VENTAS, INC. The following discussion provides information that management believes is relevant to an understanding and assessment of the consolidated financial condition and results of operations ofVentas, Inc. You should read this discussion in conjunction with our Consolidated Financial Statements and the notes thereto included in Part II, Item 8 of this Annual Report and our Risk Factors included in Part I, Item 1A of this Annual Report.
Business Summary and Overview of 2021
Ventas, Inc. , an S&P 500 company, is a real estate investment trust ("REIT") operating at the intersection of healthcare and real estate. We hold a highly diversified portfolio of senior housing communities, medical office buildings ("MOBs"), life science, research and innovation centers, hospitals and other healthcare facilities, which we generally refer to as "healthcare real estate", located throughoutthe United States ,Canada , and theUnited Kingdom . As ofDecember 31, 2021 , we owned or had investments in approximately 1,200 properties (including properties classified as held for sale). Our company was originally founded in 1983 and is headquartered inChicago, Illinois with additional corporate offices inLouisville, Kentucky andNew York, New York . We primarily invest in a diversified portfolio of healthcare real estate assets through wholly owned subsidiaries and other co-investment entities. We operate through three reportable business segments: triple-net leased properties, senior living operations, which we also refer to as SHOP, and office operations. See our Consolidated Financial Statements and the related notes, including "Note 2 - Accounting Policies" and "Note 18 - Segment Information," included in Part II, Item 8 of this Annual Report. Our senior housing communities are either subject to triple-net leases, in which case they are included in our triple-net leased properties reportable business segment, or operated by independent third-party managers, in which case they are included in our senior living operations reportable business segment. 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 our potential future earnings and cash distributions, and the trading price of our common stock 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.
Continuing Impact of and Response to the COVID-19 Pandemic and Its Extended Consequences
During fiscal 2020 and continuing into fiscal 2021, the COVID-19 pandemic has negatively affected our businesses in a number of ways, and is expected to continue to do so.
Operating Results. Our senior living operations segment, which we also refer to as SHOP, continued to be impacted by the COVID-19 pandemic. Occupancy began to improve starting in the second quarter of 2021 and continued over the course of 2021. During 2021, a broader macro labor shortage drove increased labor costs at our communities, resulting in continued decline in NOI compared to 2020. Provider Relief Grants. In 2020 and 2021, we applied for grants under Phase 2, Phase 3 and Phase 4 of theProvider Relief Fund administered by theU.S. Department of Health & Human Services ("HHS") on behalf of the assisted living communities in our senior living operations segment to partially mitigate losses attributable to COVID-19. These grants are intended to reimburse eligible providers for expenses incurred to prevent, prepare for and respond to COVID-19 and lost revenues attributable to COVID-19. Recipients are not required to repay distributions from theProvider Relief Fund , provided that they attest to and comply with certain terms and conditions. See "Government Regulation-Governmental Response to the COVID-19 Pandemic" in Part I, Item 1 of this Annual Report. During 2021 and 2020, we received$15.4 million and$35.1 million , respectively, in grants in connection with our applications and recognized these grants within property-level operating expenses in our Consolidated Statements of Income in 41 -------------------------------------------------------------------------------- the period in which they were received. Subsequent toDecember 31, 2021 , we received$34.0 million in grants in connection with our Phase 4 applications, which we expect to recognize in 2022. Any grants that are ultimately received and retained by us are not expected to fully offset the losses incurred in our senior living operating portfolio that are attributable to COVID-19. Further, although we continue to monitor and evaluate the terms and conditions associated with theProvider Relief Fund distributions, we cannot assure you that we will be in compliance with all requirements related to the payments received under theProvider Relief Fund . Continuing Impact. The trajectory and future impact of the COVID-19 pandemic remains highly uncertain. The extent of the pandemic's continuing and ultimate effect on our operational and financial performance will depend on a variety of factors, including the impact of new variants of the virus and the effectiveness of available vaccines against those variants; ongoing clinical experience, which may differ considerably across regions and fluctuate over time; and on other future developments, including the ultimate duration, spread and intensity of the outbreak, the availability of testing, the extent to which governments impose, roll-back or re-impose preventative restrictions and the availability of ongoing government financial support to our business, tenants and operators. Due to these uncertainties, we are not able at this time to estimate the ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows. See "Risk Factors - Risks Related to the COVID-19 Pandemic" included in Part I, Item 1A of this Annual Report and "Note 1 - Description of Business - COVID-19 Update" of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report for a description of charges recognized during the year endedDecember 31, 2020 as a result of the COVID-19 pandemic.
Select 2021 and Early 2022 Highlights
Investments and Dispositions
•During the year endedDecember 31, 2021 , we acquired six Canadian senior housing communities reported within our senior living operations reportable business segment and a behavioral health center inPlano, Texas reported within our office operations reportable business segment for aggregate consideration of$240.7 million . •During the year endedDecember 31, 2021 , we sold 34 MOBs, eight triple-net leased properties and 23 senior housing communities for aggregate consideration of$859.7 million and recognized gains on the sale of these assets of$218.8 million in our Consolidated Statements of Income. •InOctober 2021 , we received proceeds of$45.0 million in full repayment of a note from Brookdale Senior Living. The note was issued to us in connection with the modification of our lease with Brookdale Senior Living in the third quarter of 2020. •InSeptember 2021 , we completed our acquisition ofNew Senior Investment Group Inc. ("New Senior") for a purchase price of$2.3 billion in an all-stock transaction, which added over 100 independent living properties to our senior housing portfolio. We funded the transaction through the issuance of approximately 13.3 million shares of our common stock, the assumption of$482.5 million of New Senior mortgage debt and$1.1 billion of cash paid at closing.
•In
•InJuly 2021 , we received$66.0 million from Holiday Retirement as repayment in full of secured notes which Holiday Retirement previously issued to us as part of a lease termination transaction entered into inApril 2020 . •InJuly 2021 , we received$224 million for the full redemption of Ardent's outstanding 9.75% Senior Notes due 2026 at a price equal to 107.313% of the principal amount of the notes, plus accrued and unpaid interest. This redemption resulted in a gain of$16.6 million . •InFebruary 2022 , we closed on the acquisitions of 18 MOBs leased to affiliates of Ardent for$204 million and one senior housing community within our senior living operations reportable business segment for$105.4 million . 42 --------------------------------------------------------------------------------
Liquidity and Capital
•As of
•InDecember 2021 , Ventas Canada issued and soldC$475.0 million aggregate principal amount of 2.45% senior notes, Series G andC$300.0 million aggregate principal amount of 3.30% senior notes, Series H, due 2027 and 2031 at 99.79% and 99.65% of par, respectively.
•In
•InAugust 2021 ,Ventas Realty Limited Partnership ("Ventas Realty ") issued a make whole notice of redemption for the entirety of the$400.0 million aggregate principal amount of 3.125% senior notes due 2023, resulting in a loss on extinguishment of debt of$20.9 million for the year endedDecember 31, 2021 . The redemption settled inSeptember 2021 , principally using cash on hand. •InJuly 2021 ,Ventas Realty andVentas Capital Corporation issued a make whole notice of redemption for the entirety of the$263.7 million aggregate principal amount of 3.25% senior notes due 2022, resulting in a loss on extinguishment of debt of$8.2 million for the year endedDecember 31, 2021 . The redemption settled inAugust 2021 , principally using cash on hand. •InFebruary 2021 ,Ventas Realty issued a make whole notice of redemption for the entirety of the$400.0 million aggregate principal amount of 3.10% senior notes dueJanuary 2023 , resulting in a loss on extinguishment of debt of$27.3 million for the year endedDecember 31, 2021 . The redemption settled inMarch 2021 , principally using cash on hand. •InJanuary 2021 , we entered into an unsecured credit facility comprised of a$2.75 billion unsecured revolving credit facility priced at LIBOR plus 0.825%, which replaced our previous$3.0 billion unsecured revolving credit facility priced at 0.875%. The new unsecured revolving credit facility matures inJanuary 2025 , but may be extended at our option, subject to the satisfaction of certain conditions, for an additional year. 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 , subject to the satisfaction of certain conditions. •During 2021, we sold 10.9 million shares of our common stock under our "at-the-market" equity offering program ("ATM program") for gross proceeds of$626.4 million , representing an average price of$57.71 per share. InNovember 2021 , we replaced our ATM program with a similar program, under which we may sell up to an aggregate of$1.0 billion of our common stock. As ofDecember 31, 2021 , we have$1.0 billion remaining under our existing ATM program.
