VENTAS, INC. Unless otherwise indicated or except where the context otherwise requires, the terms "we," "us" and "our" and other similar terms in Item 2 of this Quarterly Report on Form 10-Q refer toVentas, Inc. and its consolidated subsidiaries. Cautionary Statements Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements regarding our or our tenants', operators', borrowers' or managers' expected future financial condition, results of operations, cash flows, funds from operations, dividends and dividend plans, financing opportunities and plans, capital markets transactions, business strategy, budgets, projected costs, operating metrics, capital expenditures, competitive positions, acquisitions, investment opportunities, dispositions, merger integration, growth opportunities, expected lease income, continued qualification as a real estate investment trust ("REIT"), plans and objectives of management for future operations, and statements that include words such as "anticipate," "if," "believe," "plan," "estimate," "expect," "intend," "may," "could," "should," "will," and other similar expressions are forward-looking statements. These forward-looking statements are inherently uncertain, and actual results may differ from our expectations. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made. Our actual future results and trends may differ materially from expectations depending on a variety of factors discussed in our filings with theSecurities and Exchange Commission ("SEC"). These factors include without limitation:
• The effects of the ongoing COVID-19 pandemic and measures intended to
prevent its spread on our business, results of operations, cash flows and
financial condition, including declines in rental revenues and increases
in operating costs in our senior housing operating portfolio,
deterioration in the financial conditions of our tenants and their ability
to satisfy their payment obligations to us, constraints in our ability to
access capital and other sources of funding and increased risk of claims,
litigation and regulatory proceedings and uncertainty that may adversely
affect us;
• The ability and willingness of our tenants, operators, borrowers, managers
and other third parties to satisfy their obligations under their
respective contractual arrangements with us, including, in some cases,
their obligations to indemnify, defend and hold us harmless from and
against various claims, litigation and liabilities;
• The ability of our tenants, operators, borrowers and managers to maintain
the financial strength and liquidity necessary to satisfy their respective
obligations and liabilities to third parties, including without limitation
obligations under their existing credit facilities and other indebtedness;
• Our success in implementing our business strategy and our ability to
identify, underwrite, finance, consummate and integrate diversifying
acquisitions and investments;
• Macroeconomic conditions such as a disruption of or lack of access to the
capital markets, changes in the debt rating on
default or delay in payment by the United States of its obligations, and
changes in the federal or state budgets resulting in the reduction or
nonpayment of Medicare or Medicaid reimbursement rates;
• The nature and extent of future competition, including new construction in
the markets in which our senior housing communities and office buildings
are located;
• The extent and effect of future or pending healthcare reform and
regulation, including cost containment measures and changes in
reimbursement policies, procedures and rates;
• Increases in our borrowing costs as a result of changes in interest rates
and other factors, including the potential phasing out of London
Inter-bank Offered Rate ("LIBOR") after 2021;
• The ability of our tenants, operators and managers, as applicable, to
comply with laws, rules and regulations in the operation of our
properties, to deliver high-quality services, to attract and retain
qualified personnel and to attract residents and patients;
28--------------------------------------------------------------------------------
• Changes in general economic conditions or economic conditions in the
markets in which we may, from time to time, compete, and the effect of
those changes on our revenues, earnings and funding sources;
• Our ability to pay down, refinance, restructure or extend our indebtedness
as it becomes due;
• Our ability and willingness to maintain our qualification as a REIT in
light of economic, market, legal, tax and other considerations;
• Final determination of our taxable net income for the year ended December
31, 2019 and for the year ending December 31, 2020 ;
• The ability and willingness of our tenants to renew their leases with us
upon expiration of the leases, our ability to reposition our properties on
the same or better terms in the event of nonrenewal or in the event we
exercise our right to replace an existing tenant, and obligations,
including indemnification obligations, we may incur in connection with the
replacement of an existing tenant;
• Risks associated with our senior housing operating portfolio, such asfactors that can cause volatility in our operating income and earnings
generated by those properties, including without limitation national and
regional economic conditions, development of new competing properties,
costs of food, materials, energy, labor and services, employee benefit
costs, insurance costs and professional and general liability claims, and
the timely delivery of accurate property-level financial results for those
properties;
• Changes in exchange rates for any foreign currency in which we may, from
time to time, conduct business;
• Year-over-year changes in the Consumer Price Index or the
Price Index and the effect of those changes on the rent escalators
contained in our leases and on our earnings;
• Our ability and the ability of our tenants, operators, borrowers andmanagers to obtain and maintain adequate property, liability and other
insurance from reputable, financially stable providers;
• The impact of damage to our properties from catastrophic weather and other
natural events and the physical effects of climate change;
• The impact of increased operating costs and uninsured professional
liability claims on our liquidity, financial condition and results of
operations or that of our tenants, operators, borrowers and managers and
our ability and the ability of our tenants, operators, borrowers and
managers to accurately estimate the magnitude of those claims;
• Risks associated with our office building portfolio and operations,
including our ability to successfully design, develop and manage office
buildings and to retain key personnel;
• The ability of the hospitals on or near whose campuses our medical office
buildings ("MOBs") are located and their affiliated health systems to
remain competitive and financially viable and to attract physicians and
physician groups;
• Risks associated with our investments in joint ventures and unconsolidated
entities, including our lack of sole decision-making authority and our
reliance on our joint venture partners' financial condition;
• Our ability to obtain the financial results expected from our development
and redevelopment projects, including projects undertaken through our
joint ventures;
• The impact of market or issuer events on the liquidity or value of our
investments in marketable securities;
• Consolidation in the senior housing and healthcare industries resulting in
a change of control of, or a competitor's investment in, one or more of
our tenants, operators, borrowers or managers or significant changes inthe senior management of our tenants, operators, borrowers or managers;
• The impact of litigation or any financial, accounting, legal or regulatory
issues that may affect us or our tenants, operators, borrowers or
managers; and
29--------------------------------------------------------------------------------
• Changes in accounting principles, or their application or interpretation,
and our ability to make estimates and the assumptions underlying the
estimates, which could have an effect on our earnings.
Many of these factors are beyond our control and the control of our management.
