Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion provides information that management believes is relevant to an understanding and assessment of the consolidated financial condition and results of operations of Ventas, Inc. You should read this discussion in conjunction with our Consolidated Financial Statements and the notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K, as it will help you understand:

•	Our company and the environment in which we operate;

•	Our 2019 highlights;

•	Our critical accounting policies and estimates;

•	Our results of operations for the last three years;

•	Our non-GAAP financial measures:

•	How we manage our assets and liabilities;

•	Our liquidity and capital resources;

•	Our cash flows; and

•	Our future contractual obligations.

Corporate and Operating Environment

We are a real estate investment trust (“REIT”) with a highly diversified portfolio of seniors housing, research and innovation, and healthcare properties located throughout the United States, Canada and the United Kingdom. As of December 31, 2019, we owned approximately 1,200 properties (including properties owned through investments in unconsolidated entities and properties classified as held for sale), consisting of seniors housing communities, medical office

buildings (“MOBs”), research and innovation centers, inpatient rehabilitation facilities (“IRFs”) and long-term acute care facilities (“LTACs”), and health systems. We had 22 properties under development, including four properties that are owned by unconsolidated real estate entities. We are an S&P 500 company headquartered in Chicago, Illinois.

We primarily invest in seniors housing, research and innovation, and healthcare properties through acquisitions and lease our properties to unaffiliated tenants or operate them through independent third-party managers.

As of December 31, 2019, we leased a total of 412 properties (excluding properties within our office operations reportable business segment) to various healthcare operating companies under “triple-net” or “absolute-net” leases that obligate the tenants to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures. Our three largest tenants, Brookdale Senior Living Inc. (together with its subsidiaries, “Brookdale Senior Living”), Ardent Health Partners, LLC (together with its subsidiaries, “Ardent”) and Kindred Healthcare, LLC (formerly Kindred Healthcare, Inc., together with its subsidiaries, “Kindred”) leased from us 122 properties (excluding two properties managed by Brookdale Senior Living pursuant to long-term management agreements), 11 properties and 32 properties, respectively, as of December 31, 2019

As of December 31, 2019, pursuant to long-term management agreements, we engaged independent operators, such as Atria Senior Living, Inc. (“Atria”) and Sunrise Senior Living, LLC (together with its subsidiaries, “Sunrise”) to manage 406 seniors housing communities for us.

Through our Lillibridge Healthcare Services, Inc. (“Lillibridge”) subsidiary and our ownership interest in PMB Real Estate Services LLC (“PMBRES”), we also provide MOB management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. In addition, from time to time, we make secured and non-mortgage loans and other investments relating to seniors housing and healthcare operators or properties.

We conduct our operations through three reportable business segments: triple-net leased properties, senior living operations and office operations. See “NOTE 19—SEGMENT INFORMATION” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

As of December 31, 2019, our consolidated portfolio included 100% ownership interests in 1,109 properties and controlling joint venture interests in 86 properties, and we had non-controlling ownership interests in six properties through investments in unconsolidated entities. Through Lillibridge, we provided management and leasing services to third parties with respect to 74 MOBs as of December 31, 2019.

We aim to enhance shareholder value by delivering consistent, superior total returns through a strategy of: (1) generating reliable and growing cash flows; (2) maintaining a balanced, diversified portfolio of high-quality assets; and (3) preserving our financial strength, flexibility and liquidity.

Our ability to access capital in a timely and cost-effective manner is critical to the success of our business strategy because it affects our ability to satisfy existing obligations, including the repayment of maturing indebtedness, and to make future investments. Factors such as general market conditions, interest rates, credit ratings on our securities, expectations of our potential future earnings and cash distributions, and the trading price of our common stock that are beyond our control and fluctuate over time all impact our access to and cost of external capital. For that reason, we generally attempt to match the long-term duration of our investments in real property with long-term financing through the issuance of shares of our common stock or the incurrence of long-term fixed rate debt.

2019 Highlights

For information regarding our 2019 highlights, see “Business” in Part I, Item 1 of this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”). GAAP requires us to make estimates and assumptions regarding future events that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base these estimates on our experience and assumptions we believe to be reasonable under the circumstances. However, if our judgment or interpretation of the facts and circumstances relating to various transactions or

other matters had been different, we may have applied a different accounting treatment, resulting in a different presentation of our financial statements. We periodically reevaluate our estimates and assumptions, and in the event they prove to be different from actual results, we make adjustments in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. We believe that the critical accounting policies described below, among others, affect our more significant estimates and judgments used in the preparation of our financial statements. For more information regarding our critical accounting policies, see “NOTE 2—ACCOUNTING POLICIES” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Principles of Consolidation

The Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K include our accounts and the accounts of our wholly owned subsidiaries and the joint venture entities over which we exercise control. All intercompany transactions and balances have been eliminated in consolidation, and our net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.

GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; and (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. We consolidate our investment in a VIE when we determine that we are its primary beneficiary. We may change our original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affects the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary.

We identify the primary beneficiary of a VIE as the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. We perform this analysis on an ongoing basis.

Accounting for Real Estate Acquisitions

When we acquire real estate, we first make reasonable judgments about whether the transaction involves an asset or a business. Our real estate acquisitions are generally accounted for as asset acquisitions as substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. Regardless of whether an acquisition is considered a business combination or an asset acquisition, we record the cost of the businesses or assets acquired as tangible and intangible assets and liabilities based upon their estimated fair values as of the acquisition date.

We estimate the fair value of buildings acquired on an as-if-vacant basis or replacement cost basis and depreciate the building value over the estimated remaining life of the building, generally not to exceed 35 years. We determine the fair value of other fixed assets, such as site improvements and furniture, fixtures and equipment, based upon the replacement cost and depreciate such value over the assets’ estimated remaining useful lives as determined at the applicable acquisition date. We determine the value of land either by considering the sales prices of similar properties in recent transactions or based on internal analyses of recently acquired and existing comparable properties within our portfolio. We generally determine the value of construction in progress based upon the replacement cost. However, for certain acquired properties that are part of a ground-up development, we determine fair value by using the same valuation approach as for all other properties and deducting the estimated cost to complete the development. During the remaining construction period, we capitalize project costs until the development has reached substantial completion. Construction in progress, including capitalized interest, is not depreciated until the development has reached substantial completion.

Intangibles primarily include the value of in-place leases and acquired lease contracts. We include all lease-related intangible assets and liabilities within acquired lease intangibles and accounts payable and other liabilities, respectively, on our Consolidated Balance Sheets.

The fair value of acquired lease-related intangibles, if any, reflects: (i) the estimated value of any above and/or below market leases, determined by discounting the difference between the estimated market rent and in-place lease rent; and (ii) the estimated value of in-place leases related to the cost to obtain tenants, including leasing commissions, and an estimated value of the absorption period to reflect the value of the rent and recovery costs foregone during a reasonable lease-up period as if the

acquired space was vacant. We amortize any acquired lease-related intangibles to revenue or amortization expense over the remaining life of the associated lease plus any assumed bargain renewal periods. If a lease is terminated prior to its stated expiration or not renewed upon expiration, we recognize all unamortized amounts of lease-related intangibles associated with that lease in operations at that time.

We estimate the fair value of purchase option intangible assets and liabilities, if any, by discounting the difference between the applicable property’s acquisition date fair value and an estimate of its future option price. We do not amortize the resulting intangible asset or liability over the term of the lease, but rather adjust the recognized value of the asset or liability upon sale.

In connection with an acquisition, we may assume rights and obligations under certain lease agreements pursuant to which we become the lessee of a given property. We generally assume the lease classification previously determined by the prior lessee absent a modification in the assumed lease agreement. We assess assumed operating leases, including ground leases, to determine whether the lease terms are favorable or unfavorable to us given current market conditions on the acquisition date. To the extent the lease terms are favorable or unfavorable to us relative to market conditions on the acquisition date, we recognize an intangible asset or liability at fair value and amortize that asset or liability to interest or rental expense in our Consolidated Statements of Income over the applicable lease term. Where we are the lessee, we record the acquisition date values of leases, including any above or below market value, within operating lease assets and operating lease liabilities on our Consolidated Balance Sheets.

We estimate the fair value of noncontrolling interests assumed consistent with the manner in which we value all of the underlying assets and liabilities.

We calculate the fair value of long-term assumed debt by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings, which we approximate based on the rate at which we would expect to incur a replacement instrument on the date of acquisition, and recognize any fair value adjustments related to long-term debt as effective yield adjustments over the remaining term of the instrument.

