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Ventas Reports 2023 Second Quarter Results

Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today reported results for the second quarter ended June 30, 2023.

CEO Remarks

“We are pleased to deliver strong second quarter results with broad-based organic property growth across our diverse portfolio,” said Debra A. Cafaro, Ventas Chairman and CEO.

“All our businesses are contributing positively to total company performance. We demonstrated the significant competitive advantage of our scale and access to attractively priced capital across markets, providing us with outstanding liquidity and reinforcing our financial strength and flexibility. The performance of the properties underpinning our former mezzanine loan is off to a positive start, as our experienced and active asset management teams focus on driving performance and value in that portfolio.

“In SHOP, we continue to strongly believe in and experience the multiyear growth and recovery cycle. Growth in the quarter was led by outsized performance in U.S. assisted living, complemented by our highly occupied Canadian portfolio. We are actively managing our SHOP portfolio with our proven playbook to maximize performance.

“Our second quarter results underscore the growth in our diversified enterprise that serves a large and growing aging population, and we are pleased to confirm our full year enterprise outlook,” Cafaro concluded.

Second Quarter 2023 Highlights

  • Net Income Attributable to Common Stockholders (“Net Income”) per share of $0.26
  • Normalized Funds From Operations* (“Normalized FFO”) per share of $0.75
  • Total Company Net Operating Income* (“NOI”) year-over-year growth of 7.9%. Total Company Same-Store Cash NOI* year-over-year growth of 7.0%
  • On a Same-Store Cash NOI* basis, the Company’s senior housing operating portfolio (“SHOP”) grew 14% year-over-year led by the U.S. which grew 19% year-over-year. SHOP Same-Store Cash NOI growth was driven principally by REVPOR growth of 6.6% and moderating operating expense growth, which resulted in margin expansion of 160 basis points

* Some of the financial measures throughout this press release are non-GAAP measures. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release for additional information and a reconciliation to the most directly comparable GAAP measure.

Second Quarter 2023 Enterprise Results

For the Second Quarter 2023, reported per share results were:

 

 

Quarter Ended June 30,

 

 

2023

 

2022

 

$ Change

 

% Change

Attributable Net Income

 

$0.26

 

($0.11)

 

$0.37

 

n/a

Nareit FFO*

 

$1.02

 

$0.60

 

$0.42

 

70%

Normalized FFO*

 

$0.75

 

$0.72

 

$0.03

 

4%

* Some of the financial measures throughout this press release are non-GAAP measures. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release for additional information and a reconciliation to the most directly comparable GAAP measure.

Equitized Loan Portfolio Transaction

On May 1, 2023, Ventas took ownership of the properties that secured the Company’s mezzanine loan to Santerre Health Investors (the “Santerre Mezzanine Loan”) by converting the outstanding principal amount of the Santerre Mezzanine Loan to equity, with no additional consideration being paid. These properties consist of a diverse pool of outpatient medical buildings, SHOP communities and triple-net leased healthcare facilities in the United States (such assets, collectively the “Equitized Loan Portfolio”).

On May 1, 2023, the fair value of the Equitized Loan Portfolio, as determined by a third-party appraisal, was estimated at $1.566 billion. In connection with taking ownership of the Equitized Loan Portfolio, the Company recognized $41 million in asset and liability valuation-related increases to Attributable Net Income composed of a $29 million gain and a $12 million reversal of a previously recorded CECL reserve on the Santerre Mezzanine Loan, which increases are included in Nareit FFO and excluded from Normalized FFO in the second quarter.

Financial Strength and Flexibility

Ventas’s long-term success is supported by its scale, strong liquidity and access to multiple sources of attractive capital. Year to date, the Company’s active capital markets activities have totaled approximately $2.4 billion, which has been used to refinance 2023 and 2024 maturing debt and improve its floating rate debt exposure to 10% of total consolidated debt, while enhancing its liquidity at June 30, 2023 to over $2.7 billion. Selected highlights of year-to-date successful capital markets activity include:

  • Ventas Realty, LP issued $862.5 million of 3.75% Exchangeable Senior Notes due 2026 in June.
  • Ventas Canada Finance Limited issued CAD $600 million of 5.398% Senior Notes due 2028 in April, and repurchased, at a discount to par, approximately CAD $527 million aggregate principal amount of its 2.80% Senior Notes due April 2024 and approximately CAD $87 million aggregate principal amount of its 4.125% Senior Notes due September 2024.
  • In July, Ventas entered into a $427 million 10-year mortgage loan, which (after Ventas completes its contemplated purchase of a 7.5% tranche of the original principal balance of the loan) will result in a $395 million net mortgage loan at an all-in expected weighted average cash rate of 5.5%.
  • The Company issued and sold under its “at-the-market” equity offering program (“ATM program”) a total of 2.3 million shares of common stock year-to-date at an average gross issuance price of $47.89 per share, resulting in approximately $110 million in gross proceeds.