Portfolio
•We successfully transitioned the operations of 90 senior living communities owned by us and operated under management agreements withEclipse Senior Living, Inc. ("ESL") to seven experienced managers by the start ofJanuary 2022 . ESL is expected to cease operation of its management business in 2022 following completion of the transitions. We incurred certain one-time transition costs and expenses in connection with the transitions.
Environmental, Social and Governance
•During 2021, we continued our leadership in ESG, receiving numerous recognitions and accolades, including the CDP "A List" for climate change in 2021, the 2021 Nareit Health Care "Leader in the Light" award for a fifth consecutive year, the 2022 Bloomberg Gender-Equality Index for the third consecutive year, the 2021 Dow Jones Sustainability
43
--------------------------------------------------------------------------------World Index for the third consecutive year, earning a 4-star GRESB rating for the ninth consecutive year, and named a 2021 ENERGY STAR® Partner of the Year.
Other Items
•InMarch 2021 , theVentas Life Science and Healthcare Real Estate Fund, L.P. (the "Ventas Fund ") acquired two Class-A life science properties in theBaltimore -DC life science cluster for$272 million , which increased theVentas Fund's assets under management to$2.1 billion . •During 2021 and in first quarter of 2022, we received$15.4 million and$34.0 million , respectively, in grants in connection with our Phase 3 and Phase 4 applications to theProvider Relief Fund administered by theU.S. Department of Health & Human Services ("HHS") on behalf of the assisted living communities in our senior living operations segment to partially mitigate losses attributable to COVID-19.
•During the year ended
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report have been prepared in accordance withU.S. generally accepted accounting principles ("GAAP") set forth in the Accounting Standards Codification ("ASC"), as published by theFinancial Accounting Standards Board ("FASB"). 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. We believe that the critical accounting policies described below, among others, affect our more significant estimates and judgments used in the preparation of our financial statements. For more information regarding our critical accounting policies, see "Note 2 - Accounting Policies" of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
Principles of Consolidation
The Consolidated Financial Statements included in Part II, Item 8 of this Annual
Report 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"). A VIE is broadly
defined as an entity with one or more of the following characteristics: (a) the
total equity investment at risk is insufficient to finance the entity's
activities without additional subordinated financial support; (b) as a group,
the holders of the equity investment at risk lack (i) the ability to make
decisions about the entity's activities through voting or similar rights,
(ii) the obligation to absorb the expected losses of the entity, or (iii) the
right to receive the expected residual returns of the entity; and (c) the equity
investors have voting rights that are not proportional to their economic
interests, and substantially all of the entity's activities either involve, or
are conducted on behalf of, an investor that has disproportionately few voting
rights. We consolidate our investment in a VIE when we determine that we are its
primary beneficiary. We may change our original assessment of a VIE upon
subsequent events such as the modification of contractual arrangements that
affects the characteristics or adequacy of the entity's equity investments at
risk and the disposition of all or a portion of an interest held by the primary
beneficiary.
We identify the primary beneficiary of a VIE as the enterprise that has both:
(i) the power to direct the activities of the VIE that most significantly impact
the entity's economic performance; and (ii) the obligation to absorb losses or
the right to receive benefits of the VIE that could be significant to the
entity. We perform this analysis on an ongoing basis.
44
--------------------------------------------------------------------------------Accounting for Real Estate Acquisitions
When we acquire real estate, we first make reasonable judgments about whether the transaction involves an asset or a business. Our real estate acquisitions are generally accounted for as asset acquisitions as substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. Regardless of whether an acquisition is considered a business combination or an asset acquisition, we record the cost of the businesses or assets acquired as tangible and intangible assets and liabilities based upon their estimated fair values as of the acquisition date. We estimate the fair value of buildings acquired on an as-if-vacant basis or replacement cost basis and depreciate the building value over the estimated remaining life of the building, generally not to exceed 35 years. We determine the fair value of other fixed assets, such as site improvements and furniture, fixtures and equipment, based upon the replacement cost and depreciate such value over the assets' estimated remaining useful lives as determined at the applicable acquisition date. We determine the value of land either by considering the sales prices of similar properties in recent transactions or based on internal analyses of recently acquired and existing comparable properties within our portfolio. We generally determine the value of construction in progress based upon the replacement cost. However, for certain acquired properties that are part of a ground-up development, we determine fair value by using the same valuation approach as for all other properties and deducting the estimated cost to complete the development. During the remaining construction period, we capitalize project costs until the development has reached substantial completion. Construction in progress, including capitalized interest, is not depreciated until the development has reached substantial completion. Intangibles primarily include the value of in-place leases and acquired lease contracts. We include all lease-related intangible assets and liabilities within acquired lease intangibles and accounts payable and other liabilities, respectively, on our Consolidated Balance Sheets. The fair value of acquired lease-related intangibles, if any, reflects: (i) the estimated value of any above or below market leases, determined by discounting the difference between the estimated market rent and in-place lease rent; and (ii) the estimated value of in-place leases related to the cost to obtain tenants, including leasing commissions, and an estimated value of the absorption period to reflect the value of the rent and recovery costs foregone during a reasonable lease-up period as if the acquired space was vacant. We amortize any acquired lease-related intangibles to revenue or amortization expense over the remaining life of the associated lease plus any assumed bargain renewal periods. If a lease is terminated prior to its stated expiration or not renewed upon expiration, we recognize all unamortized amounts of lease-related intangibles associated with that lease in operations over the shortened lease term. We estimate the fair value of purchase option intangible assets and liabilities, if any, by discounting the difference between the applicable property's acquisition date fair value and an estimate of its future option price. We do not amortize the resulting intangible asset or liability over the term of the lease, but rather adjust the recognized value of the asset or liability upon sale. In connection with an acquisition, we may assume rights and obligations under certain lease agreements pursuant to which we become the lessee of a given property. We generally assume the lease classification previously determined by the prior lessee absent a modification in the assumed lease agreement. We assess assumed operating leases, including ground leases, to determine whether the lease terms are favorable or unfavorable to us given current market conditions on the acquisition date. To the extent the lease terms are favorable or unfavorable to us relative to market conditions on the acquisition date, we recognize an intangible asset or liability at fair value and amortize that asset or liability to interest or rental expense in our Consolidated Statements of Income over the applicable lease term. Where we are the lessee, we record the acquisition date values of leases, including any above or below market value, within operating lease assets and operating lease liabilities on our Consolidated Balance Sheets.
We estimate the fair value of noncontrolling interests assumed consistent with the manner in which we value all of the underlying assets and liabilities.
We calculate the fair value of long-term assumed debt by discounting the
remaining contractual cash flows on each instrument at the current market rate
for those borrowings, which we approximate based on the rate at which we would
expect to incur a replacement instrument on the date of acquisition, and
recognize any fair value adjustments related to long-term debt as effective
yield adjustments over the remaining term of the instrument.
45
--------------------------------------------------------------------------------Impairment of Long-Lived and Intangible Assets
We periodically evaluate our long-lived assets, primarily consisting of investments in real estate, for impairment indicators. If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying operations. In performing this evaluation, we consider market conditions and our current intentions with respect to holding or disposing of the asset. We adjust the net book value of real estate properties and other long-lived assets to fair value if the sum of the expected future undiscounted cash flows, including sales proceeds, is less than book value. We recognize an impairment loss at the time we make any such determination. Estimates of fair value used in our evaluation of investments in real estate are based upon discounted future cash flow projections, if necessary, or other acceptable valuation techniques that are based, in turn, upon all available evidence including level three inputs, such as revenue and expense growth rates, estimates of future cash flows, capitalization rates, discount rates, general economic conditions and trends, or other available market data such as replacement cost or comparable sales. Our ability to accurately predict future operating results and cash flows and to estimate and determine fair values impacts the timing and recognition of impairments. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results.
