Ventas Reports 2018 Fourth Quarter and Full Year Results

Ventas, Inc. (NYSE: VTR) today announced its results for the fourth quarter and full year ended December 31, 2018.

Ventas extended its two decade track record of sustained excellence in 2018, highlighted by delivering positive total return to shareholders, increasing our dividend and continuing to invest in our future growth. We also expanded our forward university-based research and innovation development pipeline to over $1.5 billion, enhanced our financial strength and flexibility, harvested proceeds from profitable investments and added high-quality assets to our portfolio, said Debra A. Cafaro, Ventas Chairman and CEO.

As a result of these successful activities, we enter 2019 with a strong foundation. We are sharply focused on returning to year-over-year growth, and we expect 2019 to be the pivot year in our transition. Our collaborative and cohesive team is committed to delivering growth across our diversified businesses segments, Cafaro added.

2018 and Fourth Quarter Performance

  • Net income attributable to common stockholders per diluted share for the full year 2018 was $1.14 compared to $3.78 in 2017. The change from 2017 results was largely due to the following factors: i) the cumulative net impact of asset dispositions and resulting lower property income, in addition to higher gains on real estate dispositions in 2017 of $1.87 per share due to such disposition activity; ii) $0.17 per share of higher debt extinguishment costs associated with proactively refinancing near-term debt to manage future interest rate risk and extend the Companys debt maturity schedule; and iii) $0.15 per share of higher natural disaster expenses in 2018 principally due to non-cash impairments. For the fourth quarter 2018, net income attributable to common stockholders per diluted share was $0.17 compared to $1.09 in the same period in 2017. The main drivers of the year-over-year change in fourth quarter 2018 results were the same as those listed above.
  • Reported FFO per share, as defined by the National Association of Real Estate Investment Trusts (Nareit FFO) for the full year 2018 was $3.64 compared to $4.22 in 2017. The change from 2017 results was principally due to the factors set forth above for net income, excluding gains on sale of real estate. Fourth quarter 2018 Nareit FFO per share was $0.81 compared to $1.13 in the same period in 2017.
  • The Companys fourth quarter and full year 2018 per share net income attributable to common stockholders and Nareit FFO are consistent with the Companys previously published expectations, excluding the fourth quarter impact of natural disasters that affected several of the Companys properties and increased non-cash impairments during the quarter and year. The Company believes there is sufficient insurance coverage to mitigate the impact of these natural disasters, and any recoveries will be recognized in future periods, although there can be no assurance regarding the amount or timing of any such recoveries.
  • Normalized Funds From Operations (FFO) per share for the full year 2018 was $4.07 compared to $4.16 in 2017. The change from 2017 was principally due to the cumulative net impact of asset dispositions and resulting lower property income. Fourth quarter normalized FFO per diluted common share was $0.96 compared to $1.03 in the same period in 2017.
  • For the full year 2018, the Companys same-store total property portfolio (1,041 assets) cash net operating income (NOI) grew 1.2 percent compared to 2017, above the midpoint of the Companys published guidance range of 0.75 to 1.5 percent.
  • For the fourth quarter 2018, the Companys same-store total property portfolio (1,064 assets) cash NOI grew 0.2 percent compared to the same period in 2017.
  • Same-store cash NOI growth by segment for the full year and fourth quarter 2018 is as follows:
    2018 Same-Store Cash NOI
Full Year 2018   Q4 2018
Reported Growth Reported Growth
 
Triple-Net (NNN) 3.6% 2.1%
Seniors Housing Operating Portfolio (SHOP) (2.1%) (3.5%)
Office 1.7% 1.9%
Total Company 1.2% 0.2%
 
  • Fourth quarter year-over-year changes in the Companys same-store property results were driven by:
    • NNN portfolio: Growth was due largely to in-place lease escalations.
    • SHOP portfolio: Performance was in-line with expectations and driven by the elevated number of new community openings in select markets.
    • Office portfolio: Growth was principally due to continued strength in Research & Innovation (R&I) properties. In the Medical Office Building (MOB) segment, in-place lease escalations and strong tenant retention were offset by lower occupancy from elevated 2018 lease expirations and the timing of new leasing.

2018 Capital Allocation and Balance Sheet Excellence

R&I Excellence: Expanded Accretive Development Pipeline, New Acquisition Activity, Leasing Progress and Awards

  • Expanded R&I Pipeline: As announced separately today, Ventass R&I development pipeline (the R&I Pipeline) with leading universities exceeds $1.5 billion. The R&I Pipeline will be developed through the Companys exclusive relationship with leading university-focused developer Wexford Science & Technology, which has been extended for a 10-year term to 2029. The R&I Pipeline includes a new $77 million development commitment at highly rated Arizona State University (ASU) (Moodys Aa2) that is 50 percent pre-leased by ASU for biomedical-focused academic and commercial research space. On a pro forma basis, including the R&I Pipeline, Ventass investments in its R&I business will reach over $3.5 billion.
  • R&I Transactions: In addition to the new ASU development commitment noted above, the Company acquired a $26 million R&I property in the University City sub-market of Philadelphia that is 100 percent leased and principally occupied by Drexel University (Moodys: A3) for lab space.
  • R&I Fourth Quarter Leasing Highlights:
    • Signed a 25-year lease with Yale University (Yale) for 250,000 square feet at 100 College Street, increasing Ventass relationship with Yale, enhancing its tenant credit and extending the weighted average lease term of the building. Yale is replacing Alexion Pharmaceuticals in the space.
    • Signed a new lease with Washington University at Ventass 4220 Duncan property, making it 100 percent leased within one year of opening.
  • R&I Development Awards: Ventass recently stabilized 4220 Duncan at Washington University achieved LEED Gold status, and South Street Landing at Brown University was awarded the TOBY award for the best historical building in 2018 by BOMA Boston.

Fourth Quarter Acquisition Highlights: Ventas completed the $194 million acquisition of Brookdale Battery Park, an irreplaceable seniors housing community in Manhattan, and acquired five MOBs, predominately on the West Coast, with Pacific Medical Buildings (PMB) and Ardent Health Services.

Full Year Capital Recycling: Ventas sold properties and received final repayments on loans receivable in 2018 for proceeds of $1.3 billion at a blended GAAP yield exceeding eight percent, with proceeds used to repay debt and fund investments.

Extended Exclusive MOB Relationship with PMB: Ventas extended its exclusive MOB development relationship with PMB for a 10-year term. PMB has nearly 50 years of experience developing world-class outpatient facilities with top U.S. health systems. Ventas will continue to enhance its portfolio by investing in newly developed, high-quality MOB assets in attractive markets, as highlighted by the Companys trophy Sutter development in San Francisco opening in early 2019.

Mutually Beneficial Agreements with Brookdale Senior Living (Brookdale): The Company combined and extended its leases with Brookdale to 2026. Ventass triple-net seniors housing weighted average lease term is now over eight years.

