Ventas, Inc. · NYSE:VTR
Ventas — NAREIT REITweek 2016
59 slides from Ventas's conference presentation, June 2016
Slide 1: Excellence. Sustained. Investor Presentation
EXCELLENCE.SUSTAINED. INVESTOR PRESENTATION JUNE 2016
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, among others, statements of ex
Slide 3: Table of Contents
TABLE OF CONTENTS Ventas Investment Thesis (3) Ventas & Market Overview (4 – 16) Ventas Strategy Overview (17 – 22) Operational Excellence in Seniors Housing (23 – 29) The Hospital Growth Opportunity (30 – 37) Our Medical Office Building Platform (38 – 40) Role of Post-Acute Care (41 – 46) Closing (
Slide 4: Ventas Investment Thesis
VENTAS INVESTMENT THESIS EXCELLENCE. SUSTAINED. We are the leading provider of capital to high quality senior living and healthcare operators Ventas is positioned at the intersection of two large & dynamic markets: healthcare and real estate • Each represents nearly 20% of U.S. GDP • Demand tailwind
Slide 5: Ventas & Market Overview
VENTAS & MARKET OVERVIEW EXCELLENCE. SUSTAINED.
Slide 6: A Leading REIT with Strong Cash Flow from Balanced Portfolio
VENTAS – A LEADING REIT WITH STRONG CASH FLOW FROM BALANCED PORTFOLIO AND DEMOGRAPHIC DEMAND Asset Class Diversification Operator Diversification Loans International Hospital U.S. Acute Care Hospitals 1% Seniors Housing - Operating Other Skilled Nursing Atria 5% 5% 19% Specialty 4% Hospitals 28% 31%
Slide 7: Long Term Sustainable Growth and Income with Financial Strength
LONG TERM SUSTAINABLE GROWTH AND INCOME WITH FINANCIAL STRENGTH Annual FFO/Share Annual Dividend / Share Annual Cash Flow Annual Free Cash Flow / Growth Since 20011 Growth Since 20011 Growth Since 20011 Share Growth Since 20011 11% 10% 10% 10% TSR CAGR Since Credit Rating Completed Spin-Off Record 2
Slide 8: Reliability and Growth in Earnings
RELIABILITY AND GROWTH IN EARNINGS INDUSTRY LEADING FFO GROWTH Average NORMALIZED FFO ($) / SHARE (INDEXED TO 2001) (Since 2001) 4.5 VTR 11% 4.0 3.5 3.0 2.5 2.0 HCP 5% 1.5 HCN 4% 1.0 0.5 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Company financials. Based on a
Slide 9: Leading Sustainable Growth and Income
LEADING SUSTAINABLE GROWTH AND INCOME INDUSTRY LEADING DIVIDEND GROWTH CAGR DIVIDEND ($) / SHARE (INDEXED TO 2001) (Since 2001) 4.0 VTR 10% 3.5 3.0 2.5 2.0 HCP 3% 1.5 HCN 2% 1.0 0.5 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Company financials. VTR CAGRs based
Slide 10: Consistent Cash Flow Growth
CONSISTENT CASH FLOW GROWTH INDUSTRY LEADING CASH FLOW GENERATION $1.4B 2015 CAGR CASH FLOW FROM OPERATIONS ($) / SHARE (Since 2001) (INDEXED TO 2001) 4.0 VTR 10% 3.5 3.0 2.5 2.0 1.5 HCN 2% HCP 2% 1.0 0.5 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Company fina
Slide 11: New REIT GICS Sector Offers Opportunity
NEW REIT GICS SECTOR OFFERS OPPORTUNITY Portfolio Managers Underweight REITs • >$100B potential capital inflow to REITs expected with new REIT GICS Mutual Fund Exposure (~7,500 Funds, $5T AUM) to REITs sector in August 2016 5.0% • Great opportunity for VTR equity 4.5% ‒ Uniquely positioned at the 4.