Impairment of Long-Lived and Intangible Assets

We periodically evaluate our long-lived assets, primarily consisting of investments in real estate, for impairment indicators. If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying operations. In performing this evaluation, we consider market conditions and our current intentions with respect to holding or disposing of the asset. We adjust the net book value of real estate properties and other long-lived assets to fair value if the sum of the expected future undiscounted cash flows, including sales proceeds, is less than book value. We recognize an impairment loss at the time we make any such determination.

Estimates of fair value used in our evaluation of investments in real estate are based upon discounted future cash flow projections, if necessary, or other acceptable valuation techniques that are based, in turn, upon all available evidence including level three inputs, such as revenue and expense growth rates, estimates of future cash flows, capitalization rates, discount rates, general economic conditions and trends, or other available market data. Our ability to accurately predict future operating results and cash flows and to estimate and determine fair values impacts the timing and recognition of impairments. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results.

Revenue Recognition

We recognize rental revenues under our leases on a straight-line basis over the applicable lease term when collectability of substantially all rents is probable. We assess the probability of collecting substantially all rents under our leases based on several factors, including, among other things, payment history, the financial strength of the tenant and any guarantors, the historical operations and operating trends of the property, the historical payment pattern of the tenant, the type of property, the value of the underlying collateral, if any, expected future performance of the property and current economic conditions. If our evaluation of these factors indicates it is not probable that we will be able to collect substantially all rents, we recognize a charge to rental income. If we change our conclusions regarding the probability of collecting rent payments required by a lease, we may recognize adjustments to rental income in the period we make such change in our conclusions.

Federal Income Tax

We have elected to be treated as a REIT under the applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), for every year beginning with the year ended December 31, 1999. Accordingly, we generally are not

subject to federal income tax on net income that we distribute to our stockholders, provided that we continue to qualify as a REIT. However, with respect to certain of our subsidiaries that have elected to be treated as taxable REIT subsidiaries (“TRS” or “TRS entities”), we record income tax expense or benefit, as those entities are subject to federal income tax similar to regular corporations. Certain foreign subsidiaries are subject to foreign income tax, although they did not elect to be treated as TRSs.

We account for deferred income taxes using the asset and liability method and recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns. Under this method, we determine deferred tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Any increase or decrease in the deferred tax liability that results from a change in circumstances, and that causes us to change our judgment about expected future tax consequences of events, is included in the tax provision when such changes occur. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards. A valuation allowance is provided if we believe it is more likely than not that all or some portion of the deferred tax asset will not be realized. Any increase or decrease in the valuation allowance that results from a change in circumstances, and that causes us to change our judgment about the realizability of the related deferred tax asset, is included in the tax provision when such changes occur.

We recognize the tax benefit from an uncertain tax position claimed or expected to be claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. We recognize interest and penalties, if applicable, related to uncertain tax positions as part of income tax benefit or expense.

Recently Issued or Adopted Accounting Standards

We adopted ASC Topic 842, Leases (“ASC 842”) on January 1, 2019, which introduced a lessee model that brings most leases on the balance sheet and, among other changes, eliminates the requirement in current GAAP for an entity to use bright-line tests in determining lease classification.

ASC 842 allows for several practical expedients which permit the following: no reassessment of lease classification or initial direct costs; use of the standard’s effective date as the date of initial application; and no separation of non-lease components from the related lease components and, instead, to account for those components as a single lease component if certain criteria are met. We elected these practical expedients using the effective date as our date of initial application. Therefore, financial information and disclosures under ASC 842 are not provided for periods prior to January 1, 2019.

Upon adoption, we recognized both right of use assets and lease liabilities for leases in which we lease land, real property or other equipment. We now also report revenues and expenses within our triple-net leased properties reportable business segment for real estate taxes and insurance that are escrowed and obligations of the tenants in accordance with their respective leases with us. This reporting had no impact on our net income. Resident leases within our senior living operations reportable business segment and office leases also contain service elements. We elected the practical expedient to account for our resident and office leases as a single lease component. Also, we now expense certain leasing costs, other than leasing commissions, as they are incurred. Prior to the adoption of ASC 842, GAAP provided for the deferral and amortization of such costs over the applicable lease term. We are continuing to amortize any unamortized deferred lease costs as of December 31, 2018 over their respective lease terms.

As of January 1, 2019 we recognized operating lease assets of $361.7 million on our Consolidated Balance Sheets which includes the present value of minimum lease payments as well as certain existing above and/or below market lease intangible values associated with such leases. Also upon adoption, we recognized operating lease liabilities of $216.9 million on our Consolidated Balance Sheets. The present value of minimum lease payments was calculated on each lease using a discount rate that approximates our incremental borrowing rate primarily adjusted for the length of the individual lease terms. As of the January 1, 2019 adoption date, we utilized discount rates ranging from 6.15% to 7.60% for our ground leases.

Upon adoption, we recognized a cumulative effect adjustment to retained earnings of $0.6 million primarily relating to certain costs associated with unexecuted leases that were deferred as of December 31, 2018.

Results of Operations

As of December 31, 2019, we operated through three reportable business segments: triple-net leased properties, senior living operations and office operations. In our triple-net leased properties segment, we invest in and own seniors housing and healthcare properties throughout the United States and the United Kingdom and lease those properties to healthcare operating companies under “triple-net” or “absolute-net” leases that obligate the tenants to pay all property-related expenses. In our senior living operations segment, we invest in seniors housing communities throughout the United States and Canada and engage independent operators, such as Atria and Sunrise, to manage those communities. In our office operations segment, we primarily acquire, own, develop, lease and manage MOBs and research and innovation centers throughout the United States. Information provided for “all other” includes income from loans and investments and other miscellaneous income and various corporate-level expenses not directly attributable to any of our three reportable business segments. Assets included in “all other” consist primarily of corporate assets, including cash, restricted cash, loans receivable and investments, and miscellaneous accounts receivable.

Our chief operating decision makers evaluate performance of the combined properties in each reportable business segment and determine how to allocate resources to those segments, in significant part, based on segment net operating income (“NOI”) and related measures. For further information regarding our business segments and a discussion of our definition of segment NOI, see “NOTE 19—SEGMENT INFORMATION” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. See “Non-GAAP Financial Measures” included elsewhere in this Annual Report on Form 10-K for additional disclosure and reconciliations of net income attributable to common stockholders, as computed in accordance with GAAP, to NOI.

Years Ended December 31, 2019 and 2018

The table below shows our results of operations for the years ended December 31, 2019 and 2018 and the effect of changes in those results from period to period on our net income attributable to common stockholders.

	For the Years Ended December 31,								Increase (Decrease) to Net Income
	2019				2018				$				%
	(Dollars in thousands)
Segment NOI:
Triple-net leased properties	$	754,337			$	740,318			$	14,019			1.9	%
Senior living operations	630,135				623,276				6,859				1.1
Office operations	574,157				538,506				35,651				6.6
All other	92,610				127,520				(34,910		)		(27.4	)
Total segment NOI	2,051,239				2,029,620				21,619				1.1
Interest and other income	10,984				24,892				(13,908		)		(55.9	)
Interest expense	(451,662		)		(442,497		)		(9,165		)		(2.1	)
Depreciation and amortization	(1,045,620		)		(919,639		)		(125,981		)		(13.7	)
General, administrative and professional fees	(165,996		)		(151,982		)		(14,014		)		(9.2	)
Loss on extinguishment of debt, net	(41,900		)		(58,254		)		16,354				28.1
Merger-related expenses and deal costs	(15,235		)		(30,547		)		15,312				50.1
Other	17,609				(66,768		)		84,377				nm
Income before unconsolidated entities, real estate dispositions, income taxes, discontinued operations and noncontrolling interests	359,419				384,825				(25,406		)		(6.6	)
Loss from unconsolidated entities	(2,454		)		(55,034		)		52,580				95.5
Gain on real estate dispositions	26,022				46,247				(20,225		)		(43.7	)
Income tax benefit	56,310				39,953				16,357				40.9
Income from continuing operations	439,297				415,991				23,306				5.6
Discontinued operations	—				(10		)		10				nm
Net income	439,297				415,981				23,316				5.6
Net income attributable to noncontrolling interests	6,281				6,514				233				3.6
Net income attributable to common stockholders	$	433,016			$	409,467			23,549				5.8

nm—not meaningful

Segment NOI—Triple-Net Leased Properties

The following table summarizes results of operations in our triple-net leased properties reportable business segment, including assets sold or classified as held for sale as of December 31, 2019, but excluding assets whose operations were classified as discontinued operations:

	For the Years Ended December 31,								Increase (Decrease) to Segment NOI
	2019				2018				$				%
	(Dollars in thousands)
Segment NOI—Triple-Net Leased Properties:
Rental income	$	780,898			$	737,796			$	43,102			5.8	%
Other services revenue	—				2,522				(2,522		)		nm
Less: Property-level operating expenses	(26,561		)		—				(26,561		)		nm
Segment NOI	$	754,337			$	740,318			14,019				1.9

nm—not meaningful

In our triple-net leased properties reportable business segment, our revenues generally consist of fixed rental amounts (subject to annual contractual escalations) received from our tenants in accordance with the applicable lease terms.

