Ventas Reports 2021 Third Quarter Results
Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today reported results for the third quarter ended September 30, 2021.
“Ventas’s high-quality diversified portfolio demonstrated strength in the third quarter of 2021 despite the challenges of COVID-19 and a tight labor market. We are pleased with the growth in our life science, medical office and healthcare triple net portfolios. We are also seeing sustained demand and revenue growth in our senior housing communities, with third quarter average occupancy up 230 basis points sequentially and eight consecutive months of occupancy growth through October,” said Debra A. Cafaro, Ventas Chairman and CEO.
“We continue to drive growth through $3.7 billion of completed and announced strategic investments in 2021, including our recent acquisition of 103 independent living communities owned by New Senior for a purchase price of $2.3 billion and the development of a $0.5 billion life science project anchored by University of California, Davis. We are committed to expanding our senior living, life science and medical office footprints through relationship-driven investments that enhance our portfolio and drive returns.
“Looking ahead, we are excited for the future of Ventas and expect a robust recovery in senior housing as we also capture the benefits of our completed investments and execute on our external growth opportunities,” Cafaro concluded.
Third Quarter 2021 Results
For the third quarter 2021, reported per share results were:
Quarter Ended September 30
2021
2020
$ Change
% Change
Net Income (Loss) Attributable to Common Stockholders
$0.16
$0.03
$0.13
433%
Nareit FFO Attributable to Common Stockholders (“Nareit FFO”)*
$0.58
$0.65
($0.07)
(11%)
Normalized FFO Attributable to Common Stockholders (“Normalized FFO”)*
$0.73
$0.75
($0.02)
(3%)
* This is a non-GAAP financial measure. 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.
Third Quarter 2021 Property Results
3Q21 vs. 3Q20 (Quarterly Pools)
Year-Over-Year
Same-Store Cash Net Operating Income (“NOI”)* Growth
Assets
% Change
% Change (ex. BKD Cons)1
SHOP
306
(12.7%)
(12.7%)
NNN
338
(54.7%)
(0.8%)
Office
335
4.2%
4.2%
Total Company
979
(32.4%)
(3.0%)
3Q21 vs. 2Q21 (Sequential Pools)
Sequential
Same-Store Cash NOI* Growth
Assets
% Change
SHOP
322
(3.4%)
NNN
340
0.5%
Office2
335
(7.7%)
Total Company2
997
(3.5%)
* This is a non-GAAP financial measure. 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.
3Q21 vs. 3Q20 NNN same-store cash NOI growth adjusted to exclude the benefit of $162 million in upfront cash consideration received as part of the Brookdale lease modification agreement in July 2020. Office segment benefited from a $12 million lease termination payment in 2Q21. Excluding the impact of this payment, sequential same-store cash NOI growth would have been 1.2% in 3Q21 for the Office segment and (0.4%) for Total Company.Third Quarter Same-Store Property Results and Latest SHOP Trends
Company Results Sequential same-store third quarter 2021 cash NOI decreased 3.5% and decreased 0.4% excluding the impact of a $12 million cash lease termination fee in the Life Science, R&I portfolio received in the second quarter. SHOP (30% of Total Portfolio) Sequential Same-Store Pool (322 assets) Performance: Average SHOP occupancy grew 230 basis points to 82.2% in the third quarter versus the second quarter 2021. Approximate spot occupancy increased 183 basis points from June 30 to September 30, led by U.S. SHOP communities. Revenue increased 3.1% in the third quarter due to higher occupancy and stronger pricing versus the second quarter, with RevPOR improving sequentially by 0.3%. Expenses increased 5.4% in the third quarter principally as a result of higher labor costs, which represented approximately half of the increase. Other cost increases included the additional day in the quarter and seasonal repair and maintenance expenses. SHOP sequential same-store cash NOI decreased 3.4% in the third quarter. Clinical Trends: SHOP communities continue to experience de minimis confirmed resident cases of COVID-19, with high vaccination rates among residents and staff members. Of Ventas’s SHOP communities, 99% have never reported a resident case or have not reported a new case in the last seven days. Clinics for both the flu vaccine and the COVID-19 booster have begun in Ventas’s senior living communities to further protect residents and employees. October Trends: October was the eighth consecutive month of occupancy improvement. Leading indicators including leads and move-ins continued to outperform pre-pandemic levels in October at 109% and 104%, respectively, and followed seasonal patterns.Capital Allocation and Portfolio Strategy
Year to date, Ventas has completed or announced $3.7 billion in strategic investments, including $3.1 billion of acquisitions and the $0.5 billion UC Davis life science project. The Company’s current investment priorities are focused on expanding our portfolio of higher-margin senior housing independent living assets in the United States and Canada, growing our Life Science, R&I portfolio and selectively expanding our Medical Office footprint. On September 21, 2021, Ventas closed its acquisition of New Senior in an all-stock transaction for a purchase price of $2.3 billion. This accretive transaction added high quality independent living in advantaged markets with positive supply demand fundamentals while building on existing relationships with experienced leading operators at an attractive valuation below replacement cost. The portfolio consists of 103 independent living communities, with 12,404 units and is located across 36 states. Ventas commenced a Life Science, R&I development anchored by the University of California, Davis, a premier research institution ranked in the top 5% of universities for both NIH funding and R&D spend. The project will be the first phase of Aggie Square, a planned innovation district located on the University’s Sacramento campus and adjacent to UC Davis Medical Center. Developed with Ventas’s exclusive partner, Wexford Science & Technology, the project is principally laboratory space and related uses that will complement existing activities at the UC Davis Health Science Campus, including health sciences research, product development and manufacturing, academic and commercial research, incubator and accelerator space and shared labs. The development will be 60% pre-leased to UC Davis (Moody’s Aa2) and construction is expected to commence in the first half of 2022. Project costs are expected to approximate $0.5 billion with an expected stabilized cash yield exceeding 6%. The development is one of the pre-identified Life Science, R&I development projects in Ventas’s R&I development partnership with GIC. Ventas expanded its relationship with Hawthorn Senior Living through the approximately $180 million acquisition of five independent living and one assisted living communities in Canada. The portfolio consists of five stabilized