Ventas, Inc. · NYSE:VTR
Ventas — Conference Presentation (September 2016)
62 slides from Ventas's conference presentation, September 2016
Slide 1: Excellence. Sustained. Investor Presentation
EXCELLENCE. SUSTAINED. INVESTOR PRESENTATION SEPTEMBER 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 & Market Overview (4–14) Ventas Strategy Overview (15–20) Operational Excellence in Seniors Housing (21–27) The Hospital Growth Opportunity (28–35) Our Medical Office Building Platform (36–38) Our Life Science Platform (39–45) Role of Post-Acute
Slide 4: Ventas Investment Thesis
VENTAS INVESTMENT THESIS EXCELLENCE. SUSTAINED. We are the leading provider of capital to high-quality senior living and healthcare operators Ventas is positioned at the intersection of two large and dynamic markets: healthcare and real estate • Each represents nearly 20% of U.S. GDP • Demand tailwi
Slide 5: Ventas & Market Overview
VENTAS & MARKET OVERVIEW EXCELLENCE. SUSTAINED.
Slide 6: A Leading REIT with Strong Cash Flow from Balanced Portfolio
VENTAS – A LEADING REIT WITH STRONG CASH FLOW FROM BALANCED PORTFOLIO AND DEMOGRAPHIC DEMAND Asset Class Diversification Operator Diversification Loans U.S. Acute Care Hospitals International Hospitals 1% Skilled Seniors Housing - Nursing Operating Other Atria 5% 5% 19% Specialty 4% Hospitals 31% 34
Slide 7: Long-Term Sustainable Growth and Income with Financial Strength
LONG-TERM SUSTAINABLE GROWTH AND INCOME WITH FINANCIAL STRENGTH Annual FFO / Sh Annual Dividend / Sh Annual Free Cash Flow / Growth since 20011 Growth since 20011 Sh Growth since 20011 11% 10% 10% TSR CAGR since Credit Rating Completed Spin-Off 12/31/19992 of CCP 26% BBB+ >$4B Enterprise Value Leadi
Slide 8: Continued Track Record of Earnings Growth and Financial Strength
CONTINUED TRACK RECORD OF EARNINGS GROWTH, FINANCIAL STRENGTH AND A PRODUCTIVE AND ALIGNED TEAM1 Excellent Q2 + 2016 Outlook Wexford Acquisition • 7% Q2 comparable normalized FFO / sh • $1.5B acquisition of Wexford Science & growth Technology’s life science and medical real estate (closed September
Slide 9: New REIT GICS Sector Offers Opportunity
NEW REIT GICS SECTOR OFFERS OPPORTUNITY Portfolio Managers Underweight REITs • >$100B potential capital inflow to REITs expected with new REIT GICS sector Mutual Fund Exposure (~7,500 Funds, $5T AUM) to REITs • Great opportunity for VTR equity 5.0% ‒ Uniquely positioned at the intersection of health
Slide 10: Attractive and Dynamic Opportunities
ATTRACTIVE AND DYNAMIC OPPORTUNITIES VTR AT THE INTERSECTION OF HEALTHCARE AND REAL ESTATE • Healthcare spending projected to grow 5.8% annually (2014–2024)1 Healthcare 20% by • Large and growing aging population increases 20241 demand for healthcare and senior living products • Senior population ha
Slide 11: Healthcare Spending Increasing
HEALTHCARE SPENDING INCREASING National Health Expenditures ($ Trillions) $6.0 5.8% $5.4 CAGR $5.1 $4.8 $5.0 $4.5 $4.3 $4.0 $4.0 $3.8 $3.6 $3.4 $3.2 $3.1 $3.0 $2.0 $1.0 $0.0 2014(E) 2015(E) 2016(E) 2017(E) 2018(E) 2019(E) 2020(E) 2021(E) 2022(E) 2023 (E) 2024(E) % GDP 17.7% 18.0% 18.1% 18.1% 18.1% 1
Slide 12: Demographics & Longevity Fueling Demand
DEMOGRAPHICS & LONGEVITY FUELING DEMAND Growing Population of …With Immense Wealth …And Increasing Care Healthcare Consumers… and Spending Power… Needs with Age 7x >$640K 5x More Healthcare Spending Faster Growth in 75+ Population1 Average 75+ Net Worth4 from Seniors6 10,000 73% 2.5x Boomers Turning
Slide 13: A $1T Domestic Real Estate Market
A $1T DOMESTIC REAL ESTATE MARKET ASSETS SHOULD FLOW TO MOST EFFICIENT OWNERS Outpatient Facilities/ MOBs • Domestic market is large Life Science / Biotech Facilities and growing Post-Acute Facilities • Early stages of securitized 5% 10% public real estate 39% • Dynamic policy 15% environment Privat
Slide 14: Significant Runway for Growth
SIGNIFICANT RUNWAY FOR GROWTH EARLY INNINGS OF HEALTHCARE REIT OWNERSHIP PERCENTAGE OF REAL ESTATE OWNED BY REITS Successful Model for Separating Real Estate from Operating Business 50%-55% 40%-50% 20%-25% 12%-15% Healthcare Multifamily Malls Hotels Housing (Top 25)2 (Top 50)1 1. Based on number of
Slide 15: What Is Ventas's Winning Formula?
