Ventas Acquisition of Real Estate Assets of Atria Senior Living Group. October 22, 2010

Transcription

1 Ventas Acquisition of Real Estate Assets of Atria Senior Living Group October 22, 2010

2 Transaction Overview Acquisition of 118 High-Quality, Private Pay Seniors Housing Assets Totaling ~13,500 Units Located in Major Metropolitan Markets Purchase Price Financial Profile Atria Management Structure and Alignment Total consideration of $3.1 billion Fixed million shares of Ventas common stock (with a value of $1.35 billion based on Ventas s 10-day volume weighted average price of $54.09) $150 million in cash $1.6 billion of net debt Ventas may make an earnout payment ( Earnout ) in 2015 or 2016 equal to 10% of the excess value the assets produce over a 7% compound annual unlevered return on invested capital including CapEx Expected to be breakeven to Ventas 2011 normalized Funds from Operations ( FFO ) per share and be accretive thereafter capitalization rate (E) of 6.5% on stabilized assets 2011 NOI(E) at $186 - $196 million on revenues of approximately $640 million Atria will spin-off management company ( Atria Management Co. ) immediately prior to close Atria Management Co. (including its tenured senior management) will manage assets after closing Atria current management team will have significant ownership in Atria Management Co. including Earnout Atria will remain headquartered in Louisville, KY as an independent, privately-owned management company Timing Anticipated close in the first half of 2011 subject to satisfaction of closing conditions Ventas to Become Largest Owner of Seniors Housing Communities in U.S. 1) Please see the Company s previously issued statements for its definition of Normalized FFO and other guidance assumptions. 2

3 Strategic Rationale High-Quality Assets Managed by Atria High-Quality Portfolio Located in Major Metropolitan Markets 118 high-quality, private pay assets located in major metropolitan markets with concentrations in coastal and strong wealth demographic areas Newer assets with median age of 12 years Average monthly rate of over $4,300 68% of NOI from New York metropolitan area, New England and California $230,000 per unit approximates replacement cost due to excellent locations and larger acreage Strategic Growth Assets have superior NOI growth prospects NOI is expected to grow high single digits per year through: Increasing occupancies from current level of 87% and rate growth Redevelopment of assets in high-wealth markets such as Orange County, Westchester County and Marin County Increased FFO Growth Rate Transaction to result in higher, long-term internal FFO per share growth rate Potentially valuable purchase options Ventas benefits from NOI growth through use of TRS/RIDEA management structure Transaction Significantly Advances Ventas s Strategic Objectives 3

4 Strategic Rationale High-Quality Assets Managed by Atria Increased Tenant and Asset Class Diversification Private pay assets increase to 67% of NOI from 58%; Seniors housing moves to 59% of NOI Improved tenant and operator diversification Kindred Healthcare improves to 29% from 37% of NOI No operator >29% of portfolio NOI Ventas will own over 700 assets in 44 states and 2 Canadian provinces - Seniors Housing, SNFs, LTACs and MOBs Enhanced Scale and Strong Financial Profile $14 billion pro forma enterprise value / Top 10 U.S. REITs Excellent balance sheet/financial strength: 33% debt to enterprise value at closing Ventas intends to maintain its three investment grade ratings and continue positive ratings momentum Larger balance sheet and greater portfolio and earnings diversification should allow Ventas to improve its longterm cost of capital Excellent Supply/Demand Fundamentals Ventas to become largest owner of seniors housing communities in U.S. Excellent time in cycle to invest: economic recovery + limited new supply + demographic demand Over-85 demographic growing at 3x total population Transaction Provides Ventas with Increased Scale and Growth Opportunities, While Maintaining Strong Balance Sheet 4

