Ventas Reports 2021 Third Quarter Results

Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today reported results for the third quarter ended September 30, 2021.

“Ventas’s high-quality diversified portfolio demonstrated strength in the third quarter of 2021 despite the challenges of COVID-19 and a tight labor market. We are pleased with the growth in our life science, medical office and healthcare triple net portfolios. We are also seeing sustained demand and revenue growth in our senior housing communities, with third quarter average occupancy up 230 basis points sequentially and eight consecutive months of occupancy growth through October,” said Debra A. Cafaro, Ventas Chairman and CEO.

“We continue to drive growth through $3.7 billion of completed and announced strategic investments in 2021, including our recent acquisition of 103 independent living communities owned by New Senior for a purchase price of $2.3 billion and the development of a $0.5 billion life science project anchored by University of California, Davis. We are committed to expanding our senior living, life science and medical office footprints through relationship-driven investments that enhance our portfolio and drive returns.

“Looking ahead, we are excited for the future of Ventas and expect a robust recovery in senior housing as we also capture the benefits of our completed investments and execute on our external growth opportunities,” Cafaro concluded.

Third Quarter 2021 Results

For the third quarter 2021, reported per share results were:

* This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release for additional information and a reconciliation to the most directly comparable GAAP measure.

Third Quarter 2021 Property Results

* This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release for additional information and a reconciliation to the most directly comparable GAAP measure.

1. 3Q21 vs. 3Q20 NNN same-store cash NOI growth adjusted to exclude the benefit of $162 million in upfront cash consideration received as part of the Brookdale lease modification agreement in July 2020.
2. Office segment benefited from a $12 million lease termination payment in 2Q21. Excluding the impact of this payment, sequential same-store cash NOI growth would have been 1.2% in 3Q21 for the Office segment and (0.4%) for Total Company.

Third Quarter Same-Store Property Results and Latest SHOP Trends

• Company Results
  • Sequential same-store third quarter 2021 cash NOI decreased 3.5% and decreased 0.4% excluding the impact of a $12 million cash lease termination fee in the Life Science, R&I portfolio received in the second quarter.

• SHOP (30% of Total Portfolio)
  • Sequential Same-Store Pool (322 assets) Performance: Average SHOP occupancy grew 230 basis points to 82.2% in the third quarter versus the second quarter 2021. Approximate spot occupancy increased 183 basis points from June 30 to September 30, led by U.S. SHOP communities. Revenue increased 3.1% in the third quarter due to higher occupancy and stronger pricing versus the second quarter, with RevPOR improving sequentially by 0.3%. Expenses increased 5.4% in the third quarter principally as a result of higher labor costs, which represented approximately half of the increase. Other cost increases included the additional day in the quarter and seasonal repair and maintenance expenses. SHOP sequential same-store cash NOI decreased 3.4% in the third quarter.
  • Clinical Trends: SHOP communities continue to experience de minimis confirmed resident cases of COVID-19, with high vaccination rates among residents and staff members. Of Ventas’s SHOP communities, 99% have never reported a resident case or have not reported a new case in the last seven days. Clinics for both the flu vaccine and the COVID-19 booster have begun in Ventas’s senior living communities to further protect residents and employees.
  • October Trends: October was the eighth consecutive month of occupancy improvement. Leading indicators including leads and move-ins continued to outperform pre-pandemic levels in October at 109% and 104%, respectively, and followed seasonal patterns.

• NNN Portfolio (36% of Total Portfolio)
  • NNN sequential same-store (340 assets) cash NOI increased by 0.5% in the third quarter 2021.

• Office Portfolio (32% of Total Portfolio)
  • Office quarterly same-store pool (335 assets) cash NOI increased by 4.2% versus third quarter 2020 driven by contractual escalators, new leasing and parking recovery. Growth in Medical Office was 3.2% and in Life Science, Research & Innovation (“Life Science, R&I”) was 7.1% versus third quarter 2020.
  • Office sequential same-store pool (335 assets) cash NOI declined by 7.7% versus second quarter 2021 and increased by 1.2% when excluding the impact of a $12 million cash lease termination fee received in the second quarter 2021.

