Ventas reports substantial growth in third quarter 2009

Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) said today that third quarter 2009 normalized Funds From Operations (“FFO”) increased 7.4 percent to $103.4 million, from $96.2 million for the comparable 2008 period. Normalized FFO per diluted common share was $0.66 in the third quarter of 2009, compared to $0.68 in the comparable 2008 period. Weighted average diluted shares outstanding in the third quarter of 2009 were 156.5 million, compared to 141.1 million in the comparable 2008 period.

“Ventas’s earnings and cash flow this quarter were excellent and benefited from our high-quality, diversified healthcare and seniors housing assets, which continue to perform very well,” Ventas Chairman, President and Chief Executive Officer Debra A. Cafaro said. “With low leverage and excess liquidity, we are perfectly positioned to invest when appropriate, and to deliver value to our constituents.

“We are also pleased to increase our 2009 normalized FFO per diluted share guidance,” Cafaro added.

Third quarter 2009 normalized FFO per share versus the comparable period in 2008 benefited from rental increases from the Company’s triple-net lease portfolio; higher Net Operating Income after management fees (“NOI”) at the Company’s medical office building (“MOB”) operating portfolio; lower interest expense; and lower general, administrative and professional fees, offset by lower NOI at the Company’s senior living operating portfolio and higher weighted average diluted shares outstanding.

Normalized FFO for the quarter ended September 30, 2009 excludes the net expense (totaling $5.1 million, or $0.03 per diluted share) from merger-related expenses and deal costs, principally in relation to the Company’s favorable verdict in its lawsuit against HCP, Inc. (“HCP”), for which a three-week trial was held during the quarter, offset by income tax benefit; and normalized FFO for the quarter ended September 30, 2008 excluded the net benefit (totaling $16.7 million, or $0.12 per diluted share) from income tax benefit and the reversal of a $23.3 million previously recorded contingent liability, offset by a $6.0 million valuation allowance on real estate mortgage loans receivable, merger-related expenses and deal costs and loss on extinguishment of debt.

FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), for the third quarter of 2009 decreased 13.0 percent to $98.3 million, from $113.0 million in the prior year. Third quarter 2009 NAREIT FFO per diluted common share decreased 21.3 percent to $0.63, from $0.80 a year earlier due primarily to the reversal of a $23.3 million previously recorded contingent liability, offset by a $6.0 million valuation allowance on real estate mortgage loans receivable recorded during the third quarter of 2008.

Normalized FFO for the nine months ended September 30, 2009 was $304.2 million, or $2.01 per diluted common share, a 6.6 percent increase from $285.5 million, or $2.06 per diluted common share, for the comparable 2008 period. Normalized FFO for the nine months ended September 30, 2009 excludes the net expense (totaling $14.8 million, or $0.10 per diluted share) from merger-related expenses and deal costs and loss on extinguishment of debt, offset by income tax benefit; and normalized FFO for the nine months ended September 30, 2008 excluded the net benefit (totaling $29.3 million, or $0.21 per diluted share) from income taxes and the previously recorded contingent liability reversal, offset by the valuation allowance on real estate mortgage loans receivable and merger-related expenses and deal costs.

SUNRISE PORTFOLIO

Total Portfolio NOI Trending Toward High End of Guidance Range of $122-129 Million

The Company’s operating portfolio contains 79 seniors housing communities in North America that are managed by Sunrise Senior Living, Inc. (NYSE: SRZ) (“Sunrise”). Ventas owns 100 percent of 19 of these communities and has a partnership share of between 75 percent and 85 percent in the remaining 60 communities, in which Sunrise owns the noncontrolling interest.

NOI for these 79 communities was $33.4 million for the quarter ended September 30, 2009, compared to $35.2 million for the comparable 2008 period. Year-to-date NOI for the portfolio is $97.7 million.

