[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 TO ACQUIRE 14 ASSISTED AND INDEPENDENT LIVING FACILITIES
FOR $115 MILLION
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Brookdale Living Communities to Lease Properties
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Ventas Reaffirms 2003 Normalized FFO and
Raises Guidance on 2004 Normalized FFO to $1.70 to $1.74 per share
LOUISVILLE, Ky (January 29, 2004) - Ventas, Inc. (NYSE: VTR) ("Ventas" or the
"Company") said today that it has agreed to acquire 14 independent living and
assisted living facilities for $115 million. The facilities are located in ten
states, contain approximately 2,000 units, and have an average occupancy of 93
percent. Chicago-based Brookdale Living Communities, Inc. affiliates have agreed
to lease and operate the properties for 15 years.
"This investment for Ventas increases our presence in the independent and
assisted living markets with stabilized, well managed facilities. The
transaction is a significant step in the continued implementation of our
strategic diversification plan," Ventas Chief Investment Officer Raymond J.
Lewis said. "Additionally, we are delighted to establish a relationship with
Brookdale, a nationally respected operator of more than 60 facilities with
nearly 12,000 residents. Brookdale's management team is highly regarded for its
experience and its commitment to providing its residents with quality living."
The purchase price in the transaction represents an approximately 11.2
percent capitalization rate on the properties' EBITDA (earnings before interest,
taxes, depreciation and amortization, after deduction of management fees), and a
per unit cost of $58,000. The Brookdale transaction is expected to be accretive
to Ventas's 2004 Funds From Operations (FFO).
"We are grateful for this opportunity to work with Ventas. This is a very
important transaction in Brookdale's continued growth," stated Mark Schulte,
Chairman and CEO of Brookdale Living Communities, Inc. "As both Ventas and
Brookdale share the same commitment to excellence, I am confident that we will
continue what is a great working relationship."
Ventas said it expects to fund the transaction by assuming approximately
$41 million of non-recourse property level debt on certain of the purchased
facilities with the balance to be paid from cash on hand or draws on its
revolving credit facility. The property level debt encumbers seven of the
properties, and has a weighted average interest rate below seven percent.
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Ventas to Acquire 14 Assisted and Independent Living Facilities
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January 29, 2004
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The annual rent on the 14 properties is expected to be $10.6 million,
representing an initial cash yield on Ventas's investment of 9.25 percent. The
annual lease payments will escalate each year by the greater of 1.5 percent or
75 percent of the increase in the consumer price index (CPI). Ventas expects
that the initial GAAP yield on investment of 10.3 percent could be exceeded over
the life of the leases, due to the CPI rent adjustment.
Concurrent with today's announcement, Ventas completed the first phase of
the transaction, with the acquisition of four assets, for a purchase price of
$37 million. Acquisition of the remaining ten facilities is expected to be
completed shortly. However, there can be no assurance that the remaining
transactions will occur or when they will occur.
Upon completion of the transactions, Ventas expects that certain of the
assets will be leased under a triple-net Master Lease. The remaining assets with
property level debt will be transitioned into the Master Lease at Ventas's
option if and when that debt matures or is retired. Most of the property level
debt to be assumed by Ventas in the transaction is pre-payable by 2005. All of
the leases will be guaranteed by Brookdale.
The properties are currently being managed by Brookdale affiliates.
VENTAS REAFFIRMS 2003 NORMALIZED FFO AND RAISES GUIDANCE FOR 2004
Ventas re-affirmed its 2003 normalized FFO guidance of between $1.52 and
$1.54 per diluted share. As previously announced, Ventas expects to issue its
2003 earnings on Thursday evening, February 26, 2004 and host a conference call
at 10:00 a.m. Eastern Time the following day.
Ventas also said it raised its 2004 normalized FFO guidance to between
$1.70 and $1.74 per diluted share.
The Company's increased guidance assumes that the previously announced
merger with ElderTrust (NYSE: ETT) will be completed in the first quarter of
2004. The FFO guidance also includes the impact of the acquisition and leasing
of the ten remaining Brookdale properties. There can be no assurances that
either transaction will occur or when they will occur. Any failure or delay in
completing these transactions will reduce the amount of 2004 FFO Ventas expects
to achieve.
In addition to the previously stated assumptions, 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 future acquisitions,
additional divestitures and capital transactions. Its guidance also excludes the
future 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 other 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.
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Ventas to Acquire 14 Assisted and Independent Living Facilities
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January 29, 2004
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Brookdale Living Communities, Inc. is a Chicago-based national leader in
providing high quality senior housing, with more than 60 properties in 24
states. Founded in 1986, Brookdale provides independent living and assisted
living services to nearly 12,000 residents.
Ventas, Inc. is a healthcare real estate investment trust that owns 42
hospitals, 194 nursing facilities and 13 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.
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 to Acquire 14 Assisted and Independent Living Facilities
Page 4
January 29, 2004
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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 $1.14 - $1.18
Adjustments:
Depreciation on real estate assets ... 0.52 - 0.52 0.56 - 0.56
Realized gain on sale of
real estate assets.............. (0.64) - (0.64) -- - --
------ ------ ----- -----
FFO ...................................... $1.88 - $1.90 $1.70 - $1.74
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 $1.70 - $1.74
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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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