01—Abstract
Summary
Summary of the 10-K filed February 9, 2018. Cited figures are marked; the original filing is the authoritative source.
Ventas, Inc. (NYSE: VTR) is a real estate investment trust with a diversified portfolio of seniors housing and healthcare properties in the United States, Canada and the United Kingdom.
As of December 31, 2017, the company owned more than 1,200 properties, and its consolidated real estate investments were $26.21 billiona at cost. It operates through three reportable segments: triple-net leased properties, senior living operations and office operations. Total revenues for 2017 were $3.57 billion, and total segment NOI was $2.08 billion, up from $2.00 billion in 2016.
Net income attributable to common stockholders rose to $1.36 billionb from $649.2 million, driven mainly by a $717.3 million gain on real estate dispositions, most of it from the sale of 36 SNFs operated by Kindred. Income from continuing operations was $643.9 million, and normalized FFO attributable to common stockholders was $1.49 billion. The balance sheet carried $11.28 billion of senior notes payable and other debt at year-end, against total assets of $23.95 billion.
Normalized FFO was $1,491.2 millionc, slightly above the prior year's $1,438.6 million. The company paid $3.115 per share in dividends declared for 2017 and declared a $0.79 quarterly dividend for the fourth quarter.
On February 9, 2018 the Board declared a first-quarter 2018 dividend of $0.79d per share. Key risks disclosed include dependence on Brookdale Senior Living, Ardent and Kindred for significant revenue and NOI, reliance on Atria and Sunrise as managers of 273 communities, exposure to healthcare reimbursement policy changes under Medicare and Medicaid, and the impact of the 2017 Tax Act.
02—Key points
Key Highlights
- Acquisitions and dispositions: acquired properties for an aggregate purchase price of $691.3 million and sold 53 triple-net leased properties, five MOBs and certain land parcels for $870.8 million, recognizing a $717.3 million net gain.
- Financing: issued $400.0 million of 3.100% senior notes due 2023 and $400.0 million of 3.850% senior notes due 2027 in March 2017, and replaced the $2.0 billion revolver with a $3.0 billion unsecured revolving facility at LIBOR plus 0.875%.
- Ardent financing: provided a $700.0 million term loan to a subsidiary of Ardent for its LHP Hospital Group acquisition, at a weighted average interest rate of approximately 9.3% as of December 31, 2017.
- Dividends: paid $3.115 per share declared for 2017; the fourth-quarter 2017 dividend of $0.79 per share grew 2% over the third quarter and was paid in January 2018.
- Concentration: Brookdale Senior Living, Ardent and Kindred are the three largest tenants; California accounted for 15.3% of total rental income and resident fees and services.
- Tax: the 2017 Tax Act produced a $64.5 million benefit from remeasuring net deferred tax liabilities, offset by a $23.3 million valuation allowance charge, for a net 2017 income tax benefit of $59.8 million.
- Subsequent event: in January 2018 transitioned management of 76 private pay seniors housing communities to Eclipse Senior Living, in which the company acquired a 34% ownership stake.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 9, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $3.57B$3.44B | +3.8% |
| Operating Expenses | $2.99B$2.93B | +2.2% |
| Operating Income | $1.36B$652.41M | +108.6% |
| Interest Expense | $448.20M$419.74M | +6.8% |
| Net Income | $1.36B$649.23M | +108.9% |
| EPS (Basic) | $3.82$1.88 | +103.2% |
| EPS (Diluted) | $3.78$1.86 | +103.2% |
| Shares Outstanding (Basic) | 355.33M344.70M | +3.1% |
| Shares Outstanding (Diluted) | 358.57M348.39M | +2.9% |
05—Questions
Frequently Asked Questions
How much did Ventas earn in 2017, and what drove the increase over 2016?
Net income attributable to common stockholders was $1.36 billion in 2017, compared with $649.2 million in 2016. The increase was driven mainly by the $717.3 million gain on real estate dispositions, primarily from the sale of 36 SNFs operated by Kindred, versus $98.2 million in 2016. Income from continuing operations rose to $643.9 million from $554.2 million, helped by higher segment NOI and a $59.8 million income tax benefit that reflects the 2017 Tax Act.
What is the company's debt position at year-end 2017?
Senior notes payable and other debt totaled $11.28 billion on the balance sheet at December 31, 2017, and total debt principal was $11.37 billion. Weighted average interest rate on total debt was 3.6% at year-end. The company's 2017 interest expense was $448.2 million, up from $419.7 million in 2016, with the filing attributing $17.1 million of the increase to higher debt balances and $11.3 million to higher effective interest rates.
How concentrated is the company's revenue among tenants and operators?
Concentration is significant. The filing states that Brookdale Senior Living, Ardent and Kindred account for a significant portion of triple-net segment revenues and NOI, and that Atria and Sunrise manage 273 seniors housing communities for the company. Brookdale Senior Living represented 4.7% of total revenues and 8.0% of NOI in 2017, Kindred 4.6% of revenues and 7.9% of NOI, and Ardent 3.1% of revenues and 5.3% of NOI. Senior living operations accounted for 51.6% of total revenues.
What dividend has the company declared for 2018?
On February 9, 2018, the Board of Directors declared the first quarterly installment of the 2018 dividend of $0.79 per share, payable in cash on April 12, 2018 to stockholders of record on April 2, 2018. The company expects to distribute at least 100% of its taxable net income, after the use of any net operating loss carryforwards, to stockholders for 2018.
What are the main risks to the company's cash flow?
The filing identifies several risks: tenant or operator default or non-renewal, particularly by Brookdale Senior Living, Ardent and Kindred; dependence on Atria and Sunrise for the 273 managed communities; changes to Medicare and Medicaid reimbursement and the repeal or replacement of the ACA; rising interest rates on the company's floating rate debt; and changes to REIT tax status or tax law. Lease expirations are staggered, with 70 triple-net properties representing 14.4% of 2017 triple-net rental income expiring in 2019.
06—Continue