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News Release: Ventas Reports 2022 First Quarter Results

May 05, 2022 05:00 PM Eastern Daylight Time

CHICAGO–(BUSINESS WIRE)–Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today reported results for the first quarter ended March 31, 2022.

The Company completed the previously announced acquisition of 18 MOBs comprising 732,000 square feet 100% leased to Ardent Health Services for a twelve-year term. The price was $204 million, reflecting a ~6% GAAP yield.

Highlights

  • Net Income Attributable to Common Stockholders (“Net Income”) per share of $0.10
  • Normalized Funds from Operations* (“Normalized FFO”) per share of $0.79, inclusive of the benefit of $33 million or 8 cents per share of HHS Grants received during the quarter and previously communicated
  • Total Company year-over-year same-store cash Net Operating Income* (“NOI”) growth of 5.8% for the first quarter 2022, excluding the benefit of HHS Grants received
  • First quarter 2022 SHOP segment year-over-year same-store cash NOI* growth of 14.2%, excluding the benefit of HHS Grants received, at the high-end of the guidance range, driven by same-store revenue growth of nearly 10%
  • Approximately $500 million of closed or committed new investments year-to-date, principally in senior housing and life science, research & innovation
  • Second quarter 2022 guidance for Net Income per share of ($0.03) – $0.01, Normalized FFO* per share of $0.69 – $0.73 and year-over-year same-store cash NOI* growth in the SHOP segment of 2 – 10%

CEO Remarks

“We are pleased that we grew first quarter year-over-year Normalized FFO and SHOP same-store cash NOI for the first time since the pandemic began (excluding the benefit of HHS Grants in both periods). These strong results underscore the positive momentum of our high-quality portfolio and the powerful senior housing recovery now underway. Our SHOP communities benefitted from strong demand and pricing power during the quarter, demonstrating the strength, resiliency and potential of the assets, and overcoming inflationary impacts and the effects of COVID-19,” said Debra A. Cafaro, Ventas Chairman and CEO.

“As we look to the second quarter of 2022, we are again projecting that our earnings will benefit from continued attractive year-over-year organic growth in our SHOP segment and contribution from investments in senior housing, life science and medical office over the last twelve months. Based on favorable supply and demand fundamentals, we continue to expect sustained improvement in SHOP same-store cash NOI through 2022. We believe that our steadfast focus on execution and the decisive actions we continue to take position us to drive superior and sustainable value for our shareholders,” Cafaro concluded.

*

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.

First Quarter 2022 Enterprise Results

(per share)

Quarter Ended March 31,

2022

2021

$ Change

% Change

Attributable Net Income (Loss)

$0.10

($0.15)

$0.25

n/a

Nareit FFO*

$0.81

$0.67

$0.14

21%

Normalized FFO*

$0.79

$0.72

$0.07

10%

*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.

  • The above earnings measures include $32.8 million ($0.08 per share) benefit of HHS Grants (defined below) in the first quarter of 2022 and include $13.6 million ($0.04 per share) benefit of HHS Grants in the first quarter of 2021.

First Quarter 2022 Property Results

1Q22 (Quarterly Pools) Year-Over-Year
Same-Store Cash NOI* Growth

Business Segment

Assets

% Change

% Change
(ex. HHS Grants)1

SHOP

321

25.8%

14.2%

Triple-Net

331

0.6%

0.6%

Office

332

4.6%

4.6%

Total Company

984

9.5%

5.8%

*

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.

1

SHOP same-store growth adjusted to exclude the benefit of HHS Grants received to partially offset direct COVID-19 costs incurred by the Company to date. The HHS Grants are recorded as a contra expense within SHOP operating expenses, net of any applicable fees to SHOP operators. The quarterly pools include a ~$21.1M net benefit attributable to HHS Grants received in 1Q22 and a ~$7.6M net benefit attributable to HHS Grants received in 1Q21.

SHOP Portfolio (37% of Total Portfolio)

Excluding HHS Grants, SHOP year-over-year same-store cash NOI growth of 14.2% in the first quarter of 2022 was driven by continued robust demand, increased occupancy and pricing power, which outpaced inflationary expense pressures and the continuing impacts of COVID-19 in the quarter.

