01—Abstract
Summary
Summary of the 10-K filed February 27, 2009. Cited figures are marked; the original filing is the authoritative source.
Ventas, Inc. (NYSE: VTR) is a REIT with a portfolio of 513 seniors housing and healthcare assets across 43 states and two Canadian provinces as of December 31, 2008.
Triple-net leases to Kindred and Brookdale Senior Living remain its largest revenue sources, while 79 seniors housing communities are managed by Sunrise Senior Living under long-term agreements. Total revenues rose to $929.8 milliona in 2008 from $752.7 million in 2007, and net income applicable to common shares was $226.3 million, down from $277.1 million, largely because 2007 included $129.5 million of gains on sales of real estate. Dividends declared were $2.05 per share for 2008, and the Board declared a first-quarter 2009 dividend of $0.5125 per share.
The company reports that it has a 'strong balance sheet and liquidity' as its primary focus. At year-end 2008 it held $176.8 millionb of unrestricted cash, had $546.0 million of unused credit availability under its unsecured revolving credit facilities, and total indebtedness of approximately $3.1 billion, of which 17.4% was variable rate. Its unsecured revolving credit facilities, now totaling $850.0 million, mature in April 2010.
Credit ratings were BBB- (S&P), BBB- (Fitch), and Ba1 (Moody's) on senior unsecured debt. Key risks flagged in the filing include dependence on Kindred and Brookdale for a large share of revenue and NOI, the financial health of Sunrise, a weakening economy, lender concentration (Lehman has defaulted on a $20 millionc commitment), a pending HCP litigation with trial scheduled for August 2009, and deteriorating loans such as the Sunwest Loans, on which a $6.0 million provision was recorded.
02—Key points
Key Highlights
- Total revenues rose 23.5% to $929.8 million in 2008, driven by resident fees and services from the Sunrise-managed portfolio, which grew to $429.3 million from $282.2 million.
- Net income applicable to common shares fell to $226.3 million ($1.62 per diluted share) from $277.1 million in 2007, which included a $129.5 million gain on sale of real estate assets.
- Portfolio of 513 assets at December 31, 2008: 248 seniors housing communities, 192 skilled nursing facilities, 41 hospitals, and 32 medical office buildings and other properties.
- Liquidity: $176.8 million of unrestricted cash and $546.0 million of unused revolver capacity at year-end; the company raised $408.5 million net from common stock offerings in 2008.
- Debt profile: approximately $3.1 billion of indebtedness, 82.6% fixed rate, with a weighted average interest rate of 5.8%; $118.1 million of 2009 maturities are planned.
- Concentration: Kindred accounted for 25.5% of total revenues and Brookdale Senior Living for 12.8% in 2008; Sunrise-managed properties accounted for 45.4% of total revenues.
- Dividends declared were $2.05 per share for 2008, and the first-quarter 2009 dividend of $0.5125 per share was declared on February 11, 2009.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 27, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $919.14M$746.70M | +23.1% |
| Operating Expenses | $781.62M$636.34M | +22.8% |
| Interest Expense | $202.62M$196.66M | +3.0% |
| Net Income | $225.29M$280.58M | −19.7% |
| EPS (Basic) | $1.59$2.23 | −28.7% |
| EPS (Diluted) | $1.59$2.22 | −28.4% |
| Shares Outstanding (Basic) | 139.57M122.60M | +13.8% |
| Shares Outstanding (Diluted) | 139.91M123.01M | +13.7% |
05—Questions
Frequently Asked Questions
How much of Ventas's revenue depends on Kindred and Brookdale Senior Living?
In 2008, Kindred accounted for $241.2 million, or 25.5%, of total revenues and 38.0% of total NOI including discontinued operations. Brookdale Senior Living accounted for $121.5 million, or 12.8%, of total revenues and 19.2% of NOI. The filing states that inability or unwillingness by either tenant to meet its obligations could have a material adverse effect on the company.
What happens if Kindred does not renew its leases?
Kindred has renewed leases through April 30, 2013 for the 57 assets whose initial base term expired April 30, 2008. Ten bundles covering 109 properties, representing $123.9 million of annual Base Rent, expire April 30, 2010 unless Kindred gives renewal notice by April 30, 2009. For any non-renewed assets, Ventas says it will have at least one year to reposition them, but it cannot assure that replacement operators or equally favorable terms will be found.
How exposed is Ventas to the financial condition of Sunrise Senior Living?
Sunrise manages 79 of Ventas's seniors housing communities under long-term management agreements, and these properties account for a significant portion of revenues and operating income. The filing notes that Sunrise's weakened financial condition could lead to acceleration of its indebtedness, failure to renew its revolving credit facility, or insolvency proceedings, any of which could have a Material Adverse Effect on Ventas.
Does Ventas have enough liquidity to meet its near-term obligations?
At December 31, 2008, Ventas had $176.8 million of unrestricted cash and $546.0 million of unused credit availability under its unsecured revolving credit facilities. As of February 20, 2009, $410.6 million was outstanding under those facilities against about $392.3 million of unrestricted cash. The company lists $118.1 million of 2009 debt maturities and says it expects to extend or refinance a substantial portion of the revolver before its April 2010 maturity, though it gives no assurances. Lehman has defaulted on a $20 million commitment.
What are the main litigation and credit issues disclosed?
Ventas filed suit against HCP, Inc. in May 2007 over the Sunrise REIT acquisition, and HCP has counterclaimed. A jury trial is scheduled for August 18, 2009, and no provision has been recorded because the company cannot estimate the possible loss on the counterclaim. Separately, three Sunwest Loans totaling $20.0 million defaulted in 2008, prompting a $6.0 million loan loss provision and foreclosure actions.
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