assets and one lease-up asset. The acquisition price represents a nearly 6% yield on expected stabilized cash NOI and expands Ventas’s presence in the attractive Canadian senior housing sector. Ventas completed the $58 million acquisition of Eating Recovery Center, a 102,000 square foot Class A facility located in Plano, Texas. The asset is 100% net leased with 16 years remaining in the lease term. Eating Recovery Center is a national provider of eating disorder treatments and is a leader in this rapidly growing market. The acquisition price represents a 7.2% GAAP yield on expected 2022 NOI. Ventas, in connection with its long-standing partner Pacific Medical Buildings (“PMB”), completed a buyout of PMB’s interest in the state-of-the-art, newly developed Sutter Van Ness Medical Office Building. The asset is 92% leased and is connected to Sutter Health’s flagship hospital in an unparalleled location in downtown San Francisco. Ventas now owns 100% of this trophy asset at an all-in basis of $173 million or a 5.9% yield on expected 2022 NOI, representing significant expected value creation. Building on and expanding its relationship with Ardent Health Services, Ventas expects to acquire 18 medical office buildings from Ardent comprising 762,000 square feet in a $200 million transaction expected to close in fourth quarter 2021. The portfolio is located in Ardent’s existing markets, over 90% on campus and 100% leased to Ardent with an expected GAAP yield of 5.8%. To position the Company’s senior housing portfolio to benefit from the expected cyclical recovery of senior living, Ventas announced the transition of 90 senior living communities to experienced operators who will provide strong local market focus and oversight for the communities. The transitions are underway, with 65 asset transitions completed and the balance expected to be concluded by the end of 2021.Financial Strength & Liquidity
As of November 3, 2021, the Company has robust liquidity of $2.2 billion, including $2.5 billion of undrawn revolver capacity, net of $0.5 billion of commercial paper outstanding and including $0.2 billion in cash and cash equivalents on hand. For the third quarter 2021, Ventas’s Net Debt to Adjusted Pro Forma EBITDA ratio was 7.2x. The New Senior transaction resulted in an initial 30 basis point leverage increase from 6.9x. During and subsequent to the third quarter, the Company received $593 million in gross proceeds under its “at the market” equity offering program, with 10.3 million shares of common stock sold at an average gross price of $57.74 per share. As previously announced, on August 16, the Company retired $264 million aggregate principal amount of 3.25% senior notes due August 2022 and, on September 1, the Company retired $400 million aggregate principal amount of 3.125% senior notes due June 2023. As of November 3, 2021, the Company has retired $1.1 billion of near-term debt maturities through asset dispositions, loan repayments and other capital sourcesThird Quarter Dividend
The Company paid its third quarter 2021 dividend of $0.45 per share on October 14, 2021 to stockholders of record as of October 1, 2021.
Fourth Quarter 2021 Guidance
The Company currently expects to report fourth quarter 2021 Net Income (Loss) Attributable to Common Stockholders, Nareit FFO and Normalized FFO within the following per share ranges:
4Q21 Guidance
Per Share
Low
High
Net Income (Loss) Attributable to Common Stockholders
$0.01
-
$0.05
Nareit FFO*
$0.61
-
$0.65
Normalized FFO*
$0.67
-
$0.71
* This is a non-GAAP financial measure. 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
Key assumptions underlying the fourth quarter 2021 guidance include, among other things:
Average occupancy for fourth quarter 2021 in the same-store SHOP business is expected to increase 80 to 120 basis points sequentially, reflecting continued demand exceeding pre-pandemic levels tempered by typical seasonal trends. Revenue for the same-store SHOP business is expected to grow in the fourth quarter as a result of occupancy increases.Other fourth quarter 2021 assumptions are set forth below:
Increase / (Decrease) to
Normalized FFO/sh.
4Q21 Guidance Midpoint
vs. 3Q21 Actuals
3Q21 Normalized FFO*
$0.73
SHOP
(0.00)
Net Tenant Fees
(0.01)
Capital Recycling, Debt Reduction & Prefunding Investments
(0.02)
Other
(0.01)
4Q21 Normalized FFO* Guidance Midpoint
$0.69
* This is a non-GAAP financial measure. 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 presentation outlining the Company’s third quarter results and business update 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 third quarter 2021 supplemental posted at ir.ventasreit.com. The information contained on, or that may be accessed through, our website is not incorporated by any reference into, and is not part of, this document.
Third Quarter 2021 Results Conference Call
Ventas will hold a conference call to discuss this earnings release on November 5th at 10:00 a.m. Eastern Time (9:00 a.m. Central Time).
The dial-in number for the conference call is (833) 968-1984 (or +1 (778) 560-2824 for international callers), and the participant passcode is 8199926. A live webcast can be accessed from the Investor Relations section of www.ventasreit.com.
A telephonic replay will be available at (800) 585-8367 (or +1 (416) 621-4642 for international callers), passcode 8199926, 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 a diversified portfolio of over 1,200 properties in the United States, Canada and the United Kingdom. Ventas uses the power of its capital to unlock the value of senior living communities; life science, research & innovation properties; medical office & outpatient facilities, health systems and other healthcare real estate. 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 Unites States (“GAAP”). Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in this press release. We believe such measures provide investors with additional information concerning our operating performance and a basis to compare our performance with the performance of other REITs. 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 to net income attributable to common stockholders (determined in accordance with GAAP) as indicators of our financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of our liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs.
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 “may,” “will,” “project,” “expect,” “believe,” “intend,” “anticipate,” “seek,” “target,” “forecast,” “plan,” “potential,” “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. You are urged to carefully review the disclosures we make concerning risks and uncertainties that may affect our business and future financial performance in our filings with the Securities and Exchange Commission, including those made in the “Risk Factors” section and “Management’s Discussion & Analysis of Financial Condition and Results of Operations” section of our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made.
