filings.toolsItem 1. CONSOLIDATED FINANCIAL STATEMENTS
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Item 1. CONSOLIDATED FINANCIAL STATEMENTS
VENTAS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts, unaudited)
| As of March 31, 2024 | As of December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Real estate investments: | |||||||||||
| Land and improvements | $ | 2,573,598 | $ | 2,596,274 | |||||||
| Buildings and improvements | 27,201,303 | 27,201,381 | |||||||||
| Construction in progress | 416,206 | 368,143 | |||||||||
| Acquired lease intangibles | 1,440,122 | 1,448,146 | |||||||||
| Operating lease assets | 318,825 | 312,142 | |||||||||
| 31,950,054 | 31,926,086 | ||||||||||
| Accumulated depreciation and amortization | (10,399,248) | (10,177,136) | |||||||||
| Net real estate property | 21,550,806 | 21,748,950 | |||||||||
| Secured loans receivable and investments, net | 29,819 | 27,986 | |||||||||
| Investments in unconsolidated real estate entities | 601,406 | 598,206 | |||||||||
| Net real estate investments | 22,182,031 | 22,375,142 | |||||||||
| Cash and cash equivalents | 632,443 | 508,794 | |||||||||
| Escrow deposits and restricted cash | 55,966 | 54,668 | |||||||||
| Goodwill | 1,045,048 | 1,045,176 | |||||||||
| Assets held for sale | 41,317 | 56,489 | |||||||||
| Deferred income tax assets, net | 1,767 | 1,754 | |||||||||
| Other assets | 714,014 | 683,410 | |||||||||
| Total assets | $ | 24,672,586 | $ | 24,725,433 | |||||||
| Liabilities and equity | |||||||||||
| Liabilities: | |||||||||||
| Senior notes payable and other debt | $ | 13,555,194 | $ | 13,490,896 | |||||||
| Accrued interest | 123,157 | 117,403 | |||||||||
| Operating lease liabilities | 202,197 | 194,734 | |||||||||
| Accounts payable and other liabilities | 1,020,307 | 1,041,616 | |||||||||
| Liabilities related to assets held for sale | 7,605 | 9,243 | |||||||||
| Deferred income tax liabilities | 20,249 | 24,500 | |||||||||
| Total liabilities | 14,928,709 | 14,878,392 | |||||||||
| Redeemable OP unitholder and noncontrolling interests | 285,044 | 302,636 | |||||||||
| Commitments and contingencies | |||||||||||
| Equity: | |||||||||||
| Ventas stockholders’ equity: | |||||||||||
| Preferred stock, $1.00 par value; 10,000 shares authorized, unissued | — | — | |||||||||
| Common stock, $0.25 par value; 600,000 shares authorized, 404,433 and 402,380 shares outstanding at March 31, 2024 and December 31, 2023, respectively | 101,094 | 100,648 | |||||||||
| Capital in excess of par value | 15,756,414 | 15,650,734 | |||||||||
| Accumulated other comprehensive loss | (19,554) | (35,757) | |||||||||
| Retained earnings (deficit) | (6,410,144) | (6,213,803) | |||||||||
| Treasury stock, 0 and 279 shares issued at March 31, 2024 and December 31, 2023, respectively | (24,970) | (13,764) | |||||||||
| Total Ventas stockholders’ equity | 9,402,840 | 9,488,058 | |||||||||
| Noncontrolling interests | 55,993 | 56,347 | |||||||||
| Total equity | 9,458,833 | 9,544,405 | |||||||||
| Total liabilities and equity | $ | 24,672,586 | $ | 24,725,433 |
See accompanying notes.
VENTAS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts, unaudited)
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Rental income: | |||||||||||||||||||||||
| Triple-net leased | $ | 155,368 | $ | 149,739 | |||||||||||||||||||
| Outpatient medical and research portfolio | 218,877 | 203,004 | |||||||||||||||||||||
| 374,245 | 352,743 | ||||||||||||||||||||||
| Resident fees and services | 813,304 | 704,993 | |||||||||||||||||||||
| Third party capital management revenues | 4,296 | 4,177 | |||||||||||||||||||||
| Income from loans and investments | 1,289 | 13,589 | |||||||||||||||||||||
| Interest and other income | 6,780 | 1,743 | |||||||||||||||||||||
| Total revenues | 1,199,914 | 1,077,245 | |||||||||||||||||||||
| Expenses | |||||||||||||||||||||||
| Interest | 149,933 | 128,075 | |||||||||||||||||||||
| Depreciation and amortization | 300,255 | 282,119 | |||||||||||||||||||||
| Property-level operating expenses: | |||||||||||||||||||||||
| Senior housing | 609,821 | 537,222 | |||||||||||||||||||||
| Outpatient medical and research portfolio | 73,938 | 66,913 | |||||||||||||||||||||
| Triple-net leased | 3,738 | 3,796 | |||||||||||||||||||||
| 687,497 | 607,931 | ||||||||||||||||||||||
| Third party capital management expenses | 1,753 | 1,706 | |||||||||||||||||||||
| General, administrative and professional fees | 48,737 | 44,798 | |||||||||||||||||||||
| Loss on extinguishment of debt, net | 252 | — | |||||||||||||||||||||
| Transaction, transition and restructuring costs | 4,677 | 1,386 | |||||||||||||||||||||
| Allowance on loans receivable and investments | (68) | (8,064) | |||||||||||||||||||||
| Shareholder relations matters | 15,714 | — | |||||||||||||||||||||
| Other (income) expense | (1,334) | 7,762 | |||||||||||||||||||||
| Total expenses | 1,207,416 | 1,065,713 | |||||||||||||||||||||
| (Loss) income before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests | (7,502) | 11,532 | |||||||||||||||||||||
| Loss from unconsolidated entities | (8,383) | (5,623) | |||||||||||||||||||||
| Gain on real estate dispositions | 341 | 10,201 | |||||||||||||||||||||
| Income tax benefit | 3,004 | 2,802 | |||||||||||||||||||||
| (Loss) income from continuing operations | (12,540) | 18,912 | |||||||||||||||||||||
| Net (loss) income | (12,540) | 18,912 | |||||||||||||||||||||
| Net income attributable to noncontrolling interests | 1,772 | 1,395 | |||||||||||||||||||||
| Net (loss) income attributable to common stockholders | $ | (14,312) | $ | 17,517 | |||||||||||||||||||
| Earnings per common share | |||||||||||||||||||||||
| Basic: | |||||||||||||||||||||||
| (Loss) income from continuing operations | $ | (0.03) | $ | 0.05 | |||||||||||||||||||
| Net (loss) income attributable to common stockholders | (0.04) | 0.04 | |||||||||||||||||||||
| Diluted:1 | |||||||||||||||||||||||
| (Loss) income from continuing operations | $ | (0.03) | $ | 0.05 | |||||||||||||||||||
| Net (loss) income attributable to common stockholders | (0.04) | 0.04 |
1 Potential common shares are not included in the computation of diluted earnings per share (“EPS”) when a loss from continuing operations exists as the effect would be an antidilutive per share amount.
See accompanying notes.
VENTAS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Net (loss) income | $ | (12,540) | $ | 18,912 | |||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Foreign currency translation gain | 3,935 | 3,899 | |||||||||||||||||||||
| Unrealized gain on available for sale securities | 120 | — | |||||||||||||||||||||
| Unrealized gain (loss) on derivative instruments | 11,022 | (8,802) | |||||||||||||||||||||
| Total other comprehensive income (loss) | 15,077 | (4,903) | |||||||||||||||||||||
| Comprehensive income | 2,537 | 14,009 | |||||||||||||||||||||
| Comprehensive income attributable to noncontrolling interests | 646 | 161 | |||||||||||||||||||||
| Comprehensive income attributable to common stockholders | $ | 1,891 | $ | 13,848 |
See accompanying notes.
VENTAS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended March 31, 2024 and 2023
(In thousands, except per share amounts, unaudited)
| For the Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2019 | Common Stock Par Value | Capital in Excess of Par Value | Accumulated Other Comprehensive (Loss) Income | Retained Earnings (Deficit) | Treasury Stock | Total Ventas Stockholders’ Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | 100,648 | $ | 15,650,734 | $ | (35,757) | $ | (6,213,803) | $ | (13,764) | $ | 9,488,058 | $ | 56,347 | $ | 9,544,405 | |||||||||||||||||||||||||||||||
| Net (loss) income | — | — | — | (14,312) | — | (14,312) | 1,772 | (12,540) | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | 16,203 | — | — | 16,203 | (1,126) | 15,077 | |||||||||||||||||||||||||||||||||||||||
| Net change in noncontrolling interests | — | (6,983) | — | — | — | (6,983) | (1,000) | (7,983) | |||||||||||||||||||||||||||||||||||||||
| Dividends to common stockholders—$0.45 per share | — | 11 | — | (182,029) | — | (182,018) | — | (182,018) | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for stock plans, restricted stock grants and other | 446 | 93,089 | — | — | (11,206) | 82,329 | — | 82,329 | |||||||||||||||||||||||||||||||||||||||
| Adjust redeemable OP unitholder interests to current fair value | — | 20,359 | — | — | — | 20,359 | — | 20,359 | |||||||||||||||||||||||||||||||||||||||
| Redemption of OP Units | — | (796) | — | — | — | (796) | — | (796) | |||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | 101,094 | $ | 15,756,414 | $ | (19,554) | $ | (6,410,144) | $ | (24,970) | $ | 9,402,840 | $ | 55,993 | $ | 9,458,833 |
| For the Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock Par Value | Capital in Excess of Par Value | Accumulated Other Comprehensive (Loss) Income | Retained Earnings (Deficit) | Treasury Stock | Total Ventas Stockholders’ Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | 99,912 | $ | 15,539,777 | $ | (36,800) | $ | (5,449,385) | $ | (536) | $ | 10,152,968 | $ | 68,709 | $ | 10,221,677 | |||||||||||||||||||||||||||||||
| Net income | — | — | — | 17,517 | — | 17,517 | 1,395 | 18,912 | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | (3,669) | — | — | (3,669) | (1,234) | (4,903) | |||||||||||||||||||||||||||||||||||||||
| Net change in noncontrolling interests | — | 1,393 | — | — | — | 1,393 | (1,259) | 134 | |||||||||||||||||||||||||||||||||||||||
| Dividends to common stockholders—$0.45 per share | — | — | — | (179,199) | — | (179,199) | — | (179,199) | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for stock plans, restricted stock grants and other | 153 | 17,839 | — | — | (13,019) | 4,973 | — | 4,973 | |||||||||||||||||||||||||||||||||||||||
| Adjust redeemable OP unitholder interests to current fair value | — | 3,077 | — | — | — | 3,077 | — | 3,077 | |||||||||||||||||||||||||||||||||||||||
| Redemption of OP Units | — | (69) | — | — | — | (69) | — | (69) | |||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | 100,065 | $ | 15,562,017 | $ | (40,469) | $ | (5,611,067) | $ | (13,555) | $ | 9,996,991 | $ | 67,611 | $ | 10,064,602 |
See accompanying notes.
VENTAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
| For the Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net (loss) income | $ | (12,540) | $ | 18,912 | |||||||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 300,255 | 282,119 | |||||||||
| Amortization of deferred revenue and lease intangibles, net | (13,645) | (14,913) | |||||||||
| Other non-cash amortization | 7,298 | 4,154 | |||||||||
| Allowance on loans receivable and investments | (68) | (8,064) | |||||||||
| Stock-based compensation | 16,284 | 15,060 | |||||||||
| Straight-lining of rental income | (2,612) | (445) | |||||||||
| Loss on extinguishment of debt, net | 252 | — | |||||||||
| Gain on real estate dispositions | (341) | (10,201) | |||||||||
| Income tax benefit | (4,696) | (4,299) | |||||||||
| Loss from unconsolidated entities | 8,383 | 5,623 | |||||||||
| Distributions from unconsolidated entities | 4,576 | 5,472 | |||||||||
| Other | (5,422) | 1,526 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Increase in other assets | (25,839) | (16,885) | |||||||||
| Increase (decrease) in accrued interest | 6,096 | (17,006) | |||||||||
| Decrease in accounts payable and other liabilities | (11,533) | (18,236) | |||||||||
| Net cash provided by operating activities | 266,448 | 242,817 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Net investment in real estate property | (36,092) | — | |||||||||
| Investment in loans receivable | (5,232) | (289) | |||||||||
| Proceeds from real estate disposals | 40,016 | 46,417 | |||||||||
| Proceeds from loans receivable | 268 | 44,354 | |||||||||
| Development project expenditures | (84,737) | (69,079) | |||||||||
| Capital expenditures | (49,387) | (43,577) | |||||||||
| Investment in unconsolidated entities | (11,179) | (35,792) | |||||||||
| Insurance proceeds for property damage claims | 1,756 | 1,686 | |||||||||
| Net cash used in investing activities | (144,587) | (56,280) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Net change in borrowings under revolving credit facilities | (5,708) | 14,340 | |||||||||
| Net change in borrowings under commercial paper program | — | 22,164 | |||||||||
| Proceeds from debt | 555,489 | 343,900 | |||||||||
| Repayment of debt | (419,310) | (343,876) | |||||||||
| Purchase of noncontrolling interests | — | (110) | |||||||||
| Payment of deferred financing costs | (5,283) | (4,027) | |||||||||
| Issuance of common stock, net | 77,430 | — | |||||||||
| Cash distribution to common stockholders | (182,854) | (181,422) | |||||||||
| Cash distribution to redeemable OP unitholders | (1,555) | (1,539) | |||||||||
| Cash issued for redemption of OP Units | (1,064) | (655) | |||||||||
| Contributions from noncontrolling interests | 3,534 | 2,973 | |||||||||
| Distributions to noncontrolling interests | (4,473) | (2,566) | |||||||||
| Proceeds from stock option exercises | — | 1,736 | |||||||||
| Other | (11,382) | (13,025) | |||||||||
| Net cash provided by (used in) financing activities | 4,824 | (162,107) | |||||||||
| Net increase in cash, cash equivalents and restricted cash | 126,685 | 24,430 | |||||||||
| Effect of foreign currency translation | (1,738) | 106 | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 563,462 | 170,745 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 688,409 | $ | 195,281 |
See accompanying notes.
VENTAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands, unaudited)
| For the Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Supplemental schedule of non-cash activities: | |||||||||||
| Assets acquired and liabilities assumed from acquisitions: | |||||||||||
| Real estate investments | $ | 942 | $ | — | |||||||
| Other assets | 83 | — | |||||||||
| Other liabilities | 632 | — | |||||||||
| Deferred income tax liability | 393 | — | |||||||||
See accompanying notes.
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—DESCRIPTION OF BUSINESS
Ventas, Inc., (together with its consolidated subsidiaries, unless otherwise indicated or except where the context otherwise requires, “we,” “us,” “our,” “Company” and other similar terms) an S&P 500 company, is a real estate investment trust (“REIT”) focused on delivering strong, sustainable shareholder returns by enabling exceptional environments that benefit a large and growing aging population. We hold a portfolio that includes senior housing communities, outpatient medical buildings, research centers, hospitals and healthcare facilities located in North America and the United Kingdom. As of March 31, 2024, we owned or had investments in approximately 1,400 properties (including properties classified as held for sale and unconsolidated properties). Our company is headquartered in Chicago, Illinois with additional corporate offices in Louisville, Kentucky and New York, New York.
We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code (the “Code”), commencing with our taxable year ended December 31, 1999. Provided we qualify for taxation as a REIT, we generally will not be required to pay U.S. federal corporate income taxes on our REIT taxable income that is currently distributed to our stockholders. In order to maintain our qualification as a REIT, we must satisfy a number of highly technical requirements, which impact how we invest in, operate or manage our assets.
We primarily invest in our portfolio of real estate assets through wholly-owned subsidiaries and other co-investment entities. We operate through three reportable business segments: senior housing operating portfolio, which we also refer to as “SHOP,” outpatient medical and research portfolio, which we also refer to as “OM&R,” and triple-net leased properties. Non-segment assets consist primarily of corporate assets, including cash, restricted cash, loans receivable and investments and miscellaneous accounts receivable as well as investments in unconsolidated entities. In addition, from time to time, we make secured and unsecured loans and other investments relating to real estate or operators. Our chief operating decision maker evaluates performance of the combined properties in each operating segment and determines how to allocate resources to these segments, in significant part, based on net operating income (“NOI”) and related measures for each segment. See “Note 16 – Segment Information.” For a discussion of our definition of NOI and for a reconciliation of NOI to our net income attributable to common stockholders, as computed in accordance with U.S. generally accepted accounting principles (“GAAP”), see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”
We also have investments in unconsolidated entities, including through our third-party institutional capital management business, Ventas Investment Management (“VIM”). Through VIM, we partner with third-party institutional investors to invest in real estate through various joint ventures and other co-investment vehicles where we are the sponsor or general partner, including our open-ended investment vehicle, the Ventas Life Science & Healthcare Real Estate Fund (the “Ventas Fund”).
The following table summarizes information for our consolidated reportable business segments and non-segment assets for the three months ended March 31, 2024 (dollars in thousands):
| Segment | Total NOI (1) | Percentage of Total NOI | Number of Consolidated Properties | |||||||||||||||||
| Senior housing operating portfolio (SHOP) | $ | 203,483 | 40.4 | % | 581 | |||||||||||||||
| Outpatient medical and research portfolio (OM&R) | 145,570 | 28.9 | % | 429 | ||||||||||||||||
| Triple-net leased properties | 151,630 | 30.1 | % | 330 | ||||||||||||||||
| Non-segment (2) | 3,201 | 0.6 | % | — | ||||||||||||||||
| $ | 503,884 | 100 | % | 1,340 |
(1) “NOI” is defined as total revenues, less interest and other income, property-level operating expenses and third party capital management expenses. See “Non-GAAP Financial Measures” included elsewhere in this Quarterly Report on Form 10-Q for additional disclosure and a reconciliation of net income attributable to common stockholders, as computed in accordance with GAAP, to NOI.
(2) NOI for non-segment includes management fees and promote revenues, net of expenses related to our third-party institutional capital management business, income from loans and investments and various corporate-level expenses not directly attributable to any of our three reportable business segments.
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2—ACCOUNTING POLICIES
The accompanying Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The accompanying Consolidated Financial Statements and related notes should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”). Certain prior period amounts have been reclassified to conform to the current period presentation.
Accounting Estimates
The preparation of financial statements in accordance with 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 period. Actual results could differ from those estimates.