  • Clinical: Consistent with broader US trends, COVID-19 resident and staff confirmed cases increased sharply in January and February in Ventas’s SHOP communities but have since declined.
  • Leading Indicators: Robust demand resulted in leads and move-ins consistently trending at over 100% of pre-pandemic levels in the quarter, outperforming typical seasonal patterns.
  • Revenue: In the first quarter, same-store revenue increased by nearly 10% versus the prior year due to the positive trends in occupancy and RevPOR.
    • Same-store average occupancy grew year-over-year by 420 basis points to 83.0% in the first quarter 2022, ahead of the guidance midpoint of 410 basis points.
    • Same-store RevPOR increased by 4.2% versus the prior year. RevPOR benefited from strong in-place resident rate increases approximating 8% in the first quarter 2022 in the U.S., and improving re-leasing spreads. Pricing for new residents continued to trend positively despite industry occupancy well below stabilized levels.
  • Excluding HHS Grants, same-store operating expenses grew 8% year-over-year, driven by macro inflationary impacts throughout the quarter on labor, utilities and other operating expenses.

Triple-Net Portfolio (31% of Total Portfolio)

  • Triple-Net year-over-year same-store cash NOI increased by 0.6%, driven by contractual escalators, partially offset by reduced payments from select senior housing tenants due to the continued pandemic impact.

Office Portfolio (30% of Total Portfolio)

  • Office year-over-year same-store cash NOI increased by 4.6%, driven by contractual escalators, strong leasing, collection of holdover rent and continued recovery in parking revenue.

Select Investment Activity

Ventas expanded its presence and offerings to its tenants in the exciting uCity, Philadelphia submarket with the value-add acquisition and intended redevelopment of 3440 Market for $73 million, inclusive of redevelopment costs. Located adjacent to existing Ventas life science buildings, the expected yield after redevelopment is 7%.

Year-to-date in 2022, the Company continued to grow its superior, well positioned portfolio by closing on or committing to approximately $500 million in relationship-driven investments, consistent with its priorities of investing in senior housing and life science, research & innovation:

  • Mangrove Bay: In February 2022, the Company closed on the previously announced acquisition of Mangrove Bay, a Class A senior housing community in the highly sought-after Jupiter, Florida market for $107 million at an attractive in-place yield of nearly 6%.
  • Le Groupe Maurice: Continuing its successful track record of development with its partner Le Groupe Maurice, Ventas announced that it expects to break ground on a new $90 million, 362-unit senior housing development project in the attractive Montreal, Quebec market.
  • 3440 Market: Ventas expanded its presence and offerings to its tenants in the exciting uCity, Philadelphia submarket with the value-add acquisition and intended redevelopment of 3440 Market for $73 million, inclusive of redevelopment costs. Located adjacent to existing Ventas life science buildings, the expected yield after redevelopment is 7%.
  • Medical Office: The Company completed the previously announced acquisition of 18 MOBs comprising 732,000 square feet 100% leased to Ardent Health Services for a twelve-year term. The price was $204 million, reflecting a ~6% GAAP yield. Ventas also completed the $40 million acquisition of Eating Recovery Center, a Class-A behavioral health facility located in Denver, CO at a 6.6% GAAP yield. The asset is 100% net leased with 12 years remaining in the lease term.

Second Quarter 2022 Guidance

The Company currently expects to report second quarter 2022 Net Income (Loss) Attributable to Common Stockholders, Nareit FFO and Normalized FFO per share and same-store cash NOI growth within the following ranges:

2Q22 Guidance

Per Share

Low

High

Net Income (Loss) Attributable to Common Stockholders

($0.03)

$0.01

Nareit FFO*

$0.66

$0.70

Normalized FFO*

$0.69

$0.73

2Q22 Guidance: Same-Store Cash NOI Growth

(vs. 2Q21, Quarterly Pools)

Percentage Change

Business Segment

Low

High

SHOP1

2.0%

10.0%

Triple-Net

(3.0%)

(1.5%)

Office

1.75%

2.25%

Total Company

0.0%

3.0%

*

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.

1

Excluding the benefit of HHS Grants in all periods.

