10,733,699

 

Accrued interest

111,115

 

 

85,214

 

 

111,388

 

 

81,766

 

 

99,667

 

Operating lease liabilities

251,196

 

 

249,237

 

 

233,757

 

 

214,046

 

 

 

Accounts payable and other liabilities

1,145,700

 

 

1,194,162

 

 

1,137,980

 

 

1,063,707

 

 

1,086,030

 

Liabilities related to assets held for sale

5,463

 

 

1,531

 

 

1,216

 

 

947

 

 

205

 

Deferred income tax liabilities

200,831

 

 

147,524

 

 

149,454

 

 

205,056

 

 

205,219

 

Total liabilities

13,873,078

 

 

13,730,852

 

 

11,889,887

 

 

12,255,698

 

 

12,124,820

 

 

 

 

 

 

 

 

 

 

 

Redeemable OP unitholder and noncontrolling interests

273,678

 

 

312,478

 

 

222,662

 

 

206,386

 

 

188,141

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

Ventas stockholders' equity:

 

 

 

 

 

 

 

 

 

Preferred stock, $1.00 par value; 10,000 shares authorized, unissued

 

 

 

 

 

 

 

 

 

Common stock, $0.25 par value; 372,811; 372,726; 371,478; 358,387; and 356,572 shares issued at December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019, and December 31, 2018, respectively

93,185

 

 

93,164

 

 

92,852

 

 

89,579

 

 

89,125

 

Capital in excess of par value

14,056,453

 

 

14,017,030

 

 

13,940,117

 

 

13,160,550

 

 

13,076,528

 

Accumulated other comprehensive loss

(34,564

)

 

(59,857

)

 

(39,671

)

 

(12,065

)

 

(19,582

)

Retained earnings (deficit)

(3,669,050

)

 

(3,384,421

)

 

(3,173,287

)

 

(3,088,401

)

 

(2,930,214

)

Treasury stock, 2; 3; 0; 0; and 0; shares at December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019, and December 31, 2018, respectively

(132

)

 

(210

)

 

 

 

 

 

 

Total Ventas stockholders' equity

10,445,892

 

 

10,665,706

 

 

10,820,011

 

 

10,149,663

 

 

10,215,857

 

Noncontrolling interests

99,560

 

 

94,517

 

 

56,351

 

 

56,350

 

 

55,737

 

Total equity

10,545,452

 

 

10,760,223

 

 

10,876,362

 

 

10,206,013

 

 

10,271,594

 

Total liabilities and equity

$

24,692,208

 

 

$

24,803,553

 

 

$

22,988,911

 

 

$

22,668,097

 

 

$

22,584,555

 

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Years Ended

 

December 31,

 

December 31,

 

2019

 

2018

 

2019

 

2018

Revenues

 

 

 

 

 

 

 

Rental income:

 

 

 

 

 

 

 

Triple-net leased

$

191,065

 

 

$

189,168

 

 

$

780,898

 

 

$

737,796

 

Office

210,423

 

 

195,540

 

 

828,978

 

 

776,011

 

 

401,488

 

 

384,708

 

 

1,609,876

 

 

1,513,807

 

Resident fees and services

568,271

 

 

517,175

 

 

2,151,533

 

 

2,069,477

 

Office building and other services revenue

2,988

 

 

2,511

 

 

11,156

 

 

13,416

 

Income from loans and investments

22,382

 

 

18,512

 

 

89,201

 

 

124,218

 

Interest and other income

875

 

 

357

 

 

10,984

 

 

24,892

 

Total revenues

996,004

 

 

923,263

 

 

3,872,750

 

 

3,745,810

 

Expenses

 

 

 

 

 

 

 

Interest

116,707

 

 

110,524

 

 

451,662

 

 

442,497

 

Depreciation and amortization

348,910

 

 

244,276

 

 

1,045,620

 

 

919,639

 

Property-level operating expenses:

 

 

 

 

 

 

 

Senior living

405,564

 

 

366,148

 

 

1,521,398

 

 

1,446,201

 

Office

68,277

 

 

61,017

 

 

260,249

 

 

243,679

 

Triple-net leased

6,469

 

 

 

 

26,561

 

 

 

 

480,310

 

 

427,165

 

 

1,808,208

 

 

1,689,880

 

Office building services costs

544

 

 

338

 

 

2,319

 

 

1,418

 