Significant Financial Strength Positioned for Growth

  • $3.4 Billion in Debt Refinancing and Repayment: Ventas significantly improved its maturity profile throughout 2018, increasing its debt duration by nearly one year to seven years. The Company now has only a modest 10 percent of its total debt (and only three percent of its debt as a percentage of enterprise value) maturing over the next three years. This represents a 22 percentage point improvement from year-end 2017 and was achieved in 2018 by:

1. Refinancing and/or repaying more than $2.5 billion in debt since December 31, 2017

2. Renewing and extending a $900 million term loan

3. Proactively issuing $1.4 billion in 10 year senior notes

  • The Companys financial strength was robust at quarter end, including a sector-leading net debt to Adjusted Pro Forma EBITDA ratio of 5.6x and fixed charge coverage ratio of 4.6x.
  • In January 2019, Ventas announced a new $1 billion commercial paper program intended to cost effectively supplement the Companys working capital capacity. Ventas maintains its existing $3 billion revolving credit facility and other credit facilities, together providing the company robust liquidity to ensure financial flexibility.

People & Culture Will Drive Continued Success

  • Demonstrated Leadership Excellence, Strengthened Best-in-Class Team and Commitment to Environmental, Social and Governance (ESG) Principles
    • Ventas Chairman and CEO, Debra A. Cafaro, was again recognized as a top global CEO and leader in the real estate and healthcare industries in 2018. Recognitions include:
      • Harvard Business Review Top 100 Best Performing CEOs in the World (fifth consecutive year)
      • Modern Healthcare 100 Most Influential People in Healthcare, the only real estate representative on this prestigious list
      • Named Chair of the Real Estate Roundtable, a public policy organization that brings together leaders of the nations top real estate firms to address key national policy issues related to real estate and the overall economy
      • A Lifetime Achievement Award from The American Seniors Housing Association (ASHA)
    • Robert F. Probst, Executive Vice President and Chief Financial Officer of Ventas, was awarded the 2019 Chicago Public Company CFO of the Year by the Financial Executives International (FEI) Chicago Chapter.
    • Ventas made significant achievements in 2018 in advancing its leadership position and investment in ESG matters, including publishing its inaugural Corporate Sustainability Report. Other recognitions include:
      • Nareits 2018 Healthcare Leader in the Light for the second consecutive year and third time
      • Inclusion in the Dow Jones Sustainability IndexTM for North America for the second consecutive year
      • #1 ranked healthcare REIT in the GRESB real estate ESG assessment
  • In January, Ventas announced two key appointments to its senior leadership team. Bhavana Devulapally, Chief Information Officer and Senior Vice President, will lead Ventass technology team, overseeing the development and implementation of strategy for the Companys information systems. Juan Sanabria, Vice President of Investor Relations, will be the principal liaison with the equity market and analysts.

First Quarter Dividend

The Companys Board of Directors declared a dividend for the first quarter 2019 of $0.7925 per share. The dividend is payable in cash on April 12, 2019 to stockholders of record on April 1, 2019.

2019 Guidance

Ventas expects 2019 per share normalized FFO, Nareit FFO and net income attributable to common stockholders, and same-store cash NOI growth, to range as follows:

  FY 2019 Guidance
Per Share
Low High
 
Net Income Attributable to Common Stockholders $1.23 $1.38
Nareit FFO $3.70 $3.82
Normalized FFO $3.75 $3.85
 
FY 2019 Projected
Same-Store Cash NOI Growth
Low High
 
NNN 0.5% 1.5%
SHOP (3%) 0%
Office 1.5% 2.5%
Total Company 0% 1%
 

Ventass 2019 normalized FFO per share guidance also assumes $500 million of disposition transactions and receipt of loan repayments in 2019, including the previously announced Brookdale asset sales, with proceeds being used to fund $500 million in development and redevelopment projects, mostly in accelerating the Companys exciting university-based research and innovation development pipeline. These capital recycling activities have near-term impacts on FFO growth in 2019, but will deliver high-quality and accretive long-term cash flow growth. Guidance also includes $0.02 per share in incremental leasing costs from changes in accounting standards.

The 2019 outlook assumes no acquisitions and 361 million weighted average fully-diluted shares. Ventas expects leverage, as measured by net debt to Adjusted Pro Forma EBITDA, to remain stable year-over-year in 2019.

A reconciliation of the Companys 2019 guidance to the Companys projected GAAP measures is included in this press release. The Companys 2019 guidance is based on a number of other assumptions that are subject to change and many of which are outside the control of the Company. If actual results vary from these assumptions, the Companys expectations may change. There can be no assurance that the Company will achieve these results.

Fourth Quarter and Full Year 2018 Conference Call

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 (844) 776-7841 (or +1 (661) 378-9542 for international callers). The participant passcode is Ventas. The conference call is being webcast live by NASDAQ OMX and can be accessed at the Companys website at www.ventasreit.com. A replay of the webcast will be available following the call online, or by calling (855) 859-2056 (or +1 (404) 537-3406 for international callers), passcode 3853609, beginning at approximately 2:00 p.m. Eastern Time and will remain for 36 days.

Ventas, Inc., an S&P 500 company, is a leading real estate investment trust. Its diverse portfolio of approximately 1,200 assets in the United States, Canada and the United Kingdom consists of seniors housing communities, medical office buildings, university-based research and innovation centers, inpatient rehabilitation and long-term acute care facilities, health systems and skilled nursing facilities. Through its Lillibridge subsidiary, Ventas provides management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. References to Ventas or the Company mean Ventas, Inc. and its consolidated subsidiaries unless otherwise expressly noted. More information about Ventas and Lillibridge can be found at www.ventasreit.com and www.lillibridge.com.

The Company routinely announces material information to investors and the marketplace using press releases, Securities and Exchange Commission (SEC) filings, public conference calls, webcasts and the Companys website at www.ventasreit.com/investor-relations. The information that the Company posts to its website may be deemed to be material. Accordingly, the Company encourages investors and others interested in the Company to routinely monitor and review the information that the Company posts on its website, in addition to following the Companys press releases, SEC filings and public conference calls and webcasts. Supplemental information regarding the Company can be found on the Companys website under the Investor Relations section or at www.ventasreit.com/investor-relations/annual-reports—supplemental-information. A comprehensive listing of the Companys properties is available at www.ventasreit.com/our-portfolio/properties-by-stateprovince.

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. All statements regarding the Companys or its tenants, operators, borrowers or managers expected future financial condition, results of operations, cash flows, funds from operations, dividends and dividend plans, financing opportunities and plans, capital markets transactions, business strategy, budgets, projected costs, operating metrics, capital expenditures, competitive positions, acquisitions, investment opportunities, dispositions, merger or acquisition integration, growth opportunities, expected lease income, continued qualification as a real estate investment trust (REIT), plans and objectives of management for future operations and statements that include words such as anticipate, if, believe, plan, estimate, expect, intend, may, could, should, will and other similar expressions are forward-looking statements. These forward-looking statements are inherently uncertain, and actual results may differ from the Companys expectations. The Company does not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made.

