Ventas, Inc. · NYSE:VTR
Ventas — Investor Presentation (March 2016)
59 slides from Ventas's investor presentation, March 2016
Slide 1: Excellence. Sustained. Investor Presentation
EXCELLENCE.SUSTAINED. INVESTOR PRESENTATION MARCH 2016
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains “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 ex
Slide 3: Table of Contents
TABLE OF CONTENTS Ventas Investment Thesis (3) Ventas Today (4 – 9) Ventas Strategy Overview (10 – 19) Operational Excellence in Seniors Housing (20 – 27) The Hospital Growth Opportunity (28 – 36) Our Medical Office Building Platform (37 – 39) Role of Post-Acute Care (40 – 44) Capital Allocation and
Slide 4: Ventas Investment Thesis
VENTAS INVESTMENT THESIS EXCELLENCE. SUSTAINED. We provide attractive capital to leading healthcare providers Healthcare is a great place to be in real estate We have an excellent track record for over a decade: Excellence. Demonstrated. We are best placed to sustain excellence because we have the b
Slide 5: Ventas Today
VENTAS TODAY EXCELLENCE. SUSTAINED.
Slide 6: Stability, Growth and Income with Strong Balance Sheet
STABILITY, GROWTH AND INCOME WITH STRONG BALANCE SHEET 2016 Norm. FFO/Share 2015 Comp. Norm. Leading S&P 500 Diversified Portfolio1 Guidance1 FFO/Share Growth Company1 $4.07 - $4.15 9% <1,300 $30B Assets Enterprise Value 10-Year FFO/Share TSR CAGR Since Completed Spin-Off Credit Rating Growth3 12/31
Slide 7: Enhanced VTR Portfolio in 2015
ENHANCED VTR PORTFOLIO IN 2015 Spin-Off of Post-Acute / SNF Acquisition of Ardent Portfolio • Innovative, tax efficient $4BN spin-off at • New vector for growth in attractive and large attractive valuation U.S. Acute Care Hospital segment • Reduced SNF exposure from 17% to 4% • Top-ten operator and
Slide 8: Ventas Today – A Leading, Diverse Healthcare REIT
VENTAS TODAY – A LEADING, DIVERSE HEALTHCARE REIT WITH STRONG CASH FLOW Asset Class Diversification Operator Diversification Loans International Hospital U.S. Acute Care Hospitals 1% Seniors Housing - Operating Other Skilled Nursing Atria 4% 5% 19% Specialty 4% Hospitals 27% 31% 8% $1.9B $1.9B NOI 6
Slide 9: Meeting Healthcare Real Estate Needs
MEETING HEALTHCARE REAL ESTATE NEEDS PROVIDING CAPITAL TO LEADING HEALTHCARE PROVIDERS TO HELP THEM GROW, CONSOLIDATE AND SERVE RESIDENTS AND PATIENTS Note: Represents 4Q’15 reported asset count. 8
Slide 10: Growth and Income: Industry Leading Dividend Growth
GROWTH AND INCOME INDUSTRY LEADING DIVIDEND GROWTH 3-yr CAGR 5-yr CAGR 7-yr CAGR DIVIDEND ($) / SHARE (INDEXED TO 2008) (2012-2015) (2010-2015) (2008-2015) 1.8 1.6 VTR 10.3% 9.2% 7.2% 1.4 4.2% 4.0% 3.1% HCP 3.7% 3.8% 2.9% 1.2 HCN 1.0 0.8 2008 2009 2010 2011 2012 2013 2014 2015 Source: Company financ
Slide 11: Ventas Strategy Overview
VENTAS STRATEGY OVERVIEW EXCELLENCE. SUSTAINED.
Slide 12: What's the Winning Formula?