General, administrative and professional fees

41,627

 

 

38,475

 

 

165,996

 

 

151,982

 

Loss on extinguishment of debt, net

39

 

 

7,843

 

 

41,900

 

 

58,254

 

Merger-related expenses and deal costs

4,151

 

 

4,259

 

 

15,235

 

 

30,547

 

Other

(8,315

)

 

58,877

 

 

(17,609

)

 

66,768

 

Total expenses

983,973

 

 

891,757

 

 

3,513,331

 

 

3,360,985

 

Income before unconsolidated entities, real estate dispositions, income taxes, discontinued operations and noncontrolling interests

12,031

 

 

31,506

 

 

359,419

 

 

384,825

 

Income (loss) from unconsolidated entities

167

 

 

(7,208

)

 

(2,454

)

 

(55,034

)

Gain on real estate dispositions

1,389

 

 

10,354

 

 

26,022

 

 

46,247

 

Income tax (expense) benefit

(694

)

 

28,650

 

 

56,310

 

 

39,953

 

Income from continuing operations

12,893

 

 

63,302

 

 

439,297

 

 

415,991

 

Discontinued operations

 

 

 

 

 

 

(10

)

Net income

12,893

 

 

63,302

 

 

439,297

 

 

415,981

 

Net income attributable to noncontrolling interests

1,450

 

 

1,029

 

 

6,281

 

 

6,514

 

Net income attributable to common stockholders

$

11,443

 

 

$

62,273

 

 

$

433,016

 

 

$

409,467

 

Earnings per common share

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

Income from continuing operations

$

0.03

 

 

$

0.18

 

 

$

1.20

 

 

$

1.17

 

Net income attributable to common stockholders

0.03

 

 

0.17

 

 

1.18

 

 

1.15

 

Diluted:

 

 

 

 

 

 

 

Income from continuing operations

$

0.03

 

 

$

0.18

 

 

$

1.19

 

 

$

1.16

 

Net income attributable to common stockholders

0.03

 

 

0.17

 

 

1.17

 

 

1.14

 

 

 

 

 

 

 

 

 

Weighted average shares used in computing earnings per common share

 

 

 

 

 

 

 

Basic

372,663

 

 

356,389

 

 

365,977

 

 

356,265

 

Diluted

376,453

 

359,989

 

 

369,886

 

359,301

 

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,

 

2019

 

2019

 

2019

 

2019

 

2018

Revenues

 

 

 

 

 

 

 

 

 

Rental income:

 

 

 

 

 

 

 

 

 

Triple-net leased

$

191,065

 

 

$

193,383

 

 

$

196,382

 

 

$

200,068

 

 

$

189,168

 

Office

210,423

 

 

214,939

 

 

202,188

 

 

201,428

 

 

195,540

 

 

401,488

 

 

408,322

 

 

398,570

 

 

401,496

 

 

384,708

 

Resident fees and services

568,271

 

 

541,090

 

 

520,725

 

 

521,447

 

 

517,175

 

Office building and other services revenue

2,988

 

 

2,959

 

 

2,691

 

 

2,518

 

 

2,511

 

Income from loans and investments

22,382

 

 

30,164

 

 

19,529

 

 

17,126

 

 

18,512

 

Interest and other income

875

 

 

620

 

 

9,202

 

 

287

 

 

357

 

Total revenues

996,004

 

 

983,155

 

 

950,717

 

 

942,874

 

 

923,263

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

Interest

116,707

 

 

113,967

 

 

110,369

 

 

110,619

 

 

110,524

 

Depreciation and amortization

348,910

 

 

234,603

 

 

226,187

 

 

235,920

 

 

244,276

 

Property-level operating expenses:

 

 

 

 

 

 

 

 

 

Senior living

405,564

 

 

388,011

 

 

366,837

 

 

360,986

 

 

366,148

 

Office

68,277

 

 

67,144

 

 

62,743

 

 

62,085

 

 

61,017

 

Triple-net leased

6,469

 

 

6,338

 

 

6,321

 

 

7,433

 

 

 

 

480,310

 

 

461,493

 

 

435,901

 

 

430,504

 

 

427,165

 

Office building services costs

544

 

 

627

 

 

515

 

 

633

 

 

338

 

General, administrative and professional fees

41,627

 

 

40,530

 

 

43,079

 

 

40,760

 

 

38,475

 

