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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2010

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM              TO             

Commission file number: 1-10989

 

 

Ventas, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   61-1055020
(State or Other Jurisdiction of Incorporation or Organization)   (I.R.S. Employer Identification No.)

111 S. Wacker Drive, Suite 4800

Chicago, Illinois

(Address of Principal Executive Offices)

60606

(Zip Code)

(877) 483-6827

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  x

  Accelerated filer  ¨

Non-accelerated filer  ¨

  Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class of Common Stock:

 

Outstanding at April 27, 2010:

Common Stock, $0.25 par value   156,853,254

 

 

 


Table of Contents

VENTAS, INC.

FORM 10-Q

INDEX

 

          Page

PART I—FINANCIAL INFORMATION

  

Item 1.

  

Financial Statements

   3
  

Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009

   3
  

Consolidated Statements of Income for the Three Months Ended March 31, 2010 and 2009

   4
  

Consolidated Statements of Equity for the Three Months Ended March 31, 2010 and the Year Ended December 31, 2009

   5
  

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009

   6
  

Notes to Consolidated Financial Statements

   7

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   25

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

   36

Item 4.

  

Controls and Procedures

   38

PART II—OTHER INFORMATION

  

Item 1.

  

Legal Proceedings

   39

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

   39

Item 6.

  

Exhibits

   40

 

2


Table of Contents

PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

VENTAS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

 

     March 31,
2010
    December 31,
2009
 
     (Unaudited)     (Audited)  

Assets

    

Real estate investments:

    

Land

   $ 557,370      $ 557,276   

Buildings and improvements

     5,735,896        5,722,837   

Construction in progress

     4,370        12,508   
                
     6,297,636        6,292,621   

Accumulated depreciation

     (1,226,252     (1,177,911
                

Net real estate property

     5,071,384        5,114,710   

Loans receivable, net

     147,725        131,887   
                

Net real estate investments

     5,219,109        5,246,597   

Cash and cash equivalents

     132,729        107,397   

Escrow deposits and restricted cash

     41,023        39,832   

Deferred financing costs, net

     27,964        29,252   

Other

     213,000        193,167   
                

Total assets

   $ 5,633,825      $ 5,616,245   
                

Liabilities and equity

    

Liabilities:

    

Senior notes payable and other debt

   $ 2,698,171      $ 2,670,101   

Accrued interest

     35,773        17,974   

Accounts payable and other liabilities

     183,574        190,445   

Deferred income taxes

     252,687        253,665   
                

Total liabilities

     3,170,205        3,132,185   

Commitments and contingencies

    

Equity:

    

Ventas stockholders’ equity:

    

Preferred stock, $1.00 par value; 10,000 shares authorized, unissued

     —          —     

Common stock, $0.25 par value; 300,000 shares authorized; 156,862 and 156,627 shares issued at March 31, 2010 and December 31, 2009, respectively

     39,341        39,160   

Capital in excess of par value

     2,578,577        2,573,039   

Accumulated other comprehensive income

     25,154        19,669   

Retained earnings (deficit)

     (196,972     (165,710

Treasury stock, 10 and 15 shares at March 31, 2010 and December 31, 2009, respectively

     (467     (647
                

Total Ventas stockholders’ equity

     2,445,633        2,465,511   

Noncontrolling interest

     17,987        18,549   
                

Total equity

     2,463,620        2,484,060   
                

Total liabilities and equity

   $ 5,633,825      $ 5,616,245   
                

See accompanying notes.

 

3


Table of Contents

VENTAS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

 

     For the Three Months
Ended March 31,
 
     2010     2009  

Revenues:

    

Rental income

   $ 129,179      $ 122,398   

Resident fees and services

     108,486        102,939   

Income from loans and investments

     3,617        3,281   

Interest and other income

     263        286   
                

Total revenues

     241,545        228,904   

Expenses:

    

Interest

     44,300        45,930   

Depreciation and amortization

     52,476        49,498   

Property-level operating expenses

     78,879        75,468   

General, administrative and professional fees (including non-cash stock-based compensation expense of $3,032 and $3,059 for the three months ended March 31, 2010 and 2009, respectively)

     10,683        10,598   

Foreign currency gain

     (106     (6

Loss on extinguishment of debt

     —          105   

Merger-related expenses and deal costs

     2,319        2,054   
                

Total expenses

     188,551        183,647   
                

Income before income taxes, discontinued operations and noncontrolling interest

     52,994        45,257   

Income tax (expense) benefit

     (286     547   
                

Income from continuing operations

     52,708        45,804   

Discontinued operations

     460        29,165   
                

Net income

     53,168        74,969   

Net income attributable to noncontrolling interest (net of tax of $419 and $390 for the three months ended March 31, 2010 and 2009, respectively)

