Ventas Reports 2019 Fourth Quarter and Full Year Results and Provides 2020 Outlook

Ventas, Inc. (NYSE: VTR) (the “Company”) today announced its results for the fourth quarter and full year ended December 31, 2019.

“In 2019, we benefitted from our diverse high-quality portfolio, earnings accretion from external growth and effective capital markets execution to deliver solid enterprise results. Our Medical Office, Healthcare and Research & Innovation portfolios grew and performed well. While our Senior Housing business experienced challenges, we are taking actions to improve performance and position Ventas for success and growth,” said Debra A. Cafaro, Ventas Chairman and CEO.

“As we enter 2020, our team is sharply focused on achieving our goals and delivering value for our stakeholders. As we look ahead, we are well-positioned to benefit from the expected improvement in senior housing fundamentals, the opening and lease-up of our exciting Research & Innovation ground-up developments, reliable performance from our Office and Healthcare portfolios and the positive impact of investments and capital markets activities,” Cafaro added.

Full Year and Fourth Quarter 2019 Results

For the full year and fourth quarter 2019, the Company delivered on its enterprise expectations. Fourth quarter 2019 Normalized Funds from Operations (“FFO”) per share included $0.01 of fees and a cash tax refund that will not carry over into 2020. Reported per share results were:

Full Year and Fourth Quarter 2019 Property Results

For the full year 2019, the Company’s same-store total property portfolio (1,096 assets that qualified as same-store for the full 2018 to 2019 years) cash net operating income (“NOI”) was stable compared to the same period in 2018. ­For the fourth quarter 2019, the Company’s quarterly same-store total property portfolio (1,102 assets, representing 93 percent of the company’s consolidated assets) cash NOI declined 0.6 percent compared to the same period in 2018. Reported full year 2019 same-store cash NOI performance, for each segment and the Company’s overall portfolio, was in line with the Company’s most recently provided guidance ranges. Same-store cash NOI results for the quarter and year follow:

For the full year and fourth quarter 2019, same-store performance was driven by:

• Triple-Net (“NNN”) portfolio: Full year and fourth quarter 2019 same-store growth was driven by in-place lease escalations, particularly in the Company’s growing NNN Healthcare portfolio of acute and post-acute assets.

• Senior Housing Operating Properties (“SHOP”) portfolio: Full year and fourth quarter 2019 same-store SHOP NOI performance was driven by the cumulative impact of new competition, which affected SHOP occupancy and rate. As anticipated:
  • Results in the fourth quarter 2019 were negatively impacted by the third quarter revenue trajectory. Excluding Eclipse Senior Living (“ESL”), which experienced unique performance issues, same-store performance for the Company’s remaining SHOP same-store portfolio (92 percent of its quarterly same-store SHOP NOI) declined 4 percent in the fourth quarter.
  • Excluding ESL properties for the full year 2019, the Company’s SHOP same-store NOI declined 3.1 percent.

• Office portfolio: In 2019 and accelerating into the fourth quarter, the Office portfolio continued to post attractive growth, led by the Company’s university-based Research & Innovation (“R&I”) portfolio and complemented by steady growth in the Company’s Medical Office Building (“MOB”) portfolio.

Recent Developments

Actions to Improve Senior Housing Performance:

• Ventas appointed J. Justin Hutchens as Executive Vice President, Senior Housing, North America, effective April 1, 2020. Additional details can be found in a separate press release issued today.
• Ventas initiated plans to dispose of $0.6 billion of non-strategic senior housing assets in 2020 to enhance the Company’s longer-term senior housing portfolio growth profile. Proceeds of these dispositions are targeted for reinvestment in the Company’s attractive R&I development pipeline.
• The Company has taken initial steps to effectuate an institutional joint venture with respect to the ESL portfolio (“ESL JV”).
• The Company is accelerating targeted senior housing capital expenditures to strengthen its competitive position in priority markets.
• Ventas is updating its SHOP non-GAAP policies, definitions and methodologies (“SHOP Policies”) to provide enhanced consistency, transparency and comparability between companies on organic operating results and guidance, effective as of January 1, 2020. The adoption of the revised policies in 2020 reduces same-store SHOP NOI 2020 guidance by 50 to 100 basis points because certain SHOP redevelopments that are in a strong lease-up phase will be excluded from the same-store pool in accordance with the revised SHOP Policies. Ventas’s updated SHOP policies may be accessed here.

