Company Earns Normalized FFO Per Share of $0.68 in First Quarter
Ventas Continues to Build Liquidity with Expansion of Credit Facilities and Asset Sales
LOUISVILLE, KY (May 6, 2008) - Ventas, Inc. (NYSE:VTR) ("Ventas" or the "Company") said today that first quarter 2008 normalized Funds from Operations ("FFO") increased 28 percent to $92.4 million from $72.1 million in the first quarter of 2007. Normalized FFO per diluted common share was $0.68 in the first quarter of both 2008 and 2007. Per share results were affected by an increase in the Company's weighted average diluted common shares outstanding to 136.7 million in the first quarter of 2008 from 106.8 million in the comparable 2007 period.
FFO per diluted common share, as defined by the National Association of Real Estate Investment Trusts ("NAREIT"), in the first quarter of 2008 increased to $0.75 per diluted common share from $0.73 per diluted common share a year earlier.
First quarter results benefited from increased revenue from the Company's senior living operations and rental increases from the Company's triple-net lease portfolio. The Company did not own its 79 high-quality, private-pay seniors housing assets managed by Sunrise Senior Living, Inc. (NYSE:SRZ) ("Sunrise") in the first quarter of 2007. Normalized FFO for the three months ended March 31, 2008 excludes the net benefit (totaling $9.8 million) from income taxes and gains on extinguishment of debt, offset by merger-related costs.
"We are pleased with our results and believe Ventas is poised to enjoy an outstanding 2008," Ventas Chairman, President and Chief Executive Officer Debra A. Cafaro said. "With an excellent balance sheet and full availability on our recently expanded $850 million revolving credit facilities, a robust pipeline of attractive opportunities and a high performing, diverse portfolio of triple-net leased and operating assets, we are in a position of strength and opportunity."
SUNRISE PORTFOLIO
Total Portfolio
The Company's operating portfolio contains 79 seniors housing communities in North America that are managed by Sunrise. Ventas owns 100 percent of 18 of these communities and has a partnership share of between 75 percent and 85 percent in the remaining 61 communities, with Sunrise owning the minority interest in those 61 communities.
Net Operating Income after management fees ("NOI") for the Sunrise portfolio was in line with the Company's expectations. Total community NOI for those 79 communities was $33.4 million for the three months ended March 31, 2008. Ventas's partnership share of NOI was $28.7 million for the same period.
73 Stabilized Communities
For the 73 stabilized Sunrise communities, total community NOI was $32.7 million for the three months ended March 31, 2008. Ventas's partnership share of NOI was $28.1 million for the same period. Strong average daily rate growth continued in the first quarter, rising two percent sequentially. Average occupancy of 92 percent for the stabilized communities was consistent with anticipated first quarter seasonality.
Six Communities in Lease-up
Ventas's Sunrise portfolio also contains six recently developed communities that are in lease-up. Ventas's share of NOI at the development assets was $0.6 million for the three months ended March 31, 2008, compared to $0.9 million in fourth quarter of 2007. The decrease is due to a full quarter impact of early stage lease-up losses from the 229-unit independent living community located in Ontario and acquired by the Company in December 2007 ("Steeles"), and the reclassification of one asset from lease-up to stabilized.
Community NOI increased 57 percent for the five Sunrise development communities (excluding Steeles) in the first quarter of 2008 compared to fourth quarter 2007 results. These five assets also enjoyed a six percentage point sequential quarterly increase in occupancy, to 72 percent. The newly constructed and acquired Steeles community represents the sixth asset currently included in the lease-up portfolio. It continues to increase occupancy, which currently is 43 percent.
GAAP NET INCOME
Net income applicable to common shares for the quarter ended March 31, 2008 was $32.1 million, or $0.23 per diluted common share, after discontinued operations of $1.0 million, compared with net income for the quarter ended March 31, 2007 of $45.1 million, or $0.42 per diluted common share, after discontinued operations of $1.5 million.