Slide 12: Attractive and Dynamic Opportunities
ATTRACTIVE AND DYNAMIC OPPORTUNITIES VTR AT THE INTERSECTION OF HEALTHCARE & REAL ESTATE • Healthcare spending projected to grow 5.8% annually (2014 – 2024)1 Healthcare 20% by • Large and growing aging population increases 20241 demand for healthcare and senior living products • Senior population ha
Slide 13: Healthcare Spending Increasing
HEALTHCARE SPENDING INCREASING National Health Expenditures ($ Trillions) $6.0 5.8% $5.4 CAGR $5.1 $4.8 $5.0 $4.5 $4.3 $4.0 $4.0 $3.8 $3.6 $3.4 $3.2 $3.1 $3.0 $2.0 $1.0 $0.0 2014(E) 2015(E) 2016(E) 2017(E) 2018(E) 2019(E) 2020(E) 2021(E) 2022(E) 2023 (E) 2024(E) % GDP 17.7% 18.0% 18.1% 18.1% 18.1% 1
Slide 14: Demographics & Longevity Fueling Demand
DEMOGRAPHICS & LONGEVITY FUELING DEMAND Growing Population of …With Immense Wealth …And Increasing Care Healthcare Consumers… and Spending Power… Needs with Age 7x >$640K 5x More Healthcare Spending Faster Growth in 75+ Population1 Average 75+ Net Worth4 From Seniors6 10,000 73% 2.5x Boomers Turning
Slide 15: A $1T Domestic Real Estate Market
A $1T DOMESTIC REAL ESTATE MARKET ASSETS SHOULD FLOW TO MOST EFFICIENT OWNERS Outpatient Facilities/ MOBs • Domestic market is large Life Science / Biotech Facilities and growing Post-Acute Facilities • Early stages of securitized 5% 10% public real estate 39% • Dynamic policy 15% environment Privat
Slide 16: Significant Runway for Growth
SIGNIFICANT RUNWAY FOR GROWTH EARLY INNINGS OF HEALTHCARE REIT OWNERSHIP PERCENTAGE OF REAL ESTATE OWNED BY REITS Successful Model for Separating Real Estate from Operating Business 50%-55% 40%-50% 20%-25% 12%-15% Healthcare Multifamily Malls Hotels Housing (Top 25)2 (Top 50)1 1. Based on number of
Slide 17: What Is Ventas's Winning Formula?
WHAT IS VENTAS’S WINNING FORMULA? ENSURING EXCELLENCE. SUSTAINED. OUR PEOPLE OUR PROCESSES PEOPLE OUR CULTURE ADVANTAGED REAL ADVANTAGE LEADING ESTATE ASSETS IN OPERATORS ATTRACTIVE PROPERTIES ACROSS THE PLATFORMS MARKETS SITES OF CARE 16
Slide 18: Ventas Strategy Overview
VENTAS STRATEGY OVERVIEW EXCELLENCE. SUSTAINED.
Slide 19: Our Foresight and Innovation
OUR FORESIGHT AND INNOVATION CHANGED THE WAY INVESTORS THINK ABOUT HEALTHCARE REAL ESTATE Execute Grow Platforms with Healthcare Real Estate Foresight Early Winning Operators 1,600 2 of 10 credit upgrades during 1,400 financial crisis RIDEA 1,200 Normalized FFO ($M) 1,000 800 RMZ Campaign 600 400 20
Slide 20: Healthcare Delivery Is Converging
HEALTHCARE DELIVERY IS CONVERGING REQUIRING SOLUTIONS ACROSS SITES OF CARE AND GEOGRAPHIES Leading operators consolidating Hospitals + Care delivery increasingly interconnected Community- Post- + Based Acute Care Care Dynamic policy environment = Seniors Housing Need for broad and deep CAPITAL & REA
Slide 21: We Are Partnered with the Leaders
WE ARE PARTNERED WITH THE LEADERS Hospitals Community- Post- Based Acute Care Care Seniors Housing 20
Slide 22: Ventas Growing with Leading Tenants and Operators
VENTAS GROWING WITH LEADING TENANTS AND OPERATORS Post-Acute Care Seniors Housing Medical Office Hospitals Partnerships w/ Nation’s Top Operating Partners in Industry % Segment NOI from 89% 80% 88%1 100% Top-Ranked Operators % Total VTR NOI2 12% 57% 20% 6% 1. Represents cash NOI from assets with inv
Slide 23: Future Growth Prospects Are Bright
FUTURE GROWTH PROSPECTS ARE BRIGHT DRIVE OPERATIONAL BUILD ON CAPITALIZE ON EXPLORE NEW EXCELLENCE WITH ADVANTAGED HEALTHCARE MARKETS LEADING OPERATORS PLATFORMS WITHIN CONVERGENCE ASSET CLASSES MOBs and SHOP E.g. Hospitals and Real estate solutions New asset classes Redevelopment across sites of ca
Slide 24: Operational Excellence in Seniors Housing
OPERATIONAL EXCELLENCE IN SENIORS HOUSING EXCELLENCE. EXEMPLIFIED.