     549        741   
                

Net income attributable to common stockholders

   $ 52,619      $ 74,228   
                

Earnings per common share:

    

Basic:

    

Income from continuing operations attributable to common stockholders

   $ 0.34      $ 0.32   

Discontinued operations

     0.00        0.20   
                

Net income attributable to common stockholders

   $ 0.34      $ 0.52   
                

Diluted:

    

Income from continuing operations attributable to common stockholders

   $ 0.34      $ 0.32   

Discontinued operations

     0.00        0.20   
                

Net income attributable to common stockholders

   $ 0.34      $ 0.52   
                

Weighted average shares used in computing earnings per common share:

    

Basic

     156,453        143,091   

Diluted

     156,967        143,145   

Dividends declared per common share

   $ 0.535      $ 0.5125   

See accompanying notes.

 

4


Table of Contents

VENTAS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months Ended March 31, 2010 and the Year Ended December 31, 2009

(In thousands, except per share amounts)

 

    Common
Stock Par
Value
  Capital in
Excess of
Par Value
    Accumulated
Other
Comprehensive
Income (Loss)
    Retained
Earnings
(Deficit)
    Treasury
Stock
    Total Ventas
Stockholders’
Equity
    Noncontrolling
Interest
    Total Equity  

Balance at January 1, 2009

  $ 35,825   $ 2,264,125      $ (21,089   $ (117,806   $ (457   $ 2,160,598      $ 19,137      $ 2,179,735   

Comprehensive Income:

               

Net income

    —       —          —          266,495        —          266,495        2,865        269,360   

Foreign currency translation

    —       —          23,552        —          —          23,552        —          23,552   

Unrealized gain on marketable debt securities

    —       —          17,327        —          —          17,327        —          17,327   

Other

    —       —          (121     —          —          (121     —          (121
                                 

Comprehensive income

    —       —          —          —          —          307,253        2,865        310,118   

Net change in noncontrolling interest

    —       334        —          —          —          334        (3,453     (3,119

Dividends to common stockholders—$2.05 per share

    —       —          —          (314,399     —          (314,399     —          (314,399

Issuance of common stock

    3,266     295,935        —          —          —          299,201        —          299,201   

Issuance of common stock for stock plans

    30     12,819        —          —          175        13,024        —          13,024   

Grant of restricted stock, net of forfeitures

    39     (174     —          —          (365     (500     —          (500
                                                             

Balance at December 31, 2009

    39,160     2,573,039        19,669        (165,710     (647     2,465,511        18,549        2,484,060   

Comprehensive Income:

               

Net income

    —       —          —          52,619        —          52,619        549        53,168   

Foreign currency translation

    —       —          5,946        —          —          5,946        —          5,946   

Unrealized loss on marketable debt securities

    —       —          (293     —          —          (293     —          (293

Other

    —       —          (168     —          —          (168     —          (168
                                 

Comprehensive income

    —       —          —          —          —          58,104        549        58,653   

Net change in noncontrolling interest

    —       —          —          —          —          —          (1,111     (1,111

Dividends to common stockholders—$0.535 per share

    —       —          —          (83,881     —          (83,881     —          (83,881

Issuance of common stock for stock plans

    147     4,566        —          —          1,988        6,701        —          6,701   

Grant of restricted stock, net of forfeitures

    34     972        —          —          (1,808     (802     —          (802
                                                             

Balance at March 31, 2010

  $ 39,341   $ 2,578,577      $ 25,154      $ (196,972   $ (467   $ 2,445,633      $ 17,987      $ 2,463,620   
                                                             

See accompanying notes.

 

5


Table of Contents

VENTAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

     For the Three Months
Ended March 31,
 
     2010     2009  

Cash flows from operating activities:

    

Net income

   $ 53,168      $ 74,969   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization (including amounts in discontinued operations)

     52,537        49,908   

Amortization of deferred revenue and lease intangibles, net

     (1,549     (1,858

Other amortization expenses

     2,154        608   

Stock-based compensation

     3,032        3,059   

Straight-lining of rental income

     (2,449     (2,938

Loss on extinguishment of debt

     —          158   

Net gain on sale of real estate assets

     (184     (27,871

Income tax expense (benefit)

     286        (547

Other

     53        157   

Changes in operating assets and liabilities:

    

(Increase) decrease in other assets

     (3,772     1,688   

Increase in accrued interest

     17,799        20,190   

Decrease in accounts payable and other liabilities

     (5,514     (3,967
                

Net cash provided by operating activities

     115,561        113,556   

Cash flows from investing activities:

    