Principles of Consolidation
The accompanying Consolidated Financial Statements 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”). Substantially all of the assets of the VIEs are real estate investments and substantially all of the liabilities of the VIEs are mortgage loans. Assets of the consolidated VIEs can only be used to settle obligations of such VIEs. Liabilities of the consolidated VIEs represent claims against the specific assets of the VIEs. Unless otherwise required by an operating agreement, any mortgage loans of the consolidated VIEs are non-recourse to us. The table below summarizes the total assets and liabilities of our consolidated VIEs as reported on our Consolidated Balance Sheets (dollars in thousands):
| As of March 31, 2024 | As of December 31, 2023 | |||||||||||||||||||||||||
| Total Assets | Total Liabilities | Total Assets | Total Liabilities | |||||||||||||||||||||||
| NHP/PMB L.P. | $ | 762,340 | $ | 272,441 | $ | 759,817 | $ | 266,658 | ||||||||||||||||||
| Fonds Immobilier Groupe Maurice, S.E.C. | 1,922,757 | 1,184,984 | 1,971,410 | 1,204,619 | ||||||||||||||||||||||
| Other identified VIEs | 1,608,465 | 363,282 | 1,597,957 | 354,828 | ||||||||||||||||||||||
| Tax credit VIEs | 29,799 | 4,024 | 29,746 | 4,024 |
Recent Accounting Standards
In November 2023, the FASB issued Accounting Standards Update 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires incremental disclosures related to a public entity’s reportable segments. Required disclosures include, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount for other segment items (which is the difference between segment revenue less segment expenses and less segment profit or loss) and a description of its composition, the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The standard also permits disclosure of more than one measure of segment profit. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We are evaluating the impact of adopting ASU 2023-07 on our Consolidated Financial Statements.
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In December 2023, the FASB issued Accounting Standards Update 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires public entities on an annual basis to (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). ASU 2023-09 is effective for fiscal years beginning after December 15, 2025. We are evaluating the impact of adopting ASU 2023-09 on our Consolidated Financial Statements.
In March 2024, the SEC adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate Related Disclosures for Investors, which requires registrants to disclose climate-related information in registration statements and annual reports. The new rules would be effective for annual reporting periods beginning in fiscal year 2025. However, in April 2024, the SEC exercised its discretion to stay these rules pending the completion of judicial review of certain consolidated petitions with the United States Court of Appeals for the Eighth Circuit in connection with these rules. We are evaluating the impact of this rule on our Consolidated Financial Statements.
NOTE 3—CONCENTRATION OF CREDIT RISK
As of March 31, 2024, the properties managed by Atria Senior Living, Inc. (together with its subsidiaries, including Holiday Retirement (“Holiday”), “Atria”) and Sunrise Senior Living, LLC (together with its subsidiaries, “Sunrise”), and leased to Brookdale Senior Living Inc. (together with its subsidiaries, “Brookdale”), Ardent Health Partners, LLC (together with its subsidiaries, “Ardent”) and Kindred Healthcare, LLC (together with its subsidiaries, “Kindred”) contributed approximately 19.0%, 6.1%, 7.4%, 6.7% and 6.6%, respectively, of our total NOI. Because Atria and Sunrise manage our properties in exchange for a management fee from us, we are not directly exposed to their credit risk in the same manner or to the same extent as triple-net tenants like Brookdale, Ardent and Kindred.
Based on total NOI, our SHOP, outpatient medical and research portfolio and triple-net leased properties segments contributed 40.4%, 28.9% and 30.1%, respectively. Our consolidated properties were located in 47 states, the District of Columbia, seven Canadian provinces and the United Kingdom as of March 31, 2024, with properties in one state (California) accounting for more than 10% of our total consolidated revenues and NOI for each of the three months ended March 31, 2024 and 2023. See “Non-GAAP Financial Measures” included elsewhere in this Quarterly Report on Form 10-Q for additional disclosure and a reconciliation of net income attributable to common stockholders, as computed in accordance with GAAP, to NOI.
Triple-Net Leased Properties
The properties we triple-net leased to Brookdale, Ardent and Kindred accounted for a significant portion of total revenues and total NOI for the three months ended March 31, 2024 and 2023. The following table reflects the concentration risk related to our triple-net leased properties including assets held for sale for the periods presented:
| For the Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Contribution as a Percentage of Total Revenues (1)****: | |||||||||||
| Brookdale | 3.1 | % | 3.5 | % | |||||||
| Ardent | 2.8 | 3.1 | |||||||||
| Kindred | 2.8 | 3.0 | |||||||||
| Contribution as a Percentage of Total NOI (2)****: | |||||||||||
| Brookdale | 7.4 | % | 8.0 | % | |||||||
| Ardent | 6.7 | 7.1 | |||||||||
| Kindred | 6.6 | 7.0 |
(1)Total revenues include third party capital management revenues, income from loans and investments and interest and other income.
(2)See “Non-GAAP Financial Measures” included elsewhere in this Quarterly Report on Form 10-Q for additional disclosure and a reconciliation of net income attributable to common stockholders, as computed in accordance with GAAP, to NOI.
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Each of our leases with Brookdale, Ardent and Kindred is a triple-net lease that obligates the tenant to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and to comply with the terms of the mortgage financing documents, if any, affecting the properties. In addition, each of our Brookdale, Ardent and Kindred leases is guaranteed by a corporate parent.
Kindred Lease
As of March 31, 2024, we leased 29 properties to Kindred (collectively, the “Kindred Portfolio”) pursuant to a single, triple-net master lease agreement (together with certain other agreements related to such master lease, collectively, the “Kindred Lease”). The Kindred Portfolio is divided into two separate renewal groups. The first group is composed of six properties (“Group 1”) and the second group is composed of 23 properties (“Group 2”). As of March 31, 2024, the Kindred Lease represented approximately 6.6% of the Company’s total annualized NOI, with Group 1 representing approximately 1.3% of total annualized NOI and Group 2 representing approximately 5.3% of total annualized NOI. Kindred’s obligations under the Kindred Lease are guaranteed by a parent company.
The current term of the Kindred Lease for Group 1 expires on April 30, 2028. Under the Kindred Lease, Kindred has the option to renew the lease for all of the properties (but not less than all) within Group 1 for two 5-year extensions, in each case at the greater of escalated rent and fair market rent, by providing written notice no later than one year prior to the applicable expiration date.
The current term of the Kindred Lease for Group 2 expires on April 30, 2025. Under the Kindred Lease, Kindred has the option to renew the lease for all of the properties (but not less than all) within Group 2 for three 5-year extensions, in each case at the greater of escalated rent and fair market rent, by providing written notice no later than one year prior to the applicable expiration date. We and Kindred recently agreed to extend from April 30, 2024 to May 31, 2024 the date by which Kindred can exercise its current option to renew the lease with respect to the Group 2 properties.
If Kindred does not timely exercise its renewal option with respect to Group 2, we and Kindred could still reach a negotiated agreement to continue the Kindred Lease with respect to some or all of the Group 2 properties. For any properties that Kindred does not continue to lease, there are other options we may choose to pursue, including, without limitation, transitions to replacement operators, conversions of properties to alternative uses and sale transactions. There can be no assurance that any negotiated agreement we reach with Kindred or any other options we may pursue with respect to the Group 2 properties would be as favorable to us as the current Kindred Lease.
If the Kindred Lease is renewed or otherwise extended for some or all of the Group 2 properties, the total contractual cash rent for those properties for the period from the date of the renewal or extension agreement to the end of the new or extended lease term would be straightlined for accounting purposes. If in such renewal or extension agreement we were to agree to continue to lease to Kindred some or all of the Group 2 properties after the current expiration date of April 30, 2025 for a lower base rent than the rent currently in place for such properties, we would recognize a non-cash GAAP reduction in revenue during the period after we reach such agreement through April 30, 2025 even if existing contractual cash rent remains unchanged and is fully paid at such higher level prior to such date.
Since the COVID-19 pandemic began to recede, the financial performance of the Kindred Portfolio has declined such that financial performance for the trailing 12-month period ending December 31, 2023 does not exceed the rent under the Kindred Lease for such period. While we believe that Kindred has taken and is taking targeted actions to attempt to improve the performance of the properties, there can be no assurance that Kindred will be able to do so or that such financial performance will not affect Kindred’s ability to perform its obligations to us or impact any of its decisions related to the renewal of the lease. We believe there are many factors in addition to portfolio coverage that will influence the ultimate outcome as it relates to the Group 2 properties.
See “Part I—Item 1A. Risk Factors—Risks Related to Our Business Operations and Strategy—If we need to replace any of our tenants or managers, we may be unable to do so on as favorable terms, if at all, and we could be subject to delays, limitations and expenses, which could adversely affect our business, financial condition and results of operations.” “Part I—Item 1A. Risk Factors—Risks Related to Our Business Operations and Strategy—A significant portion of our revenues and operating income is dependent on a limited number of tenants and managers, including Brookdale, Ardent, Kindred, Atria and Sunrise.” and “Part I—Item 1A. Risk Factors—Risks Related to Our Business Operations and Strategy—We face potential adverse consequences from the bankruptcy, insolvency or financial deterioration of our tenants, managers, borrowers and other obligors.” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Brookdale Lease
As of March 31, 2024, we leased 121 properties (excluding ten properties managed by Brookdale pursuant to long-term management agreements and included in the SHOP segment) to Brookdale pursuant to a single, triple-net master lease agreement (together with certain other agreements related to such master lease, collectively, the “Brookdale Lease”). The aggregate contractual base rent due to us from Brookdale in 2024 is approximately $110.3 million, and the current aggregate contractual base rent (computed in accordance with GAAP) is approximately $148.9 million. The difference between the aggregate contractual base rent due in 2024 and the current aggregate contractual base rent (computed in accordance with GAAP) is, in part, a result of the amortization over the remaining lease term of $235 million of up-front consideration received as part of amendments to the Brookdale Lease that were entered into in July 2020 (the “2020 Consideration”). The 2020 Consideration consisted of: (a) $162 million in cash; (b) a $45 million note (repaid by Brookdale in 2021); and (c) $28 million in warrants exercisable for 16.3 million shares of Brookdale Senior Living, Inc. common stock. As of March 31, 2024, approximately $160.0 million of such 2020 Consideration has been amortized, leaving approximately $74.7 million unamortized. The Brookdale Lease is guaranteed by Brookdale Senior Living, Inc.