“We are very pleased that the results from our mansion-style, need-driven seniors housing portfolio managed by Sunrise are trending toward the high end of our NOI guidance range of $122 million to $129 million,” said Raymond J. Lewis, Ventas Executive Vice President and Chief Investment Officer. “We continue to support Sunrise management with its efforts to improve occupancy and maintain exceptional standards for our senior residents.”

Same-Store Stabilized Community Occupancy Improves Sequentially

For the 78 communities that were stabilized in the second and third quarters of 2009, average occupancy increased to 88.1 percent in the third quarter, versus 87.2 percent in the second quarter. NOI for these 78 communities was $33.0 million in the third quarter of 2009, compared to $33.7 million in the second quarter of 2009. The difference is attributable to 90 basis points of occupancy improvement, offset by higher expenses in the third quarter of 2009.

For the 76 Sunrise communities that were stabilized in the third quarters of both 2009 and 2008, total community NOI was $32.6 million in 2009, versus $34.9 million for the comparable 2008 period.

GAAP NET INCOME

Net income attributable to common stockholders for the quarter ended September 30, 2009 was $49.8 million, or $0.32 per diluted common share, after discontinued operations of $0.1 million, compared with net income attributable to common stockholders for the quarter ended September 30, 2008 of $63.8 million, or $0.45 per diluted common share, after discontinued operations of $1.6 million.

Net income attributable to common stockholders for the nine months ended September 30, 2009 was $212.4 million, or $1.40 per diluted common share, after discontinued operations of $71.4 million, compared with net income attributable to common stockholders for the nine months ended September 30, 2008 of $165.1 million, or $1.19 per diluted common share, after discontinued operations of $32.5 million.

THIRD QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS

Portfolio, Performance and Balance Sheet Highlights

Liquidity, Balance Sheet & Credit Ratings

• In October 2009, Ventas closed $58.4 million of mortgage debt at a blended annual interest rate of 5.5 percent through government-sponsored enterprises.
• At September 30, 2009, the Company had $9.7 million outstanding under its Revolving Credit Facilities; $853.0 million of undrawn availability; and $126.6 million of cash and short-term cash investments.
• In October, the Company received indications from two financial institutions that they intend to commit $125 million of additional credit capacity under the Company’s Revolving Credit Facilities to mature in 2012. As a result, the Company’s Revolving Credit Facilities would expand to $965 million. The first portion of the Revolving Credit Facilities, maturing April 26, 2012, will contain $715 million of borrowing capacity and be priced at LIBOR plus 280 basis points. The second portion of the Revolving Credit Facilities, which matures on April 26, 2010, will contain $250 million of borrowing capacity and be priced at LIBOR plus 75 basis points. There can be no assurance that the Company will receive $125 million of additional credit capacity.
• At October 28, 2009, the Company had $208.7 million of cash and short-term cash investments.
• The Company’s debt to total capitalization at September 30, 2009 was approximately 30 percent. The Company’s net debt to pro forma EBITDA at quarter end was 4.2x.
• As of October 28, 2009, the Company has $14.6 million in total debt maturities remaining in 2009 and $169.9 million in total debt maturities in 2010, excluding normal periodic principal amortization payments. Additional detail on the Company’s debt maturities can be found on the Company’s website under the “For Investors” section or at https://www.ventasreit.com/.

Investments and Dispositions

• In August 2009, the Company completed the development and commenced operations of a 75,000 rentable square foot MOB in Parker, Colorado, on the campus of Parker Adventist Hospital. The building was over 80 percent leased at completion, and was delivered on time and on budget.

Portfolio

• The 197 skilled nursing facilities and hospitals leased by the Company to Kindred Healthcare, Inc. (NYSE: KND) (“Kindred”) produced EBITDARM (earnings before interest, taxes, depreciation, amortization, rent and management fees) to actual cash rent coverage of 2.1 times for the trailing twelve-month period ended June 30, 2009 (the latest date available).