WHAT IS VENTAS’S WINNING FORMULA? ENSURING EXCELLENCE. SUSTAINED. OUR PEOPLE OUR PROCESSES PEOPLE OUR CULTURE ADVANTAGED REAL ADVANTAGE LEADING ESTATE ASSETS IN OPERATORS ATTRACTIVE PROPERTIES ACROSS THE PLATFORMS MARKETS SITES OF CARE 14
Slide 16: Ventas Strategy Overview
VENTAS STRATEGY OVERVIEW EXCELLENCE. SUSTAINED.
Slide 17: Our Foresight and Innovation
OUR FORESIGHT AND INNOVATION CHANGED THE WAY INVESTORS THINK ABOUT HEALTHCARE REAL ESTATE Execute Grow Platforms with Healthcare Real Estate Foresight Early Winning Operators 5.0 2 of 10 credit 4.5 upgrades during NORMALIZED FFO ($) / SHARE (INDEXED TO 2001) financial crisis 4.0 RIDEA 3.5 3.0 RMZ Ca
Slide 18: Healthcare Delivery Is Converging
HEALTHCARE DELIVERY IS CONVERGING REQUIRING SOLUTIONS ACROSS SITES OF CARE AND GEOGRAPHIES Leading operators consolidating + Care delivery increasingly interconnected Community- Hospitals + Based Dynamic policy environment Care = Post- Seniors Housing Acute Need for broad and deep Care CAPITAL AND R
Slide 19: We Are Partnered with the Leaders
WE ARE PARTNERED WITH THE LEADERS Community- Hospitals Based Care Post- Seniors Acute Housing Care Life Science 18
Slide 20: Ventas Growing with Leading Tenants and Operators
VENTAS GROWING WITH LEADING TENANTS AND OPERATORS Post-Acute Seniors Care Housing Medical Office Life Science Hospitals Partnerships w/ Nation’s Top Operating Partners in Industry % Segment NOI from Top-Ranked 90% 81% 85%1 73%2 100% Operators % Total VTR NOI3 11% 55% 19% 5% 6% Source: Company financ
Slide 21: 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, Life Real estate solutions New asset classes Science and across sites of c
Slide 22: Operational Excellence in Seniors Housing
OPERATIONAL EXCELLENCE IN SENIORS HOUSING EXCELLENCE. EXEMPLIFIED.
Slide 23: Ventas Seniors Housing Portfolio
VENTAS SENIORS HOUSING PORTFOLIO1 Loans U.S. Acute International Hospitals Care Hospitals Seniors Housing • Outstanding SHOP assets in 1% Skilled - Operating advantaged markets + high-quality Nursing NNN leases 5% 5% Specialty Hospitals 4% 31% • ~50% SHOP / 50% NNN seniors 7% housing portfolio Life
Slide 24: Attractive SHOP Assets
ATTRACTIVE SHOP ASSETS VTR SHOP PORTFOLIO HAS HIGH-QUALITY ASSETS IN ATTRACTIVE LOCATIONS Industry Ventas SHOP1,2 benchmarks Median household income $76,442 $55,5512 Median home value $411,601 $192,4322 75+ population growth 11.8% 11.6%2 Building age 16 223 Note: Demographic figures reflect 3-mile r
Slide 25: SHOP Assets in Attractive Locations
SHOP ASSETS IN ATTRACTIVE LOCATIONS • >60% of SHOP NOI in high- barrier-to-entry coastal markets1 21% West Coast • Median home values 2.1x national NOI1 average • Median household income 1.4x national average 44% East Coast NOI1 • 2Q16 occupancy 50bps higher SHOP than NIC industry average2 Top 30 MS
Slide 26: 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 30% Reduces intra-portfolio Sunrise competition and portfolio 63% overlap A
Slide 27: 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 28: Sales and Marketing Opportunities
SALES AND MARKETING OPPORTUNITIES EXAMPLE: ATRIA SELLS VALUE PROPOSITION OF SENIORS HOUSING THROUGH MARKETING Assisted living 40-60% cheaper than re- Social Life creating benefits at home Dining Emergency Assistance High-cost market: New York, NY Exercise / Re-create benefits at home1: $12,011 Physi
Slide 29: The Hospital Growth Opportunity
THE HOSPITAL GROWTH OPPORTUNITY EXCELLENCE. FORWARD.