Recently Issued Accounting Standards
InNovember 2021 , the FASB issued ASU 2021-10, Disclosures by Business Entities about Government Assistance, ("ASU 2022-10") which requires expanded disclosure for transactions involving the receipt of government assistance. Required disclosures include a description of the nature of transactions with government entities, our accounting policies for such transactions and their impact to our Consolidated Financial Statements. ASU 2021-10 is effective for us beginningJanuary 1, 2022 and adoption of this standard is not expected to have a significant impact on our Consolidated Financial Statements.
Results of Operations
As ofDecember 31, 2021 , 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 life science, 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 net operating income ("NOI") and related measures. For further information regarding our reportable business segments and a discussion of our definition of segment NOI, see "Note 18 - Segment Information" of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report. See "Non-GAAP Financial Measures" included elsewhere in this Annual Report for additional disclosure and reconciliations of net income attributable to common stockholders, as computed in accordance with GAAP, to NOI. 46 --------------------------------------------------------------------------------
Years Ended
The table below shows our results of operations for the years endedDecember 31, 2021 and 2020 and the effect of changes in those results from period to period on our net income attributable to common stockholders (dollars in thousands). For the Years Ended (Decrease) Increase to December 31, Net Income 2021 2020 $ % Segment NOI: Triple-net leased properties$ 638,488 $ 673,105 $ (34,617) (5.1 %) Senior living operations 458,273 538,489 (80,216) (14.9) Office operations 543,882 549,375 (5,493) (1.0) All other 84,058 87,021 (2,963) (3.4) Total segment NOI 1,724,701 1,847,990 (123,289) (6.7) Interest and other income 14,809 7,609 7,200 94.6 Interest expense (440,089) (469,541) 29,452 6.3 Depreciation and amortization (1,197,403) (1,109,763) (87,640) (7.9) General, administrative and professional fees (129,758) (130,158) 400 0.3 Loss on extinguishment of debt, net (59,299) (10,791) (48,508) nm Transaction expenses and deal costs (47,318) (29,812) (17,506) (58.7) Allowance on loans receivable and investments 9,082 (24,238) 33,320 nm Other (37,110) (707) (36,403) nm (Loss) income before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests (162,385) 80,589 (242,974) nm Income from unconsolidated entities 4,983 1,844 3,139 nm Gain on real estate dispositions 218,788 262,218 (43,430) (16.6) Income tax (expense) benefit (4,827) 96,534 (101,361) nm Income from continuing operations 56,559 441,185 (384,626) (87.2) Net income 56,559 441,185 (384,626) (87.2) Net income attributable to noncontrolling interests 7,551 2,036 5,515 nm
Net income attributable to common stockholders
(390,141) (88.8)
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 ofDecember 31, 2021 (dollars in thousands): For the Years Ended (Decrease) Increase to December 31, Segment NOI 2021 2020 $ %Segment NOI-Triple-Net Leased Properties : Rental income$ 653,823 $ 695,265 $ (41,442) (6.0 %) Less: Property-level operating expenses (15,335) (22,160) 6,825 30.8 Segment NOI$ 638,488 $ 673,105 (34,617) (5.1) In our triple-net leased properties reportable business segment, our revenues generally consist of fixed rental amounts (subject to 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. 47 -------------------------------------------------------------------------------- The decrease in our triple-net leased properties segment NOI in 2021 over the prior year was primarily driven by (i) a$69.0 million reduction (including$18.2 million of contractual rent) attributable to the net impact of the transition of 26 independent living assets operated by Holiday Retirement, from our triple-net portfolio to our senior housing operating portfolio in the beginning of the second quarter of 2020, (ii) a$17.3 million reduction in rental income under our lease with Brookdale Senior Living following modification of the lease in the third quarter of 2020, and (iii) a$29.6 million reduction attributable to rental income from communities that were sold or transitioned to our senior housing operating portfolio prior toDecember 31, 2021 . These decreases were partially offset by the$22.3 million non-cash benefit of a lease termination in connection with a transition to a new operator under a management contract during the third quarter of 2021 and$67.6 million of COVID-19 related write-offs of previously accrued straight-line rental income during the second and third quarters of 2020. 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 atDecember 31, 2021 and measured over the trailing 12 months endedSeptember 30, 2021 (which is the most recent information available to us from our tenants) and average continuing occupancy rates related to the triple-net leased properties we owned atDecember 31, 2020 and measured over the 12 months endedSeptember 30, 2020 . The table excludes non-stabilized properties, properties owned through investments in unconsolidated real estate 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 four quarters of occupancy results. Average Occupancy Average Occupancy Number of for the Trailing 12 Number of for the Trailing 12 Properties at Months Ended Properties at Months Ended December 31, 2021 September 30, 2021 December 31, 2020 September 30, 2020 Senior housing communities 261 73.5 % 290 82.1 % Skilled nursing facilities ("SNFs") 16 75.9 16 82.9 IRFs and LTACs 35 58.5 35 55.7
Declines in occupancy are primarily the result of COVID-19 impacts to senior housing and SNF operations.
The following table compares results of operations for our 328 same-store
triple-net leased properties. See "Non-GAAP Financial Measures-NOI" included
elsewhere in this Annual Report on Form 10-K for additional disclosure regarding
same-store NOI for each of our reportable business segments (dollars in
thousands):
For the Years Ended Increase to
December 31, Segment NOI
2021 2020 $ %
Same-Store Segment NOI-Triple-Net Leased
Properties:
Rental income $ 591,348 $ 553,155 $ 38,193 6.9 %
Less: Property-level operating expenses (12,617) (13,758) 1,141 8.3
Segment NOI $ 578,731 $ 539,397 39,334 7.3
The increase in our same-store triple-net leased properties rental income in
2021 over the prior year was attributable primarily to $60.8 million of COVID-19
related write-offs of previously accrued straight-line rental income during 2020
and rent increases due to contractual escalations pursuant to the terms of our
leases, partially offset by $17.3 million in lower rental income recognized
under our lease with Brookdale Senior Living following modification of the lease
in the third quarter of 2020.
48
--------------------------------------------------------------------------------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 of
For the Years Ended Increase (Decrease) to
December 31, Segment NOI
2021 2020 $ %
Segment NOI-Senior Living Operations:
Resident fees and services $ 2,270,001 $ 2,197,160 $ 72,841 3.3 %
Less: Property-level operating expenses (1,811,728) (1,658,671) (153,057) (9.2)
Segment NOI $ 458,273 $ 538,489 (80,216) (14.9)
Average Unit Average Monthly Revenue Per
Number of Occupancy Occupied Room for
Properties at for the Years Ended the Years Ended
December 31, December 31, December 31,
2021 2020 2021 2020 2021 2020
Total communities 545 432 78.5 % 81.7 % $ 4,487 $ 4,766
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. For senior housing communities in our senior living operations
reportable business segment, occupancy generally reflects average
operator-reported unit occupancy for the reporting period. Average monthly
revenue per occupied room reflects average resident fees and services per
operator-reported occupied unit for the reporting period.
The decrease in our senior living operations segment NOI in 2021 over the prior
year is primarily driven by lower occupancy, revenue per occupied room and HHS
proceeds received and higher operating expenses, principally labor costs,
partially offset by the addition of over 100 independent living properties in
the third quarter of 2021 as a result of the New Senior acquisition, the
transition of assets from our triple-net portfolio to our senior living
operating portfolio and development properties placed in service. During 2021
and 2020, we received $15.4 million and $35.1 million , respectively, from HHS
under the Provider Relief Fund , which reduced property-level operating expenses
in the applicable period.
