Ventas, Inc. (VTR)

VTR 
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Ventas (VTR)

Q4 2010 Earnings Call

February 17, 2011 10:00 am ET

Executives

Raymond Lewis - President

David Smith - SVP and CFO

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

Richard Schweinhart - Chief Financial Officer and Executive Vice President

Analysts

Daniel Cooney - Keefe, Bruyette, & Woods, Inc.

Jonathan Habermann - Goldman Sachs Group Inc.

Jerry Doctrow - Stifel, Nicolaus & Co., Inc.

James Sullivan - Cowen and Company, LLC

Robert Mains - Morgan Keegan & Company, Inc.

Richard Anderson - BMO Capital Markets U.S.

Quentin Velleley - Citigroup Inc

Bryan Sekino - Barclays Capital

Ross Nussbaum - UBS Investment Bank

Michael Bilerman - Citigroup Inc

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2010 Ventas Earnings Conference Call. My name is Angela, and I will be your coordinator for today. [Operator Instructions] And now I'd like to turn the conference over to your initial host for today, Mr. David Smith, Manager, Investor Relations & Capital Markets. Please proceed, sir.

David Smith

Good morning, and welcome to the Ventas conference call to review the company's announcement today, regarding its results for the year and quarter ended December 31, 2010.

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 the 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, 2009, 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 it's 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'll now turn the call over to Debra A. Cafaro, Chairman and CEO of the company.

Debra Cafaro

Thanks, David, and good morning, to all of our shareholders and other participants, and welcome to Ventas' 2010 year-end earnings call. Today, I'd like to provide a brief recap of our 2010 activity and 2011 outlook, including our excellent fourth quarter results. After that, Ray Lewis will discuss our portfolio performance and investments; and Rich Schweinhart will provide detailed financial results for the year and quarter ended. After the remarks, we'll be happy to take your questions.

Ventas had a highly successful 2010. We effectively used our cost of capital advantages to execute our strategic growth and diversification plan and announced nearly $4 billion of acquisition. Moreover, our diversified portfolio of over 600 assets continued its track record of strong operating performance.

Here are some of the highlights for Ventas of the year. We earned normalized FFO per share of $2.88, a year-over-year increase of 7.5% despite having 3% more shares outstanding in 2010. Total NOI grew 11% in the year. We delivered excellent shareholder return of 25.4% and our 10-year total shareholder return exceeds 1,500%. Our goal is to deliver consistent, superior total returns to shareholders derived from growth and cash flow and dividends from high-quality healthcare and senior housing assets, external growth and superior risk management.

We announced nearly $4 billion of acquisitions during the year, including three significant and highly strategic transactions I'd like to call out. First, our $381 million acquisition of Lillibridge Healthcare Services and 96 medical office buildings, which closed midyear, created the nation's leading fully integrated MOB and outpatient company.

Second, our $3.1 billion announced acquisition of 118 high-quality private pay senior living community in premier locations from Atria Senior Living will make Ventas the largest owner of seniors housing in the United States, having a $15 billion enterprise value when complete. That Atria acquisition will be our sixth consolidating entity level purchase since 2004.

And last but not least, we completed our very attractive, $186-million acquisition from Sunrise Senior Living of all of its real estate interest in our Sunrise communities in December. Ventas now owns 100% of all 79 of our best-in-class, need-driven assisted-living mansions managed by Sunrise. We achieved an attractive double-digit unlevered return and at the same time, provided capital to our partner, Sunrise, so it could expand its business and begin to re-establish itself as the leading global brand in seniors housing.

During the year, we also issued $600 million of unsecured debt at an average rate of 3.4%. This includes our highly successful inaugural investment-grade bond offering totaling $400 million, price to yield 3.23% in November, achieving the lowest five-year REIT bond coupon outstanding. Our cash flow from operations increased 6% in 2010. Same-store property NOI from our diversified portfolio of highly productive healthcare and senior housing assets also grew 6% in 2010.

We received an investment grade rating from Moody's early in the year and now maintained investment grade ratings on our corporate unsecured debt from all three nationally recognized rating agencies. We ended the year with excellent financial strength and flexibility with 26% debt-to-enterprise value and liquidity of $1 billion.

And importantly, we made positive changes and additions to our long tenured and cohesive management team, including the recent promotion of Ray Lewis to President; the addition of John Cobb as our Chief Investment Officer; and the combination with Todd Lillibridge, who is now leading our Medical Office Building business. So as you can see, the Ventas team was active on multiple fronts during 2010, all with a continuing objective of delivering superior risk-adjusted returns for years to come.

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