Ventas Reports 2020 Fourth Quarter and Full Year Results

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Ventas, Inc. (NYSE: VTR) ("Ventas" or the "Company") today reported results for the fourth quarter and full year ended December 31, 2020.

"During 2020, Ventas’s diverse portfolio, financial strength, experienced team, and committed operating partners enabled the Company to remain strong and stable. We are proud of our work throughout the year to prioritize health and safety and enhance our ESG profile, while continuing to advance our strategic growth objectives and delivering results ahead of expectations despite the enormous challenges posed by the COVID-19 pandemic," said Debra A. Cafaro, Ventas Chairman and CEO. "In particular, results were bolstered by our Office and Triple-Net Healthcare businesses which continued their positive performance."

Cafaro continued, "COVID-19 presented the most difficult clinical conditions across the country between November 2020 and through January of this year. As a result, occupancy in our Senior Housing Operating Portfolio ("SHOP"), after benefitting from steadily improving trends through October 2020, declined in the fourth quarter and into 2021, as operators experienced elevated move-outs and limited tours and move-ins to keep residents safe.

"At the same time, virtually all of our U.S. SHOP communities have already received the first dose of the vaccine, with nearly 90 percent scheduled to receive the second dose this month, protecting vulnerable older Americans in our communities. We are grateful that approximately 30,000 residents in our SHOP communities have been vaccinated against COVID-19.

"We are pleased that clinical trends in our SHOP communities have already begun to improve significantly. Leading indicators and demand are again showing strength, with leads in January at the highest level since the beginning of the pandemic. Operators are also beginning to safely reopen communities to tours and new move-ins and to offer a richer lifestyle to benefit residents and their families.

"Over the long term, resilient demand for senior housing and the strong value proposition senior housing offers to residents and their families, together with our high quality, diversified portfolio, position Ventas favorably to deliver value to our stakeholders," Cafaro concluded.

Full Year and Fourth Quarter 2020 Results
(per share)

Year Ended December 31

2020

2019

$ Change

% Change

Net Income (Loss) Attributable to Common Stockholders ("Attributable Net Income (Loss)")

$1.17

$1.17

($0.00)

(0.4%)

Nareit FFO*

$3.37

$3.88

($0.51)

(13.1%)

Normalized FFO*

$3.32

$3.85

($0.53)

(13.8%)

Quarter Ended December 31

2020

2019

$ Change

% Change

Attributable Net Income (Loss)

$0.29

$0.03

$0.26

861.8%

Nareit FFO*

$0.92

$0.94

($0.02)

(2.1%)

Normalized FFO*

$0.83

$0.93

($0.10)

(10.8%)

*

This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release and our fourth quarter 2020 supplemental for additional information and a reconciliation to the most directly comparable GAAP measure.

Select 2020 Highlights

  • Ensured financial strength and flexibility:

    • $3 billion year-end liquidity

    • 37 percent year-end Total Indebtedness to Gross Asset Value

    • $0.5 billion lower Net Debt at year end 2020 compared to year end 2019

    • 6.1x full year Net Debt to Adjusted Pro Forma EBITDA

  • Consistently prioritized the health and safety of employees, residents, tenants and our operators and managers; served as a critical resource for information and best practices; and led our industry in providing COVID-19 testing and financial support to tenants and operators who were adversely affected by the pandemic.

  • Proactively addressed the impact of the COVID-19 pandemic in our Triple-Net ("NNN") senior housing portfolio, announcing mutually beneficial arrangements with multiple tenants, including the two largest NNN senior housing tenants: Brookdale Senior Living Inc. ("Brookdale") and Holiday Retirement, receiving over $335 million in total up-front consideration.

  • Advanced ground-up development of four Research & Innovation ("R&I") properties containing nearly 1.5 million square feet and continued to expand Ventas’s footprint with partner Le Groupe Maurice ("LGM"), opening nearly 800 new units in two communities in Quebec.

  • Received loan repayment and disposition proceeds approaching $1 billion at an average cash yield of 5.3 percent.

  • Established the Company’s third-party capital platform, Ventas Investment Management ("VIM"), bringing together our preexisting and new third-party capital ventures under one umbrella. These include the Ventas Life Science and Healthcare Real Estate Fund, L.P. (the "Ventas Fund"), formed in March 2020 and our R&I development joint venture with GIC created in October 2020. VIM now has over $3 billion of assets under management.

  • Expanded the Ventas Board of Directors (the "Board") when Marguerite Nader, CEO of Equity Lifestyles, joined our diverse Board.

  • Received numerous ESG recognitions, including: the 2020 Nareit Health Care "Leader in the Light" award for a fourth consecutive year; the Bloomberg Gender-Equality Index for the first time; the 2020 Dow Jones Sustainability World Index for the second consecutive year; and maintained our industry leading position in GRESB.

Fourth Quarter 2020 Property Results

4Q20 (Quarterly Pools)
Year-Over-Year
Same-Store Cash NOI* Growth

Assets

% Change

SHOP1

377

(24.7%)

NNN

362

(10.0%)

Office

357

2.9%

Total Company

1,096

(11.8%)

4Q20 (Sequential Pools)
Sequential
Same-Store Cash NOI* Growth

Assets

% Change

% Change
(excl. BKD)2

SHOP1

420

13.4%

NNN

363

(52.9%)

(0.6%)

Office

362

1.5%

Total Company

1,145

(26.1%)

4.4%

*

This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release and our fourth quarter 2020 supplemental for additional information and a reconciliation to the most directly comparable GAAP measure.

1

Senior Housing Operating Portfolio ("SHOP") Same-Store Cash NOI reflects grants received in 4Q20 under the Provider Relief Fund administered by the Department of Health and Human Services (the "HHS Grants"). The HHS Grants are recorded as a contra expense within SHOP operating expenses. HHS Grants received in the Quarterly Pools and Sequential Pools in 4Q20 are ~$33.0M and ~$34.5M, respectively.

2

Due to the material impact of the Brookdale lease modification to 3Q20 Same-Store Cash NOI, NNN and Total Same-Store growth are separately presented excluding the benefit of ~$161.5M in upfront cash consideration received in July 2020 as part of such modification.

Same Store Property Results: Fourth Quarter 2020 Compared to Third Quarter 2020

  • Company sequential same-store fourth quarter cash net operating income ("NOI") declined 26.1 percent due to the receipt of $162 million from Brookdale in connection with a lease resolution in the third quarter (the "Brookdale Consideration"). Excluding the Brookdale Consideration, Company sequential same-store fourth quarter cash NOI grew 4.4 percent, primarily as a result of the receipt in the fourth quarter of $35 million of HHS Grants, which partially mitigate COVID-19 losses incurred by our SHOP communities.

  • Senior Housing Operating Portfolio (30 percent of Total Portfolio)

    • NOI: For the fourth quarter 2020, sequential same-store pool (420 assets) cash NOI increased by 13.4 percent compared to the third quarter driven by the HHS Grants.

    • Occupancy: Average occupancy declined sequentially by 90 basis points from the third quarter to the fourth quarter. Consistent with national trends, accelerating positive COVID-19 cases in November and December in Ventas communities restricted new move ins compared to the third quarter and October. In addition, move out activity also increased in the fourth quarter, and was correlated to geographies with higher COVID-19 incidence.

    • Revenues: Revenues declined sequentially by 2.9 percent as a result of occupancy declines together with heightened intentional discounting and incentives necessitated by the pandemic.