The following table compares results of operations for our 276 same-store senior living operating communities (dollars in thousands):
For the Years Ended Decrease to
December 31, Segment NOI
2021 2020 $ %
Same-Store Segment NOI-Senior Living Operations:
Resident fees and services $ 1,619,570 $ 1,713,490 $ (93,920) (5.5 %)
Less: Property-level operating expenses (1,249,253) (1,240,278) (8,975) (0.7)
Segment NOI $ 370,317 $ 473,212 (102,895) (21.7)
Average Unit Average Monthly Revenue Per
Number of Occupancy Occupied Room for
Properties at for the Years Ended the Years Ended
December 31, December 31, December 31,
2021 2020 2021 2020 2021 2020
Same-store communities 276 276 81.6 % 84.2 % $ 4,939 $ 5,069
The decrease in our same-store senior living operations segment NOI is primarily
driven by lower occupancy, revenue per occupied room and HHS proceeds received
and higher operating expenses, principally labor costs, partially offset by
lower direct COVID-19 costs such as PPE in 2021. During 2021 and 2020, we
received $9.4 million and $26.1 million , respectively, from HHS under the
Provider Relief Fund , which reduced property-level operating expenses in the
applicable period.
49
--------------------------------------------------------------------------------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 ofDecember 31, 2021 (dollars in thousands). 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 Years Ended (Decrease) Increase to December 31, Segment NOI 2021 2020 $ % Segment NOI-Office Operations: Rental income$ 794,297 $ 799,627 $ (5,330) (0.7 %) Office building services revenue 8,384 8,675 (291) (3.4) Total revenues 802,681 808,302 (5,621) (0.7)
Less:
Property-level operating expenses (257,001) (256,612) (389) (0.2) Office building and other services costs (1,798) (2,315) 517 22.3 Segment NOI$ 543,882 $ 549,375 (5,493) (1.0) Number of Annualized Average Rent Per Properties at Occupancy at Occupied Square Foot for the December 31, December 31, Years Ended December 31, 2021 2020 2021 2020 2021 2020 Total office buildings 342 374 90.8 % 89.7 %$ 35 $ 34 The decrease in our office operations segment NOI in 2021 over the prior year was primarily due to assets sold in the first quarter of 2020, business interruption insurance proceeds received in 2020 and dispositions of non-core assets during 2021. These decreases were partially offset by new leasing, increased tenant retention and improved parking revenues.
The following table compares results of operations for our 327 same-store office buildings (dollars in thousands):
For the Years Ended Increase (Decrease) to
December 31, Segment NOI
2021 2020 $ %
Same-Store Segment NOI-Office Operations:
Rental income $ 729,358 $ 699,231 $ 30,127 4.3 %
Less: Property-level operating expenses (230,393) (222,136) (8,257) (3.7)
Segment NOI $ 498,965 $ 477,095 21,870 4.6
Number of Annualized Average Rent Per
Properties at Occupancy at Occupied Square Foot for the
December 31, December 31, Years Ended December 31,
2021 2020 2021 2020 2021 2020
Same-store office buildings 327 327 92.3 % 91.8 % $ 35 $ 34 The increase in our same-store office operations segment NOI in 2021 over the prior year is primarily due to contractual rent escalators, new leasing, increased tenant retention and improved parking revenues.
50
--------------------------------------------------------------------------------Segment NOI - 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$3.0 million decrease in all other segment NOI in 2021 over the prior year was primarily due to reduced interest income from our loans receivable investments due to loan repayments during 2021 and lower LIBOR-based interest rates as well as costs associated with theVentas Investment Management platform. This is partially offset by the$16.6 million gain recognized in 2021 for the redemption of Ardent's outstanding 9.75% Senior Notes due 2026 and an increase in management fee revenues from investments in unconsolidated real estate entities. See "Note 6 - Loans Receivable and Investments" of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
Company Results
Interest and Other Income
The$7.2 million increase in interest and other income in 2021 over the prior year is primarily due to a$13.1 million payment received in the fourth quarter of 2021 related to certain 2021 Kindred transactions (See "Note 3 - Concentration of Credit Risk" of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K) offset by a 2020 reduction of a liability related to an acquisition and interest income on short-term investments.
Interest Expense
The$29.5 million decrease in total interest expense in 2021 over the prior year was primarily attributable to a decrease of$34.5 million due to lower debt balances, partially offset by an increase of$6.3 million due to a higher effective interest rate. Our GAAP weighted average effective interest rate was 3.6% for 2021, compared to 3.5% for 2020. Capitalized interest for 2021 and 2020 was$11.3 million and$9.6 million , respectively.
Depreciation and Amortization
The$87.6 million increase in depreciation and amortization expense in 2021 over the prior year is primarily due to a$65.6 million increase in impairments recognized in 2021 relating to properties that were sold or classified as held for sale and a$42.0 million increase related to theSeptember 2021 acquisition of New Senior, partially offset by the impact of sold properties during 2020 and 2021.
General, Administrative and Professional Fees
General, administrative and professional fees in 2021 remained relatively flat compared to the prior year.
Loss on Extinguishment of Debt, Net
The$48.5 million increase in loss on extinguishment of debt, net in 2021 is primarily related to an aggregate$56.4 million loss recognized during 2021 for the redemptions of$400.0 million aggregate principal amount of 3.10% senior notes dueJanuary 2023 ,$400.0 million aggregate principal amount of 3.125% senior notes due 2023, and$263.7 million aggregate principal amount of 3.25% senior notes due 2022, partially offset by the$7.4 million loss recognized in 2020 for the redemption of$236.3 million aggregate principal amount of our 3.25% senior notes due 2022.
Transaction Expenses and Deal Costs
The$17.5 million increase in transaction expenses and deal costs in 2021 over the prior year was primarily associated with increased costs in 2021 associated with operator transitions, partially offset by costs incurred in 2020 related to our lease modifications with Brookdale Senior Living, severance related charges and captive insurance organization costs.
Allowance on Loans Receivable and Investments
The$33.3 million change in allowance on loans receivable and investments was due to the recognition of COVID-19 related credit losses during 2020 and the subsequent reversal of certain allowances in the first quarter of 2021 due to a change in our estimate of credit losses. 51 --------------------------------------------------------------------------------
Other
The$36.4 million increase in other expenses in 2021 is primarily due to a$1.2 million unrealized loss on changes in fair value of stock warrants received in connection with the Brookdale Senior Living lease modification compared to an unrealized gain of$22.0 million recognized during 2020. In addition, there was an increase of$9.0 million relating to 2021 natural disaster events.
Income from Unconsolidated Entities
The
Gain on Real Estate Dispositions
The$43.4 million decrease in gain on real estate dispositions was due to the dispositions of 34 MOBs, eight triple-net leased properties and 23 senior housing communities, which resulted in gains on sale of real estate of$218.8 million recognized in 2021 compared to gains of$262.2 million in 2020. The gain on real estate dispositions for 2020 was primarily attributable to the sale of six properties during the first quarter of 2020.
Income Tax Expense
The$101.4 million increase in income tax expense related to continuing operations for 2021 over 2020 is primarily due to a$152.9 million deferred tax benefit related to the internal restructuring of certainU.S. taxable REIT subsidiaries completed within the first quarter of 2020, partially offset by changes in the valuation allowance in 2020 against deferred tax assets of certain of our TRS entities. The restructuring 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.
Years Ended
Our Annual Report for the year endedDecember 31, 2020 , filed with theSEC onFebruary 23, 2021 , contains information regarding our results of operations for the years endedDecember 31, 2020 and 2019 and the effect of changes in those results from period to period on our net income attributable to common stockholders.