The Companys actual future results and trends may differ materially from expectations depending on a variety of factors discussed in the Companys filings with the SEC. These factors include without limitation: (a) the ability and willingness of the Companys tenants, operators, borrowers, managers and other third parties to satisfy their obligations under their respective contractual arrangements with the Company, including, in some cases, their obligations to indemnify, defend and hold harmless the Company from and against various claims, litigation and liabilities; (b) the ability of the Companys tenants, operators, borrowers and managers to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to third parties, including without limitation obligations under their existing credit facilities and other indebtedness; (c) the Companys success in implementing its business strategy and the Companys ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions and investments; (d) macroeconomic conditions such as a disruption of or lack of access to the capital markets, changes in the debt rating on U.S. government securities, default or delay in payment by the United States of its obligations, and changes in the federal or state budgets resulting in the reduction or nonpayment of Medicare or Medicaid reimbursement rates; (e) the nature and extent of future competition, including new construction in the markets in which the Companys seniors housing communities and medical office buildings (MOBs) are located; (f) the extent and effect of future or pending healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates; (g) increases in the Companys borrowing costs as a result of changes in interest rates and other factors, including the potential phasing out of the London Inter-bank Offered Rate after 2021; (h) the ability of the Companys tenants, operators and managers, as applicable, to comply with laws, rules and regulations in the operation of the Companys properties, to deliver high-quality services, to attract and retain qualified personnel and to attract residents and patients; (i) changes in general economic conditions or economic conditions in the markets in which the Company may, from time to time, compete, and the effect of those changes on the Companys revenues, earnings and funding sources; (j) the Companys ability to pay down, refinance, restructure or extend its indebtedness as it becomes due; (k) the Companys ability and willingness to maintain its qualification as a REIT in light of economic, market, legal, tax and other considerations; (l) final determination of the Companys taxable net income for the year ended December 31, 2018 and for the year ending December 31, 2019; (m) the ability and willingness of the Companys tenants to renew their leases with the Company upon expiration of the leases, the Companys ability to reposition its properties on the same or better terms in the event of nonrenewal or in the event the Company exercises its right to replace an existing tenant, and obligations, including indemnification obligations, the Company may incur in connection with the replacement of an existing tenant; (n) risks associated with the Companys senior living operating portfolio, such as factors that can cause volatility in the Companys operating income and earnings generated by those properties, including without limitation national and regional economic conditions, costs of food, materials, energy, labor and services, employee benefit costs, insurance costs and professional and general liability claims, and the timely delivery of accurate property-level financial results for those properties; (o) changes in exchange rates for any foreign currency in which the Company may, from time to time, conduct business; (p) year-over-year changes in the Consumer Price Index or the UK Retail Price Index and the effect of those changes on the rent escalators contained in the Companys leases and the Companys earnings; (q) the Companys ability and the ability of its tenants, operators, borrowers and managers to obtain and maintain adequate property, liability and other insurance from reputable, financially stable providers; (r) the impact of damage to the Companys properties from catastrophic weather and other natural events and the physical effects of climate change; (s) the impact of increased operating costs and uninsured professional liability claims on the Companys liquidity, financial condition and results of operations or that of the Companys tenants, operators, borrowers and managers, and the ability of the Company and the Companys tenants, operators, borrowers and managers to accurately estimate the magnitude of those claims; (t) risks associated with the Companys MOB portfolio and operations, including the Companys ability to successfully design, develop and manage MOBs and to retain key personnel; (u) the ability of the hospitals on or near whose campuses the Companys MOBs are located and their affiliated health systems to remain competitive and financially viable and to attract physicians and physician groups; (v) risks associated with the Companys investments in joint ventures and unconsolidated entities, including its lack of sole decision-making authority and its reliance on its joint venture partners financial condition; (w) the Companys ability to obtain the financial results expected from its development and redevelopment projects; (x) the impact of market or issuer events on the liquidity or value of the Companys investments in marketable securities; (y) consolidation activity in the seniors housing and healthcare industries resulting in a change of control of, or a competitors investment in, one or more of the Companys tenants, operators, borrowers or managers or significant changes in the senior management of the Companys tenants, operators, borrowers or managers; (z) the impact of litigation or any financial, accounting, legal or regulatory issues that may affect the Company or its tenants, operators, borrowers or managers; and (aa) changes in accounting principles, or their application or interpretation, and the Companys ability to make estimates and the assumptions underlying the estimates, which could have an effect on the Companys earnings.

         
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
 
December 31, September 30, June 30, March 31, December 31,
2018 2018 2018 2018 2017
 
Assets
Real estate investments:
Land and improvements $ 2,114,406 $ 2,115,870 $ 2,124,231 $ 2,135,662 $ 2,151,386
Buildings and improvements 22,437,243 22,188,578 22,065,202 22,078,454 22,216,942
Construction in progress 422,334 395,072 408,313 380,064 344,151
Acquired lease intangibles 1,502,955   1,506,269   1,510,698   1,532,223   1,548,074  
26,476,938 26,205,789 26,108,444 26,126,403 26,260,553
Accumulated depreciation and amortization (6,383,281 ) (6,185,155 ) (5,972,774 ) (5,789,422 ) (5,638,099 )
Net real estate property 20,093,657 20,020,634 20,135,670 20,336,981 20,622,454
Secured loans receivable and investments, net 495,869 527,851 526,553 1,212,519 1,346,359
Investments in unconsolidated real estate entities 48,378   48,478   101,490   102,544   123,639  
Net real estate investments 20,637,904 20,596,963 20,763,713 21,652,044 22,092,452
Cash and cash equivalents 72,277 86,107 93,684 92,543 81,355
Escrow deposits and restricted cash 59,187 62,440 64,419 71,039 106,898
Goodwill 1,050,548 1,045,877 1,034,274 1,035,248 1,034,644
Assets held for sale 5,454 24,180 15,567 62,534 65,413
Other assets 759,185   782,386   727,477   580,102   573,779  
Total assets $ 22,584,555   $ 22,597,953   $ 22,699,134   $ 23,493,510   $ 23,954,541  
 
Liabilities and equity
Liabilities:
Senior notes payable and other debt $ 10,733,699 $ 10,478,455 $ 10,402,897 $ 11,039,812 $ 11,276,062
Accrued interest 99,667 76,883 93,112 77,764 93,958
Accounts payable and other liabilities 1,086,030 1,134,898 1,133,902 1,134,570 1,183,489
Liabilities related to assets held for sale 205 14,790 896 60,023 60,265
Deferred income taxes 205,219   236,616   240,941   244,742   250,092  

Total liabilities

12,124,820 11,941,642 11,871,748 12,556,911 12,863,866
 
Redeemable OP Unitholder and noncontrolling interests 188,141 143,242 149,817 132,555 158,490
 