Brookdale Senior Living, Kindred, Atria, Sunrise and Ardent Information
Brookdale Senior Living Inc. (together with its subsidiaries, "Brookdale Senior Living") is subject to the reporting requirements of theSEC and is required to file with theSEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Brookdale Senior Living contained or referred to in this Quarterly Report on Form 10-Q has been derived fromSEC filings made by Brookdale Senior Living or other publicly available information, or was provided to us by Brookdale Senior Living, and we have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you of its accuracy. We are providing this data for informational purposes only, and you are encouraged to obtain Brookdale Senior Living's publicly available filings, which can be found on theSEC's website at www.sec.gov.Kindred Healthcare, LLC (formerlyKindred Healthcare, Inc. , together with its subsidiaries, "Kindred"),Atria Senior Living, Inc. ("Atria"),Sunrise Senior Living, LLC (together with its subsidiaries, "Sunrise") andArdent Health Partners, LLC (together with its subsidiaries, "Ardent") are not currently subject to the reporting requirements of theSEC . The information related to Kindred, Atria, Sunrise and Ardent contained or referred to in this Quarterly Report on Form 10-Q has been derived from publicly available information or was provided to us by Kindred, Atria, Sunrise or Ardent, as the case may be, and we have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you of its accuracy.
Company Overview
We are a REIT with a highly diversified portfolio of senior housing, research and innovation, and healthcare properties located throughoutthe United States ,Canada and theUnited Kingdom . As ofMarch 31, 2020 , we owned or managed through unconsolidated joint ventures approximately 1,200 properties (including properties classified as held for sale), consisting of senior housing communities, MOBs, research and innovation centers, inpatient rehabilitation facilities ("IRFs") and long-term acute care facilities ("LTACs"), and health systems. We also had 22 properties under development, including four properties that are owned by unconsolidated real estate entities. We are an S&P 500 company headquartered inChicago, Illinois . We primarily invest in senior housing, research and innovation, and healthcare properties through acquisitions and lease our properties to unaffiliated tenants or operate them through independent third-party managers. As ofMarch 31, 2020 , we leased a total of 412 properties (excluding properties within our office operations reportable business segment) to various healthcare operating companies under "triple-net" or "absolute-net" leases that obligate the tenants to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures. Our three largest tenants, Brookdale Senior Living, Ardent and Kindred leased from us 122 properties (excluding two properties managed by Brookdale Senior Living pursuant to long-term management agreements), 11 properties and 32 properties, respectively, as ofMarch 31, 2020 . As ofMarch 31, 2020 , pursuant to long-term management agreements, we engaged independent operators, such as Atria and Sunrise, to manage 405 senior housing communities for us. Through ourLillibridge Healthcare Services, Inc. subsidiary and our ownership interest inPMB Real Estate Services LLC , we also provide MOB management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughoutthe United States . In addition, from time to time, we make secured and non-mortgage loans and other investments relating to senior housing and healthcare operators or properties. We aim to enhance shareholder value by delivering consistent, superior total returns through a strategy of: (1) generating reliable and growing cash flows; (2) maintaining a balanced, diversified portfolio of high-quality assets; and (3) preserving our financial strength, flexibility and liquidity. Our ability to access capital in a timely and cost effective manner is critical to the success of our business strategy because it affects our ability to satisfy existing obligations, including the repayment of maturing indebtedness, and to make future investments. Factors such as general market conditions, interest rates, credit ratings on our securities, expectations of 30 -------------------------------------------------------------------------------- our potential future earnings and cash distributions, and the trading price of our common stock that are beyond our control and fluctuate over time all impact our access to and cost of external capital. For that reason, we generally attempt to match the long-term duration of our investments in real property with long-term financing through the issuance of shares of our common stock or the incurrence of long-term fixed rate debt.
COVID-19 Update
In
Starting in March, the COVID-19 pandemic and measures to prevent its spread began to affect us in a number of ways. In our senior living operating portfolio, March occupancy trended lower in the second half of the month as government policies and implementation of infection control best practices began to materially limit or close communities to new resident move-ins. In addition, starting in mid-March, operating costs began to rise materially, including for services, labor and personal protective equipment and other supplies, as our operators took appropriate actions to protect residents and caregivers. These trends accelerated in April, and are expected to continue through at least May, impacting revenues and net operating income in the second quarter. Our triple-net senior housing tenants experienced similar trends, which has put them under increased operational and financial pressure. While we collected substantially all triple-net senior housing rent we expected to receive in March and April, we have given and may continue to provide financial support to these tenants in the form of rent deferrals and application of portions of lease deposits to fulfill payment obligations. Without financial support or other government assistance, certain of our triple-net senior housing tenants will likely experience worsening financial conditions through the second quarter, which would pressure their rent coverage ratios and may affect their ability to pay us contractual rent in full on a timely basis. In our office operations segment and healthcare triple-net leased properties business, we collected substantially all rent due in the first quarter. In April, we collected substantially all rent due from our healthcare triple-net leased tenants. This cohort of tenants has benefitted from significant government financial support to partially offset the direct financial impact of the COVID-19 pandemic on healthcare providers. In our office operations segment, we received 96% of anticipated rent in April. We expect the majority of remaining unpaid April rent to ultimately be collectible. In our office operations segment, most markets have transitioned to virtual tours and our tenant retention increased in April as many tenants have delayed or canceled move-outs as a result of the COVID-19 pandemic. In March, we took precautionary steps to increase liquidity and preserve financial flexibility in light of the uncertainty resulting from the COVID-19 pandemic. OnMarch 12, 2020 , we provided notice to the lenders under our$3.0 billion unsecured revolving credit facility to borrow$2.75 billion under the facility. A total of$2.9 billion is currently outstanding under the facility. InMarch 2020 , we added to this liquidity by issuing$500.0 million aggregate principal amount of 4.75% senior notes due 2030. The notes were settled and proceeds were received inApril 2020 . We had approximately$3.2 billion in cash and cash equivalents on hand as ofMay 6, 2020 , with negligible near-term debt maturing and no pending, unfunded or unannounced acquisitions. In order to conserve capital, we have reduced expected capital expenditures for 2020 by$0.3 billion to a new expected total of$0.5 billion , mainly through pausing certain ground-up developments that were not yet substantially underway. We are also reviewing our general and administrative expenses to identify additional opportunities to reduce operating costs. The federal government, as well as state and local governments, have implemented or announced programs to provide financial and other support to businesses affected by the COVID-19 pandemic, some of which benefit or could benefit our company, tenants, operators, borrowers and managers. While these government assistance programs are not expected to fully offset the negative financial impact of the pandemic, and there can be no assurance that these programs will continue or the extent to which they will be expanded, we are monitoring them closely and have been in active dialogue with our tenants, operators, borrowers and managers regarding ways in which these programs could benefit them or us. We expect the trends highlighted above with respect to the impact of the COVID-19 pandemic to continue and, in some cases, accelerate. The extent of the COVID-19 pandemic's continued effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, the pace at which jurisdictions across the country re-open and restrictions begin to lift, the availability of government financial support to our business, tenants and operators and whether a resurgence of the outbreak occurs. Due to these uncertainties, we are not able at this time to 31 --------------------------------------------------------------------------------
estimate the ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows but it could be material.
