Ventas, Inc.Lori B. Wittman, (877) 4-VENTAS
Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) said today that normalized Funds From Operations (“FFO”) for the quarter ended June 30, 2013 increased seven percent to $298.4 million, from $277.8 million for the comparable 2012 period. Normalized FFO per diluted common share was $1.01 for the quarter ended June 30, 2013, a six percent increase from $0.95 for the comparable 2012 period. Weighted average diluted shares outstanding for the quarter rose by one percent to 295.1 million, compared to 292.6 million in the second quarter of 2012.
“We are pleased to deliver another quarter of excellent results and consistent, superior performance,” Ventas Chairman and Chief Executive Officer Debra A. Cafaro said. “With market-leading growth from our high-quality seniors housing operating portfolio, our total same-store cash flow growth was three percent, we successfully renewed or transitioned all 89 healthcare assets whose leases expired during the quarter, and we began to deploy the attractive capital we sourced earlier in the year in accretive investments,” she added. “We are increasing our full-year outlook, reflecting the strength of our business model and execution.”
The growth in second quarter 2013 normalized FFO per diluted common share compared to the second quarter of 2012 is due primarily to the Company's $2.7 billion of investments in 2012; net operating income increases in its high-quality private pay seniors housing communities managed by Atria Senior Living, Inc. (“Atria”) and Sunrise Senior Living, LLC (“Sunrise”), its triple-net lease portfolio and its medical office building (“MOB”) segment; and lower weighted average interest rates. These benefits were partially offset by higher debt balances; increases in net cash balances during the quarter resulting from capital raises, asset sales and receipt of loan repayments; and an increase in weighted average diluted shares outstanding.
Normalized FFO for the quarter ended June 30, 2013 excludes the net benefit (totaling $6.1 million, or $0.02 per diluted share) from an income tax benefit and net gains on debt extinguishment, offset by merger-related expenses and deal costs (including integration costs) and amortization of other intangibles. Normalized FFO for the quarter ended June 30, 2012 excluded the net expense (totaling $41.8 million, or $0.14 per diluted share) from merger-related expenses and deal costs (including integration costs), loss on extinguishment of debt, and amortization of other intangibles, offset by an income tax benefit.
Normalized FFO for the six months ended June 30, 2013 increased 11 percent to $599.9 million, from $541.7 million for the comparable 2012 period. Normalized FFO per diluted common share was $2.04 for the six months ended June 30, 2013, a ten percent increase from $1.86 for the comparable 2012 period. Normalized FFO for the six months ended June 30, 2013 excludes the net expense (totaling $0.2 million, or $0.00 per diluted share) from merger-related expenses and deal costs (including integration costs) and amortization of other intangibles, offset by an income tax benefit and gains on debt extinguishment. Normalized FFO for the six months ended June 30, 2012 excluded the net expense (totaling $90.9 million, or $0.31 per diluted share) from merger-related expenses and deal costs (including integration costs), loss on extinguishment of debt, non-cash income tax expense and amortization of other intangibles.
Net income attributable to common stockholders for the quarter ended June 30, 2013 was $114.6 million, or $0.39 per diluted common share, including discontinued operations of $(18.1) million. Net income attributable to common stockholders for the quarter ended June 30, 2012 was $74.0 million, or $0.25 per diluted common share, including discontinued operations of $31.3 million. This $40.6 million increase in net income attributable to common stockholders in the second quarter of 2013 over the prior year comparable period is primarily the result of the increases described above for normalized FFO, changes in losses on extinguishment of debt, decreases in merger-related expenses and deal costs (including integration costs) and income tax benefit increases, partially offset by year-over-year changes in discontinued operations.
Net income attributable to common stockholders for the six months ended June 30, 2013 was $226.8 million, or $0.77 per diluted common share, including discontinued operations of $(23.9) million. Net income attributable to common stockholders for the six months ended June 30, 2012 was $164.7 million, or $0.56 per diluted common share, including discontinued operations of $74.6 million. This $62.1 million increase in net income attributable to common stockholders for the six months ended June 30, 2013 over the prior year six-month period is primarily the result of the increases described above for normalized FFO, changes in losses on extinguishment of debt, decreases in merger-related expenses and deal costs (including integration costs) and income tax benefit increases, partially offset by year-over-year changes in discontinued operations and additional depreciation and amortization.
FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), for the quarter ended June 30, 2013 increased 29 percent to $304.4 million, from $236.0 million in the comparable 2012 period. NAREIT FFO per diluted common share for the quarter ended June 30, 2013 increased 27 percent to $1.03, from $0.81 in the second quarter of 2012.
