Ventas, Inc. · NYSE:VTR
Ventas — NAREIT 2015
62 slides from Ventas's conference presentation, Dec 18, 2015
Slide 1: NAREIT Investor Presentation
EXCELLENCE.SUSTAINED. NAREIT INVESTOR PRESENTATION NOVEMBER 2015 *UPDATED: DECEMBER 18, 2015
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 Overview (3 – 14) Operational Excellence in Seniors Housing (15 – 26) The Hospital Growth Opportunity (27 – 38) Our Medical Office Building Platform (39 – 43) Role of Post-Acute Care (44 – 47) Capital Allocation and Investments (48 – 53) Appendix: SEC Reg. G Compliance (55 –
Slide 4: Ventas Overview
VENTAS OVERVIEW EXCELLENCE. SUSTAINED.
Slide 5: Ventas Investment Thesis
VENTAS INVESTMENT THESIS EXCELLENCE. SUSTAINED. 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 best: • People, Process and Culture: Our winning competitive ed
Slide 6: A $1T Domestic Real Estate Market
A $1T DOMESTIC REAL ESTATE MARKET Outpatient Facilities/ MOBs • Domestic market is large Life Science / Biotech Facilities and growing Post-Acute Facilities • Early stages of securitized public real estate • Dynamic policy environment Private Pay Seniors Housing • Care delivery increasingly intercon
Slide 7: Significant Runway for Growth
SIGNIFICANT RUNWAY FOR GROWTH EARLY INNINGS OF HEALTHCARE REIT OWNERSHIP PERCENTAGE OF REAL ESTATE OWNED BY REITS 50%-55% 40%-50% 20%-25% 12%-15% Healthcare Multifamily Malls Hotels Housing (Top 25)2 (Top 50)1 1. Based on number of units owned by top 50 multifamily housing owners. 2. Based on number
Slide 8: Demographics Fueling Demand
DEMOGRAPHICS FUELING DEMAND PERCENTAGE GROWTH BY 2030 • Senior population growing 7X (INDEXED TO 2015) FASTER than other adults • 10,000 BABY BOOMERS daily becoming Medicare eligible 72% 10% • Seniors’ NET WORTH >$640K 3% • Seniors visit physician's office Under 21-74 75+ 2.5X MORE than other adults
Slide 9: Healthcare Delivery Is Converging
HEALTHCARE DELIVERY IS CONVERGING REQUIRING SOLUTIONS ACROSS SITES OF CARE AND GEOGRAPHIES Leading operators consolidating Hospitals + Care delivery increasingly interconnected Community- Based Post- Acute + Care Care Dynamic policy environment = Seniors Housing Need for broad and deep REAL ESTATE S
Slide 10: Track Record of Outsized Growth
TRACK RECORD OF OUTSIZED GROWTH INDUSTRY LEADING FFO GROWTH 3-yr CAGR 5-yr CAGR 7-yr CAGR NORMALIZED FFO ($) / DILUTED SHARE (INDEXED TO 2007) (2011-2014) (2009-2014) (2007-2014) 2.0 VTR 10.0% 10.9% 7.7% 1.5 HCP1 3.9% 7.2% 4.5% HCN 6.6% 5.7% 4.3% 1.0 0.5 2007 2008 2009 2010 2011 2012 2013 2014 Sourc
Slide 11: Growth and Income
GROWTH AND INCOME INDUSTRY LEADING DIVIDEND GROWTH 3-yr CAGR 5-yr CAGR 7-yr CAGR DIVIDEND ($) / SHARE (INDEXED TO 2007) (2011-2014) (2009-2014) (2007-2014) 1.6 VTR 8.8% 7.7% 6.6% 1.4 HCP 4.3% 3.4% 2.9% 1.2 HCN 3.9% 3.2% 2.8% 1.0 0.8 2007 2008 2009 2010 2011 2012 2013 2014 Source: Company financials.
