Ventas Reports 2016 Fourth Quarter and Full-Year Results

  • Strong 2016 Earnings Growth
  • Enhanced Balance Sheet and Financial Strength
  • Continued Portfolio Optimization and Accelerated Capital Recycling
  • First Quarter 2017 Dividend of $0.775 Per Share Declared by Board
  • 2017 Guidance Consistent with Preliminary Company Expectations

CHICAGO–(BUSINESS WIRE)–$VTR–Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today announced
earnings for the fourth quarter and full year ended December 31, 2016,
driven by the Company’s high-quality healthcare, senior living and life
science properties and accretive investments:

  • Income from continuing operations per diluted common share for the
    full year 2016 grew 36 percent to $1.59 compared to the same period in
    2015. The year-over-year increase was principally due to accretive
    investments, strong property performance, profits and fees from
    beneficial transactions and lower transaction costs. For the fourth
    quarter 2016, income from continuing operations per diluted common
    share was $0.40.
  • Normalized Funds From Operations (“FFO”) for the full year 2016 grew 5
    percent to $4.13 per diluted common share on a comparable basis
    (“Comparable”), which adjusts all prior periods for the effects of the
    successful spin-off of Care Capital Properties, Inc. (“CCP”) (NYSE:
    CCP) completed in August 2015. For the fourth quarter 2016, 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 2016 grew 1 percent to $4.13 compared to the same period in
    2015. The 2015 period includes results through August 17, 2015 of the
    properties that were spun off to CCP. For the fourth quarter 2016,
    NAREIT FFO per diluted common share was $1.04.

Track Record of Excellence Continued

“Ventas extended its long track record of excellence and success in
2016, generating strong growth and income from a high-quality diverse
portfolio while enhancing its financial strength,” said Chairman and
Chief Executive Officer Debra A. Cafaro. “We also delivered 16 percent
total shareholder return as our exciting investment in life science and
innovation centers and strategic dispositions created additional value.
We are confident that demand from an aging population combined with our
productive and cohesive team, our leading operator partners and our
attractive mix of healthcare, senior living and life science properties
will sustain excellence over the long term.

“Looking ahead to 2017, we expect to deliver property cash flow growth,
improve our portfolio mix as we substantially exit the skilled nursing
business, accelerate our investment in future growth through attractive
development and redevelopment projects, particularly in our life science
and innovation platform, and enhance our financial strength. These steps
will advance our position as the premier capital provider to leading
healthcare and senior living providers and research institutions. The
outstanding Ventas team is excited to continue its long track record of
excellence in 2017 and beyond.”

Portfolio Performance

  • For the year ended December 31, 2016, same-store cash net operating
    income (“NOI”) growth for the Company’s total portfolio (1,038 assets)
    was 2.7 percent compared to 2015, in-line with previous guidance of
    2.5 to 3 percent.

    • At a segment level for the full year 2016: the triple net leased
      portfolio same-store cash NOI grew 3.7 percent; the seniors
      housing operating portfolio (“SHOP”) grew 2.3 percent; and the
      medical office building (“MOB”) portfolio grew 1.3 percent, all
      consistent with previous guidance ranges.
  • The Company’s fourth quarter 2016 same-store total portfolio (1,189
    assets) cash NOI growth was 2.9 percent compared to the same period in
    2015.

    • At a segment level for the fourth quarter 2016: the triple net
      leased portfolio same-store cash NOI increased 4.5 percent; SHOP
      grew 1.1 percent; and the MOB portfolio rose 2.1 percent.

2016 and Fourth Quarter Highlights

  • The Company invested approximately $1.6 billion in 2016, including its
    accretive acquisition of institutional-quality life science and
    innovation centers leased by leading research universities. Ventas
    also committed to funding more than $300 million of development and
    redevelopment projects, including attractive new ground-up life
    science developments.
  • To fund investments and enhance the Company’s balance sheet and
    liquidity profile in 2016, Ventas raised approximately $1.3 billion in
    aggregate gross proceeds from the sale of 18.9 million shares of
    common stock at an average gross price of approximately $70 per share;
    and $850 million in long-term senior notes.
  • The Company sold properties and received final repayment on loans
    receivable in 2016 for proceeds of approximately $620 million, ahead
    of previously-disclosed guidance of $500 million. Fourth quarter
    proceeds approached $350 million.
  • The Company’s credit profile and financial health were outstanding at
    year end 2016, including:

    • Net Debt to Adjusted Pro Forma EBITDA ratio of 5.7x, compared to
      6.1x at year end 2015;
    • 38 percent total indebtedness to gross asset value, an improvement
      of 4 percentage points year-over-year; and
    • 4.8x fixed charge coverage, an improvement of 0.3x year-over-year.
  • The Company currently has over $2 billion of available liquidity.
  • Ventas paid its shareholders dividends of $2.965 per share in 2016,
    with an attractive payout ratio.
  • The Company demonstrated its commitment to excellence through strong
    corporate governance, Board of Directors (“Board”) refreshment,
    director independence and diversity. In 2016 the Board appointed
    Roxanne M. Martino and Walter C. Rakowich as Ventas directors and
    James D. Shelton as the Company’s independent presiding director.
  • Ventas Chairman and Chief Executive Officer Debra A. Cafaro was
    recognized in 2016 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” and first among
    “Top-Performing Women CEOs, Ranked by Total Return;” the Harvard
    Business Review
    as one of “The Best-Performing CEOs in the World,”
    one of only 30 CEOs named to the Harvard Business Review list
    for three consecutive years and one of only two women on 2016’s list;
    and Modern Healthcare as one of the “100 Most Influential
    People in Healthcare” for 2016, the third time Ms. Cafaro has received
    this recognition.

Recent Developments

  • The Board declared a dividend for the first quarter 2017 of $0.775 per
    share, representing a 6 percent increase from the first quarter 2016.
    The dividend is payable in cash on March 31, 2017 to stockholders of
    record on March 7, 2017.
  • The Company continues to expect to close on its $700 million loan
    commitment to fund Ardent Health Services’ (“Ardent’s”) acquisition of
    LHP Hospital Group (“LHP”) late in the first quarter of 2017, subject
    to customary regulatory reviews and approvals. Pro forma for the
    acquisition, Ardent’s leading hospital platform is expected to
    generate $3 billion in revenues in 6 states.
  • In January 2017, the Company sold assets and received final repayment
    on loans receivable for proceeds of $88 million, primarily comprised
    of 5 seniors housing communities at a cap rate of 6 percent on a cash
    and GAAP basis.

2017 Guidance

Ventas expects 2017 income from continuing operations per diluted common
share to range between $1.72 and $1.78. The Company expects normalized
FFO per diluted common share to range between $4.12 and $4.18, in line
with the Company’s preliminary outlook provided on January 10, 2017.
NAREIT FFO per diluted common share is forecast to range between $4.10
and $4.19.

The Company expects full year 2017 cash NOI growth for the 1,163 assets
in the full-year same-store pool to range from 1.5 to 2.5 percent,
consistent with the Company’s previous outlook. Triple net same-store
cash NOI is forecast to grow 2.5 to 3.5 percent driven by lease
escalations; SHOP same-store cash NOI is forecast to grow 0 to 2
percent, led by assets in high barrier-to-entry locations; and MOB
same-store cash NOI is forecast to grow 1 to 2 percent, supported by new
leasing activity.

The Company expects to complete approximately $900 million in strategic
dispositions in 2017 (of which $88 million have closed to date),
including $700 million in proceeds in the second half of the year
through the potential sale of 36 skilled nursing facilities owned by
Ventas at a 7 percent cash yield and a gain of over $650 million.
Disposition proceeds are expected to be redeployed at approximately the
same rate into new 2017 investments approximating $1 billion,
principally to scale the Company’s life science and acute care hospital
platforms, including $700 million in secured debt financing to fund
Ardent’s acquisition of LHP.

During 2017, the Company also expects to invest in future growth by
funding approximately $300 million in development and redevelopment
projects, including attractive new ground-up life science developments.

During 2017, the Company expects to refinance approximately $1 billion
of current debt and lengthen the Company’s weighted average maturity
schedule. The 2017 outlook assumes 358.5 million weighted average
fully-diluted shares, with no new equity issuance in 2017.

Consistent with its practice, the Company’s guidance does not include
any further material investments, dispositions or capital activity. 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 2016 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 (661) 378-9542 for
international callers). The participant passcode is “Ventas.” The
conference call is being webcast live by NASDAQ OMX and can be accessed
at the Company’s website at www.ventasreit.com.
A replay of the webcast will be available following the call online, or
by calling (855) 859-2056 (or (404) 537-3406 for international callers),
passcode 50587913, beginning at approximately 2:00 p.m. Eastern Time and
will remain for 36 days.