WHAT'S THE WINNING FORMULA? ENSURING EXCELLENCE. SUSTAINED. OUR PEOPLE OUR PROCESSES PEOPLE OUR CULTURE ADVANTAGED REAL ADVANTAGE LEADING ESTATE ASSETS IN OPERATORS ATTRACTIVE PROPERTIES ACROSS THE PLATFORMS MARKETS SITES OF CARE 11
Slide 13: Our Foresight and Innovation
OUR FORESIGHT AND INNOVATION CHANGED THE WAY INVESTORS THINK ABOUT HEALTHCARE REAL ESTATE Execute Grow Platforms with Healthcare Real Estate Foresight Early Winning Operators 1,600 2 of 10 credit upgrades during 1,400 financial crisis RIDEA 1,200 Normalized FFO ($M) 1,000 800 RMZ Campaign 600 400 20
Slide 14: Healthcare Delivery Is Converging
HEALTHCARE DELIVERY IS CONVERGING REQUIRING SOLUTIONS ACROSS SITES OF CARE AND GEOGRAPHIES Leading operators consolidating Hospitals + Care delivery increasingly interconnected Community- Post- + Based Acute Care Care Dynamic policy environment = Seniors Housing Need for broad and deep CAPITAL & REA
Slide 15: We Are Partnered with the Leaders
WE ARE PARTNERED WITH THE LEADERS Hospitals Community- Post- Based Acute Care Care Seniors Housing 14
Slide 16: Ventas Growing with Leading Tenants and Operators
VENTAS GROWING WITH LEADING TENANTS AND OPERATORS Post-Acute Care Seniors Housing Medical Office Hospitals Partnerships w/ Nation’s Top Operating Partners in Industry % Segment NOI from 90% 80% 87%1 100% Top-Ranked Operators % Total VTR NOI2 12% 57% 20% 6% 1. Represents NOI from assets with investme
Slide 17: A $1T Domestic Real Estate Market
A $1T DOMESTIC REAL ESTATE MARKET ASSETS SHOULD FLOW TO MOST EFFICIENT OWNERS Outpatient Facilities/ MOBs • Domestic market is large Life Science / Biotech Facilities and growing Post-Acute Facilities • Early stages of securitized 5% 10% public real estate 39% • Dynamic policy 15% environment Privat
Slide 18: Demographics Fueling Demand
DEMOGRAPHICS FUELING DEMAND PERCENTAGE GROWTH BY 2030 (INDEXED TO 2015) • Senior population growing 7x FASTER than other adults • 10,000 BABY BOOMERS daily 72% becoming Medicare eligible 10% 3% • Seniors’ NET WORTH >$640K Under 21-74 75+ • Seniors visit physician's office 20 years old years old year
Slide 19: Significant Runway for Growth
SIGNIFICANT RUNWAY FOR GROWTH EARLY INNINGS OF HEALTHCARE REIT OWNERSHIP PERCENTAGE OF REAL ESTATE OWNED BY REITS Successful Model for Separating Real Estate from Operating Business 50%-55% 40%-50% 20%-25% 12%-15% Healthcare Multifamily Malls Hotels Housing (Top 25)2 (Top 50)1 1. Based on number of
Slide 20: Future Growth Prospects Are Bright
FUTURE GROWTH PROSPECTS ARE BRIGHT DRIVE OPERATIONAL BUILD ON CAPITALIZE ON EXPLORE NEW EXCELLENCE WITH ADVANTAGED HEALTHCARE MARKETS LEADING OPERATORS PLATFORMS WITHIN CONVERGENCE ASSET CLASSES MOBs and SHOP E.g. Hospitals and Real estate solutions New asset classes Redevelopment across sites of ca
Slide 21: Operational Excellence in Seniors Housing
OPERATIONAL EXCELLENCE IN SENIORS HOUSING EXCELLENCE. EXEMPLIFIED.