Pursuant to our adoption of ASC 842 on January 1, 2019, we now report revenues and property-level operating expenses within our triple-net leased properties reportable business segment for real estate tax and insurance expenses that are paid from escrows collected from our tenants. For further information regarding our adoption of ASC 842, see “NOTE 2—ACCOUNTING POLICIES” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Triple-net leased properties segment NOI increased in 2019 over the prior year primarily due to the second quarter 2018 non-cash expense of $21.3 million related to the Brookdale Senior Living lease extensions and net increases in rent, partially offset by fewer assets in the portfolio due to dispositions and operator transitions of seniors housing communities from triple-net leased properties to senior living operations.

Occupancy rates may affect the profitability of our tenants’ operations. The following table sets forth average continuing occupancy rates related to the triple-net leased properties we owned at December 31, 2019 for the trailing 12 months ended September 30, 2019 (which is the most recent information available to us from our tenants) and average continuing occupancy rates related to the triple-net leased properties we owned at December 31, 2018 for the 12 months ended September 30, 2018. The table excludes non-stabilized properties, properties owned through investments in unconsolidated entities, certain properties for which we do not receive occupancy information and properties acquired or properties that transitioned operators for which we do not have a full four quarters of occupancy results.

	Number of Properties at December 31, 2019			Average Occupancy for the Trailing 12 Months Ended September 30, 2019				Number of Properties at December 31, 2018			Average Occupancy for the Trailing 12 Months Ended September 30, 2018
Seniors housing communities	326			86.0	%			361			85.0	%
Skilled nursing facilities (“SNFs”)	16			87.3				17			85.2
IRFs and LTACs	36			53.6				36			56.5

The following table compares results of operations for our 393 same-store triple-net leased properties. See “Non-GAAP Financial Measures**—**NOI” included elsewhere in this Annual Report on Form 10-K for additional disclosure regarding same-store NOI.

	For the Years Ended December 31,								Increase (Decrease) to Segment NOI
	2019				2018				$				%
	(Dollars in thousands)
Same-Store Segment NOI—Triple-Net Leased Properties:
Rental income	$	749,561			$	688,914			$	60,647			8.8	%
Less: Property-level operating expenses	(25,180		)		—				(25,180		)		nm
Segment NOI	$	724,381			$	688,914			35,467				5.1

nm—not meaningful

The increase in our same-store triple-net leased properties rental income in 2019 over the prior year is attributable primarily to the second quarter 2018 non-cash expense of $21.3 million related to the Brookdale Senior Living lease extensions and net increases in rent.

Segment NOI—Senior Living Operations

The following table summarizes results of operations in our senior living operations reportable business segment, including assets sold or classified as held for sale as of December 31, 2019, but excluding assets whose operations were classified as discontinued operations:

	For the Years Ended December 31,								Increase (Decrease) to Segment NOI
	2019				2018				$				%
	(Dollars in thousands)
Segment NOI—Senior Living Operations:
Resident fees and services	$	2,151,533			$	2,069,477			$	82,056			4.0	%
Less: Property-level operating expenses	(1,521,398		)		(1,446,201		)		(75,197		)		(5.2	)
Segment NOI	$	630,135			$	623,276			6,859				1.1

	Number of Properties at December 31,						Average Unit Occupancy for the Years Ended December 31,						Average Monthly Revenue Per Occupied Room for the Years Ended December 31,
	2019			2018			2019			2018			2019				2018
Total communities	401			355			86.6	%		87.0	%		$	5,451			$	5,699

Resident fees and services include all amounts earned from residents at our seniors housing communities, such as rental fees related to resident leases, extended health care fees and other ancillary service income. Property-level operating expenses related to our senior living operations segment include labor, food, utilities, marketing, management and other costs of operating the properties.

The increase in our senior living operations segment NOI in 2019 over the prior year is attributable primarily to the acquisition of an 87% interest in 34 Canadian seniors housing communities (including five in-process developments) valued at $1.8 billion through an equity partnership (the “LGM Acquisition”) with Le Groupe Maurice (“LGM”), partially offset by decreases in occupancy and increases in property-level operating expenses.

The following table compares results of operations for our 340 same-store senior living operating communities.

	For the Years Ended December 31,								Increase (Decrease) to Segment NOI
	2019				2018				$				%
	(Dollars in thousands)
Same-Store Segment NOI—Senior Living Operations:
Resident fees and services	$	1,990,057			$	1,989,104			$	953			nm
Less: Property-level operating expenses	(1,401,208		)		(1,376,142		)		(25,066		)		(1.8	)
Segment NOI	$	588,849			$	612,962			(24,113		)		(3.9	)

nm—not meaningful

	Number of Properties at December 31,						Average Unit Occupancy for the Years Ended December 31,						Average Monthly Revenue Per Occupied Room for the Years Ended December 31,
	2019			2018			2019			2018			2019				2018
Same-store communities	340			340			86.5	%		87.2	%		$	5,787			$	5,733

The decrease in our same-store senior living operations segment NOI was primarily attributable to increases in property-level operating expenses and decreases in occupancy.

Effective January 1, 2020, we amended the same-store definition for our senior living operations segment in order to better align with industry practice. Going forward, among other changes, redevelopments in our senior living operations

segment that are considered materially disruptive will be excluded from the same-store pool until they meet the definition for subsequent inclusion. If this policy had been in place for 2019, same-store senior living operations results would have been based on same-store communities of 334 while the year-over-year change in same-store segment NOI would have remained substantially unchanged at (3.9%).

Segment NOI—Office Operations

The following table summarizes results of operations in our office operations reportable business segment, including assets sold or classified as held for sale as of December 31, 2019, but excluding assets whose operations were classified as discontinued operations:

	For the Years Ended December 31,								Increase (Decrease) to Segment NOI
	2019				2018				$				%
	(Dollars in thousands)
Segment NOI—Office Operations:
Rental income	$	828,978			$	776,011			$	52,967			6.8	%
Office building services revenue	7,747				7,592				155				2.0
Total revenues	836,725				783,603				53,122				6.8
Less:
Property-level operating expenses	(260,249		)		(243,679		)		(16,570		)		(6.8	)
Office building services costs	(2,319		)		(1,418		)		(901		)		(63.5	)
Segment NOI	$	574,157			$	538,506			35,651				6.6

	Number of Properties at December 31,						Occupancy at December 31,						Annualized Average Rent Per Occupied Square Foot for the Years Ended December 31,
	2019			2018			2019			2018			2019				2018
Total office buildings	382			387			90.3	%		90.1	%		$	34			$	32

The increase in our office operations segment NOI in 2019 over the prior year is attributable primarily to 2019 increases in occupancy and 2018 and 2019 acquisitions and openings of new buildings, partially offset by dispositions.

The following table compares results of operations for our 353 same-store office buildings.

	For the Years Ended December 31,								Increase (Decrease) to Segment NOI
	2019				2018				$				%
	(Dollars in thousands)
Same-Store Segment NOI—Office Operations:
Rental income	$	723,229			$	709,714			$	13,515			1.9	%
Less: Property-level operating expenses	(224,072		)		(218,272		)		(5,800		)		(2.7	)
Segment NOI	$	499,157			$	491,442			7,715				1.6

	Number of Properties at December 31,						Occupancy at December 31,						Annualized Average Rent Per Occupied Square Foot for the Years Ended December 31,
	2019			2018			2019			2018			2019				2018
Same-store office buildings	353			353			92.1	%		91.9	%		$	33			$	32

The increase in our same-store office operations segment NOI in 2019 over the prior year is attributable primarily to increases in occupancy.

