CHICAGO–(BUSINESS WIRE)–Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today reported results for the fourth quarter and full year ended December 31, 2022.
CEO Remarks
“We are pleased to have delivered a strong fourth quarter, which reflects the attractive operating and financial results of our diverse portfolio and the benefits of our key strategic initiatives. Accelerating SHOP top- and bottom-line growth fueled outstanding total Company performance in the fourth quarter. In 2022, we began a multiyear growth and recovery cycle in our SHOP portfolio supported by improving supply demand fundamentals, actions we have taken in the portfolio and our post-pandemic rebound,” said Debra A. Cafaro, Ventas Chairman and CEO.
“We enter 2023 with strong momentum. The proactive steps we have taken position us to capitalize on the exciting demographically led demand across our diversified portfolio of assets that cater to the needs of a large and growing aging population. Coupled with our experienced team’s insights and execution capabilities, we believe the Company is poised to drive unprecedented organic property growth.
“We are committed to reigniting a new cycle of Ventas success by delivering differentiated performance and value creation for our shareholders,” Cafaro concluded.
Fourth Quarter 2022 Highlights
Net Loss Attributable to Common Stockholders (“Attributable Net Loss”) per share of ($0.11) with total Company year-over-year NOI growth of 7.5%
Normalized Funds from Operations* (“Normalized FFO”) per share of $0.73
Total Company year-over-year same-store cash Net Operating Income* (“NOI”) growth of 8.5%
On a same-store cash NOI* basis, SHOP grew 19.1% year-over-year driven by margin expansion and same-store revenue growth of approximately 8%
*Some of the financial measures throughout this press release are non-GAAP measures. 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.
Fourth Quarter 2022 Enterprise Results
For the Fourth Quarter 2022, reported per share results were:
Quarter Ended December 31,
2022
2021
$ Change
% Change
Attributable Net Loss
($0.11)
($0.10)
($0.01)
(10.0%)
Nareit FFO*
$0.65
$0.63
$0.02
3.2%
Normalized FFO*†
$0.73
$0.73
$—
—%
* Some of the financial measures throughout this press release are non-GAAP measures. 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.
† The fourth quarter of 2021 included a $13 million ($0.03 per share) benefit of a Kindred M&A fee and a $6 million ($0.02 per share) benefit from HHS grants received. The fourth quarter of 2022 included a $9 million ($0.02 per share) benefit of promote revenue within the Company’s third-party institutional capital management business.
Other Fourth Quarter Developments
Ventas Investment Management (“VIM”) Promote Revenue: The Company earned its first promote revenue as general partner of the Ventas Life Science & Healthcare Real Estate Fund (the “Fund”) within its third-party institutional capital management business, Ventas Investment Management, or VIM. The promote revenue approximated $0.02 per share in the fourth quarter, demonstrating the significant value creation of the VIM platform for Fund investors and Ventas’s shareholders. The Company included $0.01 per share of promote revenue in its fourth quarter 2022 guidance.
Atria/Glennis Transaction: During the fourth quarter, Atria Senior Living, Inc. (“Atria”) combined its proprietary cloud-based senior housing management software platform, Glennis, with two other complementary companies in the Software as a Service (SaaS) technology space. The merger transaction was executed under the sponsorship and majority ownership of an experienced private equity technology investor. Ventas owns a 34% stake in Atria and recognized a $26 million gain on sale in the fourth quarter, which is included in Attributable Net Loss and Nareit FFO and excluded from Normalized FFO in the fourth quarter and full year 2022. Ventas now owns nearly 10% of the new combined SaaS company.
Allowance on Loans Receivable: As of December 31, 2022, the Company recognized a $20 million non-cash allowance on our cash pay $486 million mezzanine loan (the “Santerre Mezz Loan”) investment to Santerre Health Investors. The allowance, calculated using the CECL (current expected credit loss) model, reflects estimated credit losses that could arise in the future, determined as of December 31, 2022, based on estimates and assumptions that are inherently uncertain and may not reflect the ultimate loss realized, if any. The allowance is excluded from Normalized FFO in the fourth quarter and full year 2022 and included in Attributable Net Loss and Nareit FFO.
