Exhibit 99.1
Ventas Reports 2016 Third Quarter Results
- Strong Earnings, Balance Sheet and Liquidity
- Enhanced Portfolio Through $1.5 Billion Life Science and Innovation Real Estate Acquisition Leased by Leading Universities, Academic Medical Centers and Research Institutions
- Commitment to Grow High-Quality Hospital Business
- Updated and Improved 2016 Guidance
CHICAGO--(BUSINESS WIRE)--October 28, 2016--Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today announced strong earnings for the third quarter ended September 30, 2016, driven by the Company’s high-quality healthcare and senior living properties and accretive investments:
- Income from continuing operations per diluted common share for the third quarter 2016 grew 223 percent to $0.42 compared to the same period in 2015. The increase from the third quarter 2015 is principally due to accretive investments, improved property performance, and lower transaction costs.
- Normalized Funds From Operations (“FFO”) for the third quarter 2016 grew 5 percent to $1.03 per diluted common share on a comparable basis (“Comparable”), which adjusts all prior periods for the effects of the successful spin off (the “Spin-Off”) of Care Capital Properties, Inc. (“CCP”) (NYSE: CCP) completed in August 2015.
- Reported FFO per diluted common share, as defined by the National Association of Real Estate Investment Trusts (“NAREIT FFO”), for the third quarter 2016 grew 28 percent to $1.00 compared to the same period in 2015.
Strong Quarter Demonstrates the Ventas Advantage
“We are delighted to report strong financial performance in the third quarter, delivered by our excellent people, platforms and properties,” said Chairman and Chief Executive Officer Debra A. Cafaro. “With superior earnings growth, outstanding liquidity, financial strength, terrific capital markets execution and disciplined capital allocation, the Ventas team continues to deliver on our promise of producing reliable growth and income from a high-quality diversified portfolio. The completion of our acquisition of life science and innovation centers leased by leading universities and our commitment to finance Ardent’s expansion and build an excellent hospital business further solidify our position as the premier provider of capital at the intersection of health care and real estate. We remain confident in our ability to continue to drive shareholder value.”
Third Quarter Portfolio Performance
Constant currency cash net operating income (“NOI”) growth for the Company’s quarterly same-store total portfolio (1,184 assets) was 2.4 percent on a reported basis for the third quarter 2016. Reported quarterly same-store results by segment follow:
- The seniors housing operating portfolio (“SHOP”) same-store cash NOI grew 2.0 percent, fueled by growth in key markets.
- The triple net leased portfolio same-store cash NOI grew 4.2 percent, benefiting from lease escalations.
- Medical office building (“MOB”) portfolio same-store cash NOI grew 0.2 percent, in line with expectations.
Third Quarter & Other Highlights
- In October 2016, the Company announced that it issued a commitment to provide secured debt financing in the amount of $700 million to a subsidiary of Ardent Health Services (“Ardent”) in connection with Ardent’s agreement to acquire LHP Hospital Group. The transaction is expected to be accretive and close in the first quarter of 2017, pending customary regulatory reviews and approvals.
- In September 2016, the Company completed its accretive acquisition of institutional-quality life science and innovation centers managed by Wexford Science & Technology, LLC (“Wexford”) for total consideration of $1.5 billion. The acquisition marks Ventas’s entry into the attractive life science sector with high-quality real estate leased by top universities, academic medical centers and research companies and includes a pipeline of attractive near-term development opportunities.
- During and immediately following the quarter, to fund the Wexford acquisition, Ventas raised over $900 million in aggregate gross proceeds from the sale of common stock at an average gross price exceeding $73 per share through a block equity offering and “at the market” equity issuances. Year-to-date, total equity issuances have totaled 18.9 million shares and $1.3 billion in aggregate gross proceeds.
- The Company issued $450 million of 3.25 percent 10-year senior notes in September, which represented the most attractive 10-year bond issuance in the Company’s history.
- During and immediately following the quarter, the Company sold real estate assets and received final repayment on loans receivable for aggregate proceeds of $197 million. Year-to-date, the Company has sold 14 properties and received final repayment on loans receivable for aggregate proceeds of $272 million.
- The Company’s credit profile was excellent at quarter-end, including:
- 5.8x net debt to adjusted EBITDA ratio, consistent with the prior quarter and a 0.3x improvement year-over-year;
- 39 percent total indebtedness to gross asset value, an improvement of one percentage point from the prior quarter and three percentage points year-over-year; and
- 4.7x fixed charge coverage, an improvement of 0.1x from the prior quarter and 0.3x year-over-year.
- The Company currently has an outstanding liquidity position, with $1.8 billion available under its revolving credit facility and $134 million of cash or cash equivalents.
Collaborative Agreements with Sunrise
- In September 2016, Ventas and Sunrise Senior Living (“Sunrise”) reached mutually beneficial agreements that strengthen the decade-long relationship of the companies. These new arrangements provide Sunrise and its onsite employees with long-term stability, reinforcing their focus on caring for seniors, and align the companies behind profitable growth. The agreements reduce management fees paid by Ventas to Sunrise under existing management contracts, maintain the existing term of the contracts and provide Sunrise with incentives for future outperformance. Ventas and Sunrise have also entered into a new multi-year development pipeline agreement that gives Ventas the option to fund certain future Sunrise developments.
Continued Leadership Excellence
- Ventas Chairman and Chief Executive Officer Debra A. Cafaro was recognized by the Harvard Business Review as one of “The Best-Performing CEOs in the World.” She is one of 30 CEOs named to the Harvard Business Review list for three consecutive years and one of only two women on this year’s list. Ventas’s financial performance ranked in the top 30 of 886 companies globally for Ms. Cafaro’s tenure, which exceeds 17 years.
- Ventas Chairman and Chief Executive Officer Debra A. Cafaro was recognized by Modern Healthcare as one of the “100 Most Influential People in Healthcare” for 2016. This is the third time Ms. Cafaro has received this recognition, demonstrating her commitment to and stature in the healthcare industry.
Updated 2016 Guidance
The Company updated and improved its expectations for full year 2016 constant currency cash NOI growth for the 1,044 assets in the full year same-store pool to now range from 2.5 to 3 percent in 2016, compared to its previously disclosed guidance of 2 to 3 percent.
Ventas also increased its outlook for 2016 income from continuing operations per diluted share to now range between $1.51 and $1.63. The Company expects reported normalized FFO per diluted share to now range between $4.10 and $4.13, an increase of nearly 3 cents at the midpoint and now representing 4 to 5 percent per share growth over 2015 on a Comparable basis. The Company also increased its NAREIT FFO per diluted share expectations to range between $4.09 and $4.13.
The Company continues to expect to complete approximately $500 million in total 2016 dispositions; it has already closed $272 million year-to-date. Consistent with its practice, the Company’s guidance does not include any further material investments, dispositions or capital activity. A reconciliation of the Company’s guidance to the Company’s projected GAAP earnings is included in this press release.
The Company’s 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.
Third Quarter 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 (661) 378-9542 for international callers). The participant passcode is “Ventas.” The conference call is being webcast live by NASDAQ OMX and can be accessed at the Company’s website at www.ventasreit.com. A replay of the webcast will be available following the call online, or by calling (855) 859-2056 (or (404) 537-3406 for international callers), passcode 96801614, beginning at approximately 2:00 p.m. Eastern Time and will remain for 36 days.
Ventas, Inc., an S&P 500 company, is a leading real estate investment trust. Its diverse portfolio of approximately 1,300 assets in the United States, Canada and the United Kingdom consists of seniors housing communities, medical office buildings, life science and innovation centers, skilled nursing facilities, specialty hospitals and general acute care hospitals. 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. More information about Ventas and Lillibridge can be found at www.ventasreit.com and www.lillibridge.com.
