Ventas, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless noted. Ventas is a healthcare-focused REIT with approximately 1,400 owned or invested-in properties across senior housing, outpatient medical and research, and triple-net leased healthcare assets.
Financial results and key metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $1.200 billion | $1.077 billion | +11.4% |
| Net income (loss) attributable to common stockholders | $(14.3) million; $(0.04) per share | $17.5 million; $0.04 per share | Down $31.8 million |
| Net operating income (NOI), non-GAAP | $503.9 million | $465.9 million | +8.2% |
| Normalized FFO attributable to common stockholders, non-GAAP | $316.6 million | $296.9 million | +6.6% |
| Cash provided by operating activities | $266.4 million | $242.8 million | +9.7% |
SHOP produced $203.5 million of NOI (+21.3%); outpatient medical and research produced $145.6 million (+6.5%); and triple-net leased properties produced $151.6 million (+3.9%). Non-segment NOI declined to $3.2 million from $15.4 million, primarily following the 2023 conversion of the Santerre mezzanine loan to equity. SHOP occupancy was 82.7%, up from 80.6%, and average monthly revenue per occupied room was $4,935, up from $4,627. Same-store SHOP NOI rose 15.2%; same-store outpatient medical and research NOI rose 2.7%; same-store triple-net NOI fell 1.0%.
GAAP expenses exceeded revenue in the quarter. Key items included $15.7 million of shareholder-relations costs related to the 2024 proxy campaign, $149.9 million of interest expense, $300.3 million of depreciation and amortization, and an $8.4 million loss from unconsolidated entities. Higher interest expense and depreciation, lower real estate disposition gains, and shareholder-relations costs contributed to the swing to a common-stockholder loss. Normalized FFO excludes specified items and is a non-GAAP measure, not a substitute for GAAP earnings.
Cash and cash equivalents were $632.4 million at March 31, 2024; cash, cash equivalents and restricted cash totaled $688.4 million. Investing activities used $144.6 million and financing activities provided $4.8 million. Senior notes payable and other debt were $13.56 billion on the balance sheet ($13.63 billion gross debt before discounts and financing costs). Weighted-average debt outstanding was $13.6 billion, with a 4.32% weighted-average effective rate. The company reported $3.4 billion of liquidity, including cash and revolving-credit availability, and no commercial-paper borrowings at quarter-end. The quarterly common dividend was $0.45 per share.
Material changes and capital activity
- Revenue growth was led by resident fees and services, which increased to $813.3 million from $705.0 million. Higher occupancy and revenue per occupied room contributed to SHOP growth, alongside acquired and transitioned properties.
- Interest expense increased $21.9 million, reflecting higher debt balances and rates. The weighted-average effective rate rose to 4.32% from 4.04%.
- In February, Ventas Canada issued C$650 million of 5.10% notes due 2029, primarily to repay a C$500 million term loan. The company also entered a C$52.8 million Canadian mortgage loan at 4.644%.
- During Q1, Ventas sold 16 properties for $36.0 million and acquired one senior housing community for $36.0 million. After quarter-end, it reported two senior housing acquisitions for $94.0 million and property sales for $12.1 million.
- Ventas sold 1.8 million shares through its at-the-market program for $78.7 million gross proceeds during Q1; 0.3 million more shares were sold in April for $14.9 million gross proceeds.
- In April, the company replaced its $2.75 billion revolver, previously scheduled to mature in January 2025, with a $2.75 billion facility maturing in April 2028. It also repaid $854 million of senior notes at maturity in April and May, primarily with cash and partly through commercial paper.
Outlook, risks and contingencies
The filing provides no specific 2024 earnings or FFO guidance. Management said it expects senior housing to benefit from aging-population demand and low projected construction supply, while noting that labor costs, inflation and broader economic conditions remain important uncertainties. Management believes available liquidity is sufficient for expected needs over the next 12 months, subject to continued access to capital and other funding sources.
Notable tenant and lease exposures include Kindred, which contributed approximately 6.6% of annualized NOI. Kindred’s Group 2 lease, representing about 5.3% of annualized NOI, expires April 30, 2025; the deadline to exercise its renewal option was extended to May 31, 2024. Kindred portfolio trailing-twelve-month performance through December 2023 did not exceed rent. Brookdale contributed 7.4% of Q1 NOI; its master lease expires in 2025, and its next 10-year renewal option can be exercised between June 30 and November 30, 2024. Atria and Sunrise together accounted for 25.1% of Q1 NOI, primarily as SHOP managers rather than tenants.
Other risks include tenant or operator financial deterioration and non-renewal, concentration among tenants and managers, refinancing and variable-rate borrowing costs, inflation and labor availability, healthcare regulation, development costs, foreign exchange, and potential dilution from future equity issuance. Management stated pending legal matters are not expected to have a material adverse effect, though outcomes and defense costs remain uncertain. It also reported $5.4 million of real estate impairments in Q1.
Most important facts for investors to verify
- Kindred’s Group 2 renewal outcome and the performance and rent coverage of the portfolio.
- Brookdale’s renewal decision and the implications for contractual cash rent and GAAP rent.
- Whether SHOP occupancy and revenue-per-room gains continue to outweigh operating-cost inflation.
- The effect of higher financing costs, 2024 maturities already repaid, and future refinancing needs on cash flow and normalized FFO.
- How much future equity issuance under the ATM program may be needed, and the resulting dilution.
- Reconciliation of GAAP net loss to NOI and Normalized FFO, including proxy-related and other adjustments; both supplemental measures are non-GAAP.