Slide 12: Our Foresight and Innovation
OUR FORESIGHT AND INNOVATION CHANGED THE WAY INVESTORS THINK ABOUT HEALTHCARE REAL ESTATE Execute Grow Platforms with Healthcare Real Estate Foresight Early Winning Operators 1,600 2 of 10 credit upgrades during 1,400 financial crisis RIDEA 1,200 Normalized FFO ($M) 1,000 800 RMZ Campaign 600 400 20
Slide 13: Our Track Record Continues
OUR TRACK RECORD CONTINUES VENTAS INDUSTRY LEADING PERFORMANCE VTR (YTD) HCN (YTD) Same Store NOI Growth1 ✓ 4.4% 3.1% Normalized FFO Growth ✓ 9.0% 4.8% Normalized FAD Growth ✓ 9.5% 4.0% Total Investment Volume ($M)2 ✓ 5,341 4,029 Net Debt + Pref / Adj. EBITDA (Q3)2 ✓ 6.1X 5.9X Dividend Growth3 ✓ 10%
Slide 14: 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 13
Slide 15: 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 16: Operational Excellence in Seniors Housing
OPERATIONAL EXCELLENCE IN SENIORS HOUSING EXCELLENCE. EXEMPLIFIED.
Slide 17: Attractive Assets
ATTRACTIVE ASSETS VTR PORTFOLIO HAS HIGH-QUALITY ASSETS IN ATTRACTIVE LOCATIONS Ventas SHOP1 HC REIT peers2 Industry benchmarks Median household income $73,315 $72,536 $53,7063 Median home value $393,374 $399,052 $191,2273 75+ population growth 11.2% 10.7% 10.7%3 Building age 16 15 224 Note: Demogra
Slide 18: Assets in Attractive Locations
ASSETS IN ATTRACTIVE LOCATIONS • >60% of 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 • Maintain 1ppt higher occupancy SHOP than REIT peers2 Top 30 MSAs Note: Data as of
Slide 19: Ventas SHOP Strategy
VENTAS SHOP STRATEGY WE HAVE A FOCUSED SHOP PARTNERSHIP STRATEGY VTR SHOP1 VTR SHOP STRATEGY HCN OPERATING2 All others Focused on building scale All others with winners Offers partner for future Brookdale 31% Sunrise Sunrise 60% growth and redevelopment Atria Belmont Reduces intra-portfolio competit
Slide 20: Focus Versus Fragmentation
FOCUS VERSUS FRAGMENTATION VENTAS APPROACH MINIMIZES INTERNAL COMPETITION IN LARGEST MARKETS VENTAS NYC PORTFOLIO WELLTOWER LA PORTFOLIO Belmont Village Oakmont Sunrise SRG Atria Silverado Atria cluster market Sunrise Comparing largest markets, 86% of Ventas NYC communities face no intra-portfolio c
Slide 21: Atria Is a Winning Operator
ATRIA IS A WINNING OPERATOR OUTPERFORMANCE THROUGH CYCLE ATRIA NOI/UNIT CAGR 7.6% vs. 4.0% INDUSTRY CAGR1 $25,000 7.6% $20,000 $15,000 $10,000 $5,000 $0 2009 2010 2011 2012 2013 2014 Note: All Atria numbers shown reflect SS portfolio as of 2009; Atria Senior Living internal data. 1. Big 3 HC REIT an
Slide 22: A Formula for Winning Operators
A FORMULA FOR WINNING OPERATORS FOUR KEY OPERATING LEVERS Invest in Optimize Within Build Efficiency Technology for Sell the Value Local Market at National Scale Visibility and Proposition Agility Leverage Focused Asset Portfolio Leading Operators Drive Outperformance – Early Innings of Maturity 21
Slide 23: Optimize Locally
OPTIMIZE LOCALLY ATRIA GENERATES ADVANTAGE THROUGH LOCAL MARKET CLUSTERS 1 1 Westchester and 2 Long Island case studies of cluster market benefits • Manage cluster through asset redevelopment • Enhance asset quality AND cluster profitability • Impact: ~15% 6-year NOI CAGR 2 Cluster market "2.0" stra
Slide 24: National Scale Drives Efficiency
NATIONAL SCALE DRIVES EFFICIENCY 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 13% Food
Slide 25: National Scale Drives Efficiency
NATIONAL SCALE DRIVES EFFICIENCY HOLIDAY'S “TOUCHRATE” REVENUE MANAGEMENT SYSTEM AND PROCESS Best Practices Improved Process Tangible Results Centralized control +14% + pilot revenue growth1 10 years of granular data Source: Internal Holiday data. 1. Represents property revenue increase observed in
Slide 26: Sales and Marketing Opportunities
SALES AND MARKETING OPPORTUNITIES 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: $12,011 Physical Assisted
Slide 27: Sales and Marketing Opportunities
SALES AND MARKETING OPPORTUNITIES HOLIDAY INVESTS IN SALES PROCESSES TO INCREASE CONVERSION Lead Generation Lead 55% Qualification leads closing within 30 days Needs Assessment Proposal 10% reduction in Sale average close time 26
Slide 28: The Hospital Growth Opportunity
THE HOSPITAL GROWTH OPPORTUNITY EXCELLENCE. FORWARD.