    • Operating Expenses: Operating expenses decreased $32 million sequentially. Excluding the HHS Grants, operating expenses increased approximately $3 million sequentially due to the heightened COVID-19 activity and related testing and labor costs incurred in the quarter.

  • NNN Portfolio (35 percent of Total Portfolio)

    • For the fourth quarter 2020, sequential same-store pool (363 assets) cash NOI decreased 0.6 percent compared to the third quarter excluding the Brookdale Consideration. Further adjusting for a $3 million payment from a tenant received in Q3, it grew modestly.

    • Substantially all expected fourth quarter 2020 rent has been received from the Company’s NNN tenants.

  • Office Portfolio (30 percent of Total Portfolio)

    • The Office portfolio grew same-store cash NOI 1.5 percent in the fourth quarter versus the third quarter 2020. Performance was led by the Company’s R&I business.

    • The Company received over 99 percent of fourth quarter 2020 rent from the Company’s Office tenants.

Recent Developments

  • Expanded the Board with the appointment of Maurice Smith, President and Chief Executive Officer of Health Care Service Corporation ("HCSC"), on February 1, 2021. Smith is a national leader in healthcare, with over 25 years of experience in financial, strategic and operations leadership in the health insurance industry. HCSC is the largest customer owned health insurer in the United States, covering over 16 million members across its Blue Cross and Blue Shield health plans in five states and generating annual revenues of $46 billion.

  • Paid its fourth quarter 2020 dividend of $0.45 per share on January 20, 2021 to stockholders of record on January 4, 2021.

  • Closed a new four-year $2.75 billion unsecured credit facility (the "Credit Facility"). The Credit Facility was oversubscribed with strong support from 24 new and incumbent financial institutions. The Credit Facility is initially priced at 82.5 basis points over LIBOR based on the Company’s debt ratings, and the maturity date is January 2025.

  • Established a Partnership with the Real Estate Executive Council’s Diversity Initiative as the "Founding Diversity Partner – Healthcare Real Estate."

First Quarter 2021 Guidance

The Company expects the COVID-19 pandemic to continue to affect its business results in the first quarter and its trajectory and ultimate impact remain highly uncertain. The Company currently expects to report first quarter 2021 Attributable Net Income (Loss), Nareit FFO and Normalized FFO within the following ranges:

1Q21 Guidance

Per Share

Low

High

Attributable Net Income (Loss)

($0.07)

-

($0.01)

Nareit FFO*

$0.55

-

$0.59

Normalized FFO*

$0.66

-

$0.71

*

This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release and our fourth quarter 2020 supplemental for additional information and a reconciliation to the most directly comparable GAAP measure.

Key assumptions underlying the fourth quarter 2020 to the first quarter 2021 Normalized FFO include, among other things, that average occupancy in the Company’s sequential same-store SHOP business declines 250 to 325 basis points in the first quarter 2021 compared to the fourth quarter 2020, and expenses remain elevated, partially offset by positive in-house rate increases in January. Other first quarter 2021 assumptions are set forth below:

Increase / (Decrease) to
Normalized FFO/sh.

1Q21 Guidance Midpoint
vs. 4Q20 Actuals

4Q20 Normalized FFO*

$0.83

HHS Grants received in 4Q20 in SHOP segment

(0.09)

Unconsolidated entities special income items**

(0.04)

$0.70

Impact of late 4Q20 senior housing dispositions and transitions

(0.01)

NOI driven principally by SHOP ex. HHS Grants

(0.05)

HHS Grants received to date in 1Q21 in SHOP segment

0.04

1Q21 Normalized FFO* Guidance Midpoint

$0.68

*

This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures Reconciliation tables at the end of this press release and our fourth quarter 2020 supplemental for additional information and a reconciliation to the most directly comparable GAAP measure.

**

Refers to receipt of HHS Grants and fees by our unconsolidated entities.

2021 Liquidity, G&A and Capital Activities and Expectations

  • As of February 16, 2021, the Company has robust liquidity of $3.0 billion, including $2.7 billion of undrawn revolver capacity and $0.3 billion in cash and cash equivalents on hand, and no commercial paper outstanding.

  • On March 15, 2021, Ventas will fully repay $400 million in outstanding aggregate principal amount of its 3.10% senior notes due January 2023, principally using cash on hand, as reflected in its February notice of redemption. The redemption includes a make whole premium of 4.88 percent, plus accrued and unpaid interest.

  • The Company is targeting approximately $1.0 billion in asset dispositions across asset classes in the second half of 2021. Proceeds from dispositions are expected to be used to reduce indebtedness and to fund future growth through development and redevelopment capital expenditures of $0.5 billion, principally in the Office segment and with Le Groupe Maurice.

  • Following the reduction in the corporate cost structure implemented in 2020, the Company expects full year 2021 general and administrative expenses to range from approximately $135 million to $140 million.

A presentation outlining the Company’s fourth quarter results as well as first quarter 2021 business, clinical, vaccine and operating trends is posted to the Events & Presentations section of Ventas’s website at ir.ventasreit.com/events-and-presentations.

Fourth Quarter and Full Year 2020 Results Conference Call and Investor Presentation

Ventas will hold a conference call to discuss this earnings release today at 10:00 a.m. Eastern Time (9:00 a.m. Central Time).

The dial-in number for the conference call is (833) 979-2853 (or +1 (236) 714-2928 for international callers), and the participant passcode is "Ventas." A live webcast can be accessed from ir.ventasreit.com.

A telephonic replay will be available at (800) 585-8367 (or +1 (416) 621-4642 for international callers), passcode 3749905, beginning on February 18, 2021, at approximately 1:00 p.m. Eastern Time and will remain available for 30 days. The webcast replay will be posted in the Investor Relations section of www.ventasreit.com.

About Ventas

Ventas, an S&P 500 company, operates at the intersection of two powerful and dynamic industries – healthcare and real estate. As one of the world’s foremost Real Estate Investment Trusts (REIT), we use the power of capital to unlock the value of real estate, partnering with leading care providers, developers, research and medical institutions, innovators and healthcare organizations whose success is buoyed by the demographic tailwind of an aging population. For more than twenty years, Ventas has followed a successful strategy that endures: combining a high-quality diversified portfolio of properties and capital sources to manage through cycles, working with industry leading partners, and a collaborative and experienced team focused on producing consistent growing cash flows and superior returns on a strong balance sheet, ultimately rewarding Ventas shareholders. As of December 31, 2020, Ventas owned or managed through unconsolidated real estate entities approximately 1,200 properties.

Non-GAAP Financial Measures

This press release includes certain financial performance measures not defined by generally accepted accounting principles in the Unites States ("GAAP"). Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in this press release. We believe such measures provide investors with additional information concerning our operating performance and a basis to compare our performance with the performance of other REITs. Our definitions and calculations of these non-GAAP measures may not be the same as similar measures reported by other REITs.

These non-GAAP financial measures should not be considered as alternatives to net income attributable to common stockholders (determined in accordance with GAAP) as indicators of our financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of our liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs.

Cautionary Statements

Certain of the information contained herein, including intra-quarter operating information and number of confirmed cases of COVID-19, has been provided by our operators and we have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you of its accuracy.

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, among others, statements of expectations, beliefs, future plans and strategies, anticipated results from operations and developments and other matters that are not historical facts. Forward-looking statements include, among other things, statements regarding our and our officers’ intent, belief or expectation as identified by the use of words such as "may," "will," "project," "expect," "believe," "intend," "anticipate," "seek," "target," "forecast," "plan," "potential," "estimate," "could," "would," "should" and other comparable and derivative terms or the negatives thereof.