All Other

Information provided for all other segment NOI includes income from loans and investments and other miscellaneous income not directly attributable to any of our three reportable business segments. The $34.9 million decrease in all other segment NOI in 2019 over the prior year is primarily due to reduced income related to the $700.0 million term loan that we made to Ardent in March 2017, which was fully repaid in June 2018, partially offset by increased 2019 investment activity. See “NOTE 6—LOANS RECEIVABLE AND INVESTMENTS” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Interest and other income

The $13.9 million decrease in interest and other income in 2019 over the prior year is primarily due to a $12.3 million fee received in the third quarter of 2018 related to certain 2018 Kindred transactions. See “NOTE 3-CONCENTRATION OF CREDIT RISK” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Interest Expense

The $9.2 million increase in total interest expense in 2019 over the prior year is primarily attributable to an increase of $17.9 million due to higher debt balances and decreased capitalized interest, partially offset by a decrease of $10.7 million due to a lower effective interest rate. Our weighted average effective interest rate was 3.8% for 2019, compared to 3.9% for 2018. Capitalized interest for 2019 and 2018 was $9.0 million and $10.9 million, respectively.

Depreciation and Amortization

Depreciation and amortization expense related to continuing operations increased during 2019 compared to 2018, primarily due to real estate impairments and asset acquisitions, net of dispositions.

Loss on Extinguishment of Debt, Net

The loss on extinguishment of debt, net in 2019 was due primarily to the redemption and repayment of $600.0 million aggregate principal amounts then outstanding of our 4.25% senior notes due 2022. The loss on extinguishment of debt, net in 2018 was due primarily to the redemption and repayment of $1.3 billion aggregate principal amounts then outstanding of our 4.00% senior notes due 2019 and our 4.75% senior notes due 2021.

Merger-Related Expenses and Deal Costs

The $15.3 million decrease in merger-related expenses and deal costs in 2019 over the prior year was due primarily to costs associated with the 2018 transition of the management of 76 private pay seniors housing communities to Eclipse Senior Living.

Other

The $84.4 million change in other for 2019 over 2018 is primarily due to 2019 property insurance recoveries related to natural disasters in addition to 2018 impairments and expenses related to natural disasters.

Loss from Unconsolidated Entities

The $52.6 million decrease in loss from unconsolidated entities for 2019 over 2018 is primarily due to our share of improved financial results from our unconsolidated entities in 2019 and a $35.7 million impairment in 2018 relating to the carrying costs of one of our equity method investments consisting principally of SNFs.

Gain on Real Estate Dispositions

The $20.2 million decrease in gain on real estate dispositions for 2019 over 2018 is due primarily to higher disposition activity in 2018.

Income Tax Benefit

The $16.4 million increase in income tax benefit related to continuing operations for 2019 over 2018 is primarily due to a $57.6 million reversal of valuation allowances recorded against the net deferred tax assets of certain of our taxable REIT subsidiaries in the second quarter of 2019, partially offset by the reversal of a valuation allowance on deferred interest carryforwards in the fourth quarter of 2018. The $23.3 million valuation allowance reversal recorded in 2018 was an adjustment to the provisional amount recorded in the prior year related to enactment of the Tax Cuts and Jobs Act of 2017 and was made based upon additional guidance issued by the Internal Revenue Service subsequent to enactment.

Years Ended December 31, 2018 and 2017

Our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 8, 2019, contains information regarding our results of operations for the years ended December 31, 2018 and 2017 and the effect of changes in those results from period to period on our net income attributable to common stockholders.

Non-GAAP Financial Measures

We consider certain non-GAAP financial measures to be useful supplemental measures of our operating performance. A non-GAAP financial measure is a measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are not so excluded from or included in the most directly comparable measure calculated and presented in accordance with GAAP. Described below are the non-GAAP financial measures used by management to evaluate our operating performance and that we consider most useful to investors, together with reconciliations of these measures to the most directly comparable GAAP measures.

The non-GAAP financial measures we present in this Annual Report on Form 10-K may not be comparable to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. You should not consider these measures as alternatives to net income attributable to common stockholders (determined in accordance with GAAP) as indicators of our financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of our liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine these measures in conjunction with net income attributable to common stockholders as presented in our Consolidated Financial Statements and other financial data included elsewhere in this Annual Report on Form 10-K.

Funds From Operations and Normalized Funds From Operations

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. However, since real estate values historically have risen or fallen with market conditions, many industry investors deem presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For that reason, we consider Funds From Operations (“FFO”) and normalized FFO to be appropriate supplemental measures of operating performance of an equity REIT. In particular, we believe that normalized FFO is useful because it allows investors, analysts and our management to compare our operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences caused by non-recurring items and other non-operational events such as transactions and litigation. In some cases, we provide information about identified non-cash components of FFO and normalized FFO because it allows investors, analysts and our management to assess the impact of those items on our financial results.

We use the National Association of Real Estate Investment Trusts (“Nareit”) definition of FFO. Nareit defines FFO as net income attributable to common stockholders (computed in accordance with GAAP), excluding gains or losses from sales of real estate property, including gains or losses on re-measurement of equity method investments, and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis. We define normalized FFO as FFO excluding the following income and expense items (which may be recurring in nature): (a) merger-related costs and expenses, including amortization of intangibles, transition and integration expenses, and deal costs and expenses, including expenses and recoveries relating to acquisition lawsuits; (b) the impact of any expenses related to asset impairment and valuation allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of our debt; (c) the non-cash effect of income tax benefits or expenses, the non-cash impact of changes to our executive equity compensation plan, derivative transactions that have non-cash mark-to-market impacts on our Consolidated Statements of Income and non-cash charges related to lease terminations; (d) the financial impact of contingent consideration, severance-

related costs and charitable donations made to the Ventas Charitable Foundation; (e) gains and losses for non-operational foreign currency hedge agreements and changes in the fair value of financial instruments; (f) gains and losses on non-real estate dispositions and other unusual items related to unconsolidated entities; (g) expenses related to the re-audit and re-review in 2014 of our historical financial statements and related matters; and (h) net expenses or recoveries related to natural disasters.

The following table summarizes our FFO and normalized FFO for each of the five years ended December 31, 2019. The decrease in normalized FFO for the year ended December 31, 2019 over the prior year is due primarily to the $12.3 million fee received in the third quarter of 2018 related to certain 2018 Kindred transactions and 2018 loan repayments and fees.

	For the Years Ended December 31,
	2019				2018				2017				2016				2015
	(In thousands)
Net income attributable to common stockholders	$	433,016			$	409,467			$	1,356,470			$	649,231			$	417,843
Adjustments:
Real estate depreciation and amortization	1,039,550				913,537				881,088				891,985				887,126
Real estate depreciation related to noncontrolling interests	(9,762		)		(6,926		)		(7,565		)		(7,785		)		(7,906		)
Real estate depreciation related to unconsolidated entities	187				1,977				4,231				5,754				7,353
(Gain) loss on real estate dispositions related to unconsolidated entities	(1,263		)		(875		)		(1,057		)		(439		)		19
(Gain) loss on re-measurement of equity interest upon acquisition, net	—				—				(3,027		)		—				176
Impairment on equity method investment	—				35,708				—				—				—
Gain on real estate dispositions related to noncontrolling interests	343				1,508				18				—				—
Gain on real estate dispositions	(26,022		)		(46,247		)		(717,273		)		(98,203		)		(18,580		)
Discontinued operations:
Loss (gain) on real estate dispositions	—				—				—				1				(231		)
Depreciation on real estate assets	—				—				—				—				79,608
FFO attributable to common stockholders	1,436,049				1,308,149				1,512,885				1,440,544				1,365,408
Adjustments:
Change in fair value of financial instruments	(78		)		(18		)		(41		)		62				460
Non-cash income tax benefit	(58,918		)		(18,427		)		(22,387		)		(34,227		)		(42,384		)
Effect of the 2017 Tax Act	—				(24,618		)		(36,539		)		—				—
Loss on extinguishment of debt, net	41,900				63,073				839				2,779				15,797
Gain on non-real estate dispositions related to unconsolidated entities	(18		)		(2		)		(39		)		(557		)		—
Merger-related expenses, deal costs and re-audit costs	18,208				38,145				14,823				28,290				152,344
Amortization of other intangibles	484				759				1,458				1,752				2,058
Other items related to unconsolidated entities	3,291				5,035				3,188				—				—
Non-cash impact of changes to equity plan	7,812				4,830				5,453				—				—
Non-cash charges related to lease terminations	—				21,299				—				—				—
Natural disaster (recoveries) expenses, net	(25,683		)		63,830				11,601				—				—
Normalized FFO attributable to common stockholders	$	1,423,047			$	1,462,055			$	1,491,241			$	1,438,643			$	1,493,683

