Ventas Reports 2021 Fourth Quarter and Full Year Results

Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today reported results for the fourth quarter and full year ended December 31, 2021.

“We are proud of our company and team in 2021. With a relentless focus on execution, we drove the business forward amid continuing waves of COVID-19 and generated fourth quarter results ahead of our expectations. During the year we positioned Ventas to capture the upside in the multi-year senior housing recovery, delivered strong organic growth in our Office and healthcare triple-net businesses and enhanced the Company’s portfolio and financial strength. We also extended our long track record of value-creating external growth with $3.7 billion in new investments focused on our strategic priorities of senior housing and life science,” said Debra A. Cafaro, Ventas Chairman and CEO.

“As we look into 2022, the senior housing recovery is underway, with accelerating demand, strong rate increases and rapidly improving clinical conditions in our communities. In the first quarter of 2022, we are projecting ten percent revenue growth in our SHOP business supported by record high leads. Further supported by favorable market supply demand fundamentals, we expect sustained improvement in SHOP NOI through 2022.

“Sustained strength in our attractive Medical Office and growing Life Science, Research & Innovation businesses, investment accretion and receipt of HHS Grants also contribute to our positive outlook in the first quarter.

“We remain committed to enhancing value for our shareholders and other stakeholders in 2022 and beyond by capitalizing on organic growth from our high-quality diversified portfolio, robust external growth and our outstanding ESG profile,” Cafaro concluded.

Fourth Quarter 2021 Financial Results:

• Net Income (Loss) Attributable to Common Stockholders (“Attributable Net Income (Loss)”) per share of ($0.10)
• Nareit Funds from Operations (“FFO”)* per share of $0.63
• Normalized FFO* per share of $0.73
• The above earnings measures include $6 million ($0.015 per share) benefit of HHS Grants (defined below), the majority of which were attributable to the Company’s unconsolidated joint venture investments and the balance to the Company’s SHOP portfolio.

*This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release and our fourth quarter 2021 supplemental for additional information and a reconciliation to the most directly comparable GAAP measure.

2021 Company Highlights and Recent Developments:

Senior Housing Highlights and Recent Actions:

Fourth Quarter 2021 SHOP Performance Highlights:

• Total SHOP portfolio NOI achieved the high end of our expectations in the fourth quarter 2021.
• Same-store average occupancy grew by 200 basis points to 83.4% in the fourth quarter 2021 versus fourth quarter 2020.
• Rate and revenue grew for the first time since the start of the pandemic. Same-store revenue increased 3.3% in the fourth quarter 2021 versus the fourth quarter 2020 on higher occupancy and stronger pricing.
• Same-store net operating income (“NOI”)* declined 3.6% (excluding HHS Grants) in the fourth quarter 2021 versus the fourth quarter 2020 driven by elevated labor costs resulting from the pandemic.
• Same-store NOI in the fourth quarter versus the third quarter 2021 was stable, incorporating anticipated elevated labor expenses.

Recent Actions:

The Company has taken a series of actions in its senior housing portfolio with the objective of capturing meaningful upside in the expected cyclical industry recovery. Continuing its strategy of the “right asset, in the right market, with the right operator,” the Company has acted upon nearly two-thirds of its senior housing portfolio via acquisition, disposition, development, lease resolution or operator transition since 2020. Specific actions in 2021 include the following:

• Acquired nearly $2.6 billion of higher margin, independent living communities with favorable market characteristics, relatively low labor requirements and a three-year average length of stay.
• Expanded the Company’s high performing Canadian portfolio through an acquisition of five independent living and one assisted living communities and leased up three recently opened communities in our Class A Le Groupe Maurice portfolio to 92% occupancy.
• Enhanced portfolio quality via disposition of 29 non-core senior housing properties resulting in approximately $400 million gross proceeds to Ventas at an approximate 2.5% cash yield.
• Added six new senior housing operating partner relationships, increasing Ventas’s distinct operator relationships to 37.
• Transitioned 90 senior living communities to seven new experienced operators that will provide strong local market focus and oversight for the communities and take advantage of the expected industry recovery.
• Leveraged deep senior housing operating experience to enhance our performance, management and insights platform enabling the Company to add further value to its operating partners, and leading to greater foresight into industry trends, including recent labor trends witnessed in the industry.
• Drove largest effective rate increases in recent history while at the same time reducing the financial move-out rate – a testament to the quality of our operators and our precision approach to pricing strategy.