5 Atria is the 4 th Largest Operator of Assisted Living in the U.S. Owned by private equity funds managed by an affiliate of Lazard Real Estate Partners ( LREP ) Operates >120 high-quality, private pay assisted and independent living communities in 27 states with over 13,000 residents Portfolio concentrated in strong wealth demographic, high barrier to entry markets New York metropolitan area, New England, and Northern and Southern California Atria is an Excellent Senior Living Manager Approximately 14,600 units with a median community size of 111 units and a median community age of 12 years Excellent IT/Reporting and operating platform scalable for growth Outstanding record of providing quality care for seniors Over 8,000 employees Based in Louisville, Kentucky New Atria Management Co. Independent, Privately Owned Manager Experienced management team led by CEO John Moore, CFO Mark Jessee and COO Julie Harding Management team will have minority ownership stake in Atria Management Co. including Earnout LREP will own majority of Atria Management Co. With New Atria Relationship, Ventas Will Now Be Doing Business with 4 of the Top 5 Assisted Living Operators 5

6 Atria s Operating Philosophy Atria s Focus is Non-Medical Assisted Living Atria provides residents with independent and assisted living services as well as special programs for early stage Alzheimer's residents and residents with memory impairment Non-medical focus drives an average length of stay of 29 months, compared to an industry average of 23 months (1) Despite focus on lower acuity, Atria operates with assisted living licenses where possible and requires at least one licensed nurse on staff at every community Private pay focus OPERATIONS MIX BY RESIDENT 2 Independent Living 44% Independent Living with Medication Management 21% Assisted Living 26% Alzheimer s Care 9% TOTAL 100% 1) American Seniors Housing Association: The State of Seniors Housing Report ) Data as of year end

7 Atria Has National Footprint with Coastal Concentrations New York San Francisco Louisville PHYSICAL PLANT INFORMATION Los Angeles Total Properties 118 Atria Properties Houston IL Only Units 10% IL/AL Units 81% ALZ Units 9% Total Units ~13,500 Median Building Age 12 yrs. Number of States 25 Well Diversified Portfolio Clustered in Affluent Coastal Markets in the Northeast and California 7

8 Ventas Becomes Largest Owner of Private Pay Seniors Housing Assets Louisville New York San Francisco Los Angeles Legacy Ventas Properties Sunrise Properties Atria Properties Houston Roslyn, NY Atria Transaction Broadens Ventas s National Footprint in Seniors Housing 8

9 Atria s High-Quality Assets Lynbrook, NY Ardsley, NY San Juan Capistrano, CA Grapevine, TX 9

10 Atria s High-Quality Assets Camarillo, CA Chandler, AZ Encinitas, CA Darien, CT 10

11 Diversified Portfolio Atria Transaction Increases Private Pay and Lowers Government-Reimbursed NOI1 Loan MOBs Investments 8% 2% MOBs 6% SNF 27% Loan Investments 2% SNF 22% Hospitals 11% Seniors Housing 48% Hospitals 14% Seniors Housing 59% Base Case With Atria Private Pay Assets: 58% Private Pay Assets: 67% Excellent Supply/Demand Fundamentals in Seniors Housing 1) Based on annualized 2Q 2010 Ventas NOI assuming all events occurred at the beginning of the period and pro forma the Lillibridge transaction. Ventas s receipt of a $3 million cash payment from Sunrise in the 2nd quarter for expense overages is included in NOI, but not annualized. Percentages are rounded to the nearest whole number. 11

12 Significantly Improved Tenant/Operator Diversification Transaction Adds Another Top Operator to Ventas s Portfolio of Industry Leaders1 With Atria Base Case Loan Investments Other CSL 2% 3% 2% Emeritus Senior Care 8% 3% Sunrise Operating Assets 19% MOBs 8% Brookdale 18% Atria Operating Assets 21% Loan Investments 2% Other 3% CSL 2% Emeritus 2% Senior Care 6% Kindred 37% Sunrise Operating Assets 15% MOBs 6% Kindred 29% Brookdale 14% Every Tenant/Operator 29% of Ventas s NOI 1) Based on annualized 2Q 2010 Ventas NOI assuming all events occurred at the beginning of the period and pro forma the Lillibridge transaction. Ventas s receipt of a $3 million cash payment from Sunrise in the 2nd quarter for expense overages is included in NOI, but not annualized. Percentages are rounded to the nearest whole number. 12

