Ventas, Inc. · NYSE:VTR
Ventas — Citi 2017 March Conference
62 slides from Ventas's conference presentation, March 2017
Slide 1: Excellence. Sustained. Investor Presentation March 2017
EXCELLENCE. SUSTAINED. INVESTOR PRESENTATION MARCH 2017
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 Introduction (4-12) Healthcare Real Estate Market (13-22) Operational Excellence in Seniors Housing (23-30) The Hospital Growth Opportunity (31-36) Our Medical Office Building Platform (37-40) Our Life Science Platform (41-46) Post-Acute Portfolio (47-49) Closing (50) Append
Slide 4: Ventas Introduction
VENTAS INTRODUCTION EXCELLENCE. SUSTAINED.
Slide 5: Ventas Investment Thesis
VENTAS INVESTMENT THESIS EXCELLENCE. SUSTAINED. We are the premier provider of capital to leading senior living and healthcare operators and research institutions Ventas is positioned at the intersection of two large and dynamic markets: healthcare and real estate • Each represents nearly 20% of U.S
Slide 6: Long-Term Sustainable Growth and Income with Financial Strength
LONG-TERM SUSTAINABLE GROWTH AND INCOME WITH FINANCIAL STRENGTH Annual FFO / Sh 2016 Norm. FFO / Annual Cash Dividend / Sh Growth since 20011 Sh Growth2 Growth since 20011 11% 5% 8% TSR CAGR since Credit Rating Completed Spin-Off 12/31/19993 of SNFs in 2015 25% BBB+ >$4B Enterprise Value Leading S&P
Slide 7: Superior Long-Term Returns to Shareholders
SUPERIOR LONG-TERM RETURNS TO SHAREHOLDERS FROM HIGH- QUALITY DIVERSIFIED PORTFOLIO WITH LEADING OPERATORS 16% 13% 13% 11% TSR 9% 10% Performance – 8% 7% 5% Multiple Periods1 1-Year 3-Year 10-Year VTR RMZ S&P 500 VTR: 16% 1-Year TSR S&P: 11% Performance (2016) RMZ: 8% December January February March
Slide 8: Our Foresight and Innovation Changed the Way Investors Think About Healthcare Real Estate
OUR FORESIGHT AND INNOVATION CHANGED THE WAY REAL ESTATE INVESTORS THINK ABOUT HEALTHCARE; CHANGING THE WAY LEADING PROVIDERS / OPERATORS THINK ABOUT REAL ESTATE Execute Grow Platforms with Healthcare Real Estate Foresight Early Winning Operators 5.0 2 of 10 credit NORMALIZED FFO ($) / SHARE Growth
Slide 9: Delivering Value to Shareholders and Meeting Customer Needs
DELIVERING VALUE TO SHAREHOLDERS AND MEETING CUSTOMER NEEDS • Largest national MOB business 96% on-campus / • >7x investment growth ~5 years affiliated with leading health systems • Significant multiple expansion since MOBs • 92% occupancy investment creates value • Stable, growing cash flows • ~$3B
Slide 10: Consistent, Superior Growth & Income
CONSISTENT, SUPERIOR GROWTH & INCOME VTR 11% Norm. FFO / Share Growth1 HCP 5% HCN 4% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 VTR 8% Cash Dividend / Share HCN 3% Growth2 HCP 2% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1. C
Slide 11: Industry Leading Enterprise
INDUSTRY LEADING ENTERPRISE Advantaged Portfolio1 Differentiated Superior Metrics2 VTR HCN HCP 2016 Norm. FFO / Sh Growth 5% 4% 5% Specialty Hospitals Seniors 2016 Dividend 4 International Hospitals Housing - Growth3 6% 1% n/a Loans Operating 7% 7 U.S. Acute Care Hospitals 1% SNF % NOI1,5,6 1% ~13%
Slide 12: Consistent Outstanding Execution in 2016
CONSISTENT OUTSTANDING EXECUTION IN 20161 5% Normalized FFO / Share >$600M Profitable Dispositions and Growth Loan Repayments 6% Dividend / Share Increase2 Multiple mutually beneficial deals with customers 5.7x Year-End Net Debt / Adjusted >$2B Efficient Capital Raises EBITDA $1.5B Life Science and
Slide 13: 2017 Guidance
2017 GUIDANCE1 2017 Guidance • Continued same-store NOI growth • Strategic recycling of capital and disposition of nearly all of skilled nursing portfolio at >$650M gain • Invest in future growth through new Wexford ground up Highlights developments • Drive an even stronger financial profile and liq
Slide 14: Healthcare Real Estate Market
HEALTHCARE REAL ESTATE MARKET EXCELLENCE. SUSTAINED.