2020 Highlights
Investments and Dispositions
• In
that focuses on investments in life science, medical office and senior
housing real estate. We are the manager and general partner of the Fund
and have retained a 21% interest in the Fund. To seed the Fund, we
contributed six (two of which are on the same campus) stabilized research
and innovation and medical office properties comprising 1.2 million square
feet of space. We received cash consideration of
recognized a gain on the transactions of
than $0.7 billion in assets under management and third-party equity
commitments of approximately $0.65 billion from globally respected
institutional investors as of March 31, 2020 .
• During the three months ended
proceeds of
of seven loans receivable with a weighted average interest rate of 8.4%
that were due to mature between 2020 and 2024, resulting in total gains of
$1.4 million .
• During the three months ended
aggregate consideration of $9.2 million and we recognized a gain on the
sale of these assets of $2.8 million .
Liquidity
• In
light of the current uncertainty resulting from the COVID-19 pandemic, we
drew
facility and our wholly-owned subsidiary,
Partnership ("
amount of 4.75% senior notes due 2030. The notes were settled and proceeds
were received in
Portfolio
• Following the end of the quarter, we completed a transaction with
affiliates of Holiday Retirement (collectively, "Holiday"), including (a)
entry into a new, terminable management agreement with Holiday Management
Company for our 26 independent living assets previously subject to a
triple-net lease (the "Holiday Lease") with Holiday; (b) termination of
the Holiday Lease; and (c) our receipt from Holiday of approximately $34
million in cash and
expect to recognize income in the amount equal to the cash received and
the fair value of the notes and expect to record expenses including a
million write-off of the accrued straight-line receivable related to the
Holiday Lease. The transaction was effective as of April 1, 2020 .
32--------------------------------------------------------------------------------
Concentration Risk
We use concentration ratios to identify, understand and evaluate the potential
impact of economic downturns and other adverse events that may affect our asset
types, geographic locations, business models, and tenants, operators and
managers. We evaluate concentration risk in terms of investment mix and
operations mix. Investment mix measures the percentage of our investments that
is concentrated in a specific asset type or that is operated or managed by a
particular tenant, operator or manager. Operations mix measures the percentage
of our operating results that is attributed to a particular tenant, operator or
manager, geographic location or business model. The following tables reflect our
concentration risk as of the dates and for the periods presented:
As of March 31, 2020 As of December 31, 2019
Investment mix by asset type(1):
Senior housing communities 63.6 % 62.2 %
MOBs 19.1 19.3
Research and innovation centers 7.4 8.7
Health systems 5.3 5.1
IRFs and LTACs 1.7 1.6
Skilled nursing facilities ("SNFs") 0.7 0.7
Secured loans receivable and investments, net 2.2 2.4
Investment mix by tenant, operator and manager(1):
Atria 20.8 % 20.4 %
Sunrise 10.6 10.3
Brookdale Senior Living 7.9 7.7
Ardent 4.9 4.7
Kindred 1.1 1.0
All other 54.7 55.9
(1) Ratios are based on the gross book value of consolidated real estate
investments (excluding properties classified as held for sale) as of each
reporting date.
33
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For the Three
Months Ended
2020 2019
Operations mix by tenant and operator and business model:
Revenues(1):
Senior living operations 57.0 % 55.3 %
Brookdale Senior Living(2) 4.6 4.8
Ardent 3.0 3.1
Kindred 3.2 3.4
All others 32.2 33.4
Adjusted EBITDA:
Senior living operations 33.1 % 32.9 %
Brookdale Senior Living(2) 9.3 7.6
Ardent 6.1 5.0
Kindred 6.5 5.4
All others 45.0 49.1
Net operating income ("NOI")
Senior living operations 31.7 % 31.4 %
Brookdale Senior Living(2) 8.8 8.8
Ardent 5.8 5.7
Kindred 6.2 6.2
All others 47.5 47.9
Operations mix by geographic location(3):
California 15.3 % 16.3 %
New York 8.6 9.1
Texas 5.7 6.3
Pennsylvania 4.7 4.8
Florida 4.2 4.1
All others 61.5 59.4
(1) Total revenues include office building and other services revenue, revenue
from loans and investments and interest and other income (excluding
amounts in discontinued operations and including amounts related to assets
classified as held for sale).
(2) Excludes two senior housing communities which are included in the senior
living operations reportable business segment.
(3) Ratios are based on total revenues (excluding amounts in discontinued
operations and including amounts related to assets classified as held for
sale) for each period presented.
See "Non-GAAP Financial Measures" included elsewhere in this 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 Adjusted EBITDA and NOI, respectively.
Triple-Net Lease Expirations
If our tenants are not able or willing to renew our triple-net leases upon expiration, we may be unable to reposition the applicable properties on a timely basis or on the same or better economic terms, if at all. Although our lease expirations are staggered, the non-renewal of some or all of our triple-net leases that expire in any given year could have a material adverse effect on our business, financial condition, results of operations and liquidity, our ability to service our indebtedness and other obligations and our ability to make distributions to our stockholders, as required for us to continue to qualify as a REIT (a "Material Adverse Effect"). During the three months endedMarch 31, 2020 , we had no triple-net lease renewals or expirations without renewal that, in the aggregate, had a material impact on our financial condition or results of operations for that period. 34
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Critical Accounting Policies and Estimates
Our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q have been prepared in accordance withU.S. generally accepted accounting principles ("GAAP") for interim financial information set forth in the Accounting Standards Codification ("ASC"), as published by theFinancial Accounting Standards Board ("FASB"), and with theSEC instructions to Form 10-Q and Article 10 of Regulation S-X. GAAP requires us to make estimates and assumptions regarding future events that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base these estimates on our experience and assumptions we believe to be reasonable under the circumstances. However, if our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, we may have applied a different accounting treatment, resulting in a different presentation of our financial statements. We periodically reevaluate our estimates and assumptions, and in the event they prove to be different from actual results, we make adjustments in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Our Annual Report on Form 10-K for the year endedDecember 31, 2019 , filed with theSEC onFebruary 24, 2020 , contains further information regarding the critical accounting policies that affect our more significant estimates and judgments used in the preparation of our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. There have been no material changes to these policies in 2020. Please refer to "Note 2 - Accounting Policies" of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding recently adopted accounting standards.