Forward-looking statements are based on management’s beliefs as well as on a number of assumptions concerning future events. You should not put undue reliance on these forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors that could cause actual events or results to differ materially from those expressed or implied by the forward-looking statements. You are urged to carefully review the disclosures we make concerning risks and uncertainties that may affect our business and future financial performance in our filings with the Securities and Exchange Commission, including those made in the "Risk Factors" section and "Management’s Discussion & Analysis of Financial Condition and Results of Operations" section of our most recently filed Annual Report on Form 10-K. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made.

Certain factors that could affect our future results and our ability to achieve our stated goals include, but are not limited to: (a) the impact of the ongoing COVID-19 pandemic on our revenue, level of profitability, liquidity and overall risk exposure and the implementation and impact of regulations related to the CARES Act and other stimulus legislation and any future COVID-19 relief measures; (b) our exposure and the exposure of our tenants, borrowers and managers to complex healthcare and other regulation and the challenges and expense associated with complying with such regulation; (c) the potential for significant general and commercial claims, legal actions, regulatory proceedings or enforcement actions that could subject us or our tenants, borrowers or managers to increased operating costs and uninsured liabilities; (d) the impact of market and general economic conditions, including economic and financial market events, or events that affect consumer confidence, our occupancy rates and resident fee revenues, and the actual and perceived state of the real estate markets and public capital markets; (e) our ability, and the ability of our tenants, borrowers and managers, to navigate the trends impacting our or their businesses and the industries in which we or they operate; (f) the risk of bankruptcy, insolvency or financial deterioration of our tenants, borrowers, managers and other obligors and our ability to foreclose successfully on the collateral securing our loans and other investments in the event of a borrower default; (g) our ability to identify and consummate future investments in healthcare assets and effectively manage our expansion opportunities and our investments in co-investment vehicles; (h) our ability to attract and retain talented employees; (i) the limitations and significant requirements imposed upon our business as a result of our status as a REIT and the adverse consequences (including the possible loss of our status as a REIT) that would result if we are not able to comply; (j) the risk of changes in healthcare law or regulation or in tax laws, guidance and interpretations, particularly as applied to REITs, that could adversely affect us or our tenants, borrowers or managers; (k) increases in the Company’s borrowing costs as a result of becoming more leveraged or as a result of changes in interest rates and phasing out of LIBOR rates; (l) our dependency on a limited number of tenants and managers for a significant portion of our revenues and operating income; (m) the adequacy of insurance coverage provided by our policies and policies maintained by our tenants, managers or other counterparties; (n) the occurrence of cyber incidents that could disrupt our operations, result in the loss of confidential information or damage our business relationships and reputation; (o) the impact of merger, acquisition and investment activity in the healthcare industry or otherwise affecting our tenants, borrowers or managers; and (p) the risk of catastrophic or extreme weather and other natural events and the physical effects of climate change.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

December 31,

September 30,

June 30,

March 31,

December 31,

2020

2020

2020

2020

2019

Assets

Real estate investments:

Land and improvements

$

2,261,415

$

2,268,583

$

2,258,699

$

2,246,245

$

2,285,648

Buildings and improvements

24,323,279

24,196,730

23,964,691

23,826,989

24,386,051

Construction in progress

265,748

567,052

496,349

505,648

461,815

Acquired lease intangibles

1,230,886

1,246,312

1,242,414

1,243,571

1,308,077

Operating lease assets

346,372

386,946

389,302

391,908

385,225

28,427,700

28,665,623

28,351,455

28,214,361

28,826,816

Accumulated depreciation and amortization

(7,877,665

)

(7,687,211

)

(7,453,251

)

(7,241,597

)

(7,092,243

)

Net real estate property

20,550,035

20,978,412

20,898,204

20,972,764

21,734,573

Secured loans receivable and investments, net

605,567

604,452

681,831

623,716

704,612

Investments in unconsolidated real estate entities

443,688

162,860

166,039

165,745

45,022

Net real estate investments

21,599,290

21,745,724

21,746,074

21,762,225

22,484,207

Cash and cash equivalents

413,327

588,343

992,824

2,848,115

106,363

Escrow deposits and restricted cash

38,313

40,147

36,312

38,144

39,739

Goodwill

1,051,650

1,050,742

1,050,115

1,050,137

1,051,161

Assets held for sale

9,608

15,748

76,021

69,199

85,527

Deferred income tax assets, net

9,987

304

304

47,495

47,495

Other assets

807,229

779,475

687,738

802,513

877,716

Total assets

$

23,929,404

$

24,220,483

$

24,589,388

$

26,617,828

$

24,692,208

Liabilities and equity

Liabilities:

Senior notes payable and other debt

$

11,895,412

$

12,047,919

$

12,530,036

$

14,172,279

$

12,158,773

Accrued interest

111,444

97,828

117,687

87,245

111,115

Operating lease liabilities

209,917

247,255

248,912

250,357

251,196

Accounts payable and other liabilities

1,133,066

1,234,933

998,446

1,141,551

1,145,939

Liabilities related to assets held for sale

3,246

1,987

5,514

4,765

5,224

Deferred income tax liabilities

62,638

...

56,963

47,533

200,831

Total liabilities

13,415,723

13,683,633

13,957,558

15,703,730

13,873,078

Redeemable OP unitholder and noncontrolling interests

235,490

249,143

231,920

197,701

273,678

Commitments and contingencies

Equity:

Ventas stockholders’ equity:

Preferred stock, $1.00 par value; 10,000 shares authorized, unissued

Common stock, $0.25 par value; 374,609; 373,940; 373,113; 373,094; and 372,811; shares issued at December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020, and December 31, 2019, respectively

93,635

93,467

93,261

93,256

93,185

Capital in excess of par value

14,171,262

14,142,349

14,118,119

14,135,657

14,056,453

Accumulated other comprehensive loss

(54,354

)

(65,042

)

(82,761

)

(103,408

)

(34,564

)

Retained earnings (deficit)

(4,030,376

)

(3,972,647

)

(3,816,460

)

(3,491,696

)

(3,669,050

)

Treasury stock, 0; 33; 24; 22; and 2 shares at December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020, and December 31, 2019, respectively

(1,275

)

(947

)

(867

)

(132

)

Total Ventas stockholders’ equity

10,180,167

10,196,852

10,311,212

10,632,942

10,445,892

Noncontrolling interests

98,024

90,855

88,698

83,455

99,560

Total equity

10,278,191

10,287,707

10,399,910

10,716,397

10,545,452

Total liabilities and equity

$

23,929,404

$

24,220,483

$

24,589,388

$

26,617,828

$

24,692,208

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

For the Three Months Ended

For the Years Ended

December 31,

December 31,

2020

2019

2020

2019

Revenues

Rental income:

Triple-net leased

$

168,027

$

191,065

$

695,265

$

780,898

Office

199,931

210,423

799,627

828,978

367,958

401,488

1,494,892

1,609,876

Resident fees and services

529,739

568,271

2,197,160

2,151,533

Office building and other services revenue

4,522

2,988

15,191

11,156

Income from loans and investments

18,302

22,382

80,505

89,201

Interest and other income

644

875

7,609

10,984

Total revenues

921,165

996,004

3,795,357

3,872,750

Expenses

Interest

114,208

116,707

469,541

451,662

Depreciation and amortization

261,966

348,910

1,109,763

1,045,620

Property-level operating expenses:

Senior living

393,309

405,564

1,658,671

1,521,398

Office

64,420

68,277

256,612

260,249

Triple-net leased

5,156

6,469

22,160

26,561

462,885

480,310

1,937,443

1,808,208

Office building services costs

488

544

2,315

2,319

General, administrative and professional fees

29,537

39,621

130,158

158,726

Loss on extinguishment of debt, net

3,405

39

10,791

41,900

Merger-related expenses and deal costs

3,683

4,151

29,812

15,235

Allowance on loans receivable and investments

(10,416

)

24,238

Other

(16,043

)

(6,309

)

707

(10,339

)

Total expenses

849,713

983,973

3,714,768

3,513,331

Income before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests

71,452

12,031

80,589

359,419

Income (loss) from unconsolidated entities

17,705

167

1,844

(2,454

)

Gain on real estate dispositions

22,117

1,389

262,218

26,022

Income tax benefit (expense)

679

(694

)

96,534

56,310

Income from continuing operations

111,953

12,893

441,185

439,297

Net income

111,953

12,893

441,185

439,297

Net income attributable to noncontrolling interests

1,502

1,450

2,036

6,281

Net income attributable to common stockholders

$

110,451

$

11,443

$

439,149

$

433,016

Earnings per common share

Basic:

Income from continuing operations

$

0.30

$

0.03

$

1.18

$

1.20

Net income attributable to common stockholders

0.29

0.03

1.18

1.18

Diluted:

Income from continuing operations

$

0.30

$

0.03

$

1.17

$

1.19

Net income attributable to common stockholders

0.29

0.03

1.17

1.17

Weighted average shares used in computing earnings per common share

Basic

374,473

372,663

373,368

365,977

Diluted

377,696

376,453

376,503

369,886

QUARTERLY CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

For the Three Months Ended

December 31,

September 30,

June 30,

March 31,

December 31,

2020

2020

2020

2020

2019

Revenues

Rental income:

Triple-net leased

$

168,027

$

156,136

$

176,240

$

194,862

$

191,065

Office

199,931

198,376

192,925

208,395

210,423

367,958

354,512

369,165

403,257

401,488

Resident fees and services

529,739

541,322

549,329

576,770

568,271

Office building and other services revenue

4,522

3,868

3,673

3,128

2,988

Income from loans and investments

18,302

18,666

19,491

24,046

22,382

Interest and other income

644

572

1,540

4,853

875

Total revenues

921,165

918,940

943,198

1,012,054

996,004

Expenses

Interest

114,208

115,505

123,132

116,696

116,707

Depreciation and amortization

261,966

249,366

349,594

248,837

348,910

Property-level operating expenses:

Senior living

393,309

422,653

432,578

410,131

405,564

Office

64,420

66,934

60,752

64,506

68,277

Triple-net leased

5,156

5,398

5,275

6,331

6,469

462,885

494,985

498,605

480,968

480,310

Office building services costs

488

557

543

727

544

General, administrative and professional fees

29,537

32,081

28,080

40,460

39,621

Loss on extinguishment of debt, net

3,405

7,386

39

Merger-related expenses and deal costs

3,683

11,325

6,586

8,218

4,151

Allowance on loans receivable and investments

(10,416

)

4,999

29,655

Other

(16,043

)

5,681

5,286

5,783

(6,309

)

Total expenses

849,713

921,885

1,041,481

901,689

983,973

Income (loss) before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests

71,452

(2,945

)

(98,283

)

110,365

12,031

Income (loss) from unconsolidated entities

17,705

865

(5,850

)

(10,876

)

167

Gain on real estate dispositions

22,117

12,622

1,254

226,225

1,389

Income tax benefit (expense)

679

3,195

(56,356

)

149,016

(694

)

Income (loss) from continuing operations

111,953

13,737

(159,235

)

474,730

12,893

Net income (loss)

111,953

13,737

(159,235

)

474,730

12,893

Net income (loss) attributable to noncontrolling interests

1,502

986

(2,065

)

1,613

1,450

Net income (loss) attributable to common stockholders

$

110,451

$

12,751

$

(157,170

)

$

473,117

$

11,443

Earnings per common share

Basic:

Income (loss) from continuing operations

$

0.30

$

0.04

$

(0.43

)

$

1.27

$

0.03

Net income (loss) attributable to common stockholders

0.29

0.03

(0.42

)

1.27

0.03

Diluted:1

Income (loss) from continuing operations

$

0.30

$

0.04

$

(0.43

)

$

1.26

$

0.03

Net income (loss) attributable to common stockholders

0.29

0.03

(0.42

)

1.26

0.03

Weighted average shares used in computing earnings per common share

Basic

374,473

373,177

372,982

372,829

372,663

Diluted

377,696

376,295

376,024

375,997

376,453

1

Potential common shares are not included in the computation of diluted earnings per share when a loss from continuing operations exists as the effect would be an antidilutive per share amount.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For the Years Ended December 31,

2020

2019

Cash flows from operating activities:

Net income

$

441,185

$

439,297

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

1,109,763

1,045,620

Amortization of deferred revenue and lease intangibles, net

(40,856

)

(7,967

)

Other non-cash amortization

20,719

22,985

Allowance on loans receivable and investments

24,238

Stock-based compensation

21,487

33,923

Straight-lining of rental income

103,082

(30,073

)

Loss on extinguishment of debt, net

10,791

41,900

Gain on real estate dispositions

(262,218

)

(26,022

)

Gain on real estate loan investments

(167

)

Income tax benefit

(101,985

)

(58,918

)

(Income) loss from unconsolidated entities

(1,832

)

2,464

Distributions from unconsolidated entities

4,920

1,600

Other

(779

)

13,264

Changes in operating assets and liabilities:

Increase in other assets

(68,233

)

(76,693

)

Increase in accrued interest

276

9,737

Increase in accounts payable and other liabilities

189,785

26,666

Net cash provided by operating activities

1,450,176

1,437,783

Cash flows from investing activities:

Net investment in real estate property

(78,648

)

(958,125

)

Investment in loans receivable

(115,163

)

(1,258,187

)

Proceeds from real estate disposals

1,044,357

147,855

Proceeds from loans receivable

119,011

1,017,309

Development project expenditures

(380,413

)

(403,923

)

Capital expenditures

(148,234

)

(156,724

)

Distributions from unconsolidated entities

172

Investment in unconsolidated entities

(286,822

)

(3,855

)

Insurance proceeds for property damage claims

207

30,179

Net cash provided by (used in) investing activities

154,295

(1,585,299

)

Cash flows from financing activities:

Net change in borrowings under revolving credit facilities

(88,868

)

(569,891

)

Net change in borrowings under commercial paper program

(565,524

)

565,524

Proceeds from debt

733,298

3,013,191

Repayment of debt

(479,539

)

(2,623,916

)

Purchase of noncontrolling interests

(8,239

)

Payment of deferred financing costs

(8,379

)

(21,403

)

Issuance of common stock, net

55,362

942,085

Cash distribution to common stockholders

(928,809

)

(1,157,720

)

Cash distribution to redeemable OP unitholders

(7,283

)

(9,218

)

Cash issued for redemption of OP Units

(575

)

(2,203

)

Contributions from noncontrolling interests

1,314

6,282

Distributions to noncontrolling interests

(12,946

)