Net investment in real estate property

     (11,860     (8,387

Investment in loans receivable

     (15,796     (7,373

Proceeds from real estate disposals

     754        56,614   

Proceeds from loans receivable

     1,192        1,650   

Capital expenditures

     (4,295     (3,870
                

Net cash (used in) provided by investing activities

     (30,005     38,634   

Cash flows from financing activities:

    

Net change in borrowings under revolving credit facilities

     29,089        (87,046

Proceeds from debt

     196        9,201   

Repayment of debt

     (7,807     (74,357

Payment of deferred financing costs

     (1,113     (9,567

Cash distribution to common stockholders

     (83,881     (73,546

Contributions from noncontrolling interest

     265        —     

Distributions to noncontrolling interest

     (1,989     (1,414

Other

     4,169        3,649   
                

Net cash used in financing activities

     (61,071     (233,080
                

Net increase (decrease) in cash and cash equivalents

     24,485        (80,890

Effect of foreign currency translation on cash and cash equivalents

     847        (116

Cash and cash equivalents at beginning of period

     107,397        176,812   
                

Cash and cash equivalents at end of period

   $ 132,729      $ 95,806   
                

Supplemental schedule of non-cash activities:

    

Assets and liabilities assumed from acquisitions:

    

Real estate investments

   $ 496      $ 8,307   

Utilization of escrow funds held for an Internal Revenue Code Section 1031 exchange

     —          (9,295

Other assets acquired

     (355     82   

Other liabilities

     141        (1,886

Noncontrolling interest

     —          980   

Debt transferred on the sale of assets

     —          38,759   

See accompanying notes.

 

6


Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—DESCRIPTION OF BUSINESS

Ventas, Inc. (together with its subsidiaries, unless otherwise indicated or except where the context otherwise requires, “we,” “us” or “our”) is a real estate investment trust (“REIT”) with a geographically diverse portfolio of seniors housing and healthcare properties in the United States and Canada. As of March 31, 2010, this portfolio consisted of 505 assets: 244 seniors housing communities, 187 skilled nursing facilities, 40 hospitals and 34 medical office buildings (“MOBs”) and other properties in 43 states and two Canadian provinces. With the exception of our seniors housing communities that are managed by Sunrise Senior Living, Inc. (together with its subsidiaries, “Sunrise”) pursuant to long-term management agreements and the majority of our MOBs, we lease our properties to healthcare operating companies under “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses. We also had real estate loan investments relating to seniors housing and healthcare companies or properties as of March 31, 2010.

We conduct substantially all of our business through our wholly owned subsidiaries, Ventas Realty, Limited Partnership (“Ventas Realty”), PSLT OP, L.P. and Ventas SSL, Inc. Our primary business consists of acquiring, financing and owning seniors housing and healthcare properties and leasing those properties to third parties or operating those properties through independent third party managers.

NOTE 2—ACCOUNTING POLICIES

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the Securities and Exchange Commission (the “SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. Operating results for the three-month period ended March 31, 2010 are not necessarily an indication of the results that may be expected for the year ending December 31, 2010. The accompanying Consolidated Financial Statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on February 19, 2010. Certain prior period amounts have been reclassified to conform to the current period presentation.

Revenue Recognition

Certain of our leases, including the majority of our leases with Brookdale Senior Living Inc. (together with its subsidiaries, “Brookdale Senior Living”), provide for periodic and determinable increases in base rent. Base rental revenues under these leases are recognized on a straight-line basis over the terms of the applicable lease. Income on our straight-line revenue is recognized when collectibility is reasonably assured, and in the event we determine that collectibility of straight-line revenue is not reasonably assured, we establish an allowance for estimated losses. Recognizing rental income on a straight-line basis results in recognized revenue exceeding cash amounts contractually due from our tenants during the first half of the term for leases that have straight-line treatment. The cumulative excess is included in other assets, net of allowances, on our Consolidated Balance Sheets and totaled $80.8 million and $78.4 million at March 31, 2010 and December 31, 2009, respectively.

Our master lease agreements with Kindred Healthcare, Inc. (together with its subsidiaries, “Kindred”) (the “Kindred Master Leases”) and certain of our other leases provide for an annual increase in rental payments only if certain revenue parameters or other substantive contingencies are met. We recognize the increased rental revenue under these leases only if the revenue parameters or other substantive contingencies are met, rather than on a straight-line basis over the term of the applicable lease.

 

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We recognize income from rent, lease termination fees and all other income when all of the following criteria are met in accordance with SEC Staff Accounting Bulletin 104: (i) the agreement has been fully executed and delivered; (ii) services have been rendered; (iii) the amount is fixed or determinable; and (iv) collectibility is reasonably assured.

We recognize resident fees and services, other than move-in fees, monthly as services are provided. Move-in fees, a component of resident fees and services, are recognized on a straight-line basis over the term of the applicable lease agreement. Lease agreements with residents generally have a term of one year and are cancelable by the resident with 30 days’ notice.