FIRST QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
Portfolio and Performance Highlights
-- As previously announced, Ventas purchased a 47-unit seniors housing
community located in Texas for $5.1 million and leased it to an
affiliate of Capital Senior Living Corporation (NYSE:CSU). The lease
provides Ventas with an expected unlevered yield over the life of the
lease of approximately 8.6 percent.
-- In April 2008, Ventas sold seven healthcare assets for approximately
$68 million. Ventas expects to recognize a gain from the sale of
approximately $24 million in the second quarter. Proceeds will be
used to pay down debt and for general corporate purposes. Annual rent
for these assets, acquired in 2002, was $7.2 million.
-- In May 2008, Ventas entered into an agreement giving it the exclusive
right, as part of a joint venture, to develop up to ten identified
medical office buildings ("MOBs") on hospital campuses in eight
states. This joint venture represents an important new partnership
with a nationally recognized private developer of MOBs and healthcare
facilities. The expected development cost of these projects could
total up to $150 million.
-- With this acquisition and divestiture activity:
-- annualized revenue from Kindred Healthcare, Inc. (NYSE:KND)
("Kindred") represents approximately 28 percent of the Company's
annualized total revenues;
-- annualized revenue from private-pay, non-government-reimbursed
assets represents 69 percent of the Company's annualized total
revenues, computed on the same pro forma basis;
-- annualized revenue from the Company's operating assets, where rent
is paid directly from residents of the Company's operating seniors
housing communities and MOB tenants, constitutes approximately 45
percent of its annualized total revenues, computed on the same pro
forma basis;
-- assets leased to Kindred represent approximately 15 percent of the
Company's total real estate assets (measured on a gross book value
basis) on its consolidated balance sheet; and
-- annualized revenue for the above computations is determined by
excluding the Company's partner's share in revenue in the
numerator and the denominator.
-- The 203 skilled nursing facilities ("SNFs") and hospitals ("LTACs")
leased by the Company to Kindred produced EBITDARM (earnings before
interest, taxes, depreciation, amortization, rent and management fees)
to actual cash rent coverage of 2.2 times for the trailing
twelve-month period ended December 31, 2007 (the latest date
available).
-- Supplemental information regarding Ventas's portfolio of 513 seniors
housing and healthcare assets is available on the Company's website
under the "For Investors" section or at
http://www.ventasreit.com/investors/supplemental.asp.
Balance Sheet, Financing & Capital Markets
-- In March 2008, Ventas increased its borrowing capacity under its
unsecured revolving credit facilities to $850 million, of which
$150 million is available in either U.S. or Canadian dollars. The
credit facilities mature in April 2009, and the Company has the option
to extend their maturity to April 2010 upon satisfaction of customary
conditions. Pricing under the facilities remains LIBOR plus 75 basis
points. At May 6, 2008, these facilities had $780 million in undrawn
credit availability, and the Company held approximately $124 million
in unrestricted cash and marketable securities.
-- As previously announced, Ventas raised $192 million in February 2008
through the issuance and sale of 4.5 million shares of its common
stock.
-- The Company's debt to total capitalization at March 31, 2008 was
approximately 34 percent.
Medicare Reimbursement
-- On May 2, 2008, the Centers for Medicare & Medicaid Services ("CMS")
announced its final Medicare reimbursement update for LTACs for
Reimbursement Year ("RY") 2009, commencing July 1, 2008 and ending
September 30, 2009. The net Medicare reimbursement for LTACs is
expected to increase by approximately 2.5 percent for RY 2009.
-- On May 1, 2008, CMS issued its proposed Medicare reimbursement update
for SNFs for RY 2009, commencing October 1, 2008 and ending September
30, 2009. Under the proposed rule, for RY 2009 SNFs will receive: (1)
a "market basket" increase of 3.1 percent; and (2) reduced
reimbursement of approximately 3.3 percent due to administrative
changes. The proposed rule is subject to a 60-day comment period.
Additional News
-- The Wall Street Journal Shareholder Scoreboard cited Ventas as the
best performing real estate stock for the five-year period ended
December 31, 2007. Additionally, the Company was cited as the best
performing healthcare REIT for the one-year, three-year and ten-year
periods then ended.