13 Tenant/Operators Have Experience and Scale Excellent Tenant/Operators Atria Senior Living Kindred (NYSE: KND) Quality SNF, LTAC and Rehab Largest post-acute provider One of the Most Admired Healthcare Companies in the World Brookdale (NYSE: BKD) Largest U.S. senior living provider Experienced, cycle-tested management team Demonstrated access to capital Sunrise, Inc. (NYSE: SRZ) High quality, high acuity, mission-driven leader Only globally recognized senior living brand Industry-Leading Tenant/Operators Provide Transparency and Credibility 13

14 Atria Transaction Provides Increased Granular, Apartment-Like Cash Flows Ventas To Receive 36% of its NOI From >18,500 Individual Seniors 36% 58% 6% Seniors Housing Operating Assets1 MOBs1 Other VTR NOI1 Seniors Housing Operating Assets Should Provide Higher Growth Potential 1) Based on annualized 2Q 2010 Ventas NOI assuming all events occurred at the beginning of the period and pro forma the Lillibridge and Atria transaction. Ventas s receipt of a $3 million cash payment from Sunrise in the 2nd quarter for expense overages is included in NOI, but not annualized. Percentages are rounded to the nearest whole number. 14

15 Ventas Continues to Execute on Its Strategic Growth & Diversification Plan Ventas Today Ventas + Atria Post Transaction 598 Properties Over 700 Properties ~$8bn Market Cap ~$10bn Market Cap Largest Tenant = 37% of NOI; 22 Tenants/Operators Largest Tenant = 29% of NOI; 23 Tenants/Operators 58% Private Pay 67% Private Pay No Near Term Maturities / Staggered Debt No Near Term Maturities / Staggered Debt Bank, Bond, Convert, and Secured Financing Bank, Bond, Convert, and Secured Financing 250+ Employees 250+ Employees 2nd Largest Healthcare REIT (by Enterprise Value) 2nd Largest Healthcare REIT (by Enterprise Value) 9th Largest REIT (by Equity Cap) 8th Largest REIT (by Equity Cap) 13th Largest REIT (by Enterprise Value) 10th Largest REIT (by Enterprise Value) Ventas Becomes a Bigger, More Diversified, and Stronger Enterprise with Atria 15

16 Potential Value Growth Through Redevelopment Opportunities Redevelopment Opportunities Should Increase Ventas s Long-Term Growth Rate Redevelopment program repositions well-located communities Redevelopment assets are located in high income, infill locations with high rate/noi potential Since 2007, Atria has invested $105mm in 14 completed redevelopment projects 10 redevelopment assets completed prior to 2010 have delivered an approximate 16% unlevered IRR 4 redevelopment assets recently completed (all in 2010) are expected to deliver a 15-20% average unlevered IRR Since December 2008, Atria has converted 129 apartments to address the growing demand for specialized dementia care All but 2 of those apartments were occupied as of 8/31/10 (98.4%) Refurbishment of Life Guidance neighborhoods has created a best-in-class product Currently 6 assets are being redeveloped for a total cost of $83.7mm Expected unlevered IRR of ~20% Two like-new assets located on Long Island and Westchester County to open in 2011/2012 Pipeline of 14 identified redevelopment opportunities to commence as market conditions warrant Median home value of over $400k in these targeted markets Higher NOI Growth and Value Creation from Redevelopment of Targeted Assets in Excellent Markets 16

17 Redevelopment Projects Have Provided Superior Returns Before After Golden Creek (Irvine, CA) Project Stats: Feb 2009 to 2Q2010 Refurb of physical plant and redevelop 36 AL units into a 33 unit ALZ wing Invested ~$14mm Projected 23.6% IRR by Tamalpais Creek (Novato, CA) Project Stats: Feb 2009 to June 2010 Refurb of physical plant and redevelop 16 AL units into a 11 unit ALZ wing Invested ~$13mm Projected 20%+ IRR by ) Based on 100 bps improvement in total facility cap rate after redevelopment. 17

18 Excellent Seniors Housing Industry Fundamentals 85+ Population Expected to Grow 3x the Rate of the Total Population1 Growth in Population (%, 2010 Base) Growth in Total Population Growth in 85+ With Limited Current Supply of Seniors Housing2 5,000 5% 4,500 4,000 4% 3,500 3,000 3% 2,500 2,000 2% 1,500 1,000 1% % 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 Top 31 MSA Majority IL/AL Starts 1) 2) Source: U.S. Census Bureau Source: NIC-MAP 2Q09 3Q09 4Q09 1Q10 2Q10 TTM Starts % Average Supply 18

