Ventas, Inc. (VTR)

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Ventas Inc. (VTR)

March 05, 2013 7:30 am ET


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


Michael Bilerman - Citigroup Inc, Research Division

Quentin Velleley - Citigroup Inc, Research Division


Michael Bilerman - Citigroup Inc, Research Division

Good morning, and welcome to day 2 at the 7:30 a.m. session at Citi's 2013 Global Property CEO Conference. I'm Michael Bilerman. I'm here with Quentin Velleley. This session is for investing clients only, and if media or other individuals are on the line, please disconnect now. We are extraordinarily pleased to have with us Ventas and CEO Debbie Cafaro. Debbie, let me turn it over to you to introduce your team and then provide a couple of minutes of opening remarks, and then we'll turn it over to Q&A. Thank you.

Debra A. Cafaro

Good morning, Michael. Good morning, Quentin, and hello to our investors and other participants. We're really happy to be here at this early morning hour, and I had a wonderful time with Bob Costas last night, listening to all his good sports stories, so that was a great hit, Michael. Thank you.

Most of you know Ventas. I want to introduce a new colleague, Robert Riggs, our manager of IR. And of course, most of you know, Lori Wittman, our Head of IR and Capital Markets. So they'll be joining me this morning, answering questions.

So let's talk about, for a few minutes, just about a Ventas overview. Ventas is a leading, diverse health care REIT with about $29 billion, knocking on the door of $30 billion, enterprise value. We expect to have about $1.6 billion in NOI in 2013. We really pride ourselves on having a balanced portfolio, balanced business model among asset types, diverse tenant base, 83% private pay revenues and a diverse and balanced business model, with some triple net leases and some operating businesses. And we also are constructing the portfolio in our enterprise to deliver both growth as well as defense, and that's a very valuable commodity in what continues to be a fairly uncertain macro environment.

And we also pay a lot of attention to cash flow. We think that growing cash flows and actively managing our portfolio and actively managing risk in our enterprise, really creates value for stakeholders. And this year, in 2012, we kind of crossed a milestone, with about $1 billion in cash flow from operations.

To the point of delivering consistent, superior total returns to shareholders, I think Ventas has really, really put up some good numbers. We have 32%, 13-year compound annual returns to shareholders. We really focus every day on delivering value for shareholders. Our FFO per share has over a 10% CAGR for 10 years. And we believe our dividend is one of the important components of that total return proposition we offer to shareholders and that's grown about 8% for the last 8 years including, as we look, into 2013.

While we do all the growth focuses, we also look at balance sheet. We've maintained a very strong balance sheet, with about 31% debt-to-enterprise value at year end, and we'll continue to focus on making sure we have that balance between growth and a strong balance sheet.

And importantly, our business is really driven by demographic demand, which is necessary but not sufficient to deliver returns to shareholders. So the over-85 population is the fastest-growing segment of the U.S. population. Health care spending, even in a reform world, is expected to continue to grow. There's strong policy reasons why our businesses should experience increased utilization. And that combination of skill, strength, growth and demographic demand are excellent underpinnings of Ventas' future success.

So I'll stop there and open to Michael's questions.

Question-and-Answer Session

Michael Bilerman - Citigroup Inc, Research Division

Great. Debbie, we've been starting off everyone of these sessions with the same question to companies, which is what do you think is the most value-creating opportunity that you currently have within the company that the market is really not giving you much credit for?

Debra A. Cafaro

A value-creating opportunity?

Michael Bilerman - Citigroup Inc, Research Division

Well, I guess, yes, not necessarily just one opportunity but maybe just in -- more of general sense, what is being underappreciated that you think has a lot of value for shareholders?

Debra A. Cafaro

Well, I think the most underappreciated part of Ventas is really the Ventas team. We -- I love seeing all of you and you have the opportunity to see a small group of us on a regular basis, but investors talk about the importance of the management teams, but I'm not sure always pay as much attention to it as they should. So one of the huge strengths at Ventas is that we have a really deep team that's been at Ventas, by and large, for 10 years. And we have learned how to succeed together. And it's a team that is individually skilled, but more importantly, is skilled at working together and is very focused on shareholders and very committed to the company. And that has been a really important component of Ventas' success. We've been able to add senior level people, like Lori, over the years, and our new chief investment officer. But that is the most underappreciated aspect of Ventas that, I think, drives value for shareholders.

Michael Bilerman - Citigroup Inc, Research Division

And how -- what are some of the more recent hires that you can talk about in that area?

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