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 Securities and Exchange Commission. 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 seniors housing communities and medical office buildings (“MOBs”) are located; (f) the extent 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; (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 ending December 31, 2016; (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 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; (s) risks associated with the Company’s MOB portfolio and operations, including the Company’s ability to successfully design, develop and manage MOBs and to retain key personnel; (t) the ability of the hospitals on or near whose campuses the Company’s MOBs are located and their affiliated health systems to remain competitive and financially viable and to attract physicians and physician groups; (u) 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; (v) the Company’s ability to obtain the financial results expected from its development and redevelopment projects; (w) the impact of market or issuer events on the liquidity or value of the Company’s investments in marketable securities; (x) consolidation activity in the seniors 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; (y) 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 (z) 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.
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| CONSOLIDATED BALANCE SHEETS |
| (In thousands, except per share amounts) |
| | | | | | | | | | | |
| | | September 30, | | June 30, | | March 31, | | December 31, | | September 30, |
| | | 2016 | | 2016 | | 2016 | | 2015 | | 2015 |
| | | | | | | | | | | |
| Assets | | | | | | | | | | | |
| Real estate investments: | | | | | | | | | | | |
| Land and improvements | | | $ | 2,089,329 | | | $ | 2,041,880 | | | $ | 2,060,247 | | | $ | 2,056,428 | | | $ | 2,068,467 | |
| Buildings and improvements | | | 21,551,049 | | | 20,272,554 | | | 20,395,386 | | | 20,309,599 | | | 20,220,624 | |
| Construction in progress | | | 192,848 | | | 127,647 | | | 119,215 | | | 92,005 | | | 124,381 | |
| Acquired lease intangibles | | | 1,522,708 | | | 1,332,173 | | | 1,343,187 | | | 1,344,422 | | | 1,347,493 | |
| | | 25,355,934 | | | 23,774,254 | | | 23,918,035 | | | 23,802,454 | | | 23,760,965 | |
| Accumulated depreciation and amortization | | | (4,754,532 | ) | | (4,560,504 | ) | | (4,409,554 | ) | | (4,177,234 | ) | | (3,972,544 | ) |
| Net real estate property | | | 20,601,402 | | | 19,213,750 | | | 19,508,481 | | | 19,625,220 | | | 19,788,421 | |
| Secured loans receivable and investments, net | | | 821,663 | | | 1,003,561 | | | 1,002,598 | | | 857,112 | | | 766,707 | |
| Investments in unconsolidated real estate entities | | | 97,814 | | | 96,952 | | | 98,120 | | | 95,707 | | | 96,208 | |
| Net real estate investments | | | 21,520,879 | | | 20,314,263 | | | 20,609,199 | | | 20,578,039 | | | 20,651,336 | |
| Cash and cash equivalents | | | 89,279 | | | 57,322 | | | 51,701 | | | 53,023 | | | 65,231 | |
| Escrow deposits and restricted cash | | | 89,521 | | | 65,626 | | | 76,710 | | | 77,896 | | | 74,491 | |
| Goodwill | | | 1,043,075 | | | 1,043,479 | | | 1,044,983 | | | 1,047,497 | | | 1,052,321 | |
| Assets held for sale | | | 195,252 | | | 195,271 | | | 54,263 | | | 93,060 | | | 152,014 | |
| Other assets | | | 488,258 | | | 417,511 | | | 424,436 | | | 412,403 | | | 418,584 | |
| Total assets | | | $ | 23,426,264 | | | $ | 22,093,472 | | | $ | 22,261,292 | | | $ | 22,261,918 | | | $ | 22,413,977 | |
| | | | | | | | | | | |
| Liabilities and equity | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | |
| Senior notes payable and other debt | | | $ | 11,252,327 | | | $ | 10,901,131 | | | $ | 11,247,730 | | | $ | 11,206,996 | | | $ | 11,284,957 | |
| Accrued interest | | | 70,790 | | | 80,157 | | | 66,988 | | | 80,864 | | | 67,440 | |
| Accounts payable and other liabilities | | | 930,103 | | | 735,287 | | | 738,327 | | | 779,380 | | | 791,556 | |
| Liabilities related to assets held for sale | | | 77,608 | | | 88,967 | | | 12,625 | | | 34,340 | | | 48,860 | |
| Deferred income taxes | | | 315,713 | | | 320,468 | | | 333,354 | | | 338,382 | | | 352,658 | |
| Total liabilities | | | 12,646,541 | | | 12,126,010 | | | 12,399,024 | | | 12,439,962 | | | 12,545,471 | |
| | | | | | | | | | | |
| Redeemable OP unitholder and noncontrolling interests | | | 209,278 | | | 217,686 | | | 191,739 | | | 196,529 | | | 198,832 | |
| | | | | | | | | | | |
| Commitments and contingencies | | | | | | | | | | | |
| | | | | | | | | | | |
| Equity: | | | | | | | | | | | |
| Ventas stockholders' equity: | | | | | | | | | | | |
| Preferred stock, $1.00 par value; 10,000 shares authorized, unissued | | | — | | | — | | | — | | | — | | | — | |
| Common stock, $0.25 par value; 353,793; 341,055; 337,486; 334,386 and 333,027 shares issued at September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015 and September 30, 2015, respectively | | | 88,431 | | | 85,246 | | | 84,354 | | | 83,579 | | | 83,238 | |
| Capital in excess of par value | | | 12,870,566 | | | 11,961,951 | | | 11,758,306 | | | 11,602,838 | | | 11,523,312 | |
| Accumulated other comprehensive loss | | | (49,614 | ) | | (44,195 | ) | | (19,932 | ) | | (7,565 | ) | | (592 | ) |
| Retained earnings (deficit) | | | (2,420,766 | ) | | (2,313,287 | ) | | (2,208,474 | ) | | (2,111,958 | ) | | (1,992,848 | ) |
| Treasury stock, 1; 0; 1; 44 and 61 shares at September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015 and September 30, 2015, respectively | | | (78 | ) | | — | | | (59 | ) | | (2,567 | ) | | (3,675 | ) |
| Total Ventas stockholders' equity | | | 10,488,539 | | | 9,689,715 | | | 9,614,195 | | | 9,564,327 | | | 9,609,435 | |
| Noncontrolling interest | | | 81,906 | | | 60,061 | | | 56,334 | | | 61,100 | | | 60,239 | |
| Total equity | | | 10,570,445 | | | 9,749,776 | | | 9,670,529 | | | 9,625,427 | | | 9,669,674 | |
| Total liabilities and equity | | | $ | 23,426,264 | | | $ | 22,093,472 | | | $ | 22,261,292 | | | $ | 22,261,918 | | | $ | 22,413,977 | |
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| CONSOLIDATED STATEMENTS OF INCOME |
| (In thousands, except per share amounts) |
| | | | | | | | | |
| | | For the Three Months Ended | | For the Nine Months Ended |
| | | September 30, | | September 30, |
| | | 2016 | | 2015 | | 2016 | | 2015 |
| Revenues: | | | | | | | | | |
| Rental income: | | | | | | | | | |
| Triple-net leased | | | $ | 210,424 | | | $ | 201,028 | | | $ | 635,030 | | | $ | 571,591 | |
| Office | | | 158,273 | | | 142,755 | | | 446,496 | | | 420,287 | |
| | | 368,697 | | | 343,783 | | | 1,081,526 | | | 991,878 | |
| Resident fees and services | | | 461,974 | | | 454,825 | | | 1,390,387 | | | 1,356,384 | |
| Office building and other services revenue | | | 4,317 | | | 10,000 | | | 17,006 | | | 29,951 | |
