Ventas Profits Up 9% in Q3, CEO Tight-Lipped on Sunrise/HCN Deal

Ventas, Inc. (NYSE:VTR) saw its net income attributable to common stockholders rise 8.7% to $111.9 million in the third quarter ended Sept. 30, 2012 on strength of the $1.7 billion in acquisitions the real estate investment trust has completed so far this year.

As the largest senior housing and care REIT and second-large healthcare REIT, Ventas attributed its favorable third quarter earnings to its diversified portfolio.

“Ventas is thriving because of our diversified, high performing portfolio and disciplined execution of our investment and asset management strategy,” Ventas chairman and CEO Debra A. Cafaro said in the earnings statement. “We achieved another quarter of outstanding results and have completed $1.7 billion in investments year to date. We are pleased to increase our full year earnings outlook.”

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Third quarter growth was primarily attributed to Ventas’ acquisition of the Cogdell Spencer Inc. medical office building portfolio and the purchase of 16 private-pay senior living communities from affiliates of Sunrise Senior Living (NYSE:SRZ) along with its other healthcare acquisitions. The REIT also benefited from good management in its senior housing communities operated by Sunrise and Atria Senior Living; rental increases from its triple-net lease portfolio; and lower-weighted average interest rates.

During Ventas’ earnings call, an analyst asked if the REIT would consider restructuring its existing relationship with Sunrise, following competitor Health Care REIT’s acquisition of the senior living provider announced in August.

“We have excellent contracts that provide alignment and have protective—significant protective rights in them. And so the situation at Sunrise continues to evolve. We feel happy with our assets and the performance of those assets,” Cafaro replied, declining to elaborate further on those “protective rights.”

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Ventas is planning to continue its acquisition strategy. The REIT’s pipeline is “very active with potential deals emanating from Ventas, Lillibridge and NHP legacy relationship, as well as from new sellers eager to enter a market that can produce win-win outcomes for buyers and sellers,” said Cafaro during the earnings call.

“[W]e have lots of opportunities. The pie is large. It’s a fragmented industry,” she said.

The REIT’s profits of $111.9 million, or $0.38 a share, increased from last year’s $102.9 million or $0.36 a share. Ray Lewis, president of Ventas, said during the earnings calls that he expects the portfolio’s margins will continue to improve.

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“Certainly, as the housing market continues to improve, that’s another benefit to our seniors housing operating portfolio at the margin,” he said. “So I think, we’re at a pretty good point in the cycle with limited new supply, pretty strong occupancies and pretty good general underlying economic fundamentals.”

Normalized funds from operations (FFO) for the quarter increased about 12% to $284.9 million, up from $255.1 million for the third quarter of 2011.

Ventas’ $642 million in third quarter revenues outperformed analysts’ expectations of $628 million. The REIT raised its guidance for 2012 normalized FFO per diluted share, expecting it to range between $3.76 and $3.78 up from the previous range of $3.70 and $3.74, reflecting stronger-than-expected portfolio performance.

Written by Alyssa Gerace

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