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, including of the Delta or any other variant, 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; (b) our ability to achieve the anticipated benefits and synergies from the acquisition of, and the risk of greater than expected costs or other difficulties related to the integration of, New Senior Investment Group Inc.; (c) our exposure and the exposure of our tenants, borrowers and managers 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, borrowers or managers to increased operating costs and uninsured liabilities; (e) the impact of market and general economic conditions, including economic and financial market events, or 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 capital markets; (f) our ability, and the ability of our tenants, borrowers and managers, to navigate the trends impacting our or their businesses and the industries in which we or they operate; (g) the risk of bankruptcy, insolvency or financial deterioration of our tenants, borrowers, managers and other obligors and our ability to foreclose successfully on the collateral securing our loans and other investments in the event of a borrower default; (h) 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; (i) our ability to attract and retain talented employees; (j) 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; (k) 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, borrowers or managers; (l) increases in our borrowing costs as a result of becoming more leveraged or as a result of changes in interest rates and phasing out of LIBOR rates; (m) our reliance on third parties to operate a majority of our assets and our limited control and influence over such operations and results; (n) our dependency on a limited number of tenants and managers for a significant portion of our revenues and operating income; (o) the adequacy of insurance coverage provided by our policies and policies maintained by our tenants, managers or other counterparties; (p) the occurrence of cyber incidents that could disrupt our operations, result in the loss of confidential information or damage our business relationships and reputation; (q) the impact of merger, acquisition and investment activity in the healthcare industry or otherwise affecting our tenants, borrowers or managers; and (r) the risk of catastrophic or extreme weather and other natural events and the physical effects of climate change.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts; dollars in USD)
(unaudited)
September 30,
June 30,
March 31,
December 31,
September 30,
2021
2021
2021
2020
2020
Assets
Real estate investments:
Land and improvements
$
2,395,751
$
2,231,836
$
2,235,773
$
2,261,415
$
2,268,583
Buildings and improvements
25,519,840
24,269,450
24,250,630
24,323,279
24,196,730
Construction in progress
298,982
288,910
310,547
265,748
567,052
Acquired lease intangibles
1,372,462
1,200,574
1,212,263
1,230,886
1,246,312
Operating lease assets
323,950
328,707
343,072
346,372
386,946
29,910,985
28,319,477
28,352,285
28,427,700
28,665,623
Accumulated depreciation and amortization
(8,118,990
)
(8,189,447
)
(8,030,524
)
(7,877,665
)
(7,687,211
)
Net real estate property
21,791,995
20,130,030
20,321,761
20,550,035
20,978,412
Secured loans receivable and investments, net
530,439
596,171
615,037
605,567
604,452
Investments in unconsolidated real estate entities
507,880
494,239
471,243
443,688
162,860
Net real estate investments
22,830,314
21,220,440
21,408,041
21,599,290
21,745,724
Cash and cash equivalents
143,770
233,837
169,661
413,327
588,343
Escrow deposits and restricted cash
52,752
40,931
40,551
38,313
40,147
Goodwill
1,046,070
1,051,832
1,051,780
1,051,650
1,050,742
Assets held for sale
316,769
90,002
59,860
9,608
15,748
Deferred income tax assets, net
11,496
11,486
11,610
9,987
304
Other assets
643,253
855,786
810,760
807,229
779,475
Total assets
$
25,044,424
$
23,504,314
$
23,552,263
$
23,929,404
$
24,220,483
Liabilities and equity
Liabilities:
Senior notes payable and other debt
$
12,078,835
$
11,761,545
$
11,759,299
$
11,895,412
$
12,047,919
Accrued interest
90,013
105,883
91,390
111,444
97,828
Operating lease liabilities
199,551
205,484
206,426
209,917
247,255
Accounts payable and other liabilities
1,142,822
1,122,171
1,109,279
1,133,066
1,234,933
Liabilities related to assets held for sale
20,518
4,568
3,853
3,246
1,987
Deferred income tax liabilities
65,196
68,097
65,777
62,638
53,711
Total liabilities
13,596,935
13,267,748
13,236,024
13,415,723
13,683,633
Redeemable OP unitholder and noncontrolling interests
280,344
252,662
244,619
235,490
249,143
Commitments and contingencies
Equity:
Ventas stockholders’ equity:
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued
—
—
—
—
—
Common stock, $0.25 par value; 399,177; 375,204; 375,068; 374,609; and 373,940 shares issued at September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020, and September 30, 2020, respectively
99,777
93,784
93,750
93,635
93,467
Capital in excess of par value
15,504,210
14,187,577
14,186,692
14,171,262
14,142,349
Accumulated other comprehensive loss
(67,601
)
(58,290
)
(52,497
)
(54,354
)
(65,042
)
Retained earnings (deficit)
(4,459,630
)
(4,340,052
)
(4,257,001
)
(4,030,376
)
(3,972,647
)
Treasury stock, 1; 6; 14; 0; and 33 shares at September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020, and September 30, 2020, respectively
(40
)
(320
)
(789
)
—
(1,275
)
Total Ventas stockholders’ equity
11,076,716
9,882,699
9,970,155
10,180,167
10,196,852
Noncontrolling interests
90,429
101,205
101,465
98,024
90,855
Total equity
11,167,145
9,983,904
10,071,620
10,278,191
10,287,707
Total liabilities and equity
$
25,044,424
$
23,504,314
$
23,552,263
$
23,929,404
$
24,220,483
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts; dollars in USD)
(unaudited)
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Revenues
Rental income:
Triple-net leased
$
181,379
$
156,136
$
500,487
$
527,238
Office
201,673
198,376
599,516
599,696
383,052
354,512
1,100,003
1,126,934
Resident fees and services
558,039
541,322
1,622,641
1,667,421
Office building and other services revenue
5,841
3,868
16,172
10,669