| Income from loans and investments | | | 31,566 | | | 18,924 | | | 78,098 | | | 66,192 | |
| Interest and other income | | | 562 | | | 74 | | | 792 | | | 719 | |
| Total revenues | | | 867,116 | | | 827,606 | | | 2,567,809 | | | 2,445,124 | |
| Expenses: | | | | | | | | | |
| Interest | | | 105,063 | | | 97,135 | | | 312,001 | | | 263,422 | |
| Depreciation and amortization | | | 208,387 | | | 226,332 | | | 666,735 | | | 657,262 | |
| Property-level operating expenses: | | | | | | | | | |
| Senior living | | | 312,145 | | | 304,540 | | | 932,675 | | | 902,154 | |
| Office | | | 48,972 | | | 43,305 | | | 136,619 | | | 129,152 | |
| | | 361,117 | | | 347,845 | | | 1,069,294 | | | 1,031,306 | |
| Office building services costs | | | 974 | | | 6,416 | | | 6,277 | | | 19,098 | |
| General, administrative and professional fees | | | 31,567 | | | 32,114 | | | 95,387 | | | 100,399 | |
| Loss on extinguishment of debt, net | | | 383 | | | 15,331 | | | 3,165 | | | 14,897 | |
| Merger-related expenses and deal costs | | | 16,217 | | | 62,145 | | | 25,073 | | | 105,023 | |
| Other | | | 2,430 | | | 4,795 | | | 8,901 | | | 13,948 | |
| Total expenses | | | 726,138 | | | 792,113 | | | 2,186,833 | | | 2,205,355 | |
| Income before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interest | | | 140,978 | | | 35,493 | | | 380,976 | | | 239,769 | |
| Income (loss) from unconsolidated entities | | | 931 | | | (955 | ) | | 2,151 | | | (1,197 | ) |
| Income tax benefit | | | 8,537 | | | 10,697 | | | 28,507 | | | 27,736 | |
| Income from continuing operations | | | 150,446 | | | 45,235 | | | 411,634 | | | 266,308 | |
| Discontinued operations | | | (118 | ) | | (22,383 | ) | | (755 | ) | | 13,434 | |
| (Loss) gain on real estate dispositions | | | (144 | ) | | 265 | | | 31,779 | | | 14,420 | |
| Net income | | | 150,184 | | | 23,117 | | | 442,658 | | | 294,162 | |
| Net income attributable to noncontrolling interest | | | 732 | | | 265 | | | 1,064 | | | 1,047 | |
| Net income attributable to common stockholders | | | $ | 149,452 | | | $ | 22,852 | | | $ | 441,594 | | | $ | 293,115 | |
| Earnings per common share: | | | | | | | | | |
| Basic: | | | | | | | | | |
| Income from continuing operations attributable to common stockholders, including real estate dispositions | | | $ | 0.43 | | | $ | 0.14 | | | $ | 1.29 | | | $ | 0.85 | |
| Discontinued operations | | | (0.00 | ) | | (0.07 | ) | | (0.00 | ) | | 0.04 | |
| Net income attributable to common stockholders | | | $ | 0.43 | | | $ | 0.07 | | | $ | 1.29 | | | $ | 0.89 | |
| Diluted: | | | | | | | | | |
| Income from continuing operations attributable to common stockholders, including real estate dispositions | | | $ | 0.42 | | | $ | 0.14 | | | $ | 1.28 | | | $ | 0.84 | |
| Discontinued operations | | | (0.00 | ) | | (0.07 | ) | | (0.00 | ) | | 0.04 | |
| Net income attributable to common stockholders | | | $ | 0.42 | | | $ | 0.07 | | | $ | 1.28 | | | $ | 0.88 | |
| | | | | | | | | |
| Weighted average shares used in computing earnings per common share: | | | | | | | | | |
| Basic | | | 350,274 | | | 332,491 | | | 341,610 | | | 329,440 | |
| Diluted | | | 354,186 | | | 336,338 | | | 345,352 | | | 333,210 | |
| | | | | | | | | |
| Dividends declared per common share | | | $ | 0.73 | | | $ | 0.73 | | | $ | 2.19 | | | $ | 2.31 | |
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| QUARTERLY CONSOLIDATED STATEMENTS OF INCOME |
| (In thousands, except per share amounts) |
| | | | | | | | | | | |
| | | 2016 Quarters | | 2015 Quarters |
| | | Third | | Second | | First | | Fourth | | Third |
| | | | | | | | | | | |
| Revenues: | | | | | | | | | | | |
| Rental income: | | | | | | | | | | | |
| Triple-net leased | | | $ | 210,424 | | | $ | 210,119 | | | $ | 214,487 | | | $ | 208,210 | | | $ | 201,028 | |
| Office | | | 158,273 | | | 144,087 | | | 144,136 | | | 145,958 | | | 142,755 | |
| | | 368,697 | | | 354,206 | | | 358,623 | | | 354,168 | | | 343,783 | |
| Resident fees and services | | | 461,974 | | | 464,437 | | | 463,976 | | | 454,871 | | | 454,825 | |
| Office building and other services revenue | | | 4,317 | | | 5,504 | | | 7,185 | | | 11,541 | | | 10,000 | |
| Income from loans and investments | | | 31,566 | | | 24,146 | | | 22,386 | | | 20,361 | | | 18,924 | |
| Interest and other income | | | 562 | | | 111 | | | 119 | | | 333 | | | 74 | |
| Total revenues | | | 867,116 | | | 848,404 | | | 852,289 | | | 841,274 | | | 827,606 | |
| | | | | | | | | | | |
| Expenses: | | | | | | | | | | | |
| Interest | | | 105,063 | | | 103,665 | | | 103,273 | | | 103,692 | | | 97,135 | |
| Depreciation and amortization | | | 208,387 | | | 221,961 | | | 236,387 | | | 236,795 | | | 226,332 | |
| Property-level operating expenses: | | | | | | | | | | | |
| Senior living | | | 312,145 | | | 307,989 | | | 312,541 | | | 307,261 | | | 304,540 | |
| Office | | | 48,972 | | | 43,966 | | | 43,681 | | | 45,073 | | | 43,305 | |
| | | 361,117 | | | 351,955 | | | 356,222 | | | 352,334 | | | 347,845 | |
| Office building services costs | | | 974 | | | 1,852 | | | 3,451 | | | 7,467 | | | 6,416 | |
| General, administrative and professional fees | | | 31,567 | | | 32,094 | | | 31,726 | | | 27,636 | | | 32,114 | |
| Loss (gain) on extinguishment of debt, net | | | 383 | | | 2,468 | | | 314 | | | (486 | ) | | 15,331 | |
| Merger-related expenses and deal costs | | | 16,217 | | | 7,224 | | | 1,632 | | | (2,079 | ) | | 62,145 | |
| Other | | | 2,430 | | | 2,303 | | | 4,168 | | | 4,009 | | | 4,795 | |
| Total expenses | | | 726,138 | | | 723,522 | | | 737,173 | | | 729,368 | | | 792,113 | |
| | | | | | | | | | | |
| Income before unconsolidated entities, income taxes, discontinued operations, real estate dispositions and noncontrolling interest | | | 140,978 | | | 124,882 | | | 115,116 | | | 111,906 | | | 35,493 | |
| Income (loss) from unconsolidated entities | | | 931 | | | 1,418 | | | (198 | ) | | (223 | ) | | (955 | ) |
| Income tax benefit | | | 8,537 | | | 11,549 | | | 8,421 | | | 11,548 | | | 10,697 | |
| Income from continuing operations | | | 150,446 | | | 137,849 | | | 123,339 | | | 123,231 | | | 45,235 | |
| Discontinued operations | | | (118 | ) | | (148 | ) | | (489 | ) | | (2,331 | ) | | (22,383 | ) |
| (Loss) gain on real estate dispositions | | | (144 | ) | | 5,739 | | | 26,184 | | | 4,160 | | | 265 | |
| Net income | | | 150,184 | | | 143,440 | | | 149,034 | | | 125,060 | | | 23,117 | |
| Net income attributable to noncontrolling interest | | | 732 | | | 278 | | | 54 | | | 332 | | | 265 | |
| Net income attributable to common stockholders | | | $ | 149,452 | | | $ | 143,162 | | | $ | 148,980 | | | $ | 124,728 | | | $ | 22,852 | |
| | | | | | | | | | | |
| Earnings per common share: | | | | | | | | | | | |
| Basic: | | | | | | | | | | | |
| Income from continuing operations attributable to common stockholders, including real estate dispositions | | | $ | 0.43 | | | $ | 0.42 | | | $ | 0.44 | | | $ | 0.38 | | | $ | 0.14 | |