Full Year 2022 Enterprise Results
For the full year 2022, reported per share results were:
Year Ended December 31,
2022
2021
$ Change
% Change
Attributable Net (Loss) Income
($0.12)
$0.13
($0.25)
(192.3%)
Nareit FFO*
$2.82
$2.65
$0.17
6.4%
Normalized FFO*
$2.99
$2.90
$0.09
3.1%
* Some of the financial measures throughout this press release are non-GAAP measures. 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.
2022 Full Year and Recent Highlights
2022 Investment Activity
Consistent with its strategic capital allocation priorities, Ventas closed or committed $1.2 billion in total investments in 2022:
Notably, Ventas continued expanding its life science, R&I footprint, as evidenced by $0.7 billion in closed or committed projects in 2022. The 643k square foot, $425 million Atrium Health/Wake Forest University School of Medicine development in Charlotte announced in 2022 exemplifies Ventas’s ability to leverage strong relationships with leaders in research, medicine and higher education to execute on high-quality, large-scale transactions.
The Company continued to grow its well positioned senior housing portfolio by closing on approximately $0.2 billion in investments including the acquisition in Mangrove Bay, a Class A community with strong occupancy located in the highly sought-after Jupiter, Florida market. Ventas also continued its successful track record of development with its partner Le Groupe Maurice and broke ground on a new 362-unit senior housing development project in the attractive Montreal, Quebec market.
Additionally, Ventas selectively expanded its Medical Office Building business with $0.3 billion in completed acquisitions, highlighted by the 18-property, 732k square foot MOB portfolio 100% leased to Ardent Health Services for a twelve-year term.
Financial Strength and Flexibility
In June 2022, Ventas opportunistically extended the Company’s debt duration and committed capital at more attractive pricing by refinancing its existing $200 million term loan maturing in 2023 with a new $500 million term loan facility that matures in 2027. In 2022, three credit rating agencies took positive actions regarding Ventas’s credit, attributing their actions to the sustained SHOP recovery that is underway, the durable cashflows from our diversified portfolio, and Ventas’s commitment to maintaining a strong financial position.
Key financial statistics at year-end 2022 include:
$2.4 billion of available liquidity from net revolver capacity and available cash and cash equivalents
Limited near-term maturing debt, with only 4% of total consolidated debt (under $500 million) maturing in 2023
Corporate Governance and ESG Leadership
Ventas has a long history as an industry leader in environmental, social and governance initiatives and continues to pursue ambitious goals to drive meaningful change. Highlights include:
Continued a robust and rigorous multi-year Board refreshment program, including the appointments of Michael Embler and Sumit Roy to the Board in 2022, and the appointment of Melody Barnes as Chair of the Nominating, Governance and Corporate Responsibility Committee.
Committed to achieve net-zero operational carbon emissions by 2040, exceeding the Company’s existing Science-Based Target initiative (SBTi)-validated goal to decrease absolute carbon emissions by 30% by 2030.
Earned notable recognition as an ESG industry leader, including:
Receiving Nareit Leader in the Light Award for the sixth consecutive year and seventh time overall
Being named the 2022 GRESB Global Listed Sector Leader for Healthcare and earning a 4 Star Rating for the tenth consecutive year
Scoring in the 98th percentile of real estate companies in the 2022 S&P Global Corporate Sustainability Assessment (CSA) and being included in the World and North America Dow Jones Sustainability Indices (DJSI)
Being named to the Bloomberg Gender Equality Index for the fourth consecutive year
Being recognized as an ENERGY STAR® Partner of the Year for the second consecutive year
Achieving LEED Gold Certification for our Medical Park Tower redevelopment in Austin, Texas and our historic renovation of The Assembly in Pittsburgh, Pennsylvania
Leadership Update
In January 2023, J. Justin Hutchens was appointed to the additional role of Chief Investment Officer. In his expanded role, Hutchens is responsible for Ventas’s capital allocation strategy and execution across the enterprise in addition to his responsibility for the Company’s Senior Housing portfolio. By combining the CIO and EVP, Senior Housing roles, Ventas is streamlining the executive management structure and enhancing the connection between investment activity and business operations.
