How dependent is Ventas on Kindred Healthcare?

Very heavily. Kindred accounted for approximately 98.8% of rental revenues in 2001 and leases all of the company's hospitals and 210 nursing facilities under master leases. Kindred's ability to pay rent determines the company's revenues and its capacity to pay distributions and service debt.

Why does the company hold Kindred common stock, and what risks does that create?

The company holds 1,080,314 shares of Kindred common stock received under Kindred's reorganization plan, and it intends to use these shares to satisfy certain financial obligations. A significant decline in Kindred's stock value or limits on selling the shares could impair the company's ability to reduce debt. Holding too much Kindred stock could also violate the REIT 10% securities test or 5% asset test, which could cost REIT status.

What is the company's debt position after the CMBS transaction?

Notes payable and other debt totaled $848.4 million at December 31, 2001. The $225 million CMBS Loan, bearing interest at LIBOR plus 1.4589% on a weighted average basis, matures December 9, 2006. The filing describes the company as significantly leveraged.

What is the status of the United States Settlement obligation?

The company agreed to pay $103.6 million to the United States, of which $34.0 million was paid at the Kindred Effective Date. The balance of $69.6 million bears interest at 6% and is payable in quarterly installments through 2006. The company will be required to pay $16.2 million in principal and interest in 2002.

What dividend is the company expected to pay for 2002?

Management expects total 2002 dividends of $0.95 per share, consistent with distributing at least 90% of taxable income. The filing notes dividends are expected to be paid quarterly in cash, but the company reserves the right to pay in a combination of cash and other property, including Kindred stock, and there is no assurance the policy will be maintained.

VTR 10-K FY2001 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 26, 2002. Cited figures are marked; the original filing is the authoritative source.

Ventas, Inc. (VTR) is a Delaware corporation that elected REIT status for 1999 and owns 44 hospitals, 216 nursing facilities and eight personal care facilities in 36 states as of December 31, 2001.

Substantially all of its rental revenue comes from Kindred Healthcare, Inc., which leases all hospitals and 210 nursing facilities under five master leases; Kindred accounted for approximately 98.8% of 2001 rental revenues. Kindred emerged from Chapter 11 on April 20, 2001, and the company's current strategy is to reduce indebtedness and its average all-in borrowing cost and to pursue a measured diversification program to reduce dependence on Kindred. Financially, 2001 rental income was $185.2 million^a versus $232.8 million in 2000, and net income was $50.6 million ($0.73 per diluted share), including a $15.4 million gain on sale of Kindred common stock.

Funds from operations (FFO) was $93.5 million^b, or $78.1 million excluding the Kindred gain. The company completed a $225 million CMBS financing in December 2001, using $212.8 million of proceeds to pay down the Credit Agreement, and held 1,080,314 shares of Kindred common stock. Stockholders' equity was a deficit of $(91.1) million at year-end 2001.

Key risks flagged in the filing include the company's dependence on Kindred's rent payments, a significant leverage position, the REIT qualification risk tied to its Kindred stock holdings (10% securities test and 5% asset test), a $54.7 million^c remaining obligation under the United States Settlement, pending litigation including the Atria bond dispute and Black Diamond counterclaims, and a 1998 interest rate swap that may require collateral postings. Management expects 2002 dividends of $0.95 per share.

02—Key points

Key Highlights

Portfolio: 44 hospitals, 216 nursing facilities and eight personal care facilities in 36 states as of December 31, 2001; Kindred leases all hospitals and 210 nursing facilities.
Concentration: Kindred accounted for approximately 98.8% of 2001 rental revenues.
2001 rental income of $185.2 million, down from $232.8 million in 2000; net income of $50.6 million, or $0.73 per diluted share.
Funds from operations of $93.5 million for 2001, or $78.1 million excluding the $15.4 million gain on sale of Kindred common stock.
December 2001 CMBS Transaction raised $225 million; $212.8 million was used to pay down the Credit Agreement.
Stockholders' equity deficit of $(91.1) million at December 31, 2001; total debt of $848.4 million in notes payable and other debt.
Management expects 2002 dividends of $0.95 per share, while noting it may pay in a combination of cash and Kindred common stock.

03—Questions

Frequently Asked Questions

How dependent is Ventas on Kindred Healthcare?
Very heavily. Kindred accounted for approximately 98.8% of rental revenues in 2001 and leases all of the company's hospitals and 210 nursing facilities under master leases. Kindred's ability to pay rent determines the company's revenues and its capacity to pay distributions and service debt.
Why does the company hold Kindred common stock, and what risks does that create?
The company holds 1,080,314 shares of Kindred common stock received under Kindred's reorganization plan, and it intends to use these shares to satisfy certain financial obligations. A significant decline in Kindred's stock value or limits on selling the shares could impair the company's ability to reduce debt. Holding too much Kindred stock could also violate the REIT 10% securities test or 5% asset test, which could cost REIT status.
What is the company's debt position after the CMBS transaction?
Notes payable and other debt totaled $848.4 million at December 31, 2001. The $225 million CMBS Loan, bearing interest at LIBOR plus 1.4589% on a weighted average basis, matures December 9, 2006. The filing describes the company as significantly leveraged.
What is the status of the United States Settlement obligation?
The company agreed to pay $103.6 million to the United States, of which $34.0 million was paid at the Kindred Effective Date. The balance of $69.6 million bears interest at 6% and is payable in quarterly installments through 2006. The company will be required to pay $16.2 million in principal and interest in 2002.
What dividend is the company expected to pay for 2002?
Management expects total 2002 dividends of $0.95 per share, consistent with distributing at least 90% of taxable income. The filing notes dividends are expected to be paid quarterly in cash, but the company reserves the right to pay in a combination of cash and other property, including Kindred stock, and there is no assurance the policy will be maintained.

04—Continue

← View all 10-K filings