Under the terms of the Brookdale Lease, base rent escalates annually at 3% per annum, commencing on January 1, 2022. The term of the Brookdale Lease expires December 31, 2025. Brookdale has the option to renew the Brookdale Lease with respect to all (but not less than all) of the properties for two, 10-year extensions. Base rent for the first year of each extension is the greater of (a) 103% of prior full year’s base rent; and (b) fair market rent, capped at a 10% increase. Subsequent to the first year of any such renewal, base rent would continue to escalate by 3% per annum over the prior full year’s base rent.
Brookdale currently has the option to renew the Brookdale Lease for its next 10-year extension by providing written notice to us after June 30, 2024 and on or before November 30, 2024. If all or any part of the Brookdale Lease is renewed or otherwise extended, the then remaining unamortized portion of the 2020 Consideration would be re-amortized and the new GAAP rent would be straightlined from the date of the renewal exercise or extension agreement through the end of the new lease term. See “Risk Factors—Risks Related to Our Business Operations and Strategy—If we need to replace any of our tenants or managers, we may be unable to do so on as favorable terms, if at all, and we could be subject to delays, limitations and expenses, which could adversely affect our business, financial condition and results of operations.” and “Risk Factors—Risks Related to Our Business Operations and Strategy—A significant portion of our revenues and operating income is dependent on a limited number of tenants and managers, including Brookdale, Ardent, Kindred, Atria and Sunrise.” included in Part 1, Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
We hold warrants for 16.3 million shares of Brookdale Senior Living, Inc. common stock, which are exercisable at any time prior to December 31, 2025 and have an exercise price of $3.00 per share. The warrants are classified within Other Assets on our Consolidated Balance Sheets and measured at fair value with changes in fair value being recognized within Other Expense in our Consolidated Statements of Income.
Ardent Lease
As of March 31, 2024, we leased 11 properties (excluding 19 outpatient medical buildings leased to Ardent under separate leases included in our outpatient medical and research portfolio segment) to Ardent pursuant to a single, triple-net master lease agreement (together with certain other agreements related to such master lease, collectively, the “Ardent Lease”). The existing term of the Ardent Lease expires August 31, 2035 and Ardent has the option to renew such term for one, 10-year extension at contractual escalated rent. The Ardent Lease is guaranteed by the Ardent parent company.
Senior Housing Operating Portfolio
As of March 31, 2024, Atria and Sunrise, collectively, provided comprehensive property management and accounting services with respect to 302 of our 581 consolidated senior housing communities, for which we pay annual management fees pursuant to long-term management agreements.
As of March 31, 2024, Atria managed a pool of 216 senior housing communities for Ventas. Ventas has the right to terminate the management contract for 67 of the communities on short notice.
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of March 31, 2024, Sunrise managed 86 senior housing communities for Ventas pursuant to multiple management agreements (collectively, the “Sunrise Management Agreements”). Our Sunrise Management Agreements have initial terms expiring between 2035 and 2040. Ventas has the ability to terminate some or all of the Sunrise Management Agreements under certain circumstances with or without the payment of a fee.
We rely on our managers’ personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our senior housing operating portfolio efficiently and effectively. We also rely on our managers to set appropriate resident fees, provide accurate property-level financial results in a timely manner and otherwise operate our senior housing communities in compliance with the terms of our management agreements and all applicable laws and regulations.
NOTE 4—ACQUISITIONS OF REAL ESTATE PROPERTY
We acquire and invest in senior housing, outpatient medical buildings, research centers and other healthcare properties primarily to achieve an expected yield on our investment, to grow and diversify our portfolio and revenue base, and to reduce our dependence on any single tenant, operator or manager, geographic location, asset type, business model or revenue source. Each of our acquisitions disclosed below was accounted for as an asset acquisition.
2024 Acquisitions
During the three months ended March 31, 2024, we acquired one senior housing community reported within our SHOP segment for $36.0 million.
In April 2024, we acquired two senior housing communities reported within our SHOP segment for $94.0 million.
NOTE 5—DISPOSITIONS AND IMPAIRMENTS
2024 Activity
During the three months ended March 31, 2024, we sold seven senior housing communities, eight outpatient medical buildings (one of which was vacant) and one triple-net leased property for aggregate consideration of $36.0 million and recognized a gain on the sale of these assets of $0.3 million in our Consolidated Statements of Income.
In April and May 2024, we sold three senior housing communities and 12 triple-net leased properties for aggregate consideration of $12.1 million.
Assets Held for Sale
The table below summarizes our real estate assets classified as held for sale including the amounts reported on our Consolidated Balance Sheets, which may include anticipated post-closing settlements of working capital for disposed properties (dollars in thousands):
| As of March 31, 2024 | As of December 31, 2023 | |||||||||||||||||||||||||||||||||||||
| Number of Properties Held for Sale | Assets Held for Sale | Liabilities Related to Assets Held for Sale | Number of Properties Held for Sale | Assets Held for Sale | Liabilities Related to Assets Held for Sale | |||||||||||||||||||||||||||||||||
| SHOP | 11 | $ | 32,018 | $ | 5,677 | 13 | $ | 48,173 | $ | 6,419 | ||||||||||||||||||||||||||||
| Outpatient medical and research portfolio | 1 | 3,531 | 1,559 | 3 | 5,431 | 2,643 | ||||||||||||||||||||||||||||||||
| Triple-net leased properties | 12 | 5,768 | 369 | 1 | 2,885 | 181 | ||||||||||||||||||||||||||||||||
| Total | 24 | $ | 41,317 | $ | 7,605 | 17 | $ | 56,489 | $ | 9,243 |
Real Estate Impairments
We recognized impairments of $5.4 million and $8.6 million for the three months ended March 31, 2024 and 2023, respectively, which are recorded primarily as a component of depreciation and amortization in our Consolidated Statements of
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Income. The impairments recorded were primarily a result of a change in our intent to hold or a change in the future cash flows of the impaired assets.
NOTE 6—LOANS RECEIVABLE AND INVESTMENTS
As of March 31, 2024 and December 31, 2023, we held $59.2 million and $54.1 million, respectively, of loans receivable and investments, net of allowance, relating to senior housing and healthcare operators or properties. The following is a summary of our loans receivable and investments, net, including amortized cost, fair value and unrealized gains or losses on available for sale investments, if applicable (dollars in thousands):
| Amortized Cost | Allowance | Carrying Amount | Fair Value | ||||||||||||||||||||||||||
| As of March 31, 2024: | |||||||||||||||||||||||||||||
| Secured/mortgage loans and other, net (1) | $ | 29,819 | $ | — | $ | 29,819 | $ | 29,153 | |||||||||||||||||||||
| Non-mortgage loans receivable, net (2) | 33,273 | (3,908) | 29,365 | 28,392 | |||||||||||||||||||||||||
| Total loans receivable and investments, net | $ | 63,092 | $ | (3,908) | $ | 59,184 | $ | 57,545 | |||||||||||||||||||||
| As of December 31, 2023: | |||||||||||||||||||||||||||||
| Secured/mortgage loans and other, net (1) | $ | 27,986 | $ | — | $ | 27,986 | $ | 27,947 | |||||||||||||||||||||
| Non-mortgage loans receivable, net (2) | 30,128 | (3,976) | 26,152 | 25,200 | |||||||||||||||||||||||||
| Total loans receivable and investments, net | $ | 58,114 | $ | (3,976) | $ | 54,138 | $ | 53,147 |
(1)Investments have contractual maturities ranging from 2024 to 2027.
(2)Included in other assets on our Consolidated Balance Sheets.
NOTE 7—INVESTMENTS IN UNCONSOLIDATED ENTITIES
We report investments in unconsolidated entities over whose operating and financial policies we have the ability to exercise significant influence under the equity method of accounting. We are not required to consolidate these entities because our joint venture partners have significant participating rights, nor are these entities considered VIEs, as they are controlled by equity holders with sufficient capital. We invest in both real estate entities and operating entities which are described further below.
Investments in Unconsolidated Real Estate Entities
Through VIM, which combines our extensive third-party capital ventures under a single platform, we partner with third-party institutional investors to invest in real estate through various joint ventures and other co-investment vehicles where we are the sponsor or general partner.
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Below is a summary of our investments in unconsolidated real estate entities as of March 31, 2024 and December 31, 2023, respectively (dollars in thousands):
| Ownership as of (1) | Carrying Amount as of | |||||||||||||||||||||||||
| March 31, 2024 | December 31, 2023 | March 31, 2024 | December 31, 2023 | |||||||||||||||||||||||
| Investments in unconsolidated real estate entities: | ||||||||||||||||||||||||||
| Ventas Life Science & Healthcare Real Estate Fund | 20.1% | 20.1% | $ | 265,394 | $ | 264,442 | ||||||||||||||||||||
| Pension Fund Joint Venture | 25.0% | 25.0% | 20,364 | 22,169 | ||||||||||||||||||||||
| Research & Innovation Development Joint Venture | 53.0% | 53.0% | 279,282 | 275,829 | ||||||||||||||||||||||
| Ventas Investment Management platform | 565,040 | 562,440 | ||||||||||||||||||||||||
| Atrium Health & Wake Forest Joint Venture | 48.5% | 48.5% | 35,737 | 35,137 | ||||||||||||||||||||||
| All other (2) | 34.0%-37.5% | 34.0%-37.5% | 629 | 629 | ||||||||||||||||||||||
| Total investments in unconsolidated real estate entities | $ | 601,406 | $ | 598,206 |
(1) The entities in which we have an ownership interest may have less than a 100% interest in the underlying real estate. The ownership percentages in the table reflect our interest in the entities. Joint venture members, including us in some instances, have equity participation rights based on the underlying performance of the investments, which could result in non pro rata distributions.
