01—Abstract
Summary
Summary of the 10-K filed February 14, 2017. Cited figures are marked; the original filing is the authoritative source.
Ventas, Inc. is a REIT with a diversified portfolio of seniors housing and healthcare properties in the United States, Canada and the United Kingdom.
As of December 31, 2016 it owned approximately 1,300 properties, and its three reportable segments are triple-net leased properties, senior living operations and office operations. Total revenues were $3.44 billiona in 2016 versus $3.29 billion in 2015, and net income attributable to common stockholders was $649.2 million versus $417.8 million. Normalized FFO attributable to common stockholders was $1.44 billion in 2016 compared with $1.49 billion in 2015, a decline the filing attributes primarily to 2015 results from properties disposed of in the CCP Spin-Off.
Dividends declared were $2.965b per share for 2016, and the Board declared a first-quarter 2017 dividend of $0.775 per share. The 2016 year was shaped by the $1.5 billion Life Sciences Acquisition from Wexford, completed in September 2016, which added 23 operating properties and led the company to rename its MOB segment "office operations." Ventas also raised $1.3 billion in net proceeds from common stock issuances, issued several senior notes, and carried $11.1 billion of outstanding indebtedness at year end. Concentration remains significant: Atria and Sunrise manage a large share of the senior living portfolio, and Brookdale Senior Living, Kindred and Ardent are the largest triple-net tenants.
The filing also notes a $700 millionc secured loan commitment to a subsidiary of Ardent to fund its acquisition of LHP Hospital Group, expected to close in the first quarter of 2017. For investors, the key considerations are the scale of leverage and debt maturities, the concentration of revenue in a small number of operators and managers, and the exposure to regulatory and reimbursement changes in healthcare, which the filing discusses at length in the context of a new presidential administration and possible repeal of the Affordable Care Act.
02—Key points
Key Highlights
- Total revenues of $3,443.5 million in 2016, up from $3,286.4 million in 2015; net income attributable to common stockholders of $649.2 million versus $417.8 million.
- Completed the $1.5 billion Life Sciences Acquisition from Wexford/Blackstone in September 2016, adding 23 operating properties, two development assets and nine future development sites.
- Raised $1.3 billion in net proceeds from issuing 18.9 million common shares under its ATM program and public offerings during 2016.
- Normalized FFO attributable to common stockholders was $1,438.6 million in 2016 versus $1,493.7 million in 2015; diluted EPS was $1.86 versus $1.25.
- Total indebtedness of approximately $11.1 billion as of December 31, 2016, with 15.3% of consolidated debt at variable rates including hedges.
- Dividends declared were $2.965 per share for 2016; the Board declared a $0.775 quarterly dividend for the first quarter of 2017.
- Brookdale Senior Living, Kindred and Ardent are the largest triple-net tenants, and Atria and Sunrise manage 266 seniors housing communities for the company under long-term agreements.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 14, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $3.44B$3.29B | +4.8% |
| Operating Expenses | $2.93B$2.93B | −0.3% |
| Operating Income | $652.41M$389.54M | +67.5% |
| Interest Expense | $419.74M$367.11M | +14.3% |
| Net Income | $649.23M$417.84M | +55.4% |
| EPS (Basic) | $1.88$1.26 | +49.2% |
| EPS (Diluted) | $1.86$1.25 | +48.8% |
| Shares Outstanding (Basic) | 344.70M330.31M | +4.4% |
| Shares Outstanding (Diluted) | 348.39M334.01M | +4.3% |
05—Questions
Frequently Asked Questions
How much did Ventas grow its revenue and earnings in 2016?
Total revenues rose to $3,443.5 million in 2016 from $3,286.4 million in 2015. Net income attributable to common stockholders increased to $649.2 million from $417.8 million, which included a gain on real estate dispositions of $98.2 million in 2016.
What was the largest acquisition in 2016 and how was it funded?
The largest acquisition was the Life Sciences Acquisition of substantially all of the university-affiliated life science and innovation real estate assets of Wexford for total consideration of $1.5 billion, completed in September 2016. The filing states the company used proceeds from its 2016 equity issuances and debt offerings, along with cash on hand and other sources, to fund it.
How concentrated is Ventas's tenant and operator base?
The filing identifies Atria and Sunrise as managers of 266 seniors housing communities under long-term management agreements, representing 22.6% and 11.3% of real estate investments by gross book value. Brookdale Senior Living, Kindred and Ardent together account for a significant portion of triple-net leased revenues and NOI; Brookdale represented 4.8% of total revenues and Kindred 5.4%, and Ardent 3.1%.
What are the main debt-related risks for investors?
Ventas had approximately $11.1 billion of outstanding indebtedness at December 31, 2016. The filing notes that 15.3% of consolidated debt was variable rate, that a 100 basis point increase in variable rates would raise 2017 interest expense by about $16.5 million, and that the company has $300.0 million of senior notes maturing in 2017 along with other scheduled maturities.
What regulatory risks does the filing highlight?
The filing says the recent U.S. presidential election and Republican-controlled Congress make repeal of the Affordable Care Act a possibility, and that significant changes to commercial health insurance, Medicare and Medicaid are possible. It notes that about 9.2% of total revenues and 15.0% of total NOI in 2016 came from skilled nursing facilities and hospitals whose tenants receive government healthcare reimbursement.
06—Continue