-- As previously announced, James "Denny" Shelton and Robert D. Reed, two
nationally respected hospital executives, have been appointed to
Ventas's Board of Directors.
-- The Company has announced that its Chicago, Illinois office will be
designated as its headquarters, effective at the Company's Annual
Meeting of Stockholders on May 19, 2008. The Company is
simultaneously expanding its Louisville, Kentucky office.
-- In the Company's litigation against HCP, Inc. ("HCP") regarding HCP's
improper offers to acquire Sunrise Senior Living Real Estate
Investment Trust, the United States District Court for the Western
District of Kentucky set a trial date of August 18, 2009 and ordered
that discovery in the case be completed by December 31, 2008.
VENTAS REAFFIRMS 2008 NORMALIZED FFO AND FAD GUIDANCE
Ventas reaffirmed that it expects its 2008 normalized FFO to be between $2.75 and $2.82 per diluted common share and FAD to be between $2.56 and $2.63 per diluted common share. The Company's normalized FFO and FAD guidance for all periods is subject to certain assumptions and qualifications, which have been previously disclosed, and which are subject to change and outside the control of the Company. There can be no assurance that the Company will achieve these results. The Company may from time to time update its publicly announced guidance, but it is not obligated to do so.
FIRST QUARTER CONFERENCE CALL
Ventas will hold a conference call to discuss this earnings release on May 7, 2008, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The conference call is being webcast live by CCBN and can be accessed at the Company's website at www.ventasreit.com or www.earnings.com. An online replay of the webcast will be available at approximately 12:00 p.m. Eastern Time and will be archived for 30 days.
Ventas, Inc. is a leading healthcare real estate investment trust. At the date of this press release, Ventas owns 513 seniors housing and healthcare- related properties located in 43 states and two Canadian provinces. Its diverse portfolio includes 253 seniors housing communities, 192 skilled nursing facilities, 41 hospitals and 27 medical office and other properties. More information about Ventas can be found on its website at http://www.ventasreit.com.
This press release includes 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. All statements regarding Ventas, Inc.'s ("Ventas" or the "Company") and its subsidiaries' expected future financial position, results of operations, cash flows, funds from operations, dividends and dividend plans, financing plans, business strategy, budgets, projected costs, capital expenditures, competitive positions, acquisitions, investment opportunities, merger integration, growth opportunities, expected lease income, continued qualification as a real estate investment trust ("REIT"), plans and objectives of management for future operations and statements that include words such as "anticipate," "if," "believe," "plan," "estimate," "expect," "intend," "may," "could," "should," "will" and other similar expressions are forward-looking statements. These forward-looking statements are inherently uncertain, and security holders must recognize that actual results may differ from the Company's expectations. The Company does not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made.
The Company's actual future results and trends may differ materially depending on a variety of factors discussed in the Company's filings with the Securities and Exchange Commission. Factors that may affect the Company's plans or results include without limitation: (a) the ability and willingness of the Company's operators, tenants, borrowers, managers and other third parties, as applicable, to meet and/or perform the obligations under their various contractual arrangements with the Company; (b) the ability and willingness of Kindred Healthcare, Inc. (together with its subsidiaries, "Kindred"), Brookdale Living Communities, Inc. (together with its subsidiaries, "Brookdale") and Alterra Healthcare Corporation (together