Income from loans and investments
28,729
18,666
65,404
62,203
Interest and other income
417
572
1,343
6,965
Total revenues
976,078
918,940
2,805,563
2,874,192
Expenses
Interest
108,816
115,505
329,634
355,333
Depreciation and amortization
313,596
249,366
878,444
847,797
Property-level operating expenses:
Senior living
453,659
422,653
1,296,301
1,265,362
Office
66,401
66,934
195,297
192,192
Triple-net leased
3,268
5,398
12,525
17,004
523,328
494,985
1,504,123
1,474,558
Office building services costs
522
557
1,798
1,827
General, administrative and professional fees
30,259
32,081
101,156
100,621
Loss on extinguishment of debt, net
29,792
7,386
56,808
7,386
Merger-related expenses and deal costs
22,662
11,325
28,000
26,129
Allowance on loans receivable and investments
(60
)
4,999
(9,021
)
34,654
Other
33,673
5,681
10,755
16,750
Total expenses
1,062,588
921,885
2,901,697
2,865,055
(Loss) income before unconsolidated entities, real estate
dispositions, income taxes and noncontrolling interests
(86,510
)
(2,945
)
(96,134
)
9,137
Income (loss) from unconsolidated entities
2,772
865
7,289
(15,861
)
Gain on real estate dispositions
150,292
12,622
194,083
240,101
Income tax (expense) benefit
(3,780
)
3,195
(9,574
)
95,855
Income from continuing operations
62,774
13,737
95,664
329,232
Net income
62,774
13,737
95,664
329,232
Net income attributable to noncontrolling interests
2,094
986
5,802
534
Net income attributable to common stockholders
$
60,680
$
12,751
$
89,862
$
328,698
Earnings per common share
Basic:
Income from continuing operations
$
0.16
$
0.04
$
0.25
$
0.88
Net income attributable to common stockholders
0.16
0.03
0.24
0.88
Diluted:
Income from continuing operations
$
0.16
$
0.04
$
0.25
$
0.88
Net income attributable to common stockholders
0.16
0.03
0.24
0.87
Weighted average shares used in computing earnings per common share
Basic
381,996
373,177
377,271
372,997
Diluted
385,523
376,295
380,643
376,112
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts; dollars in USD)
(unaudited)
For the Three Months Ended
September 30,
June 30,
March 31,
December 31,
September 30,
2021
2021
2021
2020
2020
Revenues
Rental income:
Triple-net leased
$
181,379
$
159,223
$
159,885
$
168,027
$
156,136
Office
201,673
200,388
197,455
199,931
198,376
383,052
359,611
357,340
367,958
354,512
Resident fees and services
558,039
535,952
528,650
529,739
541,322
Office building and other services revenue
5,841
5,381
4,950
4,522
3,868
Income from loans and investments
28,729
17,665
19,010
18,302
18,666
Interest and other income
417
585
341
644
572
Total revenues
976,078
919,194
910,291
921,165
918,940
Expenses
Interest
108,816
110,051
110,767
114,208
115,505
Depreciation and amortization
313,596
250,700
314,148
261,966
249,366
Property-level operating expenses:
Senior living
453,659
424,813
417,829
393,309
422,653
Office
66,401
64,950
63,946
64,420
66,934
Triple-net leased
3,268
4,432
4,825
5,156
5,398
523,328
494,195
486,600
462,885
494,985
Office building services costs
522
658
618
488
557
General, administrative and professional fees
30,259
30,588
40,309
29,537
32,081
Loss (gain) on extinguishment of debt, net
29,792
(74
)
27,090
3,405
7,386
Merger-related expenses and deal costs
22,662
721
4,617
3,683
11,325
Allowance on loans receivable and investments
(60
)
(59
)
(8,902
)
(10,416
)
4,999
Other
33,673
(13,490
)
(9,428
)
(16,043
)
5,681
Total expenses
1,062,588
873,290
965,819
849,713
921,885
(Loss) income before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests
(86,510
)
45,904
(55,528
)
71,452
(2,945
)
Income (loss) from unconsolidated entities
2,772
4,767
(250
)
17,705
865
Gain on real estate dispositions
150,292
41,258
2,533
22,117
12,622
Income tax (expense) benefit
(3,780
)
(3,641
)
(2,153
)
679
3,195
Income (loss) from continuing operations
62,774
88,288
(55,398
)
111,953
13,737
Net income (loss)
62,774
88,288
(55,398
)
111,953
13,737
Net income attributable to noncontrolling interests
2,094
1,897
1,811
1,502
986
Net income (loss) attributable to common stockholders
$
60,680
$
86,391
$
(57,209
)
$
110,451
$
12,751
Earnings per common share
Basic:
Income (loss) from continuing operations
$
0.16
$
0.24
$
(0.15
)
$
0.30
$
0.04
Net income (loss) attributable to common stockholders
0.16
0.23
(0.15
)
0.29
0.03
Diluted:1
Income (loss) from continuing operations
$
0.16
$
0.23
$
(0.15
)
$
0.30
$
0.04
Net income (loss) attributable to common stockholders
0.16
0.23
(0.15
)
0.29
0.03
Weighted average shares used in computing earnings per common share
Basic
381,996
375,067
374,669
374,473
373,177
Diluted
385,523
378,408
377,922
377,696
376,295
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.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands USD)
(unaudited)
For the Nine Months Ended September 30,
2021
2020
Cash flows from operating activities:
Net income
$
95,664
$
329,232
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
878,444
847,797
Amortization of deferred revenue and lease intangibles, net
(71,620
)
(25,343
)
Other non-cash amortization
14,686
15,211
Allowance on loans receivable and investments
(9,021
)
34,654
Stock-based compensation
26,165
17,322
Straight-lining of rental income
(10,166
)
107,134
Loss on extinguishment of debt, net
56,808
7,386
Gain on real estate dispositions
(194,083
)
(240,101
)
Gain on real estate loan investments
(2,006
)
(167
)
Income tax expense (benefit)
4,656
(99,702
)
(Income) loss from unconsolidated entities
(7,279
)
15,869
Distributions from unconsolidated entities
9,466
2,960
Other
(830
)
15,615
Changes in operating assets and liabilities:
Increase in other assets
(49,051
)
(68,228
)
Decrease in accrued interest
(22,414
)
(12,975
)
Increase in accounts payable and other liabilities
40,896
207,749
Net cash provided by operating activities
760,315
1,154,413
Cash flows from investing activities:
Net investment in real estate property
(1,103,210
)
(77,625
)
Investment in loans receivable
(384
)
(113,147
)
Proceeds from real estate disposals
497,303
682,604
Proceeds from loans receivable
302,700
106,966
Development project expenditures
(204,649
)
(309,967
)
Capital expenditures
(119,311
)
(94,407
)
Distributions from unconsolidated entities
17,847
—