*This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release and our fourth quarter 2021 supplemental for additional information and a reconciliation to the most directly comparable GAAP measure.

Office Highlights and Recent Actions:

Fourth Quarter 2021 Office Performance Highlights:

• Medical Office Building (“MOB”) fourth quarter same-store cash NOI* grew 3.4% year-over-year, the second consecutive quarterly same-store growth rate exceeding 3%.
• MOB same-store occupancy increased sequentially in the fourth quarter for the fifth consecutive quarter, with tenant retention of 92% and new leasing up 54% in the fourth quarter 2021 compared to the prior year.
• Life Science, Research & Innovation (“R&I”) fourth quarter 2021 occupancy ended at 94% due to continued strong demand for life science space.
• The previously announced $1 billion Life Science, R&I development pipeline, comprising 1.4 million square feet across five buildings affiliated with University of Pennsylvania, Drexel University, University of Pittsburgh and Arizona State University, which have been recently completed or are currently under construction, are 85% leased or committed.

Recent Actions:

Strong performance in the Office business, which now represents a third of Ventas’s portfolio, has been driven by operational initiatives generating organic growth combined with new investments that enhance the Life Science, R&I and MOB portfolios.

• Since 2020, Ventas has created a centralized leasing center of excellence, built a technical engineering team, expanded our tenant satisfaction programs and established a digital marketing program focused on local market awareness and virtual touring of vacant suites.
• For the second year in a row, Ventas ranked in the top quartile of its peers for tenant satisfaction as measured by Kingsley Associates. Rankings for 2021 increased for each major key performance indicator compared to 2020, including renewal intentions in the top decile when compared to Ventas peers.
• Enhanced portfolio quality via disposition of over 30 non-core MOBs resulting in approximately $440 million gross proceeds to Ventas at an approximate 5% cash yield. These transactions increased occupancy by approximately 250 basis points and Ventas’s on-campus share of MOBs by approximately 325 basis points.
• The Company acquired or announced over $1 billion of Office investments in 2021 focused on high quality Medical Office and Life Science, R&I. The Company also funded and progressed the ground-up Life Science, R&I developments that were already underway.
• Ventas delivered the Assembly, anchored by the world-renowned University of Pittsburgh in collaboration with University of Pittsburgh Medical Center researchers under a long-term lease. The Assembly, which is over 90% leased or committed, is a meticulously rendered life science and innovation center focused on cutting-edge immunotherapy and transplantation research. The iconic campus, containing 350,000 square feet, is expected to achieve an 8% GAAP yield upon stabilization with total project costs of $278 million.

*This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release and our fourth quarter 2021 supplemental for additional information and a reconciliation to the most directly comparable GAAP measure.

External Growth and New Investments:

In 2021, Ventas completed or announced $3.7 billion in strategic investments focused on expanding our portfolio of high-quality senior housing assets, growing its advantaged Life Science, R&I portfolio and selectively expanding its Medical Office footprint. Since 2010, the Company has averaged over $3 billion in new investments annually, including single asset deals, portfolio transactions, public mergers and new development commitments.

In February 2022:

• Ventas closed on the previously announced acquisition of 18 MOBs comprising 732,000 square feet from Ardent Health Services for $204 million. The portfolio is located in Ardent’s existing markets, is over 90% on campus and 100% leased to Ardent with an expected GAAP yield of 5.8%.
• Ventas completed the acquisition of Mangrove Bay, a Class A senior housing community in the highly sought-after Jupiter, Florida market for $107 million at an attractive in-place yield of 5.6%. Favorable local market dynamics, including attractive demographics and limited existing or new competition, underpin Mangrove Bay’s strong occupancy and financial performance.