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 withU.S. 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 Annual Report 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 Annual Report. 52 --------------------------------------------------------------------------------
Funds From Operations and Normalized Funds From Operations Attributable to Common Stockholders
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 attributable to common
stockholders ("FFO") and Normalized FFO to be appropriate supplemental measures
of operating performance of an equity REIT. We believe that the presentation of
FFO, combined with the presentation of required GAAP financial measures, has
improved the understanding of operating results of REITs among the investing
public and has helped make comparisons of REIT operating results more
meaningful. Management generally considers FFO to be a useful measure for
understanding and comparing our operating results because, by excluding gains
and losses related to sales of previously depreciated operating real estate
assets, impairment losses on depreciable real estate and real estate asset
depreciation and amortization (which can differ across owners of similar assets
in similar condition based on historical cost accounting and useful life
estimates), FFO can help investors compare the operating performance of a
company's real estate across reporting periods and to the operating performance
of other companies. 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 gain (or loss) on re-measurement of
equity method investments and impairment write-downs of depreciable real estate,
plus real estate depreciation and amortization, and after adjustments for
unconsolidated entities. Adjustments for unconsolidated partnerships and
entities 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) transaction 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 leases; (d) the financial impact of
contingent consideration, severance-related costs and charitable donations 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) net expenses or recoveries
related to natural disasters and (h) any other incremental items set forth in
the Normalized FFO reconciliation included herein.
53
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The following table summarizes our FFO and Normalized FFO for each of the three
years ended December 31, 2021 (dollars in thousands). The decrease in Normalized
FFO for the year ended December 31, 2021 over the prior year is due to the
impact of COVID-19 on our senior housing and triple-net lease segments, and
decreased NOI from dispositions during 2020 and 2021, partially offset by a
decrease in interest expense and additional property level NOI from the New
Senior acquisition.
For the Years Ended December 31,
2021 2020 2019
Net income attributable to common stockholders $ 49,008 $ 439,149 $ 433,016
Adjustments:
Depreciation and amortization on real estate assets 1,192,856 1,104,114 1,039,550
Depreciation on real estate assets related to
noncontrolling interests (18,498) (16,767) (9,762)
Depreciation on real estate assets related to
unconsolidated entities 17,888 4,986 187
Gain on real estate dispositions related to
unconsolidated entities - - (1,263)
Gain (loss) on real estate dispositions related to noncontrolling interests
302 (9) 343
Gain on real estate dispositions (218,788) (262,218) (26,022)
FFO attributable to common stockholders 1,022,768 1,269,255 1,436,049
Adjustments:
Change in fair value of financial instruments 1,207 (21,928) (78) Non-cash income tax benefit (1,224) (98,114) (58,918) Loss on extinguishment of debt, net 64,558 10,791 41,900
Gain on transactions related to unconsolidated entities (6,328)
(597) (18)
Transaction expenses and deal costs 54,874 34,690 18,208
Amortization of other intangibles (21,627) 472 484
Other items related to unconsolidated entities 1,479 (614) 3,291
Non-cash impact of changes to equity plan 1,796 (452) 7,812
Natural disaster expenses (recoveries), net 10,147 1,247 (25,683)
Impact of Holiday lease termination - (50,184) -
Write-off of straight-line rental income, net of
noncontrolling interests - 70,863 -
Allowance on loan investments and impairment of
unconsolidated entities, net of noncontrolling interests (9,074) 34,543 -
Normalized FFO attributable to common stockholders
$ 1,249,972 $ 1,423,047 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 and other services costs. Cash receipts may differ due to straight-line recognition of certain rental income and the application of other GAAP policies. 54 --------------------------------------------------------------------------------
The following table sets forth a reconciliation of net income attributable to common stockholders to NOI (dollars in thousands):
For the Years Ended
2021 2020 2019
Net income attributable to common stockholders $ 49,008 $ 439,149 $ 433,016
Adjustments:
Interest and other income (14,809) (7,609) (10,984)
Interest expense 440,089 469,541 451,662
Depreciation and amortization 1,197,403 1,109,763 1,045,620
General, administrative and professional fees 129,758 130,158 158,726
Loss on extinguishment of debt, net 59,299 10,791 41,900
Transaction expenses and deal costs 47,318 29,812 15,235
Allowance on loan receivable and investments (9,082) 24,238 -
Other 37,110 707 (10,339)
Net income attributable to noncontrolling interests 7,551 2,036 6,281
(Income) loss from unconsolidated entities (4,983) (1,844) 2,454
Income tax expense (benefit) 4,827 (96,534) (56,310)
Gain on real estate dispositions (218,788) (262,218) (26,022)
NOI $ 1,724,701 $ 1,847,990 $ 2,051,239
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 development properties and 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) for SHOP, those properties that are
currently undergoing a materially disruptive redevelopment; (iv) for our office
operations and triple-net lease properties, those properties for which
management has an intention to institute, or has instituted, 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, most commonly as a result of an expected or
actual material change in occupancy or NOI; 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 portfolio
performance-based disclosures 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.
55
--------------------------------------------------------------------------------Asset/Liability Management
Asset/liability management, a key element of enterprise risk management, is designed to support the achievement of our business strategy, while ensuring that we maintain appropriate and tolerable levels of market risk (primarily interest rate risk and foreign currency exchange risk) and credit risk. Effective management of these risks is a contributing factor to the absolute levels and variability of our FFO and net worth. The following discussion addresses our integrated management of assets and liabilities, including the use of derivative financial instruments.
Market Risk
We are exposed to market risk related to changes in interest rates with respect
to borrowings under our unsecured revolving credit facility and our unsecured
term loans, certain of our mortgage loans that are floating rate obligations,
mortgage loans receivable that bear interest at floating rates and available for
sale securities. These market risks result primarily from changes in LIBOR rates
or prime rates. To manage these risks, we continuously monitor our level of
floating rate debt with respect to total debt and other factors, including our
assessment of current and future economic conditions. See "Risk
Factors-We are exposed to increases in interest rates, which could reduce our
profitability and adversely impact our ability to refinance existing debt, sell
assets or engage in acquisition, investment, development and redevelopment
activity, and our decision to hedge against interest rate risk might not be
effective." included in Part I, Item 1A of this Annual Report.