Investment in unconsolidated entities
(107,140
)
(7,832
)
Insurance proceeds for property damage claims
501
33
Net cash (used in) provided by investing activities
(716,343
)
186,625
Cash flows from financing activities:
Net change in borrowings under revolving credit facilities
(144,065
)
(74,144
)
Net change in borrowings under commercial paper program
369,943
(565,524
)
Proceeds from debt
914,879
657,557
Repayment of debt
(1,499,036
)
(127,528
)
Purchase of noncontrolling interests
(11,485
)
—
Payment of deferred financing costs
(23,608
)
(7,564
)
Issuance of common stock, net
617,438
36,395
Cash distribution to common stockholders
(506,972
)
(760,363
)
Cash distribution to redeemable OP unitholders
(5,400
)
(5,954
)
Cash issued for redemption of OP Units
(96
)
(575
)
Contributions from noncontrolling interests
35
1,138
Distributions to noncontrolling interests
(11,785
)
(9,666
)
Proceeds from stock option exercises
5,668
3,518
Other
(5,128
)
(4,989
)
Net cash used in financing activities
(299,612
)
(857,699
)
Net (decrease) increase in cash, cash equivalents and restricted cash
(255,640
)
483,339
Effect of foreign currency translation
522
(951
)
Cash, cash equivalents and restricted cash at beginning of period
451,640
146,102
Cash, cash equivalents and restricted cash at end of period
$
196,522
$
628,490
For the Nine Months Ended September 30,
2021
2020
Supplemental schedule of non-cash activities:
Assets acquired and liabilities assumed from acquisitions and other:
Real estate investments
$
1,317,617
$
169,484
Other assets
16,132
1,224
Debt
484,073
55,368
Other liabilities
97,960
2,707
Deferred income tax liability
—
337
Noncontrolling interests
468
20,259
Equity issued
751,248
—
Equity issued for redemption of OP Units
76
—
QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands USD)
(unaudited)
For the Three Months Ended
September 30,
June 30,
March 31,
December 31,
September 30,
2021
2021
2021
2020
2020
Cash flows from operating activities:
Net income (loss)
$
62,774
$
88,288
$
(55,398
)
$
111,953
$
13,737
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
313,596
250,700
314,148
261,966
249,366
Amortization of deferred revenue and lease intangibles, net
(40,069
)
(16,785
)
(14,766
)
(15,513
)
(19,009
)
Other non-cash amortization
4,567
4,847
5,272
5,508
5,558
Allowance on loans receivable and investments
(60
)
(59
)
(8,902
)
(10,416
)
4,999
Stock-based compensation
4,700
5,393
16,072
4,165
5,765
Straight-lining of rental income
(2,999
)
(3,304
)
(3,863
)
(4,052
)
15,635
Loss (gain) on extinguishment of debt, net
29,792
(74
)
27,090
3,405
7,386
Gain on real estate dispositions
(150,292
)
(41,258
)
(2,533
)
(22,117
)
(12,622
)
Gain on real estate loan investments
(1,932
)
—
(74
)
—
—
Income tax expense (benefit)
2,146
2,007
503
(2,283
)
(4,575
)
(Income) loss from unconsolidated entities
(2,767
)
(4,762
)
250
(17,701
)
(865
)
Distributions from unconsolidated entities
2,986
2,583
3,897
1,960
1,360
Other
34,011
(20,462
)
(14,379
)
(16,394
)
2,859
Changes in operating assets and liabilities:
(Increase) decrease in other assets
(23,433
)
(20,518
)
(5,100
)
(5
)
(55,765
)
(Decrease) increase in accrued interest
(16,682
)
14,502
(20,234
)
13,251
(20,069
)
Increase (decrease) in accounts payable and other liabilities
15,121
30,165
(4,390
)
(17,964
)
240,642
Net cash provided by operating activities
231,459
291,263
237,593
295,763
434,402
Cash flows from investing activities:
Net investment in real estate property
(1,103,000
)
—
(210
)
(1,023
)
(156
)
Investment in loans receivable
(101
)
(97
)
(186
)
(2,016
)
(45,857
)
Proceeds from real estate disposals
381,453
107,767
8,083
361,753
54,800
Proceeds from loans receivable
266,225
20,056
16,419
12,045
191
Development project expenditures
(73,755
)
(72,296
)
(58,598
)
(70,446
)
(129,569
)
Capital expenditures
(45,189
)
(44,448
)
(29,674
)
(53,827
)
(40,888
)
Distributions from unconsolidated entities
17,847
—
—
—
—
Investment in unconsolidated entities
(38,829
)
(29,859
)
(38,452
)
(278,990
)
33
Insurance proceeds (expense) for property damage claims
111
384
6
174
(9
)
Net cash used in investing activities
(595,238
)
(18,493
)
(102,612
)
(32,330
)
(161,455
)
Cash flows from financing activities:
Net change in borrowings under revolving credit facilities
(39,934
)
(109,275
)
5,144
(14,724
)
(539,560
)
Net change in borrowings under commercial paper program
199,959
(44,994
)
214,978
—
—
Proceeds from debt
646,593
237,129
31,157
75,741
17,024
Repayment of debt
(933,085
)
(120,901
)
(445,050
)
(352,011
)
(16,227
)
Purchase of noncontrolling interests
(11,485
)
—
—
(8,239
)
—
Payment of deferred financing costs
(5,832
)
(433
)
(17,343
)
(815
)
(15
)
Issuance of common stock, net
603,188
3,175
11,075
18,967
36,395
Cash distribution to common stockholders
(169,134
)
(169,075
)
(168,763
)
(168,446
)
(168,078
)
Cash distribution to redeemable OP unitholders
(2,236
)
(1,322
)
(1,842
)
(1,329
)
(1,326
)
Cash issued for redemption of OP Units
(34
)
(37
)
(25
)
—
(5
)
Contributions from noncontrolling interests
5
25
5
176
792
Distributions to noncontrolling interests
(3,197
)
(5,935
)
(2,653
)
(3,280
)
(3,373
)
Proceeds from stock option exercises
847
2,715
2,106
11,585
—
Other
806
(78
)
(5,856
)
53
(98
)
Net cash provided by (used in) financing activities
286,461
(209,006
)
(377,067
)
(442,322
)
(674,471
)
Net (decrease) increase in cash, cash equivalents and restricted cash
(77,318
)
63,764
(242,086
)
(178,889
)
(401,524
)
Effect of foreign currency translation
(928
)
792
658
2,039
878
Cash, cash equivalents and restricted cash at beginning of period
274,768
210,212
451,640
628,490
1,029,136
Cash, cash equivalents and restricted cash at end of period
$
196,522
$
274,768
$
210,212
$
451,640
$
628,490
QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Dollars in thousands USD)
(unaudited)
For the Three Months Ended
September 30,
June 30,
March 31,
December 31,
September 30,
2021
2021
2021
2020
2020
Supplemental schedule of non-cash activities:
Assets acquired and liabilities assumed from acquisitions and other:
Real estate investments
$
1,317,149
$
—
$
468
$
1,000
$
92,373
Other assets
16,132
—
—
—
610
Debt
484,073
—
—
—
—
Other liabilities