with its subsidiaries, "Alterra") to meet and/or perform their obligations to indemnify, defend and hold the Company harmless from and against various claims, litigation and liabilities under the Company's respective contractual arrangements with Kindred, Brookdale and Alterra; (c) the ability of the Company's operators, tenants, borrowers and managers, as applicable, 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; (d) 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; (e) the nature and extent of future competition; (f) the extent of future or pending healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates; (g) increases in the Company's cost of borrowing; (h) 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; (i) the results of litigation affecting the Company; (j) changes in general economic conditions and/or economic conditions in the markets in which the Company may, from time to time, compete; (k) the Company's ability to pay down, refinance, restructure and/or extend its indebtedness as it becomes due; (l) the movement of interest rates and the resulting impact on the value of and the accounting for the Company's interest rate swap agreement; (m) the Company's ability and willingness to maintain its qualification as a REIT due to economic, market, legal, tax or other considerations; (n) final determination of the Company's taxable net income for the year ended December 31, 2007 and for the year ending December 31, 2008; (o) the ability and willingness of the Company's tenants to renew their leases with the Company upon expiration of the leases and the Company's ability to relet its properties on the same or better terms in the event such leases expire and are not renewed by the existing tenants; (p) risks associated with the Company's seniors housing communities managed by Sunrise Senior Living, Inc. ("Sunrise"), including the timely delivery of accurate property-level financial results for the Company's properties; (q) factors causing volatility in the Company's revenues generated by its seniors housing communities managed by Sunrise, including without limitation national and regional economic conditions, costs of materials, energy, labor and services, employee benefit costs and professional and general liability claims; (r) the movement of U.S. and Canadian exchange rates; (s) year-over- year changes in the Consumer Price Index and the effect of those changes on the rent escalators, including the rent escalator for Master Lease 2 with Kindred, and the Company's earnings; (t) the impact on the liquidity, financial condition and results of operations of the Company's operators, tenants, borrowers and managers, as applicable, resulting from increased operating costs and uninsured liabilities for professional liability claims, and the ability of the Company's operators, tenants, borrowers and managers to accurately estimate the magnitude of such liabilities; (u) the impact of market or issuer events on the liquidity or value of the Company's investments in marketable securities; and (v) the impact of the Sunrise strategic review process and accounting, legal and regulatory issues. Many of these factors are beyond the control of the Company and its management.
CONSOLIDATED BALANCE SHEETS
As of March 31, 2008, December 31, 2007, September 30, 2007, June 30, 2007 and March 31, 2007
(In thousands, except per share amounts)
March December September June March
31, 31, 30, 30, 31,
2008 2007 2007 2007 2007
Assets
Real estate
investments:
Land $567,523 $572,092 $564,462 $551,463 $359,104
Buildings and
improvements 5,668,239 5,718,273 5,548,290 5,500,868 3,386,697
6,235,762 6,290,365 6,112,752 6,052,331 3,745,801
Accumulated
depreciation (855,148) (816,352) (765,598) (718,342) (692,402)
Net real estate
property 5,380,614 5,474,013 5,347,154 5,333,989 3,053,399
Loans receivable,
net 19,945 19,998 35,556 34,792 35,554
Net real estate
investments 5,400,559 5,494,011 5,382,710 5,368,781 3,088,953
Cash and cash
equivalents 51,347 28,334 28,573 30,138 -
Escrow deposits and
restricted cash 52,621 54,077 89,807 99,058 80,039