Commitments and contingencies
 
Equity:
Ventas stockholders equity:
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued
Common stock, $0.25 par value; 356,572; 356,468; 356,412; 356,317; and 356,187 shares issued at December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018, and December 31, 2017, respectively 89,125 89,100 89,085 89,062 89,029
Capital in excess of par value 13,076,528 13,081,324 13,068,399 13,080,220 13,053,057
Accumulated other comprehensive loss (19,582 ) (7,947 ) (10,861 ) (14,474 ) (35,120 )
Retained earnings (deficit) (2,930,214 ) (2,709,293 ) (2,529,102 ) (2,413,440 ) (2,240,698 )
Treasury stock, 0; 6; 11; 11; and 1 shares at December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018, and December 31, 2017, respectively   (345 ) (573 ) (553 ) (42 )
Total Ventas stockholders equity 10,215,857 10,452,839 10,616,948 10,740,815 10,866,226
Noncontrolling interests 55,737   60,230   60,621   63,229   65,959  
Total equity 10,271,594   10,513,069   10,677,569   10,804,044   10,932,185  
Total liabilities and equity $ 22,584,555   $ 22,597,953   $ 22,699,134   $ 23,493,510   $ 23,954,541  
 
   
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
   
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
2018 2017 2018 2017
Revenues
Rental income:
Triple-net leased $ 189,168 $ 205,176 $ 737,796 $ 840,131
Office 195,540   191,826   776,011   753,467  
384,708 397,002 1,513,807 1,593,598
Resident fees and services 517,175 457,101 2,069,477 1,843,232
Office building and other services revenue 2,511 3,896 13,416 13,677
Income from loans and investments 18,512 32,109 124,218 117,608
Interest and other income 357   5,180   24,892   6,034  
Total revenues 923,263 895,288 3,745,810 3,574,149
Expenses
Interest 110,524 111,951 442,497 448,196
Depreciation and amortization 244,276 232,650 919,639 887,948
Property-level operating expenses:
Senior living 366,148 313,769 1,446,201 1,250,065
Office 61,017   58,279   243,679   233,007  
427,165 372,048 1,689,880 1,483,072
Office building services costs 338 1,683 1,418 3,391
General, administrative and professional fees 38,475 34,930 151,982 135,490
Loss (gain) on extinguishment of debt, net 7,843 (102 ) 58,254 754
Merger-related expenses and deal costs 4,259 1,632 30,547 10,535
Other 58,877   3,986   66,768   20,052  
Total expenses 891,757   758,778   3,360,985   2,989,438  
Income before unconsolidated entities, real estate dispositions, income taxes, discontinued operations and noncontrolling interests 31,506 136,510 384,825 584,711
Loss from unconsolidated entities (7,208 ) (4,355 ) (55,034 ) (561 )
Gain on real estate dispositions 10,354 214,985 46,247 717,273
Income tax benefit 28,650   46,680   39,953   59,799  
Income from continuing operations 63,302 393,820 415,991 1,361,222
Discontinued operations   (15 ) (10 ) (110 )
Net income 63,302 393,805 415,981 1,361,112
Net income attributable to noncontrolling interests 1,029   1,251   6,514   4,642  
Net income attributable to common stockholders $ 62,273   $ 392,554   $ 409,467   $ 1,356,470  
Earnings per common share
Basic:
Income from continuing operations $ 0.18 $ 1.11 $ 1.17 $ 3.83
Net income attributable to common stockholders 0.17 1.10 1.15 3.82
Diluted:
Income from continuing operations $ 0.18 $ 1.10 $ 1.16 $ 3.80
Net income attributable to common stockholders 0.17 1.09 1.14 3.78
 
Weighted average shares used in computing earnings per common share
Basic 356,389 355,966 356,265 355,326
Diluted 359,989 359,184 359,301 358,566
 
Dividends declared per common share $ 0.7925 $ 0.79 $ 3.1625 $ 3.115
 
 
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
         
For the Quarters Ended
December 31, September 30, June 30, March 31, December 31,
2018 2018 2018 2018 2017
Revenues
Rental income:
Triple-net leased $ 189,168 $ 190,117 $ 167,870 $ 190,641 $ 205,176
Office 195,540   193,911   192,392   194,168   191,826  
384,708 384,028 360,262 384,809 397,002
Resident fees and services 517,175 518,560 518,989 514,753 457,101
Office building and other services revenue 2,511 3,288 4,289 3,328 3,896
Income from loans and investments 18,512 18,108 56,417 31,181 32,109
Interest and other income 357   12,554   2,347   9,634   5,180  
Total revenues 923,263 936,538 942,304 943,705 895,288
 
Expenses
Interest 110,524 107,581 113,029 111,363 111,951
Depreciation and amortization 244,276 218,579 223,634 233,150 232,650
Property-level operating expenses:
Senior living 366,148 366,721 361,112 352,220 313,769
Office 61,017   61,668   60,301   60,693   58,279  
427,165 428,389 421,413 412,913 372,048
Office building services costs 338 431 534 115 1,683
General, administrative and professional fees 38,475 39,677 36,656 37,174 34,930
Loss (gain) on extinguishment of debt, net 7,843 39,527 (93 ) 10,977 (102 )
Merger-related expenses and deal costs 4,259 4,458 4,494 17,336 1,632
Other 58,877   1,244   3,527   3,120   3,986  
Total expenses 891,757   839,886   803,194   826,148   758,778  
 
Income before unconsolidated entities, real estate dispositions, income taxes, discontinued operations and noncontrolling interests 31,506 96,652 139,110 117,557 136,510
Loss from unconsolidated entities (7,208 ) (716 ) (6,371 ) (40,739 ) (4,355 )
Gain on sale of real estate dispositions 10,354 18 35,827 48 214,985
Income tax benefit 28,650   7,327   734   3,242   46,680  
Income from continuing operations 63,302 103,281 169,300 80,108 393,820
Discontinued operations       (10 ) (15 )
Net income 63,302 103,281 169,300 80,098 393,805
Net income attributable to noncontrolling interests 1,029   1,309   2,781   1,395   1,251  
Net income attributable to common stockholders $ 62,273   $ 101,972   $ 166,519   $ 78,703   $ 392,554  
 
Earnings per common share
Basic:
Income from continuing operations $ 0.18 $ 0.29 $ 0.48 $ 0.22 $ 1.11
Net income attributable to common stockholders 0.17 0.29 0.47 0.22 1.10
Diluted:
Income from continuing operations $ 0.18 $ 0.29 $ 0.47 $ 0.22 $ 1.10
Net income attributable to common stockholders 0.17 0.28 0.46 0.22 1.09
 