97,960
—
—
—
610
Deferred income tax liability
—
—
—
—
337
Noncontrolling interests
—
—
468
—
—
Equity issued
751,248
—
—
—
—
Equity issued for redemption of OP Units
76
—
—
—
—
NON-GAAP FINANCIAL MEASURES RECONCILIATION
Funds From Operations Attributable to Common Stockholders (FFO)1
and Funds Available for Distribution Attributable to Common Stockholders (FAD)1
(In thousands, except per share amounts; dollars in USD)
(unaudited)
Q3 YoY
2020
2021
Growth
Q3
Q4
Q1
Q2
Q3
’20-’21
YTD 3Q20
YTD 3Q21
Net income (loss) attributable to common stockholders
$
12,751
$
110,451
$
(57,209
)
$
86,391
$
60,680
376
%
$
328,698
$
89,862
Net income (loss) attributable to common stockholders per share2
$
0.03
$
0.29
$
(0.15
)
$
0.23
$
0.16
433
%
$
0.87
$
0.24
Adjustments:
Depreciation and amortization on real estate assets
247,969
260,705
312,869
249,527
312,524
843,409
874,920
Depreciation on real estate assets related to noncontrolling interests
(4,475
)
(4,381
)
(4,618
)
(4,678
)
(4,641
)
(12,386
)
(13,937
)
Depreciation on real estate assets related to unconsolidated entities
1,360
1,758
4,018
4,615
4,474
3,228
13,107
Gain on real estate dispositions
(12,622
)
(22,117
)
(2,533
)
(41,258
)
(150,292
)
(240,101
)
(194,083
)
(Loss) gain on real estate dispositions related to noncontrolling interests
—
—
—
(7
)
232
(9
)
225
Subtotal: FFO adjustments
232,232
235,965
309,736
208,199
162,297
594,141
680,232
Subtotal: FFO adjustments per share
$
0.62
$
0.62
$
0.82
$
0.55
$
0.42
$
1.58
$
1.79
FFO (Nareit) attributable to common stockholders
$
244,983
$
346,416
$
252,527
$
294,590
$
222,977
(9
%)
$
922,839
$
770,094
FFO (Nareit) attributable to common stockholders per share
$
0.65
$
0.92
$
0.67
$
0.78
$
0.58
(11
%)
$
2.45
$
2.02
Adjustments:
Change in fair value of financial instruments
1,157
(23,062
)
(21,008
)
(23,211
)
25,451
1,134
(18,768
)
Non-cash income tax (benefit) expense
(4,763
)
(7,961
)
1,344
1,166
2,146
(90,153
)
4,656
Loss (gain) on extinguishment of debt, net
7,386
3,405
27,090
(74
)
34,654
7,386
61,670
Gain on transactions related to unconsolidated entities
(244
)
(592
)
(21
)
(10
)
(8,808
)
(5
)
(8,839
)
Merger-related expenses, deal costs and re-audit costs
12,793
6,519
5,360
1,769
25,531
28,171
32,660
Amortization of other intangibles
118
118
116
116
(22,085
)
354
(21,853
)
Other items related to unconsolidated entities
290
234
101
43
987
(848
)
1,131
Non-cash impact of changes to equity plan
(1,923
)
(2,087
)
8,741
(2,298
)
(2,359
)
1,635
4,084
Natural disaster expenses (recoveries), net
125
(71
)
5,127
3,128
1,552
1,318
9,807
Impact of Holiday lease termination
—
—
—
—
—
(50,184
)
—
Write-off of straight-line rental income, net of noncontrolling interests
18,408
87
—
—
—
70,776
—
Allowance on loan investments and impairment of unconsolidated entities, net of
noncontrolling interests
4,635
(10,412
)
(8,900
)
(57
)
(58
)
44,955
(9,015
)
Subtotal: Normalized FFO adjustments
37,982
(33,822
)
17,950
(19,428
)
57,011
14,539
55,533
Subtotal: Normalized FFO adjustments per share
$
0.10
$
(0.09
)
$
0.05
$
(0.05
)
$
0.15
$
0.04
$
0.15
Normalized FFO attributable to common stockholders
$
282,965
$
312,594
$
270,477
$
275,162
$
279,988
(1
%)
$
937,378
$
825,627
Normalized FFO attributable to common stockholders per share
$
0.75
$
0.83
$
0.72
$
0.73
$
0.73
(3
%)
$
2.49
$
2.17
Adjustments:
Deferred revenue and lease intangibles, net
(19,009
)
(15,513
)
(14,766
)
(14,779
)
(14,182
)
(25,344
)
(43,727
)
Other non-cash amortization, including fair market value of debt
5,558
5,508
5,272
4,847
4,567
15,212
14,686
Stock-based compensation
7,688
6,252
7,331
7,691
7,059
15,687
22,081
Straight-lining of rental income
(4,648
)
(4,052
)
(3,863
)
(3,304
)
(3,567
)
(16,962
)
(10,734
)
FAD Capital Expenditures
(39,955
)
(52,645
)
(28,506
)
(42,651
)
(42,393
)
(91,029
)
(113,550
)
Subtotal: Operating FAD adjustments
(50,366
)
(60,450
)
(34,532
)
(48,196
)
(48,516
)
(102,436
)
(131,244
)
Operating FAD attributable to common stockholders 3
$
232,599
$
252,144
$
235,945
$
226,966
$
231,472
0
%
$
834,942
$
694,383
Merger-related expenses, deal costs and re-audit costs
(12,793
)
(6,519
)
(5,360
)
(1,769
)
(25,531
)
(28,171
)
(32,660
)
Other items related to unconsolidated entities
(290
)
(234
)
(101
)
(43
)
(987
)
848
(1,131
)
FAD attributable to common stockholders 3
$
219,516
$
245,391
$
230,484
$
225,154
$
204,954
(7
%)
$
807,619
$
660,592
Weighted average diluted shares
376,295
377,696
377,922
378,408
385,523
376,112
380,643
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.
2 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.
3 Operating FAD and FAD exclude the impact of the Company’s receipt of unusually significant amounts of cash in connection with lease terminations and modifications. Exclusions in the period presented are $34 million in cash received in April 2020 related to the Holiday lease termination and $162 million in cash received in July 2020 related to the Brookdale lease modification. For additional information related to these transactions, refer to the Company’s earnings release and Form 10-Q for the quarter ended September 30, 2020.
NON-GAAP FINANCIAL MEASURES RECONCILIATION
Net Income and FFO Attributable to Common Stockholders Q4 2021 Guidance1,2
(In millions, except per share amounts; dollars in USD)
(unaudited)
Q4 2021 Guidance
Tentative / Preliminary and Subject to Change
Q4 2021
Q4 2021 - Per Share
Low
High
Low
High
Net Income Attributable to Common Stockholders
$
4
$
20
$
0.01
$
0.05
Depreciation & Amortization Adjustments
267
267
0.66
0.66
Gain on Real Estate Dispositions
(24
)
(24
)
(0.06
)
(0.06
)
Other Adjustments 3
—
—
0.00
0.00
FFO (Nareit) Attributable to Common Stockholders
$
247
$
262
$
0.61
$
0.65
Merger-Related Expenses, Deal Costs & Re-Audit Costs
20
23
0.05
0.06
Other Adjustments 3
3
1
0.01
0.00
Normalized FFO Attributable to Common Stockholders
$
270
$
286
$
0.67
$
0.71
% Year-Over-Year Growth
(19
%)
(14
%)
Weighted Average Diluted Shares (in millions)
403
403
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
Per share quarterly amounts may not add to annual per share amounts due to changes in the Company’s weighted average diluted share count, if any.