Dispositions Including Partial Sale of Ardent Health Services Equity (“Ardent OpCo”)

During the second quarter, Ventas sold approximately 24% of its successful investment in Ardent OpCo for approximately $50 million in total cash proceeds. The valuation on the partial sale represents a greater than 4x equity multiple versus Ventas’s original investment basis. After the sale, Ventas retains an approximately 7.5% equity investment in Ardent OpCo. As a result of the sale, the Company recognized in Attributable Net Income and Nareit FFO a gain on sale of approximately $34 million in the second quarter, which is excluded from Normalized FFO.

In addition, the Company has received approximately $155 million year-to-date in disposition and loan repayment proceeds. The Company now expects to generate capital recycling proceeds of $450 million in 2023, which is an increase from the previous guidance for $300 million of capital recycling proceeds, principally composed of exercised purchase options and skilled nursing facilities from its Equitized Loan Portfolio.

Updated Full Year 2023 Guidance

The Company’s guidance contains forward-looking statements and is based on a number of assumptions; actual results may differ materially.

 

 

As of 5/8/23

 

As of 8/3/23

Attributable Net Income Per Share Range

 

$0.20 - $0.34

 

$0.22 - $0.32

Attributable Net Income Per Share Midpoint

 

$0.27

 

$0.27

Nareit FFO Per Share Range*

 

$2.97 - $3.11

 

$3.19 - $3.29

Nareit FFO Per Share Midpoint*

 

$3.04

 

$3.24

2023 Normalized Per Share FFO Range*

 

$2.90 - $3.04

 

$2.92 - $3.02

2023 Normalized Per Share FFO Midpoint*

 

$2.97

 

$2.97

* Some of the financial measures throughout this press release are non-GAAP measures. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release for additional information and a reconciliation to the most directly comparable GAAP measure.

Investor Presentation

A second quarter earnings presentation is posted to the Events & Presentations section of Ventas’s website at ir.ventasreit.com/events-and-presentations. Additional information regarding the Company can be found in its second quarter 2023 supplemental posted at ir.ventasreit.com. The information contained on, or that may be accessed through, our website, including the information contained in the aforementioned presentation and supplemental, is not incorporated by reference into, and is not part of, this document.

Second Quarter 2023 Results Conference Call

Ventas will hold a conference call to discuss this earnings release on Friday, August 4, 2023 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time).

The dial-in number for the conference call is (888) 330-3576 (or +1 (646) 960-0672 for international callers), and the participant passcode is 7655497. A live webcast can be accessed from the Investor Relations section of www.ventasreit.com.

A telephonic replay will be available at (800) 770-2030 (or +1 (647) 362-9199 for international callers), passcode 7655497, after the earnings call and will remain available for 30 days. The webcast replay will be posted in the Investor Relations section of www.ventasreit.com.

About Ventas

Ventas Inc., an S&P 500 company, operates at the intersection of two large and dynamic industries – healthcare and real estate. Fueled by powerful demographic demand from growth in the aging population, Ventas owns or has investments in a highly diversified portfolio of approximately 1,400 properties in the United States, Canada, and the United Kingdom. Ventas uses the power of its capital to unlock the value of senior housing communities, outpatient medical buildings, research centers, hospitals and other healthcare facilities. A globally-recognized real estate investment trust, Ventas follows a successful long-term strategy, proven over more than 20 years, built on diversification of property types, capital sources and industry leading partners, financial strength and flexibility, consistent and reliable growth and industry leading ESG achievements, managed by a collaborative and experienced team dedicated to its stakeholders.

Non-GAAP Financial Measures

This press release includes certain financial performance measures not defined by generally accepted accounting principles in the United States (“GAAP”), such as Nareit FFO, Normalized FFO, NOI and Same-Store Cash NOI. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in this press release. Our definitions and calculations of these non-GAAP measures may not be the same as similar measures reported by other REITs.

These non-GAAP financial measures should not be considered as alternatives for, or superior to, financial measures calculated in accordance with GAAP.

Cautionary Statements

Certain of the information contained herein, including intra-quarter operating information and number of confirmed cases of COVID-19, has been provided by our operators and we have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you of its accuracy.

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. These forward-looking statements include, among others, statements of expectations, beliefs, future plans and strategies, anticipated results from operations and developments and other matters that are not historical facts. Forward-looking statements include, among other things, statements regarding our and our officers’ intent, belief or expectation as identified by the use of words such as “assume,” “may,” “will,” “project,” “expect,” “believe,” “intend,” “anticipate,” “seek,” “target,” “forecast,” “plan,” “potential,” “opportunity,” “estimate,” “could,” “would,” “should” and other comparable and derivative terms or the negatives thereof.