Deferred financing
costs, net 21,978 22,836 22,280 23,202 17,984
Notes receivable-
related parties 2,109 2,092 2,144 2,126 2,484
Other 123,174 115,278 136,106 148,148 96,707
Total assets $5,651,788 $5,716,628 $5,661,620 $5,671,453 $3,286,167
Liabilities and
stockholders'
equity
Liabilities:
Senior notes
payable and
other debt $3,157,111 $3,360,499 $3,267,705 $3,284,642 $2,370,418
Deferred revenue 8,700 9,065 9,665 10,219 7,607
Accrued interest 46,748 20,790 46,752 21,157 45,696
Accounts payable
and other
accrued
liabilities 142,386 173,576 152,753 140,493 122,155
Deferred income
taxes 286,153 297,590 313,987 309,215 30,394
Total
liabilities 3,641,098 3,861,520 3,790,862 3,765,726 2,576,270
Minority interest 32,316 31,454 26,781 26,622 983
Commitments and
contingencies
Stockholders'
equity:
Preferred stock,
10,000 shares
authorized,
unissued - - - - -
Common stock,
$0.25 par value;
138,369, 133,665,
133,451, 133,366
and 106,314 shares
issued at March 31,
2008, December 31,
2007, September 30,
2007, June 30, 2007
and March 31, 2007,
respectively 34,592 33,416 33,371 33,350 26,587
Capital in excess
of par value 2,015,661 1,821,294 1,817,809 1,814,637 771,004
Accumulated other
comprehensive
income 14,819 17,416 6,652 9,482 914
Retained earnings
(deficit) (86,698) (47,846) (13,761) 21,636 (89,591)
Treasury stock,
0, 14, 3, 0 and
0 shares at March 31,
2008, December 31,
2007, September 30,
2007, June 30, 2007
and March 31, 2007,
respectively - (626) (94) - -
Total stockholders'
equity 1,978,374 1,823,654 1,843,977 1,879,105 708,914
Total liabilities
and stockholders'
equity $5,651,788 $5,716,628 $5,661,620 $5,671,453 $3,286,167
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2008 and 2007
(In thousands, except per share amounts)
For the Three Months
Ended March 31,
2008 2007
Revenues:
Rental income $122,707 $116,345
Resident fees and services 107,726 -
Interest income from loans receivable 467 823
Interest and other income 864 249
Total revenues 231,764 117,417
Expenses:
Interest 52,864 38,809
Depreciation and amortization 71,660 32,279
Property-level operating expenses 76,957 941
General, administrative and
professional fees (including non-cash
stock-based compensation expense of
$1,949 and $2,014 for the three
months ended March 31, 2008 and 2007,
respectively) 8,257 7,581
Foreign currency gain (79) (5,786)
Merger-related expenses 646 -
Gain on extinguishment of debt (79) -
Total expenses 210,226 73,824
Income before income taxes, minority
interest and discontinued operations 21,538 43,593
Income tax benefit 10,038 -
Income before minority interest and
discontinued operations 31,576 43,593
Minority interest, net of tax 478 5
Income from continuing operations 31,098 43,588
Discontinued operations 954 1,518
Net income applicable to common
shares $32,052 $45,106
Earnings per common share:
Basic:
Income from continuing operations
applicable to common shares $0.23 $0.41
Discontinued operations 0.01 0.02
Net income applicable to common
shares $0.24 $0.43
Diluted:
Income from continuing operations
applicable to common shares $0.22 $0.41
Discontinued operations 0.01 0.01
Net income applicable to common
shares $0.23 $0.42
Weighted average shares used in
computing earnings per common share:
Basic 136,381 106,044
Diluted 136,673 106,775
Dividends declared per common share $0.5125 $0.475
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
2008 First 2007 Quarters
Quarter Fourth Third Second First
Revenues:
Rental income $122,707 $122,806 $119,362 $118,252 $116,345
Resident fees and
services 107,726 106,888 103,938 71,400 -
Interest income from
loans receivable 467 471 477 815 823
Interest and other
income 864 583 712 1,450 249
Total revenues 231,764 230,748 224,489 191,917 117,417
Expenses:
Interest 52,864 54,723 53,373 54,414 38,809
Depreciation and
amortization 71,660 72,018 70,189 57,467 32,279
Property-level operating
expenses 76,957 75,395 71,382 50,407 941
General, administrative
and professional fees
(including non-cash
stock-based compensation
expense of $1,949,
$1,891, $1,768, $1,820
