[VENTAS LOGO]
Ventas, Inc. 10350 Ormsby Park Place Suite 300 Louisville, Kentucky 40223
(502) 357.9000 (502) 357.9029 Fax
Contacts: Debra A. Cafaro
Chairman, President and CEO
or
Richard A. Schweinhart
Senior Vice President and CFO
(502) 357-9000
VENTAS COMPLETES SALE OF UNDERPERFORMING FACILITIES TO KINDRED
Company to Record Gain of $54 Million From Sale
Ventas Reduces Swap Notional Amount to $330 Million
LOUISVILLE, Ky (December 11, 2003) - Ventas, Inc. (NYSE: VTR) ("Ventas" or the
"Company") said today that it has completed the previously announced sale of 10
of its underperforming facilities to its primary tenant, Kindred Healthcare,
Inc. (NASDAQ: KIND), which leased and operated those facilities prior to the
sale.
"This is an excellent transaction that provides us with funds we intend to
re-deploy in the Company's strategic diversification program, in particular our
previously announced accretive ElderTrust (NYSE:ETT) acquisition," Ventas
Chairman, President and CEO Debra A. Cafaro said. "We are delighted to complete
another transaction with Kindred, which during 2003 involved a total of 26
facilities. By divesting these underperforming assets, Ventas expects the
overall quality of its portfolio to improve and the cash flow coverages in the
Master Leases it has with Kindred to increase. Kindred should also see greater
corporate profitability when it eliminates the embedded losses generated by
these assets from its operations. We are pleased that both companies and our
respective shareholders will benefit from this successful transaction."
Ventas expects to record a gain on the sale of approximately $54 million,
based upon the purchase price of $79 million for the assets. The gain will be
excluded from Funds From Operations (FFO) in accordance with the NAREIT
definition of FFO. The Company does not expect to incur any taxes or additional
2003 dividend requirements in connection with the sale.
The Company has also received from Kindred a $6 million lease termination
fee on the sold facilities. Current annual rent on the sold facilities is
approximately $5 million.
The assets Ventas sold to Kindred are: two hospitals, located in Minnesota
and Michigan, and eight skilled nursing facilities located in Kentucky,
Massachusetts, Connecticut and Wisconsin. The hospitals contain 332 beds and the
eight skilled nursing facilities contain 1,080 beds.
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Ventas Completes Sale to Kindred
Page 2 of 4
December 11, 2003
VENTAS REDUCES NOTIONAL AMOUNT OF SWAP
Ventas also said today that it reduced the notional amount of its fixed
rate swap from $450 million to $330 million for the period through June 30,
2006. The Company entered into a swap breakage transaction to more closely match
the notional amount of its swap with the Company's expected variable rate debt
balances.
The existing swap expires on June 30, 2008. For periods after June 30,
2006, the notional amount of the existing swap will decline to $300 million on
July 1, 2006 and then to $150 million on July 1, 2007, under its existing terms.
As a result of this transaction, the Company will realize approximately $6
million in net swap expense in the fourth quarter of 2003, which will be
recorded as an expense from continuing operations for the quarterly and annual
periods ended December 31, 2003. This expense will be included in the Company's
FFO calculation for those periods.
2003 AND 2004 NORMALIZED FFO GUIDANCE REAFFIRMED
Ventas re-affirmed its 2003 normalized FFO guidance of between $1.52 and
$1.54 per diluted share, and its 2004 normalized FFO guidance of between $1.58
and $1.62 per diluted share on a steady state basis. It also re-affirmed that it
expects to add between five and seven cents to 2004 fully diluted FFO per share
on a full year basis upon the successful completion of the ElderTrust merger,
announced on November 20, 2003, which is expected to close in the first quarter
of 2004. However, the merger is subject to the satisfaction of certain closing
conditions and there can be no assurance that the merger will occur or, if so,
when the merger will close.
The Company's FFO guidance (and related GAAP earnings projections) for 2003
and 2004 excludes gains and losses on the sales of assets, and the impact of
acquisitions, additional divestitures and capital transactions. Its guidance
also excludes the impact of (a) any expense the Company records for non-cash
"swap ineffectiveness," and (b) any expenses related to the write-off of
unamortized deferred financing fees or additional costs, expenses or premiums
incurred as a result of early debt retirement.
The Company's FFO guidance is based on a number of assumptions, which 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.
Ventas, Inc. is a healthcare real estate investment trust that owns 42
hospitals, 194 nursing facilities and nine other healthcare and senior housing
facilities in 37 states. The Company also has investments in 25 additional
healthcare and senior housing facilities. More information about Ventas can be
found on its website at www.ventasreit.com.
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Ventas Completes Sale to Kindred
Page 3 of 4
December 11, 2003
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 Ventas,
Inc.'s ("Ventas" or the "Company") and its subsidiaries' expected future
financial position, results of operations, cash flows, funds from operations,
dividends and dividend plans, financing plans, business strategy, budgets,
projected costs, capital expenditures, competitive positions, growth
opportunities, expected lease income, continued qualification as a real estate
investment trust, 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. Such forward-looking
statements are inherently uncertain, and security holders must recognize that
actual results may differ from the Company's expectations. The Company does not
undertake a duty to update such forward-looking statements.