3
Other Adjustments include the categories of adjustments presented in our “Non-GAAP Financial Measures Reconciliation – Funds From Operations Attributable to Common Stockholders (FFO) and Funds Available for Distribution Attributable to Common Stockholders (FAD)” above.
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 Operating FAD 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 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), 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 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. Further, the Company believes that FAD and Operating FAD are useful supplemental measures of the Company’s operating performance that would not otherwise be available and may be useful to investors in assessing the Company’s operating performance and performance as a REIT. The Company believes FAD and Operating FAD may provide investors with useful supplemental information regarding the Company’s ability to generate income from its operating performance and the impact of the Company’s operating performance on its ability to make distributions to its stockholders.
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 entities. Adjustments for unconsolidated partnerships and entities 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 leases; (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; (h) net expenses or recoveries related to natural disasters and (i) any other incremental items set forth in the Normalized FFO reconciliation included herein.
Operating FAD represents Normalized FFO (i) excluding non-cash components and straight-line rent adjustments and (ii) including the impact of FAD Capital Expenditures. FAD Capital Expenditures are (i) Ventas-invested capital expenditures, whether routine or non-routine, that extend the useful life of a property but are not expected to generate incremental income for the Company (ii) Office Building and Triple-Net leasing commissions paid to third-party agents and (iii) capital expenditures for second-generation tenant improvements. It excludes (i) costs for a first generation lease (e.g., a development project) or related to properties that have undergone redevelopment and (ii) Initial Capital Expenditures, which are defined as capital expenditures required to bring a newly acquired or newly transitioned property up to standard. Initial Capital Expenditures are typically incurred within the first 12 months after acquisition or transition, respectively.
FAD represents Operating FAD after including the impact of deal costs and unusual items related to unconsolidated entities.
FFO, Normalized FFO, FAD and Operating 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 Operating 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 Operating FAD should be examined in conjunction with net income attributable to common stockholders as presented elsewhere herein.
NON-GAAP FINANCIAL MEASURES RECONCILIATION
Net Debt to Adjusted Pro Forma EBITDA1
(Dollars in thousands USD)
(unaudited)
For the Three Months
Ended September 30,
2021
Net income attributable to common stockholders
$
60,680
Adjustments:
Interest
108,816
Loss on extinguishment of debt, net
29,792
Taxes (including tax amounts in general, administrative and professional fees)
5,151
Depreciation and amortization
313,596
Non-cash stock-based compensation expense
4,700
Merger-related expenses, deal costs and re-audit costs
22,662
Net income attributable to noncontrolling interests, adjusted for partners’ share of consolidated entity EBITDA
(6,578
)
Loss from unconsolidated entities, adjusted for Ventas share of EBITDA from unconsolidated entities
14,002
Gain on real estate dispositions
(150,292
)
Unrealized foreign currency loss
33
Change in fair value of financial instruments
25,448
Natural disaster expenses, net
1,566
Allowance on loan investments, net of noncontrolling interests
(58
)
Adjusted EBITDA
$
429,518
Adjustments for New Senior acquisition2
24,698
Adjustments for current period activity
(41,268
)
Adjusted Pro Forma EBITDA
$
412,948
Adjusted Pro Forma EBITDA annualized
$
1,651,792
Total debt
$
12,078,835
Cash
(143,770
)
Restricted cash pertaining to debt
(23,515
)
Partners’ share of consolidated debt
(277,325
)
Ventas share of non-consolidated debt
292,516
Net debt
$
11,926,741
Net debt to Adjusted Pro Forma EBITDA
7.2
x
1 Totals may not add due to rounding.
2 On September 21, 2021, Ventas acquired New Senior Investment Group. New Senior’s financial results following the acquisition are included in Adjusted EBITDA for the three months ended September 30, 2021. New Senior’s financial results prior to the acquisition, as adjusted to reflect anticipated G&A synergies that are directly attributable to the acquisition, are included in Adjusted Pro Forma EBITDA for the three months ended September 30, 2021. New Senior’s financial results prior to the acquisition were derived from New Senior’s accounting records. Anticipated G&A synergies reflected in Adjusted Pro Forma EBITDA are based on preliminary estimates and assumptions, which are subject to change. For additional information related to the acquisition of New Senior, please refer to Ventas’s earnings release and Form 10-Q for the quarter ended September 30, 2021.
The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization (including non-cash stock-based compensation expense, asset impairment and valuation allowances), excluding gains or losses on extinguishment of debt, partners’ share of EBITDA of consolidated entities, 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 leases, and including (a) Ventas’ share of EBITDA from unconsolidated entities and (b) other immaterial or identified items.
The information above considers the pro forma effect on Adjusted EBITDA of the Company’s activity during the three months ended September 30, 2021, as if the transactions had been consummated as of the beginning of the period (“Adjusted Pro Forma EBITDA”) and considers any other incremental items set forth in the Adjusted Pro Forma EBITDA reconciliation included herein.
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.