and $2,014,
respectively) 8,257 11,506 9,315 8,023 7,581
Foreign currency (gain)
loss (79) (35) 116 (18,575) (5,786)
Merger-related expenses 646 652 1,535 792 -
Gain on extinguishment
of debt (79) - (88) - -
Total expenses 210,226 214,259 205,822 152,528 73,824
Income before income
taxes, minority
interest and
discontinued operations 21,538 16,489 18,667 39,389 43,593
Income tax benefit 10,038 12,968 9,463 5,611 -
Income before minority
interest and
discontinued operations 31,576 29,457 28,130 45,000 43,593
Minority interest, net
of tax 478 610 675 408 5
Income from continuing
operations 31,098 28,847 27,455 44,592 43,588
Discontinued operations 954 554 559 135,205 1,518
Net income 32,052 29,401 28,014 179,797 45,106
Preferred stock
dividends and issuance
costs - - - 5,199 -
Net income applicable to
common shares $32,052 $29,401 $28,014 $174,598 $45,106
Earnings per common
share:
Basic:
Income from continuing
operations applicable
to common shares $0.23 $0.22 $0.21 $0.34 $0.41
Discontinued operations 0.01 0.00 0.00 1.15 0.02
Net income applicable to
common shares $0.24 $0.22 $0.21 $1.49 $0.43
Diluted:
Income from continuing
operations applicable
to common shares $0.22 $0.22 $0.21 $0.33 $0.41
Discontinued operations 0.01 0.00 0.00 1.15 0.01
Net income applicable to
common shares $0.23 $0.22 $0.21 $1.48 $0.42
Shares used in computing
earnings per common
share:
Basic 136,381 133,300 133,205 117,419 106,044
Diluted 136,673 133,685 133,503 117,825 106,775
Dividends declared per
common share $0.5125 $0.475 $0.475 $0.475 $0.475
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2008 and 2007
(In thousands)
For the Three Months
Ended March 31,
2008 2007
Cash flows from operating activities:
Net income applicable to common shares $32,052 $45,106
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization
(including amounts in discontinued
operations) 71,836 33,433
Amortization of deferred revenue and
lease intangibles, net (3,111) (604)
Other amortization expenses 638 1,110
Stock-based compensation 1,949 2,014
Straight-lining of rental income (3,759) (4,269)
Gain on extinguishment of debt (108) -
Unrealized gain on foreign currency
hedge - (5,786)
Income tax benefit (10,038) -
Other 801 34
Changes in operating assets and
liabilities:
Decrease (increase) in other assets 15,728 (16,577)
Increase in accrued interest 25,958 25,748
(Decrease) increase in other
liabilities (27,320) 7,931
Net cash provided by operating
activities 104,626 88,140
Cash flows from investing activities:
Net investment in real estate
property (5,971) (30,351)
Proceeds from sale of securities - 5,072
Proceeds from loans receivable 62 110
Capital expenditures (932) (36)
Other (17) (18)
Net cash used in investing activities (6,858) (25,223)
Cash flows from financing activities:
Net change in borrowings under
revolving credit facilities (172,216) 151,500
Proceeds from debt 5,001 -
Repayment of debt (29,204) (117,270)
Payment of deferred financing costs (675) (412)
Issuance of common stock 191,668 -
Cash distribution to common
stockholders (70,906) (92,471)
Other 1,866 (5,510)
Net cash used in financing activities (74,466) (64,163)
Net increase (decrease) in cash and
cash equivalents 23,302 (1,246)
Effect of foreign currency
translation on cash and cash
equivalents (289) -
Cash and cash equivalents at
beginning of period 28,334 1,246
Cash and cash equivalents at end of
period $51,347 $-
QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
2008 First 2007 Quarters
Quarter Fourth Third Second First
Cash flows from
operating activities:
Net income applicable
to common shares $32,052 $29,401 $28,014 $179,797 $45,106
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization
(including amounts
in discontinued
operations) 71,836 72,544 70,716 58,352 33,433
Amortization of
deferred revenue
and lease
intangibles, net (3,111) (3,190) (3,027) (2,998) (604)
Other amortization
expenses 638 475 322 549 1,110
Stock-based
compensation 1,949 1,891 1,768 1,820 2,014
Straight-lining of
rental income (3,759) (4,379) (4,326) (4,337) (4,269)
Gain on extinguishment