Slide 30: Ventas Acute Care Hospital Portfolio
VENTAS ACUTE CARE HOSPITAL PORTFOLIO1 Loans U.S. Acute International Hospitals Care Hospitals 1% Skilled Seniors Housing - Nursing Operating 5% 5% • >$100M annualized rent = 5% NOI Specialty 4% Hospitals 31% 7% • ~3x EBITDARM coverage (operator cash flow / rent) Life Science 5% $2.0B NOI • 3 key mar
Slide 31: Hospitals: Large, Growing
HOSPITALS: LARGE, GROWING ONE-THIRD OF HEALTHCARE SPENDING 2,000 +6% 1,653 1,463 Spending on Hospitals ($B) 1,500 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 U.S. 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 and Credit
MARKET CONSOLIDATION RESULTS IN BETTER MARGINS AND CREDIT HOSPITALS INCREASINGLY CONSOLIDATED HOSPITALS ... AND HAVE BETTER CONSOLIDATING HAVE STRONGER MARGINS... CREDIT 100 8% MHS 15 Unaffiliated % of Community Hospitals 35% hospitals Non-MHS 40% 50% Total Margin1 (%) 6% 12 Log Revenue ($M) 62% 6.3
Slide 36: 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 37: Our Medical Office Building Platform
OUR MEDICAL OFFICE BUILDING PLATFORM EXCELLENCE. ESTABLISHED.
Slide 38: Ventas Medical Office Portfolio
VENTAS MEDICAL OFFICE PORTFOLIO1 Loans U.S. Acute International Hospitals Care Hospitals 1% Skilled Seniors Housing - Nursing Operating • 400+ hospital relationships 5% 5% Specialty 4% • #1 largest owner of MOBs in the Hospitals 31% 7% U.S.2 Life Science 5% $2.0B • ~92% total occupancy NOI 19% • 96%
Slide 39: 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 20M per person4 Newly insured1 2.5x $6,000 Number of visits 65+ cohort $5,200 $4,000 makes to physician office
Slide 40: Our Life Science Platform
OUR LIFE SCIENCE PLATFORM EXCELLENCE. SUSTAINED.