Forward-looking statements are based on management’s beliefs as well as on a number of assumptions concerning future events. You should not put undue reliance on these forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors that could cause actual events or results to differ materially from those expressed or implied by the forward-looking statements. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made. We urge you to carefully review the disclosures we make concerning risks and uncertainties that may affect our business and future financial performance, including those made below and in our filings with the Securities and Exchange Commission, such as in the sections titled “Cautionary Statements — Summary Risk Factors,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Certain factors that could affect our future results and our ability to achieve our stated goals include, but are not limited to: (a) the impact of the ongoing COVID-19 pandemic and other viruses and infections, such as flu and respiratory syncytial virus, and their extended consequences, including of any variants, on our revenue, level of profitability, liquidity and overall risk exposure and the implementation and impact of regulations related to the CARES Act and other stimulus legislation and any future COVID-19 relief measures, including the risk that some or all of the CARES Act or other COVID-19 relief payments we or our tenants, managers or borrowers received may be subject to recoupment; (b) our ability to achieve the anticipated benefits and synergies from, and effectively integrate, our completed or anticipated acquisitions and investments, including our ownership of the properties that previously secured the Santerre Mezzanine Loan; (c) our exposure and the exposure of our tenants, managers and borrowers to complex healthcare and other regulation and the challenges and expense associated with complying with such regulation; (d) the potential for significant general and commercial claims, legal actions, regulatory proceedings or enforcement actions that could subject us or our tenants, managers or borrowers to increased operating costs, uninsured liabilities fines or significant operational limitations, including the loss or suspension of or moratoriums on accreditations, licenses or certificates of need, suspension of new admissions, suspension, decertification or exclusion from federal, state or foreign healthcare programs or facility or community closure; (e) the impact of market and general economic conditions on us and our tenants, managers and borrowers, including economic and financial market events, such as bank failures and other events affecting financial institutions, market volatility, increases in inflation, changes in interest rates and exchange rates, tightening of lending standards and reduced availability of credit or capital, supply chain pressures, rising labor costs and historically low unemployment, events that affect consumer confidence, our occupancy rates and resident fee revenues, and the actual and perceived state of the real estate markets, labor markets and public and private capital markets; (f) our reliance and the reliance of our tenants, managers and borrowers on the financial, credit and capital markets and the risk that those markets may be disrupted or become constrained, including as a result of bank failures or concerns or rumors about such events, tightening of lending standards and reduced availability of credit or capital; (g) our ability, and the ability of our tenants, managers and borrowers, to navigate the trends impacting our or their businesses and the industries in which we or they operate; (h) the risk of bankruptcy, inability to obtain benefits from governmental programs, insolvency or financial deterioration of our tenants, managers, borrowers and other obligors which may, among other things, have an adverse impact on the ability of such parties to pay obligations due to us or our financial results and financial condition; (i) the risk that the borrowers under our loans or other investments default or that, to the extent we are able to foreclose or otherwise acquire the collateral securing our loans or other investments, we will be required to incur additional expense or indebtedness in connection therewith, that the assets will underperform expectations or that we may not be able to subsequently dispose of all or part of such assets on favorable terms; (j) the recognition of reserves, allowances, credit losses or impairment charges are inherently uncertain, may increase or decrease in the future and may not represent or reflect the ultimate value of, or loss that we ultimately realize with respect to, the relevant assets, which could have an adverse impact on our results of operations and financial condition; (k) the non-renewal of any leases or management agreement or defaults by tenants or managers thereunder and the risk of our inability to replace those tenants or managers on favorable terms, if at all; (l) our ability to identify and consummate future investments in or dispositions of healthcare assets and effectively manage our portfolio opportunities and our investments in co-investment vehicles, joint ventures and minority interests, including our ability to dispose of such assets on favorable terms as a result of rights of first offer or rights of first refusal in favor of third parties; (m) risks related to development, redevelopment and construction projects, including costs associated with inflation, rising interest rates, labor conditions and supply chain pressures; (n) our ability to attract and retain talented employees; (o) the limitations and significant requirements imposed upon our business as a result of our status as a REIT and the adverse consequences (including the possible loss of our status as a REIT) that would result if we are not able to comply with such requirements; (p) the risk of changes in healthcare law or regulation or in tax laws, guidance and interpretations, particularly as applied to REITs, that could adversely affect us or our tenants, managers or borrowers; (q) increases in our borrowing costs as a result of becoming more leveraged, including in connection with acquisitions or other investment activity and rising interest rates; (r) our reliance on third parties to operate a majority of our assets and our limited control and influence over such operations and results; (s) our dependency on a limited number of tenants and managers for a significant portion of our revenues and operating income; (t) the availability, adequacy and pricing of insurance coverage provided by our policies and policies maintained by our tenants, managers or other counterparties; (u) the occurrence of cyber incidents that could disrupt our operations, result in the loss of confidential information or damage our business relationships and reputation; (v) the impact of merger, acquisition and investment activity in the healthcare industry or otherwise affecting our tenants, managers or borrowers; (w) disruptions to the management and operations of our business and the uncertainties caused by activist investors; (x) the risk of catastrophic or extreme weather and other natural events and the physical effects of climate change; (y) the impact of purchase accounting adjustments, impairments, write downs and other non-cash charges related to our equitization of the Santerre Mezzanine Loan; (z) the risk of potential dilution resulting from future sales or issuances of our equity securities; and (aa) the other factors set forth in our periodic filings with the Securities and Exchange Commission.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts; dollars in USD; unaudited)