Results of Operations
As ofMarch 31, 2020 , we operated through three reportable business segments: triple-net leased properties, senior living operations and office operations. In our triple-net leased properties segment, we invest in and own senior housing and healthcare properties throughoutthe United States and theUnited Kingdom and lease those properties to healthcare operating companies under "triple-net" or "absolute-net" leases that obligate the tenants to pay all property-related expenses. In our senior living operations segment, we invest in senior housing communities throughoutthe United States andCanada and engage independent operators, such as Atria and Sunrise, to manage those communities. In our office operations segment, we primarily acquire, own, develop, lease and manage MOBs and research and innovation centers throughout theUnited States. Information provided for "all other" includes income from loans and investments and other miscellaneous income and various corporate-level expenses not directly attributable to any of our three reportable business segments. Assets included in "all other" consist primarily of corporate assets, including cash, restricted cash, loans receivable and investments, and miscellaneous accounts receivable. Our chief operating decision makers evaluate performance of the combined properties in each reportable business segment and determine how to allocate resources to those segments, in significant part, based on segment NOI and related measures. For further information regarding our reportable business segments and a discussion of our definition of segment NOI, see "Note 15 - Segment Information" of the Notes to Consolidated Financial Statements included in Part I, Item 1 of 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. 35 --------------------------------------------------------------------------------
Three Months Ended
The table below shows our results of operations for the three months ended
For the Three Months Ended (Decrease) Increase
March 31, to Net Income
2020 2019 $ %
(Dollars in thousands)
Segment NOI:
Triple-net leased properties $ 188,531 $ 192,635 $ (4,104 ) (2.1 )%
Senior living operations 166,639 160,461 6,178 3.9
Office operations 145,336 140,485 4,851 3.5
All other 25,000 17,869 7,131 39.9
Total segment NOI 525,506 511,450 14,056 2.7
Interest and other income 4,853 287 4,566 nm
Interest expense (116,696 ) (110,619 ) (6,077 ) (5.5 )
Depreciation and amortization (248,837 ) (235,920 ) (12,917 ) (5.5 )
General, administrative and
professional fees (42,535 ) (40,760 ) (1,775 ) (4.4 )
Loss on extinguishment of debt, net - (405 ) 405 nm
Merger-related expenses and deal costs (8,218 ) (2,180 )
(6,038 ) nm
Other (3,708 ) (23 ) (3,685 ) nm
Income before unconsolidated entities,
real estate dispositions, income taxes
and noncontrolling interests 110,365 121,830 (11,465 ) (9.4 )
Loss from unconsolidated entities (10,876 ) (946 ) (9,930 ) nm
Gain on real estate dispositions 226,225 5,447 220,778 nm
Income tax benefit 149,016 1,257 147,759 nm
Income from continuing operations 474,730 127,588 347,142 nm
Net income 474,730 127,588 347,142 nm
Net income attributable to
noncontrolling interests 1,613 1,803 190 10.5
Net income attributable to common
stockholders $ 473,117 $ 125,785 347,332 nm
nm - not meaningful
The following table summarizes results of operations in our triple-net leased properties reportable business segment, including assets sold or classified as held for sale as ofMarch 31, 2020 , but excluding assets whose operations were classified as discontinued operations. For the Three Months Ended (Decrease) Increase March 31, to Segment NOI 2020 2019 $ % (Dollars in thousands)Segment NOI-Triple-Net Leased Properties : Rental income$ 194,862 $ 200,068 $ (5,206 ) (2.6 )% Less: Property-level operating expenses (6,331 ) (7,433 ) 1,102 14.8 Segment NOI$ 188,531 $ 192,635 (4,104 ) (2.1 ) In our triple-net leased properties reportable business segment, our revenues generally consist of fixed rental amounts (subject to annual contractual escalations) received from our tenants in accordance with the applicable lease terms. We report revenues and property-level operating expenses within our triple-net leased properties reportable business segment for real estate tax and insurance expenses that are paid from escrows collected from our tenants. 36 --------------------------------------------------------------------------------
The segment NOI decrease in our triple-net leased portfolio was primarily driven by 2019 transitions from our triple-net portfolio to our senior housing operating portfolio, partially offset by annual rent escalations due to contractual increases pursuant to the terms of our leases.
Occupancy rates may affect the profitability of our tenants' operations. For senior housing communities and post-acute properties in our triple-net leased properties reportable business segment, occupancy generally reflects average operator-reported unit and bed occupancy, respectively, for the reporting period. Because triple-net financials are delivered to us following the reporting period, occupancy is reported in arrears. The following table sets forth average continuing occupancy rates related to the triple-net leased properties we owned atMarch 31, 2020 and 2019 for the fourth quarter of 2019 and 2018, respectively. The table excludes non-stabilized properties, properties owned through investments in unconsolidated entities, certain properties for which we do not receive occupancy information and properties acquired or properties that transitioned operators for which we do not have a full quarter of occupancy results. Average Average Occupancy Occupancy Number of for the Number of for the Properties Three Months Properties Three Months Owned at Ended Owned at Ended March 31, December 31, March 31, December 31, 2020 2019 2019 2018 Senior housing communities 329 86.2% 351 84.9% SNFs 16 87.6 17 85.2 IRFs and LTACs 36 51.5 36 52.0 The following table compares results of operations for our 400 same-store triple-net leased properties. See "Non-GAAP Financial Measures-NOI" included elsewhere in this Quarterly Report on Form 10-Q for additional disclosure regarding same-store NOI. For the Three Months Ended March 31, Increase to Segment NOI 2020 2019 $ % (Dollars in thousands) Same-Store Segment NOI-Triple-Net Leased Properties: Rental income$ 193,375 $ 190,975 $ 2,400 1.3 % Less: Property-level operating expenses (6,295 ) (7,157 ) 862 12.0 Segment NOI$ 187,080 $ 183,818 3,262 1.8
The segment NOI increase in our same-store triple net leased portfolio was primarily driven by annual rent escalations due to contractual increases pursuant to the terms of our leases.