Slide 22: Ventas Seniors Housing Portfolio
VENTAS SENIORS HOUSING PORTFOLIO1 International Hospital U.S. Acute Care Hospital Loans Seniors Housing - Operating 1% • Outstanding SHOP assets in Skilled Nursing 4% 5% advantaged markets + high-quality Specialty 4% NNN leases 31% Hospitals 8% $1.9B • ~50 SHOP / 50% NNN seniors housing portfolio NO
Slide 23: Attractive SHOP Assets
ATTRACTIVE SHOP ASSETS VTR SHOP PORTFOLIO HAS HIGH-QUALITY ASSETS IN ATTRACTIVE LOCATIONS Ventas SHOP1 HC REIT peers2 Industry benchmarks Median household income $73,430 $72,536 $53,7063 Median home value $395,337 $399,052 $191,2273 75+ population growth 11.1% 10.7% 10.7%3 Building age 16 15 224 Not
Slide 24: SHOP Assets in Attractive Locations
SHOP ASSETS IN ATTRACTIVE LOCATIONS • >60% of SHOP NOI in high barrier to entry coastal markets1 20% West Coast • Median home values 2x national NOI1 average • Median household income 1.4x national average 43% East Coast NOI1 • 4Q15 occupancy 100bps higher SHOP than NIC industry average2 Top 30 MSAs
Slide 25: Ventas SHOP Strategy
VENTAS SHOP STRATEGY WE HAVE A FOCUSED SHOP PARTNERSHIP STRATEGY VTR SHOP1 VTR SHOP STRATEGY Focused on building scale All Others with winners driving operational excellence Offers partner for future growth and redevelopment 31% Reduces intra-portfolio Sunrise competition and portfolio 60% overlap A
Slide 26: National Scale Drives Efficiency
NATIONAL SCALE DRIVES EFFICIENCY EXAMPLE: ATRIA DRIVES EFFICIENCY THROUGH HR AND COST SAVINGS ROBUST PROCESSES FOCUSED ON ATTRACTING, SAVINGS REALIZED ACROSS DEVELOPING AND RETAINING TALENT CORPORATE AND LOCAL COSTS Growth 22% Insurance savings through VTR Opportunities aggregation Robust Transition
Slide 27: Sales and Marketing Opportunities
SALES AND MARKETING OPPORTUNITIES EXAMPLE: ATRIA SELLS VALUE PROPOSITION OF SENIORS HOUSING THROUGH MARKETING Assisted living 40-60% cheaper than Social Life recreating benefits at home Dining Emergency Assistance High-cost market: New York, NY Exercise / Recreate benefits at home1: $12,011 Physical
Slide 28: SHOP Guidance Update
SHOP GUIDANCE UPDATE1 SHOP Metric FY Expectations ~Flat Occupancy to Prior Year Rate Driven Profit Growth Expense Growth 3% - 4% Same-Store NOI Growth 1% - 3% Re-Confirming Full-Year Guidance Provided in February 2016 1. Data per Q4 2015 press release, supplemental, and earnings conference c
Slide 29: The Hospital Growth Opportunity
THE HOSPITAL GROWTH OPPORTUNITY EXCELLENCE. FORWARD.
Slide 30: Ventas Acute Care Hospital Portfolio
VENTAS ACUTE CARE HOSPITAL PORTFOLIO1 International Hospital U.S. Acute Loans Care Hospital 1% Seniors Housing - Operating Skilled Nursing 5% 4% • >$100M annualized rent = 5% NOI Specialty 4% Hospitals 31% • ~3x EBITDARM coverage (operator 8% cash flow / rent) $1.9B NOI • 3 key markets, network of r
Slide 31: Hospitals: Large, Growing
HOSPITALS: LARGE, GROWING ONE-THIRD OF HEALTHCARE SPENDING 2,000 Spending On Hospitals ($B) +6% 1,653 1,500 1,463 1,292 1,147 978 1,031 1,000 500 0 2014 2015 2017 2019 2021 2023 Source: CMS. 30
Slide 32: Demographic Fundamentals
DEMOGRAPHIC FUNDAMENTALS SUPPLY CONSTRAINED AND UTILIZATION INCREASING US NUMBER OF HOSPITAL BEDS ('000S) DAILY VOLUMES ('000S)1 900 1,050 1,043 872 1,000 985 973 850 950 929 824 900 802 805 849 796 850 800 787 809 800 750 50 0 0 1995 2000 2005 2010 2015 2020F 1995 2000 2005 2010 2015F 2020F Source:
Slide 33: Hospitals Are Evolving
HOSPITALS ARE EVOLVING HOSPITALS remain the NERVE CENTER of healthcare delivery SHORTER HIGHER HIGHEST LENGTHS OF STAY VOLUMES ACUITY CARE 32
Slide 34: Role of Hospitals Is Changing
ROLE OF HOSPITALS IS CHANGING FROM ... TO ... Independent physicians EMPLOYED PHYSICIANS HIGHER ACUITY General acute care WITH CENTERS OF EXCELLENCE VALUE-BASED AND BUNDLED Fee-for-service PAYMENTS Stand-alone hospital NETWORK OF SITES 33
Slide 35: Market Consolidation Results in Better Margins & Credit
MARKET CONSOLIDATION RESULTS IN BETTER MARGINS & CREDIT VENTAS INVESTS IN MOST SECURE TRANCHE OF CAPITAL STRUCTURE HOSPITALS INCREASINGLY CONSOLIDATED HOSPITALS ... AND HAVE BETTER CONSOLIDATING HAVE STRONGER MARGINS... CREDIT 100 8% MHS 15 Unaffiliated % Of Community Hospitals 35% hospitals Non-MHS
Slide 36: Defining a Strong Hospital Investment
DEFINING A STRONG HOSPITAL INVESTMENT MORE THAN ATTRACTIVE REAL ESTATE, PLATFORMS AND POSITIONS MATTER LOCAL MARKET SHARE PAYER / PROVIDER LEVERAGE DEMOGRAPHIC TRENDS COST EFFICIENCY AND SCALE QUALITY OUTCOMES REGULATORY/RATE ENVIRONMENT ECONOMIC INDICATORS LEASE STRUCTURE CREDIT PROFILE GROWTH PROS
Slide 37: Capital Source to Providers to Help Them Grow
CAPITAL SOURCE TO PROVIDERS TO HELP THEM GROW, CONSOLIDATE AND SERVE PATIENTS CONSOLIDATION OPPORTUNITIES GREATER THAN EVER State and Non- local government government, tax-exempt 20% GROWTH OPPORTUNITIES Public companies looking to spin off assets 59% 21% Investor- PE owned hospital systems owned Gr
Slide 38: Our Medical Office Building Platform
OUR MEDICAL OFFICE BUILDING PLATFORM EXCELLENCE. ESTABLISHED.