56
--------------------------------------------------------------------------------The table below sets forth certain information with respect to our debt, excluding premiums and discounts (dollars in thousands):
As of December 31,
2021 2020 2019
Balance:
Fixed rate:
Senior notes $ 8,729,102 $ 8,869,036 $ 8,584,056
Unsecured term loans 200,000 200,000 200,000
Secured revolving construction credit facility - - 160,492
Mortgage loans and other 2,061,880 1,389,227 1,325,854
Subtotal fixed rate 10,990,982 10,458,263 10,270,402
Variable rate:
Senior notes - 235,664 231,018
Unsecured revolving credit facility 56,448 39,395 120,787
Unsecured term loans 395,757 392,773 385,030
Commercial paper notes 280,000 - 567,450
Secured revolving construction credit facility - 154,098 -
Mortgage loans and other 369,951 702,878 671,115
Subtotal variable rate 1,102,156 1,524,808 1,975,400
Total $ 12,093,138 $ 11,983,071 $ 12,245,802
Percent of total debt:
Fixed rate:
Senior notes 72.1 % 73.9 % 70.1 %
Unsecured term loans 1.7 1.7 1.6
Secured revolving construction credit facility - - 1.3
Mortgage loans and other 17.0 11.6 10.8
Variable rate:
Senior notes - 2.0 1.9
Unsecured revolving credit facility 0.5 0.3 1.0
Unsecured term loans 3.3 3.3 3.1
Commercial paper notes 2.3 - 4.7
Secured revolving construction credit facility - 1.3 -
Mortgage loans and other 3.1 5.9 5.5
Total 100.0 % 100.0 % 100.0 %
Weighted average interest rate at end of period:
Fixed rate:
Senior notes 3.7 % 3.7 % 3.7 %
Unsecured term loans 3.6 3.6 2.0
Secured revolving construction credit facility - - 4.5
Mortgage loans and other 3.6 3.5 3.7
Variable rate:
Senior notes - 1.0 2.5
Unsecured revolving credit facility 1.1 1.0 2.4
Unsecured term loans 1.4 1.4 2.9
Commercial paper notes 0.3 - 2.0
Secured revolving construction credit facility - 1.9 -
Mortgage loans and other 1.7 1.9 3.4
Total 3.4 3.4 3.5
57-------------------------------------------------------------------------------- The variable rate debt in the table above reflects, in part, the effect of$145.6 million notional amount of interest rate swaps with maturities ranging fromMarch 2022 toMay 2022 , in each case that effectively convert fixed rate debt to variable rate debt. In addition, the fixed rate debt in the table above reflects, in part, the effect of$303.1 million andC$274.0 million notional amount of interest rate swaps with maturities ranging fromJanuary 2023 toApril 2031 , in each case that effectively convert variable rate debt to fixed rate debt. See "Note 10 - Senior Notes Payable and Other Debt" of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report. The increase in our fixed rate debt fromDecember 31, 2020 toDecember 31, 2021 was primarily due to an increase in mortgage loans outstanding, largely as a result of mortgage debt assumed in connection with the New Senior Acquisition, and the issuance of$500.0 million of senior notes due in 2031, partially offset by the redemptions of senior notes due in 2022 and 2023. The decrease in our outstanding variable rate debt atDecember 31, 2021 compared toDecember 31, 2020 is primarily attributable to the payoffs of senior notes, the secured revolving construction credit facility, and secured mortgages, all partially offset by an increase in commercial paper notes outstanding. Assuming a 100 basis point increase in the weighted average interest rate related to our variable rate debt and assuming no change in our variable rate debt outstanding as ofDecember 31, 2021 , interest expense on an annualized basis would increase by approximately$10.4 million , or$0.03 per diluted common share. As ofDecember 31, 2021 and 2020, our joint venture partners' aggregate share of total debt was$278.0 million and$271.6 million , respectively, with respect to certain properties we owned through consolidated joint ventures. Total debt does not include our portion of debt related to investments in unconsolidated real estate entities, which was$338.1 million and$213.0 million as ofDecember 31, 2021 and 2020, respectively. The fair value of our fixed rate debt is based on current market interest rates at which we could obtain similar borrowings. Increases in market interest rates typically result in a decrease in the fair value of fixed rate debt while decreases in market interest rates typically result in an increase in the fair value of fixed rate date. While changes in market interest rates affect the fair value of our fixed rate debt, these changes do not affect the interest expense associated with our fixed rate debt. Therefore, interest rate risk does not have a significant impact on our fixed rate debt obligations until their maturity or earlier prepayment and refinancing. If interest rates have risen at the time we seek to refinance our fixed rate debt, whether at maturity or otherwise, our future earnings and cash flows could be adversely affected by additional borrowing costs. Conversely, lower interest rates at the time of refinancing may reduce our overall borrowing costs.
To highlight the sensitivity of our fixed rate debt to changes in interest rates, the following summary shows the effects of a hypothetical instantaneous change of 100 basis points in interest rates (dollars in thousands):
As of December 31,
2021 2020
Gross book value $ 10,990,981 $ 10,458,262
Fair value 11,766,336 11,550,236
Fair value reflecting change in interest rates:
-100 basis points 12,437,306 12,204,507
+100 basis points 11,164,150 10,951,483
The change in fair value of our fixed rate debt from
As ofDecember 31, 2021 and 2020, the fair value of our secured and non-mortgage loans receivable, based on our estimates of currently prevailing rates for comparable loans, was$498.0 million and$565.7 million , respectively. See "Note 6 - Loans Receivable and Investments" and "Note 11 - Fair Values of Financial Instruments" of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report. As a result of our Canadian andUnited Kingdom operations, we are subject to fluctuations in certain foreign currency exchange rates that may, from time to time, affect our financial condition and operating performance. Based solely on our results for the year endedDecember 31, 2021 (including the impact of existing hedging arrangements), if the value of theU.S. 58 -------------------------------------------------------------------------------- dollar relative to the British pound and Canadian dollar were to increase or decrease by one standard deviation compared to the average exchange rate during the year, our Normalized FFO per share for the year endedDecember 31, 2021 would decrease or increase, as applicable, by$0.01 per share or 1%. We will continue to mitigate these risks through a layered approach to hedging looking out for the next year and continual assessment of our foreign operational capital structure. Nevertheless, we cannot assure you that any such fluctuations will not have an effect on our earnings.
Concentration and Credit 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 December 31,
2021 2020
Investment mix by asset type (1): Senior housing communities 67.4 % 63.5 % MOBs 17.1
19.7
Life science, research and innovation centers 6.7 7.1 Health systems 5.0 5.2 IRFs and LTACs 1.5 1.7 SNFs 0.6 0.7 Secured loans receivable and investments, net 1.7
2.1
Total 100.0 % 100.0 % Investment mix by tenant, operator and manager (1): Atria 19.8 % 20.8 % Sunrise 10.0 10.4 Brookdale Senior Living 7.8 8.2 Ardent 4.7 4.9 Kindred 1.0 1.1 All other 56.7 54.6 Total 100.0 % 100.0 %
(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.
59
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For the Years Ended
2021 2020 2019
Operations mix by tenant and operator and business model: Revenues (1): Senior living operations
59.4 % 58.0 % 55.8 %
Brookdale Senior Living (2) 3.9 4.4 4.7
Ardent 3.3 3.2 3.1
Kindred 3.8 3.5 3.3
All others 29.6 30.9 33.1
Total 100.0 % 100.0 % 100.0 %
NOI:
Senior living operations 26.8 % 29.4 % 31.1 %
Brookdale Senior Living (2) 8.6 9.0 8.7
Ardent 7.4 6.6 5.8
Kindred 7.8 7.1 6.3
All others 49.4 47.9 48.1
Total 100.0 % 100.0 % 100.0 %
Operations mix by geographic location (3):
California 15.0 % 15.7 % 15.9 %
New York 7.6 8.1 8.8
Texas 6.1 6.1 6.0
Pennsylvania 4.6 4.6 4.7
North Carolina 4.0 4.1 4.3
All others 62.7 61.4 60.3
Total 100.0 % 100.0 % 100.0 %
(1)Total revenues include office building and other services revenue, revenue
from loans and investments and interest and other income (including amounts
related to assets classified as held for sale).
(2)Results exclude eight senior housing communities which are included in the
senior living operations reportable business segment.
(3)Ratios are based on total revenues (including amounts related to assets
classified as held for sale) for each period presented.
See "Non-GAAP Financial Measures" included elsewhere in this Annual Report for
additional disclosure and reconciliations of net income attributable to common
stockholders, as computed in accordance with GAAP to NOI.
We derive a significant portion of our revenues by leasing assets under
long-term triple-net leases in which the rental rate is generally fixed with
escalators, subject to certain limitations. Some of our triple-net lease
escalators are contingent upon the satisfaction of specified facility revenue
parameters or based on increases in the Consumer Price Index ("CPI"), with caps,
floors or collars. We also earn revenues directly from individual residents in
our senior housing communities that are managed by independent operators, such
as Atria and Sunrise, and tenants in our office buildings.
The concentration of our triple-net leased properties segment revenues and
operating income that are attributed to Brookdale Senior Living, Ardent and
Kindred creates credit risk. If any of Brookdale Senior Living, Ardent or
Kindred becomes unable or unwilling to satisfy its obligations to us or to renew
its leases with us upon expiration of the terms thereof, our financial condition
and results of operations could decline, and our ability to service our
indebtedness and to make distributions to our stockholders could be impaired.
See "Risk Factors-Our Business Operations and Strategy Risks-A significant
portion of our revenues and operating income is dependent on a limited number of
tenants and managers, including Brookdale Senior Living, Ardent, Kindred, Atria
and Sunrise." included in Part I, Item 1A of this Annual Report and "Note 3 -
Concentration of Credit Risk" of the Notes to Consolidated Financial Statements
included in Part II, Item 8 of this Annual Report.