Slide 25: Ventas Seniors Housing Portfolio
VENTAS SENIORS HOUSING PORTFOLIO1 International Hospital U.S. Acute Care Hospital Loans • Outstanding SHOP assets in Seniors Housing - Operating advantaged markets + high-quality 1% NNN leases Skilled Nursing 5% 5% • ~50 SHOP / 50% NNN seniors Specialty 4% housing portfolio 31% Hospitals 7% • Tremen
Slide 26: Attractive SHOP Assets
ATTRACTIVE SHOP ASSETS VTR SHOP PORTFOLIO HAS HIGH-QUALITY ASSETS IN ATTRACTIVE LOCATIONS Industry Ventas SHOP1,2 benchmarks Median household income $75,676 $55,5512 Median home value $400,748 $192,4322 75+ population growth 11.9% 11.6%2 Building age 16 223 Note: Demographic figures reflect 3 mile r
Slide 27: SHOP Assets in Attractive Locations
SHOP ASSETS IN ATTRACTIVE LOCATIONS • >60% of SHOP NOI in high barrier to entry coastal markets1 20% West Coast • Median home values 2x national NOI1 average • Median household income 1.4x national average 44% East Coast NOI1 • 1Q16 occupancy 40bps higher SHOP than NIC industry average2 Top 30 MSAs
Slide 28: Ventas SHOP Strategy
VENTAS SHOP STRATEGY WE HAVE A FOCUSED SHOP PARTNERSHIP STRATEGY VTR SHOP1 VTR SHOP STRATEGY Focused on building scale All Others with winners driving operational excellence Offers partner for future growth and redevelopment 29% Reduces intra-portfolio Sunrise competition and portfolio 62% overlap A
Slide 29: National Scale Drives Efficiency
NATIONAL SCALE DRIVES EFFICIENCY EXAMPLE: ATRIA DRIVES EFFICIENCY THROUGH HR AND COST SAVINGS ROBUST PROCESSES FOCUSED ON ATTRACTING, SAVINGS REALIZED ACROSS DEVELOPING AND RETAINING TALENT CORPORATE AND LOCAL COSTS Growth 22% Insurance savings through VTR Opportunities aggregation Robust Transition
Slide 30: Sales and Marketing Opportunities
SALES AND MARKETING OPPORTUNITIES EXAMPLE: ATRIA SELLS VALUE PROPOSITION OF SENIORS HOUSING THROUGH MARKETING Assisted living 40-60% cheaper than Social Life recreating benefits at home Dining Emergency Assistance High-cost market: New York, NY Exercise / Recreate benefits at home1: $12,011 Physical
Slide 31: The Hospital Growth Opportunity
THE HOSPITAL GROWTH OPPORTUNITY EXCELLENCE. FORWARD.
Slide 32: Ventas Acute Care Hospital Portfolio
VENTAS ACUTE CARE HOSPITAL PORTFOLIO1 International Hospital U.S. Acute Loans Care Hospital 1% Seniors Housing - Operating Skilled Nursing 5% 5% • >$100M annualized rent = 5% NOI Specialty 4% Hospitals 31% • ~3x EBITDARM coverage (operator 7% cash flow / rent) $1.9B NOI • 3 key markets, network of r
Slide 33: Hospitals: Large, Growing
HOSPITALS: LARGE, GROWING ONE-THIRD OF HEALTHCARE SPENDING 2,000 +6% 1,653 1,463 Spending On Hospitals ($B) 1,500 1,292 1,147 978 1,031 1,000 500 0 2014 2015 2017 2019 2021 2023 Source: CMS. 32
Slide 34: Demographic Fundamentals
DEMOGRAPHIC FUNDAMENTALS SUPPLY CONSTRAINED AND UTILIZATION INCREASING US NUMBER OF HOSPITAL BEDS ('000S) DAILY VOLUMES ('000S)1 900 1,050 1,043 872 1,000 985 973 850 950 929 824 900 802 805 849 796 850 800 787 809 800 750 50 0 0 1995 2000 2005 2010 2015 2020F 1995 2000 2005 2010 2015F 2020F Source:
Slide 35: Hospitals Are Evolving
HOSPITALS ARE EVOLVING HOSPITALS remain the NERVE CENTER of healthcare delivery SHORTER HIGHER HIGHEST LENGTHS OF STAY VOLUMES ACUITY CARE 34
Slide 36: Role of Hospitals Is Changing
ROLE OF HOSPITALS IS CHANGING FROM ... TO ... Independent physicians EMPLOYED PHYSICIANS HIGHER ACUITY General acute care WITH CENTERS OF EXCELLENCE VALUE-BASED AND BUNDLED Fee-for-service PAYMENTS Stand-alone hospital NETWORK OF SITES 35
Slide 37: Market Consolidation Results in Better Margins & Credit