Slide 15: Attractive and Dynamic Opportunities
ATTRACTIVE AND DYNAMIC OPPORTUNITIES VTR AT THE INTERSECTION OF HEALTHCARE AND REAL ESTATE • Large and growing aging population increases demand for healthcare and senior living products Healthcare 20% by • Senior population has immense spending power 20241 and wealth • Healthcare spending projected
Slide 16: 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 Worth3 from Seniors5 10,000 73% 2.5x Boomers Turning
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: 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 19: Consolidation Is on the Horizon
CONSOLIDATION IS ON THE HORIZON WINNING OPERATORS WILL EMERGE MARKET SHARE OF TOP 10 OPERATORS Highly fragmented markets Benefits of scale and integration Dynamic policy environment Other 90% 90% 80% Operators Accelerating consolidation Winners will emerge Top 10 Consolidators will need capital 20%
Slide 20: 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 21: Investing Across the Capital Structure in Diversified Asset Types
INVESTING ACROSS THE CAPITAL STRUCTURE IN DIVERSIFIED ASSET TYPES Senior MOBs Acute Care Life Science Post-Acute Housing NNN Lease Debt Investments Operating Real Estate Operator Equity Investment 20
Slide 22: The Ventas Advantage
THE VENTAS ADVANTAGE 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 21
Slide 23: 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 24: Operational Excellence in Seniors Housing
OPERATIONAL EXCELLENCE IN SENIORS HOUSING EXCELLENCE. EXEMPLIFIED.
Slide 25: Ventas Seniors Housing Portfolio
VENTAS SENIORS HOUSING PORTFOLIO1 Specialty Seniors Hospitals Housing - • Outstanding SHOP assets in Operating International Hospitals advantaged markets + high-quality Loans 7% NNN leases U.S. Acute 1% Care Hospitals 6% 29% • ~50% SHOP / 50% NNN seniors 5% Skilled Nursing housing portfolio 1% 6% $2
Slide 26: SHOP 2017 Guidance
SHOP 2017 GUIDANCE1 2017 Expectations • 70% equilibrium markets driving NOI growth • Annual in-place rate increases together with wage inflation • Accelerated pace of deliveries, driving mid- to high-single Overview digit NOI declines in non-equilibrium markets • A slower start to the year, together
Slide 27: Attractive SHOP Assets
ATTRACTIVE SHOP ASSETS VTR SHOP PORTFOLIO HAS HIGH-QUALITY ASSETS IN ATTRACTIVE LOCATIONS Industry Ventas SHOP1,2 benchmarks Median household income $81,107 $57,4622 Median home value $436,742 $197,9802 75+ population growth 12.3% 12.2%2 Building age 18 223 Note: Demographic figures reflect 3-mile r
Slide 28: SHOP Assets in Attractive Locations
SHOP ASSETS IN ATTRACTIVE LOCATIONS • >66% of SHOP NOI in high- barrier-to-entry coastal markets1 23% West Coast • Median home values 2.2x national NOI1 average • Median household income 1.4x national average 43% East Coast NOI1 • 4Q16 occupancy 70bps higher SHOP than NIC industry average2 Top 30 MS
Slide 29: 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 32% Reduces intra-portfolio Sunrise competition and portfolio 62% overlap A
Slide 30: 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 31: 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: $12,011 Physi
Slide 32: The Hospital Growth Opportunity
THE HOSPITAL GROWTH OPPORTUNITY EXCELLENCE. FORWARD.