Loss on extinguishment of debt, net

39

 

 

37,434

 

 

4,022

 

 

405

 

 

7,843

 

Merger-related expenses and deal costs

4,151

 

 

4,304

 

 

4,600

 

 

2,180

 

 

4,259

 

Other

(8,315

)

 

2,164

 

 

(11,481

)

 

23

 

 

58,877

 

Total expenses

983,973

 

 

895,122

 

 

813,192

 

 

821,044

 

 

891,757

 

 

 

 

 

 

 

 

 

 

 

Income before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests

12,031

 

 

88,033

 

 

137,525

 

 

121,830

 

 

31,506

 

Income (loss) from unconsolidated entities

167

 

 

854

 

 

(2,529

)

 

(946

)

 

(7,208

)

Gain on real estate dispositions

1,389

 

 

36

 

 

19,150

 

 

5,447

 

 

10,354

 

Income tax (expense) benefit

(694

)

 

(2,005

)

 

57,752

 

 

1,257

 

 

28,650

 

Income from continuing operations

12,893

 

 

86,918

 

 

211,898

 

 

127,588

 

 

63,302

 

Net income

12,893

 

 

86,918

 

 

211,898

 

 

127,588

 

 

63,302

 

Net income attributable to noncontrolling interests

1,450

 

 

1,659

 

 

1,369

 

 

1,803

 

 

1,029

 

Net income attributable to common stockholders

$

11,443

 

 

$

85,259

 

 

$

210,529

 

 

$

125,785

 

 

$

62,273

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

0.03

 

 

$

0.23

 

 

$

0.59

 

 

$

0.36

 

 

$

0.18

 

Net income attributable to common stockholders

0.03

 

 

0.23

 

 

0.58

 

 

0.35

 

 

0.17

 

Diluted:

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

0.03

 

 

$

0.23

 

 

$

0.58

 

 

$

0.35

 

 

$

0.18

 

Net income attributable to common stockholders

0.03

 

 

0.23

 

 

0.58

 

 

0.35

 

 

0.17

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used in computing earnings per common share

 

 

 

 

 

 

 

 

 

Basic

372,663

 

 

372,426

 

 

361,722

 

 

356,853

 

 

356,389

 

Diluted

376,453

 

 

376,625

 

 

365,553

 

 

360,619

 

 

359,989

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

For the Years Ended

 

December 31,

 

2019

 

2018

Cash flows from operating activities:

 

 

 

Net income

$

439,297

 

 

$

415,981

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

1,045,620

 

 

919,639

 

Amortization of deferred revenue and lease intangibles, net

(7,967

)

 

(30,660

)

Other non-cash amortization

22,985

 

 

18,886

 

Stock-based compensation

33,923

 

 

29,963

 

Straight-lining of rental income

(30,073

)

 

13,396

 

Loss on extinguishment of debt, net

41,900

 

 

58,254

 

Gain on real estate dispositions

(26,022

)

 

(46,247

)

Gain on real estate loan investments

 

 

(13,202

)

Income tax benefit

(58,918

)

 

(43,026

)

Loss from unconsolidated entities

2,464

 

 

55,034

 

Distributions from unconsolidated entities

1,600

 

 

2,934

 

Real estate impairments related to natural disasters

 

 

52,510

 

Other

13,264

 

 

3,720

 

Changes in operating assets and liabilities:

 

 

 

Increase in other assets

(76,693

)

 

(23,198

)

Increase in accrued interest

9,737

 

 

4,992

 

Increase (decrease) in accounts payable and other liabilities

26,666

 

 

(37,509

)

Net cash provided by operating activities

1,437,783

 

 

1,381,467

 

Cash flows from investing activities:

 

 

 

Net investment in real estate property

(958,125

)

 

(265,907

)

Investment in loans receivable

(1,258,187

)

 

(229,534

)

Proceeds from real estate disposals

147,855

 

 

353,792

 

Proceeds from loans receivable

1,017,309

 

 

911,540

 

Development project expenditures

(403,923

)

 

(330,876

)

Capital expenditures

(156,724

)

 

(131,858

)

Distributions from unconsolidated entities

172

 

 

57,455

 

Investment in unconsolidated entities

(3,855

)

 

(47,007

)

Insurance proceeds for property damage claims

30,179

 

 

6,891

 

Net cash (used in) provided by investing activities

(1,585,299

)

 

324,496

 