of debt (108) - - - -
Gain on sale of assets
(including amounts in
discontinued operations) - - - (129,478) -
Net gain on sale of
marketable equity
securities - - - (864) -
Loss on bridge
financing - - - 2,550 -
Income tax benefit (10,038) (12,968) (9,463) (5,611) -
Realized gain on
foreign currency
hedge - - - 5,786 -
Unrealized gain on
foreign currency hedge - - - - (5,786)
Other 801 (264) 463 (11) 34
Changes in operating
assets and liabilities:
Decrease (increase) in
other assets 15,728 29,386 25,972 6,931 (16,577)
Increase (decrease)
in accrued interest 25,958 (27,534) 25,125 (28,245) 25,748
(Decrease) increase in
other liabilities (27,320) (33,525) 46,570 (6,542) 7,931
Net cash provided by
operating
activities 104,626 51,837 182,134 77,699 88,140
Cash flows from
investing activities:
Net investment in real
estate property (5,971) (54,604) (72,835) (1,190,564) (30,351)
Proceeds from real
estate disposals - - - 157,400 -
Proceeds from sale of
securities - - - 2,701 5,072
Proceeds from loans
receivable 62 (525) 643 15,575 110
Capital expenditures (932) (2,928) (2,242) (1,166) (36)
Other (17) 52 (18) 358 (18)
Net cash used in
investing activities (6,858) (58,005) (74,452) (1,015,696) (25,223)
Cash flows from
financing activities:
Net change in borrowings
under revolving credit
facilities (172,216) 46,027 (25,641) 4,700 151,500
Issuance of bridge
financing - - - 1,230,000 -
Repayment of bridge
financing - - - (1,230,000) -
Proceeds from debt 5,001 44,422 1,095 8,315 -
Repayment of debt (29,204) (40,838) (12,059) (14,446) (117,270)
Debt and preferred stock
issuance costs - - - (4,300) -
Payment of deferred
financing costs (675) (2,322) (131) (4,991) (412)
Issuance of common
stock 191,668 1,589 (250) 1,045,979 -
Cash distributions to
preferred stockholders - - - (3,449) -
Cash distributions to
common stockholders (70,906) (63,486) (63,411) (63,371) (92,471)
Other 1,866 11,165 2,099 3,116 (5,510)
Net cash (used in)
provided by financing
activities (74,466) (3,443) (98,298) 971,553 (64,163)
Net increase (decrease)
in cash and cash
equivalents 23,302 (9,611) 9,384 33,556 (1,246)
Effect of foreign
currency translation on
cash and cash
equivalents (289) 9,372 (10,949) (3,418) -
Cash and cash
equivalents at
beginning of period 28,334 28,573 30,138 - 1,246
Cash and cash
equivalents at end of
period $51,347 $28,334 $28,573 $30,138 $-
FUNDS FROM OPERATIONS, NORMALIZED FFO AND FUNDS AVAILABLE
FOR DISTRIBUTION
(In thousands, except per share amounts)
2008
First 2007 Quarters
Quarter Fourth Third Second First
Net income applicable to
common shares $32,052 $29,401 $28,014 $174,598 $45,106
Adjustments:
Depreciation and
amortization on real estate
assets 71,480 71,840 70,022 57,300 31,682
Depreciation on real estate
assets related to minority
interest (1,501) (1,391) (1,420) (938) -
Discontinued operations:
Gain on sale of real estate
assets - - - (129,478) -
Depreciation and
amortization on real estate
assets 176 527 527 730 1,136
FFO 102,207 100,377 97,143 102,212 77,924
Gain on foreign currency
hedge - - - (18,528) (5,786)
Preferred stock issuance
costs - - - 1,750 -
Bridge loan fee - - - 2,550 -
Merger-related expenses 646 652 1,535 792 -
Gain on sale of securities - - - (864) -
Income tax benefit (10,404) (13,342) (9,897) (5,856) -
Gain on extinguishment of
debt (79) - (88) - -
Normalized FFO 92,370 87,687 88,693 82,056 72,138
Straight-lining of rental
income (3,759) (4,379) (4,326) (4,337) (4,269)
Routine capital expenditures (823) (2,927) (2,243) (1,166) (36)
FAD $87,788 $80,381 $82,124 $76,553 $67,833
Per diluted share:
Net income applicable to
common shares $0.23 $0.22 $0.21 $1.48 $0.42
Adjustments:
Depreciation and
amortization on real estate
assets 0.52 0.54 0.53 0.49 0.31
Depreciation on real estate
assets related to minority
interest (0.01) (0.01) (0.01) (0.01) -
Discontinued operations:
Gain on sale of real estate
assets - - - (1.10) -
Depreciation and
amortization on real estate
assets 0.00 0.00 0.00 0.01 0.01
FFO 0.75 0.75 0.73 0.87 0.73
Gain on foreign currency
hedge - - - (0.16) (0.05)
Preferred stock issuance