Full Year 2023 Guidance
Consistent with the Company’s pre-pandemic practice, the Company is reintroducing full year guidance for 2023. The Company’s 2023 guidance contains forward-looking statements and is based on a number of assumptions; actual results may differ materially. Ventas expects to report 2023 per share attributable net income to common stockholders, Nareit FFO and Normalized FFO within the following ranges:
FY 2023 Guidance
Per Share
Low
High
Attributable Net Income
$0.20
–
$0.34
Nareit FFO*
$2.97
–
$3.11
Normalized FFO*
$2.90
–
$3.04
* Some of the financial measures throughout this press release are non-GAAP measures. 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.
2023 Guidance Commentary
The Company’s full year guidance for 2023 Attributable Net Income per share of $0.27 per share at the midpoint of the range compares to 2022 Attributable Net Loss per share of ($0.12). This increase of $0.39 per share projected at the midpoint of the guidance range assumes: a benefit of lower projected 2023 non-cash impairments and allowances of $0.26 per share and lower projected 2023 transaction expenses and natural disaster expenses of $0.13 per share.
The Company’s full year guidance for 2023 Normalized FFO per share of $2.97 per share at the midpoint of the range compares to 2022 Normalized FFO per share of $2.99, which includes $0.15 per share of HHS grants and promote revenue in FY 2022. Excluding these two items in FY 2022, the year-over-year increase of $0.13 per share at the midpoint of the 2023 guidance range assumes: (1) the 2023 benefit of $0.29 per share of organic growth in NOI from the SHOP business partially offset by (2) the impact of higher interest rates and foreign exchange approximating ($0.16) per share principally on the Company’s consolidated variable rate debt and approximately $500 million in 2023 maturing debt expected to be refinanced during the year.
The Company’s guidance is based on the assumptions described above as well as other assumptions that are subject to change, many of which are outside the control of the Company. The guidance assumes 404 million weighted average fully-diluted shares, receipt of over $300 million in capital recycling proceeds, no additional promote revenue and no material changes in the impact of COVID-19 on the Company’s business. If actual results vary from these and other assumptions, the Company’s expectations may change. There can be no assurance that the Company will achieve these results. Information regarding potential risks that could cause actual results to differ is set forth below and in our filings with the SEC.
Investor Presentation
A fourth quarter earnings presentation 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 fourth quarter 2022 supplemental posted at ir.ventasreit.com. The information contained on, or that may be accessed through, our website, including the information contained in the aforementioned presentation and supplemental, is not incorporated by reference into, and is not part of, this document.
Fourth Quarter and Full Year 2022 Results Conference Call
Ventas will hold a conference call to discuss this earnings release on Friday, February 10, 2023 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time).
The dial-in number for the conference call is (888) 330-3576 (or +1 (646) 960-0672 for international callers), and the participant passcode is 7655497. A live webcast can be accessed from the Investor Relations section of www.ventasreit.com.
A telephonic replay will be available at (800) 770-2030 (or +1 (647) 362-9199 for international callers), passcode 7655497, 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, hospitals 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 United 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, as alternatives to cash flow from operating activities (determined in accordance with GAAP), or 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 “assume”, “may,” “will,” “project,” “expect,” “believe,” “intend,” “anticipate,” “seek,” “target,” “forecast,” “plan,” “potential,” “opportunity,” “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. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made. We urge you to carefully review the disclosures we make concerning risks and uncertainties that may affect our business and future financial performance, including those made below and in our filings with the Securities and Exchange Commission, such as in the sections titled “Cautionary Statements — Summary Risk Factors,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.