(2) Includes investments in parking structures and other de minimis investments in unconsolidated real estate entities.
We provide various services to our unconsolidated real estate entities in exchange for fees and reimbursements. Total management fees earned in connection with these services were $3.9 million and $3.6 million for the three months ended March 31, 2024 and 2023, respectively. Such amounts, along with any promote revenue, are included in third party capital management revenues in our Consolidated Statements of Income.
Investments in Unconsolidated Operating Entities
We own investments in unconsolidated operating entities such as Ardent and Atria, which are included within other assets on our Consolidated Balance Sheets. Our 34% ownership interest in Atria entitles us to customary minority rights and protections, including the right to appoint two members to the Atria Board of Directors.
As of March 31, 2024, we held a 7.5% ownership interest in Ardent, which entitles us to customary minority rights and protections, including the right to appoint one member to the Ardent Board of Directors.
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8—INTANGIBLES
The following is a summary of our intangibles (dollars in thousands):
| As of March 31, 2024 | As of December 31, 2023 | ||||||||||||||||||||||
| Balance | Weighted Average Remaining Amortization Period in Years | Balance | Weighted Average Remaining Amortization Period in Years | ||||||||||||||||||||
| Intangible assets: | |||||||||||||||||||||||
| Above-market lease intangibles (1) | $ | 129,730 | 4.6 | $ | 130,371 | 4.8 | |||||||||||||||||
| In-place and other lease intangibles (2) | 1,310,392 | 9.1 | 1,317,775 | 8.3 | |||||||||||||||||||
| Goodwill | 1,045,048 | N/A | 1,045,176 | N/A | |||||||||||||||||||
| Other intangibles (2) | 34,405 | 4.6 | 34,440 | 4.8 | |||||||||||||||||||
| Accumulated amortization | (1,221,231) | N/A | (1,189,817) | N/A | |||||||||||||||||||
| Net intangible assets | $ | 1,298,344 | 8.7 | $ | 1,337,945 | 8.0 | |||||||||||||||||
| Intangible liabilities: | |||||||||||||||||||||||
| Below-market lease intangibles (1) | $ | 306,197 | 8.0 | $ | 306,499 | 8.1 | |||||||||||||||||
| Other lease intangibles | 13,498 | N/A | 13,498 | N/A | |||||||||||||||||||
| Accumulated amortization | (244,169) | N/A | (241,600) | N/A | |||||||||||||||||||
| Purchase option intangibles | 3,568 | N/A | 3,568 | N/A | |||||||||||||||||||
| Net intangible liabilities | $ | 79,094 | 8.0 | $ | 81,965 | 8.1 |
(1) Amortization of above- and below-market lease intangibles is recorded as a decrease and an increase to revenues, respectively, in our Consolidated Statements of Income.
(2) Amortization of lease intangibles is recorded in depreciation and amortization in our Consolidated Statements of Income.
N/A—Not Applicable
Above-market lease intangibles and in-place and other lease intangibles are included in acquired lease intangibles within real estate investments on our Consolidated Balance Sheets. Other intangibles (including non-compete agreements, trade names and trademarks) are included in other assets on our Consolidated Balance Sheets. Below-market lease intangibles, other lease intangibles and purchase option intangibles are included in accounts payable and other liabilities on our Consolidated Balance Sheets.
NOTE 9—OTHER ASSETS
The following is a summary of our other assets (dollars in thousands):
| As of March 31, 2024 | As of December 31, 2023 | ||||||||||
| Straight-line rent receivables | $ | 196,254 | $ | 194,108 | |||||||
| Deferred lease costs, net | 122,982 | 118,556 | |||||||||
| Investment in unconsolidated operating entities | 74,626 | 80,312 | |||||||||
| Stock warrants | 68,602 | 59,281 | |||||||||
| Non-mortgage loans receivable, net | 29,365 | 26,152 | |||||||||
| Other intangibles, net | 5,365 | 5,584 | |||||||||
| Other | 216,820 | 199,417 | |||||||||
| Total other assets | $ | 714,014 | $ | 683,410 |
Stock warrants represent warrants exercisable at any time prior to December 31, 2025, in whole or in part, for 16.3 million shares of Brookdale common stock at an exercise price of $3.00 per share. These warrants are measured at fair value with changes in fair value being recognized within other expense in our Consolidated Statements of Income.
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 10—SENIOR NOTES PAYABLE AND OTHER DEBT
The following is a summary of our senior notes payable and other debt (dollars in thousands):
| As of March 31, 2024 | As of December 31, 2023 | ||||||||||
| Unsecured revolving credit facility (1)(2) | $ | 8,207 | $ | 14,006 | |||||||
| Commercial paper notes | — | — | |||||||||
| 3.50% Senior Notes due 2024 | 400,000 | 400,000 | |||||||||
| 3.75% Senior Notes due 2024 | 400,000 | 400,000 | |||||||||
| 4.125% Senior Notes, Series B due 2024 (2) | 120,597 | 123,256 | |||||||||
| 2.80% Senior Notes, Series E due 2024 (2) | 53,954 | 55,143 | |||||||||
| Unsecured term loan due 2025 (2) | — | 377,501 | |||||||||
| 3.50% Senior Notes due 2025 | 600,000 | 600,000 | |||||||||
| 2.65% Senior Notes due 2025 | 450,000 | 450,000 | |||||||||
| 4.125% Senior Notes due 2026 | 500,000 | 500,000 | |||||||||
| 3.25% Senior Notes due 2026 | 450,000 | 450,000 | |||||||||
| 3.75% Exchangeable Senior Notes due 2026 | 862,500 | 862,500 | |||||||||
| Unsecured term loan due February 2027 | 200,000 | 200,000 | |||||||||
| Unsecured term loan due June 2027 | 500,000 | 500,000 | |||||||||
| 2.45% Senior Notes, Series G due 2027 (2) | 350,890 | 358,626 | |||||||||
| 3.85% Senior Notes due 2027 | 400,000 | 400,000 | |||||||||
| 4.00% Senior Notes due 2028 | 650,000 | 650,000 | |||||||||
| 5.398% Senior Notes, Series I due 2028 (2) | 443,230 | 453,001 | |||||||||
| 4.40% Senior Notes due 2029 | 750,000 | 750,000 | |||||||||
| 5.10% Senior Notes, Series J due 2029 (2) | 480,165 | — | |||||||||
| 3.00% Senior Notes due 2030 | 650,000 | 650,000 | |||||||||
| 4.75% Senior Notes due 2030 | 500,000 | 500,000 | |||||||||
| 2.50% Senior Notes due 2031 | 500,000 | 500,000 | |||||||||
| 3.30% Senior Notes, Series H due 2031 (2) | 221,615 | 226,501 | |||||||||
| 6.90% Senior Notes due 2037 (3) | 52,400 | 52,400 | |||||||||
| 6.59% Senior Notes due 2038 (3) | 21,413 | 21,413 | |||||||||
| 5.70% Senior Notes due 2043 | 300,000 | 300,000 | |||||||||
| 4.375% Senior Notes due 2045 | 300,000 | 300,000 | |||||||||
| 4.875% Senior Notes due 2049 | 300,000 | 300,000 | |||||||||
| Mortgage loans and other | 3,167,042 | 3,174,251 | |||||||||
| Total | 13,632,013 | 13,568,598 | |||||||||
| Deferred financing costs, net | (82,534) | (84,034) | |||||||||
| Unamortized fair value adjustment | 15,917 | 17,081 | |||||||||
| Unamortized discounts | (10,202) | (10,749) | |||||||||
| Senior notes payable and other debt | $ | 13,555,194 | $ | 13,490,896 |
(1)As of March 31, 2024 and December 31, 2023, respectively, no aggregate borrowings were denominated in Canadian dollars. Aggregate borrowings of $8.2 million and $14.0 million were denominated in British pounds as of March 31, 2024 and December 31, 2023, respectively.
(2)British Pound and Canadian Dollar debt obligations shown in US Dollars.
(3)Our 6.90% Senior Notes due 2037 are subject to repurchase at the option of the holders, at par, on October 1, 2027, and our 6.59% Senior Notes due 2038 are subject to repurchase at the option of the holders, at par, on July 7, 2028.
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Credit Facilities, Commercial Paper, Unsecured Term Loans and Letters of Credit
As of March 31, 2024, our unsecured revolving credit facility was comprised of a $2.75 billion unsecured revolving credit facility priced at SOFR plus 0.925% based on the Company’s debt ratings. Our unsecured revolving credit facility was scheduled to mature in January 2025. In April 2024, we entered into an amended and restated unsecured credit facility (the “New Credit Facility”) comprised of a $2.75 billion unsecured revolving credit facility initially priced at SOFR plus 0.875% based on the Company’s debt ratings. The New Credit Facility replaces our existing unsecured revolving credit facility and matures in April 2028, and may be extended at our option, subject to the satisfaction of certain conditions, for two additional periods of six months each. The New Credit Facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $3.75 billion, subject to the satisfaction of certain conditions, including the receipt of additional commitments for such increase.