Slide 33: Ventas Acute Care Hospital Portfolio
VENTAS ACUTE CARE HOSPITAL PORTFOLIO1 • Ardent-LHP business model well Specialty positioned for post-ACA environment Hospitals International Hospitals −2/6 Medicaid expansion states Loans Seniors U.S. Acute 7% Housing - • >3x EBITDARM coverage (operator cash Care Hospitals 1% 6% Operating flow / ren
Slide 34: Demographic Fundamentals
DEMOGRAPHIC FUNDAMENTALS SUPPLY CONSTRAINED AND UTILIZATION INCREASING U.S. NUMBER OF HOSPITAL BEDS (000s) DAILY VOLUMES (000s)1 900 1,050 1,043 872 1,000 985 973 850 950 929 824 900 802 805 849 796 850 800 787 809 800 750 50 0 0 1995 2000 2005 2010 2015 2020F 1995 2000 2005 2010 2015F 2020F Source:
Slide 35: Hospitals Are Evolving
HOSPITALS ARE EVOLVING HOSPITALS remain the NERVE CENTER of healthcare delivery SHORTER HIGHER HIGHEST LENGTHS OF STAY VOLUMES ACUITY CARE 34
Slide 36: Market Consolidation Results in Better Margins and Credit
MARKET CONSOLIDATION RESULTS IN BETTER MARGINS AND CREDIT HOSPITALS INCREASINGLY CONSOLIDATED HOSPITALS ... AND HAVE BETTER CONSOLIDATING HAVE STRONGER MARGINS... CREDIT 100 8% MHS 15 Unaffiliated % of Community Hospitals 35% hospitals Non-MHS 40% 50% 6% 12 Total Margin1 (%) Log Revenue ($M) 62% 6.3
Slide 37: Capital Source to Providers to Help Them Grow, Consolidate and Serve Patients
CAPITAL SOURCE TO PROVIDERS TO HELP THEM GROW, CONSOLIDATE AND SERVE PATIENTS Non- State and government, GROWTH OPPORTUNITIES local government tax-exempt Public companies looking to spin off assets 20% Private capital-backed hospital systems 59% 21% Grow with tax-exempt hospitals Investor- owned LHP
Slide 38: Our Medical Office Building Platform
OUR MEDICAL OFFICE BUILDING PLATFORM EXCELLENCE. ESTABLISHED.
Slide 39: Ventas Medical Office Portfolio
VENTAS MEDICAL OFFICE PORTFOLIO1 • Top platform Specialty International Hospitals Hospitals • 400+ customers Loans Seniors 7% Housing - U.S. Acute 6% 1% Operating • ~92% total occupancy Care Hospitals 29% Skilled Nursing 5% • 96% affiliated or on campus Life 1% 6% $2B Science NOI • 85% of affiliatio
Slide 40: Lillibridge National MOB Footprint
LILLIBRIDGE NATIONAL MOB FOOTPRINT Properties 1-5 Corporate Headquarters 6-10 Regional Office Top 10 Tenant by NOI >20M Square Foot VTR MOB Portfolio1 11-19 20+ 39 1. Consolidated and unconsolidated square feet.
Slide 41: Secular Trends Attractive
SECULAR TRENDS ATTRACTIVE INCREASING POPULATION, INCREASING VISITS, INCREASING SPEND INCREASING GROWING HIGHER POPULATION PHYSICIAN VISITS SPENDING Seniors 65+ spend 5x more per person4 10,000 2.5x $6,000 New seniors eligible for Number of visits 65+ cohort $5,200 $4,000 Medicare daily1 makes to phy
Slide 42: Our Life Science Platform
OUR LIFE SCIENCE PLATFORM EXCELLENCE. SUSTAINED.