60
--------------------------------------------------------------------------------
We regularly monitor and assess any changes in the relative credit risk of our
significant tenants, and in particular those tenants that have recourse
obligations under our triple-net leases. The ratios and metrics we use to
evaluate a significant tenant's liquidity and creditworthiness depend on facts
and circumstances specific to that tenant and the industry or industries in
which it operates, including without limitation the tenant's credit history and
economic conditions related to the tenant, its operations and the markets in
which the tenant operates, that may vary over time. Among other things, we may
(i) review and analyze information regarding the real estate, senior housing and
healthcare industries generally, publicly available information regarding the
significant tenant, and information required to be provided by the tenant under
the terms of its lease agreements with us, (ii) examine monthly or quarterly
financial statements of the significant tenant to the extent publicly available
or otherwise provided under the terms of our lease agreements, and (iii)
participate in periodic discussions and in-person meetings with representatives
of the significant tenant. Using this information, we calculate multiple
financial ratios (which may, but do not necessarily, include leverage, fixed
charge coverage and tangible net worth), after making certain adjustments based
on our judgment, and assess other metrics we deem relevant to an understanding
of the significant tenant's credit risk.
Because Atria and Sunrise manage our properties in exchange for the receipt of a
management fee from us, we are not directly exposed to the credit risk of our
managers in the same manner or to the same extent as our triple-net tenants.
However, we rely on our managers' personnel, expertise, technical resources and
information systems, proprietary information, good faith and judgment to manage
our senior living operations efficiently and effectively. We also rely on Atria
and Sunrise to set appropriate resident fees, to provide accurate property-level
financials 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. Although we have various rights as the property
owner under our management agreements, including various rights to terminate and
exercise remedies under the agreements as provided therein, Atria's or Sunrise's
failure, inability or unwillingness to satisfy its respective obligations under
those agreements, to efficiently and effectively manage our properties or to
provide timely and accurate accounting information with respect thereto could
have a Material Adverse Effect on us. See "Risk Factors-Our Business Operations
and Strategy Risks." included in Part I, Item 1A of this Annual Report.
We hold a 34% ownership interest in Atria, which entitles us to customary minority rights and protections, as well as the right to appoint two of the six members on the Atria Board of Directors.
Triple-Net Lease Performance and Expirations
Any failure, inability or unwillingness by our tenants to satisfy their obligations under our triple-net leases could have a material adverse effect on us. Also, 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 us. During the year endedDecember 31, 2021 , 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. See "Risk Factors-Our Business Operations and Strategy Risks-If we must replace any of our tenants or managers, we may be unable to do so on as favorable terms, or at all, and we could be subject to delays, limitations and expenses, which could adversely affect our business, financial condition and results of operations." included in Part I, Item IA of this Annual Report. 61 -------------------------------------------------------------------------------- The following table summarizes our lease expirations in our triple-net leased properties segment currently scheduled to occur over the next 10 years as ofDecember 31, 2021 (dollars in thousands): % of 2021 Total 2021 Annualized Triple-Net Leased Number of Base Rent Properties Segment Properties(1) ("ABR")(2) Rental Income 2022 4 $ 5,844 0.9 % 2023 (3) 6 31,750 4.9 2024 26 14,484 2.2 2025 163 207,869 31.8 2026 36 44,045 6.7 2027 7 13,194 2.0 2028 27 29,109 4.5 2029 16 16,862 2.6 2030 6 4,891 0.7 2031 2 1,397 0.2 (1)Excludes assets sold or classified as held for sale, unconsolidated entities development properties not yet operational, unconsolidated joint ventures and land parcels. (2)ABR represents the annualized impact of the current period's cash base rent at 100% share for consolidated entities. ABR does not include common area maintenance charges, the amortization of above/below market lease intangibles or other noncash items. ABR is used only for the purpose of determining lease expirations. (3)Relates to six LTACs leased by Kindred. Kindred may extend the term for 5 years by delivering a renewal notice to the Company 12 to 18 months prior to expiration. We cannot assure you that Kindred will exercise its renewal option for these LTACs. See "Risk Factors-Our Business Operations and Strategy Risk-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." included in Part I, Item 1A of this Annual Report.
Liquidity and Capital Resources
During 2021, our principal sources of liquidity were cash flows from operations, proceeds from the issuance of debt and equity securities, borrowings under our unsecured revolving credit facility, and proceeds from asset sales. 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. Depending upon the availability of external capital, we believe our liquidity is sufficient to fund these uses of cash. 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. Our material contractual obligations arising in the normal course of business primarily consist of long-term debt and related interest payments, and operating obligations which include ground lease obligations. See Note 10 - Senior Notes Payable and Other Debt and Note 14 - Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report for amounts outstanding as ofDecember 31, 2021 relating to our long-term debt obligations and operating obligations, respectively. 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 "Risk Factors-Our Capital Structure Risks-We are highly dependent on access to the capital markets. Limitations on our ability to access capital could have an adverse effect on us, including our ability to make required payments on our debt obligations, make distributions to our stockholders or make future investments necessary to implement our business strategy." included in Part I, Item 1A of this Annual Report. 62 --------------------------------------------------------------------------------
Loans Receivable and Investments
InOctober 2021 , we received proceeds of$45.0 million in full repayment of a note from Brookdale Senior Living. The note was issued to us in connection with the modification of our lease with Brookdale Senior Living in the third quarter of 2020. InJuly 2021 , we received$66 million from Holiday Retirement as repayment in full of secured notes which Holiday Retirement previously issued to us as part of a lease termination transaction entered into inApril 2020 . InJuly 2021 , we received aggregate proceeds of$224 million from the redemption of Ardent's outstanding 9.75% Senior Notes due 2026 at a price equal to 107.313% of the principal amount of the notes, plus accrued and unpaid interest. The redemption resulted in a gain of$16.6 million which is recorded in income from loans and investments in our Consolidated Statements of Income. As ofDecember 31, 2020 ,$23.0 million of unrealized gain related to these securities was included in accumulated other comprehensive income.
Credit Facilities, Commercial Paper and Unsecured Term Loans
InJanuary 2021 , 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 LIBOR plus 0.825% based on the Company's debt rating. The New Credit Facility replaced our previous$3.0 billion unsecured revolving credit facility priced at 0.875%. The New Credit Facility matures inJanuary 2025 , but 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.
As of
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 ofVentas Realty's other unsecured senior indebtedness. The notes are fully and unconditionally guaranteed byVentas, Inc. As ofDecember 31, 2021 , we had$280.0 million borrowings outstanding under our commercial paper program. As ofDecember 31, 2021 , we had a$200.0 million unsecured term loan priced at LIBOR plus 0.90% that matures in 2023. The term loan also includes an accordion feature that effectively permits us to increase our aggregate borrowings thereunder to up to$800.0 million .
As of
During the year ended
Senior Notes
InDecember 2021 , Ventas Canada issued and soldC$475.0 million aggregate principal amount of 2.45% senior notes, Series G andC$300.0 million aggregate principal amount of 3.30% senior notes, Series H, due 2027 and 2031 at 99.79% and 99.65% of par, respectively. InNovember 2021 , Ventas Canada issued a make whole notice of redemption for the entirety of theC$250.0 million aggregate principal amount of 3.30% senior notes due 2022, resulting in a loss on extinguishment of debt of$0.8 million during the year endedDecember 31, 2021 . The redemption settled inDecember 2021 , principally using cash on hand.
In
63
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In
InAugust 2021 ,Ventas Realty issued a make whole notice of redemption for the entirety of the$400.0 million aggregate principal amount of 3.125% senior notes due 2023, resulting in a loss on extinguishment of debt of$20.9 million for the year endedDecember 31, 2021 . The redemption settled inSeptember 2021 , principally using cash on hand. InJuly 2021 ,Ventas Realty andVentas Capital Corporation issued a make whole notice of redemption for the entirety of the$263.7 million aggregate principal amount of 3.25% senior notes due 2022, resulting in a loss on extinguishment of debt of$8.2 million for the year endedDecember 31, 2021 . The redemption settled inAugust 2021 , principally using cash on hand. InFebruary 2021 ,Ventas Realty issued a make whole notice of redemption for the entirety of the$400.0 million aggregate principal amount of 3.10% senior notes dueJanuary 2023 , resulting in a loss on extinguishment of debt of$27.3 million for the year endedDecember 31, 2021 . The redemption settled inMarch 2021 , principally using cash on hand. As ofDecember 31, 2021 , we had outstanding$7.2 billion aggregate principal amount of senior notes issued byVentas Realty , approximately$75.2 million aggregate principal amount of senior notes issued byNationwide Health Properties, Inc. ("NHP") and assumed by our subsidiary,Nationwide Health Properties, LLC ("NHP LLC "), as successor to NHP, in connection with our acquisition of NHP, andC$1.9 billion aggregate principal amount of senior notes issued by our subsidiary,Ventas Canada Finance Limited ("Ventas Canada"). All of the senior notes issued byVentas Realty and Ventas Canada are unconditionally guaranteed byVentas, Inc. We may, from time to time, seek to retire or purchase our outstanding senior notes for cash or in exchange for equity securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, prospects for capital and other factors. The amounts involved may be material. The indentures governing our outstanding senior notes require us to comply with various financial and other restrictive covenants. We were in compliance with all of these covenants atDecember 31, 2021 .