Slide 29: Hospitals: Large, Growing
HOSPITALS: LARGE, GROWING ONE-THIRD OF HEALTHCARE SPENDING 2,000 Spending On Hospitals ($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. 28
Slide 30: Hospitals: Stable Through Cycles
HOSPITALS: STABLE THROUGH CYCLES LEADERS IN INDUSTRY SHOW CONSISTENT MARGINS FOR TWO DECADES EBITDA MARGIN (4 TOP HOSPITALS)1 20% 15% 10% 5% 0% 1995 2000 2005 2010 2015 Source: CMS, Company Financials. 1. Among 4 publicly traded hospitals: CYH, HCA, LPNT, and UHS. 29
Slide 31: 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 32: Hospitals Are Evolving
HOSPITALS ARE EVOLVING HOSPITALS remain the NERVE CENTER of healthcare delivery SHORTER HIGHER HIGHEST LENGTHS OF STAY VOLUMES ACUITY CARE 31
Slide 33: 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 32
Slide 34: Market Consolidating
MARKET CONSOLIDATING RESULTING 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
Slide 35: Ardent's Strategy
ARDENT'S STRATEGY CONCENTRATING SUCCESS WITHIN EACH MARKET ATTRACTIVE NETWORK OF COST-EFFECTIVE QUALITY OF MARKETS ACCESS SITES CARE 34
Slide 36: Ardent Delivers Strong Results
ARDENT DELIVERS STRONG RESULTS CONSISTENT GROWTH AND STRONG OUTCOMES GROWING REVENUES 12+% EBITDA Margin +16% SS Net patient revenue/adj. 6% admission ~$2B 6% ER visit growth 3+% Same facility admissions First-year growth in acquired ~50% hospital margins 2011 2012 2013 2014 2015 Source: Ardent inte
Slide 37: Defining a Strong Hospital
DEFINING A STRONG HOSPITAL 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 36
Slide 38: Case Study: Amarillo Market
CASE STUDY: AMARILLO MARKET ARDENT’S ATTRACTIVE ASSETS ARE DIFFERENT FROM TRADITIONAL REAL ESTATE >50% MARKET SHARE [CAT EGO RY Self ATTRACTIVE NAM Medi Pay E] 1% PAYOR MIX care [VAL 30% UE] Com Medi merc EXCLUSIVE caid ial PROVIDER 2% 65% Source: Ardent internal information. Note: Totals may not ad
Slide 39: We Are Positioned to Grow Together
WE ARE POSITIONED TO GROW TOGETHER 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 Grow with tax-exempt hospitals ~5,000 HOSPITA
Slide 40: Our Medical Office Building Platform
OUR MEDICAL OFFICE BUILDING PLATFORM EXCELLENCE. ESTABLISHED.
Slide 41: MOB: A Large and Important Segment
MOB: A LARGE AND IMPORTANT SEGMENT INTEGRATED HEALTHCARE DELIVERY WILL REQUIRE REAL ESTATE SOLUTIONS Outpatient Hospitals Facilities / MOBs Hospitals Community- Post- Based Acute Care Care Seniors Housing Private Pay Seniors Life Science / Housing Biotech Facilities Post-Acute Facilities 40
Slide 42: 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 43: Ventas Investing in Our Platform
VENTAS INVESTING IN OUR PLATFORM ACCELERATING OUR GROWTH TO BECOME TOP MOB OPERATOR ~$5B TOTAL INVESTMENT1 MORE THAN DOUBLED SQUARE FOOTAGE +106% 6,000 30 HCT: $1.4B Cumulative Investment ($M) Sq ft Owned and Managed (M) Cogdell-Spencer: $800M 24.1M 4,000 20 NHP: $1.4B 2,000 10 11.7M 0 0 2011 2012 2
Slide 44: Our Quality Assets and Markets
OUR QUALITY ASSETS AND MARKETS INDUSTRY-LEADING METRICS SAME-STORE CASH NOI GROWTH 400+ Hospital relationships 4.0% #1 largest owner of MOBs in the US1 3.0% 94% stabilized occupancy2 2.0% 3.7% 3.8% 96% affiliated or on campus2 1.0% 88% of affiliations are investment grade hospital systems and HCA2 0
Slide 45: Role of Post-Acute Care
ROLE OF POST-ACUTE CARE EXCELLENCE. EVOLVED.