(9,717

)

Proceeds from stock option exercises

15,103

36,179

Other

(4,936

)

(8,519

)

Net cash (used in) provided by financing activities

(1,300,021

)

160,674

Net increase in cash, cash equivalents and restricted cash

304,450

13,158

Effect of foreign currency translation

1,088

1,480

Cash, cash equivalents and restricted cash at beginning of period

146,102

131,464

Cash, cash equivalents and restricted cash at end of period

$

451,640

$

146,102

Supplemental schedule of non-cash activities:

Assets acquired and liabilities assumed from acquisitions and other:

Real estate investments

$

170,484

$

1,057,138

Other assets

1,224

11,140

Debt

55,368

907,746

Other liabilities

2,707

47,121

Deferred income tax liability

337

95

Noncontrolling interests

20,259

113,316

Equity issued for redemption of OP Units

127

QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For the Three Months Ended

December 31,

September 30,

June 30,

March 31,

December 31,

2020

2020

2020

2020

2019

Cash flows from operating activities:

Net income (loss)

$

111,953

$

13,737

$

(159,235

)

$

474,730

$

12,893

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

261,966

249,366

349,594

248,837

348,910

Amortization of deferred revenue and lease intangibles, net

(15,513

)

(19,009

)

(3,361

)

(2,973

)

(1,483

)

Other non-cash amortization

5,508

5,558

5,802

3,851

6,075

Allowance on loans receivable and investments

(10,416

)

4,999

29,655

Stock-based compensation

4,165

5,765

1,043

10,514

7,253

Straight-lining of rental income

(4,052

)

15,635

98,287

(6,788

)

(4,393

)

Loss on extinguishment of debt, net

3,405

7,386

39

Gain on real estate dispositions

(22,117

)

(12,622

)

(1,254

)

(226,225

)

(1,389

)

Gain on real estate loan investments

(167

)

Income tax (benefit) expense

(2,283

)

(4,575

)

55,146

(150,273

)

1,331

(Income) loss from unconsolidated entities

(17,701

)

(865

)

5,858

10,876

(157

)

Distributions from unconsolidated entities

1,960

1,360

1,600

200

Other

(16,394

)

2,859

8,951

3,805

4,028

Changes in operating assets and liabilities:

(Increase) decrease in other assets

(5

)

(55,765

)

1,305

(13,768

)

(17,327

)

Increase (decrease) in accrued interest

13,251

(20,069

)

30,126

(23,032

)

25,646

(Decrease) increase in accounts payable and other liabilities

(17,964

)

240,642

(16,358

)

(16,535

)

(27,391

)

Net cash provided by operating activities

295,763

434,402

405,559

314,452

354,235

Cash flows from investing activities:

Net investment in real estate property

(1,023

)

(156

)

2,070

(79,539

)

(18,320

)

Investment in loans receivable

(2,016

)

(45,857

)

(66,239

)

(1,051

)

(610

)

Proceeds from real estate disposals

361,753

54,800

2,365

625,439

70,300

Proceeds from loans receivable

12,045

191

7,658

99,117

8,626

Development project expenditures

(70,446

)

(129,569

)

(86,169

)

(94,229

)

(174,078

)

Capital expenditures

(53,827

)

(40,888

)

(26,730

)

(26,789

)

(56,937

)

Distributions from unconsolidated entities

21

Investment in unconsolidated entities

(278,990

)

33

(2,056

)

(5,809

)

(2,144

)

Insurance proceeds (expense) for property damage claims

174

(9

)

42

9,722

Net cash (used in) provided by investing activities

(32,330

)

(161,455

)

(169,101

)

517,181

(163,420

)

Cash flows from financing activities:

Net change in borrowings under revolving credit facilities

(14,724

)

(539,560

)

(2,296,737

)

2,762,153

(848,568

)

Net change in borrowings under commercial paper program

(565,524

)

261,016

Proceeds from debt

75,741

17,024

557,774

82,759

806,614

Repayment of debt

(352,011

)

(16,227

)

(48,328

)

(62,973

)

(167,781

)

Purchase of noncontrolling interests

(8,239

)

Payment of deferred financing costs

(815

)

(15

)

(5,586

)

(1,963

)

(3,536

)

Issuance of common stock, net

18,967

36,395

(165

)

Cash distribution to common stockholders

(168,446

)

(168,078

)

(295,981

)

(296,304

)

(295,931

)

Cash distribution to redeemable OP unitholders

(1,329

)

(1,326

)

(2,303

)

(2,325

)

(2,336

)

Cash issued for redemption of OP Units

(5

)

(570

)

(1,842

)

Contributions from noncontrolling interests

176

792

191

155

1,323

Distributions to noncontrolling interests

(3,280

)

(3,373

)

(3,750

)

(2,543

)

(3,314

)

Proceeds from stock option exercises

11,585

129

3,389

2,045

Other

53

(98

)

63

(4,954

)

(1,918

)

Net cash (used in) provided by financing activities

(442,322

)

(674,471

)

(2,094,528

)

1,911,300

(254,393

)

Net (decrease) increase in cash, cash equivalents and restricted cash

(178,889

)

(401,524

)

(1,858,070

)

2,742,933

(63,578

)

Effect of foreign currency translation

2,039

878

947

(2,776

)

1,084

Cash, cash equivalents and restricted cash at beginning of period

628,490

1,029,136

2,886,259

146,102

208,596

Cash, cash equivalents and restricted cash at end of period

$

451,640

$

628,490

$

1,029,136

$

2,886,259

$

146,102

Supplemental schedule of non-cash activities:

Assets acquired and liabilities assumed from acquisitions and other:

Real estate investments

$

1,000

$

92,373

$

76,578

$

533

$

657

Other assets

610

558

56

17

Debt

55,368

Other liabilities

610

1,699

398

785

Deferred income tax liability

337

95

Noncontrolling interests

20,068

191

(206

)

Equity issued for redemption of OP Units

127

NON-GAAP FINANCIAL MEASURES RECONCILIATION

Funds From Operations Attributable to Common Stockholders (FFO)1

and Funds Available for Distribution Attributable to Common Stockholders (FAD)1

(Dollars in thousands, except per share amounts)

FY YoY

2019

2020

Growth

Q4

FY

Q1

Q2

Q3

Q4

FY

19-'20

Net income (loss) attributable to common stockholders

$

11,443

$

433,016

$

473,117

$

(157,170

)

$

12,751

$

110,451

$

439,149

1

%

Net income (loss) attributable to common stockholders per share2

$

0.03

$

1.17

$

1.26

$

(0.42

)

$

0.03

$

0.29

$

1.17

%

Adjustments:

Depreciation and amortization on real estate assets

347,371

1,039,550

247,330

348,110

247,969

260,705

1,104,114

Depreciation on real estate assets related to noncontrolling interests

(3,682

)

(9,762

)

(3,843

)

(4,068

)

(4,475

)

(4,381

)

(16,767

)

Depreciation on real estate assets related to unconsolidated entities

311

187

561

1,307

1,360

1,758

4,986

Gain on real estate dispositions

(1,389

)

(26,022

)

(226,225

)

(1,254

)

(12,622

)

(22,117

)

(262,218

)

(Loss) gain on real estate dispositions related to noncontrolling interests

(11

)

343

(6

)

(3

)

(9

)

Gain on real estate dispositions related to unconsolidated entities

(395

)

(1,263

)

