Ventas, Inc. — Q1 2022 Form 10-Q
Business context and period. This unaudited filing covers the three months ended March 31, 2022, with balance-sheet comparisons to December 31, 2021. Ventas is a healthcare real estate REIT with approximately 1,300 properties in the U.S., Canada and U.K., across triple-net leased, senior living operations (SHOP) and office operations.
Financial results and key metrics
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $1,017.6 million | $910.3 million |
| Net income (loss) attributable to common stockholders | $38.7 million; $0.10 per share | $(57.2) million; $(0.15) per share |
| Net operating income (NOI, non-GAAP) | $473.0 million | $422.7 million |
| Normalized FFO attributable to common stockholders (non-GAAP) | $316.7 million | $270.5 million |
| Cash provided by operating activities | $274.6 million | $237.6 million |
| Cash used in investing activities | $(437.3) million | $(102.6) million |
Revenue increased 11.8%; common-stockholder earnings improved by $95.9 million from the prior-year loss. NOI rose 11.9% and normalized FFO rose 17.1%. Interest expense was nearly unchanged at $110.8 million; weighted-average effective interest rate declined to 3.49% from 3.62%.
SHOP revenue increased 23.2% to $651.1 million and segment NOI increased 58.4% to $175.6 million. Same-store SHOP NOI rose 25.8%; same-store occupancy improved to 83.0% from 78.8%. Office segment NOI increased 2.0% to $138.0 million, while same-store office NOI increased 7.1%. Triple-net segment NOI declined 4.8% to $147.6 million; same-store triple-net NOI was essentially flat.
At March 31, 2022, total assets were $25.0 billion, carrying-value debt was $12.4 billion (gross debt $12.5 billion), and unrestricted cash was $149.6 million. The company reported $2.7 billion of undrawn capacity on its $2.75 billion revolving credit facility, subject to facility terms; commercial paper outstanding was $636.9 million. Debt maturities totaled $1.02 billion in 2022, including commercial paper and scheduled amortization. The quarterly common dividend was $0.45 per share; cash distributions to common stockholders were approximately $180.0 million.
Material changes and unusual items
- SHOP improvement reflected the 2021 acquisition of more than 100 New Senior communities, improved occupancy and revenue per occupied room, and increased HHS Provider Relief Fund grants. Ventas received $34.0 million of grants in Q1 2022 versus $13.6 million in Q1 2021; grants reduced property-level operating expenses.
- Q1 acquisitions included 18 medical office buildings, one behavioral health center and one senior housing community for $349.2 million. A further research and innovation center was acquired in April for $46.1 million. Q1 asset sales included one vacant land parcel for $5.6 million.
- Investing cash outflow rose substantially, primarily due to the $349.2 million of acquisitions. Financing cash flow was positive $165.4 million, compared with a $377.1 million outflow in Q1 2021, when the company redeemed $400 million of senior notes.
- Q1 2022 transaction and deal costs were $20.0 million, including $12.0 million related to stockholder-relations matters and costs associated with operator transitions. The 2021 comparison included a $27.1 million debt-extinguishment loss and $78.5 million of real estate impairments; Q1 2022 impairments were $14.3 million.
Outlook, risks and contingencies
The filing provides no quantified earnings or FFO guidance. Management said liquidity was believed sufficient for expected needs over the next 12 months, relying on operating cash flow, cash, debt and equity issuance, asset sales and borrowing facilities; access to multiple capital sources is not assured. Management could not estimate the pandemic’s ultimate effects.
Key risks include continuing COVID-19 effects, inflationary labor and operating costs, interest-rate and refinancing exposure, tenant/operator financial health, healthcare regulation, reliance on third-party managers, and geographic and operator concentrations. A 100-basis-point increase in rates on variable-rate debt outstanding at quarter-end would increase annualized interest expense by approximately $13.5 million, assuming debt balances do not change. Six Kindred LTAC leases, with $31.9 million in annual rent for the referenced period, were due to expire April 30, 2023 unless renewed.
Pending legal and regulatory matters were not expected by management to have a material adverse effect individually or in aggregate, though outcomes and defense costs remain uncertain. Subsequent to quarter-end, Ventas entered a revised management agreement with Sunrise for 92 communities, running through May 31, 2035, with performance-related fees and termination provisions.
Investor verification points
- Assess how much SHOP improvement depends on government relief grants and whether occupancy and resident revenue gains persist as relief changes.
- Review debt maturities, commercial-paper refinancing needs, variable-rate exposure and available revolving-credit capacity.
- Verify the operational and financial performance of New Senior acquisitions and the Q1 property acquisitions, alongside integration and transition costs.
- Monitor renewal or transition plans for the six LTAC leases expiring in 2023 and the performance terms of the Sunrise agreement.
- Reconcile GAAP earnings with non-GAAP NOI and normalized FFO; these supplemental measures are company-defined and may not be comparable across issuers.