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 and other viruses and infections, such as flu and respiratory syncytial virus, and their extended consequences, including of any variants, 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, and effectively integrate, our acquisitions and investments, including our acquisition of New Senior Investment Group Inc.; (c) our exposure and the exposure of our tenants, managers and borrowers 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, managers or borrowers to increased operating costs and uninsured liabilities; (e) the impact of market and general economic conditions, including economic and financial market events, inflation, changes in interest rates and exchange rates, supply chain pressures, 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, managers and borrowers, to navigate the trends impacting our or their businesses and the industries in which we or they operate; (g) the risk of bankruptcy, inability to obtain benefits from governmental programs, insolvency or financial deterioration of our tenants, managers, borrowers and other obligors which may, among other things, have an adverse impact on our financial results and financial condition; (h) the risk that we may be unable to foreclose successfully on the collateral securing our loans and other investments in the event of a borrower default and, if we are able to foreclose or otherwise acquire assets in lieu of foreclosure, the risk that we will be required to incur additional expense or indebtedness in connection therewith; (i) the recognition of reserves, allowances, credit losses or impairment charges are inherently uncertain, may increase or decrease in the future and may not represent or reflect the ultimate value of, or loss that we ultimately realize with respect to, the relevant assets, which could have an adverse impact on our results of operations and financial condition (j) the non-renewal of any leases or management agreement or defaults by tenants or managers thereunder and the risk of our inability to replace those tenants or managers on favorable terms, if at all; (k) 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, joint ventures and minority interests, including our ability to dispose of such assets on favorable terms as a result of rights of first offer or rights of first refusal in favor of third parties; (l) risks related to development, redevelopment and construction projects, including costs associated with inflation, rising interest rates, labor conditions and supply chain pressures; (m) our ability to attract and retain talented employees; (n) 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; (o) 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, managers or borrowers; (p) increases in our borrowing costs as a result of becoming more leveraged, including in connection with acquisitions or other investment activity, rising interest rates and the phasing out of LIBOR rates; (q) our reliance on third parties to operate a majority of our assets and our limited control and influence over such operations and results; (r) our dependency on a limited number of tenants and managers for a significant portion of our revenues and operating income; (s) the adequacy and pricing of insurance coverage provided by our policies and policies maintained by our tenants, managers or other counterparties; (t) the occurrence of cyber incidents that could disrupt our operations, result in the loss of confidential information or damage our business relationships and reputation; (u) the impact of merger, acquisition and investment activity in the healthcare industry or otherwise affecting our tenants, managers or borrowers; (v) disruptions to the management and operations of our business and the uncertainties caused by activist investors; and (w) the risk of catastrophic or extreme weather and other natural events and the physical effects of climate change.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts; dollars in USD; unaudited)
As of December 31,
2022
2021
Assets
Real estate investments:
Land and improvements
$
2,437,905
$
2,432,065
Buildings and improvements
26,020,048
25,778,490
Construction in progress
310,456
269,315
Acquired lease intangibles
1,346,190
1,369,747
Operating lease assets
310,307
317,858
30,424,906
30,167,475
Accumulated depreciation and amortization
(9,264,456
)
(8,350,637
)
Net real estate property
21,160,450
21,816,838
Secured loans receivable and investments, net
537,075
530,126
Investments in unconsolidated real estate entities
579,949
523,465
Net real estate investments
22,277,474
22,870,429
Cash and cash equivalents
122,564
149,725
Escrow deposits and restricted cash
48,181
46,872
Goodwill
1,044,415
1,046,140
Assets held for sale
44,893
28,399
Deferred income tax assets
10,490
11,152
Other assets
609,823
565,069
Total assets
$
24,157,840
$
24,717,786
Liabilities and equity
Liabilities:
Senior notes payable and other debt
$
12,296,780
$
12,027,544
Accrued interest
110,542
106,602
Operating lease liabilities
190,440
197,234
Accounts payable and other liabilities
1,031,689
1,090,254
Liabilities related to assets held for sale
6,492
10,850
Deferred income tax liabilities
35,570
59,259
Total liabilities
13,671,513
13,491,743
Redeemable OP unitholder and noncontrolling interests
264,650
280,283
Commitments and contingencies
Equity:
Ventas stockholders’ equity:
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued
—
—
Common stock, $0.25 par value; 600,000 shares authorized, 399,707 and 399,420 shares issued at December 31, 2022 and 2021, respectively
99,912
99,838
Capital in excess of par value
15,539,777
15,498,956
Accumulated other comprehensive loss
(36,800
)
(64,520
)
Retained earnings (deficit)
(5,449,385
)
(4,679,889
)
Treasury stock, 10 and 0 shares issued at December 31, 2022 and 2021, respectively
(536
)
—
Total Ventas stockholders’ equity
10,152,968
10,854,385
Noncontrolling interests
68,709
91,375
Total equity
10,221,677
10,945,760
Total liabilities and equity
$
24,157,840
$
24,717,786
Contacts
BJ Grant
(877) 4-VENTAS