Weighted average shares used in computing earnings per common share
Basic 356,389 356,318 356,228 356,112 355,966
Diluted 359,989 359,355 359,000 358,853 359,184
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
  For the Years Ended
December 31,
2018   2017
Cash flows from operating activities:
Net income $ 415,981 $ 1,361,112
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 919,639 887,948
Amortization of deferred revenue and lease intangibles, net (30,660 ) (20,537 )
Other non-cash amortization 18,886 16,058
Stock-based compensation 29,963 26,543
Straight-lining of rental income, net 13,396 (23,134 )
Loss on extinguishment of debt, net 58,254 754
Gain on real estate dispositions (46,247 ) (717,273 )
Gain on real estate loan investments (13,202 ) (124 )
Income tax benefit (43,026 ) (63,599 )
Loss from unconsolidated entities 55,034 3,588
Gain on re-measurement of equity interest upon acquisition, net (3,027 )
Distributions from unconsolidated entities 2,934 4,676
Real estate impairments related to natural disasters 52,510 4,616
Other 3,720 4,624
Changes in operating assets and liabilities:
Increase in other assets (23,198 ) (29,282 )
Increase in accrued interest 4,992 11,068
Decrease in accounts payable and other liabilities (37,509 ) (35,259 )
Net cash provided by operating activities 1,381,467 1,428,752
Cash flows from investing activities:
Net investment in real estate property (265,907 ) (664,684 )
Investment in loans receivable (229,534 ) (748,119 )
Proceeds from real estate disposals 353,792 859,874
Proceeds from loans receivable 911,540 101,097
Development project expenditures (330,876 ) (299,085 )
Capital expenditures (131,858 ) (132,558 )
Distributions from unconsolidated entities 57,455 6,169
Investment in unconsolidated entities (47,007 ) (61,220 )
Insurance proceeds for property damage claims 6,891   1,419  
Net cash provided by (used in) investing activities 324,496 (937,107 )
Cash flows from financing activities:
Net change in borrowings under revolving credit facilities 321,463 384,783
Proceeds from debt 2,549,473 1,111,649
Repayment of debt (3,465,579 ) (1,369,084 )
Purchase of noncontrolling interests (4,724 ) (15,809 )
Payment of deferred financing costs (20,612 ) (27,297 )
Issuance of common stock, net 73,596
Cash distribution to common stockholders (1,127,143 ) (827,285 )
Cash distribution to redeemable OP Unitholders (7,459 ) (5,677 )
Cash issued for redemption of OP and Class C Units (1,370 )
Contributions from noncontrolling interests 1,883 4,402
Distributions to noncontrolling interests (11,574 ) (11,187 )
Other 3,705   10,582  
Net cash used in financing activities (1,761,937 ) (671,327 )
Net decrease in cash, cash equivalents and restricted cash (55,974 ) (179,682 )
Effect of foreign currency translation (815 ) 581
Cash, cash equivalents and restricted cash at beginning of period 188,253   367,354  
Cash, cash equivalents and restricted cash at end of period $ 131,464   $ 188,253  
 
Supplemental schedule of non-cash activities:
Assets acquired and liabilities assumed from acquisitions and other:
Real estate investments $ 94,280 $ 425,906
Other assets 5,398 (3,716 )
Debt 30,508 75,231
Other liabilities 18,086 70,878
Deferred income tax liability 922 (14,869 )
Noncontrolling interests 2,591 4,202
Equity issued 30,487
Equity issued for redemption of OP and Class C Units 907 24,002
 
 
QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
  For the Quarters Ended
December 31,   September 30,   June 30,   March 31,   December 31,
2018 2018 2018 2018 2017
Cash flows from operating activities:
Net income $ 63,302 $ 103,281 $ 169,300 $ 80,098 $ 393,805
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 244,276 218,579 223,634 233,150 232,650
Amortization of deferred revenue and lease intangibles, net (4,659 ) (2,164 ) (19,972 ) (3,865 ) (4,254 )
Other non-cash amortization 5,359 4,877 4,873 3,777 4,872
Stock-based compensation 9,202 6,488 7,149 7,124 6,620
Straight-lining of rental income, net (6,587 )

(8,102

) 31,707 (3,622 ) (5,750 )
Loss (gain) on extinguishment of debt, net 7,843 39,527 (93 ) 10,977 (102 )
Gain on real estate dispositions (10,354 ) (18 ) (35,827 ) (48 ) (214,985 )
(Gain) loss on real estate loan investments (13,211 ) 9
Income tax benefit (29,562 ) (8,147 ) (1,642 ) (3,675 ) (47,980 )
Loss from unconsolidated entities 7,208 716 6,371 40,739 4,355
Distributions from unconsolidated entities 200 100 1,245 1,389 767
Real estate impairments related to natural disasters 52,510
Other 3,330 (734 ) 1,214 (90 ) 1,801
Changes in operating assets and liabilities:
Decrease (increase) in other assets 11,681 (47,655 ) 7,513 5,263 (7,670 )
Increase (decrease) in accrued interest 22,500 (16,004 ) 15,020 (16,524 ) (1,620 )
(Decrease) increase in accounts payable and other liabilities (12,404 ) 16,542   5,036   (46,683 ) (15,982 )
Net cash provided by operating activities 363,845 307,286 402,317 308,019 346,527
Cash flows from investing activities:
Net investment in real estate property (230,107 ) (23,543 ) (807 ) (11,450 ) (318,193 )
Investment in loans receivable (17,445 ) (535 ) (207,173 ) (4,381 ) (14,086 )
Proceeds from real estate disposals 22,549 19,000 136,873 175,370 245,121
Proceeds from loans receivable 45,227 216 723,003 143,094 16,736
Development project expenditures (100,528 ) (74,666 ) (81,793 ) (73,889 ) (88,662 )
Capital expenditures (58,833 ) (30,996 ) (21,412 ) (20,617 ) (49,171 )
Distributions from unconsolidated entities 25 50,638 6,792 353
Investment in unconsolidated entities (1,901 ) (5,073 ) (932 ) (39,101 ) (18,821 )
Insurance proceeds for property damage claims 564   3,998   802   1,527   26  
Net cash (used in) provided by investing activities (340,449 ) (60,961 ) 555,353 170,553 (226,697 )
Cash flows from financing activities:
Net change in borrowings under revolving credit facilities 280,171 239,018 (471,569 ) 273,843 45
Proceeds from debt 137,053 1,662,104 11,797 738,519 53,212
Repayment of debt (171,475 ) (1,862,217 ) (214,769 ) (1,217,118 ) (143,559 )
Purchase of noncontrolling interests (2,295 ) (2,429 )
Payment of deferred financing costs (4,029 ) (10,235 ) (30 ) (6,318 ) (871 )
Cash distribution to common stockholders (281,895 ) (281,853 ) (281,760 ) (281,635 )
Cash distribution to redeemable OP Unitholders (1,865 ) (1,850 ) (1,886 ) (1,858 )
Cash issued for redemption of OP and Class C Units (395 ) (320 ) (655 )
Contributions from noncontrolling interests 1,383 500
Distributions to noncontrolling interests (1,606 ) (2,160 ) (4,469 ) (3,339 ) (1,939 )
Other 4,441   1,259   2,692   (4,687 ) 39  
Net cash used in financing activities (40,117 ) (255,829 ) (962,743 ) (503,248 ) (93,073 )
Net (decrease) increase in cash, cash equivalents and restricted cash (16,721 ) (9,504 ) (5,073 ) (24,676 ) 26,757
Effect of foreign currency translation (362 ) (52 ) (406 ) 5 (89 )
Cash, cash equivalents and restricted cash at beginning of period 148,547   158,103   163,582   188,253   161,585  
Cash, cash equivalents and restricted cash at end of period $ 131,464   $ 148,547   $ 158,103   $ 163,582   $ 188,253  
 