Slide 43: Ventas Life Science Portfolio
VENTAS LIFE SCIENCE PORTFOLIO1 • 6% pro forma 2017 VTR NOI • 73% of revenue from excellent credit tenants Specialty Hospitals −11 universities with avg. Aa2 International Hospitals Loans Seniors rating 7% Housing - U.S. Acute 6% 1% Operating −Investment grade companies Care Hospitals Skilled Nursing
Slide 44: 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 45: 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 $172 million Location On-campus Adjac
Slide 46: Enhances Ventas's Relationships with Leading Universities and Research Companies
ENHANCES VENTAS’S RELATIONSHIPS WITH LEADING UNIVERSITIES, ACADEMIC MEDICAL CENTERS AND RESEARCH COMPANIES Geographic Presence and University Affiliations Key Highlights for Leading Tenants MSA with Lillibridge Relationships with 11 top research universities that presence account for 10% of all un
Slide 47: Life Science Industry Experiencing Continued Growth
LIFE SCIENCE INDUSTRY EXPERIENCING CONTINUED GROWTH Current Life Science Tenants 2014 R&D ($M) University Life Sciences Research Spending Drexel, Old Dominion, Universities & Research institutions have CAGR Wake Forest increased R&D spending IIT $38B +3.6% $88 $172 Penn State Duke $250 $6B +4.0% Cur
Slide 48: Post-Acute Portfolio
POST-ACUTE PORTFOLIO EXCELLENCE. EVOLVED.
Slide 49: Pro Forma Ventas Post-Acute Portfolio
PRO FORMA VENTAS POST-ACUTE PORTFOLIO1 • 1% SNFs post-sale – successful de- Specialty emphasis of SNF starting with CCP Hospitals spin off • Strong 1.9x Q3 specialty hospital International Hospitals 7% Loans Seniors EBITDARM coverage (operator cash U.S. Acute 1% Housing - flow / rent) Care Hospitals
Slide 50: Kindred Healthcare
KINDRED HEALTHCARE Diverse Business Mix Impact of LTAC Patient Criteria3 • KND ~$50M end of 2017 run- 12% VTR = 31/82 rate EBITDARM impact KND LTACs ~$50M LTAC 38% KND • “…our early performance Impact gives us confidence in our multi-pronged LTAC criteria Rehab2 23% 88% SNF mitigation strategy…” Ben
Slide 51: Summary
SUMMARY Ventas is an S&P 500 diversified provider of capital to leading senior living and healthcare operators and research institutions. Ventas has a long and successful history of outperformance, stability, growth and income with a strong balance sheet. Massive, fragmented healthcare real estate m
Slide 52: Excellence. Sustained.
EXCELLENCE. SUSTAINED. 1 Welcome Overviewv9.ppt 51
Slide 53: Definitions and SEC Reg. G Compliance
DEFINITIONS AND SEC REG. G COMPLIANCE
Slide 54: Definition of Terms
DEFINITION OF TERMS NAREIT Funds from Operations (“FFO”) Net income attributable to common stockholders (computed in accordance with GAAP) excluding gains (or losses) from sales of real estate property, including gain (or loss) on re-measurement of equity method investments and impairment write-down
Slide 55: Definition of Terms (Cont'd)
DEFINITION OF TERMS (CONT’D) Seniors Housing Operating Portfolio (“SHOP”) In our senior living operations segment, we invest in seniors housing communities throughout the United States and Canada and engage independent operators, such as Atria and Sunrise, to manage those communities pursuant to lon
Slide 56: 2017 Guidance
2017 GUIDANCE1,2,3 INCOME, FFO & FAD ATTRIBUTABLE TO COMMON SHAREHOLDERS 1. The Company’s guidance constitutes forward-looking statements within the meaning of the federal securities laws and is based on a number of assumptions that are subject to change and many of which are outside the control of
Slide 57: FFO and FAD Reconciliation Including Comparable Earnings
NON-GAAP FINANCIAL MEASURES FFO AND FAD RECONCILIATION INCLUDING COMPARABLE EARNINGS ($ 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: 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: 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. 59
Slide 61: 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. 60
Slide 62: Same-Store Cash NOI Guidance
NON-GAAP FINANCIAL MEASURES SAME-STORE CASH NOI GUIDANCE1,2 ($ IN 000S) 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 t