Ensured Financial Strength and Flexibility:

In 2021, the Company enhanced its portfolio and strengthened its balance sheet through $1.2 billion in asset dispositions and loan repayments. Non-core senior housing and MOB asset sales comprised approximately $850 million of proceeds at a below 4% cap rate and the repayment of several well-structured loans generated $350 million at an average yield exceeding 9%. Proceeds were principally used to pay down $1.1 billion in near-term debt maturities. To manage interest rate risk, the Company raised over $1.1 billion in new bonds in the US and Canada, including a 10-year offering with a coupon of 2.5%, the best 10-year healthcare REIT issuance in 2021. Key financial statistics at year-end include:

• $2.5 billion year-end liquidity
• 36% year-end Total Indebtedness to Gross Asset Value
• Average cost of debt of 3.4% with a total weighted average maturity of over 6 years
• Of the total debt outstanding, 91% is at fixed interest rates, an increase of 4 percentage points versus prior year
• 7.2x Fourth Quarter 2021 Net Debt to Adjusted Pro Forma EBITDA

Corporate Governance, Sustainability and Other Initiatives:

• Refreshed the Ventas Board of Directors with the appointment of Maurice Smith, President and Chief Executive Officer of Health Care Service Corporation, on February 1, 2021. The Ventas Board currently comprises 11 directors, 10 of whom are independent.
• Continued recognition as an Environmental, Social and Governance (“ESG”) industry leader, receiving Nareit’s Leader in the Light Award for the sixth time, recognized in the Bloomberg Gender Equality Index for the third consecutive year, achieving the GRESB Real Estate Sector Leader, and inclusion in the S&P DJSI World and North America indices.
• Accelerated growth in Ventas Investment Management (“VIM”), Ventas’s institutional third-party capital business, in 2021. VIM provides a growth platform for Ventas and leverages its brand, industry knowledge, infrastructure and team. VIM currently has over $4.5 billion in Assets Under Management, including unfunded commitments, development projects underway and gross asset value. The Ventas Life Science & Healthcare Real Estate Fund, a perpetual life vehicle, obtained over $730 million in new capital commitments from third party institutional investors during the year.

Full Year and Fourth Quarter 2021 Enterprise Results

(per share)

*This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release and our fourth quarter 2021 supplemental for additional information and a reconciliation to the most directly comparable GAAP measure.

Fourth 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 and our fourth quarter 2021 supplemental for additional information and a reconciliation to the most directly comparable GAAP measure.

^1. Excluding the effect of the HHS Grants in all periods, Senior Housing Operating Portfolio (“SHOP”) year over year same store cash NOI growth was (3.6%) and sequentially was (0.9%). SHOP Same-Store cash NOI reflects grants received in 4Q21 and 4Q20 under the Provider Relief Fund administered by the Department of Health and Human Services (the “HHS Grants”). The HHS Grants are recorded as a contra expense within SHOP operating expenses. The Quarterly Pools include ~$1.9 million in HHS Grants received in 4Q21 and ~$26.1 million in HHS Grants received in 4Q20. The Sequential Pools include ~$1.9 million in HHS Grants received in 4Q21.

First Quarter 2022 Guidance

The Company currently expects to report first quarter 2022 Net Income (Loss) Attributable to Common Stockholders, Nareit FFO and Normalized FFO per share and same-store Cash NOI growth within the following ranges, which include $33 million (or $0.08 per share) of net HHS Grants received to date in the first quarter 2022:

* This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release and our fourth quarter 2021 supplemental for additional information and a reconciliation to the most directly comparable GAAP measure.

¹ Excluding the effect of the HHS Grants in all periods, the projected growth rate is expected to range from 6-15%. Senior Housing Operating Portfolio (“SHOP”) Same-Store Cash NOI reflects HHS Grants received in 1Q22, to date, and in 1Q21 under the Provider Relief Fund. The HHS Grants are recorded as a contra expense within SHOP operating expenses, net of any applicable fees to SHOP operators. The anticipated 1Q22 Quarterly Pool includes ~$21 million in net HHS Grants received in 1Q22, to date, and ~$8 million in HHS Grants received in 1Q21.