| Discontinued operations | | | (0.00 | ) | | (0.00 | ) | | (0.00 | ) | | (0.01 | ) | | (0.07 | ) |
| Net income attributable to common stockholders | | | $ | 0.43 | | | $ | 0.42 | | | $ | 0.44 | | | $ | 0.37 | | | $ | 0.07 | |
| Diluted: | | | | | | | | | | | |
| Income from continuing operations attributable to common stockholders, including real estate dispositions | | | $ | 0.42 | | | $ | 0.42 | | | $ | 0.44 | | | $ | 0.38 | | | $ | 0.14 | |
| Discontinued operations | | | (0.00 | ) | | (0.00 | ) | | (0.00 | ) | | (0.01 | ) | | (0.07 | ) |
| Net income attributable to common stockholders | | | $ | 0.42 | | | $ | 0.42 | | | $ | 0.44 | | | $ | 0.37 | | | $ | 0.07 | |
| | | | | | | | | | | |
| Weighted average shares used in computing earnings per common share: | | | | | | | | | | | |
| Basic | | | 350,274 | | | 338,901 | | | 335,559 | | | 332,914 | | | 332,491 | |
| Diluted | | | 354,186 | | | 342,571 | | | 339,202 | | | 336,406 | | | 336,338 | |
| |
| |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (In thousands) |
| | | For the Nine Months Ended September 30, |
| | | 2016 | | 2015 |
| Cash flows from operating activities: | | | | | |
| Net income | | | $ | 442,658 | | | $ | 294,162 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Depreciation and amortization (including amounts in discontinued operations) | | | 666,735 | | | 736,870 | |
| Amortization of deferred revenue and lease intangibles, net | | | (15,307 | ) | | (19,312 | ) |
| Other non-cash amortization | | | 7,174 | | | 3,051 | |
| Stock-based compensation | | | 15,885 | | | 16,061 | |
| Straight-lining of rental income, net | | | (21,386 | ) | | (25,118 | ) |
| Loss on extinguishment of debt, net | | | 3,165 | | | 14,897 | |
| Gain on real estate dispositions (including amounts in discontinued operations) | | | (31,779 | ) | | (14,649 | ) |
| Gain on real estate loan investments | | | (2,271 | ) | | — | |
| Gain on sale of marketable debt securities | | | — | | | (5,800 | ) |
| Income tax benefit | | | (30,832 | ) | | (30,717 | ) |
| (Income) loss from unconsolidated entities | | | (2,151 | ) | | 1,197 | |
| Distributions from unconsolidated entities | | | 5,574 | | | 20,550 | |
| Other | | | (1,075 | ) | | 3,276 | |
| Changes in operating assets and liabilities: | | | | | |
| Decrease in other assets | | | 1,753 | | | 11,164 | |
| (Decrease) increase in accrued interest | | | (10,053 | ) | | 6,338 | |
| (Decrease) increase in accounts payable and other liabilities | | | (26,820 | ) | | 10,075 | |
| Net cash provided by operating activities | | | 1,001,270 | | | 1,022,045 | |
| Cash flows from investing activities: | | | | | |
| Net investment in real estate property | | | (1,421,592 | ) | | (2,556,988 | ) |
| Investment in loans receivable and other | | | (154,949 | ) | | (74,386 | ) |
| Proceeds from real estate disposals | | | 63,561 | | | 409,633 | |
| Proceeds from loans receivable | | | 194,063 | | | 106,909 | |
| Proceeds from sale or maturity of marketable securities | | | — | | | 76,800 | |
| Funds held in escrow for future development expenditures | | | — | | | 4,003 | |
| Development project expenditures | | | (94,398 | ) | | (90,458 | ) |
| Capital expenditures | | | (75,296 | ) | | (75,812 | ) |
| Investment in unconsolidated operating entity | | | — | | | (26,282 | ) |
| Other | | | (6,175 | ) | | (27,984 | ) |
| Net cash used in investing activities | | | (1,494,786 | ) | | (2,254,565 | ) |
| Cash flows from financing activities: | | | | | |
| Net change in borrowings under credit facility | | | 46,728 | | | (790,406 | ) |
| Net cash impact of CCP Spin-Off | | | — | | | (128,749 | ) |
| Proceeds from debt | | | 876,617 | | | 2,511,061 | |
| Proceeds from debt related to CCP Spin-Off | | | — | | | 1,400,000 | |
| Repayment of debt | | | (916,505 | ) | | (1,329,070 | ) |
| Purchase of noncontrolling interest | | | (1,604 | ) | | (3,819 | ) |
| Payment of deferred financing costs | | | (6,147 | ) | | (23,893 | ) |
| Issuance of common stock, net | | | 1,265,702 | | | 417,818 | |
| Cash distribution to common stockholders | | | (750,402 | ) | | (759,575 | ) |
| Cash distribution to redeemable OP unitholders | | | (6,486 | ) | | (12,776 | ) |
| Purchases of redeemable OP units | | | — | | | (33,188 | ) |
| Contributions from noncontrolling interest | | | 5,926 | | | — | |
| Distributions to noncontrolling interest | | | (5,121 | ) | | (11,250 | ) |
| Other | | | 21,507 | | | 6,489 | |
| Net cash provided by financing activities | | | 530,215 | | | 1,242,642 | |
| Net increase in cash and cash equivalents | | | 36,699 | | | 10,122 | |
| Effect of foreign currency translation on cash and cash equivalents | | | (443 | ) | | (239 | ) |
| Cash and cash equivalents at beginning of period | | | 53,023 | | | 55,348 | |
| Cash and cash equivalents at end of period | | | $ | 89,279 | | | $ | 65,231 | |
| | | | | |
| Supplemental schedule of non-cash activities: | | | | | |
| Assets and liabilities assumed from acquisitions: | | | | | |
| Real estate investments | | | $ | 59,666 | | | $ | 2,567,150 | |
| Utilization of funds held for an Internal Revenue Code Section 1031 exchange | | | (6,954 | ) | | (8,911 | ) |
| Other assets acquired | | | 79,879 | | | 20,221 | |
| Debt assumed | | | 47,641 | | | 177,857 | |
| Other liabilities | | | 60,446 | | | 57,937 | |
| Deferred income tax liability | | | 2,279 | | | 50,836 | |
| Redeemable OP unitholder interests assumed | | | — | | | 87,245 | |
| Noncontrolling interest | | | 22,225 | | | — | |
| Equity issued | | | — | | | 2,204,585 | |
| Non-cash impact of CCP Spin-Off | | | — | | | 1,256,404 | |
| Equity issued for purchase of OP and Class C units | | | 22,970 | | | — | |
| |
| |
| QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (In thousands) |
| | | | | | | | | | | |
| | | 2016 Quarters | | 2015 Quarters |
| | | Third | | Second | | First | | Fourth | | Third |
| Cash flows from operating activities: | | | | | | | | | | | |
| Net income | | | $ | 150,184 | | | $ | 143,440 | | | $ | 149,034 | | | $ | 125,060 | | | $ | 23,117 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | |
| Depreciation and amortization (including amounts in discontinued operations) | | | 208,387 | | | 221,961 | | | 236,387 | | | 236,793 | | | 240,210 | |
| Amortization of deferred revenue and lease intangibles, net | | | (5,217 | ) | | (5,053 | ) | | (5,037 | ) | | (4,817 | ) | | (5,682 | ) |
| Other non-cash amortization | | | 2,487 | | | 2,241 | | | 2,446 | | | 2,397 | | | 2,142 | |
| Stock-based compensation | | | 5,848 | | | 5,008 | | | 5,029 | | | 3,476 | | | 4,869 | |
| Straight-lining of rental income, net | | | (5,960 | ) | | (5,581 | ) | | (9,845 | ) | | (8,674 | ) | | (8,357 | ) |
| Loss (gain) on extinguishment of debt, net | | | 383 | | | 2,468 | | | 314 | | | (486 | ) | | 15,331 | |