NON-GAAP FINANCIAL MEASURES RECONCILIATION
Net Operating Income (NOI) and Same-Store Cash NOI by Segment (Constant Currency)
(Dollars in thousands USD)
(unaudited)
For the Three Months Ended September 30, 2021 and 2020
Triple-Net
Senior Housing
Operating
Office
Non-Segment
Total
For the Three Months Ended September 30, 2021
Net income attributable to common stockholders
$
60,680
Adjustments:
Interest and other income
(417
)
Interest expense
108,816
Depreciation and amortization
313,596
General, administrative and professional fees
30,259
Loss on extinguishment of debt, net
29,792
Merger-related expenses and deal costs
22,662
Allowance on loans receivable and investments
(60
)
Other
33,673
Income from unconsolidated entities
(2,772
)
Gain on real estate dispositions
(150,292
)
Income tax expense
3,780
Net income attributable to noncontrolling interests
2,094
Reported segment NOI
$
178,111
$
104,380
$
137,622
$
31,698
$
451,811
Adjustments:
Straight-lining of rental income
(1,854
)
—
(1,713
)
—
(3,567
)
Non-cash rental income
(11,713
)
—
(5,491
)
—
(17,204
)
Non-cash impact of lease termination
(22,309
)
—
—
—
(22,309
)
NOI not included in cash NOI1
(2,065
)
(216
)
(5,927
)
—
(8,208
)
Non-segment NOI
—
—
—
(31,698
)
(31,698
)
Cash NOI
140,170
104,164
124,491
—
368,825
Adjustments:
Cash NOI not included in same-store
(5,431
)
(1,750
)
(1,754
)
—
(8,935
)
Same-store cash NOI (constant currency)
$
134,739
$
102,414
$
122,737
$
—
$
359,890
Percentage (decrease) increase - constant currency
(54.7
%)
(12.7
%)
4.2
%
(32.4
%)
Adjusted Same-store cash NOI - constant currency
$
134,739
$
102,414
$
122,737
$
—
$
359,890
Adjusted percentage (decrease) increase - constant currency
(0.8
%)
(12.7
%)
4.2
%
(3.0
%)
For the Three Months Ended September 30, 2020
Net income attributable to common stockholders
$
12,751
Adjustments:
Interest and other income
(572
)
Interest expense
115,505
Depreciation and amortization
249,366
General, administrative and professional fees
32,081
Loss on extinguishment of debt, net
7,386
Merger-related expenses and deal costs
11,325
Allowance on loans receivable and investments
4,999
Other
5,681
Income from unconsolidated entities
(865
)
Gain on real estate dispositions
(12,622
)
Income tax benefit
(3,195
)
Net income attributable to noncontrolling interests
986
Reported segment NOI
$
150,738
$
118,669
$
133,325
$
20,094
$
422,826
Adjustments:
Straight-lining of rental income
(2,072
)
—
(2,576
)
—
(4,648
)
Non-cash rental income
(12,687
)
—
(5,936
)
—
(18,623
)
Cash impact of Brookdale lease modification
161,533
—
—
—
161,533
Write-off of straight-line rental income
14,312
—
5,970
—
20,282
NOI not included in cash NOI1
(10,934
)
(929
)
(10,890
)
—
(22,753
)
Non-segment NOI
—
—
—
(20,094
)
(20,094
)
NOI impact from change in FX
419
2,260
—
—
2,679
Cash NOI
$
301,309
$
120,000
$
119,893
$
—
$
541,202
Adjustments:
Cash NOI not included in same-store
(3,904
)
(2,740
)
(2,079
)
—
(8,723
)
NOI impact from change in FX not in same-store
—
2
—
—
2
Same-store cash NOI (constant currency)
$
297,405
$
117,262
$
117,814
$
—
$
532,481
Adjusted Same-store cash NOI:
Less cash impact of Brookdale lease modification
(161,533
)
—
—
—
(161,533
)
Adjusted Same-store cash NOI - constant currency
$
135,872
$
117,262
$
117,814
$
—
$
370,948
1 Excludes sold assets, Assets Held for Sale, development properties not yet operational and land parcels.
For the Three Months Ended September 30, 2021 and June 30, 2021
Triple-Net
Senior Housing
Operating
Office
Non-Segment
Total
For the Three Months Ended September 30, 2021
Net income attributable to common stockholders
$
60,680
Adjustments:
Interest and other income
(417
)
Interest expense
108,816
Depreciation and amortization
313,596
General, administrative and professional fees
30,259
Loss on extinguishment of debt, net
29,792
Merger-related expenses and deal costs
22,662
Allowance on loans receivable and investments
(60
)
Other
33,673
Income from unconsolidated entities
(2,772
)
Gain on real estate dispositions
(150,292
)
Income tax expense
3,780
Net income attributable to noncontrolling interests
2,094
Reported segment NOI
$
178,111
$
104,380
$
137,622
$
31,698
$
451,811
Adjustments:
Straight-lining of rental income
(1,854
)
—
(1,713
)
—
(3,567
)
Non-cash rental income
(11,713
)
—
(5,491
)
—
(17,204
)
Non-cash impact of lease termination
(22,309
)
—
—
—
(22,309
)
NOI not included in cash NOI1
(2,065
)
(216
)
(5,927
)
—
(8,208
)
Non-segment NOI
—
—
—
(31,698
)
(31,698
)
Cash NOI
140,170
104,164
124,491
—
368,825
Adjustments:
Cash NOI not included in same-store
(4,381
)
2,508
(1,754
)
—
(3,627
)
Same-store cash NOI (constant currency)
$
135,789
$
106,672
$
122,737
$
—
$
365,198
Percentage increase (decrease) - constant currency
0.5
%
(3.4
%)
(7.7
%)
(3.5
%)
For the Three Months Ended June 30, 2021
Net income attributable to common stockholders
$
86,391
Adjustments:
Interest and other income
(585
)
Interest expense
110,051
Depreciation and amortization
250,700
General, administrative and professional fees
30,588
Gain on extinguishment of debt, net
(74
)
Merger-related expenses and deal costs
721
Allowance on loans receivable and investments
(59
)
Other
(13,490
)
Income from unconsolidated entities
(4,767
)
Gain on real estate dispositions
(41,258
)
Income tax expense
3,641
Net income attributable to noncontrolling interests
1,897
Reported segment NOI
$
154,791
$
111,139
$
137,320
$
20,506
$
423,756
Adjustments:
Straight-lining of rental income
(1,808
)
—
(1,496
)
—
(3,304
)
Non-cash rental income
(11,905
)
—
(4,478
)
—
(16,383
)
Cash modification / termination fees
—
—
12,037
—
12,037
NOI not included in cash NOI1
(2,296
)
(1,312
)
(8,692
)
—
(12,300
)
Non-segment NOI
—
—
—
(20,506
)
(20,506
)
NOI impact from change in FX
(93
)
(1,103
)
—
—
(1,196
)
Cash NOI
$
138,689
$
108,724
$
134,691
$
—
$
382,104
Adjustments:
Cash NOI not included in same-store
(3,554
)
1,640
(1,692
)
—
(3,606
)
NOI impact from change in FX not in same-store
—
26
—
—
26
Same-store cash NOI (constant currency)
$
135,135
$
110,390
$
132,999
$
—
$
378,524
1 Excludes sold assets, Assets Held for Sale, development properties not yet operational and land parcels.
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. Newly acquired development properties and recently developed or redeveloped properties in the Company’s Seniors Housing Operating Portfolio (“SHOP”) 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 Office and Triple-Net Leased Portfolios 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 Office and Triple-Net Leased Portfolios, 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 net operating income, 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 the SHOP and Triple-Net Leased Portfolios, 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.
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.
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