Segment NOI-Senior Living Operations
The following table summarizes results of operations in our senior living operations reportable business segment, including assets sold or classified as held for sale as ofMarch 31, 2020 , but excluding assets whose operations were classified as discontinued operations. For senior housing communities in our senior living operations reportable business segment, occupancy generally reflects average operator-reported unit occupancy for the reporting period. For the Three Months Ended Increase (Decrease) March 31, to Segment NOI 2020 2019 $ % (Dollars in thousands) Segment NOI-Senior Living Operations: Resident fees and services$ 576,770 $ 521,447 $ 55,323 10.6 % Less: Property-level operating expenses (410,131 ) (360,986 ) (49,145 ) (13.6 ) Segment NOI$ 166,639 $ 160,461 6,178 3.9 Average Unit Occupancy for the Average Monthly Revenue Per Number of Properties at Three Months Ended Occupied Room For the Three March 31, March 31, Months Ended March 31, 2020 2019 2020 2019 2020 2019
Total communities 400 358 86.6 % 86.4 %$ 5,056 $ 5,797 37
-------------------------------------------------------------------------------- Resident fees and services include all amounts earned from residents at our senior housing communities, such as rental fees related to resident leases, extended health care fees and other ancillary service income. Property-level operating expenses related to our senior living operations segment include labor, food, utilities, marketing, management and other costs of operating the properties. The segment NOI increase in our senior housing operating portfolio was primarily driven by the 2019 acquisition of an 87% interest in 34 Canadian senior housing communities via an equity partnership with LeGroupe Maurice , in addition to 2019 property transitions from our triple-net leased portfolio to our senior housing operating portfolio.
The following table compares results of operations for our 335 same-store senior living operating communities.
For the Three Months Ended Decrease
March 31, to Segment NOI
2020 2019 $ %
(Dollars in thousands)
Same-Store Segment NOI-Senior Living
Operations:
Resident fees and services $ 495,102 $ 496,024 $ (922 ) (0.2 )%
Less: Property-level operating expenses (353,760 ) (338,201 ) (15,559 ) (4.6 )
Segment NOI $ 141,342 $ 157,823 (16,481 ) (10.4 )
Average UnitOccupancy for the Average Monthly Revenue Per
Number of Properties at Three Months Ended Occupied Room For the Three
March 31, March 31, Months Ended March 31,
2020 2019 2020 2019 2020 2019
Same-store communities 335 335 85.5 %
87.0 %
The segment NOI decrease in our same-store senior housing operating portfolio was primarily driven by a lower occupancy starting point entering the year, the impact of cumulative supply and, beginning in mid-March, an estimated$6 million in increased COVID-19 related labor and supply costs.
Segment NOI-Office Operations
The following table summarizes results of operations in our office operations reportable business segment, including assets sold or classified as held for sale as ofMarch 31, 2020 , but excluding assets whose operations were classified as discontinued operations. For properties in our office operations reportable business segment, occupancy generally reflects occupied square footage divided by net rentable square footage as of the end of the reporting period. For the Three Months Ended Increase (Decrease) March 31, to Segment NOI 2020 2019 $ % (Dollars in thousands) Segment NOI-Office Operations: Rental income$ 208,395 $ 201,428 $ 6,967 3.5 % Office building services costs 2,174 1,775 399 22.5 Total revenues 210,569 203,203 7,366 3.6
Less:
Property-level operating expenses (64,506 ) (62,085 ) (2,421 ) (3.9 ) Office building services costs (727 ) (633 ) (94 ) (14.8 ) Segment NOI$ 145,336 $ 140,485 4,851 3.5 Annualized Average Rent Per Occupied Square Foot Number of Properties at for the Three Months Ended March 31, Occupancy at March 31, March 31, 2020 2019 2020 2019 2020 2019 Total office buildings 377 385 90.2 % 90.1 %$ 34 $ 33 38
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Office operations grew due to active leasing at recently developed properties,
increasing tenant retention, contractual rent increases, acquisitions and
business interruption insurance proceeds received in the first quarter of 2020,
partially offset by assets sold in the quarter.
The following table compares results of operations for our 359 same-store office
buildings.
For the Three Months Ended Increase (Decrease)
March 31, to Segment NOI
2020 2019 $ %
(Dollars in thousands)
Same-Store Segment NOI-Office Operations:
Rental income $ 184,999 $ 179,065 $ 5,934 3.3 %
Less: Property-level operating expenses (57,311 ) (55,954 )
(1,357 ) (2.4 )
Segment NOI $ 127,688 $ 123,111 4,577 3.7
Annualized Average Rent Per
Occupied Square Foot
Number of Properties at Occupancy at for the Three Months Ended
March 31, March 31, March 31,
2020 2019 2020 2019 2020 2019
Same-store office buildings 359 359 91.4 % 90.3 % $ 33 $ 32 Same-store operations increases in the first quarter of 2020 over the same period in 2019 were driven by strong tenant retention, rent escalators and increased occupancy.
All Other
Information provided for all other segment NOI includes income from loans and investments and other miscellaneous income not directly attributable to any of our three reportable business segments. The$7.1 million increase in all other segment NOI for the three months endedMarch 31, 2020 over the same period in 2019 is primarily due to income from 2019 loans receivable investments and gains from first quarter 2020 loans receivable repayments.
Interest and Other Income
The
Interest Expense
The$6.1 million increase in total interest expense for the three months endedMarch 31, 2020 compared to the same period in 2019 is attributable to an increase of$17.0 million due to higher debt balances, partially offset by a decrease of$11.3 million due to a lower effective interest rate and increased capitalized interest. Our weighted average effective interest rate was 3.5% and 3.9% for the three months endedMarch 31, 2020 and 2019, respectively. Capitalized interest for the three months endedMarch 31, 2020 and 2019 was$2.9 million and$2.0 million , respectively.
Depreciation and Amortization
Depreciation and amortization expense related to continuing operations increased$12.9 million during the three months endedMarch 31, 2020 compared to the same period in 2019 primarily due to asset acquisitions, net of dispositions.
Merger-Related Expenses and Deal Costs
The
39
--------------------------------------------------------------------------------Other
The
Loss from Unconsolidated Entities
The$9.9 million increase in loss from unconsolidated entities during the three months endedMarch 31, 2020 compared to the same period in 2019 is primarily due to our share of non-cash income tax expense from one of our unconsolidated entities.
Gain on Real Estate Dispositions
The
Income Tax Benefit The$147.8 million increase in income tax benefit related to continuing operations for the three months endedMarch 31, 2020 compared to the same period in 2019 is primarily due to a$152.9 million net deferred tax benefit related to the internal restructuring of certain US taxable REIT subsidiaries completed within the first quarter of 2020. The benefit resulted from the transfer of assets subject to certain deferred tax liabilities from taxable REIT subsidiaries to the entities other than the TRS entities in this tax-free transaction.