Slide 46: Why Post-Acute Care Is So Important
WHY POST-ACUTE CARE IS SO IMPORTANT MEDICARE PATIENTS' USE OF POST-ACUTE SERVICES THROUGHOUT AN "EPISODE" Higher Intensity of Service Lower Short-Term Long-Term Skilled Home Inpatient Outpatient Acute Care Acute Care Nursing Health Rehab Rehab Hospitals Hospitals Facilities Care Patients’ FIRST 2% 1
Slide 47: Policy Impacting Market Dynamics
POLICY IMPACTING MARKET DYNAMICS HOSPITAL RELATIONSHIP WITH POST-ACUTE CARE CHANGING CURRENT PAYOR MIX Managed Care Demand for Post-Acute Care Services Strong Increasing Demand for Integrated and Fee For Coordinated Post-Acute Care Services Service Expanding Role for Home-Based Services POTENTIAL FU
Slide 48: Kindred Is a Winner in Post-Acute
KINDRED IS A WINNER IN POST-ACUTE BETTER ASSETS LEADING TO BETTER OPERATOR RESULTS DIVERSE BUSINESS MIX... ...A STRONGER PAYER BASE ...AND FINANCIAL POSITION 1% 11% ✓ 34% 30% LTAC1 Other4 40% 38% Solid credit rating Medicaid 11% ✓ 33% 33% 86% Rehab2 79% 79% 34% Strong operating 14% SNF 14% 70% cash
Slide 49: Capital Allocation and Investments
CAPITAL ALLOCATION AND INVESTMENTS EXCELLENCE. INVESTED.
Slide 50: Debt Composition In-Line with Peers
DEBT COMPOSITION IN-LINE WITH PEERS STRONG ACROSS METRICS VTR HCN HCP Other Peers1 (Net Debt + Preferred) / EBITDA2 6.1x 5.9x 5.8x 6.0x (Debt + Preferred) / Enterprise Value 37% 35% 39% 43% Maturities Through 2016 ($ / %) $667 / 6% $952 / 8% $1,394 / 13% $119 / 5% Weighted Average Maturity (Years) 7
Slide 51: Sources of Cash
SOURCES OF CASH FOR INVESTMENTS, DEBT REPAYMENT OR RETURN TO SHAREHOLDERS 2,000 >$1.3B leverage neutral ~500 1,500 purchasing power (Dollars in Millions) ~975 1,000 ~110 ~1,350 500 ~765 0 Operating Asset Sales Dividends Sustaining Discretionary Cash Flow CapEx Cash Note: Data is presented for illust
Slide 52: Sources and Uses
SOURCES AND USES VENTAS HAS MULTIPLE ATTRACTIVE INVESTMENT OPPORTUNITIES $265M “Available” $500M (Unlevered) Dispositions Cash $765M Discretionary Cash Development / Other Debt Return to Redevelopment Investments Shareholders Repayment ~8%–12% Yield ~6%–8% Yield ~1%–4% Yield Note: Data is presented
Slide 53: Investment Options
INVESTMENT OPTIONS ATTRACTIVE RISK-ADJUSTED RETURNS REDEVELOPMENT NEW DEVELOPMENT High returns with proven operators Attractive returns with proven • SHOP: ~10% operators • NNN: ~7-8% (guaranteed) • MOB: ~7-9% Mitigate risk with institutional capital CUSTOMER EXPANSION NEW MARKETS Value-add opportun
Slide 54: (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 $2B flagship hospital • Downtown San Francisco: Van Ness and Geary • Top health
Slide 55: Excellence. Sustained.
EXCELLENCE.SUSTAINED. 1 Welcome Overviewv9.ppt 54
Slide 56: SEC Reg. G Compliance
SEC REG. G COMPLIANCE
Slide 57: FFO and FAD Reconciliation
NON-GAAP FINANCIAL MEASURES FFO AND FAD RECONCILIATION INCLUDING COMPARABLE EARNINGS ($ IN 000S, EXCEPT PER SHARE AMOUNTS)1,2 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
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
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, depreciation and amortization, noncontrolling interest and income taxes of the Company’s investments and
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, noncontrolling interest and income taxes of the Company’s investments and other capit
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