Fair Values of Financial Instruments

The following methods and assumptions were used in estimating fair value disclosures for financial instruments.

 

   

Cash and cash equivalents: The carrying amount of unrestricted cash and cash equivalents reported in our Consolidated Balance Sheets approximates fair value due to the short maturity of these instruments.

 

   

Loans receivable: The fair value of loans receivable is estimated by discounting the future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

 

   

Marketable debt securities: The fair value of marketable debt securities is estimated using quoted prices in active markets for identical assets or liabilities that we have the ability to access.

 

   

Senior notes payable and other debt: The fair values of borrowings are estimated by discounting the future cash flows using current interest rates at which similar borrowings could be made by us.

Recently Issued or Adopted Accounting Standards

On January 1, 2010, we adopted FASB guidance related to variable interest accounting. The guidance requires an enterprise to analyze whether its variable interest gives it a controlling financial interest in a variable interest entity (“VIE”). This analysis identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics: (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 receive benefits of the VIE that could potentially be significant to the entity. The guidance requires an enterprise to perform this analysis on an ongoing basis and requires additional disclosures about an enterprise’s involvement in VIEs. The adoption of this guidance did not impact our Consolidated Financial Statements.

On January 1, 2010, we adopted FASB guidance related to noncontrolling interests. The guidance provides additional clarification regarding decrease-in-ownership provisions and expands the disclosures required upon deconsolidation of a subsidiary. The adoption of this guidance did not impact our Consolidated Financial Statements.

In January 2010, the FASB issued guidance related to disclosures about fair value measurements, which adds new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances and settlements relating to Level 3 measurements. This guidance, which we adopted on January 1, 2010, is partially effective for periods beginning after December 15, 2009. Requirements related to additional Level 3 disclosures will be effective for fiscal years beginning after December 15, 2010. The adoption of this guidance did not impact our Consolidated Financial Statements.

In February 2010, the FASB issued additional guidance related to subsequent events procedures, which includes, among other things, an exemption for SEC filers from the requirement to disclose the date through

 

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which subsequent events have been evaluated. We adopted this guidance during the first quarter of 2010 and will no longer include the date through which subsequent events have been evaluated in our notes to Consolidated Financial Statements.

NOTE 3—CONCENTRATION OF CREDIT RISK

As of March 31, 2010, approximately 38.9%, 21.7% and 14.0% of our properties, based on the gross book value of real estate investments (including assets held for sale), were managed or operated by Sunrise, Brookdale Senior Living (whose subsidiaries include Brookdale Living Communities, Inc. (“Brookdale”) and Alterra Healthcare Corporation (“Alterra”)) and Kindred, respectively. Seniors housing communities and skilled nursing facilities constituted approximately 73.9% and 12.5%, respectively, of our portfolio, based on the gross book value of real estate investments (including assets held for sale), as of March 31, 2010, with the remaining properties consisting of hospitals, MOBs and other healthcare assets. Our properties are located in 43 states and two Canadian provinces, with properties in two states each accounting for 10% or more of total revenues during the three months ended March 31, 2010.

Approximately 25.2% and 26.3% of our total revenues and 37.4% and 39.1% of our total net operating income (“NOI,” which is defined as total revenues, less interest and other income and property-level operating expenses) (including amounts in discontinued operations) for the three months ended March 31, 2010 and 2009, respectively, were derived from our four Kindred Master Leases. Approximately 12.6% and 13.0% of our total revenues and 18.7% and 19.4% of our total NOI (including amounts in discontinued operations) for the three months ended March 31, 2010 and 2009, respectively, were derived from our lease agreements with Brookdale Senior Living. Each of the Kindred Master Leases and our leases with Brookdale Senior Living is a triple-net lease pursuant to which the tenant is required to pay all insurance, taxes, utilities and maintenance and repairs related to the properties. In addition, the tenants are required to comply with the terms of the mortgage financing documents, if any, affecting the properties.

In view of the fact that Kindred and Brookdale Senior Living lease a substantial portion of our triple-net leased properties and are each a significant source of our revenues and operating income, their financial condition and ability and willingness to satisfy their obligations under their respective leases and other agreements with us, as well as their willingness to renew those leases upon expiration of the terms thereof, have a considerable impact on our results of operations and our ability to service our indebtedness and to make distributions to our stockholders. We cannot assure you that Kindred or Brookdale Senior Living will have sufficient assets, income and access to financing to enable it to satisfy its obligations under its respective leases and other agreements with us, and any inability or unwillingness on its part to do so would have a material adverse effect on our business, financial condition, results of operations and liquidity, our ability to service our indebtedness and our ability to make distributions to our stockholders, as required for us to continue to qualify as a REIT (a “Material Adverse Effect”). We also cannot assure you that Kindred or Brookdale Senior Living will elect to renew its respective leases with us upon expiration of the initial base terms or any renewal terms thereof.