Non-GAAP Financial Measures
We consider certain non-GAAP financial measures to be useful supplemental measures of our operating performance. A non-GAAP financial measure is a measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are not so excluded from or included in the most directly comparable measure calculated and presented in accordance with GAAP. Described below are the non-GAAP financial measures used by management to evaluate our operating performance and that we consider most useful to investors, together with reconciliations of these measures to the most directly comparable GAAP measures. The non-GAAP financial measures we present in this Quarterly Report on Form 10-Q may not be comparable to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. You should not consider these measures as alternatives to net income attributable to common stockholders (determined in accordance with GAAP) as indicators of our financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of our liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine these measures in conjunction with net income attributable to common stockholders as presented in our Consolidated Financial Statements and other financial data included elsewhere in this Quarterly Report on Form 10-Q.
Funds From Operations and Normalized Funds From Operations
Historical cost accounting for real estate assets implicitly assumes that the
value of real estate assets diminishes predictably over time. However, since
real estate values historically have risen or fallen with market conditions,
many industry investors deem presentations of operating results for real estate
companies that use historical cost accounting to be insufficient by themselves.
For that reason, we consider Funds From Operations ("FFO") and normalized FFO to
be appropriate supplemental measures of operating performance of an equity REIT.
In particular, we believe that normalized FFO is useful because it allows
investors, analysts and our management to compare our operating performance to
the operating performance of other real estate companies and between periods on
a consistent basis without having to account for differences caused by
non-recurring items and other non-operational events such as transactions and
litigation. In some cases, we provide information about identified non-cash
components of FFO and normalized FFO because it allows investors, analysts and
our management to assess the impact of those items on our financial results.
We use the National Association of Real Estate Investment Trusts ("Nareit")
definition of FFO. Nareit defines FFO as net income attributable to common
stockholders (computed in accordance with GAAP), excluding gains or losses from
sales of real estate property, including gains or losses on re-measurement of
equity method investments, and impairment write-downs of
40
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depreciable real estate, plus real estate depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures will be
calculated to reflect FFO on the same basis. We define normalized FFO as FFO
excluding the following income and expense items (which may be recurring in
nature): (a) merger-related costs and expenses, including amortization of
intangibles, transition and integration expenses, and deal costs and expenses,
including expenses and recoveries relating to acquisition lawsuits; (b) the
impact of any expenses related to asset impairment and valuation allowances, the
write-off of unamortized deferred financing fees, or additional costs, expenses,
discounts, make-whole payments, penalties or premiums incurred as a result of
early retirement or payment of our debt; (c) the non-cash effect of income tax
benefits or expenses, the non-cash impact of changes to our executive equity
compensation plan, derivative transactions that have non-cash mark-to-market
impacts on our Consolidated Statements of Income and non-cash charges related to
lease terminations; (d) the financial impact of contingent consideration,
severance-related costs and charitable donations made to the Ventas Charitable
Foundation ; (e) gains and losses for non-operational foreign currency hedge
agreements and changes in the fair value of financial instruments; (f) gains and
losses on non-real estate dispositions and other unusual items related to
unconsolidated entities; (g) expenses related to the re-audit and re-review in
2014 of our historical financial statements and related matters; and (h) net
expenses or recoveries related to natural disasters.
The following table summarizes our FFO and normalized FFO for the three months
ended March 31, 2020 and 2019. The increase in normalized FFO for the three
months ended March 31, 2020 over the same period in 2019 is principally due to
higher interest income from loans and investments and the positive impact of our
2019 acquisition of an 87% interest in 34 Canadian senior housing communities
via an equity partnership with Le Groupe Maurice , partially offset by increases
in interest expense and higher supplies and labor costs as a result of COVID-19.
See "COVID-19 Update."
For the Three Months Ended March 31,
2020 2019
(In thousands)
Net income attributable to common stockholders $ 473,117 $ 125,785
Adjustments:
Real estate depreciation and amortization 247,330 234,471
Real estate depreciation related to noncontrolling interests
(3,843 ) (1,834 )
Real estate depreciation related to unconsolidated entities
561 165
Gain on real estate dispositions related to
unconsolidated entities - (799 )
(Loss) gain on real estate dispositions related to noncontrolling interests
(6 ) 354
Gain on real estate dispositions (226,225 ) (5,447 )
FFO attributable to common stockholders 490,934 352,695
Adjustments:
Change in fair value of financial instruments (10 ) (38 ) Non-cash income tax benefit (140,895 ) (1,714 ) Loss on extinguishment of debt, net - 405 Loss on non-real estate dispositions related to unconsolidated entities 239 - Merger-related expenses, deal costs and re-audit costs 8,773 2,829 Amortization of other intangibles 118 121 Other items related to unconsolidated entities (875 ) 1,038 Non-cash impact of changes to equity plan 6,895 2,334 Natural disaster expenses (recoveries), net 941 (1,539 )
Normalized FFO attributable to common stockholders $ 366,120
$ 356,131
41--------------------------------------------------------------------------------
Adjusted EBITDA
We consider Adjusted EBITDA an important supplemental measure because it
provides another manner in which to evaluate our operating performance and
serves as another indicator of our credit strength and our ability to service
our debt obligations. We define Adjusted EBITDA as consolidated earnings, which
includes amounts in discontinued operations, before interest, taxes,
depreciation and amortization (including non-cash stock-based compensation
expense), excluding gains or losses on extinguishment of debt, our consolidated
joint venture partners' share of EBITDA, merger-related expenses and deal costs,
expenses related to the re-audit and re-review in 2014 of our historical
financial statements, net gains or losses on real estate activity, gains or
losses on re-measurement of equity interest upon acquisition, changes in the
fair value of financial instruments, unrealized foreign currency gains or
losses, net expenses or recoveries related to natural disasters and non-cash
charges related to lease terminations, and including our share of EBITDA from
unconsolidated entities and adjustments for other immaterial or identified
items. The following table sets forth a reconciliation of net income
attributable to common stockholders to Adjusted EBITDA:
For the Three Months Ended March 31,
2020 2019
(In thousands)
Net income attributable to common stockholders $ 473,117 $ 125,785
Adjustments:
Interest 116,696 110,619
Loss on extinguishment of debt, net - 405
Taxes (including tax amounts in general, administrative and professional fees)
(147,707 ) 114
Depreciation and amortization 248,837 235,920
Non-cash stock-based compensation expense 10,514 8,405
Merger-related expenses, deal costs and re-audit costs 8,218 2,191
Net income attributable to noncontrolling interests, adjusted for consolidated joint venture partners' share of EBITDA