 

 

 

 

 

As of

June 30, 2023

 

As of

December 31, 2022

Assets

 

 

 

Real estate investments:

 

 

 

Land and improvements

$

2,630,480

 

 

$

2,437,905

 

Buildings and improvements

 

27,438,274

 

 

 

26,020,048

 

Construction in progress

 

387,194

 

 

 

310,456

 

Acquired lease intangibles

 

1,498,639

 

 

 

1,346,190

 

Operating lease assets

 

321,344

 

 

 

310,307

 

 

 

32,275,931

 

 

 

30,424,906

 

Accumulated depreciation and amortization

 

(9,792,822

)

 

 

(9,264,456

)

Net real estate property

 

22,483,109

 

 

 

21,160,450

 

Secured loans receivable and investments, net

 

27,749

 

 

 

537,075

 

Investments in unconsolidated real estate entities

 

629,184

 

 

 

579,949

 

Net real estate investments

 

23,140,042

 

 

 

22,277,474

 

Cash and cash equivalents

 

138,648

 

 

 

122,564

 

Escrow deposits and restricted cash

 

71,699

 

 

 

48,181

 

Goodwill

 

1,045,147

 

 

 

1,044,415

 

Assets held for sale

 

21,027

 

 

 

44,893

 

Deferred income tax assets, net

 

6,980

 

 

 

10,490

 

Other assets

 

647,319

 

 

 

609,823

 

Total assets

$

25,070,862

 

 

$

24,157,840

 

Liabilities and equity

 

 

 

Liabilities:

 

 

 

Senior notes payable and other debt

$

13,354,740

 

 

$

12,296,780

 

Accrued interest

 

112,788

 

 

 

110,542

 

Operating lease liabilities

 

200,968

 

 

 

190,440

 

Accounts payable and other liabilities

 

1,069,590

 

 

 

1,031,689

 

Liabilities related to assets held for sale

 

2,959

 

 

 

6,492

 

Deferred income tax liabilities

 

29,702

 

 

 

35,570

 

Total liabilities

 

14,770,747

 

 

 

13,671,513

 

Redeemable OP unitholder and noncontrolling interests

 

271,671

 

 

 

264,650

 

Commitments and contingencies

 

 

 

Equity:

 

 

 

Ventas stockholders’ equity:

 

 

 

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

 

 

 

 

 

Common stock, $0.25 par value; 600,000 shares authorized, 400,620 and 399,707 shares outstanding at June 30, 2023 and December 31, 2022, respectively

 

100,206

 

 

 

99,912

 

Capital in excess of par value

 

15,584,858

 

 

 

15,539,777

 

Accumulated other comprehensive loss

 

(14,552

)

 

 

(36,800

)

Retained earnings (deficit)

 

(5,688,499

)

 

 

(5,449,385

)

Treasury stock, 276 and 10 shares issued at June 30, 2023 and December 31, 2022, respectively

 

(13,631

)

 

 

(536

)

Total Ventas stockholders’ equity

 

9,968,382

 

 

 

10,152,968

 

Noncontrolling interests

 

60,062

 

 

 

68,709

 

Total equity

 

10,028,444

 

 

 

10,221,677

 

Total liabilities and equity

$

25,070,862

 

 

$

24,157,840

 

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts; dollars in USD; unaudited)

 

 

 

 

 

 

 

 

 

For the Three Months Ended

June 30,

 

For the Six Months Ended

June 30,

 

2023

 

2022

 

2023

 

2022

Revenues

 

 

 

 

 

 

 

Rental income:

 

 

 

 

 

 

 

Triple-net leased

$

154,355

 

 

$

149,397

 

 

$

304,094

 

 

$

300,958

 

Outpatient medical and research portfolio

 

215,807

 

 

 

199,241

 

 

 

418,811

 

 

 

399,781

 

 

 

370,162

 

 

 

348,638

 

 

 

722,905

 

 

700,739

 

Resident fees and services

 

724,614

 

 

 

658,056

 

 

 