New Growth Platform: The Company announced it has sponsored and formed a perpetual life vehicle (the “Fund”) to enable institutional investors to invest in core and core plus life science, medical office and senior housing real estate. The Fund has a broad range of financial and strategic benefits. Additional details are available in a separate press release issued today.

2019 Company Highlights

Attractive 2019 Investments: The Company completed or committed to nearly $4 billion of new investments in 2019 at an attractive blended 6.4 percent initial cash yield (6.8 percent GAAP yield). Investment highlights included:

• $1.8 billion investment in partnership with Le Groupe Maurice in a high-quality portfolio of senior housing communities in the attractive Quebec market.
• Five outstanding R&I development projects affiliated with top-tier new and existing university partners totaling nearly $1 billion.

Growth in R&I Development in Thriving uCity Market, Philadelphia, PA:

• Ventas closed a 100 percent pre-leased 450,000 square-foot build-to-suit lease (upsized from 258,000 square feet) with Drexel University to be occupied by its School of Nursing and Health Professions. With total project costs of $275 million and a 30-year lease, this attractive University-based R&I building is expected to open in 2022.
• Ventas commenced construction at One uCity, a $271 million (400,000 square feet) R&I ground up development, where leasing activity is robust.

Financial Strength:

• The Company enhanced its balance sheet and liquidity and funded new investments through the (a) issuance and refinancing of $1.4 billion of Company debt; (b) sourcing equity financing and attractive local currency debt for its Canadian investments; and (c) establishment of a robust commercial paper program.
• Ventas’s Net Debt to Adjusted Pro Forma EBITDA ratio was 6.0x for the full year 2019.
• At year-end, the Company maintained a weighted average debt maturity on senior notes of nearly 8 years and improved its cost of debt to 3.5 percent. Through 2021, the Company has only approximately $700 million of debt maturities, excluding commercial paper and the revolving credit facility.
• The Company had robust available liquidity from cash on hand and existing credit facilities totaling $2.6 billion, net of $567 million of outstanding commercial paper at the end of 2019.

Leadership & Recognition

Environmental, Social & Governance (“ESG”) Leadership: The Company was repeatedly recognized for its commitment to ESG principles and its achievements, including:

• Receipt of the 2019 Nareit Health Care “Leader in the Light” award for a third consecutive year.
• First time inclusion in the 2020 Bloomberg Gender-Equality Index.
• First S&P 500 REIT signatory to the United Nations Global Compact and the United Nations Women’s Empowerment Principles.

Executive Leadership and Recognition:

• The Company recently appointed Carey S. Roberts as Executive Vice President, General Counsel and Ethics and Compliance Officer. She will assume her role March 4, 2020.
• Debra A. Cafaro, the Company’s Chairman and CEO, was named one of Harvard Business Review’s CEO 100 for the sixth consecutive year, Chair of the Economic Club of Chicago and 100 Most Influential People in Healthcare by Modern Healthcare magazine.

Fourth Quarter Dividend

The Company’s Board of Directors declared a dividend for the fourth quarter 2019 of $0.7925 per share. The dividend was paid in cash on January 13, 2020 to stockholders of record on January 2, 2020.

Full Year 2020 Guidance

Ventas expects 2020 per share Normalized FFO, Nareit FFO and net income attributable to common stockholders, and same-store cash NOI growth, assuming no new investments and approximately $1.3 billion in divestitures and receipt of loan repayments (inclusive of $0.6 billion in proceeds arising from property contributions to seed the Fund), to range as follows:

Full year SHOP year over year same-store NOI growth is projected to be negative in 2020 as a result of the trajectory of the business in the second half of 2019 and the resulting lower occupancy start point in January 2020, together with the impact of cumulative supply. 2020 SHOP same-store NOI is expected to be flat at the guidance midpoint with 2019 Q4 same-store SHOP NOI annualized.