Capital Allocation and Portfolio Strategy

• Year to date, Ventas has completed or announced $3.7 billion in strategic investments, including $3.1 billion of acquisitions and the $0.5 billion UC Davis life science project. The Company’s current investment priorities are focused on expanding our portfolio of higher-margin senior housing independent living assets in the United States and Canada, growing our Life Science, R&I portfolio and selectively expanding our Medical Office footprint.
  • On September 21, 2021, Ventas closed its acquisition of New Senior in an all-stock transaction for a purchase price of $2.3 billion. This accretive transaction added high quality independent living in advantaged markets with positive supply demand fundamentals while building on existing relationships with experienced leading operators at an attractive valuation below replacement cost. The portfolio consists of 103 independent living communities, with 12,404 units and is located across 36 states.
  • Ventas commenced a Life Science, R&I development anchored by the University of California, Davis, a premier research institution ranked in the top 5% of universities for both NIH funding and R&D spend. The project will be the first phase of Aggie Square, a planned innovation district located on the University’s Sacramento campus and adjacent to UC Davis Medical Center. Developed with Ventas’s exclusive partner, Wexford Science & Technology, the project is principally laboratory space and related uses that will complement existing activities at the UC Davis Health Science Campus, including health sciences research, product development and manufacturing, academic and commercial research, incubator and accelerator space and shared labs. The development will be 60% pre-leased to UC Davis (Moody’s Aa2) and construction is expected to commence in the first half of 2022. Project costs are expected to approximate $0.5 billion with an expected stabilized cash yield exceeding 6%. The development is one of the pre-identified Life Science, R&I development projects in Ventas’s R&I development partnership with GIC.
  • Ventas expanded its relationship with Hawthorn Senior Living through the approximately $180 million acquisition of five independent living and one assisted living communities in Canada. The portfolio consists of five stabilized assets and one lease-up asset. The acquisition price represents a nearly 6% yield on expected stabilized cash NOI and expands Ventas’s presence in the attractive Canadian senior housing sector.
  • Ventas completed the $58 million acquisition of Eating Recovery Center, a 102,000 square foot Class A facility located in Plano, Texas. The asset is 100% net leased with 16 years remaining in the lease term. Eating Recovery Center is a national provider of eating disorder treatments and is a leader in this rapidly growing market. The acquisition price represents a 7.2% GAAP yield on expected 2022 NOI.
  • Ventas, in connection with its long-standing partner Pacific Medical Buildings (“PMB”), completed a buyout of PMB’s interest in the state-of-the-art, newly developed Sutter Van Ness Medical Office Building. The asset is 92% leased and is connected to Sutter Health’s flagship hospital in an unparalleled location in downtown San Francisco. Ventas now owns 100% of this trophy asset at an all-in basis of $173 million or a 5.9% yield on expected 2022 NOI, representing significant expected value creation.
  • Building on and expanding its relationship with Ardent Health Services, Ventas expects to acquire 18 medical office buildings from Ardent comprising 762,000 square feet in a $200 million transaction expected to close in fourth quarter 2021. The portfolio is located in Ardent’s existing markets, over 90% on campus and 100% leased to Ardent with an expected GAAP yield of 5.8%.
  • To position the Company’s senior housing portfolio to benefit from the expected cyclical recovery of senior living, Ventas announced the transition of 90 senior living communities to experienced operators who will provide strong local market focus and oversight for the communities. The transitions are underway, with 65 asset transitions completed and the balance expected to be concluded by the end of 2021.

• During and subsequent to the third quarter, the Company continues to enhance the quality of its portfolio through asset sales and to receive repayment of high return, well-structured loans. Year to date through November 3, 2021, the Company has received over $875 million of proceeds and remains on track to meet the previously announced guidance of $1 billion in 2021 dispositions.
  • Ventas sold 23 medical office buildings for total consideration of $266 million representing a 5.0% cash yield. Ventas recognized a gain on sale of $113 million in connection with the transactions.
  • Ventas sold a triple-net leased senior housing community in Naples, Florida for approximately $100 million. Ventas recognized a gain on sale of $36 million in connection with the transaction.
  • As previously announced, in the third quarter, Ventas received full repayment of its investment in $200 million of Ardent 9.75% senior notes due 2026, along with a $15 million prepayment premium, and $66 million of Holiday 9.4% notes due 2025.
  • In October, Ventas received full repayment of a $45 million cash pay note bearing 9.5% interest from Brookdale. Ventas originally received the note as part of $235 million of total up-front consideration received in July 2020 as part of mutually beneficial arrangements with Brookdale Senior Living to reset cash rent due to the impact of the pandemic.
  • As of November 3, 2021, Ventas has binding agreements to sell $170 million of senior housing and medical office assets expected to close in 2021.