Ventas, Inc., an S&P 500 company, is a leading real estate investment
trust. Its diverse portfolio of approximately 1,300 assets in the United
States, Canada and the United Kingdom consists of seniors housing
communities, medical office buildings, life science and innovation
centers, skilled nursing facilities, specialty hospitals and general
acute care hospitals. Through its Lillibridge subsidiary, Ventas
provides management, leasing, marketing, facility development and
advisory services to highly rated hospitals and health systems
throughout the United States. More information about Ventas and
Lillibridge can be found at www.ventasreit.com
and www.lillibridge.com.

Supplemental information regarding the Company can be found on the
Company’s website under the “Investor Relations” section or at www.ventasreit.com/investor-relations/annual-reports—supplemental-information.
A comprehensive listing of the Company’s properties is available at www.ventasreit.com/our-portfolio/properties-by-stateprovince.

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

The Company’s actual future results and trends may differ materially
from expectations depending on a variety of factors discussed in the
Company’s filings with the Securities and Exchange Commission.
These
factors include without limitation: (a) the ability and willingness of
the Company’s tenants, operators, borrowers, managers and other third
parties to satisfy their obligations under their respective contractual
arrangements with the Company, including, in some cases, their
obligations to indemnify, defend and hold harmless the Company from and
against various claims, litigation and liabilities; (b) the ability of
the Company’s tenants, operators, borrowers and managers to maintain the
financial strength and liquidity necessary to satisfy their respective
obligations and liabilities to third parties, including without
limitation obligations under their existing credit facilities and other
indebtedness; (c) the Company’s success in implementing its business
strategy and the Company’s ability to identify, underwrite, finance,
consummate and integrate diversifying acquisitions and investments; (d)
macroeconomic conditions such as a disruption of or lack of access to
the capital markets, changes in the debt rating on U.S. government
securities, default or delay in payment by the United States of its
obligations, and changes in the federal or state budgets resulting in
the reduction or nonpayment of Medicare or Medicaid reimbursement rates;
(e) the nature and extent of future competition, including new
construction in the markets in which the Company’s seniors housing
communities and medical office buildings (“MOBs”)
are located;
(f) the extent 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, 2016 and for the year ending
December 31, 2017; (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,
2016 2016 2016 2016 2015
 
Assets
Real estate investments:
Land and improvements $ 2,089,591 $ 2,089,329 $ 2,041,880 $ 2,060,247 $ 2,056,428
Buildings and improvements 21,516,396 21,551,049 20,272,554 20,395,386 20,309,599
Construction in progress 210,599 192,848 127,647 119,215 92,005
Acquired lease intangibles 1,510,629   1,522,708   1,332,173   1,343,187   1,344,422  
25,327,215 25,355,934 23,774,254 23,918,035 23,802,454
Accumulated depreciation and amortization (4,932,461 ) (4,754,532 ) (4,560,504 ) (4,409,554 ) (4,177,234 )
Net real estate property 20,394,754 20,601,402 19,213,750 19,508,481 19,625,220
Secured loans receivable and investments, net 702,021 821,663 1,003,561 1,002,598 857,112
Investments in unconsolidated real estate entities 95,921   97,814   96,952   98,120   95,707  
Net real estate investments 21,192,696 21,520,879 20,314,263 20,609,199 20,578,039
Cash and cash equivalents 286,707 89,279 57,322 51,701 53,023
Escrow deposits and restricted cash 80,647 89,521 65,626 76,710 77,896
Goodwill 1,033,225 1,043,075 1,043,479 1,044,983 1,047,497
Assets held for sale 54,961 195,252 195,271 54,263 93,060
Other assets 518,364   488,258   417,511   424,436   412,403  
Total assets $ 23,166,600   $ 23,426,264   $ 22,093,472   $ 22,261,292   $ 22,261,918  
 
Liabilities and equity
Liabilities:
Senior notes payable and other debt $ 11,127,326 $ 11,252,327 $ 10,901,131 $ 11,247,730 $ 11,206,996
Accrued interest 83,762 70,790 80,157 66,988 80,864
Accounts payable and other liabilities 907,928 930,103 735,287 738,327 779,380
Liabilities related to assets held for sale 1,462 77,608 88,967 12,625 34,340
Deferred income taxes 316,641   315,713   320,468   333,354   338,382  
Total liabilities 12,437,119 12,646,541 12,126,010 12,399,024 12,439,962
 
Redeemable OP unitholder and noncontrolling interests 200,728 209,278 217,686 191,739 196,529
 