2020 Guidance Commentary

Consistent with the Company’s previous communications, Normalized FFO per share in the fourth quarter of 2019, multiplied by four, represented a reasonable starting point for estimating full year 2020 Normalized FFO expectations, excluding any impact from 2020 investments, dispositions and capital transactions. The below table reconciles (a) the Company’s fourth quarter 2019 Normalized FFO per share, adjusted for fourth quarter items that will not carry over to 2020, times four to annualize; with (b) the midpoint of its 2020 full year expectations for Normalized FFO per share.

Compared to the fourth quarter 2019 annualized property performance, the Company expects its Office and NNN Healthcare portfolio to contribute an incremental $0.04 per share to its 2020 Normalized FFO, and the Company expects its total Senior Housing (NNN and SHOP) portfolio to contribute approximately the same amount per share of Normalized FFO in 2020 as it did in the fourth quarter 2019 annualized.

Capital recycling, including the anticipated sale of non-core senior housing assets ($0.6 billion), as well as other dispositions and loan repayments ($0.2 billion), is expected to be approximately ($0.05) dilutive to earnings in 2020. Proceeds from the dispositions will be used to fund future growth through investment in $0.6 billion of high-quality developments and redevelopment projects in 2020, principally in the Office segment.

While the Fund is expected to be accretive to Ventas earnings as it scales assets under management, it will initially be dilutive to the Company by ($0.03) per share in 2020. The initial dilution is as a result of the contribution of five R&I and MOB assets at an approximate cash yield of 4.9 percent, generating net proceeds to Ventas of $0.6 billion that will be used to repay debt and therefore be modestly deleveraging.

Consistent with historical practice, the Company’s 2020 guidance does not include any new unannounced acquisitions, fees or capital markets activity. The Company’s guidance also does not include the impact of an ESL JV. The 2020 outlook assumes 376 million weighted average fully-diluted shares. Ventas expects leverage to remain stable for the full year 2020.

A reconciliation of the Company’s 2020 guidance to the Company’s projected GAAP measures is included in this press release. The Company’s 2020 guidance is based on a number of other assumptions that are subject to change and many of which are outside the control of the Company. If actual results vary from these assumptions, the Company’s expectations may change. There can be no assurance that the Company will achieve these results.

Fourth Quarter 2019 Conference Call

Ventas will hold a conference call to discuss this earnings release today at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The dial-in number for the conference call is (844) 776-7841 (or +1 (661) 378-9542 for international callers), and the participant passcode is “Ventas.” The call will also be webcast live by NASDAQ OMX and can be accessed at the Company’s website at www.ventasreit.com. A replay of the call will be available at the Company’s website, or by calling (855) 859-2056 (or +1 (404) 537-3406 for international callers), passcode 3291199, beginning on February 20, 2020, at approximately 1:00 p.m. Eastern Time and will remain available for 30 days.

Ventas, Inc., an S&P 500 company, is a leading real estate investment trust. Its diverse portfolio of approximately 1,200 assets in the United States, Canada and the United Kingdom consists of senior housing communities, medical office buildings, university-based research and innovation centers, inpatient rehabilitation and long-term acute care facilities, and health systems. Through its Lillibridge subsidiary, Ventas provides management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. References to “Ventas” or the “Company” mean Ventas, Inc. and its consolidated subsidiaries unless otherwise expressly noted. More information about Ventas and Lillibridge can be found at www.ventasreit.com and www.lillibridge.com.

The Company routinely announces material information to investors and the marketplace using press releases, Securities and Exchange Commission (“SEC”) filings, public conference calls, webcasts and the Company’s website at www.ventasreit.com/investor-relations. The information that the Company posts to its website may be deemed to be material. Accordingly, the Company encourages investors and others interested in the Company to routinely monitor and review the information that the Company posts on its website, in addition to following the Company’s press releases, SEC filings and public conference calls and webcasts. Supplemental information regarding the Company can be found on the Company’s website under the “Investor Relations” section or at www.ventasreit.com/investor-relations/annual-reports---supplemental-information. A comprehensive listing of the Company’s properties is available at www.ventasreit.com/our-portfolio/properties-by-stateprovince.