| Loss (gain) on real estate dispositions (including amounts in discontinued operations) | | | 144 | | | (5,739 | ) | | (26,184 | ) | | (4,162 | ) | | (217 | ) |
| Gain on real estate loan investments | | | (2,238 | ) | | (33 | ) | | — | | | — | | | — | |
| Income tax benefit | | | (9,389 | ) | | (12,287 | ) | | (9,156 | ) | | (11,667 | ) | | (12,477 | ) |
| (Income) loss from unconsolidated entities | | | (931 | ) | | (1,418 | ) | | 198 | | | 47 | | | 955 | |
| Loss on re-measurement of equity interest upon acquisition, net | | | — | | | — | | | — | | | 176 | | | — | |
| Distributions from unconsolidated entities | | | 1,701 | | | 1,884 | | | 1,989 | | | 2,912 | | | 5,577 | |
| Other | | | (1,799 | ) | | (375 | ) | | 1,099 | | | 3,241 | | | 170 | |
| Changes in operating assets and liabilities: | | | | | | | | | | | |
| (Increase) decrease in other assets | | | (8,856 | ) | | 15,444 | | | (4,835 | ) | | 31,152 | | | 20,875 | |
| (Decrease) increase in accrued interest | | | (9,284 | ) | | 13,542 | | | (14,311 | ) | | 13,657 | | | (9,770 | ) |
| Increase (decrease) in accounts payable and other liabilities | | | 19,335 | | | 8,082 | | | (54,237 | ) | | (19,383 | ) | | 27,578 | |
| Net cash provided by operating activities | | | 344,795 | | | 383,584 | | | 272,891 | | | 369,722 | | | 304,321 | |
| Cash flows from investing activities: | | | | | | | | | | | |
| Net investment in real estate property | | | (1,387,139 | ) | | (20,833 | ) | | (13,620 | ) | | (93,800 | ) | | (1,303,078 | ) |
| Investment in loans receivable and other | | | (2,499 | ) | | (6,236 | ) | | (146,214 | ) | | (96,758 | ) | | (18,727 | ) |
| Proceeds from real estate disposals | | | — | | | 9,350 | | | 54,211 | | | 82,775 | | | 136,442 | |
| Proceeds from loans receivable | | | 186,419 | | | 6,019 | | | 1,625 | | | 2,267 | | | 13,634 | |
| Proceeds from sale or maturity of marketable securities | | | — | | | — | | | — | | | — | | | 19,575 | |
| Development project expenditures | | | (24,719 | ) | | (34,912 | ) | | (34,767 | ) | | (29,216 | ) | | (27,828 | ) |
| Capital expenditures | | | (28,371 | ) | | (23,204 | ) | | (23,721 | ) | | (31,675 | ) | | (32,383 | ) |
| Investment in unconsolidated operating entity | | | — | | | — | | | — | | | — | | | (26,282 | ) |
| Other | | | (1,910 | ) | | — | | | (4,265 | ) | | (2,720 | ) | | (19,171 | ) |
| Net cash used in investing activities | | | (1,258,219 | ) | | (69,816 | ) | | (166,751 | ) | | (169,127 | ) | | (1,257,818 | ) |
| Cash flows from financing activities: | | | | | | | | | | | |
| Net change in borrowings under credit facility | | | 22,424 | | | (113,136 | ) | | 137,440 | | | 66,949 | | | (469,072 | ) |
| Net cash impact of CCP Spin-Off | | | — | | | — | | | — | | | — | | | (128,749 | ) |
| Proceeds from debt | | | 460,400 | | | 416,072 | | | 145 | | | 1,686 | | | 1,403,090 | |
| Proceeds from debt related to CCP Spin-Off | | | — | | | — | | | — | | | — | | | 1,400,000 | |
| Repayment of debt | | | (176,168 | ) | | (589,028 | ) | | (151,309 | ) | | (106,526 | ) | | (1,050,628 | ) |
| Purchase of noncontrolling interest | | | — | | | (1,604 | ) | | — | | | — | | | (3 | ) |
| Payment of deferred financing costs | | | (2,303 | ) | | (3,768 | ) | | (76 | ) | | (772 | ) | | (9,285 | ) |
| Issuance of common stock, net | | | 887,963 | | | 228,108 | | | 149,631 | | | 73,205 | | | 65,651 | |
| Cash distribution to common stockholders | | | (256,931 | ) | | (247,975 | ) | | (245,496 | ) | | (243,838 | ) | | (243,171 | ) |
| Cash distribution to redeemable OP unitholders | | | (2,049 | ) | | (2,114 | ) | | (2,323 | ) | | (2,319 | ) | | (8,079 | ) |
| Contributions from noncontrolling interest | | | 246 | | | 5,680 | | | — | | | — | | | — | |
| Distributions to noncontrolling interest | | | (1,539 | ) | | (1,839 | ) | | (1,743 | ) | | (1,399 | ) | | (1,783 | ) |
| Other | | | 13,624 | | | 1,732 | | | 6,151 | | | 494 | | | 561 | |
| Net cash provided by (used in) financing activities | | | 945,667 | | | (307,872 | ) | | (107,580 | ) | | (212,520 | ) | | 958,532 | |
| Net increase (decrease) in cash and cash equivalents | | | 32,243 | | | 5,896 | | | (1,440 | ) | | (11,925 | ) | | 5,035 | |
| Effect of foreign currency translation on cash and cash equivalents | | | (286 | ) | | (275 | ) | | 118 | | | (283 | ) | | (336 | ) |
| Cash and cash equivalents at beginning of period | | | 57,322 | | | 51,701 | | | 53,023 | | | 65,231 | | | 60,532 | |
| Cash and cash equivalents at end of period | | | $ | 89,279 | | | $ | 57,322 | | | $ | 51,701 | | | $ | 53,023 | | | $ | 65,231 | |
| |
| |
| QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) |
| (In thousands) |
| | | | | | | | | | | | | | | |
| | | 2016 Quarters | | | 2015 Quarters |
| | | Third | | | Second | | | First | | | Fourth | | | Third |
| Supplemental schedule of non-cash activities: | | | | | | | | | | | | | | | |
| Assets and liabilities assumed from acquisitions: | | | | | | | | | | | | | | | |
| Real estate investments | | | $ | 51,001 | | | | $ | 6,107 | | | | $ | 2,558 | | | | $ | (1,190 | ) | | | $ | 3,649 | |
| Utilization of funds held for an Internal Revenue Code Section 1031 exchange | | | — | | | | (6,954 | ) | | | — | | | | — | | | | — | |
| Other assets acquired | | | 79,018 | | | | 927 | | | | (66 | ) | | | (131 | ) | | | 3,716 | |
| Debt assumed | | | 47,641 | | | | — | | | | — | | | | — | | | | — | |
| Other liabilities | | | 57,808 | | | | 80 | | | | 2,558 | | | | (3,478 | ) | | | 8,149 | |
| Deferred income tax liability | | | 2,345 | | | | — | | | | (66 | ) | | | 1,317 | | | | (784 | ) |
| Noncontrolling interest | | | 22,225 | | | | — | | | | — | | | | 840 | | | | — | |
| Non-cash impact of CCP Spin-Off | | | — | | | | — | | | | — | | | | — | | | | 1,256,404 | |
| Equity issued for purchase of OP and Class C units | | | 2,200 | | | | 1,422 | | | | 19,348 | | | | — | | | | — | |
| |
| |
NON-GAAP FINANCIAL MEASURES RECONCILIATION Funds From Operations (FFO) and Funds Available for Distribution (FAD) Including Comparable Earnings1 (Dollars in thousands, except per share amounts) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Q3 YOY |
| | | 2015 | | 2016 | | Growth |
| | | | Q3 | | Q4 | | YTD | | Q1 | | Q2 | | Q3 | | YTD | | '15-'16 |
| Income from continuing operations | | | $ | 45,235 | | | $ | 123,231 | | | $ | 389,539 | | | $ | 123,339 | | | $ | 137,849 | | | $ | 150,446 | | | $ | 411,634 | | | 233 | % |
| Income from continuing operations per share | | | $ | 0.13 | | | $ | 0.37 | | | $ | 1.17 | | | $ | 0.36 | | | $ | 0.40 | | | $ | 0.42 | | | $ | 1.19 | | | 223 | % |
| Discontinued operations | | | (22,383 | ) | | (2,331 | ) | | 11,103 | | | (489 | ) | | (148 | ) | | (118 | ) | | (755 | ) | | |
| Gain (loss) on real estate dispositions | | | 265 | | | 4,160 | | | 18,580 | | | 26,184 | | | 5,739 | | | (144 | ) | | 31,779 | | | |
| Net income | | | 23,117 | | | 125,060 | | | 419,222 | | | 149,034 | | | 143,440 | | | 150,184 | | | 442,658 | | | |