Verdict Against HCP

• On September 4, 2009, the jury unanimously rendered a verdict in favor of Ventas in its lawsuit against HCP, brought in the United States District Court for the Western District of Kentucky (the “Court”), for tortious interference with business expectation arising out of the Company’s acquisition of Sunrise Senior Living REIT (“Sunrise REIT”) in April 2007. The jury awarded the Company USD $101,672,807 in compensatory damages (100% of the damages the jury was instructed to consider), which represents the difference between the amount the Company would have paid had its Cdn $15 per unit agreement been approved by the Sunrise REIT unitholders and the amount the Company was required to pay to acquire Sunrise REIT, Cdn $16.50 per unit. The jury found that HCP employed “significantly wrongful means,” which includes conduct such as fraudulent misrepresentation, deceit and coercion, and “intended” to improperly interfere with the Company’s acquisition of Sunrise REIT. On September 8, 2009, the Court entered judgment on the jury’s verdict. Both HCP and Ventas have filed post-trial motions that are currently pending before the Court. HCP is required to post security during its post-trial motions and appeal, if any.

Additional Information

• James L. Andrews recently joined Ventas as Vice President, Hospital Business Development. In this newly created position, Jim will lead the Company’s capital deployment efforts with not-for-profit and for-profit hospitals and health systems. Jim previously worked with not-for-profit healthcare systems at, among others, Goldman, Sachs & Co. and Financial Security Assurance (FSA).
• Beginning in 2009, consistent with U.S. generally accepted accounting principles (“GAAP”), Ventas is recognizing additional non-cash interest expense in connection with the Company’s $230 million principal amount of 3⅞% convertible senior notes due 2011. This non-cash interest expense will decrease 2009 FFO per diluted share by approximately $0.01 per share per quarter. As required by GAAP, this additional non-cash interest expense is reflected in the Company’s prior period results, which have been restated for comparability.
• Supplemental information regarding the Company can be found on the Company’s website under the “For Investors” section or at https://www.ventasreit.com/.

VENTAS INCREASES GUIDANCE FOR 2009 NORMALIZED FFO PER DILUTED SHARE TO $2.62 TO $2.65

Ventas currently expects its 2009 normalized FFO per diluted share to range between $2.62 and $2.65, improving its previously announced 2009 guidance of between $2.55 and $2.62 per diluted share. Normalized FFO per diluted share in 2008 was $2.71.

The Company's normalized FFO guidance for all periods assumes that all of the Company's tenants and borrowers continue to meet all of their obligations to the Company. In addition, the Company's normalized FFO guidance (and related GAAP earnings projections) excludes (a) gains and losses on the sales of assets, (b) the impact of future unannounced acquisitions or divestitures (including pursuant to tenant options to purchase) and capital transactions, (c) merger-related costs and expenses that are not capitalized under GAAP, including expenses relating to the Company’s lawsuit against HCP, (d) net proceeds, if any, the Company may receive from its lawsuit against HCP related to the acquisition of Sunrise REIT, (e) the impact of any expenses related to asset impairment and valuation allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts or premiums incurred as a result of early retirement or payment of the Company’s debt, (f) the non-cash effect of income tax benefits or expenses, (g) deal costs and expenses and earnout payments required by GAAP to be expensed rather than capitalized into asset cost, and (h) the reversal or incurrence of contingent liabilities.

The Company's guidance is based on a number of other assumptions, which are subject to change and many of which are outside the control of the Company. If actual results vary from these assumptions, the Company's expectations may change. There can be no assurance that the Company will achieve these results.

A reconciliation of the Company's guidance to the Company's projected GAAP earnings is provided on a schedule attached to this press release. The Company may from time to time update its publicly announced guidance, but it is not obligated to do so.

THIRD QUARTER CONFERENCE CALL

Ventas will hold a conference call to discuss this earnings release today, at 9:00 a.m. Eastern Time (8:00 a.m. Central Time). The dial-in number for the conference call is (617) 614-3523. The participant passcode is “Ventas.” The conference call is being webcast live by CCBN and can be accessed at the Company’s website at www.ventasreit.com or www.earnings.com. An online replay of the webcast will be available today at approximately 12:00 p.m. Eastern Time and will be archived for one month.