Mortgages
InSeptember 2021 , we assumed mortgage debt of$482.5 million in connection with the New Senior Acquisition, including a$25.4 million fair value premium which will be amortized over the remaining term through interest expense in our Consolidated Statement of Income. See "Note 4 - Acquisitions of Real Estate Property". AtDecember 31, 2021 and 2020, our consolidated aggregate principal amount of mortgage debt outstanding was$2.4 billion and$2.1 billion , respectively, of which our share was$2.2 billion and$1.8 billion respectively. 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 andVentas Canada Finance Limited's senior notes. 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. 64 --------------------------------------------------------------------------------
Dividends
During 2021, we declared four dividends totaling$1.80 per share of our common stock, including a fourth quarter dividend of$0.45 per share. In order to continue to qualify as a REIT, we must make annual distributions to our stockholders of at least 90% of our REIT taxable income (excluding net capital gain). In addition, we will be subject to income tax at the regular corporate rate to the extent we distribute less than 100% of our REIT taxable income, including any net capital gains. We intend to pay dividends greater than 100% of our taxable income, after the use of any net operating loss carryforwards, for 2022. We expect that our cash flows will exceed our REIT taxable income due to depreciation and other non-cash deductions in computing REIT taxable income and that we will be able to satisfy the 90% distribution requirement. However, from time to time, we may not have sufficient cash on hand or other liquid assets to meet this requirement or we may decide to retain cash or distribute such greater amount as may be necessary to avoid income and excise taxation. If we do not have sufficient cash on hand or other liquid assets to enable us to satisfy the 90% distribution requirement, or if we desire to retain cash, we may borrow funds, issue additional equity securities, pay taxable stock dividends, if possible, distribute other property or securities or engage in a transaction intended to enable us to meet the REIT distribution requirements or any combination of the foregoing.
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 ofDecember 31, 2021 , we had 14 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.
Equity Offerings
From time to time, we may sell our common stock under an "at-the-market" equity
offering program ("ATM program"). In November 2021 , we replaced our ATM program
with a similar program, under which we may sell up to an aggregate of $1.0
billion of our common stock. As of December 31, 2021 , we have $1.0 billion
remaining under our existing ATM program. During the years ended December 31,
2021 , 2020 and 2019, we sold 10.9 million, 1.5 million and 2.7 million shares of
our common stock under our previous ATM program for gross proceeds of
$626.4 million , $66.6 million and $177.9 million , respectively, at an average
gross price of $57.71 , $44.88 and $66.75 per share, respectively.
In
65
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The following table sets forth our sources and uses of cash flows for the years
ended
For the Years Ended (Decrease) Increase
December 31, to Cash
2021 2020 $ %
Cash, cash equivalents and restricted cash at
beginning of year $ 451,640 $ 146,102 $ 305,538 nm
Net cash provided by operating activities 1,026,116 1,450,176 (424,060) (29.2)
Net cash (used in) provided by investing
activities (724,140) 154,295 (878,435) nm
Net cash used in financing activities (558,466) (1,300,021) 741,555 57.0
Effect of foreign currency translation 1,447 1,088 359 33.0
Cash, cash equivalents and restricted cash at end
of year $ 196,597 $ 451,640 $ (255,043) (56.5)
nm-not meaningful
Cash Flows from Operating Activities
Cash flows from operating activities decreased$424.1 million during the year endedDecember 31, 2021 over the same period in 2020 primarily due to the up-front consideration received in connection with the Brookdale transaction in 2020, and the continued impact of COVID-19 contributing to lower NOI in 2021.
Cash Flows from Investing Activities
Cash flows from investing activities decreased$0.9 billion during 2021 over 2020 primarily due to the New Senior acquisition which was partially funded with$1.1 billion of cash, partially offset by decreased proceeds from real estate dispositions.
Cash Flows from Financing Activities
Cash flows from financing activities increased$0.7 billion during 2021 over 2020 primarily due to higher issuances of common stock, increased borrowings, net of repayments, and lower dividends paid to common stockholders during 2021.
Off-Balance Sheet Arrangements
We own interests in certain unconsolidated entities as described in Note 7 - Investments in Unconsolidated Entities. Except in limited circumstances, our risk of loss is limited to our investment in the joint venture and any outstanding loans receivable. In addition, we have certain properties which serve as collateral for debt that is owed by a previous owner of certain of our facilities, as described under Note 10 - Senior Notes Payable and Other Debt to the Consolidated Financial Statements. Our risk of loss for these certain properties is limited to the outstanding debt balance plus penalties, if any. Further, we use financial derivative instruments to hedge interest rate and foreign currency exchange rate exposure. Finally, atDecember 31, 2020 , we had$24.9 million outstanding letter of credit obligations. We have no other material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources except those described above under "Contractual Obligations."
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 66 --------------------------------------------------------------------------------
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
in
In connection with the acquisition ofNationwide Health Properties, Inc. ("NHP"), our 100% owned subsidiaryNationwide 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 of
Balance Sheet Information
As of December 31, 2021
Guarantor Issuer
Assets
Investment in and advances to affiliates $ 17,448,874 $ 3,045,738
Total assets 17,561,305 3,156,840
Liabilities and equity
Intercompany loans 10,742,915 (3,563,060)
Total liabilities 10,972,521 4,097,362Redeemable OP unitholder and noncontrolling interests 98,356
-
Total equity (deficit) 6,490,428 (940,522)
Total liabilities and equity 17,561,305 3,156,840
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Balance Sheet Information
As of December 31, 2020
Guarantor Issuer
Assets
Investment in and advances to affiliates $ 16,576,278 $ 2,727,931
Total assets 16,937,149 2,844,339
Liabilities and equity
Intercompany loans 10,691,626 (4,532,350)
Total liabilities 10,918,320 3,577,009Redeemable OP unitholder and noncontrolling interests 89,669
-
Total equity (deficit) 5,929,161
(732,670)
Total liabilities and equity 16,937,149 2,844,339
Statement of Income Information
For the Year Ended December 31, 2021
Guarantor Issuer
Equity earnings in affiliates $ 133,143 $ -
Total revenues 137,348 158,255
Income (loss) before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests
49,694 (215,773)
Net income (loss) 49,008 (215,777)
Net income (loss) attributable to common stockholders 49,008 (215,777)
Statement of Income Information
For the Year Ended December 31, 2020
Guarantor Issuer
Equity earnings in affiliates $ 469,311 $ -
Total revenues 474,392 143,259
Income (loss) before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests
440,210 (215,406)
Net income (loss) 439,149 (202,845)
Net income (loss) attributable to common stockholders 439,149 (202,845)
For the Year Ended December 31, 2019
Guarantor Issuer
Equity earnings in affiliates $ 362,143 $ -
Total revenues 366,243 142,754
Income (loss) before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests
432,020 (246,929)
Net income (loss) 433,016 (246,841)
Net income (loss) attributable to common stockholders 433,016 (246,841)
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
The information set forth in Part II, Item 7 of this Annual Report under "Management's Discussion and Analysis of Financial Condition and Results of Operations-Asset/Liability Management" is incorporated by reference into this Item 7A.
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