Adjusted EBITDA

We consider Adjusted EBITDA an important supplemental measure because it provides another manner in which to evaluate our operating performance and serves as another indicator of our credit strength and our ability to service our debt obligations. We define Adjusted EBITDA as consolidated earnings, which includes amounts in discontinued operations, before interest, taxes, depreciation and amortization (including non-cash stock-based compensation expense), excluding gains or losses on extinguishment of debt, our consolidated joint venture partners’ share of EBITDA, merger-related expenses and deal costs, expenses related to the re-audit and re-review in 2014 of our historical financial statements, net gains or losses on real estate activity, gains or losses on re-measurement of equity interest upon acquisition, changes in the fair value of financial instruments, unrealized foreign currency gains or losses, net expenses or recoveries related to natural disasters and non-cash charges related to lease terminations, and including our share of EBITDA from unconsolidated entities and adjustments for other immaterial or identified items. The following table sets forth a reconciliation of net income attributable to common stockholders to Adjusted EBITDA:

	For the Years Ended December 31,
	2019				2018				2017
	(In thousands)
Net income attributable to common stockholders	$	433,016			$	409,467			$	1,356,470
Adjustments:
Interest	451,662				442,497				448,196
Loss on extinguishment of debt, net	41,900				58,254				754
Taxes (including amounts in general, administrative and professional fees)	(52,677		)		(37,230		)		(57,307		)
Depreciation and amortization	1,045,620				919,639				887,948
Non-cash stock-based compensation expense	33,923				29,963				26,543
Merger-related expenses, deal costs and re-audit costs	15,246				33,608				12,653
Net income attributable to noncontrolling interests, adjusted for consolidated joint venture partners’ share of EBITDA	(16,396		)		(10,420		)		(12,975		)
Loss from unconsolidated entities, adjusted for Ventas share of EBITDA from unconsolidated entities	32,462				86,278				32,219
Gain on real estate dispositions	(26,022		)		(46,247		)		(717,273		)
Unrealized foreign currency (gains) losses	(1,061		)		138				(612		)
Changes in fair value of financial instruments	(104		)		(54		)		(61		)
Gain on re-measurement of equity interest upon acquisition, net	—				—				(3,027		)
Non-cash charges related to lease terminations	—				21,299				—
Natural disaster (recoveries) expenses, net	(25,981		)		54,684				11,601
Adjusted EBITDA	$	1,931,588			$	1,961,876			$	1,985,129

NOI

We also consider NOI an important supplemental measure because it allows investors, analysts and our management to assess our unlevered property-level operating results and to compare our operating results with those of other real estate companies and between periods on a consistent basis. We define NOI as total revenues, less interest and other income, property-level operating expenses and office building services costs. Cash receipts may differ due to straight-line recognition

of certain rental income and the application of other GAAP policies. The following table sets forth a reconciliation of net income attributable to common stockholders to NOI:

	For the Years Ended December 31,
	2019				2018				2017
	(In thousands)
Net income attributable to common stockholders	$	433,016			$	409,467			$	1,356,470
Adjustments:
Interest and other income	(10,984		)		(24,892		)		(6,034		)
Interest	451,662				442,497				448,196
Depreciation and amortization	1,045,620				919,639				887,948
General, administrative and professional fees	165,996				151,982				135,490
Loss on extinguishment of debt, net	41,900				58,254				754
Merger-related expenses and deal costs	15,235				30,547				10,535
Discontinued operations	—				10				110
Other	(17,609		)		66,768				20,052
Net income attributable to noncontrolling interests	6,281				6,514				4,642
Loss from unconsolidated entities	2,454				55,034				561
Income tax benefit	(56,310		)		(39,953		)		(59,799		)
Gain on real estate dispositions	(26,022		)		(46,247		)		(717,273		)
NOI	$	2,051,239			$	2,029,620			$	2,081,652

See “Results of Operations” for discussions regarding both segment NOI and same-store segment NOI. We define same-store as properties owned, consolidated and operational for the full period in both comparison periods and are not otherwise excluded; provided, however, that we may include selected properties that otherwise meet the same-store criteria if they are included in substantially all of, but not a full, period for one or both of the comparison periods, and in our judgment such inclusion provides a more meaningful presentation of our portfolio performance. Same-store excludes: (i) properties sold or classified as held for sale or properties whose operations were classified as discontinued operations in accordance with GAAP; (ii) for properties included in our office operations reportable business segment, those properties for which management has an intention to institute a redevelopment plan because the properties may require major property-level expenditures to maximize value, increase NOI, maintain a market-competitive position and/or achieve property stabilization; and (iii) for other assets, those properties (A) that have transitioned operators or business models after the start of the prior comparison period or (B) for which an operator or business model transition has been scheduled after the start of the prior comparison period. Newly-developed properties in the office operations and triple-net leased properties reportable business segments will be included in same-store if in service for the full period in both periods presented. To eliminate the impact of exchange rate movements, all same-store NOI measures assume constant exchange rates across comparable periods, using the following methodology: the current period’s results are shown in actual reported USD, while prior comparison period’s results are adjusted and converted to USD based on the average exchange rate for the current period.

Asset/Liability Management

Asset/liability management, a key element of enterprise risk management, is designed to support the achievement of our business strategy, while ensuring that we maintain appropriate and tolerable levels of market risk (primarily interest rate risk and foreign currency exchange risk) and credit risk. Effective management of these risks is a contributing factor to the absolute levels and variability of our FFO and net worth. The following discussion addresses our integrated management of assets and liabilities, including the use of derivative financial instruments.

Market Risk

We are exposed to market risk related to changes in interest rates with respect to borrowings under our unsecured revolving credit facility and our unsecured term loans, certain of our mortgage loans that are floating rate obligations, mortgage loans receivable that bear interest at floating rates and available for sale securities. These market risks result primarily from changes in LIBOR rates or prime rates. To manage these risks, we continuously monitor our level of floating rate debt with respect to total debt and other factors, including our assessment of current and future economic conditions.

The table below sets forth certain information with respect to our debt, excluding premiums and discounts.

	As of December 31,
	2019				2018				2017
	(Dollars in thousands)
Balance:
Fixed rate:
Senior notes	$	8,584,056			$	7,945,598			$	8,218,369
Unsecured term loans	200,000				400,000				200,000
Secured revolving construction credit facility	160,492				—				—
Mortgage loans and other(1)	1,325,854				698,136				1,010,517
Variable rate:
Senior notes	231,018				—				400,000
Unsecured revolving credit facility	120,787				765,919				535,832
Unsecured term loans	385,030				500,000				700,000
Commercial paper notes	567,450				—				—
Secured revolving construction credit facility	—				90,488				2,868
Mortgage loans and other(1)	671,115				429,561				298,047
Total	$	12,245,802			$	10,829,702			$	11,365,633
Percent of total debt:
Fixed rate:
Senior notes	70.1		%		73.4		%		72.3		%
Unsecured term loans	1.6				3.7				1.8
Secured revolving construction credit facility	1.3				—				—
Mortgage loans and other(1)	10.8				6.4				8.9
Variable rate:
Senior notes	1.9				—				3.5
Unsecured revolving credit facility	1.0				7.1				4.7
Unsecured term loans	3.1				4.6				6.2
Commercial paper notes	4.7				—				—
Secured revolving construction credit facility	—				0.8				0.0
Mortgage loans and other(1)	5.5				4.0				2.6
Total	100.0		%		100.0		%		100.0		%
Weighted average interest rate at end of period:
Fixed rate:
Senior notes	3.7		%		3.8		%		3.7		%
Unsecured term loans	2.0				2.8				2.1
Secured revolving construction credit facility	4.5				—				—
Mortgage loans and other(1)	3.7				4.4				5.2
Variable rate:
Senior notes	2.5				—				2.3
Unsecured revolving credit facility	2.4				3.2				2.3
Unsecured term loans	2.9				3.3				2.3
Commercial paper notes	2.0				—				—
Secured revolving construction credit facility	—				4.1				3.1
Mortgage loans and other(1)	3.4				3.4				2.9
Total	3.5				3.7				3.6

(1)	Excludes mortgage debt of $57.4 million related to real estate assets classified as held for sale as of December 31, 2017 which was included in liabilities related to assets held for sale on our Consolidated Balance Sheet.

