) has reported a better-than-expected result in the fourth
quarter 2012 and announced an 8% hike in its quarterly dividend
rate. Its normalized funds from operations (FFO) reached 99 cents
per share in the fourth quarter, 2 cents ahead of the Zacks
Consensus Estimate and 10 cents above the prior-year quarter
For full year 2012, the company's normalized FFO came in at
$3.80 per share, exceeding the Zacks Consensus Estimate by a cent
and significantly ahead of the year-ago figure of $3.37 per
share. The results were aided by the strategic acquisitions made
in 2012 and in the prior year, decent performance of its seniors
housing communities and rental excalation from its triple-net
Including the non-recurring items, FFO in the reported quarter
stood at $284.0 million or 96 cents per share, down from $359.1
million or $1.24 per share in the year-ago quarter. A rise in
shares outstanding as well as litigation proceeds that were
received in the prior-year quarter accounted for the decline. On
the same basis, for full year 2012, reported FFO per share
decreased 2.5% to $3.48 from $3.57 in 2011.
Total revenue during the quarter reached $660.7 million,
escalating 17.3% year over year. The figure also exceeded the
Zacks Consensus Estimate of $642 million. Total revenue for
full-year 2012, came in at $2.49 billion, up 42.5% from a year
ago and marginally ahead of the Zacks Consensus Estimate of $2.46
Behind the Headline Numbers
As of Dec 31, 2012, Ventas had an operating portfolio of 95
private pay seniors housing communities managed by Sunrise and
125 private pay seniors housing communities managed by Atria. Net
Operating Income (NOI) for this portfolio before management fees
stood at $455.8 million.
During the fourth quarter of 2012, same-store NOI before
management fees escalated 6.2% from the year-ago quarter to
$107.3 million. Average unit occupancy in the same-store
communities surged 360 basis points year over year to 91.9% in
the quarter under review.
Notable Activities During 2012
During 2012, Ventas completed $2.7 billion in investments,
including Cogdell Spencer, Inc. and 16 private pay seniors
housing communities managed by Sunrise. Private pay assets
comprised 97% of the total investment. Moreover, Ventas made
investments worth $1 billion during the fourth quarter and this
included seniors housing assets, medical office buildings and
Ventas also acquired 100% of several private investment funds
which were managed previously by Lazard Frères Real Estate
Investors LLC or its affiliates. This helped in gaining 34%
interest in Atria and 3.7 million shares of Ventas common stock.
The remaining 66% of Atria is being owned by the Atria management
In addition, Ventas made dispositions of 43 properties and
received final repayment on loans aggregating $422 million in
proceeds. These dispositions helped the company in realizing a
net gain of $81.0 million. Moreover, during the fourth quarter
2012, Ventas disposed assets and got final repayment on loans
totaling $120 million in proceeds as well as recognized a net
As of Dec 31, 2012, Ventas had $541 million of borrowings
outstanding under its unsecured revolving credit facility and $68
million of cash and cash equivalents. Moreover, at quarter-end,
debt to total capitalization stood at 31% and
net-debt-to-adjusted-pro-forma-EBITDA (earnings before interest,
tax, depreciation and amortization) was 5.4x.
Ventas currently projects its normalized FFO per share in the
range $3.99 - $4.07 for full year 2013. Notably, this excludes
the impact of unannounced acquisitions, divestitures and capital
The company expects NOI for its total Sunrise- and Atria-managed
seniors housing operating portfolio to be in the range of $430
million - $440 million for 2013, reflecting around 5% - 8%
same-store NOI growth.
Ventas increased its first quarter 2013 cash dividend by 8% to 67
cents per share. The increased dividend will be paid on Mar 28,
2013 to stockholders of record as on Mar 8, 2013.
We are encouraged with the decent result at Ventas as well as the
dividend hike announcement. We expect the company's strategic
move in Atria and other opportunistic acquisitions to provide
significant upside potential to the stock going forward.
Moreover, being one of the largest healthcare REITs in the U.S.,
Ventas boasts of a significantly diversified portfolio and
exposure to nearly all types of facilities.
Also, the healthcare sector is relatively immune to the downturn
in the economy, and provides a steady source of income that
insulates the company from short-term market volatility.
Ventas currently has a Zacks Rank #2 (Buy). A number of other
REITs that are also performing well include
Terreno Realty Corp.
), having a Zacks Rank #1 (Strong Buy) as well as
Hersha Hospitality Trust
Medical Properties Trust Inc.
), both carrying a Zacks Rank #2 (Buy).
FFO, a widely used metric to gauge the performance of REITs,
is obtained after adding depreciation and amortization and other
non-cash expenses to net income.
HERSHA HOSPTLY (HT): Free Stock Analysis
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VENTAS INC (VTR): Free Stock Analysis Report
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