01—Abstract
Summary
Summary of the 10-K filed February 8, 2019. 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, research and innovation, and healthcare properties in the United States, Canada and the United Kingdom.
As of December 31, 2018, the company owned approximately 1,200 properties, and its consolidated real estate investments at cost totaled $26.48 billiona. The company operates three reportable segments: triple-net leased properties, senior living operations and office operations. Total revenues were $3.75 billion in 2018 versus $3.57 billion in 2017, while net income attributable to common stockholders fell to $409.5 million from $1.36 billion, reflecting the absence of the $717.3 million gain on real estate dispositions recognized in 2017 from the sale of 36 Kindred SNFs.
Normalized FFO attributable to common stockholders was $1.46 billionb in 2018 compared with $1.49 billion in 2017. Segment NOI was $2.03 billion in 2018, down from $2.08 billion, with triple-net leased properties NOI declining 12.4% to $740.3 million, while senior living operations NOI rose 5.1% to $623.3 million and office operations NOI rose 2.7% to $538.5 million. Total debt was $10.7 billion at year-end, and the company reported $72.3 million of unrestricted cash.
In 2018 the company repaid or redeemed $2.0 billionc of senior notes and issued $1.4 billion of new senior notes at a weighted average rate of 4.2%. Key concentrations include Brookdale Senior Living, Ardent and Kindred, and the company's senior living portfolio is managed by Atria, Sunrise and ESL, which together operate 334 consolidated communities.
The filing also highlights a $21.3 milliond non-cash expense tied to the April 2018 Brookdale master lease restructuring, $54.5 million of losses from unconsolidated entities including a $35.7 million impairment, and natural disaster-related charges. Management expects to distribute at least 100% of 2019 taxable income, and the company disclosed that it adopted ASC 842 leasing standards effective January 1, 2019.
02—Key points
Key Highlights
- Total revenues rose to $3,745.8 million in 2018 from $3,574.1 million in 2017, while net income attributable to common stockholders declined to $409.5 million from $1,356.5 million, largely because 2017 included a $717.3 million gain on real estate dispositions.
- Normalized FFO attributable to common stockholders was $1,462.1 million in 2018 versus $1,491.2 million in 2017; diluted EPS was $1.14 in 2018 compared with $3.78 in 2017.
- Senior living operations segment NOI increased 5.1% to $623.3 million, supported by the transition of 75 private pay communities from triple-net leases in the first quarter of 2018, while triple-net leased properties NOI fell 12.4% to $740.3 million.
- The company sold 23 properties and two vacant land parcels for $348.6 million in 2018 and acquired six properties for $311.3 million, while receiving $862.9 million from the full repayment of 14 loans receivable.
- In 2018 the company repaid or redeemed $2.0 billion of senior notes, issued $1.4 billion of senior notes at a 4.2% weighted average rate, and replaced its $900.0 million unsecured term loan with a new $900.0 million facility priced at LIBOR plus 0.90%.
- Total consolidated debt was $10.7 billion at year-end 2018, and the company established a $1 billion unsecured commercial paper program in January 2019.
- Concentration risk remains significant: Brookdale Senior Living, Ardent and Kindred leased 129, 11 and 32 properties respectively, and Atria, Sunrise and ESL managed 334 consolidated communities.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 8, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $3.75B$3.57B | +4.8% |
| Operating Expenses | $3.36B$2.99B | +12.4% |
| Operating Income | $415.99M$1.36B | −69.4% |
| Interest Expense | $442.50M$448.20M | −1.3% |
| Net Income | $409.47M$1.36B | −69.8% |
| EPS (Basic) | $1.15$3.82 | −69.9% |
| EPS (Diluted) | $1.14$3.78 | −69.8% |
| Shares Outstanding (Basic) | 356.26M355.33M | +0.3% |
| Shares Outstanding (Diluted) | 359.30M358.57M | +0.2% |
05—Questions
Frequently Asked Questions
Why did net income fall so sharply in 2018 compared with 2017?
Net income attributable to common stockholders was $409.5 million in 2018 versus $1.36 billion in 2017. The filing attributes much of the decline to 2017, which included a $717.3 million gain on real estate dispositions, mainly from the sale of 36 Kindred SNFs, while 2018 gains on dispositions were $46.2 million. Other 2018 charges included a $58.3 million loss on extinguishment of debt, $30.5 million of merger-related expenses and deal costs, $66.8 million of other expenses largely tied to natural disasters, and a $54.5 million loss from unconsolidated entities.
How did the company's core cash-generating measures perform?
Normalized FFO attributable to common stockholders was $1,462.1 million in 2018 compared with $1,491.2 million in 2017, and Adjusted EBITDA was $1,961.9 million versus $1,985.1 million. NOI totaled $2,029.6 million in 2018 compared with $2,081.7 million in 2017. Management attributed the normalized FFO decline primarily to the cumulative net impact of asset dispositions and resulting lower property income.
What are the main risks from tenant concentration?
Brookdale Senior Living, Ardent and Kindred account for a significant portion of triple-net leased segment revenues and NOI, with Brookdale at 4.3% of total revenues and 7.6% of NOI, Ardent at 3.1% and 5.7%, and Kindred at 3.5% and 6.4% for 2018. The filing states that a failure by any of these tenants to meet obligations or renew leases could materially affect financial condition, debt service and distributions. Senior living operations are managed by Atria, Sunrise and ESL, whose performance also could have a Material Adverse Effect on the company.
What is the company's near-term liquidity and debt maturity profile?
At year-end 2018 the company had $72.3 million of unrestricted cash and $2.2 billion of unused capacity under its $3.0 billion unsecured revolving credit facility, plus $309.5 million available under a $400.0 million secured revolving construction facility. For the next 12 months, principal liquidity needs include repaying $293.3 million of 3.00% Series A senior notes due 2019 and other maturing debt. The company stated it was in compliance with all debt covenants at December 31, 2018.
What accounting and dividend changes are expected in 2019?
The company expects to adopt ASC 842 on January 1, 2019, recognizing operating lease assets of $320 million to $420 million and operating lease liabilities of $175 million to $275 million, with a cumulative effect adjustment to retained earnings of $1 million. It will also begin expensing certain leasing costs as incurred, which may reduce net income. For 2019, the company stated it intends to distribute more than 100% of its taxable income after the use of net operating loss carryforwards, and it paid dividends of $3.1625 per share in 2018.
06—Continue