Cash flows from financing activities:

 

 

 

Net change in borrowings under revolving credit facilities

(569,891

)

 

321,463

 

Net change in borrowings under commercial paper program

565,524

 

 

 

Proceeds from debt

3,013,191

 

 

2,549,473

 

Repayment of debt

(2,623,916

)

 

(3,465,579

)

Purchase of noncontrolling interests

 

 

(4,724

)

Payment of deferred financing costs

(21,403

)

 

(20,612

)

Issuance of common stock, net

942,085

 

 

 

Cash distribution to common stockholders

(1,157,720

)

 

(1,127,143

)

Cash distribution to redeemable OP unitholders

(9,218

)

 

(7,459

)

Cash issued for redemption of OP Units

(2,203

)

 

(1,370

)

Contributions from noncontrolling interests

6,282

 

 

1,883

 

Distributions to noncontrolling interests

(9,717

)

 

(11,574

)

Proceeds from stock option exercises

36,179

 

 

8,762

 

Other

(8,519

)

 

(5,057

)

Net cash provided by (used in) financing activities

160,674

 

 

(1,761,937

)

Net increase (decrease) in cash, cash equivalents and restricted cash

13,158

 

 

(55,974

)

Effect of foreign currency translation

1,480

 

 

(815

)

Cash, cash equivalents and restricted cash at beginning of year

131,464

 

 

188,253

 

Cash, cash equivalents and restricted cash at end of year

$

146,102

 

 

$

131,464

 

 

 

 

 

Supplemental schedule of non-cash activities:

 

 

 

Assets acquired and liabilities assumed from acquisitions and other:

 

 

 

Real estate investments

$

1,057,138

 

 

$

94,280

 

Other assets

11,140

 

 

5,398

 

Debt

907,746

 

 

30,508

 

Other liabilities

47,121

 

 

18,086

 

Deferred income tax liability

95

 

 

922

 

Noncontrolling interests

113,316

 

 

2,591

 

Equity issued

 

 

30,487

 

Equity issued for redemption of OP Units

127

 

907

 

QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

For the Quarters Ended

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

2019

 

2019

 

2019

 

2019

 

2018

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income

$

12,893

 

 

$

86,918

 

 

$

211,898

 

 

$

127,588

 

 

$

63,302

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

348,910

 

 

234,603

 

 

226,187

 

 

235,920

 

 

244,276

 

Amortization of deferred revenue and lease intangibles, net

(1,483

)

 

(339

)

 

(3,299

)

 

(2,846

)

 

(4,659

)

Other non-cash amortization

6,075

 

 

5,323

 

 

5,456

 

 

6,131

 

 

5,359

 

Stock-based compensation

7,253

 

 

8,195

 

 

10,070

 

 

8,405

 

 

9,202

 

Straight-lining of rental income

(4,393

)

 

(8,680

)

 

(8,511

)

 

(8,489

)

 

(6,587

)

Loss on extinguishment of debt, net

39

 

 

37,434

 

 

4,022

 

 

405

 

 

7,843

 

Gain on real estate dispositions

(1,389

)

 

(36

)

 

(19,150

)

 

(5,447

)

 

(10,354

)

Income tax expense (benefit)

1,331

 

 

946

 

 

(59,480

)

 

(1,715

)

 

(29,562

)

(Income) loss from unconsolidated entities

(157

)

 

(854

)

 

2,529

 

 

946

 

 

7,208

 

Distributions from unconsolidated entities

200

 

 

100

 

 

100

 

 

1,200

 

 

200

 

Real estate impairments related to natural disasters

 

 

 

 

 

 

 

 

52,510

 

Other

4,028

 

 

4,145

 

 

2,808

 

 

2,283

 

 

3,330

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

(Increase) decrease in other assets

(17,327

)

 

(14,894

)

 

(30,768

)

 

(13,704

)

 

11,681

 

Increase (decrease) in accrued interest

25,646

 

 

(27,307

)

 

29,445

 

 

(18,047

)

 

22,500

 

(Decrease) increase in accounts payable and other liabilities

(27,391

)

 

28,775

 

 

21,792

 

 

3,490

 

 

(12,404

)

Net cash provided by operating activities

354,235

 

 

354,329

 

 

393,099

 

 

336,120

 

 

363,845

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Net investment in real estate property

(18,320

)

 

(731,766

)

 

(194,942

)