1,429,607

 

 

 

1,309,177

 

Third party capital management revenues

 

3,996

 

 

 

4,326

 

 

 

8,173

 

 

 

8,275

 

Income from loans and investments

 

6,554

 

 

 

10,752

 

 

 

20,143

 

 

 

20,599

 

Interest and other income

 

1,032

 

 

 

1,166

 

 

 

2,775

 

 

 

1,702

 

Total revenues

 

1,106,358

 

 

 

1,022,938

 

 

 

2,183,603

 

 

 

2,040,492

 

Expenses

 

 

 

 

 

 

 

Interest

 

143,265

 

 

 

113,951

 

 

 

271,340

 

 

 

224,745

 

Depreciation and amortization

 

304,689

 

 

 

283,075

 

 

 

586,808

 

 

 

572,139

 

Property-level operating expenses:

 

 

 

 

 

 

 

Senior housing

 

547,110

 

 

 

507,446

 

 

 

1,084,332

 

 

 

982,976

 

Outpatient medical and research portfolio

 

72,171

 

 

 

63,328

 

 

 

139,084

 

 

 

126,511

 

Triple-net leased

 

3,537

 

 

 

3,585

 

 

 

7,333

 

 

 

7,593

 

 

 

622,818

 

 

 

574,359

 

 

 

1,230,749

 

 

 

1,117,080

 

Third party capital management expenses

 

1,436

 

 

 

1,410

 

 

 

3,142

 

 

 

2,723

 

General, administrative and professional fees

 

34,399

 

 

 

32,915

 

 

 

79,197

 

 

 

75,913

 

(Gain) loss on extinguishment of debt, net

 

(6,801

)

 

 

7

 

 

 

(6,801

)

 

 

7

 

Transaction expenses and deal costs

 

3,069

 

 

 

13,078

 

 

 

4,455

 

 

 

33,070

 

Allowance on loans receivable and investments

 

(12,065

)

 

 

(62

)

 

 

(20,129

)

 

 

(116

)

Gain on foreclosure of real estate

 

(29,127

)

 

 

 

 

 

(29,127

)

 

 

 

Other

 

(17,959

)

 

 

48,116

 

 

 

(10,197

)

 

 

20,926

 

Total expenses

 

1,043,724

 

 

 

1,066,849

 

 

 

2,109,437

 

 

 

2,046,487

 

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

 

62,634

 

 

 

(43,911

)

 

 

74,166

 

 

 

(5,995

)

Income (loss) from unconsolidated entities

 

31,254

 

 

 

(1,047

)

 

 

25,631

 

 

 

(5,316

)

Gain (loss) on real estate dispositions

 

1,405

 

 

 

(34

)

 

 

11,606

 

 

 

2,421

 

Income tax benefit

 

9,773

 

 

 

3,790

 

 

 

12,575

 

 

 

8,280

 

Income (loss) from continuing operations

 

105,066

 

 

 

(41,202

)

 

 

123,978

 

 

 

(610

)

Net income (loss)

 

105,066

 

 

 

(41,202

)

 

 

123,978

 

 

 

(610

)

Net income attributable to noncontrolling interests

 

1,613

 

 

 

1,214

 

 

 

3,008

 

 

 

3,074

 

Net income (loss) attributable to common stockholders

$

103,453

 

 

$

(42,416

)

 

$

120,970

 

 

$

(3,684

)

Earnings per common share

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

0.26

 

 

$

(0.10

)

 

$

0.31

 

 

$

 

Net income (loss) attributable to common stockholders

 

0.26

 

 

 

(0.11

)

 

 

0.30

 

 

 

(0.01

)

Diluted:1

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

0.26

 

 

$

(0.10

)

 

$

0.31

 

 

$

 

Net income (loss) attributable to common stockholders

 

0.26

 

 

 

(0.11

)

 

 

0.30

 

 

 

(0.01

)

Weighted average shares used in computing earnings per common share

 

 

 

 

 

 

 

Basic

 

400,431

 

 

 

399,592

 

 

 

400,211

 

 

 

399,445

 

Diluted

 

404,122

 

 

 

403,526

 

 

 

403,957

 

 

 

403,393

 

 

1 Potential common shares are not included in the computation of diluted earnings per share when a loss from continuing operations exists as the effect would be an antidilutive per share amount.