Slide 41: Ventas Life Science Portfolio
VENTAS LIFE SCIENCE PORTFOLIO1 Loans • ~$95M pro forma 2017 cash rent = U.S. Acute International Hospitals 5% pro forma VTR NOI Care Hospitals 1% Seniors Housing - • 73% of revenue from excellent Skilled Nursing Operating credit tenants 5% Specialty 5% −11 universities with avg. Aa2 4% Hospitals 31%
Slide 42: High-Quality Operating Portfolio with Institutional-Quality Tenants
HIGH-QUALITY OPERATING PORTFOLIO WITH INSTITUTIONAL-QUALITY TENANTS Class-A Operating Properties Excellent Amenities for Tenants 4.1 million square feet of purpose- built real estate with average age of 6 years Located campuses on or contiguous to major 13 LEED-certified buildings High-quality
Slide 43: Additional Growth from Near-Term Development Properties
ADDITIONAL GROWTH FROM NEAR-TERM DEVELOPMENT PROPERTIES W.F. Innovation Quarter – The Chesterfield Bailey Power Plant Property Duke Wake Forest University (Durham, NC) (Winston Salem, NC) Endowment1 $7.3 billion $1.2 billion Life sciences R&D spend2 $868 million $172 million Location On-campus Adjac
Slide 44: Enhances Relationships with Leading Universities
ENHANCES VENTAS’S RELATIONSHIPS WITH LEADING UNIVERSITIES, ACADEMIC MEDICAL CENTERS AND RESEARCH COMPANIES Geographic Presence and University Affiliations Key Highlights for Leading Tenants MSA with Lillibridge Relationships with 11 top research universities that presence account for 10% of all un
Slide 45: Total Addressable Market Opportunity
TOTAL ADDRESSABLE MARKET OPPORTUNITY Growth Opportunities Current Tenants 2014 R&D ($ millions) Drexel, Old $4 Billion • Large and fragmented market Dominion, in Total Wake Forest place IIT $88 $172 Penn State o $38 billion total university life Duke $250 science R&D spend across 100+ $868 Miami uni
Slide 46: Life Science Industry Experiencing Continued Growth
LIFE SCIENCE INDUSTRY EXPERIENCING CONTINUED GROWTH Overview University Life Sciences Research Spending Global life science R&D market is ~$200 billion in CAGR spend Universities & Research institutions have increased R&D spending $38B +3.6% 12.3K drugs are in R&D pipelines, growing 5.3% since 2
Slide 47: Role of Post-Acute Care
ROLE OF POST-ACUTE CARE EXCELLENCE. EVOLVED.
Slide 48: Ventas Post-Acute Portfolio
VENTAS POST-ACUTE PORTFOLIO1 Loans U.S. Acute International Hospitals Care Hospitals • 2x post-acute EBITDARM coverage 1% (operator cash flow / rent) Skilled Seniors Housing - Nursing Operating 5% • Only 4% SNFs 4% 5% Specialty Hospitals 7% 31% • Guaranteed leases 5% $2.0B • 68 of 92 post-acute asse
Slide 49: Kindred Is a Winner
KINDRED IS A WINNER Diverse Business Mix Impact of LTAC Criteria4 BETTER ASSETS LEADING TO $55M BETTER OPERATOR RESULTS • KND ~$55M expected 2% $30M $25M 12% EBITDARM impact from LTAC criteria in 2017 $30M $30M LTAC 34% 2016 KND 2016 + 2017 Impact KND Impact 19% 85% • 2017 trough, pro forma Rehab2 I
Slide 50: Kindred Is a Leading Care Provider
KINDRED IS A LEADING CARE PROVIDER “Ensign & Kindred Screen Well on Hospital “Kindred & Consulate Screen Best On Re-admission Rates” Outpatient Emergency Department Visits” % Short-stay Residents Re-Hospitalized after Nursing Home % Short-stay Residents Who Have Had an Outpatient Admission (25%-75%
Slide 51: 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. Massive, fragmented healthcare real estate market with strong demand t
Slide 52: Excellence. Sustained.
EXCELLENCE. SUSTAINED. 1 Welcome Overviewv9.ppt 51
Slide 53: Definitions and SEC Reg. G Compliance
DEFINITIONS AND SEC REG. G COMPLIANCE
Slide 54: Definition of Terms
DEFINITION OF TERMS NAREIT Funds from Operations (“FFO”) Net income attributable to common stockholders (computed in accordance with GAAP) excluding gains (or losses) from sales of real estate property, including gain (or loss) on re-measurement of equity method investments and impairment write-down
Slide 55: Definition of Terms (Cont'd)
DEFINITION OF TERMS (CONT’D) Seniors Housing Operating Portfolio (“SHOP”) In our senior living operations segment, we invest in seniors housing communities throughout the United States and Canada and engage independent operators, such as Atria and Sunrise, to manage those communities pursuant to lon
Slide 56: 2016 Guidance
2016 GUIDANCE1,2 Dollars in millions USD, except per share amounts Income, FFO & FAD Attributable to Common Stockholders Same-Store Cash NOI Growth Tentative / Preliminary & Subject to Change Tentative / Preliminary & FY2016 - Guidance 2016 - Per Share Subject to Change Low High Low High Low High In
Slide 57: 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 1. Totals and per share amounts may not add due to rounding. Per share quarterly amounts may not add to annual per share amounts due to material changes in the Company’s weig
Slide 58: 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. 57
Slide 59: Adjusted Pro Forma EBITDA and Net Debt to Adjusted Pro Forma EBITDA
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 60: 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 61: 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. 60
Slide 62: 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. 61