01—Abstract
Summary
Summary of the 10-K filed February 23, 2021. Cited figures are marked; the original filing is the authoritative source.
Ventas, Inc. (NYSE: VTR) is a real estate investment trust operating at the intersection of healthcare and real estate, with a portfolio of senior housing, life science, research and innovation, and healthcare properties across the United States, Canada and the United Kingdom.
As of December 31, 2020, the company owned or managed through unconsolidated entities approximately 1,200 properties and reported three segments: triple-net leased properties, senior living operations (SHOP), and office operations. Total revenues were $3.80 billiona in 2020 versus $3.87 billion in 2019, and net income attributable to common stockholders was $439.1 million versus $433.0 million. Normalized FFO attributable to common stockholders declined to $1.25 billion from $1.42 billion, and the filing attributes the decrease primarily to COVID-19's impact on the senior housing business.
Segment NOI fell 9.9% to $1.85 billionb, driven largely by a 14.5% decline in senior living operations NOI as occupancy fell, with average unit occupancy at 81.7% versus 86.6%. The company took capital conservation actions in 2020, including cutting the quarterly dividend to $0.45 per share from $0.7925, eliminating roughly 25% of corporate positions, and reducing planned capital expenditures. Total liquidity was approximately $3.0 billion as of February 16, 2021, and senior notes payable and other debt stood at $11.90 billion at year-end.
The company also expanded its third-party capital platform, Ventas Investment Management, which had over $3 billionc in assets under management, through the Ventas Life Science and Healthcare Real Estate Fund and an R&I development joint venture with GIC. Management states that it is not able at this time to estimate the ultimate impact of the COVID-19 pandemic on its business.
The filing highlights concentration risk, as Atria and Sunrise managed significant portions of the senior living portfolio and Brookdale Senior Living, Ardent and Kindred were the largest triple-net tenants. The company also recorded $126.5 milliond of real estate impairments tied largely to COVID-19 and a $67.6 million write-off of previously accrued straight-line rent on triple-net tenants, while gains on real estate dispositions rose to $262.2 million, largely from contributing properties to the Ventas Fund.
02—Key points
Key Highlights
- Total revenues were $3,795.4 million in 2020, compared with $3,872.8 million in 2019.
- Net income attributable to common stockholders was $439.1 million in 2020, compared with $433.0 million in 2019.
- Normalized FFO attributable to common stockholders was $1,249.97 million in 2020, compared with $1,423.05 million in 2019, which the company attributes mainly to COVID-19 effects on senior housing and higher interest expense.
- Total segment NOI decreased to $1,848.0 million from $2,051.2 million, with senior living operations NOI down $91.6 million to $538.5 million.
- Quarterly dividend was reset to $0.45 per share from the first-quarter level of $0.7925 as part of a capital conservation strategy estimated to conserve about $130 million of cash per quarter.
- Liquidity of approximately $3.0 billion as of February 16, 2021, with no commercial paper borrowings outstanding and negligible near-term debt maturing.
- Gains on real estate dispositions of $262.2 million in 2020, including $225.1 million from the sale of six properties to the Ventas Fund; Ventas Investment Management had over $3 billion in assets under management.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 23, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $3.80B$3.87B | −2.0% |
| Operating Expenses | $3.71B$3.51B | +5.7% |
| Operating Income | $441.19M$439.30M | +0.4% |
| Interest Expense | $469.54M$451.66M | +4.0% |
| Net Income | $439.15M$433.02M | +1.4% |
| EPS (Basic) | $1.18$1.18 | 0.0% |
| EPS (Diluted) | $1.17$1.17 | 0.0% |
| Shares Outstanding (Basic) | 373.37M365.98M | +2.0% |
| Shares Outstanding (Diluted) | 376.50M369.89M | +1.8% |
05—Questions
Frequently Asked Questions
How did COVID-19 affect Ventas's results in 2020?
The filing says the pandemic lowered occupancy and raised operating costs in the senior living operations segment, causing a significant decline in NOI versus 2019. Average unit occupancy in same-store senior living communities fell to 79.6% from 86.9%. Triple-net tenants were also affected, and the company wrote off $67.6 million of previously accrued straight-line rent and recognized $126.5 million of real estate impairments, mostly tied to COVID-19 and senior housing communities. Provider Relief Fund grants partly offset costs, with $34.3 million in Phase 2 and $0.8 million in Phase 3 grants received in the fourth quarter.
Why did the dividend decline in 2020?
In 2020 the company established a quarterly dividend of $0.45 per share beginning in the second quarter, down from $0.7925 in the first quarter. Management said this conserved approximately $130 million of cash per quarter compared with the prior dividend level. Total 2020 dividends declared were $2.1425 per share, and the company stated it intends to pay dividends greater than 100% of its taxable income for 2021.
What is Ventas's debt position and liquidity?
Senior notes payable and other debt totaled $11.90 billion on the balance sheet at December 31, 2020, against gross principal of $11.98 billion. The weighted average effective interest rate was 3.5% for 2020. As of December 31, 2020 liquidity was approximately $3.3 billion, and as of February 16, 2021 it was approximately $3.0 billion, with no commercial paper borrowings and negligible near-term maturities. In January 2021 the company entered into a new $2.75 billion unsecured revolving credit facility maturing in 2025.
Which tenants and managers represent the largest concentration risk?
Atria and Sunrise manage a large portion of the senior living portfolio under management agreements, representing 20.8% and 10.4% of gross book value of consolidated real estate investments, respectively. The largest triple-net tenants are Brookdale Senior Living (8.2% of gross book value), Ardent (4.9%) and Kindred (1.1%). The filing notes that these concentrations create credit risk and that Atria and Sunrise are paid management fees rather than being exposed to tenant credit risk in the same way.
What drove the gain on real estate dispositions in 2020?
Gains on real estate dispositions totaled $262.2 million in 2020, compared with $26.0 million in 2019. The largest component came from contributing six properties to the Ventas Life Science and Healthcare Real Estate Fund, which produced a $225.1 million gain and provided $620 million of cash consideration and a 21% interest in the fund. Additional gains included $13.7 million from the R&I Development JV and $23.4 million from the sale of other properties.
06—Continue