(6,098 ) (2,874 )
Loss from unconsolidated entities, adjusted for Ventas share of EBITDA from unconsolidated entities
17,733 7,758
Gain on real estate dispositions (226,225 ) (5,447 )
Unrealized foreign currency gains (73 ) (427 )
Change in fair value of financial instruments (9 ) (53 )
Natural disaster expenses (recoveries), net 783 (1,649 )
Adjusted EBITDA $ 495,786 $ 480,747
42--------------------------------------------------------------------------------
NOI
We also consider NOI an important supplemental measure because it allows
investors, analysts and our management to assess our unlevered property-level
operating results and to compare our operating results with those of other real
estate companies and between periods on a consistent basis. We define NOI as
total revenues, less interest and other income, property-level operating
expenses and office building services costs. Cash receipts may differ due to
straight-line recognition of certain rental income and the application of other
GAAP policies. The following table sets forth a reconciliation of net income
attributable to common stockholders to NOI:
For the Three Months Ended March 31,
2020 2019
(In thousands)
Net income attributable to common stockholders $ 473,117 $ 125,785
Adjustments:
Interest and other income (4,853 ) (287 )
Interest 116,696 110,619
Depreciation and amortization 248,837 235,920
General, administrative and professional fees 42,535 40,760
Loss on extinguishment of debt, net - 405
Merger-related expenses and deal costs 8,218 2,180
Other 3,708 23
Net income attributable to noncontrolling interests 1,613 1,803
Loss from unconsolidated entities 10,876 946
Income tax benefit (149,016 ) (1,257 )
Gain on real estate dispositions (226,225 ) (5,447 )
NOI $ 525,506 $ 511,450
See "Results of Operations" for discussions regarding both segment NOI and
same-store segment NOI. We define same-store as properties owned, consolidated
and operational for the full period in both comparison periods and are not
otherwise excluded; provided, however, that we may include selected properties
that otherwise meet the same-store criteria if they are included in
substantially all of, but not a full, period for one or both of the comparison
periods, and in our judgment such inclusion provides a more meaningful
presentation of our portfolio performance. Newly acquired or recently developed
or redeveloped properties in our senior living operations segment will be
included in same-store once they are stabilized for the full period in both
periods presented. These properties are considered stabilized upon the earlier
of (a) the achievement of 80% sustained occupancy or (b) 24 months from the date
of acquisition or substantial completion of work. Recently developed or
redeveloped properties in our office operations and triple-net leased properties
segments will be included in same-store once substantial completion of work has
occurred for the full period in both periods presented. Our senior living
operations and triple-net leased properties that have undergone operator or
business model transitions will be included in same-store once operating under
consistent operating structures for the full period in both periods presented.
Properties are excluded from same-store if they are: (i) sold, classified as
held for sale or properties whose operations were classified as discontinued
operations in accordance with GAAP; (ii) impacted by materially disruptive
events such as flood or fire; (iii) those properties that are currently
undergoing a materially disruptive redevelopment; (iv) for our office
operations, those properties for which management has an intention to institute
a redevelopment plan because the properties may require major property-level
expenditures to maximize value, increase NOI, or maintain a market-competitive
position and/or achieve property stabilization; or (v) for the senior living
operations and triple-net leased segments, those properties that are scheduled
to undergo operator or business model transitions, or have transitioned
operators or business models after the start of the prior comparison period.
To eliminate the impact of exchange rate movements, all same-store NOI measures
assume constant exchange rates across comparable periods, using the following
methodology: the current period's results are shown in actual reported USD,
while prior comparison period's results are adjusted and converted to USD based
on the average exchange rate for the current period.
43
--------------------------------------------------------------------------------Liquidity and Capital Resources
During the three months endedMarch 31, 2020 , our principal sources of liquidity were cash flows from operations, proceeds from the issuance of debt securities, borrowings under our unsecured revolving credit facility, proceeds from asset sales and cash on hand. For the next 12 months, our principal liquidity needs are to: (i) fund operating expenses; (ii) meet our debt service requirements; (iii) repay maturing mortgage and other debt; (iv) fund acquisitions, investments and commitments and any development and redevelopment activities; (v) fund capital expenditures; and (vi) make distributions to our stockholders and unitholders, as required for us to continue to qualify as a REIT. We expect that these liquidity needs generally will be satisfied by a combination of the following: cash flows from operations, cash on hand, debt assumptions and financings (including secured financings), issuances of debt and equity securities, dispositions of assets (in whole or in part through joint venture arrangements with third parties) and borrowings under our revolving credit facilities and commercial paper program. However, an inability to access liquidity through multiple capital sources concurrently could have a Material Adverse Effect on us. In addition, while continuing decreased revenue and net operating income as a result of the COVID-19 pandemic could lead to downgrades of our long-term credit rating and therefore adversely impact our cost of borrowing, we currently believe we will continue to have access to one or more debt markets during the duration of the pandemic and could seek to enter into secured debt financings or issue debt and equity securities to satisfy our liquidity needs, although no assurances can be made in this regard. See "COVID-19 Update."
See "Note 9 - Senior Notes Payable And Other Debt" of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information regarding our significant financing activities.
Credit Facilities, Commercial Paper and Unsecured Term Loans
Our unsecured credit facility is comprised of a$3.0 billion unsecured revolving credit facility priced at LIBOR plus 0.875% as ofMarch 31, 2020 . The unsecured revolving credit facility matures inApril 2021 , but may be extended at our option subject to the satisfaction of certain conditions, including all representations and warranties being correct in all material respects with no existing defaults, for two additional periods of six months each toApril 2022 . The unsecured revolving credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to$3.75 billion . Our wholly-owned subsidiary,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 inthe United States commercial paper note market and are ranked pari passu with all ofVentas Realty's other unsecured senior indebtedness. The notes are fully and unconditionally guaranteed byVentas, Inc. As ofMarch 31, 2020 , we had no borrowings outstanding under our commercial paper program. As ofMarch 31, 2020 ,$2.9 billion was outstanding under the unsecured revolving credit facility with an additional$24.0 million restricted to support outstanding letters of credit. See "COVID-19 Update." We had$87.9 million in available liquidity under the unsecured revolving credit facility as ofMarch 31, 2020 .
As of
As of
As ofMarch 31, 2020 , we had a$400.0 million secured revolving construction credit facility with$152.4 million of borrowings outstanding. The secured revolving construction credit facility matures in 2022 and is primarily used to finance the development of research and innovation centers and other construction projects.