We are party to long-term management agreements with Sunrise pursuant to which Sunrise currently provides comprehensive accounting and property management services with respect to 79 of our seniors housing communities. Each management agreement has a term of 30 years from its effective date, the earliest of which began in 2004. Approximately 44.7% and 44.5% of our total revenues and 20.9% and 19.7% of our total earnings before interest, taxes, depreciation and amortization (including of non-cash stock-based compensation), excluding merger-related expenses and deal costs and gains and losses on real estate disposals (“Adjusted EBITDA”) (including amounts in discontinued operations) for the three months ended March 31, 2010 and 2009, respectively, were attributable to senior living operations managed by Sunrise.

Unlike Kindred and Brookdale Senior Living, Sunrise does not lease properties from us, but rather acts as a property manager for all of our senior living operations. Therefore, while we are not directly exposed to credit risk with Sunrise, Sunrise’s inability to efficiently and effectively manage our properties and to provide timely and accurate accounting information with respect thereto could have a Material Adverse Effect on us. Although

 

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we have various rights as owner under the Sunrise management agreements, we rely on Sunrise’s personnel, good faith, expertise, historical performance, technical resources and information systems, proprietary information and judgment to manage our seniors housing communities efficiently and effectively. We also rely on Sunrise to set resident fees and otherwise operate those properties pursuant to our management agreements. Any adverse developments in Sunrise’s business and affairs or financial condition, including without limitation, the acceleration of its indebtedness, the inability to renew or extend its revolving credit facility, the enforcement of default remedies by its counterparties, or the commencement of insolvency proceedings under the U.S. Bankruptcy Code by or against Sunrise could have a Material Adverse Effect on us.

Each of Kindred, Brookdale Senior Living and Sunrise is subject to the reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Kindred, Brookdale Senior Living and Sunrise contained or referred to in this Quarterly Report on Form 10-Q is derived from filings made by Kindred, Brookdale Senior Living or Sunrise, as the case may be, with the SEC or other publicly available information, or has been provided to us by Kindred, Brookdale Senior Living or Sunrise. We have not verified this information either through an independent investigation or by reviewing Kindred’s, Brookdale Senior Living’s or Sunrise’s public filings. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you that all of this information is accurate. Kindred’s, Brookdale Senior Living’s and Sunrise’s filings with the SEC can be found at the SEC’s website at www.sec.gov. We are providing this data for informational purposes only, and you are encouraged to obtain Kindred’s, Brookdale Senior Living’s and Sunrise’s publicly available filings from the SEC.

NOTE 4—DISPOSITIONS

We present separately, as discontinued operations, in all periods presented the results of operations for all long-lived assets disposed of or held for sale.

2010 Dispositions and Assets Held for Sale

During the first quarter of 2010, we classified the operations of five seniors housing communities as held for sale. The net book value of these assets, $19.0 million, is reflected as held for sale as of March 31, 2010 and included in other assets on our Consolidated Balance Sheets, and the operations for these assets have been reported as discontinued operations for the three months ended March 31, 2010 and 2009. We expect to record a gain from the sale of these assets during the second quarter of 2010 of approximately $5.2 million.

In February 2010, we sold one seniors housing community for approximately $2.5 million. We recognized a gain from the sale of this asset of $0.1 million during the first quarter of 2010. The operations for this asset have been reported as discontinued operations for the three months ended March 31, 2010 and 2009.

2009 Dispositions

In June 2009, we sold six skilled nursing facilities to Kindred for total consideration of $58.0 million, consisting of a $55.7 million aggregate sale price and a $2.3 million lease termination fee. The proceeds from the sale were held in an Internal Revenue Code Section 1031 exchange escrow account with a qualified intermediary and used for our acquisition of three MOBs in December 2009. Cash rent for these assets for the May 1, 2008 to April 30, 2009 lease year was approximately $5.6 million. We recognized a net gain from the sale of these assets of $38.9 million in the second quarter of 2009.

During 2009, we also sold five seniors housing communities, one hospital, one MOB and one other property to the existing tenants for an aggregate sale price of $96.2 million and transferred related debt of $38.8 million. We recognized a net gain from the sales of these assets of $27.5 million in 2009.