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

The Company’s actual future results and trends may differ materially from expectations depending on a variety of factors discussed in the Company’s filings with the SEC. These factors include without limitation: (a) the ability and willingness of the Company’s tenants, operators, borrowers, managers and other third parties to satisfy their obligations under their respective contractual arrangements with the Company, including, in some cases, their obligations to indemnify, defend and hold harmless the Company from and against various claims, litigation and liabilities; (b) the ability of the Company’s tenants, operators, borrowers and managers to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to third parties, including without limitation obligations under their existing credit facilities and other indebtedness; (c) the Company’s success in implementing its business strategy and the Company’s ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions and investments; (d) macroeconomic conditions such as a disruption of or lack of access to the capital markets, changes in the debt rating on U.S. government securities, default or delay in payment by the United States of its obligations, and changes in the federal or state budgets resulting in the reduction or nonpayment of Medicare or Medicaid reimbursement rates; (e) the nature and extent of future competition, including new construction in the markets in which the Company’s senior housing communities and office buildings are located; (f) the extent and effect of future or pending healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates; (g) increases in the Company’s borrowing costs as a result of changes in interest rates and other factors, including the potential phasing out of the London Inter-bank Offered Rate after 2021; (h) the ability of the Company’s tenants, operators and managers, as applicable, to comply with laws, rules and regulations in the operation of the Company’s properties, to deliver high-quality services, to attract and retain qualified personnel and to attract residents and patients; (i) changes in general economic conditions or economic conditions in the markets in which the Company may, from time to time, compete, and the effect of those changes on the Company’s revenues, earnings and funding sources; (j) the Company’s ability to pay down, refinance, restructure or extend its indebtedness as it becomes due; (k) the Company’s ability and willingness to maintain its qualification as a REIT in light of economic, market, legal, tax and other considerations; (l) final determination of the Company’s taxable net income for the year ended December 31, 2019 and for the year ending December 31, 2020; (m) the ability and willingness of the Company’s tenants to renew their leases with the Company upon expiration of the leases, the Company’s ability to reposition its properties on the same or better terms in the event of nonrenewal or in the event the Company exercises its right to replace an existing tenant, and obligations, including indemnification obligations, the Company may incur in connection with the replacement of an existing tenant; (n) risks associated with the Company’s senior living operating portfolio, such as factors that can cause volatility in the Company’s operating income and earnings generated by those properties, including without limitation national and regional economic conditions, costs of food, materials, energy, labor and services, employee benefit costs, insurance costs and professional and general liability claims, and the timely delivery of accurate property-level financial results for those properties; (o) changes in exchange rates for any foreign currency in which the Company may, from time to time, conduct business; (p) year-over-year changes in the Consumer Price Index or the UK Retail Price Index and the effect of those changes on the rent escalators contained in the Company’s leases and the Company’s earnings; (q) the Company’s ability and the ability of its tenants, operators, borrowers and managers to obtain and maintain adequate property, liability and other insurance from reputable, financially stable providers; (r) the impact of damage to the Company’s properties from catastrophic weather and other natural events and the physical effects of climate change; (s) the impact of increased operating costs and uninsured professional liability claims on the Company’s liquidity, financial condition and results of operations or that of the Company’s tenants, operators, borrowers and managers, and the ability of the Company and the Company’s tenants, operators, borrowers and managers to accurately estimate the magnitude of those claims; (t) risks associated with the Company’s office building portfolio and operations, including the Company’s ability to successfully design, develop and manage office buildings and to retain key personnel; (u) the ability of the hospitals on or near whose campuses the Company’s medical office buildings are located and their affiliated health systems to remain competitive and financially viable and to attract physicians and physician groups; (v) risks associated with the Company’s investments in joint ventures and unconsolidated entities, including its lack of sole decision-making authority and its reliance on its joint venture partners’ financial condition; (w) the Company’s ability to obtain the financial results expected from its development and redevelopment projects; (x) the impact of market or issuer events on the liquidity or value of the Company’s investments in marketable securities; (y) consolidation activity in the senior housing and healthcare industries resulting in a change of control of, or a competitor’s investment in, one or more of the Company’s tenants, operators, borrowers or managers or significant changes in the senior management of the Company’s tenants, operators, borrowers or managers; (z) the impact of litigation or any financial, accounting, legal or regulatory issues that may affect the Company or its tenants, operators, borrowers or managers; and (aa) changes in accounting principles, or their application or interpretation, and the Company’s ability to make estimates and the assumptions underlying the estimates, which could have an effect on the Company’s earnings.