Commitments and contingencies
 
Equity:
Ventas stockholders’ equity:
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued
Common stock, $0.25 par value; 354,125; 353,793; 341,055; 337,486;
and 334,386 shares issued at December 31, 2016, September 30, 2016,
June 30, 2016, March 31, 2016, and December 31, 2015, respectively
88,514 88,431 85,246 84,354 83,579
Capital in excess of par value 12,917,002 12,870,566 11,961,951 11,758,306 11,602,838
Accumulated other comprehensive loss (57,534 ) (49,614 ) (44,195 ) (19,932 ) (7,565 )
Retained earnings (deficit) (2,487,695 ) (2,420,766 ) (2,313,287 ) (2,208,474 ) (2,111,958 )
Treasury stock, 1; 1; 0; 1; and 44 shares at December 31, 2016,
September 30, 2016, June 30, 2016, March 31, 2016 and December 31,
2015, respectively
(47 ) (78 )   (59 ) (2,567 )
Total Ventas stockholders’ equity 10,460,240 10,488,539 9,689,715 9,614,195 9,564,327
Noncontrolling interest 68,513   81,906   60,061   56,334   61,100  
Total equity 10,528,753   10,570,445   9,749,776   9,670,529   9,625,427  
Total liabilities and equity $ 23,166,600   $ 23,426,264   $ 22,093,472   $ 22,261,292   $ 22,261,918  
 
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
       
For the Three Months Ended For the Years Ended
December 31, December 31,
2016 2015 2016 2015
Revenues:
Rental income:
Triple-net leased $ 210,804 $ 208,210 $ 845,834 $ 779,801
Office 183,846   145,958   630,342   566,245  
394,650 354,168 1,476,176 1,346,046
Resident fees and services 456,919 454,871 1,847,306 1,811,255
Office building and other services revenue 4,064 11,541 21,070 41,492
Income from loans and investments 19,996 20,361 98,094 86,553
Interest and other income 84   333   876   1,052  
Total revenues 875,713 841,274 3,443,522 3,286,398
Expenses:
Interest 107,739 103,692 419,740 367,114
Depreciation and amortization 232,189 236,795 898,924 894,057
Property-level operating expenses:
Senior living 310,303 307,261 1,242,978 1,209,415
Office 55,165   45,073   191,784   174,225  
365,468 352,334 1,434,762 1,383,640
Office building services costs 1,034 7,467 7,311 26,565
General, administrative and professional fees 31,488 27,636 126,875 128,035
(Gain) loss on extinguishment of debt, net (386 ) (486 ) 2,779 14,411
Merger-related expenses and deal costs (438 ) (2,079 ) 24,635 102,944
Other 1,087   4,009   9,988   17,957  
Total expenses 738,181   729,368   2,925,014   2,934,723  
Income before unconsolidated entities, income taxes, discontinued
operations, real estate dispositions and noncontrolling interest
137,532 111,906 518,508 351,675
Income (loss) from unconsolidated entities 2,207 (223 ) 4,358 (1,420 )
Income tax benefit 2,836   11,548   31,343   39,284  
Income from continuing operations 142,575 123,231 554,209 389,539
Discontinued operations (167 ) (2,331 ) (922 ) 11,103
Gain on real estate dispositions 66,424   4,160   98,203   18,580  
Net income 208,832 125,060 651,490 419,222
Net income attributable to noncontrolling interest 1,195   332   2,259   1,379  
Net income attributable to common stockholders $ 207,637   $ 124,728   $ 649,231   $ 417,843  
Earnings per common share:
Basic:
Income from continuing operations attributable to common
stockholders, including real estate dispositions
$ 0.59 $ 0.38 $ 1.88 $ 1.23
Discontinued operations 0.00   (0.01 ) 0.00   0.03  
Net income attributable to common stockholders $ 0.59   $ 0.37   $ 1.88   $ 1.26  
Diluted:
Income from continuing operations attributable to common
stockholders, including real estate dispositions
$ 0.58 $ 0.38 $ 1.86 $ 1.22
Discontinued operations 0.00   (0.01 ) 0.00   0.03  
Net income attributable to common stockholders $ 0.58   $ 0.37   $ 1.86   $ 1.25  
 
Weighted average shares used in computing earnings per common
share:
Basic 353,911 332,914 344,703 330,311
Diluted 357,435 336,406 348,390 334,007
 
Dividends declared per common share $ 0.775 $ 0.73 $ 2.965 $ 3.04

Contacts

Ventas, Inc.
Ryan K. Shannon
(877) 4-VENTAS

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