Ventas, Inc. (VTR)

VTR 
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Ventas (VTR)

Q4 2012 Earnings Call

February 15, 2013 10:00 am ET

Executives

Lori Wittman

Debra A. Cafaro - Chairman, Chief Executive Officer, Member of Executive Committee, and Member of Investment Committee

Raymond J. Lewis - President

Richard A. Schweinhart - Chief Financial Officer and Executive Vice President

Analysts

Jana Galan - BofA Merrill Lynch, Research Division

Michael Carroll - RBC Capital Markets, LLC, Research Division

Jack Meehan - Barclays Capital, Research Division

James Milam - Sandler O'Neill + Partners, L.P., Research Division

Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division

Quentin Velleley - Citigroup Inc, Research Division

Michael Bilerman - Citigroup Inc, Research Division

Daniel M. Bernstein - Stifel, Nicolaus & Co., Inc., Research Division

Jeff Theiler - Green Street Advisors, Inc., Research Division

Thomas C. Truxillo - BofA Merrill Lynch, Research Division

Nicholas Yulico - Macquarie Research

Richard C. Anderson - BMO Capital Markets U.S.

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 Ventas Earnings Conference Call. My name is Erin, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I will now turn the presentation over to your host for today's conference, Ms. Lori Wittman, Vice President, Capital Markets. Please proceed, ma'am.

Lori Wittman

Thank you. Good morning, and welcome to the Ventas conference call to review the company's announcement today regarding its results for the quarter and year ended December 31, 2012. As we start, let me express that all projections and predictions and certain other statements to be made during this conference call may be considered forward-looking statements within the meaning of Federal Securities laws. These projections, predictions and statements are based on management's current beliefs, as well as on a number of assumptions concerning future events. The forward-looking statements are subject to many risks, uncertainties and contingencies, and stockholders and others should recognize that actual results may differ materially from the company's expectations, whether expressed or implied.

We refer you to the company's reports filed with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the year ended December 31, 2011, and the company's other reports filed periodically with the SEC for a discussion of these forward-looking statements and other factors that could affect these forward-looking statements.

Many of these factors are beyond the control of the company and its management. The information being provided today is as of this date only, and Ventas expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any changes in expectations. Please note that quantitative reconciliations between each non-GAAP financial measure contained in this presentation and its most directly comparable GAAP measure, as well as the company's supplemental disclosure schedule are available in the Investor Relations section of our website at www.ventasreit.com.

I will now turn the call over to Debra A. Cafaro, Chairman and CEO of the company.

Debra A. Cafaro

Thanks, Lori, and good morning to everyone. Welcome to our year-end 2012 earnings call. I'm delighted to discuss the highlights of our successful year and our expectations for a strong 2013. This morning, Ray Lewis will also discuss our portfolio performance and Rich Schweinhart will review our financial results in detail. Following those remarks, we'll be happy to take your questions.

2012 was a year of successfully executing our strategy and harnessing the power of the diverse assets, platforms and people we acquired over the past several years to deliver outstanding results for our stakeholders. Our total return to investors for the year was over 22%, and over the last 13 years Ventas has delivered 32% compound annual return to shareholders. As you know, we have built a balanced business model to provide consistent superior returns in a variety of economic, reimbursement and capital market environment, and our performance demonstrates the success of that approach. Ventas total return has exceeded the U.S. REIT index and the S&P 500 in each of the trailing 1, 3, 5 and 10-year time periods. Our strategy is simple and consistent: increase diversification and private pay assets in our portfolio, grow cash flows, maintain financial strength and flexibility, improve our cost of capital, make disciplined investments and actively manage our portfolio and enterprise risks. At Ventas, we strive to achieve and sustain excellence so that we can provide consistent superior total returns to investors. Our drive for excellence is supported by 3 key activities: allocating capital, raising capital and asset management.

Here are a few of our 2012 highlights. Our full-year financial results were outstanding. Normalized FFO for the year was $3.80 a share, up 13% from last year and total FFO grew 44%. Importantly, excluding non-cash items, our normalized FFO per share grew 10%. We completed $2.7 billion of investments, which were generated from all parts of our business, including existing NHP, Lillibridge, Cogdell Spencer and Ventas relationships as well as new customers. 97% of these investments were in private pay assets. Our cash unlevered yield on our 2012 real estate investment approaches 8%. We also improved our cost of capital during the year. We raised $2.6 billion in debt capital in 2012 at an interest rate of just over 3%. And our balance sheet remains pristine with debt to total capitalization a strong 31% at year-end.

Our Asset Management Group and our quality tenant operators continued to drive portfolio performance this year. Same-store cash NOI in our portfolio grew 4.4% year-over-year, normalizing for the scheduled increase in the Sunrise management fee during 2012. And that doesn't even include the outstanding high-single-digit NOI growth in our Atria-managed assets, which we acquired mid-2011.

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