Financial Strength & Liquidity

• As of November 3, 2021, the Company has robust liquidity of $2.2 billion, including $2.5 billion of undrawn revolver capacity, net of $0.5 billion of commercial paper outstanding and including $0.2 billion in cash and cash equivalents on hand.
  • For the third quarter 2021, Ventas’s Net Debt to Adjusted Pro Forma EBITDA ratio was 7.2x. The New Senior transaction resulted in an initial 30 basis point leverage increase from 6.9x.
  • During and subsequent to the third quarter, the Company received $593 million in gross proceeds under its “at the market” equity offering program, with 10.3 million shares of common stock sold at an average gross price of $57.74 per share.
  • As previously announced, on August 16, the Company retired $264 million aggregate principal amount of 3.25% senior notes due August 2022 and, on September 1, the Company retired $400 million aggregate principal amount of 3.125% senior notes due June 2023.
  • As of November 3, 2021, the Company has retired $1.1 billion of near-term debt maturities through asset dispositions, loan repayments and other capital sources

Third Quarter Dividend

The Company paid its third quarter 2021 dividend of $0.45 per share on October 14, 2021 to stockholders of record as of October 1, 2021.

Fourth Quarter 2021 Guidance

The Company currently expects to report fourth quarter 2021 Net Income (Loss) Attributable to Common Stockholders, Nareit FFO and Normalized FFO within the following per share ranges:

* This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release for additional information and a reconciliation to the most directly comparable GAAP measure

Key assumptions underlying the fourth quarter 2021 guidance include, among other things:

• Average occupancy for fourth quarter 2021 in the same-store SHOP business is expected to increase 80 to 120 basis points sequentially, reflecting continued demand exceeding pre-pandemic levels tempered by typical seasonal trends.

• Revenue for the same-store SHOP business is expected to grow in the fourth quarter as a result of occupancy increases.

• Approximately stable NOI is expected in the Company’s sequential same-store SHOP business in the fourth quarter. At the mid-point of the range, revenue growth is assumed to be offset by increasing operating costs, notably including continued elevated labor costs.

• We have assumed that no HHS Grants will be received by the Company in the fourth quarter. Although we have applied for grants under Phase 4 of HHS’s Provider Relief Fund on behalf of the eligible assisted living communities in our SHOP business to mitigate COVID-19 losses, there can be no assurance that our applications will be approved or that our communities will receive any additional funding.

• Stable sequential performance is expected in the Office and NNN segments.

• Receipt of a $13 million fee related to the previously announced acquisition of Kindred Healthcare. Kindred has communicated that it expects the transaction to close in the fourth quarter of 2021, subject to receipt of regulatory approvals and satisfaction of customary closing conditions.

• We have assumed a fully diluted share count of 403 million shares reflecting the equity raised in the third quarter under the Company’s “at the market” equity offering program and shares issued in connection with the New Senior acquisition.

• The Company continues to expect to receive approximately $1.0 billion in proceeds from asset sales and loan repayments in 2021 principally in senior housing, medical office and loan investments with proceeds used to reduce near-term indebtedness.

• The guidance assumes no material changes in the impact of COVID-19 on our business. The trajectory and future impact of the COVID-19 pandemic, including the impact of the Delta or any other variant, remain highly uncertain and may change rapidly. The extent of the pandemic’s continuing and ultimate effect on our operational and financial performance will depend on a variety of factors, including the speed at which vaccines and other clinical treatments are successfully developed and deployed. Significant changes or impacts of the pandemic are excluded from our guidance.

Other fourth quarter 2021 assumptions are set forth below:

* This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release for additional information and a reconciliation to the most directly comparable GAAP measure.

Investor Presentation

A presentation outlining the Company’s third quarter results and business update is posted to the Events & Presentations section of Ventas’s website at ir.ventasreit.com/events-and-presentations. Additional information regarding the Company can be found in its third quarter 2021 supplemental posted at ir.ventasreit.com. The information contained on, or that may be accessed through, our website is not incorporated by any reference into, and is not part of, this document.

Third Quarter 2021 Results Conference Call

Ventas will hold a conference call to discuss this earnings release on November 5^th at 10:00 a.m. Eastern Time (9:00 a.m. Central Time).

The dial-in number for the conference call is (833) 968-1984 (or +1 (778) 560-2824 for international callers), and the participant passcode is 8199926. A live webcast can be accessed from the Investor Relations section of www.ventasreit.com.

A telephonic replay will be available at (800) 585-8367 (or +1 (416) 621-4642 for international callers), passcode 8199926, after the earnings call and will remain available for 30 days. The webcast replay will be posted in the Investor Relations section of www.ventasreit.com.

About Ventas

Ventas Inc., an S&P 500 company, operates at the intersection of two large and dynamic industries – healthcare and real estate. Fueled by powerful demographic demand from growth in the aging population, Ventas owns a diversified portfolio of over 1,200 properties in the United States, Canada and the United Kingdom. Ventas uses the power of its capital to unlock the value of senior living communities; life science, research & innovation properties; medical office & outpatient facilities, health systems and other healthcare real estate. A globally-recognized real estate investment trust, Ventas follows a successful long-term strategy, proven over more than 20 years, built on diversification of property types, capital sources and industry leading partners, financial strength and flexibility, consistent and reliable growth and industry leading ESG achievements, managed by a collaborative and experienced team dedicated to its stakeholders.