Our existing unsecured revolving credit facility imposed certain customary restrictions on us, including restrictions pertaining to: (i) liens; (ii) investments; (iii) the incurrence of additional indebtedness; (iv) mergers and dissolutions; (v) certain dividend, distribution and other payments; (vi) permitted businesses; (vii) transactions with affiliates; and (viii) the maintenance of certain consolidated total leverage, secured debt leverage, unsecured debt leverage and fixed charge coverage ratios and minimum consolidated adjusted net worth, and contains customary events of default. The New Credit Facility imposes similar restrictions.
As of March 31, 2024, we had $2.7 billion of undrawn capacity on our unsecured revolving credit facility with $8.2 million outstanding and an additional $1.2 million restricted to support outstanding letters of credit. In connection with the New Credit Facility, we paid off all amounts outstanding under the existing unsecured revolving credit facility by drawing down the same amount on the New Credit Facility. We limit our use of the unsecured revolving credit facility, to the extent necessary, to support our commercial paper program when commercial paper notes are outstanding.
Our wholly-owned subsidiary, Ventas Realty, Limited Partnership (“Ventas Realty”), may issue from time to time unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $1.0 billion. The notes are sold under customary terms in the U.S. 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 March 31, 2024, we had no borrowings outstanding under our commercial paper program.
Ventas Realty has a $500.0 million unsecured term loan priced at Term SOFR plus 0.95%, which is subject to adjustment based on Ventas Realty’s debt ratings. This term loan is fully and unconditionally guaranteed by Ventas, Inc. It matures in June 2027 and includes an accordion feature that permits Ventas Realty to increase the aggregate borrowings thereunder to up to $1.25 billion, subject to the satisfaction of certain conditions, including the receipt of additional commitments for such increase.
Ventas Realty has a $200.0 million unsecured term loan priced at Term SOFR plus 0.95%, which is subject to adjustment based on Ventas Realty’s debt ratings. This term loan is fully and unconditionally guaranteed by Ventas, Inc. It matures in February 2027 and includes an accordion feature that permits Ventas Realty to increase the aggregate borrowings thereunder to up to $500.0 million, subject to the satisfaction of certain conditions, including the receipt of additional commitments for such increase.
During the three months ended March 31, 2024, we repaid and extinguished a C$500.0 million or $369.4 million unsecured term loan facility priced at Canadian Dollar Offered Rate (“CDOR”) plus 0.90% that matures in January 2025.
As of March 31, 2024, our $100.0 million uncommitted line for standby letters of credit had an outstanding balance of $15.0 million. The agreement governing the line contains certain customary covenants and, under its terms, we are required to pay a commission on each outstanding letter of credit at a fixed rate.
Exchangeable Senior Notes
In June 2023, Ventas Realty issued $862.5 million aggregate principal amount of its 3.75% Exchangeable Senior Notes due 2026 (the “Exchangeable Notes”) in a private placement. The Exchangeable Notes are senior, unsecured obligations of Ventas Realty and are fully and unconditionally guaranteed on an unsecured and unsubordinated basis by Ventas. The Exchangeable Notes bear interest at a rate of 3.75% per year, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2023. The Exchangeable Notes mature on June 1, 2026, unless earlier exchanged,
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
redeemed or repurchased. As of March 31, 2024, we had $862.5 million aggregate principal amount of the Exchangeable Notes outstanding. During the three months ended March 31, 2024, we recognized approximately $8.1 million of contractual interest expense and amortization of issuance costs of $1.7 million related to the Exchangeable Notes. Unamortized issuance costs of $15.4 million as of March 31, 2024 was recorded as an offset to senior notes payable and other debt on our Consolidated Balance Sheet.
The Exchangeable Notes are exchangeable at an initial exchange rate of 18.2460 shares of our common stock per $1,000 principal amount of Exchangeable Notes (equivalent to an initial exchange price of approximately $54.81 per share of common stock). The initial exchange rate is subject to adjustment, including in the event of the payment of a quarterly dividend in excess of $0.45 per share, but will not be adjusted for any accrued and unpaid interest. Upon exchange of the Exchangeable Notes, Ventas Realty will pay cash up to the aggregate principal amount of the Exchangeable Notes to be exchanged and pay or deliver (or cause to be delivered), as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at Ventas Realty’s election, in respect of the remainder, if any, of its exchange obligation in excess of the aggregate principal amount of the Exchangeable Notes being exchanged. Prior to the close of business on the business day immediately preceding March 1, 2026, the Exchangeable Notes will be exchangeable at the option of the noteholders only upon the satisfaction of specified conditions and during certain periods described in the indenture governing the Exchangeable Notes. On or after March 1, 2026, until the close of business on the business day immediately preceding the maturity date, the Exchangeable Notes will be exchangeable at the option of the noteholders at any time regardless of these conditions or periods.
We have evaluated and concluded that the exchange options embedded in our exchangeable senior notes are eligible for the entity’s own equity scope exception from ASC 815 and therefore, do not need to be bifurcated. Accordingly, we record our exchangeable senior notes as liabilities (included in senior notes payable and other debt on our Consolidated Balance Sheets).
Senior Notes
In February 2024, Ventas Canada Finance Limited (“Ventas Canada”) issued and sold C$650.0 million aggregate principal amount of 5.10% Senior Notes, Series J due 2029 in a private placement. The proceeds were primarily used to repay the C$500.0 million unsecured term loan facility due 2025.
In April and May 2024, we repaid $854.0 million senior notes at maturity consisting of $400.0 million 3.50% Senior Notes, $400.0 million 3.75% Senior Notes and $54.0 million (C$73.0 million) 2.80% Senior Notes primarily with cash on hand and the remainder through our commercial paper program.
Mortgages
In February 2024, we entered into a C$52.8 million fixed rate mortgage loan, which accrues interest at 4.644%, matures in 2029 and is secured by one senior housing community in Canada.
Scheduled Maturities of Borrowing Arrangements and Other Provisions
As of March 31, 2024, our indebtedness had the following maturities (dollars in thousands):
| Principal Amount Due at Maturity | Unsecured Revolving Credit Facility and Commercial Paper Notes | Scheduled Periodic Amortization | Total Maturities | ||||||||||||||||||||
| 2024 | $ | 1,167,226 | $ | — | $ | 39,262 | $ | 1,206,488 | |||||||||||||||
| 2025 | 1,807,171 | 8,207 | 46,833 | 1,862,211 | |||||||||||||||||||
| 2026 | 1,903,689 | — | 40,858 | 1,944,547 | |||||||||||||||||||
| 2027 | 1,560,756 | — | 40,912 | 1,601,668 | |||||||||||||||||||
| 2028 | 1,492,500 | — | 33,773 | 1,526,273 | |||||||||||||||||||
| Thereafter | 5,368,497 | — | 122,329 | 5,490,826 | |||||||||||||||||||
| Total maturities | $ | 13,299,839 | $ | 8,207 | $ | 323,967 | $ | 13,632,013 |
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
We do not use derivative instruments for trading or speculative purposes, and we have a policy of entering into contracts only with major financial institutions based upon their credit ratings and other factors. When considered together with the underlying exposure that the derivative is designed to hedge, we do not expect that the use of derivatives in this manner would have any material adverse effect on our future financial condition or results of operations.
Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into earnings over the life of the related debt, except where a material amount is deemed to be ineffective, which would be immediately recognized in the Consolidated Statements of Income.
As of March 31, 2024, our variable rate debt obligations of $0.8 billion reflect, in part, the effect of $142.7 million notional amount of interest rate swaps with maturities in March 2027, that effectively convert fixed rate debt to variable rate debt.
As of March 31, 2024, our fixed rate debt obligations of $12.9 billion reflect, in part, the effect of $527.1 million and C$647.6 million notional amount of interest rate swaps with maturities ranging from February 2025 to April 2031, in each case, that effectively convert variable rate debt to fixed rate debt.
NOTE 11—FAIR VALUES OF FINANCIAL INSTRUMENTS
Overview
Accounting guidance on fair value measurements for certain financial assets and liabilities requires that financial assets and liabilities carried at fair value be classified and disclosed in one of the following categories:
-
Level 1: Fair value calculated based on unadjusted quoted prices for identical assets or liabilities in active markets that we have the ability to access.
-
Level 2: Fair value calculated using inputs other than quoted prices included in level one that are directly or indirectly observable for the asset or liability. Level two inputs may include quoted prices for similar assets and liabilities in active markets and other inputs for the asset or liability that are observable at commonly quoted intervals, such as interest rates, foreign exchange rates and yield curves.
-
Level 3: Fair value calculated using unobservable inputs for the asset or liability, which typically are based on our own assumptions, because there is little, if any, related market activity.
The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented are not necessarily indicative of the amounts we would realize in a current market exchange or transaction.