Key assumptions underlying the first quarter 2022 guidance include:

• SHOP NOI Expectations: At the midpoint of the guidance, Ventas expects first quarter 2022 year-over-year same-store SHOP revenue to increase approximately 10% versus first quarter 2021. SHOP NOI is expected to grow in the range of 6% to 15% in the first quarter 2022, excluding net HHS Grants in all periods, with the range principally a function of operating expense assumptions.
  • Clinical Trends: Consistent with broader US trends, COVID-19 resident and staff confirmed cases increased sharply in January and into early February in Ventas’s SHOP communities but have recently declined dramatically.
  • Leading Indicators: Demand for senior housing continues to be robust. Leads have consistently trended at over 100% of pre-pandemic levels for nine consecutive months including January 2022, when leads reached their highest number since the onset of the pandemic.
  • Occupancy: Average occupancy for the first quarter 2022 in the same-store year-over-year SHOP business of 321 assets is expected to increase approximately 410 basis points at the midpoint of the Company’s expectations versus first quarter 2021. SHOP average occupancy for the first quarter 2022 in the same-store sequential SHOP business of 436 assets, is expected to decline by 20 basis points at the midpoint of the Company’s expectations, versus the fourth quarter 2021, outperforming normal seasonal trends and tempered by COVID-19 related impacts.
  • Revenue for the same-store SHOP business is expected to grow 10% at the midpoint of the Company’s expectations in the first quarter 2022 as compared to the first quarter 2021 principally through strong in-place rate increases implemented in the first quarter 2022 and improving re-leasing spreads.
  • Operating Expenses: A tight labor market, and increased staff absences due to COVID-19 protocols, have driven elevated labor and agency costs in the first quarter 2022 to date. At the guidance midpoint, Ventas expects operating costs to remain elevated through the first quarter even as COVID-19 clinical conditions moderate.
  • In the first quarter 2022, to date, the Company has received approximately $33 million of HHS Grants, net of fees to SHOP operators. The Company’s guidance assumes that no additional HHS Grants are received during the quarter.
• The Office business year-over-year same-store cash NOI is expected to increase approximately 4.5% at the midpoint of the Company’s expectations versus first quarter 2021 due to occupancy growth in MOB and strong expense controls.
• The guidance does not assume any new or unannounced material acquisitions or capital markets activities.
• The guidance assumes a fully diluted share count of 403 million shares.
• The guidance assumes no material changes in the impact of COVID-19 on the Company’s business. The trajectory and future impact of the COVID-19 pandemic, including the impact of any variant, on various aspects of our business, 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 clinical conditions improve, regulatory restrictions are loosened, and behavioral changes occur. Our guidance assumes continued improvement in these factors.

Investor Presentation

A presentation outlining the Company’s fourth 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 fourth 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.

Fourth Quarter and Full Year 2021 Results Conference Call and Investor Presentation

Ventas will hold a conference call to discuss this earnings release on Friday, February 18, 2022 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 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. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made. 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 “Summary Risk Factors” section, “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.

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 its extended consequences, including of the Delta, Omicron 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, 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, 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, insolvency or financial deterioration of our tenants, managers, borrowers 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 risk of investments in co-investment vehicles, joint ventures and minority interests; (k) risks related to development, redevelopment and construction projects; (l) 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; (m) 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; (n) 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; (o) our reliance on third parties to operate a majority of our assets and our limited control and influence over such operations and results; (p) our dependency on a limited number of tenants and managers for a significant portion of our revenues and operating income; (q) the adequacy of insurance coverage provided by our policies and policies maintained by our tenants, managers or other counterparties; (r) the occurrence of cyber incidents that could disrupt our operations, result in the loss of confidential information or damage our business relationships and reputation; (s) the impact of merger, acquisition and investment activity in the healthcare industry or otherwise affecting our tenants, managers or borrowers; and (t) the risk of catastrophic or extreme weather and other natural events and the physical effects of climate change.