Ventas’ Q4 Normalized FFO Skyrockets 114%, Boosted by NHP Acquisition

Ventas, Inc. (NYSE:VTR) saw its normalized funds from operations (FFO) skyrocket 114% to $259.3 million for the fourth quarter ended Dec. 31, 2011, thanks to acquisitions made in the period.

“Ventas delivered excellent results in 2011, as our portfolio performed well while we successfully integrated over $11 billion of accretive acquisitions,” Ventas Chairman and CEO Debra A. Cafaro said in a statement. “We have a highly diversified portfolio approaching 1,400 properties, with nearly 80% of our annualized revenues derived from private pay sources, an outstanding balance sheet and an attractive cost of capital.”

Normalized FFO—Fourth Quarter & Years End


Both the quarterly and yearly FFO benefited from the REIT’s acquisition of Nationwide Health Properties, Inc., its 117 Atria-managed communities, increased net operating income from senior housing communities managed by Sunrise Senior Living, and rental increases from Ventas’ triple-net lease portfolio. FFO was partially offset by increases in general and administrative expenses, higher interest expense, and a greater number of weighted average diluted shares.

The normalized FFO per diluted common share was $0.89 in the fourth quarter, up 15.6% from the comparable 2010 period, and does not include the net benefit from litigation proceeds ($99.7 million from HCP, Inc.) and income tax benefit.

For the full year, normalized FFO increased approximately 71.1% to $777 million, up from the previous year’s $454 million, with normalized per diluted common share of $3.37.


Net Income—Fourth Quarter & Years End

Net income attributable to common stockholders for the quarter ended Dec. 31 was $192.9 million, or $.66 per diluted common share, compared with $77.6 million, or $0.49 per diluted common share, during the same period in 2010.

For the year, net income attributable to common stockholders totaled $364.5 million, or $1.58 per diluted common share, compared with the previous year’s $246.2 million, or $1.56 per common diluted share.

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Net Operating Income—Fourth Quarter & Years End

In the fourth quarter, total net operating income for Ventas’ portfolio grew 2.4% versus the third quarter to $89.5 million, and stabilized unit occupancy increased 100 basis points.

While 70% of Ventas’ net operating income (and 84% of revenues) came from its private pay census, CEO Debra Cafaro said the REIT still believes in diversification, and that having a balanced portfolio is the best way to manage the company’s growth.

“We have deliberately focused over the past 2 years on driving our private pay revenue and NOI statistics higher and we think it was the right time in the cycle to do that,” said Cafaro during the earnings call. “But obviously, nursing homes are an important part of the post-acute delivery of care to seniors in the United States. And at the right time and at the right price and the right structure, those are appropriate assets to own as a health care REIT, I believe, in a diversified portfolio.”

However, she added that net operating income from private pay residents could rise to 80%.

Looking forward, the REIT expects its 2012 normalized FFO per diluted share to range between $3.63 and $3.69.

Written by Alyssa Gerace

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