 

(13,097

)

 

(230,107

)

Investment in loans receivable

(610

)

 

(750,429

)

 

(502,891

)

 

(4,257

)

 

(17,445

)

Proceeds from real estate disposals

70,300

 

 

3,150

 

 

56,854

 

 

17,551

 

 

22,549

 

Proceeds from loans receivable

8,626

 

 

719,026

 

 

288,382

 

 

1,275

 

 

45,227

 

Development project expenditures

(174,078

)

 

(115,619

)

 

(64,574

)

 

(49,652

)

 

(100,528

)

Capital expenditures

(56,937

)

 

(41,406

)

 

(36,426

)

 

(21,955

)

 

(58,833

)

Distributions from unconsolidated entities

21

 

 

151

 

 

 

 

 

 

25

 

Investment in unconsolidated entities

(2,144

)

 

(777

)

 

(247

)

 

(687

)

 

(1,901

)

Insurance proceeds for property damage claims

9,722

 

 

3,518

 

 

13,941

 

 

2,998

 

 

564

 

Net cash used in investing activities

(163,420

)

 

(914,152

)

 

(439,903

)

 

(67,824

)

 

(340,449

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Net change in borrowings under revolving credit facilities

(848,568

)

 

785,228

 

 

194,224

 

 

(700,775

)

 

280,171

 

Net change in borrowings under commercial paper program

261,016

 

 

34,698

 

 

75,312

 

 

194,498

 

 

 

Proceeds from debt

806,614

 

 

1,493,643

 

 

6,343

 

 

706,591

 

 

137,053

 

Repayment of debt

(167,781

)

 

(1,459,074

)

 

(734,491

)

 

(262,570

)

 

(171,475

)

Purchase of noncontrolling interests

 

 

 

 

 

 

 

 

(2,295

)

Payment of deferred financing costs

(3,536

)

 

(11,030

)

 

 

 

(6,837

)

 

(4,029

)

Issuance of common stock, net

(165

)

 

76,217

 

 

767,655

 

 

98,378

 

 

 

Cash distribution to common stockholders

(295,931

)

 

(294,647

)

 

(284,268

)

 

(282,874

)

 

(281,895

)

Cash distribution to redeemable OP unitholders

(2,336

)

 

(2,331

)

 

(2,335

)

 

(2,216

)

 

(1,865

)

Cash issued for redemption of OP Units

(1,842

)

 

(361

)

 

 

 

 

 

 

Contributions from noncontrolling interests

1,323

 

 

1,365

 

 

2,371

 

 

1,223

 

 

1,383

 

Distributions to noncontrolling interests

(3,314

)

 

(2,300

)

 

(1,480

)

 

(2,623

)

 

(1,606

)

Proceeds from stock option exercises

2,045

 

 

8,396

 

 

21,422

 

 

4,316

 

 

4,524

 

Other

(1,918

)

 

131

 

 

142

 

 

(6,874

)

 

(83

)

Net cash (used in) provided by financing activities

(254,393

)

 

629,935

 

 

44,895

 

 

(259,763

)

 

(40,117

)

Net (decrease) increase in cash, cash equivalents and restricted cash

(63,578

)

 

70,112

 

 

(1,909

)

 

8,533

 

 

(16,721

)

Effect of foreign currency translation

1,084

 

 

188

 

 

(26

)

 

234

 

 

(362

)

Cash, cash equivalents and restricted cash at beginning of period

208,596

 

 

138,296

 

 

140,231

 

 

131,464

 

 

148,547

 

Cash, cash equivalents and restricted cash at end of period

$

146,102

 

 

$

208,596

 

 

$

138,296

 

 

$

140,231

 

 

$

131,464

 

QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(In thousands)

 

For the Quarters Ended

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

2019

 

2019

 

2019

 

2019

 

2018

Supplemental schedule of non-cash activities:

 

 

 

 

 

 

 

 

 

Assets acquired and liabilities assumed from acquisitions and other:

 

 

 

 

 

 

 

 

 

Real estate investments

$

657

 

 

$

1,055,412

 

 

$

1,069

 

 

$

 

 

$

65,174

 

Other assets

17

 

 

10,940

 

 

183

 

 

 

 

1,286

 

Debt

 

 

907,746

 

 

 

 

 

 

30,508

 

Other liabilities

785

 

 

45,084

 

 

1,252

 

 

 

