Ventas, Inc. (VTR)

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Ventas (VTR)

Q3 2011 Earnings Call

November 04, 2011 11:00 am ET


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

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

Raymond J. Lewis - President

David J. Smith - Head of Investor Relations


Bryan Sekino - Barclays Capital, Research Division

Ross T. Nussbaum - UBS Investment Bank, Research Division

Jana Galan - BofA Merrill Lynch, Research Division

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

Jerry L. Doctrow - Stifel, Nicolaus & Co., Inc., Research Division

Michael Bilerman - Citigroup Inc, Research Division

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

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

Karin A. Ford - KeyBanc Capital Markets Inc., Research Division

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



Good day, ladies and gentlemen, and welcome to the Third Quarter 2011 Ventas Inc. Earnings Conference Call. My name is Jess, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. David Smith, Manager, Investor Relations and Capital Markets. And you have the floor, sir.

David J. Smith

Good morning, and welcome to the Ventas conference call to review the company's announcement today regarding its results for the quarter ended September 30, 2011. 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, 2010, 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

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

Debra A. Cafaro

Thanks, David, and good morning to all of our shareholders and other participants, and welcome to the Ventas third quarter 2011 earnings call. We're so happy to be with you today, reporting on excellent results that for the first time include a full quarter of those on Atria and NHP acquisitions. Together, these acquisitions improved our private-pay NOI percentage, significantly diversified our business, increased our percentage of NOI from high-quality private-pay senior housing, and we're accretive to earnings. And importantly, all of these occurred with a very, very strong balance sheet. First, I want to thank more than 60 investors and analysts who attended our New York Atria property tour on October 20. The tour showcased 7 of our high-quality private-pay senior housing communities managed by Atria. Those who attended undoubtedly could see why we acquired the portfolio. These communities knock your socks off in terms of physical plant, location and wealthy sub-markets and high service levels.

Atria, the fourth largest assisted living operator in the U.S., also highlighted its commitment to delivering a gold standard customer experience for its residents and its track record of delivering high returning, environmentally focused redevelopment projects. Today, I'll provide a brief overview of the quarter and discuss how we are executing on our larger, more diverse platform. Ray will review our portfolio performance, and Rick will end with a detailed review of our financial results. Following our presentation, we'll be happy to take your questions.

In 2011, Ventas completed $11 billion of acquisitions and today, we're a $20-plus billion S&P 500 company, with multiple avenues for growth that generates 1.4 billion of diversified NOI from over 1,300 properties with the lion share derived from private-pay sources. We continue to focus on delivering consistent superior total return to our shareholders by growing cash flows and managing enterprise risk.

Ventas' balance sheet, ratings and liquidity continued to be excellent, aided by our Atria and NHP acquisitions. Our current net debt to EBITDA is an outstanding 4.7x, and our current fixed charge coverage well exceeds 4x. These industry-leading credit statistics position us with significant dry powder as additional, attractive investment opportunities come our way.

The rating agencies have recognized the benefits of our diversified platform, size, increased tenant-operator relationships and strong balance sheet. Both Fitch and Moody's upgraded Ventas' credit ratings during the third quarter to BBB+ and Baa2 respectively. We have also continued to reduce our borrowing costs and increase our liquidity. Not only did we issue $700 million in 10-year bonds in May at 4 3/4%. We also closed a new $2 billion unsecured revolving credit facility in October. This new facility added $1 billion of liquidity, extended the maturity from early 2012 to late 2016, and significantly improved our pricing. At LIBOR plus 125 basis points, we currently have the lowest healthcare reach spread in the revolver market. We will remain relentless in our focus to drive down our capital cost, as well as maintain financial strength and flexibility going forward. These dual attributes will allow us to be both opportunistic and safe.

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