| Net income attributable to noncontrolling interest | | | 265 | | | 332 | | | 1,379 | | | 54 | | | 278 | | | 732 | | | 1,064 | | | |
| Net income attributable to common stockholders 2 | | | $ | 22,852 | | | $ | 124,728 | | | $ | 417,843 | | | $ | 148,980 | | | $ | 143,162 | | | $ | 149,452 | | | $ | 441,594 | | | 554 | % |
| Net income attributable to common stockholders per share 2 | | | $ | 0.07 | | | $ | 0.37 | | | $ | 1.25 | | | $ | 0.44 | | | $ | 0.42 | | | $ | 0.42 | | | $ | 1.28 | | | 500 | % |
| | | | | | | | | | | | | | | | | |
| Adjustments: | | | | | | | | | | | | | | | | | |
| Depreciation and amortization on real estate assets | | | 224,688 | | | 235,101 | | | 887,126 | | | 234,726 | | | 220,346 | | | 206,560 | | | 661,632 | | | |
| Depreciation on real estate assets related to noncontrolling interest | | | (1,964 | ) | | (1,926 | ) | | (7,906 | ) | | (2,075 | ) | | (1,814 | ) | | (1,865 | ) | | (5,754 | ) | | |
| Depreciation on real estate assets related to unconsolidated entities | | | 1,445 | | | 2,982 | | | 7,353 | | | 1,989 | | | 1,220 | | | 1,113 | | | 4,322 | | | |
| Loss on re-measurement of equity interest upon acquisition, net | | | — | | | 176 | | | 176 | | | — | | | — | | | — | | | — | | | |
| (Gain) loss on real estate dispositions | | | (265 | ) | | (4,160 | ) | | (18,580 | ) | | (26,184 | ) | | (5,739 | ) | | 144 | | | (31,779 | ) | | |
| Loss (gain) on real estate dispositions related to unconsolidated entities | | | — | | | 19 | | | 19 | | | (536 | ) | | 41 | | — | | | (495 | ) | | |
| Discontinued operations: | | | | | | | | | | | | | | | | | |
| Loss (gain) on real estate dispositions | | | 48 | | | (2 | ) | | (231 | ) | | — | | | 1 | | | — | | | 1 | | | |
| Depreciation and amortization on real estate assets | | | 13,878 | | | — | | | 79,608 | | | — | | | — | | | — | | | — | | | |
| Subtotal: FFO add-backs | | | 237,830 | | | 232,190 | | | 947,565 | | | 207,920 | | | 214,055 | | | 205,952 | | | 627,927 | | | |
| Subtotal: FFO add-backs per share | | | $ | 0.71 | | | $ | 0.69 | | | $ | 2.84 | | | $ | 0.61 | | | $ | 0.62 | | | $ | 0.58 | | | $ | 1.82 | | | |
| FFO (NAREIT) attributable to common stockholders | | | $ | 260,682 | | | $ | 356,918 | | | $ | 1,365,408 | | | $ | 356,900 | | | $ | 357,217 | | | $ | 355,404 | | | $ | 1,069,521 | | | 36 | % |
| FFO (NAREIT) attributable to common stockholders per share | | | $ | 0.78 | | | $ | 1.06 | | | $ | 4.09 | | | $ | 1.05 | | | $ | 1.04 | | | $ | 1.00 | | | $ | 3.10 | | | 28 | % |
| | | | | | | | | | | | | | | | | |
| Adjustments: | | | | | | | | | | | | | | | | | |
| Change in fair value of financial instruments | | | (18 | ) | | 454 | | | 460 | | | (79 | ) | | (7 | ) | | 14 | | | (72 | ) | | |
| Non-cash income tax benefit | | | (12,477 | ) | | (11,668 | ) | | (42,384 | ) | | (9,157 | ) | | (12,286 | ) | | (9,389 | ) | | (30,832 | ) | | |
| Loss (gain) on extinguishment of debt, net | | | 16,301 | | | (486 | ) | | 15,797 | | | 314 | | | 2,468 | | | 383 | | | 3,165 | | | |
| (Gain) loss on non-real estate dispositions related to unconsolidated entities | | | — | | | — | | | — | | | — | | | (585 | ) | | 28 | | | (557 | ) | | |
| Merger-related expenses, deal costs and re-audit costs | | | 100,548 | | | 659 | | | 152,344 | | | 3,254 | | | 8,550 | | | 16,965 | | | 28,769 | | | |
| Amortization of other intangibles | | | 438 | | | 438 | | | 2,058 | | | 438 | | | 438 | | | 438 | | | 1,314 | | | |
| Subtotal: normalized FFO add-backs | | | 104,792 | | | (10,603 | ) | | 128,275 | | | (5,230 | ) | | (1,422 | ) | | 8,439 | | | 1,787 | | | |
| Subtotal: normalized FFO add-backs per share | | | $ | 0.31 | | | $ | (0.03 | ) | | $ | 0.38 | | | $ | (0.02 | ) | | $ | (0.00 | ) | | $ | 0.02 | | | $ | 0.01 | | | |
| Normalized FFO attributable to common stockholders | | | $ | 365,474 | | | $ | 346,315 | | | $ | 1,493,683 | | | $ | 351,670 | | | $ | 355,795 | | | $ | 363,843 | | | $ | 1,071,308 | | | (0 | %) |
| Normalized FFO attributable to common stockholders per share | | | $ | 1.09 | | | $ | 1.03 | | | $ | 4.47 | | | $ | 1.04 | | | $ | 1.04 | | | $ | 1.03 | | | $ | 3.10 | | | (6 | %) |
| Adjusted: Normalized FFO from CCP Spin-Off | | | $ | (35,393 | ) | | $ | — | | | $ | (173,400 | ) | | — | | | — | | | $ | — | | | $ | — | | | |
| Adjusted Normalized FFO per share from CCP Spin-Off | | | $ | (0.11 | ) | | $ | — | | | $ | (0.52 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | |
| Comparable Normalized FFO attributable to common stockholders | | | $ | 330,081 | | | $ | 346,315 | | | $ | 1,320,283 | | | $ | 351,670 | | | $ | 355,795 | | | $ | 363,843 | | | $ | 1,071,308 | | | 10 | % |
| Comparable Normalized FFO attributable to common stockholders per share | | | $ | 0.98 | | | $ | 1.03 | | | $ | 3.95 | | | $ | 1.04 | | | $ | 1.04 | | | $ | 1.03 | | | $ | 3.10 | | | 5 | % |
| | | | | | | | | | | | | | | | | |
| Non-cash items included in normalized FFO: | | | | | | | | | | | | | | | | | |
| Amortization of deferred revenue and lease intangibles, net | | | (5,682 | ) | | (4,817 | ) | | (24,129 | ) | | (5,037 | ) | | (5,053 | ) | | (5,217 | ) | | (15,307 | ) | | |
| Other non-cash amortization, including fair market value of debt | | | 2,142 | | | 2,397 | | | 5,448 | | | 2,446 | | | 2,241 | | | 2,487 | | | 7,174 | | | |
| Stock-based compensation | | | 4,869 | | | 3,476 | | | 19,537 | | | 5,029 | | | 5,008 | | | 5,848 | | | 15,885 | | | |
| Straight-lining of rental income, net | | | (8,357 | ) | | (8,674 | ) | | (33,792 | ) | | (9,845 | ) | | (5,581 | ) | | (5,960 | ) | | (21,386 | ) | | |
| Subtotal: non-cash items included in normalized FFO | | | (7,028 | ) | | (7,618 | ) | | (32,936 | ) | | (7,407 | ) | | (3,385 | ) | | (2,842 | ) | | (13,634 | ) | | |
| Capital expenditures | | | (33,536 | ) | | (33,496 | ) | | (112,700 | ) | | (24,987 | ) | | (25,103 | ) | | (29,991 | ) | | (80,081 | ) | | |
| Normalized FAD attributable to common stockholders | | | $ | 324,910 | | | $ | 305,201 | | | $ | 1,348,047 | | | $ | 319,276 | | | $ | 327,307 | | | $ | 331,010 | | | $ | 977,593 | | | 2 | % |
| Adjusted: Normalized FAD from CCP Spin-Off | | | $ | (29,987 | ) | | $ | — | | | $ | (155,081 | ) | | $ | — | | | — | | | $ | — | | | $ | — | | | |
| Comparable Normalized FAD attributable to common stockholders | | | $ | 294,923 | | | $ | 305,201 | | | $ | 1,192,966 | | | $ | 319,276 | | | $ | 327,307 | | | $ | 331,010 | | | $ | 977,593 | | | 12 | % |
| Merger-related expenses, deal costs and re-audit costs | | | (100,548 | ) | | (659 | ) | | (152,344 | ) | | (3,254 | ) | | (8,550 | ) | | (16,965 | ) | | (28,769 | ) | | |
| FAD attributable to common stockholders | | | $ | 224,362 | | | $ | 304,542 | | | $ | 1,195,703 | | | $ | 316,022 | | | $ | 318,757 | | | $ | 314,045 | | | $ | 948,824 | | | 40 | % |
| Adjusted: FAD from CCP Spin-Off | | | $ | 7,204 | | | $ | 2,333 | | | $ | (108,677 | ) | | $ | 489 | | | $ | 148 | | | $ | 118 | | | $ | 755 | | | |