Slide 39: Ventas Medical Office Portfolio
VENTAS MEDICAL OFFICE PORTFOLIO1 International Hospital Loans U.S. Acute Care Hospital 1% Seniors Housing - Skilled Nursing Operating • 400+ hospital relationships 4% Specialty 5% Hospitals 4% 31% • #1 largest owner of MOBs in the 8% U.S.2 $1.9B • >94% stabilized occupancy NOI 20% • 96% affiliated o
Slide 40: Secular Trends Attractive
SECULAR TRENDS ATTRACTIVE INCREASING INSURED POPULATION, INCREASING VISITS, INCREASING SPEND INCREASING INSURED GROWING HIGHER POPULATION PHYSICIAN VISITS SPENDING Seniors 65+ spend 5x more 18M per person4 Newly insured1 2.5x $6,000 Number of visits 65+ cohort $5,200 $4,000 makes to physician office
Slide 41: Role of Post-Acute Care
ROLE OF POST-ACUTE CARE EXCELLENCE. EVOLVED.
Slide 42: Ventas Post-Acute Portfolio
VENTAS POST-ACUTE PORTFOLIO1 International Hospital U.S. Acute Care Loans Hospital Skilled 1% • 2x post-acute EBITDARM coverage Seniors Housing - Nursing Operating (operator cash flow / rent) Specialty 4% Hospitals 4% 5% • Only 4% SNFs 31% 8% • Guaranteed leases $1.9B • 75 out of 99 post-acute asset
Slide 43: Why Post-Acute Care Is So Important
WHY POST-ACUTE CARE IS SO IMPORTANT MEDICARE PATIENTS' USE OF POST-ACUTE SERVICES THROUGHOUT AN "EPISODE" Higher Intensity of Service Lower Short-Term Long-Term Skilled Home Inpatient Outpatient Acute Care Acute Care Nursing Health Rehab Rehab Hospitals Hospitals Facilities Care Patients’ FIRST 2% 1
Slide 44: Policy Impacting Market Dynamics
POLICY IMPACTING MARKET DYNAMICS HOSPITAL RELATIONSHIP WITH POST-ACUTE CARE CHANGING CURRENT PAYOR MIX Managed Care Demand for Post-Acute Care Services Strong Increasing Demand for Integrated and Fee For Coordinated Post-Acute Care Services Service Expanding Role for Home-Based Services POTENTIAL FU
Slide 45: Kindred Is a Winner
KINDRED IS A WINNER Diverse Business Mix Impact of LTAC Criteria6 1% $55M • KND ~$55M expected impact 11% $25M 34% from LTAC criteria in 2017 $30M LTAC1 $30M $30M • VTR 40% of KND LTACs = 33% 86% 2016 KND 2016 + 2017 Rehab2 79% ~$20M-$25M EBITDARM Impact KND Impact SNF 14% Impact Expected to • 2017
Slide 46: Capital Allocation and Investments
CAPITAL ALLOCATION AND INVESTMENTS EXCELLENCE. INVESTED.