 
QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
  For the Quarters Ended
December 31,   September 30,   June 30,   March 31,   December 31,
2018 2018 2018 2018 2017
Supplemental schedule of non-cash activities:
Assets acquired and liabilities assumed from acquisitions and other:
Real estate investments $ 65,174 $ 190 $ 6 $ 28,910 $ 219,135
Other assets 1,286 4,112 1,830
Debt 30,508 10,602
Other liabilities 1,952 190 6 15,938 6,788
Deferred income tax liability 922 1,247
Noncontrolling interests 2,591 575
Equity issued 30,487
Equity issued for redemption of OP and Class C Units 641 266 1,308
 
 
NON-GAAP FINANCIAL MEASURES RECONCILIATION
Funds From Operations (FFO) and Funds Available for Distribution (FAD)(1)
(Dollars in thousands, except per share amounts)
 
FY
YOY
2017 2018 Growth
    Q4 FY Q1 Q2 Q3 Q4 FY ’17-’18
Net income attributable to common stockholders $ 392,554 $ 1,356,470 $ 78,703 $ 166,519 $ 101,972 $ 62,273 $ 409,467 (70 %)
Net income attributable to common stockholders per share   $ 1.09   $ 3.78   $ 0.22   $ 0.46   $ 0.28   $ 0.17   $ 1.14   (70 %)
Adjustments:
Depreciation and amortization on real estate assets 230,996 881,088 231,495 222,092 217,116 242,834 913,537
Depreciation on real estate assets related to noncontrolling interests (1,842 ) (7,565 ) (1,811 ) (1,776 ) (1,718 ) (1,621 ) (6,926 )
Depreciation on real estate assets related to unconsolidated entities 731 4,231 1,030 302 723 (78 ) 1,977
Impairment on equity method investment 35,708 35,708
Gain on re-measurement of equity interest upon acquisition, net (3,027 )
Gain on real estate dispositions (214,985 ) (717,273 ) (48 ) (35,827 ) (18 ) (10,354 ) (46,247 )
Gain on real estate dispositions related to noncontrolling interests 18 1,508 1,508
Gain on real estate dispositions related to unconsolidated entities (12 ) (1,057 )     (875 )   (875 )
Subtotal: FFO add-backs 14,888 156,415 266,374 186,299 215,228 230,781 898,682
Subtotal: FFO add-backs per share   $ 0.04   $ 0.44   $ 0.74   $ 0.52   $ 0.60   $ 0.64   $ 2.50    
FFO (NAREIT) attributable to common stockholders $ 407,442 $ 1,512,885 $ 345,077 $ 352,818 $ 317,200 $ 293,054 $ 1,308,149 (14 %)
FFO (NAREIT) attributable to common stockholders per share   $ 1.13   $ 4.22   $ 0.96   $ 0.98   $ 0.88   $ 0.81   $ 3.64   (14 %)
 
Adjustments:
Change in fair value of financial instruments 81 (41 ) (91 ) 45 42 (14 ) (18 )
Non-cash income tax benefit (6,768 ) (22,387 ) (3,675 ) (1,642 ) (8,166 ) (4,944 ) (18,427 )
Impact of tax reform (36,539 ) (36,539 ) (24,618 ) (24,618 )
(Gain) loss on extinguishment of debt, net (97 ) 839 10,987 4,707 39,489 7,890 63,073
(Gain) loss on non-real estate dispositions related to unconsolidated entities (5 ) (39 ) 4 (16 ) 10 (2 )
Merger-related expenses, deal costs and re-audit costs 1,917 14,823 19,245 7,540 4,985 6,375 38,145
Amortization of other intangibles 327 1,458 328 190 121 120 759
Other items related to unconsolidated entities 1,489 3,188 2,847 878 632 678 5,035
Non-cash charges related to lease terminations 21,299 21,299
Non-cash impact of changes to equity plan 1,371 5,453 1,581 1,292 448 1,509 4,830
Natural disaster expenses (recoveries), net 1,791   11,601   (383 ) 79   93   64,041   63,830  
Subtotal: normalized FFO add-backs (36,433 ) (21,644 ) 30,843 34,388 37,628 51,047 153,906
Subtotal: normalized FFO add-backs per share   $ (0.10 ) $ (0.06 ) $ 0.09   $ 0.10   $ 0.10   $ 0.14   $ 0.43    
Normalized FFO attributable to common stockholders $ 371,009 $ 1,491,241 $ 375,920 $ 387,206 $ 354,828 $ 344,101 $ 1,462,055 (2 %)
Normalized FFO attributable to common stockholders per share   $ 1.03   $ 4.16   $ 1.05   $ 1.08   $ 0.99   $ 0.96   $ 4.07   (2 %)
 
Non-cash items included in normalized FFO:
Amortization of deferred revenue and lease intangibles, net (4,254 ) (20,537 ) (3,865 ) (2,992 ) (2,164 ) (4,659 ) (13,680 )
Other non-cash amortization, including fair market value of debt 4,872 16,058 3,777 4,873 4,877 5,359 18,886
Stock-based compensation 5,249 21,090 5,543 5,857 6,040 7,693 25,133
Straight-lining of rental income, net (5,750 ) (23,134 ) (3,622 ) (6,572 ) (8,102 ) (6,587 ) (24,883 )
Subtotal: non-cash items included in normalized FFO 117 (6,523 ) 1,833 1,166 651 1,806 5,456
Capital expenditures   (49,812 ) (138,778 ) (22,233 ) (23,584 ) (33,576 ) (60,667 ) (140,060 )  
Normalized FAD attributable to common stockholders   $ 321,314   $ 1,345,940   $ 355,520   $ 364,788   $ 321,903   $ 285,240   $ 1,327,451   (1 %)
Merger-related expenses, deal costs and re-audit costs (1,917 ) (14,823 ) (19,245 ) (7,540 ) (4,985 ) (6,375 ) (38,145 )
Other items related to unconsolidated entities   (1,489 ) (3,188 ) (2,847 ) (878 ) (632 ) (678 ) (5,035 )  
FAD attributable to common stockholders   $ 317,908   $ 1,327,929   $ 333,428   $ 356,370   $ 316,286   $ 278,187   $ 1,284,271   (3 %)
Weighted average diluted shares 359,184   358,566   358,853   359,000   359,355   359,989   359,301  
 
1 Per share quarterly amounts may not add to annual per share amounts due to material changes in the Companys weighted average diluted share count, if any. Per share amounts may not add to total per share amounts due to rounding.
 