The variable rate debt in the table above reflects, in part, the effect of $147.8 million notional amount of interest rate swaps with maturities ranging from March 2022 to May 2022, in each case that effectively convert fixed rate debt to variable rate debt. In addition, the fixed rate debt in the table above reflects, in part, the effect of $505.1 million and C$119.8 million notional amount of interest rate swaps with maturities ranging from August 2020 to December 2029, in each case that effectively convert variable rate debt to fixed rate debt. See “NOTE 10—SENIOR NOTES PAYABLE AND OTHER DEBT” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

The increase in our outstanding variable rate debt at December 31, 2019 compared to December 31, 2018 is primarily attributable to the assumption of mortgage debt related to the LGM Acquisition and our November 2019 issuance of floating rate senior notes.

Assuming a 100 basis point increase in the weighted average interest rate related to our variable rate debt and assuming no change in our variable rate debt outstanding as of December 31, 2019, interest expense on an annualized basis would increase by approximately $19.2 million, or $0.05 per diluted common share.

As of December 31, 2019 and 2018, our joint venture partners’ aggregate share of total debt was $228.2 million and $100.9 million, respectively, with respect to certain properties we owned through consolidated joint ventures. Total debt does not include our portion of debt related to investments in unconsolidated entities, which was $60.6 million and $40.8 million as of December 31, 2019 and 2018, respectively.

The fair value of our fixed and variable rate debt is based on current interest rates at which we could obtain similar borrowings. For fixed rate debt, interest rate fluctuations generally affect the fair value, but not our earnings or cash flows. Therefore, interest rate risk does not have a significant impact on our fixed rate debt obligations until their maturity or earlier prepayment and refinancing. If interest rates have risen at the time we seek to refinance our fixed rate debt, whether at maturity or otherwise, our future earnings and cash flows could be adversely affected by additional borrowing costs. Conversely, lower interest rates at the time of refinancing may reduce our overall borrowing costs.

To highlight the sensitivity of our fixed rate debt to changes in interest rates, the following summary shows the effects of a hypothetical instantaneous change of 100 basis points in interest rates:

	As of December 31,
	2019			2018
	(In thousands)
Gross book value	10,270,402			$	9,043,734
Fair value	10,784,441			8,926,280
Fair value reflecting change in interest rates:
-100 basis points	11,438,507			9,574,799
+100 basis points	10,196,943			8,568,149

The change in fair value of our fixed rate debt from December 31, 2018 to December 31, 2019 was due primarily to 2019 senior note issuances, net of repayments, and the assumption of mortgage debt related to the LGM Acquisition.

As of December 31, 2019 and 2018, the fair value of our secured and non-mortgage loans receivable, based on our estimates of currently prevailing rates for comparable loans, was $710.5 million and $479.4 million, respectively. See “NOTE 6—LOANS RECEIVABLE AND INVESTMENTS” and “NOTE 11—FAIR VALUES OF FINANCIAL INSTRUMENTS” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

As a result of our Canadian and United Kingdom operations, we are subject to fluctuations in certain foreign currency exchange rates that may, from time to time, affect our financial condition and operating performance. Based solely on our results for the year ended December 31, 2019 (including the impact of existing hedging arrangements), if the value of the U.S. dollar relative to the British pound and Canadian dollar were to increase or decrease by one standard deviation compared to the average exchange rate during the year, our normalized FFO per share for the year ended December 31, 2019 would decrease or increase, as applicable, by less than $0.01 per share or 0.1%. We will continue to mitigate these risks through a layered approach to hedging looking out for the next year and continual assessment of our foreign operational capital structure. Nevertheless, we cannot assure you that any such fluctuations will not have an effect on our earnings.

Concentration and Credit Risk

We use concentration ratios to identify, understand and evaluate the potential impact of economic downturns and other adverse events that may affect our asset types, geographic locations, business models, and tenants, operators and managers. We evaluate concentration risk in terms of investment mix and operations mix. Investment mix measures the percentage of our investments that is concentrated in a specific asset type or that is operated or managed by a particular tenant, operator or manager. Operations mix measures the percentage of our operating results that is attributed to a particular tenant, operator or manager, geographic location or business model. The following tables reflect our concentration risk as of the dates and for the periods presented:

	As of December 31,
	2019			2018
Investment mix by asset type(1):
Seniors housing communities	62.2	%		61.6	%
MOBs	19.3			20.4
Research and innovation centers	8.7			8.1
Health systems	5.1			5.6
IRFs and LTACs	1.6			1.7
SNFs	0.7			0.8
Secured loans receivable and investments, net	2.4			1.8
Investment mix by tenant, operator and manager(1):
Atria	20.4	%		22.1	%
Sunrise	10.3			11.0
Brookdale Senior Living	7.7			8.4
Ardent	4.7			5.2
Kindred	1.0			1.1
All other	55.9			52.2

(1)	Ratios are based on the gross book value of consolidated real estate investments (excluding properties classified as held for sale) as of each reporting date.

	For the Years Ended December 31,
	2019			2018			2017
Operations mix by tenant and operator and business model:
Revenues(1):
Senior living operations	55.8	%		55.3	%		51.6	%
Brookdale Senior Living(2)	4.7			4.3			4.7
Ardent	3.1			3.1			3.1
Kindred	3.3			3.5			4.7
All others	33.1			33.8			35.9
Adjusted EBITDA:
Senior living operations	32.5	%		31.3	%		28.7	%
Brookdale Senior Living(2)	8.1			6.7			7.6
Ardent	5.4			5.1			5.1
Kindred	5.8			5.6			7.7
All others	48.2			51.3			50.9
NOI:
Senior living operations	31.1	%		30.7	%		28.5	%
Brookdale Senior Living(2)	8.7			7.6			8.0
Ardent	5.8			5.7			5.3
Kindred	6.3			6.4			8.1
All others	48.1			49.6			50.1
Operations mix by geographic location(3):
California	15.9	%		15.7	%		15.3	%
New York	8.8			8.4			8.6
Texas	6.0			6.2			5.8
Pennsylvania	4.7			4.6			4.2
Florida	4.0			4.4			4.4
All others	60.6			60.7			61.7

(1)	Total revenues include medical office building and other services revenue, revenue from loans and investments and interest and other income (excluding amounts in discontinued operations and including amounts related to assets classified as held for sale).

(2)	Results exclude two seniors housing communities in 2019 and 2018 and one seniors housing community in 2017 included in the senior living operations reportable business segment. 2018 results include the impact of a net non-cash charge of $21.3 million related to April 2018 lease extensions.

(3)	Ratios are based on total revenues (excluding amounts in discontinued operations and including amounts related to assets classified as held for sale) for each period presented.

See “Non-GAAP Financial Measures” included elsewhere in this Annual Report on Form 10-K for additional disclosure and reconciliations of net income attributable to common stockholders, as computed in accordance with GAAP, to Adjusted EBITDA and NOI, respectively.

We derive a significant portion of our revenues by leasing assets under long-term triple-net leases in which the rental rate is generally fixed with annual escalators, subject to certain limitations. Some of our triple-net lease escalators are contingent upon the satisfaction of specified facility revenue parameters or based on increases in the Consumer Price Index (“CPI”), with caps, floors or collars. We also earn revenues directly from individual residents in our seniors housing communities that are managed by independent operators, such as Atria and Sunrise, and tenants in our office buildings. For the year ended December 31, 2019, 60.3% of our Adjusted EBITDA (including amounts in discontinued operations) was derived from our senior living operations and office operations, for which rental rates may fluctuate more frequently upon lease rollovers and renewals due to shorter term leases and changing economic or market conditions.