Slide 47: Investment Focus
INVESTMENT FOCUS ATTRACTIVE RISK-ADJUSTED RETURNS REDEVELOPMENT & Hospitals DEVELOPMENT High returns with proven operators Align with leading providers to deliver efficient capital solutions Fund growth and consolidate market CUSTOMER EXPANSION NEW MARKETS Value-add opportunity for current Expand in
Slide 48: Sources and Uses
SOURCES AND USES VENTAS HAS MULTIPLE ATTRACTIVE INVESTMENT OPPORTUNITIES ~$250M1 “Available” ~$500M (Unlevered) Dispositions Cash ~$750M Discretionary Cash ~$350M ~$400M Development & Debt Acquisitions Redevelopment Repayment Note: Data is presented for illustrative purposes only. 1. Based on 2015 o
Slide 49: (Re)Development Drives High Returns
(RE)DEVELOPMENT DRIVES HIGH RETURNS EXAMPLE SHOP REDEVELOPMENT RESULTING IN SIGNIFICANT NOI GROWTH BEFORE AFTER VENTAS’S PMB & SUTTER RELATIONSHIPS ENABLED "TROPHY" MOB OPPORTUNITY SUTTER MOB • Connected to Sutter's new $2B flagship hospital • Downtown San Francisco: Van Ness and Geary • Top health
Slide 50: Summary
SUMMARY Ventas is an S&P 500 diversified provider of capital to leading senior living and healthcare operators Ventas has a long and successful history of outperformance, stability, growth and income with a strong balance sheet The external environment provides opportunities for growth The “Ventas A
Slide 51: Excellence. Sustained.
EXCELLENCE.SUSTAINED. 1 Welcome Overviewv9.ppt 50
Slide 52: SEC Reg. G Compliance
SEC REG. G COMPLIANCE
Slide 53: 2016 Guidance
2016 GUIDANCE1,2 Dollars in millions USD, except per share amounts EPS, FFO & FAD Guidance Attributable to Common Shareholders Same-Store Cash NOI Growth Guidance Tentative / Preliminary & Subject to Change Tentative / Preliminary & FY2016 - Guidance 2016 - Per Share Subject to Change Low High Low H
Slide 54: FFO and FAD Reconciliation Including Comparable Earnings
NON-GAAP FINANCIAL MEASURES FFO AND FAD RECONCILIATION INCLUDING COMPARABLE EARNINGS ($ IN 000S, EXCEPT PER SHARE AMOUNTS)1,2 FY YOY 2014 2015 Growth Q4 FY Q1 Q2 Q3 Q4 FY '14-'15 Net income attributable to common stockholders 3 $107,190 $475,767 $120,442 $149,821 $22,852 $124,728 $417,843 Net income
Slide 55: Non-GAAP Financial Measures: Normalized FFO
NON-GAAP FINANCIAL MEASURES NORMALIZED FFO ($ IN 000S, EXCEPT PER SHARE AMOUNTS) 1. Per share amounts may not add due to rounding. 54
Slide 56: Adjusted Pro Forma EBITDA and Net Debt
NON-GAAP FINANCIAL MEASURES ADJUSTED PRO FORMA1 EBITDA AND NET DEBT TO ADJUSTED PRO FORMA1 EBITDA ($ IN 000S) 1. The following information considers the pro forma effect on net income, interest and depreciation and amortization of the Com pany’s investments and other capital transactions that were c
Slide 57: Adjusted Pro Forma EBITDA and Fixed Charge Coverage Ratio
NON-GAAP FINANCIAL MEASURES ADJUSTED PRO FORMA1 EBITDA AND FIXED CHARGE COVERAGE RATIO ($ IN 000S) 1. The following information considers the pro forma effect on net income, interest, depreciation and amortization, merger-related expenses and deal costs and income taxes of the Company’s investments
Slide 58: NOI Reconciliation by Segment
NON-GAAP FINANCIAL MEASURES NOI RECONCILIATION BY SEGMENT1,2 ($ IN 000S) 1. Amounts above are adjusted to exclude discontinued operations for all periods presented. 2. Amounts above are not restated for changes between categories from quarter to quarter. 57
Slide 59: NOI Reconciliation by Segment (Cont'd)
NON-GAAP FINANCIAL MEASURES NOI RECONCILIATION BY SEGMENT (CONT’D)1,2 ($ IN 000S) 1. Amounts above are adjusted to exclude discontinued operations for all periods presented. 2. Amounts above are not restated for changes between categories from quarter to quarter. 58