 

1,952

 

Deferred income tax liability

95

 

 

 

 

 

 

 

 

922

 

Noncontrolling interests

(206

)

 

113,522

 

 

 

 

 

 

2,591

 

Equity issued

 

 

 

 

 

 

 

 

30,487

 

Equity issued for redemption of OP Units

127

 

 

 

 

 

 

 

 

641

 

NON-GAAP FINANCIAL MEASURES RECONCILIATION

Funds From Operations (FFO) and Funds Available for Distribution (FAD)1

(Dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FY YoY

 

2018

2019

Growth

 

Q4

FY

Q1

Q2

Q3

Q4

FY

'18-'19

Net income attributable to common stockholders

$

62,273

 

$

409,467

 

$

125,785

 

$

210,529

 

$

85,259

 

$

11,443

 

$

433,016

 

6

%

Net income attributable to common stockholders per share

$

0.17

 

$

1.14

 

$

0.35

 

$

0.58

 

$

0.23

 

$

0.03

 

$

1.17

 

3

%

Adjustments:

 

 

 

 

 

 

 

 

Depreciation and amortization on real estate assets

242,834

 

913,537

 

234,471

 

224,630

 

233,078

 

347,371

 

1,039,550

 

 

Depreciation on real estate assets related to noncontrolling interests

(1,621

)

(6,926

)

(1,834

)

(1,750

)

(2,496

)

(3,682

)

(9,762

)

 

Depreciation on real estate assets related to unconsolidated entities

(78

)

1,977

 

165

 

167

 

(456

)

311

 

187

 

 

Impairment on equity method investment

 

35,708

 

 

 

 

 

 

 

Gain on real estate dispositions

(10,354

)

(46,247

)

(5,447

)

(19,150

)

(36

)

(1,389

)

(26,022

)

 

Gain (loss) on real estate dispositions related to noncontrolling interests

 

1,508

 

354

 

 

 

(11

)

343

 

 

Gain on real estate dispositions related to unconsolidated entities

 

(875

)

(799

)

(2

)

(67

)

(395

)

(1,263

)

 

Subtotal: FFO add-backs

230,781

 

898,682

 

226,910

 

203,895

 

230,023

 

342,205

 

1,003,033

 

 

Subtotal: FFO add-backs per share

$

0.64

 

$

2.50

 

$

0.63

 

$

0.56

 

$

0.61

 

$

0.91

 

$

2.71

 

 

FFO (Nareit) attributable to common stockholders

$

293,054

 

$

1,308,149

 

$

352,695

 

$

414,424

 

$

315,282

 

$

353,648

 

$

1,436,049

 

10

%

FFO (Nareit) attributable to common stockholders per share

$

0.81

 

$

3.64

 

$

0.98

 

$

1.13

 

$

0.84

 

$

0.94

 

$

3.88

 

7

%

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

Change in fair value of financial instruments

(14

)

(18

)

(38

)

(11

)

(7

)

(22

)

(78

)

 

Non-cash income tax (benefit) expense

(4,944

)

(18,427

)

(1,714

)

(59,480

)

946

 

1,330

 

(58,918

)

 

Impact of tax reform

(24,618

)

(24,618

)

 

 

 

 

 

 

Loss on extinguishment of debt, net

7,890

 

63,073

 

405

 

4,022

 

37,434

 

39

 

41,900

 

 

Loss (gain) on non-real estate dispositions related to unconsolidated entities

10

 

(2

)

 

(3

)

(34

)

19

 

(18

)

 

Merger-related expenses, deal costs and re-audit costs

6,375

 

38,145

 

2,829

 

5,564

 

4,726

 

5,089

 

18,208

 

 

Amortization of other intangibles

120

 

759

 

121

 

121

 

121

 

121

 

484

 

 

Other items related to unconsolidated entities

678

 

5,035

 

1,038

 

1,377

 

502

 

374

 

3,291

 

 

Non-cash charges related to lease terminations

 

21,299

 

 

 

 

 

 

 

Non-cash impact of changes to equity plan

1,509

 

4,830

 

2,334

 

2,584

 

1,729

 

1,165

 

7,812

 

 

Natural disaster expenses (recoveries), net

64,041

 

63,830

 

(1,539

)

(13,339

)

(101

)

(10,704

)

(25,683

)

 

Subtotal: normalized FFO add-backs

51,047

 

153,906

 