Key assumptions underlying the second quarter 2022 guidance include:

  • SHOP: We anticipate approximately 10% year-over-year revenue growth at the midpoint of the same-store cash NOI guidance range driven by the expected combination of approximately 400 basis points of occupancy growth and improved rates. Revenue growth is expected to be partially offset by continued inflationary expense pressure, with the SHOP same-store cash NOI guidance range principally a function of operating expense assumptions.
  • Office: Same-store cash NOI growth is expected to be driven by contractual escalators, leasing and parking. As previously communicated, Normalized FFO will be reduced by ($0.01) per share sequentially due to the proposed redevelopment into high demand lab space at two R&I properties, following the move-out of two tenants enabling the contemplated projects.
  • Triple-Net: As previously communicated, Normalized FFO will be impacted by ($0.01) per share sequentially due to lease resolutions with senior housing triple-net tenants who were materially affected by the COVID-19 pandemic. Ventas expects to receive the benefit of upward future performance in these assets through revenue or NOI-based payments.
  • General and Administrative Expenses: We anticipate the Normalized FFO impact of second quarter general and administrative expenses to be approximately $34 million to $36 million.
  • Transactions: The guidance does not assume any new or unannounced material acquisitions or capital markets activities.
  • Dispositions: We expect disposition proceeds of $200 million principally in the second half of 2022.

Please see below for further discussion and our definitions of non-GAAP measures along with reconciliations to the most directly comparable GAAP measure. We will provide additional detail regarding our second quarter outlook and assumptions on the first quarter 2022 conference call.

Investor Presentation

A presentation outlining the Company’s first quarter results, second quarter guidance and key assumptions, and a 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 first quarter 2022 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 any reference into, and is not part of, this document.

First Quarter 2022 Results Conference Call

Ventas will hold a conference call to discuss this earnings release on Friday, May 6, 2022 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 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, hospitals 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 United 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, as alternatives to cash flow from operating activities (determined in accordance with GAAP), or 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,” “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. You are urged 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 section titled “Cautionary Statements — Summary Risk Factors,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and Quarterly Report on Form 10-Q for the quarter ended March 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 its extended consequences, including of the Delta, Omicron 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, and effectively integrate, our acquisitions and investments, including our acquisition of New Senior Investment Group Inc.; (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 and uninsured liabilities; (e) the impact of market and general economic conditions, including economic and financial market events, inflation, changes in interest rates, supply chain pressures, 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, managers and borrowers, 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, managers, borrowers 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, joint ventures and minority interests; (i) risks related to development, redevelopment and construction projects; (j) our ability to attract and retain talented employees; (k) 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; (l) 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; (m) 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; (n) our reliance on third parties to operate a majority of our assets and our limited control and influence over such operations and results; (o) our dependency on a limited number of tenants and managers for a significant portion of our revenues and operating income; (p) the adequacy of insurance coverage provided by our policies and policies maintained by our tenants, managers or other counterparties; (q) the occurrence of cyber incidents that could disrupt our operations, result in the loss of confidential information or damage our business relationships and reputation; (r) the impact of merger, acquisition and investment activity in the healthcare industry or otherwise affecting our tenants, managers or borrowers; (s) disruptions to the management and operations of our business and the uncertainties caused by activist investors; and (t) 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)

March 31,

December 31,

September 30,

June 30,

March 31,

2022

2021

2021

2021

2021

Assets

Real estate investments:

Land and improvements

$

2,452,474

$

2,432,065

$

2,395,751

$

2,231,836

$

2,235,773

Buildings and improvements

26,186,628

25,778,490

25,519,840

24,269,450

24,250,630

Construction in progress

275,896

269,315

298,982

288,910

310,547

Acquired lease intangibles

1,373,364

1,369,747

1,372,462

1,200,574

1,212,263

Operating lease assets

318,679

317,858

323,950

328,707

343,072

30,607,041

30,167,475

29,910,985

28,319,477

28,352,285

Accumulated depreciation and amortization

(8,624,820

)

(8,350,637

)

(8,118,990

)

(8,189,447

)

(8,030,524

)

Net real estate property

21,982,221

21,816,838

21,791,995

20,130,030

20,321,761

Secured loans receivable and investments, net

530,388

530,126

530,439

596,171

615,037

Investments in unconsolidated real estate entities

541,914

523,465

507,880

494,239

471,243

Net real estate investments

23,054,523

22,870,429

22,830,314

21,220,440

21,408,041

Cash and cash equivalents

149,599

149,725

143,770

233,837

169,661

Escrow deposits and restricted cash

49,848

46,872

52,752

40,931

40,551

Goodwill

1,045,663

1,046,140

1,046,070

1,051,832

1,051,780

Assets held for sale

26,231

28,399

316,769

90,002

59,860

Deferred income tax assets, net

11,152

11,152

11,496

11,486

11,610

Other assets

613,091

565,069

643,253

855,786

810,760

Total assets

$

24,950,107

$

24,717,786

$

25,044,424

$

23,504,314

$

23,552,263

Liabilities and equity

Liabilities:

Senior notes payable and other debt

$

12,413,743

$

12,027,544

$

12,078,835

$

11,761,545

$

11,759,299

Accrued interest

93,564

106,602

90,013

105,883

91,390

Operating lease liabilities

195,668

197,234

199,551

205,484

206,426

Accounts payable and other liabilities

1,079,596

1,090,254

1,142,822

1,122,171

1,109,279

Liabilities related to assets held for sale

8,411

10,850

20,518

4,568

3,853

Deferred income tax liabilities

52,750

59,259

65,196

68,097

65,777

Total liabilities

13,843,732

13,491,743

13,596,935

13,267,748

13,236,024

Redeemable OP unitholder and noncontrolling interests

313,685

280,283

280,344

252,662

244,619

Commitments and contingencies

Equity:

Ventas stockholders’ equity:

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

Common stock, $0.25 par value; 399,623; 399,420; 399,177; 375,204 and 375,068 shares issued at March 31, 2022, December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 2021, respectively

99,888

99,838

99,777

93,784

93,750

Capital in excess of par value

15,478,467

15,498,956

15,504,210

14,187,577

14,186,692

Accumulated other comprehensive loss

(59,296

)

(64,520

)

(67,601

)

(58,290

)

(52,497

)

Retained earnings (deficit)

(4,821,653

)

(4,679,889

)

(4,459,630

)

(4,340,052

)

(4,257,001

)

Treasury stock, 0; 0; 1; 6 and 14 shares issued at March 31, 2022, December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 2021, respectively

(40

)

(320

)

(789

)

Total Ventas stockholders’ equity

10,697,406

10,854,385

11,076,716

9,882,699

9,970,155

Noncontrolling interests

95,284

91,375

90,429

101,205

101,465

Total equity

10,792,690

10,945,760

11,167,145

9,983,904

10,071,620

Total liabilities and equity

$

24,950,107

$

24,717,786

$

25,044,424

$

23,504,314

$

23,552,263

CONSOLIDATED STATEMENTS OF INCOME

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

(unaudited)

For the Three Months Ended March 31,

2022

2021

Revenues

Rental income:

Triple-net leased

$

151,561

$

159,885

Office

200,540

197,455

352,101

357,340

Resident fees and services

651,121

528,650

Office building and other services revenue

3,949

4,950

Income from loans and investments

9,847

19,010

Interest and other income

536

341

Total revenues

1,017,554

910,291

Expenses

Interest

110,794

110,767

Depreciation and amortization

289,064

314,148

Property-level operating expenses:

Senior living

475,530

417,829

Office

63,183

63,946

Triple-net leased

4,008

4,825

542,721

486,600

Office building and other services costs

1,313

618

General, administrative and professional fees

42,998

40,309

Loss on extinguishment of debt, net

27,090

Transaction expenses and deal costs

19,992

4,617

Allowance on loans receivable and investments

(54

)

(8,902

)

Other

(27,190

)

(9,428

)

Total expenses

979,638

965,819

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

37,916

(55,528

)

Loss from unconsolidated entities

(4,269

)

(250

)

Gain on real estate dispositions

2,455

2,533

Income tax benefit (expense)

4,490

(2,153

)

Income (loss) from continuing operations

40,592

(55,398

)

Net income (loss)

40,592

(55,398

)

Net income attributable to noncontrolling interests

1,860

1,811

Net income (loss) attributable to common stockholders

$

38,732

$

(57,209

)

Earnings per common share

Basic:

Income (loss) from continuing operations

$

0.10

$

(0.15

)

Net income (loss) attributable to common stockholders

0.10

(0.15

)

Diluted:1

Income (loss) from continuing operations

$

0.10

$

(0.15

)

Net income (loss) attributable to common stockholders

0.10

(0.15

)

Weighted average shares used in computing earnings per common share

Basic

399,297

374,669

Diluted

403,260

377,922

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.

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