Subtotal: FFO add-backs

342,205

1,003,033

17,817

344,092

232,232

235,965

830,106

Subtotal: FFO add-backs per share

$

0.91

$

2.71

$

0.05

$

0.92

$

0.62

$

0.62

$

2.20

FFO (Nareit) attributable to common stockholders

$

353,648

$

1,436,049

$

490,934

$

186,922

$

244,983

$

346,416

$

1,269,255

(12

%)

FFO (Nareit) attributable to common stockholders per share

$

0.94

$

3.88

$

1.31

$

0.50

$

0.65

$

0.92

$

3.37

(13

%)

Adjustments:

Change in fair value of financial instruments

(22

)

(78

)

(10

)

(13

)

1,157

(23,062

)

(21,928

)

Non-cash income tax expense (benefit)

1,330

(58,918

)

(140,895

)

55,505

(4,763

)

(7,961

)

(98,114

)

Loss on extinguishment of debt, net

39

41,900

7,386

3,405

10,791

Loss (gain) on non-real estate dispositions related to unconsolidated entities

19

(18

)

239

(244

)

(592

)

(597

)

Merger-related expenses, deal costs and re-audit costs

5,089

18,208

8,773

6,605

12,793

6,519

34,690

Amortization of other intangibles

121

484

118

118

118

118

472

Other items related to unconsolidated entities

374

3,291

(875

)

(263

)

290

234

(614

)

Non-cash impact of changes to equity plan

1,165

7,812

6,895

(3,337

)

(1,923

)

(2,087

)

(452

)

Natural disaster (recoveries) expenses, net

(10,704

)

(25,683

)

941

252

125

(71

)

1,247

Impact of Holiday lease termination

(50,184

)

(50,184

)

Write-off of straight-line rental income, net of noncontrolling interests

52,368

18,408

87

70,863

Allowance on loan investments and impairment of unconsolidated entities, net of noncontrolling interests

40,320

4,635

(10,412

)

34,543

Subtotal: normalized FFO add-backs

(2,589

)

(13,002

)

(124,814

)

101,371

37,982

(33,822

)

(19,283

)

Subtotal: normalized FFO add-backs per share

$

(0.01

)

$

(0.04

)

$

(0.33

)

$

0.27

$

0.10

$

(0.09

)

$

(0.05

)

Normalized FFO attributable to common stockholders

$

351,059

$

1,423,047

$

366,120

$

288,293

$

282,965

$

312,594

$

1,249,972

(12

%)

Normalized FFO attributable to common stockholders per share

$

0.93

$

3.85

$

0.97

$

0.77

$

0.75

$

0.83

$

3.32

(14

%)

Non-cash items included in normalized FFO:

Amortization of deferred revenue and lease intangibles, net

(1,483

)

(7,967

)

(2,973

)

(3,362

)

(19,009

)

(15,513

)

(40,857

)

Other non-cash amortization, including fair market value of debt

6,075

22,985

3,851

5,803

5,558

5,508

20,720

Stock-based compensation

6,088

26,111

3,619

4,380

7,688

6,252

21,939

Straight-lining of rental income

(4,393

)

(30,073

)

(6,788

)

(5,526

)

(4,648

)

(4,052

)

(21,014

)

Subtotal: non-cash items included in normalized FFO

6,287

11,056

(2,291

)

1,295

(10,411

)

(7,805

)

(19,212

)

Cash impact of Brookdale lease modification

161,533

161,533

Cash impact of Holiday lease termination

33,795

33,795

FAD Capital Expenditures3

(55,400

)

(152,582

)

(24,972

)

(26,102

)

(39,955

)

(52,645

)

(143,674

)

Normalized FAD attributable to common stockholders

$

301,946

$

1,281,521

$

338,857

$

297,281

$

394,132

$

252,144

$

1,282,414

0

%

Merger-related expenses, deal costs and re-audit costs

(5,089

)

(18,208

)

(8,773

)

(6,605

)

(12,793

)

(6,519

)

(34,690

)

Other items related to unconsolidated entities

(374

)

(3,291

)

875

263

(290

)

(234

)

614

FAD attributable to common stockholders

$

296,483

$

1,260,022

$

330,959

$

290,939

$

381,049

$

245,391

$

1,248,338

(1

%)

Weighted average diluted shares

376,453

369,886

375,997

376,024

376,295

377,696

376,503

1

Per share quarterly amounts may not add to annual per share amounts due to material changes in the Company’s weighted average diluted share count, if any. Per share amounts may not add to total per share amounts due to rounding.

2

Potential common shares are not included in the computation of diluted earnings per share when a loss from continuing operations exists, as the effect would be an antidilutive per share amount.

3

2019 FAD Capital Expenditures have been updated to exclude the impact of Initial Capital Expenditures. Impact on reported values are as follows: Q4 2019 ($1.5M) and FY 2019 ($4.1M).

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. However, since real estate values historically have risen or fallen with market conditions, many industry investors deem presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For that reason, the Company considers FFO, normalized FFO, FAD and normalized FAD to be appropriate supplemental measures of operating performance of an equity REIT. In particular, the Company believes that normalized FFO is useful because it allows investors, analysts and Company management to compare the Company’s operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences caused by non-recurring items and other non-operational events such as transactions and litigation. In some cases, the Company provides information about identified non-cash components of FFO and normalized FFO because it allows investors, analysts and Company management to assess the impact of those items on the Company’s financial results.

The Company uses the National Association of Real Estate Investment Trusts ("Nareit") definition of FFO. Nareit defines FFO as net income attributable to common stockholders (computed in accordance with GAAP), excluding gains or losses from sales of real estate property, including gains or losses on re-measurement of equity method investments, and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and entities. Adjustments for unconsolidated partnerships and entities will be calculated to reflect FFO on the same basis. The Company defines normalized FFO as FFO excluding the following income and expense items (which may be recurring in nature): (a) merger-related costs and expenses, including amortization of intangibles, transition and integration expenses, and deal costs and expenses, including expenses and recoveries relating to acquisition lawsuits; (b) the impact of any expenses related to asset impairment and valuation allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of the Company’s debt; (c) the non-cash effect of income tax benefits or expenses, the non-cash impact of changes to the Company’s executive equity compensation plan, derivative transactions that have non-cash mark to market impacts on the Company’s income statement and non-cash charges related to leases; (d) the financial impact of contingent consideration, severance-related costs and charitable donations made to the Ventas Charitable Foundation; (e) gains and losses for non-operational foreign currency hedge agreements and changes in the fair value of financial instruments; (f) gains and losses on non-real estate dispositions and other unusual items related to unconsolidated entities; (g) expenses related to the re-audit and re-review in 2014 of the Company’s historical financial statements and related matters; (h) net expenses or recoveries related to natural disasters and (i) any other incremental items set forth in the normalized FFO reconciliation included herein.

Normalized FAD represents normalized FFO excluding non-cash components and straight-line rent adjustments, deducting FAD Capital Expenditures plus cash received related to lease terminations and modifications. FAD Capital Expenditures are (i) Ventas-invested capital expenditures, whether routine or non-routine, that extend the useful life of a property but are not expected to generate incremental income for the Company (ii) Office Building and Triple-Net leasing commissions paid to third-party agents and (iii) capital expenditures for second-generation tenant improvements. It excludes (i) costs for a first generation lease (e.g., a development project) or related to properties that have undergone redevelopment and (ii) Initial Capital Expenditures, which are defined as capital expenditures required to bring a newly acquired or newly transitioned property up to standard. Initial Capital Expenditures are typically incurred within the first 12 months after acquisition or transition, respectively.