| Comparable FAD attributable to common stockholders | | | $ | 231,566 | | | $ | 306,875 | | | $ | 1,087,026 | | | $ | 316,511 | | | $ | 318,905 | | | $ | 314,163 | | | $ | 949,579 | | | 36 | % |
| Weighted average diluted shares | | | 336,338 | | | 336,406 | | | 334,007 | | | 339,202 | | | 342,571 | | | 354,186 | | | 345,352 | | | |
| | | | | | | | | | | | | | | | | |
| 1 Per share amounts may not add due to rounding. 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. |
| 2 CCP impacts calculated based on net income related to discontinued operations, less the de minimis share of discontinued operations net income not related to CCP assets, assuming (a) G&A of $2.5 million in Q1’15 and Q2’15 ($0.01 per share per quarter) and $1.3 million in Q3’15 ($0.00 per share) and (b) interest expense of $6.9 million in Q1’15 and Q2’15 ($0.02 per share per quarter) and $4.3 million in Q3’15 ($0.01 per share); these adjustments differ from the respective amounts found in discontinued operations. |
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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 normalized FAD to be appropriate supplemental measures of operating performance of an equity REIT. In particular, 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 unanticipated items and other 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.
The Company uses the NAREIT definition of FFO. NAREIT defines FFO as net income attributable to common stockholders (computed in accordance with GAAP) excluding gains (or losses) from sales of real estate property, including gain (or loss) on re-measurement of equity method investments, and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures 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 and derivative transactions that have non-cash mark-to-market impacts on the Company’s income statement; (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 related to unconsolidated entities; and (g) expenses related to the re-audit and re-review in 2014 of the Company’s historical financial statements and related matters. Normalized FAD represents normalized FFO excluding non-cash components, straight-line rental adjustments and deducting capital expenditures, including tenant allowances and leasing commissions. FAD represents normalized FAD after subtracting merger-related expenses, deal costs and re-audit costs.
FFO, normalized FFO, FAD and normalized FAD presented herein may not be identical 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 normalized FAD should not be considered as alternatives to net income or income from continuing operations (both 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 income from continuing operations is the most comparable GAAP measure because it provides insight into the Company’s continuing operations. 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 normalized FAD should be examined in conjunction with net income and income from continuing operations as presented elsewhere herein.
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NON-GAAP FINANCIAL MEASURES RECONCILIATION EPS, FFO and FAD Guidance Attributable to Common Stockholders 1,2 (Dollars in millions, except per share amounts) |
| | | | | | | | |
| | | | | | | | |
| | Tentative / Preliminary and Subject to Change |
| | FY2016 - Guidance | | 2016 - Per Share |
| | Low | | High | | Low | | High |
| | | | | | | | | |
| Income from Continuing Operations | | $525 | | | $568 | | | $1.51 | | | $1.63 | |
| | | | | | | | |
| Adjustments 3 | | 98 | | | 88 | | | 0.28 | | | 0.25 | |
| | | | | | | | | |
| Net Income Attributable to Common Stockholders | | $623 | | | $656 | | | $1.79 | | | $1.89 | |
| | | | | | | | |
| Depreciation and Amortization Adjustments | | 901 | | | 870 | | | 2.59 | | | 2.50 | |
| Other Adjustments 3 | | (100 | ) | | (90 | ) | | (0.29 | ) | | (0.26 | ) |
| | | | | | | | | |
| FFO (NAREIT) Attributable to Common Stockholders | | $1,424 | | | $1,436 | | | $4.09 | | | $4.13 | |
| | | | | | | | |
| Merger-Related Expenses, Deal Costs and Re-Audit Costs | | 29 | | | 31 | | | 0.08 | | | 0.09 | |
| Other Adjustments 3 | | (27 | ) | | (31 | ) | | (0.08 | ) | | (0.09 | ) |
| | | | | | | | | |
| Normalized FFO Attributable to Common Stockholders | | $1,426 | | | $1,436 | | | $4.10 | | | $4.13 | |
| % Year-Over-Year Comparable Growth | | | | | | 4 | % | | 5 | % |
| | | | | | | | |
| Non-Cash Items Included in Normalized FFO | | (16 | ) | | (18 | ) | | | | |
| Capital Expenditures | | (111 | ) | | (116 | ) | | | | |
| | | | | | | | | |
| Normalized FAD Attributable to Common Stockholders | | $1,299 | | | $1,302 | | | | | |
| | | | | | | | |
| Merger-Related Expense, Deal Costs and Re-Audit Costs | | (29 | ) | | (31 | ) | | | | |
| Other Adjustments 3 | | 0 | | | 0 | | | | | |
| | | | | | | | | |
| FAD Attributable to Common Stockholders | | $1,270 | | | $1,271 | | | | | |
| | | | | | | | |
| Weighted Average Diluted Shares | | 347,897 | | | 347,897 | | | | | |
| 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 in the Company’s filings with the Securities and Exchange Commission. |
| 2 | | | Totals and per share amounts may not add due to rounding. 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 | | | See table titled “Funds From Operations (FFO) and Funds Available for Distribution (FAD) Including Comparable Earnings” for detailed breakout of “adjustments” for each respective category. |
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NON-GAAP FINANCIAL MEASURES RECONCILIATION
Net Debt to Adjusted Pro Forma EBITDA
The following information considers the pro forma effect on net income attributable to common stockholders of the Company’s investments and other capital transactions that were completed during the three months ended September 30, 2016, as if the transactions had been consummated as of the beginning of the period. The following table illustrates net debt to pro forma earnings before interest, taxes, depreciation and amortization (including non-cash stock-based compensation expense), excluding gains or losses on extinguishment of debt, consolidated joint venture partners’ share of EBITDA, 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 and unrealized foreign currency gains or losses, and including the Company’s share of EBITDA from unconsolidated entities and adjustments for other immaterial or identified items (including amounts in discontinued operations) (“Adjusted Pro Forma EBITDA”) (dollars in thousands). The Company believes that net debt, Adjusted Pro Forma EBITDA and net debt to Adjusted Pro Forma EBITDA are important supplemental measures in evaluating the credit strength of the Company and its ability to service its debt obligations. 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 and tend to obscure the Company’s actual credit quality.