 

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Set forth below is a summary of the results of operations for the three-month periods ended March 31, 2010 and 2009 with respect to the properties sold or held for sale during the three months ended March 31, 2010 and the year ended December 31, 2009:

 

     For the Three Months
Ended March 31,
         2010            2009    
     (In thousands)

Revenues:

     

Rental income

   $ 496    $ 2,460

Interest and other income

     —        123
             
     496      2,583

Expenses:

     

Interest

     159      879

Depreciation and amortization

     61      410
             
     220      1,289
             

Income before gain on sale of real estate assets

     276      1,294

Gain on sale of real estate assets

     184      27,871
             

Discontinued operations

   $ 460    $ 29,165
             

NOTE 5—INTANGIBLES

At March 31, 2010, intangible lease assets, comprised of above market resident leases, in-place resident leases and other intangibles, were $9.4 million, $96.8 million and $3.4 million, respectively. At December 31, 2009, these intangible lease assets were $10.5 million, $96.3 million and $2.5 million, respectively. At March 31, 2010 and December 31, 2009, the accumulated amortization of the intangible assets was $93.8 million and $92.6 million, respectively. The remaining weighted average amortization period of our lease-related intangible assets at March 31, 2010 was approximately 7.7 years.

At March 31, 2010 and December 31, 2009, intangible lease liabilities, comprised of below market resident leases, were $15.3 million and $15.1 million, respectively. At March 31, 2010 and December 31, 2009, the accumulated amortization of the intangible liabilities was $11.0 million and $10.8 million, respectively. The remaining weighted average amortization period of intangible liabilities at March 31, 2010 was approximately 8.2 years.

 

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NOTE 6—SENIOR NOTES PAYABLE AND OTHER DEBT

The following is a summary of our senior notes payable and other debt as of March 31, 2010 and December 31, 2009:

 

     March 31,
2010
    December 31,
2009
 
     (In thousands)  

Unsecured revolving credit facilities

   $ 38,204      $ 8,466   

6 3/4 % Senior Notes due 2010

     1,375        1,375   

3 7/8 % Convertible Senior Notes due 2011

     230,000        230,000   

9% Senior Notes due 2012

     82,433        82,433   

6 5/8 % Senior Notes due 2014

     71,654        71,654   

7 1/8 % Senior Notes due 2015

     142,669        142,669   

6 1/2 % Senior Notes due 2016

     400,000        400,000   

6 3/4 % Senior Notes due 2017

     225,000        225,000   

Mortgage loans and other

     1,537,004        1,540,064   
                

Total

     2,728,339        2,701,661   

Unamortized fair value adjustment

     10,980        11,642   

Unamortized commission fees and discounts

     (41,148     (43,202
                

Senior notes payable and other debt

   $ 2,698,171      $ 2,670,101   
                

As of March 31, 2010, our indebtedness had the following maturities:

 

     Principal Amount
Due at Maturity
   Unsecured
Revolving Credit
Facilities (1)
   Scheduled Periodic
Amortization
   Total Maturities
     (In thousands)

2010

   $ 176,412    $ —      $ 20,887    $ 197,299

2011

     301,323      —        26,450      327,773

2012

     388,937      38,204      22,899      450,040

2013

     150,962      —        17,373      168,335

2014

     109,137      —        15,168      124,305

Thereafter

     1,401,136      —        59,451      1,460,587
                           

Total maturities

   $ 2,527,907    $ 38,204    $ 162,228    $ 2,728,339
                           

 

(1) At March 31, 2010, we had $132.7 million of unrestricted cash and cash equivalents for cash available of $94.5 million, net of amounts outstanding on our unsecured revolving credit facilities.

As of March 31, 2010, our joint venture partners’ share of total debt was $158.5 million.

Unsecured Revolving Credit Facilities

As of March 31, 2010, our aggregate borrowing capacity under the unsecured revolving credit facilities was $1.0 billion, of which $875.0 million matures on April 26, 2012 and $125.0 million matured on April 26, 2010. Borrowings under our unsecured revolving credit facilities bear interest at a fluctuating rate per annum (based on U.S. or Canadian LIBOR, the Canadian Bankers’ Acceptance rate, or the U.S. or Canadian Prime rate), plus an applicable percentage based on our consolidated leverage. At March 31, 2010, the applicable percentage was 0.75% for 2010 maturities and 2.80% for 2012 maturities. Our unsecured revolving credit facilities have a 20 basis point facility fee. At March 31, 2010, we had $38.2 million outstanding under our unsecured revolving credit facilities and approximately $961.8 million of availability. At the time of filing, we have $1.0 billion of total committed capital under our revolving credit facilities all of which will mature April 26, 2012.