The concentration of our triple-net leased properties segment revenues and operating income that are attributed to Brookdale Senior Living, Ardent and Kindred creates credit risk. If any of Brookdale Senior Living, Ardent or Kindred becomes unable or unwilling to satisfy its obligations to us or to renew its leases with us upon expiration of the terms thereof, our financial condition and results of operations could decline, and our ability to service our indebtedness and to make distributions to our stockholders could be impaired. See “Risk Factors—Risks Arising from Our Business—Our leases and other agreements with Brookdale Senior Living, Ardent and Kindred account for a significant portion of our revenues and operating income; any failure, inability or unwillingness by Brookdale Senior Living, Ardent or Kindred to satisfy its obligations under our agreements could have a Material Adverse Effect on us” included in Part I, Item 1A of this Annual Report on Form 10-K and “NOTE 3—CONCENTRATION OF CREDIT RISK” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

We regularly monitor and assess any changes in the relative credit risk of our significant tenants, and in particular those tenants that have recourse obligations under our triple-net leases. The ratios and metrics we use to evaluate a significant tenant’s liquidity and creditworthiness depend on facts and circumstances specific to that tenant and the industry or industries in which it operates, including without limitation the tenant’s credit history and economic conditions related to the tenant, its operations and the markets in which the tenant operates, that may vary over time. Among other things, we may (i) review and analyze information regarding the real estate, seniors housing and healthcare industries generally, publicly available information regarding the significant tenant, and information required to be provided by the tenant under the terms of its lease agreements with us, (ii) examine monthly and/or quarterly financial statements of the significant tenant to the extent publicly available or otherwise provided under the terms of our lease agreements, and (iii) participate in periodic discussions and in-person meetings with representatives of the significant tenant. Using this information, we calculate multiple financial ratios (which may, but do not necessarily, include leverage, fixed charge coverage and tangible net worth), after making certain adjustments based on our judgment, and assess other metrics we deem relevant to an understanding of the significant tenant’s credit risk.

Because Atria and Sunrise manage our properties in exchange for the receipt of a management fee from us, we are not directly exposed to the credit risk of our managers in the same manner or to the same extent as our triple-net tenants. However, we rely on our managers’ personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our senior living operations efficiently and effectively. We also rely on Atria and Sunrise to set appropriate resident fees, to provide accurate property-level financials results in a timely manner and otherwise operate our seniors housing communities in compliance with the terms of our management agreements and all applicable laws and regulations. Although we have various rights as the property owner under our management agreements, including various rights to terminate and exercise remedies under the agreements as provided therein, Atria’s or Sunrise’s failure, inability or unwillingness to satisfy its respective obligations under those agreements, to efficiently and effectively manage our properties or to provide timely and accurate accounting information with respect thereto could have a Material Adverse Effect on us. See “Risk Factors—Risks Arising from Our Business—The properties managed by Atria and Sunrise account for a significant portion of our revenues and operating income; adverse developments in Atria’s and Sunrise’s business and affairs or financial condition could have a Material Adverse Effect on us” and “—We have rights to terminate our management agreements with Atria and Sunrise in whole or with respect to specific properties under certain circumstances, and we may be unable to replace Atria or Sunrise if our management agreements are terminated or not renewed” included in Part I, Item 1A of this Annual Report on Form 10-K.

Our 34% ownership interests in Atria entitles us to customary rights and minority protections, including the right to appoint two of six members to the Atria Board of Directors.

Triple-Net Lease Performance and Expirations

Any failure, inability or unwillingness by our tenants to satisfy their obligations under our triple-net leases could have a Material Adverse Effect on us. Also, if our tenants are not able or willing to renew our triple-net leases upon expiration, we may be unable to reposition the applicable properties on a timely basis or on the same or better economic terms, if at all. Although our lease expirations are staggered, the non-renewal of some or all of our triple-net leases that expire in any given year could have a Material Adverse Effect on us. During the year ended December 31, 2019, we had no triple-net lease renewals or expirations without renewal that, in the aggregate, had a material impact on our financial condition or results of operations for that period. See “Risk Factors—Risks Arising from Our Business—If we must replace any of our tenants or operators, we might be unable to reposition the properties on as favorable terms, or at all, and we could be subject to delays, limitations and expenses, which could have a Material Adverse Effect on us” included in Part I, Item IA of this Annual Report on Form 10-K.

The following table summarizes our triple-net lease expirations currently scheduled to occur over the next 10 years (excluding leases related to assets classified as held for sale as of December 31, 2019):

	Number of Properties			2019 Annual Rental Income				% of 2019 Total Triple-Net Leased Properties Segment Rental Income
	(Dollars in thousands)
2020	1			$	4,425			0.6	%
2021	8			6,543				0.8
2022	9			10,777				1.4
2023	6			30,506				3.9
2024	29			16,747				2.1
2025	180			315,596				40.4
2026	36			56,515				7.2
2027	3			6,857				0.9
2028	66			114,344				14.6
2029	21			25,284				3.2

Liquidity and Capital Resources

During 2019, our principal sources of liquidity were cash flows from operations, proceeds from the issuance of debt and equity securities, borrowings under our commercial paper program, proceeds from asset sales and cash on hand.

For the next 12 months, our principal liquidity needs are to: (i) fund operating expenses; (ii) meet our debt service requirements; (iii) repay maturing mortgage and other debt; (iv) fund acquisitions, investments and commitments and any development and redevelopment activities; (v) fund capital expenditures; and (vi) make distributions to our stockholders and unitholders, as required for us to continue to qualify as a REIT. We expect that these liquidity needs generally will be satisfied by a combination of the following: cash flows from operations, cash on hand, debt assumptions and financings (including secured financings), issuances of debt and equity securities, dispositions of assets (in whole or in part through joint venture arrangements with third parties) and borrowings under our revolving credit facilities and commercial paper program. However, an inability to access liquidity through multiple capital sources concurrently could have a Material Adverse Effect on us. See “Risk Factors—Risks Arising from Our Capital Structure—Limitations on our ability to access capital could have an adverse effect on our ability to make required payments on our debt obligations, make distributions to our stockholders or make future investments necessary to implement our business strategy” included in Part I, Item 1A of this Annual Report on Form 10-K.

See “NOTE 10—SENIOR NOTES PAYABLE AND OTHER DEBT” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information regarding our significant financing activities.

Credit Facilities, Commercial Paper and Unsecured Term Loans

Our unsecured credit facility is comprised of a $3.0 billion unsecured revolving credit facility priced at LIBOR plus 0.875%, as of December 31, 2019. The unsecured revolving credit facility matures in 2021, but may be extended at our option subject to the satisfaction of certain conditions for two additional periods of six months each. The unsecured revolving credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $3.75 billion.

In January 2019, our wholly-owned subsidiary, Ventas Realty, Limited Partnership (“Ventas Realty”), established an unsecured commercial paper program. Under the terms of the program, we may issue from time to time unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $1 billion. The notes are sold under customary terms in the United States commercial paper note market and are ranked pari passu with all of Ventas Realty’s other unsecured senior indebtedness. The notes are fully and unconditionally guaranteed by Ventas, Inc. As of December 31, 2019, $567.5 million was outstanding under our commercial paper program.

As of December 31, 2019, $120.8 million was outstanding under the unsecured revolving credit facility with an additional $24.0 million restricted to support outstanding letters of credit. In addition, we limit our utilization of the unsecured

revolving credit facility in order to maintain liquidity and to support our commercial paper program. Including these internal limits, we had $2.3 billion in available liquidity under the unsecured revolving credit facility as of December 31, 2019.

As of December 31, 2019, we had a $200.0 million unsecured term loan priced at LIBOR plus 0.90% that matures in 2023. The term loan also includes an accordion feature that effectively permits us to increase our aggregate borrowings thereunder to up to $800.0 million.

As of December 31, 2019, we had a $400.0 million secured revolving construction credit facility with $160.5 million of borrowings outstanding. The secured revolving construction credit facility matures in 2022 and is primarily used to finance the development of research and innovation centers and other construction projects.

As of December 31, 2019, we had a C$500 million unsecured term loan facility priced at Canadian Dollar Offered Rate (“CDOR”) plus 0.90% that matures in 2025.

Senior Notes

As of December 31, 2019, we had outstanding $7.5 billion aggregate principal amount of senior notes issued by Ventas Realty ($500.0 million of which was co-issued by Ventas Realty’s wholly owned subsidiary, Ventas Capital Corporation), approximately $75.2 million aggregate principal amount of senior notes issued by Nationwide Health Properties, Inc. (“NHP”) and assumed by our subsidiary, Nationwide Health Properties, LLC (“NHP LLC”), as successor to NHP, in connection with our acquisition of NHP, and C$1.7 billion aggregate principal amount of senior notes issued by our subsidiary, Ventas Canada Finance Limited (“Ventas Canada”). All of the senior notes issued by Ventas Realty and Ventas Canada are unconditionally guaranteed by Ventas, Inc.

We may, from time to time, seek to retire or purchase our outstanding senior notes for cash or in exchange for equity securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, prospects for future access to capital and other factors. The amounts involved may be material.

The indentures governing our outstanding senior notes require us to comply with various financial and other restrictive covenants. We were in compliance with all of these covenants at December 31, 2019.