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Financial Instruments Measured at Fair Value
The table below summarizes the carrying amounts and fair values of our financial instruments either recorded or disclosed on a recurring basis (dollars in thousands):
| As of March 31, 2024 | As of December 31, 2023 | ||||||||||||||||||||||
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash and cash equivalents (1) | $ | 632,443 | $ | 632,443 | $ | 508,794 | $ | 508,794 | |||||||||||||||
| Escrow deposits and restricted cash (1) | 55,966 | 55,966 | 54,668 | 54,668 | |||||||||||||||||||
| Stock warrants (3)(5) | 68,602 | 68,602 | 59,281 | 59,281 | |||||||||||||||||||
| Secured mortgage loans and other, net (3)(4) | 29,819 | 29,153 | 27,986 | 27,947 | |||||||||||||||||||
| Non-mortgage loans receivable, net (3)(4)(5) | 29,365 | 28,392 | 26,152 | 25,200 | |||||||||||||||||||
| Derivative instruments (3)(5) | 29,898 | 29,898 | 19,782 | 19,782 | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Senior notes payable and other debt, gross (3)(4) | 13,632,013 | 13,081,014 | 13,568,598 | 13,104,091 | |||||||||||||||||||
| Derivative instruments (3)(6) | 778 | 778 | 2,525 | 2,525 | |||||||||||||||||||
| Redeemable OP Units (2) | 151,316 | 151,316 | 173,452 | 173,452 |
(1)The carrying amount approximates fair value due to the short maturity of these instruments.
(2)Level 1 within fair value hierarchy.
(3)Level 2 within fair value hierarchy.
(4)Level 3 within fair value hierarchy.
(5)Included in other assets on our Consolidated Balance Sheets.
(6)Included in accounts payable and other liabilities on our Consolidated Balance Sheets.
Other Items Measured at Fair Value on a Nonrecurring Basis
Real estate recorded as held for sale and any associated real estate impairment recorded due to the shortening of the expected hold period due to our change in intent to hold the asset (see “Note 5 – Dispositions and Impairments”) are measured at fair value on a nonrecurring basis. We estimate the fair value of assets held for sale and any associated impairment charges based primarily on current sales price expectations, which reside within Level 2 of the fair value hierarchy.
Real estate impairment charges recorded due to our evaluation of recoverability when events or changes in circumstances indicate the carrying amount may not be recoverable are based on company-specific inputs and our assumptions about the marketability of the properties as observable inputs are not available. As such, we have determined that these fair value measurements generally reside within Level 3 of the fair value hierarchy. We estimate the fair value of real estate deemed to not be recoverable using the cost or income approach and unobservable data such as net operating income and estimated capitalization and discount rates, and giving consideration to local and national industry market data including comparable sales.
NOTE 12—COMMITMENTS AND CONTINGENCIES
From time to time, we are party to various lawsuits, investigations, claims and other legal and regulatory proceedings arising in connection with our business. In certain circumstances, regardless of whether we are a named party in a lawsuit, investigation, claim or other legal or regulatory proceeding, we may be contractually obligated to indemnify, defend and hold harmless our tenants, operators, managers or other third parties against, or may otherwise be responsible for, such actions, proceedings or claims. These claims may include, among other things, professional liability and general liability claims, commercial liability claims, unfair business practices claims and employment claims, as well as regulatory proceedings, including proceedings related to our senior housing operating portfolio, where we are typically the holder of the applicable healthcare license. These claims may not be fully insured and some may allege large damage amounts.
It is the opinion of management, that the disposition of any such lawsuits, investigations, claims and other legal and regulatory proceedings that are currently pending will not, individually or in the aggregate, have a material adverse effect on us.
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
However, regardless of the merits of a particular action, investigation or claim, we may be forced to expend significant financial resources to defend and resolve these matters. We are unable to predict the ultimate outcome of these lawsuits, investigations, claims and other legal and regulatory proceedings, and if management’s assessment of our liability with respect thereto is incorrect, such actions, investigations and claims could have a material adverse effect on us.
From time to time, on behalf of ourselves or on behalf of our unconsolidated entities, we have agreed, and may in the future agree, to provide guarantees, indemnities or other similar contingent obligations to third parties. Such agreements may include, without limitation: (1) guarantees of all or a portion of the principal, interest and other amounts due under mortgage debt or other borrowings, (2) customary nonrecourse carve-out guarantees provided in connection with mortgage or other borrowings, (3) customary indemnifications of lenders for potential environmental liabilities, (4) completion guarantees provided to lenders, tenants, ground lessors or other third parties for the completion of development and redevelopment projects, (5) guarantees of payment of contingent tax obligations to tax credit investors who have purchased historic, new market and other tax credits from us or our unconsolidated entities, (6) guarantees of ground rent and other payment of ground rent and other obligations to ground lessors and (7) indemnities and other guarantees required in connection with the procurement of performance and surety bonds and standby letters of credit.
As of March 31, 2024, it is the opinion of management that (i) our liability under these arrangements is not quantifiable and (ii) the risk of us being required to make payments under these arrangements is remote, in each case, individually and in the aggregate. Accordingly, no contingent liability is recorded in our Consolidated Balance Sheet for any of these arrangements.
NOTE 13—INCOME TAXES
We have elected to be taxed as a REIT under the applicable provisions of the Internal Revenue Code of 1986, as amended, for every year beginning with the year ended December 31, 1999. We have also elected for certain of our subsidiaries to be treated as taxable REIT subsidiaries (“TRS” or “TRS entities”), which are subject to federal, state and foreign income taxes. All entities other than the TRS entities are collectively referred to as the “REIT” within this note. Certain REIT entities are subject to foreign income tax.
Although the TRS entities and certain other foreign entities have paid minimal federal, state and foreign income taxes for the three months ended March 31, 2024, their income tax liabilities may increase in future periods as we exhaust net operating loss (“NOL”) carryforwards and as our operations grow. Such increases could be significant.
Our consolidated provision for income taxes for the three months ended March 31, 2024 and 2023 was a benefit of $3.0 million and a benefit of $2.8 million, respectively. The income tax benefit for both the three months ended March 31, 2024 and 2023 was primarily due to losses in certain of our TRS entities.
Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. Deferred tax liabilities with respect to our TRS entities totaled $20.2 million and $24.5 million as of March 31, 2024 and December 31, 2023, respectively, and related primarily to differences between the financial reporting and tax bases of fixed and intangible assets, net of loss carryforwards. Deferred tax assets with respect to our TRS entities totaled $1.8 million and $1.8 million as of March 31, 2024 and December 31, 2023, respectively, and related primarily to loss carryforwards.
Generally, we are subject to audit under the statute of limitations by the Internal Revenue Service for the year ended December 31, 2020 and subsequent years and are subject to audit by state taxing authorities for the year ended December 31, 2019 and subsequent years. We are subject to audit generally under the statutes of limitation by the Canada Revenue Agency and provincial authorities with respect to the Canadian entities for the year ended December 31, 2019 and subsequent years. We are subject to audit in the United Kingdom generally for periods ended in and subsequent to 2022.
NOTE 14—STOCKHOLDERS' EQUITY
Capital Stock
We participate in an “at-the-market” equity offering program (“ATM program”), pursuant to which we may, from time to time, sell up to $1.0 billion aggregate gross sales price of shares of our common stock. During the three months ended March 31, 2024, we sold 1.8 million shares of our common stock under our ATM program for gross proceeds of $78.7 million,
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
representing an average price of $44.12 per share. As of March 31, 2024, the remaining amount available under our ATM program for future sales of common stock was $921.3 million.
In April 2024, we sold 0.3 million shares of our common stock under our ATM program for gross proceeds of $14.9 million, representing an average price of $43.63 per share. As of April 30, 2024, the remaining amount available under our ATM program for future sales of common stock was $906.4 million.
Accumulated Other Comprehensive Loss
The following is a summary of our accumulated other comprehensive loss (dollars in thousands):
| As of March 31, 2024 | As of December 31, 2023 | ||||||||||
| Foreign currency translation loss | $ | (50,475) | $ | (56,596) | |||||||
| Unrealized loss on available for sale securities | (1,136) | (1,256) | |||||||||
| Unrealized gain on derivative instruments | 32,057 | 22,095 | |||||||||
| Total accumulated other comprehensive loss | $ | (19,554) | $ | (35,757) |
NOTE 15—EARNINGS PER SHARE
The following table shows the amounts used in computing our basic and diluted earnings per share (in thousands, except per share amounts):
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Numerator for basic and diluted earnings per share: | |||||||||||||||||||||||
| (Loss) income from continuing operations | $ | (12,540) | $ | 18,912 | |||||||||||||||||||
| Net (loss) income | (12,540) | 18,912 | |||||||||||||||||||||
| Net income attributable to noncontrolling interests | 1,772 | 1,395 | |||||||||||||||||||||
| Net (loss) income attributable to common stockholders | $ | (14,312) | $ | 17,517 | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Denominator for basic earnings per share—weighted average shares | 403,365 | 399,989 | |||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Restricted stock awards | 416 | 320 | |||||||||||||||||||||
| OP unitholder interests | 3,446 | 3,483 | |||||||||||||||||||||
| Denominator for diluted earnings per share—adjusted weighted average shares | 407,227 | 403,792 | |||||||||||||||||||||
| Basic earnings per share: | |||||||||||||||||||||||
| (Loss) income from continuing operations | $ | (0.03) | $ | 0.05 | |||||||||||||||||||
| Net (loss) income attributable to common stockholders | (0.04) | 0.04 | |||||||||||||||||||||
| Diluted earnings per share: (1) | |||||||||||||||||||||||
| (Loss) income from continuing operations | $ | (0.03) | $ | 0.05 | |||||||||||||||||||
| Net (loss) income attributable to common stockholders | (0.04) | 0.04 | |||||||||||||||||||||
(1) Potential common shares are not included in the computation of diluted earnings per share when a loss from continuing operations exists as the effect would be an antidilutive per share amount.