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 Companys 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 Companys 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 joint ventures. Adjustments for unconsolidated partnerships and joint ventures 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 Companys debt; (c) the non-cash effect of income tax benefits or expenses, the non-cash impact of changes to the Companys executive equity compensation plan, derivative transactions that have non-cash mark-to-market impacts on the Companys income statement and non-cash charges related to lease terminations; (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 Companys historical financial statements and related matters; and (h) net expenses or recoveries related to natural disasters. Normalized FAD represents normalized FFO excluding non-cash components, which include straight-line rental adjustments, and deducting capital expenditures, including certain tenant allowances and leasing commissions. FAD represents normalized FAD after subtracting merger-related expenses, deal costs and re-audit costs and other 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 Companys financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of the Companys liquidity, nor are they necessarily indicative of sufficient cash flow to fund all of the Companys needs. The Company has historically reconciled FFO, normalized FFO, FAD and normalized FAD to income from continuing operations because it provides insight into the Companys continuing operations, but, in light of recent SEC regulations that changed the presentation of statements of income, the Company now believes that net income attributable to common stockholders is the most comparable GAAP measure. 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
EPS, FFO and FAD Guidance Attributable to Common Stockholders (1,2)
(Dollars in millions, except per share amounts)
 
Tentative / Preliminary and Subject to Change
FY2019 – Guidance   FY2019 – Per Share
Low   High Low   High
                 
Net Income Attributable to Common Stockholders   $442   $496   $1.23   $1.38
   
Depreciation and Amortization Adjustments 900 930 2.50 2.58
Gain on Real Estate Dispositions (10 ) (50 ) (0.03 ) (0.14 )
Other Adjustments 3

1

                 
FFO (NAREIT) Attributable to Common Stockholders   $1,333   $1,376   $3.70   $3.82
 
Merger-Related Expenses, Deal Costs and Re-Audit Costs 15 10 0.04 0.03
Loss on Extinguishment of Debt, Net 5 1 0.01 0.00
Natural Disaster Expenses (Recoveries), Net
Other Adjustments 3

(1

) 2 (0.00 )

0.01

                 
Normalized FFO Attributable to Common Stockholders $1,352 $1,389 $3.75 $3.85
% Year-Over-Year Growth           (10 %)   (7 %)
 
Non-Cash Items Included in Normalized FFO

11

7

Capital Expenditures (146 ) (156 )
           
Normalized FAD Attributable to Common Stockholders   $1,217   $1,240  
 
Merger-Related Expenses, Deal Costs and Re-Audit Costs (15 ) (10 )
Other Adjustments 3 (3 ) (2 )
           
FAD Attributable to Common Stockholders   $1,199   $1,228  
 
Weighted Average Diluted Shares (in millions) 361 361
 

1

 

The Companys 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 Companys expectations depending on factors discussed in the Companys 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. Totals may not add due to minor corporate-level adjustments.

3

See table titled Funds From Operations (FFO) and Funds Available for Distribution (FAD) for detailed breakout of adjustments for each respective category.

NON-GAAP FINANCIAL MEASURES RECONCILIATION Net Debt to Adjusted Pro Forma EBITDA (Dollars in thousands)

The following table illustrates net debt to pro forma earnings before interest, taxes, depreciation and amortization (including non-cash stock-based compensation expense), excluding gains or losses on extinguishment of debt, consolidated joint venture partners share of EBITDA, merger-related expenses and deal costs, expenses related to the re-audit and re-review in 2014 of the Companys 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 lease terminations, and including the Companys share of EBITDA from unconsolidated entities and adjustments for other immaterial or identified items (Adjusted EBITDA).

The following information considers the pro forma effect on Adjusted EBITDA of the Companys activity during the three months ended December 31, 2018, as if the transactions had been consummated as of the beginning of the period (Adjusted Pro Forma EBITDA).

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 Companys 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 and tend to obscure the Companys actual credit quality.

 
For the Three Months Ended December 31, 2018:
   
Net income attributable to common stockholders $ 62,273  
Adjustments:
Interest 110,524
Loss on extinguishment of debt, net 7,843
Taxes (including tax amounts in general, administrative and professional fees) (28,642 )
Depreciation and amortization 244,276
Non-cash stock-based compensation expense 9,202
Merger-related expenses, deal costs and re-audit costs 4,322
Net income attributable to noncontrolling interests, net of consolidated joint venture partners share of EBITDA (2,960 )
Loss from unconsolidated entities, net of Ventas share of EBITDA from unconsolidated entities 18,310
Gain on real estate dispositions (10,354 )
Unrealized foreign currency gains (349 )
Change in fair value of financial instruments (28 )
Natural disaster expenses (recoveries), net 54,895  
Adjusted EBITDA 469,312  
Pro forma adjustments for current period activity 3,384  
Adjusted Pro Forma EBITDA $ 472,696  
   
Adjusted Pro Forma EBITDA annualized $ 1,890,784  
 
As of December 31, 2018:
 
Total debt $ 10,733,699
Cash (72,277 )
Restricted cash pertaining to debt (28,669 )
Consolidated joint venture partners share of debt (100,944 )
Ventas share of debt from unconsolidated entities 40,753  
Net debt $ 10,572,562  
   
Net debt to Adjusted Pro Forma EBITDA 5.6 x

NON-GAAP FINANCIAL MEASURES RECONCILIATION Net Operating Income (NOI) and Same-Store Cash NOI by Segment (Dollars in thousands)

The Company considers NOI and same-store cash NOI as important supplemental measures because they allow investors, analysts and the Companys management to assess its unlevered property-level operating results and to compare its operating results with those of other real estate companies and between periods on a consistent basis. The Company defines NOI as total revenues, less interest and other income, property-level operating expenses and office building services costs. In the case of NOI, cash receipts may differ due to straight-line recognition of certain rental income and the application of other GAAP policies. The Company has historically reconciled NOI and same-store cash NOI to income from continuing operations because it provides insight into the Companys continuing operations, but, in light of recent SEC regulations that changed the presentation of statements of income, the Company now believes that net income attributable to common stockholders is the most comparable GAAP measure for both NOI and same-store cash NOI. The Company defines same-store as properties owned, consolidated, operational and reported under a consistent business model for the full period in both comparison periods, and excluding assets intended for disposition and for SHOP, those properties that transitioned operators after the start of the prior comparison period, and for office operations, assets that experience a significant disruption in operations and redevelopment assets. To normalize for exchange rate movements, all same-store cash NOI measures assume constant exchange rates across comparable periods, using the following methodology: the current periods results are shown in actual reported USD, while prior comparison periods results are adjusted and converted to USD based on the average exchange rate for the current period.

 
Seniors Housing
Triple-Net Operating Office Non-Segment Total
 
For the Three Months Ended December 31, 2018:
Net income attributable to common stockholders         $ 62,273  
Adjustments:
Interest and other income (357 )
Interest 110,524
Depreciation and amortization 244,276
General, administrative and professional fees 38,475
Loss on extinguishment of debt, net 7,843
Merger-related expenses and deal costs 4,259
Other 58,877
Loss from unconsolidated entities 7,208
Gain on real estate dispositions (10,354 )
Income tax benefit (28,650 )
Net income attributable to noncontrolling interests         1,029  
Reported segment NOI $ 189,168   $ 151,027   $ 135,992   $ 19,216   $ 495,403  
Adjustments:
Modification fee 100 100
Normalizing adjustment for technology costs (2 ) (2 )
NOI not included in same-store (4,261 ) (17,405 ) (9,105 ) (30,771 )
Straight-lining of rental income (2,710 ) (3,876 ) (6,586 )
Non-cash rental income (895 ) (3,689 ) (4,584 )
Non-segment NOI       (19,216 ) (19,216 )
Same-store cash NOI (constant currency) $ 181,402 $ 133,620 $ 119,322 $ $ 434,344
YOY growth ˜17 – ˜18 2.1 % (3.5 %) 1.9 %   0.2 %
For the Three Months Ended December 31, 2017:
Net income attributable to common stockholders         $ 392,554  
Adjustments:
Interest and other income (5,180 )
Interest 111,951
Depreciation and amortization 232,650
General, administrative and professional fees 34,930
Gain on extinguishment of debt, net (102 )
Merger-related expenses and deal costs 1,632
Other 3,986
Loss from unconsolidated entities 4,355
Gain on real estate dispositions (214,985 )
Income tax benefit (46,680 )
Discontinued operations 15
Net income attributable to noncontrolling interests         1,251  
Reported segment NOI $ 206,301   $ 143,332   $ 134,014   $ 32,730   $ 516,377  
Adjustments:
Normalizing adjustment for technology costs 310 310
NOI not included in same-store (24,755 ) (4,444 ) (11,372 ) (40,571 )
Straight-lining of rental income (608 ) (5,142 ) (5,750 )
Non-cash rental income (3,007 ) (351 ) (3,358 )
Non-segment NOI (32,730 ) (32,730 )
NOI impact from change in FX (182 ) (737 )     (919 )
Same-store cash NOI (constant currency) $ 177,749   $ 138,461   $ 117,149   $   $ 433,359  
 