NAREIT FFO for the six months ended June 30, 2013 increased 33 percent to $599.7 million, from $450.8 million in the comparable 2012 period. NAREIT FFO per diluted common share for the six months ended June 30, 2013 increased 32 percent to $2.04, from $1.55 in the six months ended June 30, 2012.
At June 30, 2013, the Company's seniors housing operating portfolio included 227 communities, seven of which were acquired in the second quarter of 2013: 132 seniors housing communities managed by Atria and 95 seniors housing communities managed by Sunrise. Second quarter 2013 Net Operating Income (“NOI”) after management fees for this portfolio totaled $110.1 million.
For the 196 private pay seniors housing communities owned by the Company for the full second quarters of 2013 and 2012 (“same-store”), average unit occupancy rose 160 basis points to 90.8 percent, NOI after management fees grew 6.9 percent and REVPOR (revenue per occupied room) grew 3.7 percent in the second quarter of 2013 compared to the second quarter of 2012.
Ventas currently expects its 2013 normalized FFO per diluted share to range between $4.06 and $4.10, improving its previously announced 2013 guidance of between $3.99 and $4.07 per diluted share. The Company has included the impact of approximately $400 million of additional acquisitions in its updated guidance. For the full year, Ventas expects average fully diluted shares outstanding to be approximately 295 million.
The Company continues to expect that 2013 NOI from the Atria- and Sunrise-managed seniors housing communities that were included in its original full-year NOI guidance will be $430 million to $440 million. If achieved, this would represent five to eight percent same-store NOI growth.
Excluding non-cash items from normalized FFO (projected to be $0.12 per diluted share), computed consistent with prior periods, the midpoint of the Company's improved guidance range constitutes approximately ten percent per share growth in 2013. A reconciliation of the Company's guidance, and the non-cash items, to the Company's projected GAAP earnings is included elsewhere in this press release.
The Company's normalized FFO guidance (and related GAAP earnings projections) for all periods assumes, with certain immaterial exceptions, that all of the Company's tenants and borrowers continue to meet all of their obligations to the Company. In addition, the Company's normalized FFO guidance excludes, other than as specifically stated, (a) net gains on the sales of real property assets, including gain on re-measurement of equity method investments, (b) merger-related costs and expenses, including amortization of intangibles and transition and integration expenses, and deal costs and expenses, (c) 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, (d) 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, and (e) the impact of future unannounced acquisitions or divestitures (including pursuant to tenant options to purchase) and capital transactions.
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 assurances that the Company will achieve these results. The Company may from time to time update its publicly announced guidance, but it is not obligated to do so.
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 (857) 244-7319. The participant passcode is “Ventas.” The conference call is being webcast live by Thomson Reuters and can be accessed at the Company’s website at or at . A replay of the webcast will be available today online, or by calling (617) 801-6888, passcode 58823878, beginning at approximately 12:00 p.m. Eastern Time and will be archived for 28 days.
Ventas, Inc., an S&P 500 company, is a leading real estate investment trust. Its diverse portfolio of more than 1,400 assets in 47 states (including the District of Columbia) and two Canadian provinces consists of seniors housing communities, skilled nursing facilities, hospitals, medical office buildings and other properties. 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 and .
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 and normalized FFO appropriate measures of operating performance of an equity REIT. Moreover, the Company believes that normalized FFO provides useful information 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 such as transactions and litigation.
The Company uses the NAREIT definition of FFO. NAREIT defines FFO as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of real estate property, including gain 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) net gains on the sales of real property assets, including gain on re-measurement of equity method investments; (b) merger-related costs and expenses, including amortization of intangibles and transition and integration expenses, and deal costs and expenses, including expenses and recoveries relating to acquisition lawsuits; (c) 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; (d) 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; (e) except as specifically stated in the case of guidance, the impact of future acquisitions or divestitures (including pursuant to tenant options to purchase) and capital transactions; (f) the financial impact of contingent consideration; (g) charitable donations made to the Ventas Charitable Foundation; and (h) gains and losses for non-operational foreign currency hedge agreements and changes in the fair value of financial instruments.
FFO and normalized FFO presented herein may not be identical to FFO and normalized FFO presented by other real estate companies due to the fact that not all real estate companies use the same definitions. FFO and normalized FFO should not be considered as alternatives to net income (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 FFO and normalized 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 and normalized FFO should be examined in conjunction with net income as presented elsewhere herein.
The following information considers the pro forma effect on net income, interest and depreciation of the Company’s investments and other capital transactions that were completed during the three months ended June 30, 2013, 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, merger-related expenses and deal costs, net gains on real estate activity and changes in the fair value of financial instruments (including amounts in discontinued operations) (“Adjusted Pro Forma EBITDA”) (dollars in thousands):