Mortgages

At December 31, 2019 and 2018, our consolidated aggregate principal amount of mortgage debt outstanding was $2.0 billion and $1.1 billion, of which our share was $1.8 billion and $1.0 billion, respectively.

Under certain circumstances, contractual and legal restrictions, including those contained in the instruments governing our subsidiaries’ outstanding mortgage indebtedness, may restrict our ability to obtain cash from our subsidiaries for the purpose of meeting our debt service obligations, including our payment guarantees with respect to Ventas Realty’s and Ventas Canada Finance Limited’s senior notes.

Derivatives and Hedging

In the normal course of our business, interest rate fluctuations affect future cash flows under our variable rate debt obligations, loans receivable and marketable debt securities, and foreign currency exchange rate fluctuations affect our operating results. We follow established risk management policies and procedures, including the use of derivative instruments, to mitigate the impact of these risks.

Dividends

In order to continue to qualify as a REIT, we must make annual distributions to our stockholders of at least 90% of our REIT taxable income (excluding net capital gain). In addition, we will be subject to income tax at the regular corporate rate to the extent we distribute less than 100% of our REIT taxable income, including any net capital gains. We intend to pay dividends greater than 100% of our taxable income, after the use of any net operating loss carryforwards, for 2020.

We expect that our cash flows will exceed our REIT taxable income due to depreciation and other non-cash deductions in computing REIT taxable income and that we will be able to satisfy the 90% distribution requirement. However, from time to time, we may not have sufficient cash on hand or other liquid assets to meet this requirement or we may decide to retain cash or

distribute such greater amount as may be necessary to avoid income and excise taxation. If we do not have sufficient cash on hand or other liquid assets to enable us to satisfy the 90% distribution requirement, or if we desire to retain cash, we may borrow funds, issue additional equity securities, pay taxable stock dividends, if possible, distribute other property or securities or engage in a transaction intended to enable us to meet the REIT distribution requirements or any combination of the foregoing.

Capital Expenditures

The terms of our triple-net leases generally obligate our tenants to pay all capital expenditures necessary to maintain and improve our triple-net leased properties. However, from time to time, we may fund the capital expenditures for our triple-net leased properties through loans or advances to the tenants, which may increase the amount of rent payable with respect to the properties in certain cases. We may also fund capital expenditures for which we may become responsible upon expiration of our triple-net leases or in the event that our tenants are unable or unwilling to meet their obligations under those leases. We also expect to fund capital expenditures related to our senior living operations and office operations reportable business segments with the cash flows from the properties or through additional borrowings. We expect that these liquidity needs generally will be satisfied by a combination of the following: cash flows from operations, cash on hand, debt assumptions and financings (including secured financings), issuances of debt and equity securities, dispositions of assets (in whole or in part through joint venture arrangements with third parties) and borrowings under our revolving credit facilities.

To the extent that unanticipated capital expenditure needs arise or significant borrowings are required, our liquidity may be affected adversely. Our ability to borrow additional funds may be restricted in certain circumstances by the terms of the instruments governing our outstanding indebtedness.

We are party to certain agreements that obligate us to develop seniors housing or healthcare properties funded through capital that we and, in certain circumstances, our joint venture partners provide. As of December 31, 2019, we had 22 properties under development pursuant to these agreements, including four properties that are owned by unconsolidated real estate entities. In addition, from time to time, we engage in redevelopment projects with respect to our existing seniors housing communities to maximize the value, increase NOI, maintain a market-competitive position, achieve property stabilization or change the primary use of the property.

Equity Offerings

From time to time, we may sell our common stock under an “at-the-market” equity offering program (“ATM program”). In August 2018, we replaced our expired ATM program with an identical program, under which we may sell up to an aggregate of $1.0 billion of our common stock.

In June 2019, we sold 12.7 million shares of our common stock under a registered public offering for gross proceeds of $62.75 per share. We used the majority of the net proceeds to fund our LGM Acquisition. See “NOTE 4—ACQUISITIONS OF REAL ESTATE PROPERTY” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding the LGM Acquisition.

During the year ended December 31, 2019, we sold 2.7 million shares of our common stock under our ATM program for gross proceeds of $66.75 per share. As of December 31, 2019, $822.1 million of our common stock remained available for sale under our ATM program.

For the year ended December 31, 2018, we sold no shares of our common stock under our ATM program.

Cash Flows

The following table sets forth our sources and uses of cash flows for the years ended December 31, 2019 and 2018:

	For the Years Ended December 31,								(Decrease) Increase to Cash
	2019				2018				$				%
	(Dollars in thousands)
Cash, cash equivalents and restricted cash at beginning of year	$	131,464			$	188,253			$	(56,789	)		(30.2	)%
Net cash provided by operating activities	1,437,783				1,381,467				56,316				4.1
Net cash (used in) provided by investing activities	(1,585,299		)		324,496				(1,909,795		)		nm
Net cash provided by (used in) financing activities	160,674				(1,761,937		)		1,922,611				nm
Effect of foreign currency translation	1,480				(815		)		2,295				nm
Cash, cash equivalents and restricted cash at end of year	$	146,102			$	131,464			14,638				11.1

nm—not meaningful

Cash Flows from Operating Activities

Cash flows from operating activities increased $56.3 million during the year ended December 31, 2019 over the same period in 2018 due primarily to higher NOI in 2019 including the impact of property acquisitions and lease-up of new developments, partially offset by asset dispositions, and lower merger-related expenses and deal costs in 2019.

Cash Flows from Investing Activities

Cash flows from investing activities decreased $1.9 billion during 2019 over 2018 primarily due to increased acquisition and investment activity together with decreased real estate dispositions.

Cash Flows from Financing Activities

Cash flows from financing activities increased $1.9 billion during 2019 over 2018 primarily due to the 2019 issuance of common stock and increased net borrowings in 2019.

Contractual Obligations

The following table summarizes the effect that minimum debt (which includes principal and interest payments) and other material noncancelable commitments are expected to have on our cash flow in future periods as of December 31, 2019:

	Total				Less than 1 year**(3)**				1 - 3 years**(4)**				3 - 5 years**(5)**				More than 5 years**(6)**
	(In thousands)
Long-term debt obligations (1) (2)	$	15,591,539			$	1,296,990			$	2,607,408			$	3,799,947			$	7,887,194
Operating obligations, including ground lease obligations	803,659				28,826				90,930				38,902				645,001
Total	$	16,395,198			$	1,325,816			$	2,698,338			$	3,838,849			$	8,532,195

(1)	Amounts represent contractual amounts due, including interest.

(2)	Interest on variable rate debt based on rates as of December 31, 2019.

(3)	Includes $567.5 million of borrowings outstanding on our commercial paper program.

(4)

Includes $120.8 million of borrowings outstanding on our unsecured revolving credit facility, $160.5 million of borrowings outstanding on our secured revolving construction credit facility, $500.0 million outstanding principal amount of our 3.25% senior notes due 2022, $231.0 million outstanding principal amount of our floating rate senior notes, Series F due 2021 and $192.5 million outstanding principal amount of our 3.30% senior notes, Series C due 2022.

(5)	Includes $200.0 million of borrowings outstanding on our unsecured term loan due 2023, $400.0 million outstanding principal amount of our 3.125% senior notes due 2023, $400.0 million outstanding principal amount of our 3.10% senior notes due 2023, $211.8 million outstanding principal amount of our 2.55% senior notes, Series D due 2023, $400.0 million

outstanding principal amount of our 3.50% senior notes due 2024, $400.0 million outstanding principal amount of our 3.75% senior notes due 2024, $462.0 million outstanding principal amount of our 2.80% senior notes, Series E due 2024 and $192.5 million outstanding principal amount of our 4.125% senior notes, Series B due 2024.

(6)

Includes $385.0 million of borrowings outstanding on our unsecured term loan due 2025 and $5.4 billion aggregate principal amount outstanding of our senior notes maturing between 2025 and 2049. $52.4 million aggregate principal amount outstanding of our 6.90% senior notes due 2037 are subject to repurchase, at the option of the holders, at par, on October 1, 2027, and $22.8 million aggregate principal amount outstanding of our 6.59% senior notes due 2038 are subject to repurchase, at the option of the holders, at par, on July 7 in each of 2023 and 2028.

As of December 31, 2019, we had $12.1 million of unrecognized tax benefits that are excluded from the table above, as we are unable to make a reasonable reliable estimate of the period of cash settlement, if any, with the respective tax authority.