The dilutive effect of our Exchangeable Notes is calculated using the if-converted method in accordance with ASU 2020-06. We are required, pursuant to the indenture governing the Exchangeable Notes, to settle the aggregate principal amount of the Exchangeable Notes in cash and may elect to settle any remaining exchange obligation (i.e., the stock price in excess of the exchange obligation) in cash, shares of our common stock, or a combination thereof. Under the if-converted method, we include the number of shares required to satisfy the exchange obligation, assuming all the Exchangeable Notes are exchanged. The average closing price of our common stock for the three months ended March 31, 2024 is used as the basis for determining
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the dilutive effect on earnings per share. The average price of our common stock for each of the three months ended March 31, 2024 was less than the initial exchange price of $54.81 and, therefore, all associated shares were antidilutive.
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 16—SEGMENT INFORMATION
As of March 31, 2024, we operated through three reportable business segments: SHOP, outpatient medical and research portfolio and triple-net leased properties. In our SHOP segment, we invest in senior housing communities throughout the United States and Canada and engage operators to operate those communities. In our outpatient medical and research portfolio segment, we primarily acquire, own, develop, lease and manage outpatient medical buildings and research centers throughout the United States. In our triple-net leased properties segment, we invest in and own senior housing communities, skilled nursing facilities (“SNFs”), long-term acute care facilities (“LTACs”), freestanding inpatient rehabilitation facilities (“IRFs”) and other healthcare facilities throughout the United States and the United Kingdom and lease those properties to tenants 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. Information provided for “non-segment” includes management fees and promote revenues, net of expenses related to our third-party institutional capital management business, income from loans and investments and various corporate-level expenses not directly attributable to any of our three reportable business segments. Non-segment assets consist primarily of corporate assets, including cash, restricted cash, loans receivable and investments and miscellaneous accounts receivable as well as investments in unconsolidated entities including VIM.
Our chief operating decision maker evaluates performance of the combined properties in each reportable business segment and determines how to allocate resources to those segments, in significant part, based on NOI and related measures for each segment. We define NOI as total revenues, less interest and other income, property-level operating expenses and third party capital management expenses. We consider NOI useful because it allows investors, analysts and our management to measure unlevered property-level operating results and to compare our operating results to the operating results of other real estate companies between periods on a consistent basis. In order to facilitate a clear understanding of our historical consolidated operating results, NOI should be examined in conjunction with net income attributable to common stockholders as presented in our Consolidated Financial Statements and other financial data included elsewhere in this Quarterly Report on Form 10-Q. See “Non-GAAP Financial Measures” included elsewhere in this Quarterly Report on Form 10-Q for additional disclosure and reconciliations of net income attributable to common stockholders, as computed in accordance with GAAP, to NOI.
Interest expense, depreciation and amortization, general, administrative and professional fees, income tax expense and other non-property-specific revenues and expenses are not allocated to individual reportable business segments for purposes of assessing segment performance. There are no intersegment sales or transfers.
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Summary information by reportable business segment is as follows (dollars in thousands):
| For the Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||
| SHOP | Outpatient Medical and Research Portfolio | Triple-Net Leased Properties | Non-Segment | Total | |||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||
| Rental income | $ | — | $ | 218,877 | $ | 155,368 | $ | — | $ | 374,245 | |||||||||||||||||||
| Resident fees and services | 813,304 | — | — | — | 813,304 | ||||||||||||||||||||||||
| Third party capital management revenues | — | 631 | — | 3,665 | 4,296 | ||||||||||||||||||||||||
| Income from loans and investments | — | — | — | 1,289 | 1,289 | ||||||||||||||||||||||||
| Interest and other income | — | — | — | 6,780 | 6,780 | ||||||||||||||||||||||||
| Total revenues | $ | 813,304 | $ | 219,508 | $ | 155,368 | $ | 11,734 | $ | 1,199,914 | |||||||||||||||||||
| Total revenues | $ | 813,304 | $ | 219,508 | $ | 155,368 | $ | 11,734 | $ | 1,199,914 | |||||||||||||||||||
| Less: | |||||||||||||||||||||||||||||
| Interest and other income | — | — | — | 6,780 | 6,780 | ||||||||||||||||||||||||
| Property-level operating expenses | 609,821 | 73,938 | 3,738 | — | 687,497 | ||||||||||||||||||||||||
| Third party capital management expenses | — | — | — | 1,753 | 1,753 | ||||||||||||||||||||||||
| NOI | $ | 203,483 | $ | 145,570 | $ | 151,630 | $ | 3,201 | 503,884 | ||||||||||||||||||||
| Interest and other income | 6,780 | ||||||||||||||||||||||||||||
| Interest expense | (149,933) | ||||||||||||||||||||||||||||
| Depreciation and amortization | (300,255) | ||||||||||||||||||||||||||||
| General, administrative and professional fees | (48,737) | ||||||||||||||||||||||||||||
| Loss on extinguishment of debt, net | (252) | ||||||||||||||||||||||||||||
| Transaction, transition and restructuring costs | (4,677) | ||||||||||||||||||||||||||||
| Allowance on loans receivable and investments | 68 | ||||||||||||||||||||||||||||
| Shareholder relations matters | (15,714) | ||||||||||||||||||||||||||||
| Other income | 1,334 | ||||||||||||||||||||||||||||
| Loss from unconsolidated entities | (8,383) | ||||||||||||||||||||||||||||
| Gain on real estate dispositions | 341 | ||||||||||||||||||||||||||||
| Income tax benefit | 3,004 | ||||||||||||||||||||||||||||
| Loss from continuing operations | (12,540) | ||||||||||||||||||||||||||||
| Net loss | (12,540) | ||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interests | 1,772 | ||||||||||||||||||||||||||||
| Net loss attributable to common stockholders | $ | (14,312) |
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| For the Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||
| SHOP | Outpatient Medical and Research Portfolio | Triple-Net Leased Properties | Non-Segment | Total | |||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||
| Rental income | $ | — | $ | 203,004 | $ | 149,739 | $ | — | $ | 352,743 | |||||||||||||||||||
| Resident fees and services | 704,993 | — | — | — | 704,993 | ||||||||||||||||||||||||
| Third party capital management revenues | — | 628 | — | 3,549 | 4,177 | ||||||||||||||||||||||||
| Income from loans and investments | — | — | — | 13,589 | 13,589 | ||||||||||||||||||||||||
| Interest and other income | — | — | — | 1,743 | 1,743 | ||||||||||||||||||||||||
| Total revenues | $ | 704,993 | $ | 203,632 | $ | 149,739 | $ | 18,881 | $ | 1,077,245 | |||||||||||||||||||
| Total revenues | $ | 704,993 | $ | 203,632 | $ | 149,739 | $ | 18,881 | $ | 1,077,245 | |||||||||||||||||||
| Less: | |||||||||||||||||||||||||||||
| Interest and other income | — | — | — | 1,743 | 1,743 | ||||||||||||||||||||||||
| Property-level operating expenses | 537,222 | 66,913 | 3,796 | — | 607,931 | ||||||||||||||||||||||||
| Third party capital management expenses | — | — | — | 1,706 | 1,706 | ||||||||||||||||||||||||
| NOI | $ | 167,771 | $ | 136,719 | $ | 145,943 | $ | 15,432 | 465,865 | ||||||||||||||||||||
| Interest and other income | 1,743 | ||||||||||||||||||||||||||||
| Interest expense | (128,075) | ||||||||||||||||||||||||||||
| Depreciation and amortization | (282,119) | ||||||||||||||||||||||||||||
| General, administrative and professional fees | (44,798) | ||||||||||||||||||||||||||||
| Transaction, transition and restructuring costs | (1,386) | ||||||||||||||||||||||||||||
| Allowance on loans receivable and investments | 8,064 | ||||||||||||||||||||||||||||
| Other expense | (7,762) | ||||||||||||||||||||||||||||
| Loss from unconsolidated entities | (5,623) | ||||||||||||||||||||||||||||
| Gain on real estate dispositions | 10,201 | ||||||||||||||||||||||||||||
| Income tax benefit | 2,802 | ||||||||||||||||||||||||||||
| Income from continuing operations | 18,912 | ||||||||||||||||||||||||||||
| Net income | 18,912 | ||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interests | 1,395 | ||||||||||||||||||||||||||||
| Net income attributable to common stockholders | $ | 17,517 |
Capital expenditures, including investments in real estate property and development project expenditures, by reportable business segment are as follows (dollars in thousands):
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Capital Expenditures: | |||||||||||||||||||||||
| SHOP | $ | 106,540 | $ | 68,132 | |||||||||||||||||||
| Outpatient medical and research portfolio | 62,770 | 40,804 | |||||||||||||||||||||
| Triple-net leased properties | 906 | 3,720 | |||||||||||||||||||||
| Total capital expenditures | $ | 170,216 | $ | 112,656 |
VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Our portfolio of properties and mortgage loan and other investments are located in the United States, Canada and the United Kingdom. Revenues are attributed to an individual country based on the location of each property. Geographic information regarding our operations is as follows (dollars in thousands):
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| United States | $ | 1,063,384 | $ | 958,126 | |||||||||||||||||||
| Canada | 128,959 | 112,122 | |||||||||||||||||||||
| United Kingdom | 7,571 | 6,997 | |||||||||||||||||||||
| Total revenues | $ | 1,199,914 | $ | 1,077,245 |
| As of March 31, 2024 | As of December 31, 2023 | ||||||||||
| Net Real Estate Property: | |||||||||||
| United States | $ | 18,425,569 | $ | 18,702,960 | |||||||
| Canada | 2,921,702 | 2,837,858 | |||||||||
| United Kingdom | 203,535 | 208,132 | |||||||||
| Total net real estate property | $ | 21,550,806 | $ | 21,748,950 |
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