01—Abstract
Summary
Summary of the 10-K filed February 19, 2010. Cited figures are marked; the original filing is the authoritative source.
Ventas, Inc. (NYSE: VTR) reports as a REIT with 505 seniors housing and healthcare assets in 43 states and two Canadian provinces as of December 31, 2009.
Triple-net leases with Kindred Healthcare and Brookdale Senior Living, plus senior living communities managed by Sunrise Senior Living, drive results. For 2009, total revenues were $936.1 milliona, net income attributable to common stockholders was $266.5 million, and Normalized FFO was $409.0 million. Kindred accounted for 26.2% of total revenues and 38.5% of total NOI, and Sunrise-managed properties accounted for 44.7% of total revenues.
The balance sheet strengthened during 2009. The company issued $312.2 millionb of common stock and $200.0 million of 6 1/2% senior notes due 2016, and repurchased $361.6 million of senior notes, recognizing a $6.1 million net loss on extinguishment. Total debt fell to $2.70 billion from $3.14 billion, and only 8.3% of consolidated debt was variable rate.
Moody's upgraded the unsecured debt to Baa3 on February 4, 2010, giving the company investment-grade ratings from all three agencies. Unrestricted cash was $107.4 millionc, and $988.4 million was available under the unsecured revolving credit facilities. Investors should note several risk items.
Kindred's Master Lease 2 and certain bundles expiring in 2013 depend on tenant renewal decisions, and the company's 2010 dividend was declared at $0.535d per share after $2.05 was declared in 2009. The filing also reports a $101.6 million jury verdict in the company's favor against HCP, Inc., which HCP has appealed to the Sixth Circuit.
02—Key points
Key Highlights
- Total 2009 revenues of $936.1 million, up from $923.7 million in 2008; net income attributable to common stockholders of $266.5 million, or $1.74 per diluted share.
- Normalized FFO of $409.0 million for 2009, compared with $379.5 million in 2008; FFO was $393.4 million.
- Investment-grade ratings on unsecured debt from all three agencies after Moody's upgrade to Baa3 on February 4, 2010.
- Total debt reduced to $2.70 billion from $3.14 billion at year-end 2008, with fixed-rate debt at 91.7% of total debt.
- Raised $312.2 million from a common stock offering in April 2009 and issued $200.0 million of 6 1/2% senior notes due 2016, using proceeds to repurchase $361.6 million of senior notes.
- Kindred Healthcare represented 26.2% of total revenues and 38.5% of total NOI; Brookdale Senior Living represented 12.9% of revenues and 19.1% of NOI.
- Received a $101.6 million jury verdict against HCP, Inc. over the Sunrise REIT acquisition; HCP has appealed.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 19, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $923.47M$919.14M | +0.5% |
| Operating Expenses | $731.90M$781.62M | −6.4% |
| Operating Income | $190.42M— | — |
| Interest Expense | $173.81M$202.62M | −14.2% |
| Net Income | $266.50M$225.29M | +18.3% |
| EPS (Basic) | $1.75$1.59 | +10.1% |
| EPS (Diluted) | $1.74$1.59 | +9.4% |
| Shares Outstanding (Basic) | 152.57M139.57M | +9.3% |
| Shares Outstanding (Diluted) | 152.76M139.91M | +9.2% |
05—Questions
Frequently Asked Questions
How concentrated is the portfolio among tenants and operators?
Sunrise managed properties representing 38.9% of gross book value and 44.7% of 2009 total revenues, while Kindred and Brookdale Senior Living were the other major counterparties. Kindred's four master leases accounted for 26.2% of revenues and 38.5% of NOI, and Brookdale accounted for 12.9% of revenues and 19.1% of NOI. The filing states that Kindred and Brookdale's ability to meet their obligations has a significant impact on results and distributions.
What is the lease renewal exposure in the coming years?
The filing states that Kindred renewed leases on 109 assets through April 30, 2015, and renewed its 57 assets through April 30, 2013. Ten bundles covering 89 properties and $117 million of annual Base Rent expire on April 30, 2013 unless Kindred renews them by April 30, 2012. Triple-net lease expirations in 2013 represented 25.0% of 2009 triple-net rental income, and 2015 represented 32.4%.
How did the company fund its activity and manage its debt in 2009?
The company sold 13,062,500 common shares for $312.2 million and issued $200.0 million of 6 1/2% senior notes due 2016 at a 15 3/4% discount, for total proceeds of $168.5 million before underwriting discount and expenses. It repaid $49.8 million of notes at maturity and repurchased $361.6 million of senior notes. As of February 15, 2010, the company had approximately $9 million outstanding under its revolving credit facilities.
What is the dividend outlook?
Dividends declared were $2.05 per share in 2009. On February 17, 2010, the Board declared the first quarterly installment of the 2010 dividend at $0.535 per share, payable March 31, 2010. The company expects to distribute 100% or more of its taxable net income for 2010, though the Board makes dividend decisions quarterly and the company said it cannot assure the policy will be maintained.
What are the main regulatory and reimbursement risks?
The filing describes pending federal healthcare reform, Medicare and Medicaid reimbursement changes, and state Medicaid rate freezes or cuts as risks to tenants and operators. It notes that Medicare therapy caps for nursing facilities expired on December 31, 2009 and were not renewed, and that CMS estimated its SNF PPS update would decrease payments by approximately $360 million, or 1.1%, in fiscal 2010. The company states that these developments could have a Material Adverse Effect on it.
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