Actual future results and trends for the Company may differ materially
depending on a variety of factors discussed in the Company's filings with the
Securities and Exchange Commission. Factors that may affect the plans or results
of the Company include, without limitation, (a) the ability and willingness of
Kindred Healthcare, Inc. ("Kindred") and certain of its affiliates to continue
to meet and/or perform their obligations under their contractual arrangements
with the Company and the Company's subsidiaries, including without limitation
the lease agreements and various agreements entered into by the Company and
Kindred at the time of the Company's spin off of Kindred on May 1, 1998 (the
"1998 Spin Off"), as such agreements may have been amended and restated in
connection with Kindred's emergence from bankruptcy on April 20, 2001, (b) the
ability and willingness of Kindred to continue to meet and/or perform its
obligation to indemnify and defend the Company for all litigation and other
claims relating to the healthcare operations and other assets and liabilities
transferred to Kindred in the 1998 Spin Off, (c) the ability of Kindred and the
Company's other operators to maintain the financial strength and liquidity
necessary to satisfy their respective obligations and duties under the leases
and other agreements with the Company, and their existing credit agreements, (d)
the Company's success in implementing its business strategy and the Company's
ability to identify and consummate diversifying acquisitions or investments,
including without limitation, its proposed acquisition of ElderTrust, (e) the
nature and extent of future competition, (f) the extent of future healthcare
reform and regulation, including cost containment measures and changes in
reimbursement policies, procedures and rates, (g) increases in the cost of
borrowing for the Company, (h) the ability of the Company's operators to deliver
high quality care and to attract patients, (i) the results of litigation
affecting the Company, (j) changes in general economic conditions and/or
economic conditions in the markets in which the Company may, from time to time,
compete, (k) the ability of the Company to pay down, refinance, restructure,
and/or extend its indebtedness as it becomes due, (l) the movement of interest
rates and the resulting impact on the value of and the accounting for the
Company's interest rate swap agreement, (m) the ability and willingness of the
Company to maintain its qualification as a REIT due to economic, market, legal,
tax or other considerations, (n) final determination of the Company's taxable
net income for the year ending December 31, 2003, (o) the ability and
willingness of the Company's tenants to renew their leases with the Company upon
expiration of the leases and the Company's ability to relet its properties on
the same or better terms in the event such leases expire and are not renewed by
the existing tenants, and (p) the impact on the liquidity, financial condition
and results of operations of Kindred and the Company's other operators resulting
from increased operating costs and uninsured liabilities for professional
liability claims, and the ability of Kindred and the Company's other operators
to accurately estimate the magnitude of such liabilities. Many of such factors
are beyond the control of the Company and its management
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Ventas Completes Sale to Kindred
Page 4 of 4
December 11, 2003
SUPPLEMENTAL DATA
Projected FFO per diluted share for the years ended December 31, 2003 and 2004:
2003 Projected 2004 Projected
------------------------- --------------------------
Per diluted share:
Net income ........................................ $2.00 - $2.02 $1.11 - $1.15
Adjustments:
Depreciation on real estate assets ........... 0.52 - 0.52 0.47 - 0.47
Realized gain on sale of real estate assets... (0.64) - (0.64) -- - --
------ ------- ------ -----
FFO................................................ $1.88 - $1.90 $1.58 - $1.62
Adjustments:
Gain on sale of Kindred common stock ......... (0.11) - (0.11) -- - --
Reversal of contingent liability ............. (0.25) - (0.25) -- - --
------ -------- ------ ------
Normalized FFO..................................... $1.52 - $1.54 $1.58 - $1.62
====== ======== ====== =====
Estimated incremental annualized FFO per diluted share from the ElderTrust
merger:
Annual Increment
-------------------------------
Per diluted share:
Net income ................................................... $(0.03) - $ (0.01)
Adjustments:
Depreciation on real estate assets ...................... 0.08 - 0.08
------ -------
FFO increment................................................. $0.05 - $ 0.07
====== =======
Historical cost accounting for real estate assets implicitly assumes that
the value of real estate assets diminishes predictably over time. Since real
estate values instead have historically risen or fallen with market conditions,
many industry investors have considered presentations of operating results for
real estate companies that use historical cost accounting to be insufficient by
themselves. To overcome this problem, the Company considers FFO an appropriate
measure of performance of an equity REIT and uses the National Association of
Real Estate Investment Trusts ("NAREIT") definition of FFO. NAREIT defines FFO
as net income (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from sales of property, plus
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships and
joint ventures will be calculated to reflect funds from operations on the same
basis.
FFO presented herein is not necessarily comparable to FFO presented by
other real estate companies due to the fact that not all real estate companies
use the same definition. FFO should not be considered as an alternative to net
income (determined in accordance with accounting principles generally accepted
in the United States ("GAAP")), as an indicator of the Company's financial
performance, as an alternative to cash flow from operating activities
(determined in accordance with GAAP), as a measure of the Company's liquidity,
nor is FFO necessarily indicative of sufficient cash flow to fund all of the
Company's needs. The Company believes that in order to facilitate a clear
understanding of the consolidated historical operating results of the Company,
FFO should be examined in conjunction with net income as presented elsewhere in
the Company's public filings on Form 10-Q and Form 10-K.
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