 
Seniors Housing
Triple-Net Operating Office Non-Segment Total
 
For the Year Ended December 31, 2018:
Net income attributable to common stockholders         $ 409,467  
Adjustments:
Interest and other income (24,892 )
Interest 442,497
Depreciation and amortization 919,639
General, administrative and professional fees 151,982
Loss on extinguishment of debt, net 58,254
Merger-related expenses and deal costs 30,547
Other 66,768
Loss from unconsolidated entities 55,034
Gain on real estate dispositions (46,247 )
Income tax benefit (39,953 )
Discontinued operations 10
Net income attributable to noncontrolling interests         6,514  
Reported segment NOI $ 740,318   $ 623,276   $ 538,506   $ 127,520   $ 2,029,620  
 
Adjustments:
Modification fee 2,600 431 3,031
Normalizing adjustment for technology costs 648 648
NOI not included in same-store (46,188 ) (64,624 ) (56,290 ) (167,102 )
Straight-lining of rental income 29,638 (16,242 ) 13,396
Non-cash rental income (23,743 ) (5,057 ) (28,800 )
Non-segment NOI       (127,520 ) (127,520 )
Same-store cash NOI (constant currency) $ 702,625 $ 559,300 $ 461,348 $ $ 1,723,273
YOY growth ˜17 – ˜18 3.6 % (2.1 %) 1.7 %   1.2 %
 
For the Year Ended December 31, 2017:
Net income attributable to common stockholders         $ 1,356,470  
Adjustments:
Interest and other income (6,034 )
Interest 448,196
Depreciation and amortization 887,948
General, administrative and professional fees 135,490
Loss on extinguishment of debt, net 754
Merger-related expenses and deal costs 10,535
Other 20,052
Loss from unconsolidated entities 561
Gain on real estate dispositions (717,273 )
Income tax benefit (59,799 )
Discontinued operations 110
Net income attributable to noncontrolling interests         4,642  
Reported segment NOI $ 844,711   $ 593,167   $ 524,566   $ 119,208   $ 2,081,652  
 
Adjustments:
Normalizing adjustment for technology costs 3,375 3,375
NOI not included in same-store (146,690 ) (25,311 ) (50,353 ) (222,354 )
Straight-lining of rental income (3,612 ) (19,521 ) (23,133 )
Non-cash rental income (16,758 ) (942 ) (17,700 )
Non-segment NOI (119,208 ) (119,208 )
NOI impact from change in FX 746   (33 )     713  
Same-store cash NOI (constant currency) $ 678,397   $ 571,198   $ 453,750   $   $ 1,703,345  
 
 
NON-GAAP FINANCIAL MEASURES RECONCILIATION

NOI and Same-Store Cash NOI by Segment Guidance 1,2

(Dollars in millions, except per share amounts)
 
FY2019 – Guidance
Tentative / Preliminary and Subject to Change
  Seniors      
Housing
Triple-Net Operating Office Non-Segment Total
High End
Net Income Attributable to Common Stockholders $ 496
Depreciation and Amortization3 941
Interest Expense, G&A, Other Income and Expenses4 579  
Reported Segment NOI5 $ 765 $ 631 $ 556 $ 69 2,016
Non-Cash and Non-Same-Store Adjustments (37 ) (13 ) (67 ) (69 ) (185 )
Same-Store Cash NOI5 728 618 489 1,831
Percentage Increase 1.5 % 0.0 % 2.5 % NM 1.0 %
 
Modification Fees          
Adjusted Same-Store Cash NOI5 $ 728   $ 618   $ 489   $   $ 1,831  
Adjusted Percentage Increase 1.9 % 0.0 % 2.6 % NM 1.2 %
 
Low End
Net Income Attributable to Common Stockholders $ 442
Depreciation and Amortization3 911
Interest Expense, G&A, Other Income and Expenses4 629  
Reported Segment NOI5 $ 755 $ 612 $ 551 $ 56 1,982
Non-Cash and Non-Same-Store Adjustments (34 ) (13 ) (67 ) (56 ) (170 )
Same-Store Cash NOI5 721 599 484 1,812
Percentage Increase 0.5 % (3.0 %) 1.5 % NM 0.0 %
 
Modification Fees          
Adjusted Same-Store Cash NOI5 $ 721   $

599

  $ 484   $   $

1,812

 
Adjusted Percentage Increase 0.9 % (3.0 %) 1.6 % NM 0.2 %
 
Prior Year
Net Income Attributable to Common Stockholders $ 409
Depreciation and Amortization3 920
Interest Expense, G&A, Other Income and Expenses4 701  
Reported Segment NOI $ 740 $ 623 $ 539 $ 128 2,030
Normalizing Adjustment for Technology Costs6 1 1
Non-Cash and Non-Same-Store Adjustments (22 ) (3 ) (62 ) (128 ) (215 )
NOI Impact from Change in FX (1 ) (3 )     (4 )
Same-Store Cash NOI 717 618 477 1,812
Modification Fees (3 )   (0 )   (3 )
 
Adjusted Same-Store Cash NOI $ 714   $ 618   $ 477   $   $ 1,809  
 
2019
GBP (£) to USD ($) 1.25
USD ($) to CAD (C$) 1.35
1   The Companys 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 Companys expectations depending on factors discussed in the Companys filings with the Securities and Exchange Commission.
2 See tables titled Net Operating Income (NOI) and Same-Store Cash NOI by Segment for a detailed breakout of adjustments for each respective category.
3 Includes real estate depreciation and amortization, corporate depreciation and amortization, and amortization of other intangibles.
4 Includes interest expense, general and administrative expenses (including stock-based compensation), loss on extinguishment of debt, merger-related expenses and deal costs, income from unconsolidated entities, income tax benefit, and other income and expenses.
5 Totals may not add across due to minor corporate-level adjustments and rounding.
6 Represents costs expensed by one operator related to implementation of new software.

Juan Sanabria
(877) 4-VENTAS