FAD represents normalized FAD after subtracting merger-related expenses, deal costs, re-audit costs and unusual items related to unconsolidated entities.

FFO, normalized FFO, FAD and normalized FAD presented herein may not be comparable to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. FFO, normalized FFO, FAD and normalized FAD should not be considered as alternatives to net income attributable to common stockholders (determined in accordance with GAAP) as indicators of the Company’s financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of the Company’s liquidity, nor are they necessarily indicative of sufficient cash flow to fund all of the Company’s needs. The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, FFO, normalized FFO, FAD and normalized FAD should be examined in conjunction with net income attributable to common stockholders as presented elsewhere herein.

NON-GAAP FINANCIAL MEASURES RECONCILIATION

FFO Attributable to Common Stockholders Q1 2021 Guidance1,2

(Dollars in millions, except per share amounts)

Q1 2021 Guidance

Tentative / Preliminary and Subject to Change

Q1 2021 - Guidance

Q1 2021 - Per Share

Low

High

Low

High

Net Income Attributable to Common Stockholders

($27

)

($4

)

($0.07

)

($0.01

)

Depreciation and Amortization Adjustments

236

230

0.63

0.61

Gain on Real Estate Dispositions

(2

)

(2

)

(0.01

)

(0.00

)

Other Adjustments 3

(0

)

(0

)

(0.00

)

(0.00

)

FFO (Nareit) Attributable to Common Stockholders

$207

$224

$0.55

$0.59

Merger-Related Expenses, Deal Costs and Re-Audit Costs

5

6

0.01

0.02

Natural Disaster Expenses (Recoveries), Net

0.00

0.00

Other Adjustments 3

38

38

0.10

0.10

Normalized FFO Attributable to Common Stockholders

$250

$268

$0.66

$0.71

% Year-Over-Year Growth

(32

%)

(27

%)

Weighted Average Diluted Shares (in millions)

378

378

1

The Company’s guidance constitutes forward-looking statements within the meaning of the federal securities laws and is based on a number of assumptions that are subject to change and many of which are outside the control of the Company. Actual results may differ materially from the Company’s expectations depending on factors discussed in this press release and the Company’s filings with the Securities and Exchange Commission.

2

Per share quarterly amounts may not add to annual per share amounts due to changes in the Company's weighted average diluted share count, if any.

3

Other Adjustments include the categories of adjustments presented in our "Non-GAAP Financial Measures Reconciliation – Funds From Operations Attributable to Common Stockholders (FFO) and Funds Available for Distribution Attributable to Common Stockholders (FAD)" above.

NON-GAAP FINANCIAL MEASURES RECONCILIATION

Net Debt to Adjusted Pro Forma EBITDA1

(Dollars in thousands)

For the Year Ended

For the Three Months Ended

December 31, 2020

December 31, 2020

September 30, 2020

Net income attributable to common stockholders

$

439,149

$

110,451

$

12,751

Adjustments:

Interest

469,541

114,208

115,505

Loss on extinguishment of debt, net

10,791

3,405

7,386

Taxes (including tax amounts in general, administrative and professional fees)

(91,389

)

667

(1,849

)

Depreciation and amortization

1,109,763

261,966

249,366

Non-cash stock-based compensation expense

21,487

4,165

5,765

Merger-related expenses, deal costs and re-audit costs

29,811

3,683

11,325

Net income attributable to noncontrolling interests, adjusted for partners’ share of consolidated entity EBITDA

(24,381

)

(6,285

)

(6,359

)

Loss from unconsolidated entities, adjusted for Ventas share of EBITDA from unconsolidated entities

59,631

8,982

11,811

Gain on real estate dispositions

(262,218

)

(22,117

)

(12,622

)

Unrealized foreign currency gains

(439

)

(184

)

(146

)

Change in fair value of financial instruments

(21,928

)

(23,061

)

1,155

Natural disaster expenses (recoveries), net

1,203

41

181

Write-off of straight-line rental income from Holiday lease termination

49,611

Write-off of straight-line rental income, net of noncontrolling interests

70,863

87

18,408

Allowance on loan investments and impairment of unconsolidated entities, net of noncontrolling interests

23,879

(10,411

)

4,635

Adjusted EBITDA

$

1,885,374

$

445,597

$

417,312

Adjustments for current period activity

(7,442

)

(7,051

)

(1,385

)

Adjusted Pro Forma EBITDA

$

1,877,932

$

438,546

$

415,927

Adjusted Pro Forma EBITDA annualized

$

1,754,184

$

1,663,708

Total debt

$

11,895,412

$

11,895,412

$

12,047,919

Debt on assets held for sale

2,634

2,634

Cash

(413,327

)

(413,327

)

(588,343

)

Restricted cash pertaining to debt

(20,477

)

(20,477

)

(21,021

)

Partners’ share of consolidated debt

(271,557

)

(271,557

)

(259,994

)

Ventas share of non-consolidated debt

213,013

213,013

120,807

Net debt

$

11,405,698

$

11,405,698

$

11,299,368

Net debt to Adjusted Pro Forma EBITDA

6.1

x

6.5

x

6.8

x

1

Totals may not add due to rounding.

The table above illustrates net debt to adjusted pro forma earnings before interest, taxes, depreciation and amortization (including non-cash stock-based compensation expense, asset impairment and valuation allowances), excluding gains or losses on extinguishment of debt, partners’ share of EBITDA of consolidated entities, merger-related expenses and deal costs, expenses related to the re-audit and re-review in 2014 of the Company’s historical financial statements, net gains or losses on real estate activity, gains or losses on re-measurement of equity interest upon acquisition, changes in the fair value of financial instruments, unrealized foreign currency gains or losses, net expenses or recoveries related to natural disasters and non-cash charges related to leases, and including (a) Ventas’ share of EBITDA from unconsolidated entities and (b) other immaterial or identified items ("Adjusted EBITDA").

The information above considers the pro forma effect on Adjusted EBITDA of the Company’s activity during the three months and year ended December 31, 2020 and the three months ended September 30, 2020, as if the transactions had been consummated as of the beginning of the period ("Adjusted Pro Forma EBITDA") and considers any other incremental items set forth in the Adjusted Pro Forma EBITDA reconciliation included herein.

The Company believes that net debt, Adjusted Pro Forma EBITDA and net debt to Adjusted Pro Forma EBITDA are useful to investors, analysts and Company management because they allow the comparison of the Company’s credit strength between periods and to other real estate companies without the effect of items that by their nature are not comparable from period to period.

