News Release: Ventas Reports 2022 Third Quarter Results

CHICAGO–(BUSINESS WIRE)–Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today reported results for the third quarter ended September 30, 2022.

Third Quarter 2022 Highlights

• Net Income Attributable to Common Stockholders (“Attributable Net Income (Loss)”) per share of $0.00
• Normalized Funds from Operations* (“Normalized FFO”) per share of $0.76, inclusive of the benefit of approximately $20 million or $0.05 per share of HHS grants received during the quarter and included in initial third quarter guidance
• Total Company year-over-year same-store cash Net Operating Income* (“NOI”) growth of 4.8%, at the high end of the guidance range
• Senior Housing Operating Portfolio (“SHOP”) segment year-over-year same-store cash NOI* growth of 13%, above the midpoint of the guidance range, driven by same-store revenue growth of approximately 9%; SHOP segment cash NOI growth excludes the benefit of HHS grants received

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

CEO Remarks

“We are pleased to deliver third quarter growth consistent with our expectations. Our diverse portfolio demonstrated strong performance across business lines. Notably, our SHOP same-store communities grew cash NOI 13% year-over-year, benefitting from outstanding demand and pricing power,” said Debra A. Cafaro, Ventas Chairman and CEO.

“In the fourth quarter, we expect accelerating year-over-year same-store SHOP cash NOI growth of 15% to 21% and positive contributions from all other segments amidst a continuing dynamic macroeconomic environment. The Ventas balance sheet is well positioned with an outstanding 2023 maturity profile. Although we do expect to experience the effects of higher interest rates, we believe Ventas has an advantaged position with demographically driven sustainable demand and an experienced team focused on value creation for shareholders,” Cafaro concluded.

Third Quarter 2022 Enterprise Results

For the third quarter 2022, reported per share results were:

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

• The above earnings measures include a $20 million ($0.05 per share) benefit from HHS grants received in the third quarter of 2022 and a $15 million ($0.04 per share) benefit from a prepayment premium received on the Ardent senior notes in the third quarter of 2021.

Third Quarter 2022 Property Results

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

SHOP Portfolio (36% of Total Portfolio)

SHOP year-over-year same-store (320 assets) cash NOI increased by 13% in the third quarter of 2022 and was driven primarily by growth in the U.S., which increased 17% versus the third quarter of 2021.* Excluding HHS grants:

• Same-store SHOP revenue in the third quarter grew ahead of expectations, increasing nearly 9% year-over-year due to continued acceleration in RevPOR growth and positive trends in occupancy.
• Same-store RevPOR increased more than 5% versus the prior year, demonstrating strong pricing power with robust increases in care pricing and move-in rates. Portfolio re-leasing spreads on rental rates showed continuing momentum and turned positive in the third quarter.
• Same-store average occupancy grew year-over-year by 260 basis points to 84.7% in the third quarter of 2022. Robust demand led to net move-ins in the 2022 key selling season that significantly exceeded pre-pandemic experience, with U.S. move-ins at 107% of 2019 levels in the third quarter.
• Operating expenses remained elevated as contemplated in the Company’s guidance for the third quarter. Year-over-year same-store operating expenses grew approximately 8%, driven primarily by occupancy growth and continued macro inflationary impacts throughout the quarter on labor, utilities, repair and maintenance and food costs.
• SHOP NOI margin expanded 90 basis points in the third quarter due to stronger than expected revenue growth that outpaced continued elevated expense pressures.

^{* The SHOP portfolio is comprised of investments in the United States and in Canada. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release for a reconciliation of same-store cash NOI for the SHOP segment to the most directly comparable GAAP measure.}

Office Portfolio (30% of Total Portfolio)

• Office year-over-year same-store cash NOI increased by 3%, above the high end of the Company’s guidance range, driven by strong performance in Medical Office Buildings including 90 basis points of occupancy gains, high tenant retention and favorable expense controls.

Triple-Net Portfolio (31% of Total Portfolio)

• Triple-Net year-over-year same-store cash NOI decreased by (0.1%), which was on the favorable end of the Company’s guidance range.

Select Investment Activity

Ventas continues to allocate capital to its priority focus areas of senior housing and life science, research & innovation (“R&I”). Within the company’s advantaged university-based R&I platform, Ventas has $2.3 billion of life science, R&I developments recently delivered and in progress. These development projects demonstrate Ventas’s ability to capitalize on strong relationships with the nation’s leaders in research, medicine and higher education to execute high-quality, large-scale transactions. Recently:

• Ventas delivered the core and shell of the new state-of-the-art 400k square foot lab building in Philadelphia’s premier life science ecosystem at One uCity Square. The building is currently over 90% leased and committed to leading gene and cell therapy companies and the University of Pennsylvania.
• Ventas, together with its JV partners, commenced a 255k square foot lab building to be anchored by the University of Maryland, Baltimore (“UMB”) in the University of Maryland’s 14-acre BioPark research campus. The Maryland BioHealth Capital Region ranks among the top life science markets and has the nation’s most favorable ratio of current life science tenant demand to under construction lab space. UMB is a premier public research university that is part of the University of Maryland system (rated AA+ and ranked in the top 10 public universities nationwide for research spend). The project has a projected completion date in 2024 and is expected to achieve a stabilized cash yield approximating 7.5% on estimated project costs of approximately $160 million.