NON-GAAP FINANCIAL MEASURES RECONCILIATION

Funds From Operations Attributable to Common Stockholders (FFO)

(In thousands, except per share amounts; dollars in USD; totals may not sum due to rounding; unaudited)

 

 

 

 

 

 

 

 

 

 

 

Q2 YoY

 

2023

 

2022

 

Change

 

Q2

 

Q2

 

’23-’22

Net income (loss) attributable to common stockholders

$

103,453

 

 

$

(42,416

)

 

n/a

 

Net income (loss) attributable to common stockholders per share

$

0.26

 

 

$

(0.11

)

 

n/a

 

Adjustments:

 

 

 

 

 

Depreciation and amortization on real estate assets

 

304,095

 

 

 

282,313

 

 

 

Depreciation on real estate assets related to noncontrolling interests

 

(4,344

)

 

 

(4,335

)

 

 

Depreciation on real estate assets related to unconsolidated entities

 

10,675

 

 

 

7,621

 

 

 

(Gain) loss real estate dispositions

 

(1,405

)

 

 

34

 

 

 

Gain on real estate dispositions and other related to unconsolidated entities

 

 

 

 

(301

)

 

 

Subtotal: Nareit FFO adjustments

 

309,021

 

 

 

285,332

 

 

 

Subtotal: Nareit FFO adjustments per share

$

0.76

 

 

$

0.71

 

 

 

Nareit FFO attributable to common stockholders

$

412,474

 

 

$

242,916

 

 

70

%

Nareit FFO attributable to common stockholders per share

$

1.02

 

 

$

0.60

 

 

70

%

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

Change in fair value of financial instruments

 

(12,290

)

 

 

37,837

 

 

 

Non-cash income tax benefit

 

(11,535

)

 

 

(5,379

)

 

 

(Gain) loss on extinguishment of debt, net of noncontrolling interests and including Ventas’ share attributable to unconsolidated entities

 

(6,795

)

 

 

7

 

 

 

Gain on transactions related to unconsolidated entities

 

(33,492

)

 

 

 

 

 

Transaction expenses and deal costs, net of noncontrolling interests and including Ventas’ share attributable to unconsolidated entities

 

3,376

 

 

 

15,027

 

 

 

Amortization of other intangibles including Ventas’ share attributable to unconsolidated entities

 

96

 

 

 

268

 

 

 

Other items related to unconsolidated entities

 

1,006

 

 

 

(1,285

)

 

 

Non-cash impact of changes to equity plan

 

(2,402

)

 

 

(2,389

)

 

 

Materially disruptive events, net and including Ventas’ share attributable to unconsolidated entities

 

(6,902

)

 

 

2,074

 

 

 

Allowance on loan investments and impairment of unconsolidated entities, net of noncontrolling interests

 

(12,064

)

 

 

(61

)

 

 

Gain on foreclosure of real estate

 

(29,127

)

 

 

 

 

 

Subtotal: Normalized FFO adjustments

 

(110,129

)

 

 

46,099

 

 

 

Subtotal: Normalized FFO adjustments per share

$

(0.27

)

 

$

0.11

 

 

 

Normalized FFO attributable to common stockholders

$

302,345

 

 

$

289,015

 

 

5

%

Normalized FFO attributable to common stockholders per share

$

0.75

 

 

$

0.72

 

 

4

%

Weighted average diluted shares

 

404,122

 

 

 

403,526

 

 

 

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 Nareit FFO and Normalized FFO to be appropriate supplemental measures of operating performance of an equity REIT. The Company believes that the presentation of FFO, combined with the presentation of required GAAP financial measures, has improved the understanding of operating results of REITs among the investing public and has helped make comparisons of REIT operating results more meaningful. Management generally considers Nareit FFO to be a useful measure for understanding and comparing our operating results because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment losses on depreciable real estate and real estate asset depreciation and amortization (which can differ across owners of similar assets in similar condition based on historical cost accounting and useful life estimates), Nareit FFO can help investors compare the operating performance of a company’s real estate across reporting periods and to the operating performance of other companies. 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 across 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 Nareit 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.

Nareit Funds From Operations Attributable to Common Stockholders (“Nareit FFO”)

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 gain (or loss) on re-measurement of equity method investments and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated entities and noncontrolling interests. Adjustments for unconsolidated entities and noncontrolling interests will be calculated to reflect FFO on the same basis.

Normalized FFO

The Company defines Normalized FFO as Nareit FFO excluding the following income and expense items, without duplication: (a) transaction expenses and deal costs, including transaction, integration and severance-related costs and expenses, and amortization of intangibles, in each case net of noncontrolling interests’ share of these items and including Ventas’ share of these items from unconsolidated entities; (b) the impact of 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 leases; (d) the financial impact of contingent consideration; (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 items related to unconsolidated entities; (g) net expenses or recoveries related to materially disruptive events; and (h) other items set forth in the Normalized FFO reconciliation included herein.

Nareit FFO and Normalized FFO 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. Nareit FFO and Normalized FFO 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, Nareit FFO and Normalized FFO should be examined in conjunction with net income attributable to common stockholders as presented elsewhere herein.

