Ventas, Inc. — 2022 Form 10-K Summary
Business context and reporting period
Annual report for the year ended December 31, 2022; the filing reports full-year results, not a standalone fourth-quarter income statement. Ventas is a healthcare real estate investment trust (REIT) with approximately 1,300 owned or invested-in properties across the United States, Canada and the United Kingdom. Its segments are senior housing operating portfolio (SHOP), triple-net leased properties and office operations.
Financial and operating performance
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $4.129 billion | $3.828 billion |
| Net income (loss) attributable to common stockholders | $(47.4) million; $(0.12) per diluted share | $49.0 million; $0.13 per diluted share |
| Net operating income (NOI, non-GAAP) | $1.843 billion, up 6.8% | $1.725 billion |
| Normalized FFO attributable to common stockholders (non-GAAP) | $1.207 billion, up 7.9% | $1.119 billion |
| Cash from operating activities | $1.120 billion | $1.026 billion |
| Cash, cash equivalents and restricted cash at year-end | $170.7 million | $196.6 million |
| Debt principal outstanding | $12.36 billion | $12.09 billion |
SHOP NOI increased 41.3% to $647.5 million; same-store SHOP NOI rose 20.7%, with same-store occupancy improving to 84.1% from 81.1%. Office operations NOI increased 0.5% to $546.6 million, while triple-net leased NOI declined 8.7% to $582.9 million, primarily reflecting properties shifted into SHOP and dispositions. Total NOI was approximately 44.6% of revenue; NOI is a company-defined non-GAAP measure, not a GAAP operating margin.
Interest expense rose 6.2% to $467.6 million; the GAAP weighted-average effective interest rate was 3.66%, versus 3.59% in 2021. Approximately $10.86 billion of debt was fixed-rate and $1.50 billion variable-rate. Management reported approximately $2.4 billion of liquidity, including revolver availability and cash; the filing also reports $2.7 billion of undrawn revolving capacity, $403 million of commercial paper outstanding and $25.2 million drawn on the revolver. Total assets were $24.16 billion and total equity was $10.22 billion.
Material changes versus 2021
- Revenue grew 7.9%, supported in part by SHOP recovery and the full-year contribution of the 2021 New Senior acquisition. SHOP revenue increased 16.8%; occupancy improved, while inflation-driven labor, utility and food costs remained a partial offset.
- GAAP common-stockholder results shifted from $49.0 million of income to a $47.4 million loss. Lower real estate disposition gains—$7.8 million in 2022 versus $218.8 million in 2021—were a major comparison factor. 2022 also included $107.8 million of real estate impairments and a $20 million allowance on the Santerre mezzanine loan.
- Operating cash flow increased 9.2%. Investing cash use rose to $859.2 million, while financing cash use fell to $283.9 million, partly because 2021 included substantial senior-note repayments.
- Ventas acquired properties for $453.2 million and sold properties for $115.1 million in 2022. It also transitioned 90 senior housing communities from Eclipse Senior Living to seven managers, with related one-time costs.
- Debt increased from $12.09 billion to $12.36 billion. A new $500 million unsecured term loan maturing in 2027 replaced a $200 million term loan due in 2023.
Outlook, commentary, risks and unusual items
- The filing provides no specific 2023 earnings or FFO guidance. Management stated that liquidity was expected to be sufficient for anticipated needs over the next 12 months, subject to access to capital and other funding sources.
- Ventas declared $1.80 per common share in dividends for 2022 and said it expected to distribute at least 100% of 2023 taxable net income after applicable net operating loss carryforwards. Future dividends remain subject to Board decisions and liquidity, operating performance and other factors.
- Management cited senior housing occupancy and revenue improvement, alongside continued labor and other inflationary pressures. COVID-19’s remaining operational and financial effects, and the availability or retention of pandemic relief grants, remain uncertain.
- Key credit exposure is the $486.1 million Santerre mezzanine loan, subordinate to a $1.0 billion senior loan. Ventas recorded a $20 million allowance; the borrower’s collateral performance and interest coverage weakened amid operating underperformance and higher rates. The loan’s stated maturity was June 9, 2023, subject to a conditional extension. The filing says the borrower was current through January 2023 and expected to remain current through February 2023.
- Other notable items: Ventas recorded a $26.1 million gain associated with Atria’s software-platform transaction, $11.7 million of its share of an Ardent real estate-sale gain, and received $64.7 million in HHS and other government grants. It also recognized $12.5 million of expenses from materially disruptive events, primarily winter storm Elliott cleanup.
- Principal risks include staffing costs and availability, inflation and interest rates, dependence on major tenants and third-party managers, tenant or borrower distress, property impairments, healthcare regulation, capital-market access, refinancing and REIT qualification. Triple-net lease expirations in 2025 include 121 Brookdale properties and 23 Kindred properties; renewal is not assured.
- The auditor issued an unqualified opinion on the financial statements and internal controls. The critical audit matter was impairment testing for SHOP real estate, which depends on estimates including operating cash flows, capitalization rates and stabilization periods.
Important facts for investors to verify
- Santerre loan performance, maturity or extension outcome, collateral value, and whether further allowance or enforcement action is required.
- SHOP occupancy, resident revenue and labor-cost trends, including how results progress without comparable levels of government grant support.
- Brookdale and Kindred tenant credit, 2025 renewal decisions and Ventas’s options if leases are not renewed.
- Debt maturities, variable-rate exposure, refinancing costs and continued compliance with debt covenants.
- The sustainability of dividends relative to cash generation, REIT distribution requirements and funding needs.
- Assumptions behind real estate impairment estimates and the completion, leasing and cost outlook for development projects.