Financial Strength and Flexibility

• Financial strength and flexibility has been a top priority for Ventas for over 20 years. Several actions taken during 2021 enhanced balance sheet liquidity and extended debt maturities at historically low fixed rates, contributing to Ventas’s strong financial position.
  • Key financial statistics at quarter-end include:
    • $2.5 billion quarter-end liquidity, with consolidated debt maturities and scheduled principal amortization limited to approximately $500 million in 2023
    • Net Debt to Adjusted Pro Forma EBITDA improved by 40 basis points versus the second quarter 2022, reaching 6.9x
    • 89% of consolidated debt outstanding is at fixed rates
    • Total Indebtedness / Gross Asset Value is 36%

Corporate Governance and ESG Leadership

• Ventas appointed Sumit Roy, CEO of Realty Income Corporation, as an independent member of the Ventas Board of Directors, effective October 1, 2022. Mr. Roy is a highly accomplished executive with deep industry knowledge and capital allocation expertise and a complementary skillset that aligns with Ventas’s strategic vision. Mr. Roy serves on the Investment Committee of the Ventas Board.
• Ventas continues to earn recognition for its industry-leading commitment to ESG:
  • Named 2022 GRESB Global Listed Sector Leader for Healthcare and earned a 4 Star Rating for the 10th consecutive year
  • Scored in the 98th percentile of real estate companies in 2022 S&P Global Corporate Sustainability Assessment (CSA) and is included in the World and North America Dow Jones Sustainability Indices (DJSI)
  • Achieved LEED Gold Certification for Medical Park Tower redevelopment in Austin, TX and new development at The Assembly in Pittsburgh, PA

Fourth Quarter 2022 Guidance

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

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

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

Key assumptions underlying the fourth quarter 2022 guidance include:

• SHOP: SHOP same-store cash NOI is expected to grow in the range of 15% to 21% year-over-year. Ventas anticipates year-over-year revenue growth of approximately 8% at the midpoint of the same-store cash NOI guidance range, driven by continued strong rate growth and occupancy growth of 100 to 150 basis points. Year-over-year revenue growth is expected to be partially mitigated by continued broad inflationary expense pressure.
• Office: Same-store cash NOI growth year-over-year is expected to be driven by occupancy growth, contractual escalators and favorable expense controls.
• Triple-Net: Same-store cash NOI growth is expected to be driven by contractual escalators.
• Interest Rates and Foreign Exchange: Rising interest rates on floating rate debt and a strengthening U.S. dollar are expected to reduce Normalized FFO by ($0.02) per share in the fourth quarter versus the third quarter 2022.
• VIM: The Company is expected to earn its first promote revenue from its third-party institutional capital management business (VIM), approximating $0.01 per share in the fourth quarter.
• General and Administrative Expenses: The Normalized FFO impact of fourth quarter general and administrative expenses is expected to range from approximately $36 million to $38 million.
• Transactions: The guidance does not assume any new or unannounced material acquisitions or capital markets activities.
• HHS Grants: The Company does not expect to receive any HHS grants in the fourth quarter. Ventas has received the benefit of $54 million or $0.13 per share of HHS grants year-to-date through the third quarter of 2022 on behalf of the assisted living communities in its SHOP segment to partially mitigate losses attributable to COVID-19.
• The guidance assumes no material changes in the impact of COVID-19 on the Company’s business. The trajectory and future impact of COVID-19 on various aspects of the business remain highly uncertain and may change rapidly.

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

Investor Presentation

A third quarter business update presentation is posted to the Events & Presentations section of Ventas’s website at ir.ventasreit.com/events-and-presentations. Additional information regarding the Company can be found in its third 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.

Third Quarter 2022 Results Conference Call

Ventas will hold a conference call to discuss this earnings release on Friday, November 4, 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 sections titled “Cautionary Statements — Summary Risk Factors,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021 and “Risk Factors” in our 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 any variants, on our revenue, level of profitability, liquidity and overall risk exposure and the implementation and impact of regulations related to the CARES Act and other stimulus legislation and any future COVID-19 relief measures; (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 and exchange 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 which may, among other things, have an adverse impact on our financial results and result in recognition of impairments in our reserves, allowances or credit losses in connection therewith and the risk of 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, including costs associated with inflation, rising interest rates, labor conditions and supply chain pressures; (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, rising interest rates and the 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.