NON-GAAP FINANCIAL MEASURES RECONCILIATION

Net Income and FFO Attributable to Common Stockholders Full Year 2023 Guidance1,2

(In millions, except per share amounts; dollars in USD; totals may not sum due to rounding; unaudited)

 

 

 

 

 

 

 

FY 2023

 

FY 2023 - Per Share

 

 

Low

 

High

 

Low

 

High

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

 

$

88

 

 

$

128

 

 

$

0.22

 

 

$

0.32

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization adjustments

 

 

1,215

 

 

 

1,215

 

 

 

3.00

 

 

 

3.00

 

Gain on real estate dispositions

 

 

(12

)

 

 

(12

)

 

 

(0.03

)

 

 

(0.03

)

Other adjustments3

 

 

 

 

 

 

 

 

0.00

 

 

 

0.00

 

 

 

 

 

 

 

 

 

 

Nareit FFO attributable to common stockholders

 

$

1,291

 

 

$

1,331

 

 

$

3.19

 

 

$

3.29

 

 

 

 

 

 

 

 

 

 

Other adjustments3

 

 

(108

)

 

 

(108

)

 

 

(0.27

)

 

 

(0.27

)

 

 

 

 

 

 

 

 

 

Normalized FFO attributable to common stockholders

 

$

1,183

 

 

$

1,223

 

 

$

2.92

 

 

$

3.02

 

% Year-over-year growth

 

 

 

 

 

 

(2

%)

 

 

1

%

 

 

 

 

 

 

 

 

 

Weighted average diluted shares (in millions)

 

 

405

 

 

 

405

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 herein and in the Company’s filings with the Securities and Exchange Commission.

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

3 Other adjustments include the categories of adjustments presented in our “Non-GAAP Financial Measures Reconciliation – Funds From Operations Attributable to Common Stockholders (FFO)”.

NON-GAAP FINANCIAL MEASURES RECONCILIATION

Second Quarter 2023 Same-Store Cash NOI by Segment

(Dollars in thousands USD, unless otherwise noted; totals may not sum due to rounding; unaudited)

 

 

 

 

 

For the Three Months Ended June 30, 2023

 

 

SHOP

 

OM&R

 

Triple-Net

 

Non-Segment

 

Total

Net income attributable to common stockholders

 

 

 

 

 

 

 

 

 

$

103,453

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

 

 

 

 

 

 

 

 

(1,032

)

Interest expense

 

 

 

 

 

 

 

 

 

 

143,265

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

304,689

 

General, administrative and professional fees

 

 

 

 

 

 

 

 

 

 

34,399

 

Gain on extinguishment of debt, net

 

 

 

 

 

 

 

 

 

 

(6,801

)

Transaction expenses and deal costs

 

 

 

 

 

 

 

 

 

 

3,069

 

Allowance on loans receivable and investments

 

 

 

 

 

 

 

 

 

 

(12,065

)

Gain on foreclosure of real estate

 

 

 

 

 

 

 

 

 

 

(29,127

)

Other

 

 

 

 

 

 

 

 

 

 

(17,959

)

Income from unconsolidated entities

 

 

 

 

 

 

 

 

 

 

(31,254

)

Gain on real estate dispositions

 

 

 

 

 

 

 

 

 

 

(1,405

)

Income tax benefit

 

 

 

 

 

 

 

 

 

 

(9,773

)

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

1,613

 

NOI

 

$

177,504

 

 

$

144,195

 

 

$

150,818

 

 

$

8,555

 

 

$

481,072

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

Straight-lining of rental income

 

 

 

 

 

(1,958

)

 

 

519

 

 

 

 

 

 

(1,439

)

Non-cash rental income

 

 

 

 

 

(2,177

)

 

 

(12,502

)

 

 

 

 

 

(14,679

)

NOI not included in cash NOI1

 

 

(162

)

 

 

(852

)

 

 

(519

)

 

 

 

 

 

(1,533

)

Non-segment NOI

 

 

 

 

 

 

 

 

 

 

 

(8,555

)

 

 

(8,555

)

Cash NOI

 

$

177,342

 

 

$

139,208

 

 

$

138,316

 

 

$

 

 

$

454,866

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

Cash NOI not included in same-store

 

 

(10,015

)

 

 

(9,859

)

 

 

(8,029

)

 

 

 

 

 

(27,903

)

Same-store Cash NOI

 

$

167,327

 

 

$

129,349

 

 

$

130,287

 

 

$

 

 

$

426,963

 

Percentage increase

 

 

14.0

%

 

 

3.8

%

 

 

2.0

%

 

 

 

 

7.0

%

 

 

For the Three Months Ended June 30, 2022

 

 

SHOP

 

OM&R

 

Triple-Net

 

Non-Segment

 

Total

Net loss attributable to common stockholders

 

 

 

 

 

 

 

 

 

$

(42,416

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

 

 

 

 

 