Senior Notes
InMarch 2020 ,Ventas Realty issued$500.0 million aggregate principal amount of 4.75% senior notes due 2030 at a public offering price equal to 97.86% of par. The notes were settled and proceeds were received inApril 2020 . 44 --------------------------------------------------------------------------------
Equity Offerings
From time to time, we may sell up to an aggregate of$1.0 billion of our common stock under an "at-the-market" equity offering program ("ATM program"). During the three months endedMarch 31, 2020 , we sold no shares of common stock under our ATM program. As ofMarch 31, 2020 ,$822.1 million of our common stock remained available for sale under our ATM program.
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. Cash Flows
The following table sets forth our sources and uses of cash flows:
For the Three Months Ended March 31, Increase (Decrease) to Cash
2020 2019 $ %
(Dollars in thousands)
Cash, cash equivalents and restricted
cash at beginning of period $ 146,102 $ 131,464 $ 14,638 11.1 %
Net cash provided by operating activities 314,452 336,120 (21,668 ) (6.4 )
Net cash provided by (used in) investing
activities 517,181 (67,824 ) 585,005 nm
Net cash provided by (used in) financing
activities 1,911,300 (259,763 ) 2,171,063 nm
Effect of foreign currency translation (2,776 ) 234 (3,010 ) nm
Cash, cash equivalents and restricted
cash at end of period $ 2,886,259 $ 140,231 2,746,028 nm
nm - not meaningful
Cash Flows from Operating Activities
Cash flows from operating activities decreased
Cash Flows from Investing Activities
Cash flows from investing activities increased
Cash Flows from Financing Activities
Cash flows from financing activities increased$2.2 billion during the three months endedMarch 31, 2020 over the same period in 2019 primarily due to increased debt borrowings during 2020, net of repayments, partially offset by the issuance of common stock in 2019. 45 --------------------------------------------------------------------------------
Capital Expenditures
The terms of our triple-net leases generally obligate our tenants to pay all capital expenditures necessary to maintain and improve our triple-net leased properties. However, from time to time, we may fund the capital expenditures for our triple-net leased properties through loans or advances to the tenants, which may increase the amount of rent payable with respect to the properties in certain cases. We may also fund capital expenditures for which we may become responsible upon expiration of our triple-net leases or in the event that our tenants are unable or unwilling to meet their obligations under those leases. We also expect to fund capital expenditures related to our senior living operations and office operations reportable business segments with the cash flows from the properties or through additional borrowings. We expect that these liquidity needs generally will be satisfied by a combination of the following: cash flows from operations, cash on hand, debt assumptions and financings (including secured financings), issuances of debt and equity securities, dispositions of assets (in whole or in part through joint venture arrangements with third parties) and borrowings under our revolving credit facilities. To the extent that unanticipated capital expenditure needs arise or significant borrowings are required, our liquidity may be affected adversely. Our ability to borrow additional funds may be restricted in certain circumstances by the terms of the instruments governing our outstanding indebtedness. We are party to certain agreements that obligate us to develop senior housing or healthcare properties funded through capital that we and, in certain circumstances, our joint venture partners provide. As ofMarch 31, 2020 , we had 22 properties under development pursuant to these agreements, including four properties that are owned by unconsolidated real estate entities. In addition, from time to time, we engage in redevelopment projects with respect to our existing senior housing communities to maximize the value, increase NOI, maintain a market-competitive position, achieve property stabilization or change the primary use of the property.
Guarantor and Issuer Financial Information
Ventas, Inc. has fully and unconditionally guaranteed the obligation to pay principal and interest with respect to the outstanding senior notes issued by our 100% owned subsidiary,Ventas Realty , including the senior notes that were jointly issued withVentas Capital Corporation .Ventas Capital Corporation is a direct 100% owned subsidiary ofVentas Realty that has no assets or operations, but was formed in 2002 solely to facilitate offerings of senior notes by a limited partnership. None of our other subsidiaries (excludingVentas Realty andVentas Capital Corporation ) is obligated with respect toVentas Realty's outstanding senior notes.Ventas, Inc. has also fully and unconditionally guaranteed the obligation to pay principal and interest with respect to the outstanding senior notes issued by our 100% owned subsidiary,Ventas Canada Finance Limited ("Ventas Canada"). None of our other subsidiaries is obligated with respect to Ventas Canada's outstanding senior notes, all of which were issued on a private placement basis inCanada . In connection with the acquisition ofNationwide Health Properties, Inc. ("NHP"), our 100% owned subsidiary,Nationwide Health Properties, LLC ("NHP LLC "), as successor to NHP, assumed the obligation to pay principal and interest with respect to the outstanding senior notes issued by NHP. Neither we nor any of our subsidiaries (other thanNHP LLC ) is obligated with respect to any ofNHP LLC's outstanding senior notes. Under certain circumstances, contractual and legal restrictions, including those contained in the instruments governing our subsidiaries' outstanding mortgage indebtedness, may restrict our ability to obtain cash from our subsidiaries for the purpose of meeting our debt service obligations, including our payment guarantees with respect toVentas Realty's and Ventas Canada's senior notes. The following summarizes our guarantor and issuer balance sheet and statement of income information as ofMarch 31, 2020 andDecember 31, 2019 and for the three months endedMarch 31, 2020 and the year endedDecember 31, 2019 . 46 --------------------------------------------------------------------------------
Balance Sheet Information
As of March 31, 2020
Guarantor Issuer
(In thousands)
Assets
Investment in and advances to affiliates $ 16,012,470 $ 2,728,110
Total assets 18,640,068 2,837,725
Liabilities and equity
Intercompany loans 11,795,172 (7,246,353 )
Total liabilities 12,149,594 3,416,352Redeemable OP unitholder and noncontrolling interests 97,094
-
Total equity (deficit) 6,393,380 (578,627 )
Total liabilities and equity 18,640,068 2,837,725
Balance Sheet Information
As of December 31, 2019
Guarantor Issuer
(In thousands)
Assets
Investment in and advances to affiliates $ 15,774,897 $ 2,728,110
Total assets 15,875,910 2,838,270
Liabilities and equity
Intercompany loans 8,789,600 (5,105,070 )
Total liabilities 9,133,733 3,363,067Redeemable OP unitholder and noncontrolling interests 102,657
-
Total equity (deficit) 6,639,520 (524,797 )
Total liabilities and equity 15,875,910 2,838,270
Statement of Income Information
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