19 Financial Impact to Ventas Timeline and Pro Forma Effects Purchase Price = $3.1 billion Metric 3,500 3,000 ($mm) 2,500 2,000 1,500 1, Ventas Credit Statistics Remain Outstanding Revolver Draw, Unsecured Bonds, Common Stock Issued to Seller and Assumed Debt Purchase Price & Deal Costs Sources Uses Pro Forma1 Net Debt / Adjusted EBITDA ~5.6x Debt / Enterprise Value2 ~33% 0 Breakeven to 2011 normalized FFO per share and accretive thereafter3 Closing expected in 1H11, subject to satisfaction of closing conditions Transaction Provides Future Earnings Growth and Maintains Investment Grade Balance Sheet 1) 2) 3) As of 12/31/10. Estimates the effects of the transaction. Actual results may differ. Based on December 31, 2010 balance sheet pro forma for the acquisition and using a current stock price Please see the Company s previously issued statements for its definition of Normalized FFO and other guidance assumptions. 19

20 Highly Strategic Transaction for Ventas Acquisition Solidifies Ventas as Leading REIT Creating Value for Shareholders 6th Diversifying Acquisition Since 2004 High-Quality, Private Pay Assets Located in Major Metropolitan Markets with Coastal Concentrations Located in Strong Wealth Demographic Areas High Same-Store NOI Growth Expected Strong Supply/Demand Fundamentals Upside in Current 87% Occupancy and Rate Growth Long-Term Growth from Redevelopment Opportunities Increased Internal FFO per Share Growth Rate Increased Scale and Strong Balance Sheet - $14B Enterprise Value / Reduced Cost of Capital Intend to Maintain Investment Grade Ratings Increased Tenant/Operator Diversification Kindred 29% of NOI Over 700 assets / 44 states and 2 Canadian Provinces MOBs, SNFs, LTACs and Seniors Housing Ventas Will Become Largest Owner of Seniors Housing Communities in the U.S. Relationships with 4 of the Top 5 Assisted Living Operators Excellent Time in Cycle to Invest: Limited Supply and Increasing Demand Ventas Continued Track Record of Creating Shareholder Value through Execution of its Strategic Growth & Diversification Plan 20

21 Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, among others, statements of expectations, beliefs, future plans and strategies, anticipated results from operations and developments and other matters that are not historical facts. The forward-looking statements are based on management s beliefs as well as on a number of assumptions concerning future events. Readers of these materials are cautioned not to put undue reliance on these forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors that could cause actual events or results to differ materially from those expressed or implied by the forward-looking statements. The most important factors that could prevent the Company from achieving its stated goals include, but are not limited to: (a) the ability and willingness of the Company s tenants, operators, borrowers, managers and other third parties to meet and/or perform the obligations under their various contractual arrangements with the Company, including, in some cases, their obligations to indemnify, defend and hold the Company harmless from and against various claims, litigation and liabilities; (b) the ability of the Company s tenants, operators, borrowers and managers to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to third parties, including without limitation obligations under their existing credit facilities and other indebtedness; (c) the Company s success in implementing its business strategy and the Company's ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions or investments, including those in different asset types and outside the United States; (d) the extent of future or pending healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates; (e) the ability of the Company s operators and managers, as applicable, to deliver high quality services, to attract and retain qualified personnel and to attract residents and patients; (f) the Company s ability and willingness to maintain its qualification as a REIT due to economic, market, legal, tax or other considerations; (g) risks associated with the Company s senior living operating portfolio, such as factors causing volatility in the Company s operating income and earnings generated by its properties, including without limitation national and regional economic conditions, costs of materials, energy, labor and services, employee benefit costs, insurance costs and professional and general liability claims, and timely delivery of accurate property-level financial results for those properties; and (h) the other factors set forth in the Company s periodic filings with the Securities and Exchange Commission. 21

22 Ventas Acquisition of Real Estate Assets Of Atria Senior Living Group October 22, 2010