 

 

 

(1,166

)

Interest expense

 

 

 

 

 

 

 

 

 

 

113,951

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

283,075

 

General, administrative and professional fees

 

 

 

 

 

 

 

 

 

 

32,915

 

Loss on extinguishment of debt, net

 

 

 

 

 

 

 

 

 

 

7

 

Transaction expenses and deal costs

 

 

 

 

 

 

 

 

 

 

13,078

 

Allowance on loans receivable and investments

 

 

 

 

 

 

 

 

 

 

(62

)

Other

 

 

 

 

 

 

 

 

 

 

48,116

 

Loss from unconsolidated entities

 

 

 

 

 

 

 

 

 

 

1,047

 

Loss on real estate dispositions

 

 

 

 

 

 

 

 

 

 

34

 

Income tax benefit

 

 

 

 

 

 

 

 

 

 

(3,790

)

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

1,214

 

NOI

 

$

150,610

 

 

$

136,583

 

 

$

145,812

 

 

$

12,998

 

 

$

446,003

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

Straight-lining of rental income

 

 

 

 

 

(2,747

)

 

 

(971

)

 

 

 

 

 

(3,718

)

Non-cash rental income

 

 

 

 

 

(3,493

)

 

 

(12,610

)

 

 

 

 

 

(16,103

)

NOI not included in cash NOI1

 

 

1,431

 

 

 

(1,391

)

 

 

(4,495

)

 

 

 

 

 

(4,455

)

Non-segment NOI

 

 

 

 

 

 

 

 

 

 

 

(12,998

)

 

 

(12,998

)

NOI impact from change in FX

 

 

(2,255

)

 

 

 

 

 

(26

)

 

 

 

 

 

(2,281

)

Cash NOI

 

$

149,786

 

 

$

128,952

 

 

$

127,710

 

 

$

 

 

$

406,448

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

Cash NOI not included in same-store

 

 

(3,084

)

 

 

(4,361

)

 

 

 

 

 

 

 

 

(7,445

)

NOI impact from change in FX not in same-store

 

 

124

 

 

 

 

 

 

 

 

 

 

 

 

124

 

Same-store Cash NOI

 

$

146,826

 

 

$

124,591

 

 

$

127,710

 

 

$

 

 

$

399,127

 

 

1 Excludes sold assets, assets held for sale, development properties not yet operational and land parcels.

The Company considers NOI and 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.

NOI

The Company defines NOI as total revenues, less interest and other income, property-level operating expenses and third party capital management expenses.

Cash NOI

The Company defines Cash NOI as NOI for its reportable business segments (i.e., SHOP, Outpatient Medical and Research Portfolio and Triple-Net), determined on a Constant Currency basis, excluding the impact of, without duplication (i) non-cash items such as straight-line rent and the amortization of lease intangibles, (ii) sold assets, assets held for sale, development properties not yet operational and land parcels and (iii) other items set forth in the Cash NOI reconciliation included herein. In certain cases, results may be adjusted to reflect the receipt of cash payments, fees, and other consideration that is not fully recognized as NOI in the period.

Same-store

The Company defines same-store as properties owned, consolidated and operational for the full period in both comparison periods and that 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 segment performance. Newly acquired development properties and recently developed or redeveloped properties in the Company’s SHOP reportable business segment will be included in same-store once they are stabilized for the full period in both periods presented. These properties are considered stabilized upon the earlier of (a) the achievement of 80% sustained occupancy or (b) 24 months from the date of acquisition or substantial completion of work. Recently developed or redeveloped properties in the outpatient medical and research portfolio and triple-net leased properties reportable business segments will be included in same-store once substantial completion of work has occurred for the full period in both periods presented. SHOP and triple-net leased properties that have undergone operator or business model transitions will be included in same-store once operating under consistent operating structures for the full period in both periods presented.

Properties are excluded from same-store if they are: (i) sold, classified as held for sale or properties whose operations were classified as discontinued operations in accordance with GAAP; (ii) impacted by materially disruptive events such as flood or fire; (iii) for SHOP, those properties that are currently undergoing a materially disruptive redevelopment; (iv) for the outpatient medical and research portfolio and triple-net leased properties reportable business segments, those properties for which management has an intention to institute, or has instituted, a redevelopment plan because the properties may require major property-level expenditures to maximize value, increase NOI, or maintain a market-competitive position and/or achieve property stabilization, most commonly as the result of an expected or actual material change in occupancy or NOI; or (v) for SHOP and triple-net leased properties reportable business segments, those properties that are scheduled to undergo operator or business model transitions, or have transitioned operators or business models after the start of the prior comparison period.

Constant Currency

To eliminate the impact of exchange rate movements, all portfolio performance-based disclosures 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.

Contacts

BJ Grant

(877) 4-VENTAS

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