3,436

 

(59,165

)

45,316

 

(2,589

)

(13,002

)

 

Subtotal: normalized FFO add-backs per share

$

0.14

 

$

0.43

 

$

0.01

 

$

(0.16

)

$

0.12

 

$

(0.01

)

$

(0.04

)

 

Normalized FFO attributable to common stockholders

$

344,101

 

$

1,462,055

 

$

356,131

 

$

355,259

 

$

360,598

 

$

351,059

 

$

1,423,047

 

(3

%)

Normalized FFO attributable to common stockholders per share

$

0.96

 

$

4.07

 

$

0.99

 

$

0.97

 

$

0.96

 

$

0.93

 

$

3.85

 

(5

%)

 

 

 

 

 

 

 

 

 

Non-cash items included in normalized FFO:

 

 

 

 

 

 

 

 

Amortization of deferred revenue and lease intangibles, net

(4,659

)

(13,680

)

(2,846

)

(3,299

)

(339

)

(1,483

)

(7,967

)

 

Other non-cash amortization, including fair market value of debt

5,359

 

18,886

 

6,131

 

5,335

 

5,444

 

6,075

 

22,985

 

 

Stock-based compensation

7,693

 

25,133

 

6,071

 

7,486

 

6,466

 

6,088

 

26,111

 

 

Straight-lining of rental income

(6,587

)

(24,883

)

(8,489

)

(8,511

)

(8,680

)

(4,393

)

(30,073

)

 

Subtotal: non-cash items included in normalized FFO

1,806

 

5,456

 

867

 

1,011

 

2,891

 

6,287

 

11,056

 

 

Capital expenditures

(60,667

)

(140,060

)

(24,015

)

(34,366

)

(41,406

)

(56,937

)

(156,724

)

 

Normalized FAD attributable to common stockholders

$

285,240

 

$

1,327,451

 

$

332,983

 

$

321,904

 

$

322,083

 

$

300,409

 

$

1,277,379

 

(4

%)

Merger-related expenses, deal costs and re-audit costs

(6,375

)

(38,145

)

(2,829

)

(5,564

)

(4,726

)

(5,089

)

(18,208

)

 

Other items related to unconsolidated entities

(678

)

(5,035

)

(1,038

)

(1,377

)

(502

)

(374

)

(3,291

)

 

FAD attributable to common stockholders

$

278,187

 

$

1,284,271

 

$

329,116

 

$

314,963

 

$

316,855

 

$

294,946

 

$

1,255,880

 

(2

%)

Weighted average diluted shares

359,989

 

359,301

 

360,619

 

365,553

 

376,625

 

376,453

 

369,886

 

 

 

 

 

 

 

 

 

 

 

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. Per share amounts may not add to total per share amounts due to rounding.

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, derivative transactions that have non-cash mark-to-market impacts on the Company's income statement and non-cash charges related to lease terminations; (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 attributable to common stockholders (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 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 attributable to common stockholders as presented elsewhere herein.

NON-GAAP FINANCIAL MEASURES RECONCILIATION

NET INCOME, FFO and FAD Attributable to Common Stockholders 2020 Guidance 1,2

(Dollars in millions, except per share amounts)

 

 

 

Tentative / Preliminary and Subject to Change

 

 

FY2020 - Guidance

 

FY2020 - Per Share

 

 

Low

 

High

 

Low

 

High

 

 

 

 

 

 

 

 

 

Net Income Attributable to Common Stockholders

 

$

606

 

 

$

653

 

 

$

1.61

 

 

$

1.74

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization Adjustments

 

 

1,117

 

 

 

1,147

 

 

 

2.97

 

 

 

3.05

 

Gain on Real Estate Dispositions

 

 

(296

)

 

 

(316

)

 

 

(0.79

)

 

 

(0.84

)

Other Adjustments 3

 

 

 

 

 

 

0.00

 

 

 

0.00

 

 

 

 

 

 

 

 

 

 

FFO (Nareit) Attributable to Common Stockholders

 

$

1,427

 

 

$

1,484

 

 

$

3.79

 

 

$

3.94

 

 

 

 

 

 

 

 

 

 

Merger-Related Expenses, Deal Costs and Re-Audit Costs

 

 

25

 

 

 

15

 

 

 

0.07

 

 

 

0.04

 

Natural Disaster Expenses (Recoveries), Net

 

 