MARKET CONSOLIDATION RESULTS IN BETTER MARGINS & CREDIT HOSPITALS INCREASINGLY CONSOLIDATED HOSPITALS ... AND HAVE BETTER CONSOLIDATING HAVE STRONGER MARGINS... CREDIT 100 8% MHS 15 Unaffiliated % Of Community Hospitals 35% hospitals Non-MHS 40% 50% Total Margin1 (%) 6% 12 Log Revenue ($M) 62% 6.3%
Slide 38: Capital Source to Providers to Help Them Grow, Consolidate
CAPITAL SOURCE TO PROVIDERS TO HELP THEM GROW, CONSOLIDATE AND SERVE PATIENTS CONSOLIDATION OPPORTUNITIES GREATER THAN EVER State and Non- local government government, tax-exempt 20% GROWTH OPPORTUNITIES Public companies looking to spin off assets 59% 21% Investor- PE owned hospital systems owned Gr
Slide 39: Our Medical Office Building Platform
OUR MEDICAL OFFICE BUILDING PLATFORM EXCELLENCE. ESTABLISHED.
Slide 40: Ventas Medical Office Portfolio
VENTAS MEDICAL OFFICE PORTFOLIO1 International Hospital Loans U.S. Acute Care Hospital 1% Seniors Housing - Skilled Nursing Operating • 400+ hospital relationships 5% Specialty 5% Hospitals 4% 31% • #1 largest owner of MOBs in the 7% U.S.2 $1.9B • ~94% stabilized occupancy NOI 20% • 96% affiliated o
Slide 41: Secular Trends Attractive
SECULAR TRENDS ATTRACTIVE INCREASING INSURED POPULATION, INCREASING VISITS, INCREASING SPEND INCREASING INSURED GROWING HIGHER POPULATION PHYSICIAN VISITS SPENDING Seniors 65+ spend 5x more 20M per person4 Newly insured1 2.5x $6,000 Number of visits 65+ cohort $5,200 $4,000 makes to physician office
Slide 42: Role of Post-Acute Care
ROLE OF POST-ACUTE CARE EXCELLENCE. EVOLVED.
Slide 43: Ventas Post-Acute Portfolio
VENTAS POST-ACUTE PORTFOLIO1 International Hospital U.S. Acute Care Loans Hospital • 2x post-acute EBITDARM coverage Skilled 1% (operator cash flow / rent) Seniors Housing - Nursing Operating Specialty 5% • Only 4% SNFs Hospitals 4% 5% 7% 31% • Guaranteed leases $1.9B • 68 out of 92 post-acute asset
Slide 44: Why Post-Acute Care Is So Important
WHY POST-ACUTE CARE IS SO IMPORTANT MEDICARE PATIENTS' USE OF POST-ACUTE SERVICES THROUGHOUT AN "EPISODE" Higher Intensity of Service Lower Short-Term Long-Term Skilled Home Inpatient Outpatient Acute Care Acute Care Nursing Health Rehab Rehab Hospitals Hospitals Facilities Care Patients’ FIRST 2% 1
Slide 45: Policy Impacting Market Dynamics
POLICY IMPACTING MARKET DYNAMICS HOSPITAL RELATIONSHIP WITH POST-ACUTE CARE CHANGING CURRENT PAYOR MIX Managed Care Demand for Post-Acute Care Services Strong Increasing Demand for Integrated and Fee For Coordinated Post-Acute Care Services Service Expanding Role for Home-Based Services POTENTIAL FU
Slide 46: Kindred Is a Winner
KINDRED IS A WINNER Diverse Business Mix Impact of LTAC Criteria4 2% $55M 12% • KND ~$55M expected $25M $30M LTAC 33% EBITDARM impact from $30M $30M LTAC criteria in 2017 21% 85% 2016 KND 2016 + 2017 Rehab2 Impact KND Impact 88% 15% • 2017 trough, pro forma SNF Impact Expected to impact to VTR post-
Slide 47: Kindred Is a Leading Care Provider
KINDRED IS A LEADING CARE PROVIDER “Ensign & Kindred Screen Well on Hospital “Kindred & Consulate Screen Best On Re-admission Rates” Outpatient Emergency Department Visits” % Short-Stay Residents Re-Hospitalized After Nursing Home % Short-Stay Residents Who Have Had an Outpatient Admission (25% - 75
Slide 48: Summary
SUMMARY Ventas is an S&P 500 diversified provider of capital to leading senior living and healthcare operators Ventas has a long and successful history of outperformance, stability, growth and income with a strong balance sheet Massive, fragmented healthcare real estate market with strong demand tai
Slide 49: Excellence. Sustained.