 

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NOTE 7—FAIR VALUES OF FINANCIAL INSTRUMENTS

As of March 31, 2010 and December 31, 2009, the carrying amounts and fair values of our financial instruments were as follows:

 

     March 31, 2010     December 31, 2009  
     Carrying
Amount
    Fair Value     Carrying
Amount
    Fair Value  
     (In thousands)  

Cash and cash equivalents

   $ 132,729      $ 132,729      $ 107,397      $ 107,397   

Loans receivable, net

     147,725        149,196        131,887        129,512   

Marketable debt securities

     65,050        65,050        65,038        65,038   

Senior notes payable and other debt, gross

     (2,728,339     (2,948,248     (2,701,661     (2,780,405

Fair value estimates are subjective in nature and depend on a number of important assumptions, including estimates of future cash flows, risks, discount rates and relevant comparable market information associated with each financial instrument. The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented above are not necessarily indicative of the amounts we would realize in a current market exchange.

At March 31, 2010, we held marketable debt securities, classified as available-for-sale, with an aggregate amortized cost basis and fair value of $60.9 million and $65.1 million, respectively. At December 31, 2009, these securities had an aggregate amortized cost basis and fair value of $60.6 million and $65.0 million, respectively. The contractual maturities of our marketable debt securities range from October 1, 2012 to April 15, 2016. We do not intend to sell these securities and it is more likely than not that we will not be required to sell these securities prior to maturity.

NOTE 8—LITIGATION

Legal Proceedings Defended and Indemnified by Third Parties

Kindred, Brookdale Senior Living, Sunrise and our other tenants, operators and managers are parties to certain legal actions and regulatory investigations arising in the normal course of their business. In certain cases, the tenant, operator or manager, as applicable, has agreed to indemnify, defend and hold us harmless against these actions and investigations. However, the resolution of any litigation or investigations, either individually or in the aggregate, could have a material adverse effect on Kindred’s, Brookdale Senior Living’s, Sunrise’s or such other tenants’, operators’ and managers’ liquidity, financial condition or results of operations, which, in turn, could have a Material Adverse Effect on us.

Litigation Related to the Sunrise REIT Acquisition

On May 3, 2007, we filed a lawsuit against HCP, Inc. (“HCP”) in the United States District Court for the Western District of Kentucky, entitled Ventas, Inc. v. HCP, Inc., Case No. 07-cv-238-JGH. We asserted claims of tortious interference with contract and tortious interference with prospective business advantage. Our complaint alleged that HCP interfered with our purchase agreement to acquire the assets and liabilities of Sunrise Senior Living Real Estate Investment Trust (“Sunrise REIT”) and with the process for unitholder consideration of the purchase agreement. The complaint alleged, among other things, that HCP made certain improper and misleading public statements and/or offers to acquire Sunrise REIT and that HCP’s actions caused us to suffer substantial damages, including, among other things, the payment of materially greater consideration to acquire Sunrise REIT resulting from the substantial increase in the purchase price above the original contract price necessary to obtain unitholder approval and increased costs associated with the delay in closing the acquisition, including increased costs to finance the transaction as a result of the delay.

 

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HCP brought counterclaims against us alleging misrepresentation and negligent misrepresentation by Sunrise REIT related to its sale process, claiming that we were responsible for those actions as successor. HCP sought compensatory and punitive damages. On March 25, 2009, the District Court granted us judgment on the pleadings against all counterclaims brought by HCP and dismissed HCP’s counterclaims with prejudice. Thereafter, the District Court confirmed the dismissal of HCP’s counterclaims.

On July 16, 2009, the District Court denied HCP’s summary judgment motion as to our claim for tortious interference with business expectation, permitting us to present that claim against HCP at trial. The District Court granted HCP’s motion for summary judgment as to our claim for tortious interference with contract and dismissed that claim. The District Court also ruled that we could not seek to recover a portion of our alleged damages.

On September 4, 2009, the jury unanimously held that HCP tortiously interfered with our business expectation to acquire Sunrise REIT at the agreed price by employing significantly wrongful means such as fraudulent misrepresentation, deceit and coercion. The jury awarded us $101.6 million in compensatory damages, which is the full amount of damages the District Court permitted us to seek at trial. The District Court entered judgment on the jury’s verdict on September 8, 2009.

On November 16, 2009, the District Court affirmed the jury’s verdict and denied all of HCP’s post-trial motions, including a motion requesting that the District Court overturn the jury’s verdict and enter judgment for HCP or, in the alternative, award HCP a new trial. The District Court also denied our motion for pre-judgment interest and/or to modify the jury award to increase it to reflect the currency rates in effect on September 8, 2009, the date of entry of the judgment.

On November 17, 2009, HCP appealed the District Court’s judgment to the United States Court of Appeals for the Sixth Circuit (the “Sixth Circuit”). HCP argues that the judgment against it should be vacated and the case remanded for a new trial and/or that judgment should be entered in its favor as a matter of law. We are vigorously contesting HCP’s appeal and seek confirmation by the Sixth Circuit of both the jury’s verdict and the various rulings in our favor in the District Court.