costs - - - 0.01 -
Bridge loan fee - - - 0.02 -
Merger-related expenses 0.01 0.00 0.01 0.01 -
Gain on sale of securities - - - (0.01) -
Income tax benefit (0.08) (0.10) (0.07) (0.05) -
Gain on extinguishment of
debt (0.00) - (0.00) - -
Normalized FFO 0.68 0.66 0.66 0.70 0.68
Straight-lining of rental
income (0.03) (0.03) (0.03) (0.04) (0.04)
Routine capital expenditures (0.01) (0.02) (0.02) (0.01) (0.00)
FAD $0.64 $0.60 $0.62 $0.65 $0.64
Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. To overcome this problem, the Company considers FFO and FAD appropriate measures of performance of an equity REIT. The Company uses the NAREIT definition of FFO. NAREIT defines FFO as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis. FAD represents normalized FFO excluding straight-line rental adjustments and routine capital expenditures.
FFO and FAD presented herein are not necessarily comparable to FFO and FAD presented by other real estate companies due to the fact that not all real estate companies use the same definitions. Neither FFO nor FAD should be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company's financial performance or as an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is FFO or FAD necessarily indicative of sufficient cash flow to fund all of the Company's needs.
The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, FFO and FAD should be examined in conjunction with net income as presented elsewhere in this press release.
Normalized FFO and FAD Guidance for the Year Ending December 31, 2008
The following table illustrates the Company's normalized FFO and FAD per diluted common share guidance for the year ending December 31, 2008:
GUIDANCE
For the Year
Ending
December 31, 2008
Net income applicable to common
shares $1.36 - $1.43
Adjustments:
Depreciation and amortization on real
estate assets and depreciation related to
minority interest 1.70 - 1.70
FFO 3.06 - 3.13
Adjustments:
Income tax benefit, gain/loss on
foreign currency, and merger-related
expenses, net (0.31)- (0.31)
Normalized FFO 2.75 - 2.82
Straight-lining of rental income and
routine capital expenditures (0.19)- (0.19)
FAD $2.56 - $2.63
Net Debt to Pro Forma EBITDA
The following pro forma information considers the effect on net income, interest and depreciation of the Company's investments and other capital transactions that were completed during the trailing twelve months ended March 31, 2008, as if the transactions had been consummated as of the beginning of the period. The following table illustrates net debt to pro forma earnings before interest, taxes, depreciation and amortization ("EBITDA") (dollars in thousands):
Pro forma net income for the
twelve months ended March 31, 2008 $262,868
Add back:
Pro forma interest (including
discontinued operations) 219,854
Pro forma depreciation and
amortization (including discontinued
operations) 289,031
Stock-based compensation 7,428
Gain on extinguishment of debt (167)
Income tax benefit (41,230)
Minority interest 1,972
Net gain on real estate disposals (129,478)
Other taxes 1,626
Pro forma EBITDA $611,904
As of March 31, 2008:
Debt $3,157,111
Cash (60,320)
Net debt $3,096,791
Net debt to pro forma EBITDA 5.1 x
The Company considers EBITDA a profitability measure which indicates the Company's ability to service debt. The Company considers the net debt to pro forma EBITDA ratio a useful measure to evaluate the Company's ability to pay its indebtedness. EBITDA presented herein is not necessarily comparable to EBITDA presented by other companies due to the fact that not all companies use the same definition. EBITDA should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company's financial performance or as an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is EBITDA necessarily indicative of sufficient cash flow to fund all of the Company's needs. The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, EBITDA should be examined in conjunction with net income as presented elsewhere in this press release.
- END -
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