NON-GAAP FINANCIAL MEASURES RECONCILIATION

Net Operating Income (NOI) and Same-Store Cash NOI by Segment (Constant Currency)

(Dollars in thousands)

For the Three Months Ended December 31, 2020 and 2019

Triple-Net

Senior Housing
Operating

Office

Non-Segment

Total

For the Three Months Ended December 31, 2020

Net income attributable to common stockholders

$

110,451

Adjustments:

Interest and other income

(644

)

Interest expense

114,208

Depreciation and amortization

261,966

General, administrative and professional fees

29,537

Loss on extinguishment of debt, net

3,405

Merger-related expenses and deal costs

3,683

Allowance on loans receivable and investments

(10,416

)

Other

(16,043

)

Income from unconsolidated entities

(17,705

)

Gain on real estate dispositions

(22,117

)

Income tax benefit

(679

)

Net income attributable to noncontrolling interests

1,502

Reported segment NOI

$

162,871

$

136,430

$

136,827

$

21,020

$

457,148

Adjustments to Cash NOI:

Straight-lining of rental income

(1,879

)

(2,272

)

(4,151

)

Non-cash rental income

(12,707

)

(2,390

)

(15,097

)

Write-off of straight-line rental income

14

85

99

NOI not included in cash NOI1

(2,675

)

253

(1,247

)

(3,669

)

Non-segment NOI

(21,020

)

(21,020

)

Cash NOI

145,624

136,683

131,003

413,310

Adjustments to Same-store NOI:

Cash NOI not included in same-store

(1,416

)

(15,940

)

(4,912

)

(22,268

)

Same-store cash NOI (constant currency)

$

144,208

$

120,743

$

126,091

$

$

391,042

Percentage (decrease) increase

(10.0

%)

(24.7

%)

2.9

%

(11.8

%)

For the Three Months Ended December 31, 2019

Net income attributable to common stockholders

$

11,443

Adjustments:

Interest and other income

(875

)

Interest expense

116,707

Depreciation and amortization

348,910

General, administrative and professional fees

39,621

Loss on extinguishment of debt, net

39

Merger-related expenses and deal costs

4,151

Other

(6,309

)

Income from unconsolidated entities

(167

)

Gain on real estate dispositions

(1,389

)

Income tax expense

694

Net income attributable to noncontrolling interests

1,450

Reported segment NOI

$

184,596

$

162,707

$

143,664

$

23,308

$

514,275

Adjustments to Cash NOI:

Straight-lining of rental income

(112

)

(4,281

)

(4,393

)

Non-cash rental income

(364

)

(762

)

(1,126

)

Cash modification fees

(180

)

(180

)

NOI not included in cash NOI1

(23,601

)

11

(11,713

)

(35,303

)

Non-segment NOI

(23,308

)

(23,308

)

NOI impact from change in FX

155

516

671

Cash NOI

$

160,674

$

163,234

$

126,728

$

$

450,636

Adjustments to Same-store NOI:

Cash NOI not included in same-store

(399

)

(2,776

)

(4,237

)

(7,412

)

NOI impact from change in FX not in same-store

(13

)

(13

)

Same-store cash NOI (constant currency)

$

160,275

$

160,445

$

122,491

$

$

443,211

1

Excludes sold assets, Assets Held for Sale, development properties not yet operational and land parcels.

For the Three Months Ended December 31, 2020 and September 30, 2020

Triple-Net

Senior Housing
Operating

Office

Non-Segment

Total

For the Three Months Ended December 31, 2020

Net income attributable to common stockholders

$

110,451

Adjustments:

Interest and other income

(644

)

Interest expense

114,208

Depreciation and amortization

261,966

General, administrative and professional fees

29,537

Loss on extinguishment of debt, net

3,405

Merger-related expenses and deal costs

3,683

Allowance on loans receivable and investments

(10,416

)

Other

(16,043

)

Income from unconsolidated entities

(17,705

)

Gain on real estate dispositions

(22,117

)

Income tax benefit

(679

)

Net income attributable to noncontrolling interests

1,502

Reported segment NOI

$

162,871

$

136,430

$

136,827

$

21,020

$

457,148

Adjustments to Cash NOI:

Straight-lining of rental income

(1,879

)

(2,272

)

(4,151

)

Non-cash rental income

(12,707

)

(2,390

)

(15,097

)

Write-off of straight-line rental income

14

85

99

NOI not included in cash NOI1

(2,675

)

253

(1,247

)

(3,669

)

Non-segment NOI

(21,020

)

(21,020

)

Cash NOI

145,624

136,683

131,003

413,310

Adjustments to Same-store NOI:

Cash NOI not included in same-store

(896

)

(865

)

(3,209

)

(4,970

)

Same-store cash NOI (constant currency)

$

144,728

$

135,818

$

127,794

$

$

408,340

Percentage (decrease) increase

(52.9

%)

13.4

%

1.5

%

(26.1

%)

Adjusted percentage (decrease) increase - constant currency

(0.6

%)

13.4

%

1.5

%

4.4

%

For the Three Months Ended September 30, 2020

Net income attributable to common stockholders

$

12,751

Adjustments:

Interest and other income

(572

)

Interest expense

115,505

Depreciation and amortization

249,366

General, administrative and professional fees

32,081

Loss on extinguishment of debt, net

7,386

Merger-related expenses and deal costs

11,325

Allowance on loans receivable and investments

4,999

Other

5,681

Income from unconsolidated entities

(865

)

Gain on real estate dispositions

(12,622

)

Income tax benefit

(3,195

)

Net income attributable to noncontrolling interests

986

Reported segment NOI

$

150,738

$

118,669

$

133,325

$

20,094

$

422,826

Adjustments to Cash NOI:

Straight-lining of rental income

(2,072

)

(2,576

)

(4,648

)

Non-cash rental income

(12,687

)

(5,936

)

(18,623

)

Cash impact of Brookdale lease modification

161,533

161,533

Write-off of straight-line rental income

14,312

5,970

20,282

NOI not included in cash NOI1

(4,581

)

556

(1,708

)

(5,733

)

Non-segment NOI

(20,094

)

(20,094

)

NOI impact from change in FX

143

885

1,028

Cash NOI

$

307,386

$

120,110

$

129,075

$

$

556,571

Adjustments to Same-store NOI:

Cash NOI not included in same-store

(299

)

(274

)

(3,128

)

(3,701

)

NOI impact from change in FX not in same-store

(41

)

(41

)

Same-store cash NOI (constant currency)

$

307,087

$

119,795

$

125,947

$

$

552,829

Adjusted Same-store cash NOI:

Less cash impact of Brookdale lease modification

(161,533

)

(161,533

)

Adjusted Same-store cash NOI - constant currency

$

145,554

$

119,795

$

125,947

$

$

391,296

1

Excludes sold assets, Assets Held for Sale, development properties not yet operational and land parcels.

For the Year Ended December 31, 2020 and 2019

Triple-Net

Senior Housing
Operating

Office

Non-Segment

Total

For the Year Ended December 31, 2020

Net income attributable to common stockholders

$

439,149

Adjustments:

Interest and other income

(7,609

)

Interest expense

469,541

Depreciation and amortization

1,109,763

General, administrative and professional fees

130,158

Loss on extinguishment of debt, net

10,791

Merger-related expenses and deal costs

29,812

Allowance on loans receivable and investments

24,238

Other

707

Income from unconsolidated entities

(1,844

)

Gain on real estate dispositions

(262,218

)

Income tax benefit

(96,534

)

Net income attributable to noncontrolling interests

2,036

Reported segment NOI

$

673,105

$

538,489

$

549,375

$

87,021

$

1,847,990

Adjustments to Cash NOI:

Straight-lining of rental income

(8,833

)

(12,286

)

(21,119

)

Non-cash rental income

(28,726

)

(10,668

)

(39,394

)

Cash modification fees

3,029

(1,000

)

2,029

Cash impact of Brookdale lease modification

161,533

161,533

Impact of Holiday lease termination

(50,184

)

(50,184

)

Write-off of straight-line rental income

67,636

6,953

74,589

NOI not included in cash NOI1

(34,803

)

(930

)

(12,082

)

(47,815

)

Non-segment NOI

(87,021

)

(87,021

)