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| Income from continuing operations | $ | 150,446 | | |
| Discontinued operations | (118 | ) | |
| Loss on real estate dispositions | (144 | ) | |
| Net income | 150,184 | | |
| Net income attributable to noncontrolling interest | 732 | | |
| Net income attributable to common stockholders | 149,452 | | |
| Pro forma adjustments for current period investments, capital transactions and dispositions | 14,323 | | |
| Pro forma net income attributable to common stockholders for the three months ended September 30, 2016 | 163,775 | | |
| Add back: | | |
| Interest | 100,281 | | |
| Depreciation and amortization | 204,317 | | |
| Stock-based compensation | 5,848 | | |
| Loss on real estate dispositions | 145 | | |
| Loss on extinguishment of debt, net | 7 | | |
| (Income) loss from unconsolidated entities, net of Ventas share of EBITDA from unconsolidated entities | 5,509 | | |
| Net income (loss) attributable to noncontrolling interest, net of consolidated joint venture partners’ share of EBITDA | (3,076 | ) | |
| Income tax benefit | (8,537 | ) | |
| Change in fair value of financial instruments | 12 | | |
| Unrealized foreign currency gains | (359 | ) | |
| Other taxes | 597 | | |
| Merger-related expenses, deal costs and re-audit costs | 16,489 | | |
| Adjusted Pro Forma EBITDA | 485,008 | | |
| Adjusted Pro Forma EBITDA annualized | $ | 1,940,032 | | |
| | |
| As of September 30, 2016: | | |
| Debt | $ | 11,252,327 | | |
| Debt on held for sale assets | 65,981 | | |
| Cash | (89,279 | ) | |
| Restricted cash pertaining to debt | (22,888 | ) | |
| Consolidated joint venture partners’ share of debt | (80,938 | ) | |
| Ventas share of debt from unconsolidated entities | 116,118 | | |
| Net debt | $ | 11,241,321 | | |
| | |
| Net debt to Adjusted Pro Forma EBITDA | 5.8 | | x |
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NON-GAAP FINANCIAL MEASURES RECONCILIATION
NOI and Same-Store Cash NOI
The Company considers NOI and same-store cash NOI to be important supplemental measures to net income because they allow investors, analysts and Company management to assess the Company’s unlevered property-level operating results and to compare the Company’s operating results with the operating results 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 (including amounts in discontinued operations). 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 cash NOI as the NOI for properties owned, consolidated and operational for the full period in both comparison periods excluding the impact of non-cash items such as straight-line rent and the impact of exchange rate movements across the comparison periods. In certain cases, results for same-store cash NOI may be adjusted to reflect non-recurring items and the receipt of cash payments and fees not fully recognized as NOI in the period. Same-store cash NOI excludes assets intended for disposition and, for the SHOP portfolio, those properties that transitioned operators after the start of the prior comparison period.
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| NON-GAAP FINANCIAL MEASURES RECONCILIATION | | |
| (Dollars in thousands) | | |
| Total Portfolio Same-Store Cash NOI | | |
| | | | | |
| | | For the Three Months Ended | | Percentage |
| | | September 30, | | Increase |
| | | 2016 | | 2015 | | |
| | | | | | | |
| Total Revenues, Excluding Interest and Other Income | | | $ | 866,554 | | | $ | 827,532 | | | |
| Less: | | | | | | | |
| Total Property-Level Operating Expenses | | | (361,117 | ) | | (347,845 | ) | | |
| Office Building Services Costs | | | (974 | ) | | (6,416 | ) | | |
| Net Operating Income | | | 504,463 | | | 473,271 | | | |
| | | | | | | |
| Adjustments: | | | | | | | |
| NOI Not Included in Same-Store | | | (47,519 | ) | | (36,759 | ) | | |
| Straight-Lining of Rental Income | | | (5,936 | ) | | (8,353 | ) | | |
| Non-Cash Rental Income | | | (4,709 | ) | | (3,879 | ) | | |
| Non-Segment NOI | | | (32,426 | ) | | (19,453 | ) | | |
| Constant Currency Adjustment | | | — | | | (845 | ) | | |
| | | (90,590 | ) | | (69,289 | ) | | |
| | | | | | | |
| Cash NOI as Reported | | | $ | 413,873 | | | $ | 403,982 | | | 2.4 | % |
| | |
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| NON-GAAP FINANCIAL MEASURES RECONCILIATION | | |
| (Dollars in thousands) | | |
| Triple-Net Portfolio Same-Store Cash NOI | | |
| | | For the Three Months Ended | | Percentage |
| | | September 30, | | Increase |
| | | 2016 | | 2015 | | |
| | | | | | | |
| Total Revenues, Excluding Interest and Other Income | | | $ | 211,670 | | | $ | 202,039 | | | |
| Less: | | | | | | | |
| Total Property-Level Operating Expenses | | | — | | | — | | | |
| Office Building Services Costs | | | — | | | — | | | |
| Net Operating Income | | | 211,670 | | | 202,039 | | | |
| | | | | | | |
| Adjustments: | | | | | | | |
| NOI Not Included in Same-Store | | | (30,893 | ) | | (25,387 | ) | | |
| Straight-Lining of Rental Income | | | (2,607 | ) | | (4,991 | ) | | |
| Non-Cash Rental Income | | | (5,092 | ) | | (4,601 | ) | | |
| Constant Currency Adjustment | | | — | | | (898 | ) | | |
| | | (38,592 | ) | | (35,877 | ) | | |
| | | | | | | |
| Cash NOI as Reported | | | $ | 173,078 | | | $ | 166,162 | | | 4.2 | % |
| | |
| | |
| NON-GAAP FINANCIAL MEASURES RECONCILIATION | | |
| (Dollars in thousands) | | |
| | |
| Senior Housing Operating Portfolio Same-Store Cash NOI | | |
| | | For the Three Months Ended | | Percentage |
| | | September 30, | | Increase |
| | | 2016 | | 2015 | | |
| | | | | | | |
| Total Revenues, Excluding Interest and Other Income | | | $ | 461,974 | | | $ | 454,825 | | | |
| Less: | | | | | | | |
| Total Property-Level Operating Expenses | | | (312,145 | ) | | (304,540 | ) | | |
| Office Building Services Costs | | | — | | | — | | | |
| Net Operating Income | | | 149,829 | | | 150,285 | | | |
| | | | | | | |
| Adjustments: | | | | | | | |
| NOI Not Included in Same-Store | | | (3,164 | ) | | (6,505 | ) | | |
| Constant Currency Adjustment | | | — | | | 53 | | | |
| | | (3,164 | ) | | (6,452 | ) | | |
| | | | | | | |
| Cash NOI as Reported | | | $ | 146,665 | | | $ | 143,833 | | | 2.0 | % |
| | |
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| NON-GAAP FINANCIAL MEASURES RECONCILIATION | | |
| (Dollars in thousands) | | |
| | |
| Office Portfolio Same-Store Cash NOI | | |
| | | For the Three Months Ended | | Percentage |
| | | September 30, | | Increase |
| | | 2016 | | 2015 | | |
| | | | | | | |
| Total Revenues, Excluding Interest and Other Income | | | $ | 160,484 | | | $ | 151,214 | | | |
| Less: | | | | | | | |
| Total Property-Level Operating Expenses | | | (48,972 | ) | | (43,305 | ) | | |
| Office Building Services Costs | | | (974 | ) | | (6,416 | ) | | |
| Net Operating Income | | | 110,538 | | | 101,493 | | | |
| | | | | | | |
| Adjustments: | | | | | | | |
| NOI Not Included in Same-Store | | | (13,463 | ) | | (4,867 | ) | | |
| Straight-Lining of Rental Income | | | (3,329 | ) | | (3,363 | ) | | |
| Non-Cash Rental Income | | | 383 | | | 722 | | | |
| | | (16,409 | ) | | (7,508 | ) | | |
| | | | | | | |
| Cash NOI as Reported | | | $ | 94,129 | | | $ | 93,985 | | | 0.2 | % |
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CONTACT:
Ventas, Inc.
Ryan K. Shannon
(877) 4-VENTAS
