01—Abstract
Summary
Summary of the 10-K filed February 13, 2015. Cited figures are marked; the original filing is the authoritative source.
Ventas, Inc. (NYSE: VTR) is a REIT with a diversified portfolio of seniors housing and healthcare properties across the United States, Canada and the United Kingdom.
As of December 31, 2014, the company owned more than 1,500 properties and leased 922 of them under triple-net leases, while engaging Atria and Sunrise to manage 270 seniors housing communities. The three reportable segments are triple-net leased properties, senior living operations and MOB operations. Segment NOI for 2014 was $1.86 billiona, up from $1.69 billion in 2013, and total revenues were $3.08 billion, compared with $2.81 billion in 2013.
Net income attributable to common stockholders was $475.8 millionb, and diluted EPS was $1.60. During 2014 the company invested approximately $2.4 billion in seniors housing and healthcare assets, including the Holiday Canada Acquisition and a $425.0 million mezzanine loan. In January 2015 it acquired American Realty Capital Healthcare Trust, Inc. (HCT), adding 152 properties, funded with about 28.4 million shares, 1.1 million OP units, cash and assumed debt.
Total indebtedness was approximately $10.9 billionc at year-end, and 21.9% of consolidated debt was variable rate. The 2014 dividend was $2.965 per share, and the first 2015 quarterly installment was set at $0.79 per share.
The filing also discloses that Ventas reported in July 2014 that its former auditor, Ernst & Young LLP, was not independent due to an inappropriate personal relationship, that the company is cooperating with an SEC inquiry on the matter, and that the 2014 financial statements were re-audited and re-reviewed. KPMG LLP audited the 2014 financial statements and internal control over financial reporting, which management concluded were effective.
02—Key points
Key Highlights
- 2014 total revenues of $3,075.7 million and total segment NOI of $1,859.3 million, up from $2,811.5 million and $1,691.5 million in 2013.
- Net income attributable to common stockholders of $475.8 million in 2014, compared with $453.5 million in 2013; diluted EPS of $1.60 versus $1.54.
- Approximately $2.4 billion invested in 2014, including the Holiday Canada Acquisition (29 communities) and three UK private hospitals, plus a $425.0 million mezzanine loan at an 8.1% blended rate.
- January 2015 acquisition of HCT added 152 properties, funded with about 28.4 million shares, 1.1 million OP units, cash and assumed debt.
- Total senior notes payable and other debt of $10.9 billion at December 31, 2014, with 21.9% of consolidated debt at variable rates; January 2015 issuances included $900 million of notes at 3.8%.
- Annual dividend of $2.965 per share paid in 2014 and a first 2015 quarterly installment of $0.79 per share, with the company intending to distribute more than 100% of taxable income for 2015.
- Former auditor EY was found not independent due to an inappropriate personal relationship; the matter is under SEC inquiry and 2014 financial statements were re-audited by KPMG.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 13, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $2.78B$2.52B | +10.3% |
| Operating Expenses | $2.43B$2.15B | +12.7% |
| Operating Income | $359.30M$374.34M | −4.0% |
| Interest Expense | $292.06M$249.01M | +17.3% |
| Net Income | $475.77M$453.51M | +4.9% |
| EPS (Basic) | $1.62$1.55 | +4.5% |
| EPS (Diluted) | $1.60$1.54 | +3.9% |
| Shares Outstanding (Basic) | 294.18M292.65M | +0.5% |
| Shares Outstanding (Diluted) | 296.68M295.11M | +0.5% |
05—Questions
Frequently Asked Questions
How concentrated is Ventas's tenant base?
Brookdale Senior Living and Kindred are the two largest triple-net tenants. Brookdale leases 160 properties, representing 5.5% of total revenues and 9.2% of NOI in 2014; Kindred leases 83 properties, representing 6.2% of total revenues and 10.2% of NOI. Atria and Sunrise, which manage 270 communities, make up a larger share of the portfolio: Atria is 23.6% and Sunrise 12.3% of real estate investments by gross book value.
What is the outlook for the HCT acquisition?
The HCT Acquisition closed in January 2015, adding 152 properties. The company expects to incur substantial integration expenses, and the filing notes these could exceed expected savings in the near term. Pro forma 2014 revenues including HCT were $3,369.2 million, with pro forma diluted income from continuing operations of $1.48 per share.
How much debt matures soon, and how is it being refinanced?
The company says it must repay $634.4 million of senior notes over the next 12 months. Total debt maturities are $745.8 million in 2015 and $899.7 million in 2016. Liquidity sources cited include operating cash flow, debt and equity issuances, asset sales and borrowings under the $2.0 billion unsecured revolver, which had $1.1 billion of unused capacity at year-end. In January 2015 the company issued $900 million of notes and CAD 250.0 million of Canadian notes.
What is the status of the auditor-independence matter?
In July 2014 Ventas voluntarily informed the SEC that Ernst & Young was not independent due to an inappropriate personal relationship between an EY partner and an individual in a financial reporting oversight role at the company. The company says it is cooperating with SEC inquiries, that the matter is ongoing, and that it cannot reasonably assess its timing or outcome. KPMG audited the 2014 financial statements.
How did the dividend and payout compare with earnings?
Dividends declared per common share rose to $2.965 in 2014 from $2.735 in 2013. The company stated the 2014 dividend exceeded 100% of estimated taxable income after net operating loss carryforwards. Normalized FFO was $1.33 billion in 2014, up from $1.22 billion in 2013, and the company intends to pay more than 100% of taxable income for 2015.
06—Continue