Non-GAAP Financial Measures

This press release includes certain financial performance measures not defined by generally accepted accounting principles in the Unites States (“GAAP”). Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in this press release. We believe such measures provide investors with additional information concerning our operating performance and a basis to compare our performance with the performance of other REITs. Our definitions and calculations of these non-GAAP measures may not be the same as similar measures reported by other REITs.

These non-GAAP financial measures should not be considered as alternatives to net income attributable to common stockholders (determined in accordance with GAAP) as indicators of our financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of our liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs.

Cautionary Statements

Certain of the information contained herein, including intra-quarter operating information and number of confirmed cases of COVID-19, has been provided by our operators and we have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you of its accuracy.

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, among others, statements of expectations, beliefs, future plans and strategies, anticipated results from operations and developments and other matters that are not historical facts. Forward-looking statements include, among other things, statements regarding our and our officers’ intent, belief or expectation as identified by the use of words such as “may,” “will,” “project,” “expect,” “believe,” “intend,” “anticipate,” “seek,” “target,” “forecast,” “plan,” “potential,” “estimate,” “could,” “would,” “should” and other comparable and derivative terms or the negatives thereof.

Forward-looking statements are based on management’s beliefs as well as on a number of assumptions concerning future events. You should not put undue reliance on these forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors that could cause actual events or results to differ materially from those expressed or implied by the forward-looking statements. You are urged to carefully review the disclosures we make concerning risks and uncertainties that may affect our business and future financial performance in our filings with the Securities and Exchange Commission, including those made in the “Risk Factors” section and “Management’s Discussion & Analysis of Financial Condition and Results of Operations” section of our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made.

Certain factors that could affect our future results and our ability to achieve our stated goals include, but are not limited to: (a) the impact of the ongoing COVID-19 pandemic, including of the Delta or any other variant, on our revenue, level of profitability, liquidity and overall risk exposure and the implementation and impact of regulations related to the CARES Act and other stimulus legislation and any future COVID-19 relief measures; (b) our ability to achieve the anticipated benefits and synergies from the acquisition of, and the risk of greater than expected costs or other difficulties related to the integration of, New Senior Investment Group Inc.; (c) our exposure and the exposure of our tenants, borrowers and managers to complex healthcare and other regulation and the challenges and expense associated with complying with such regulation; (d) the potential for significant general and commercial claims, legal actions, regulatory proceedings or enforcement actions that could subject us or our tenants, borrowers or managers to increased operating costs and uninsured liabilities; (e) the impact of market and general economic conditions, including economic and financial market events, or events that affect consumer confidence, our occupancy rates and resident fee revenues, and the actual and perceived state of the real estate markets, labor markets and public capital markets; (f) our ability, and the ability of our tenants, borrowers and managers, to navigate the trends impacting our or their businesses and the industries in which we or they operate; (g) the risk of bankruptcy, insolvency or financial deterioration of our tenants, borrowers, managers and other obligors and our ability to foreclose successfully on the collateral securing our loans and other investments in the event of a borrower default; (h) our ability to identify and consummate future investments in or dispositions of healthcare assets and effectively manage our portfolio opportunities and our investments in co-investment vehicles; (i) our ability to attract and retain talented employees; (j) the limitations and significant requirements imposed upon our business as a result of our status as a REIT and the adverse consequences (including the possible loss of our status as a REIT) that would result if we are not able to comply; (k) the risk of changes in healthcare law or regulation or in tax laws, guidance and interpretations, particularly as applied to REITs, that could adversely affect us or our tenants, borrowers or managers; (l) increases in our borrowing costs as a result of becoming more leveraged or as a result of changes in interest rates and phasing out of LIBOR rates; (m) our reliance on third parties to operate a majority of our assets and our limited control and influence over such operations and results; (n) our dependency on a limited number of tenants and managers for a significant portion of our revenues and operating income; (o) the adequacy of insurance coverage provided by our policies and policies maintained by our tenants, managers or other counterparties; (p) the occurrence of cyber incidents that could disrupt our operations, result in the loss of confidential information or damage our business relationships and reputation; (q) the impact of merger, acquisition and investment activity in the healthcare industry or otherwise affecting our tenants, borrowers or managers; and (r) the risk of catastrophic or extreme weather and other natural events and the physical effects of climate change.