(1

)

 

 

(1

)

 

 

(0.00

)

 

 

(0.00

)

Other Adjustments 3

 

 

(111

)

 

 

(109

)

 

 

(0.30

)

 

 

(0.29

)

 

 

 

 

 

 

 

 

 

Normalized FFO Attributable to Common Stockholders

 

$

1,340

 

 

$

1,389

 

 

$

3.56

 

 

$

3.69

 

% Year-Over-Year Growth

 

 

 

 

 

 

(8%

)

 

 

(4%

)

 

 

 

 

 

 

 

 

 

Non-Cash Items Included in Normalized FFO

 

 

14

 

 

 

12

 

 

 

 

 

Capital Expenditures

 

 

(175

)

 

 

(185

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized FAD Attributable to Common Stockholders

 

$

1,179

 

 

$

1,216

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger-Related Expenses, Deal Costs and Re-Audit Costs

 

 

(25

)

 

 

(15

)

 

 

 

 

Other Adjustments 3

 

 

(3

)

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

FAD Attributable to Common Stockholders

 

$

1,151

 

 

$

1,198

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Diluted Shares (in millions)

 

 

376

 

 

 

376

 

 

 

 

 

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. Totals may not add due to minor corporate-level adjustments.

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 EBITDA1

(Dollars in thousands)

The following table illustrates net debt to pro forma earnings 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, net expenses or recoveries related to natural disasters and non-cash charges related to lease terminations, 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 year ended December 31, 2019, 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.

For the Year Ended December 31, 2019

 

 

Net income attributable to common stockholders

$

433,016

 

Adjustments:

 

Interest

451,662

 

Loss on extinguishment of debt, net

41,900

 

Taxes (including tax amounts in general, administrative and professional fees)

(52,677

)

Depreciation and amortization

1,045,620

 

Non-cash stock-based compensation expense

33,923

 

Merger-related expenses, deal costs and re-audit costs

15,246

 

Net income attributable to noncontrolling interests, adjusted for consolidated joint venture partners' share of EBITDA

(16,396

)

Loss from unconsolidated entities, adjusted for Ventas share of EBITDA from unconsolidated entities

32,462

 

Gain on real estate dispositions

(26,022

)

Unrealized foreign currency gains

(1,061

)

Change in fair value of financial instruments

(104

)

Natural disaster expenses (recoveries), net

(25,981

)

Adjusted EBITDA

$

1,931,588

 

Adjustments for current period activity

57,747

 

Adjusted Pro Forma EBITDA

$

1,989,335

 

 

 

As of December 31, 2019:

 

 

Total debt

$

12,158,773

 

Cash

(106,363

)

Restricted cash pertaining to debt

(18,425

)

Consolidated joint venture partners' share of debt

(228,154

)

Ventas share of debt from unconsolidated entities

60,605

 

Net debt

$

11,866,436

 

 

 

Net debt to Adjusted Pro Forma EBITDA

6.0

x

 

 

1 Totals may not add due to rounding.

NON-GAAP FINANCIAL MEASURES RECONCILIATION

Net Operating Income (NOI) and Same-Store Cash NOI by Segment (Constant Currency)

(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 defines same-store as properties owned, consolidated and operational for the full period in both comparison periods and are not otherwise excluded; provided, however, that the Company may include selected properties that otherwise meet the same-store criteria if they are included in substantially all of, but not a full, period for one or both of the comparison periods, and in the Company's judgment such inclusion provides a more meaningful presentation of its portfolio performance. Same-store excludes: (i) properties sold or classified as held for sale or properties whose operations were classified as discontinued operations in accordance with GAAP; (ii) for properties included in the Company's office operations reportable business segment, those properties for which management has an intention to institute a redevelopment plan because the properties may require major property-level expenditures to maximize value, increase NOI, maintain a market-competitive position and/or achieve property stabilization; and (iii) for other assets, those properties (A) that have transitioned operators or business models after the start of the prior comparison period or (B) for which an operator or business model transition has been scheduled after the start of the prior comparison period. Newly-developed properties in the office operations and triple-net leased properties reportable business segments will be included in same-store if in service for the full period in both periods presented. To eliminate the impact of exchange rate movements, all same-store 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

Senior Housing

Operating

Office

Non-Segment

Total

For the Three Months Ended December 31, 2019:

Net income attributable to common stockholders

 

 

 

 

$