EXCELLENCE.SUSTAINED. 1 Welcome Overviewv9.ppt 48
Slide 50: Definitions & SEC Reg. G Compliance
DEFINITIONS & SEC REG. G COMPLIANCE
Slide 51: Definition of Terms
DEFINITION OF TERMS NAREIT Funds from Operations (“FFO”) Net income attributable to common stockholders (computed in accordance with GAAP) excluding gains (or losses) from sales of real estate property, including gain (or loss) on re-measurement of equity method investments, impairment write-downs o
Slide 52: Definition of Terms (Cont'd)
DEFINITION OF TERMS (CONT’D) Triple-Net Leased (“NNN”) Portfolio Under our triple-net leased properties segment, we invest in seniors housing and healthcare properties throughout the United States and the United Kingdom and lease those properties to healthcare operating companies under “triple-net”
Slide 53: 2016 Guidance
2016 GUIDANCE1,2 Dollars in millions USD, except per share amounts EPS, FFO & FAD Guidance Attributable to Common Shareholders Same-Store Cash NOI Growth Guidance Tentative / Preliminary & Subject to Change Tentative / Preliminary & FY2016 - Guidance 2016 - Per Share Subject to Change Low High Low H
Slide 54: Non-GAAP Financial Measures: FFO and FAD Reconciliation
NON-GAAP FINANCIAL MEASURES Dollars in thousands USD, except per share amounts FFO AND FAD RECONCILIATION INCLUDING 1 COMPARABLE FFO and FAD Reconciliation Including Comparable Earnings for FY16 1,2 Tentative Estima EARNINGS ($ IN 000S, EXCEPT PER SHARE AMOUNTS) Preliminary an YoY 2015 2016 Growth Q
Slide 55: Non-GAAP Financial Measures: Normalized FFO
NON-GAAP FINANCIAL MEASURES NORMALIZED FFO ($ IN 000S, EXCEPT PER SHARE AMOUNTS) 1. Per share amounts may not add due to rounding. 54
Slide 56: Adjusted Pro Forma EBITDA and Net Debt to EBITDA
NON-GAAP FINANCIAL MEASURES ADJUSTED PRO FORMA1 EBITDA AND NET DEBT TO ADJUSTED PRO FORMA1 EBITDA ($ IN 000S) 1. The following information considers the pro forma effect on net income, interest and depreciation and amortization of the Com pany’s investments and other capital transactions that were c
Slide 57: Adjusted Pro Forma EBITDA and Fixed Charge Coverage Ratio
NON-GAAP FINANCIAL MEASURES ADJUSTED PRO FORMA1 EBITDA AND FIXED CHARGE COVERAGE RATIO ($ IN 000S) 1. The following information considers the pro forma effect on net income, interest, depreciation and amortization, merger-related expenses and deal costs and income taxes of the Company’s investments
Slide 58: NOI Reconciliation by Segment
NON-GAAP FINANCIAL MEASURES NOI RECONCILIATION BY SEGMENT1,2 ($ IN 000S) 1. Amounts above are adjusted to exclude discontinued operations for all periods presented. 2. Amounts above are not restated for changes between categories from quarter to quarter. 57
Slide 59: NOI Reconciliation by Segment (Cont'd)
NON-GAAP FINANCIAL MEASURES NOI RECONCILIATION BY SEGMENT (CONT’D)1,2 ($ IN 000S) 1. Amounts above are adjusted to exclude discontinued operations for all periods presented. 2. Amounts above are not restated for changes between categories from quarter to quarter. 58