On November 24, 2009, we filed a cross-appeal to the Sixth Circuit, which will be heard and decided in conjunction with HCP’s appeal. In addition to maintaining the full benefit of our favorable jury verdict, in our cross-appeal, we have asserted that we are entitled to substantial monetary relief in addition to the jury verdict, including punitive damages, additional compensatory damages and pre-judgment interest. We are vigorously pursuing our cross-appeal and seek additional proceedings in the District Court in which a jury may supplement the current judgment.

On December 11, 2009, HCP posted a $102.8 million letter of credit in our favor to serve as security to stay execution of the jury verdict pending the appellate proceedings.

The briefing process for HCP’s appeal and our cross-appeal commenced in March 2010 and is expected to conclude in June 2010, and a final decision by the Sixth Circuit could be issued by June 2011. There can be no assurance as to the outcome of HCP’s appeal or our cross-appeal or the timing of a decision by the Sixth Circuit.

Other Litigation

We are party to various other lawsuits, investigations and claims (some of which may not be insured) arising in the normal course of our business, including without limitation in connection with the operations of our seniors housing communities managed by Sunrise. It is the opinion of management that, except as set forth in this Note 8, the disposition of these actions, investigations and claims will not, individually or in the aggregate, have a Material Adverse Effect on us. However, we are unable to predict the ultimate outcome of pending litigation, investigations and claims, and if management’s assessment of our liability with respect to these actions, investigations and claims is incorrect, such actions, investigations and claims could have a Material Adverse Effect on us.

 

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NOTE 9—INCOME TAXES

We have elected for certain of our subsidiaries to be treated as taxable REIT subsidiaries (“TRS” or “TRS entities”), which are subject to federal and state income taxes. Although the TRS entities were not liable for any cash federal income taxes for the three-month period ended March 31, 2010, federal income tax liabilities for these TRS entities may increase in future periods as we exhaust net operating loss carryforwards and as our senior living operations segment grows. Such increases could be significant.

The consolidated provision for income taxes for the three-month periods ended March 31, 2010 and 2009 was an expense of $0.3 million and a benefit of $0.5 million, respectively. The expense and benefit were reduced by income tax expense of $0.4 million for each period, related to the noncontrolling interest share of net income. Realization of a deferred tax benefit is dependent in part upon generating sufficient taxable income in future periods. Our net operating loss carryforwards begin to expire in 2024 with respect to the TRS entities and 2020 with respect to our other entities.

Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. Net deferred tax liabilities related to TRS entities totaled $252.7 million and $253.7 million at March 31, 2010 and December 31, 2009, respectively, and related primarily to book and tax basis differences for fixed and intangible assets and to net operating losses.

Generally, we are subject to audit under the statute of limitations by the Internal Revenue Service for the year ended December 31, 2006 and subsequent years and are subject to audit by state taxing authorities for the year ended December 31, 2005 and subsequent years. The potential impact on income tax expense of years open under the statute of limitations for Canadian entities acquired as part of the Sunrise REIT acquisition is not expected to be material.

NOTE 10—CAPITAL STOCK

In March 2010, in connection with our outstanding 3 7/8% convertible senior notes due 2011, issued in 2006, we filed a registration statement on Form S-3 with the SEC relating to the resale, from time to time, by the selling stockholders of shares of our common stock, if any, that may become issuable upon conversion of the convertible notes. The registration statement replaced our previous resale shelf registration statement, which expired pursuant to the SEC’s rules.

Accumulated Other Comprehensive Income

 

     March 31,
2010
    December 31,
2009
 
     (In thousands)  

Foreign currency translation

   $ 22,005      $ 16,059   

Unrealized gain on marketable debt securities

     4,147        4,440   

Other

     (998     (830
                

Total accumulated other comprehensive income

   $ 25,154      $ 19,669   
                

 

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NOTE 11—EARNINGS PER COMMON SHARE

The following table shows the amounts used in computing basic and diluted earnings per common share:

 

     For the Three Months
Ended March 31,
     2010    2009
     (In thousands, except per
share amounts)

Numerator for basic and diluted earnings per share:

     

Income from continuing operations attributable to common stockholders

   $ 52,159    $ 45,063

Discontinued operations

     460      29,165
             

Net income attributable to common stockholders

   $ 52,619    $ 74,228
             

Denominator:

     

Denominator for basic earnings per share—weighted average shares

     156,453      143,091

Effect of dilutive securities:

     

Stock options

     316      48

Restricted stock awards

     42      6

Convertible notes

     156      —  
             

Denominator for diluted earnings per share—adjusted weighted average shares

     156,967      143,145
             

Basic earnings per share:

     

Income from continuing operations attributable to common stockholders

   $ 0.34    $ 0.32

Discontinued operations

     0.00      0.20
             

Net income attributable to common stockholders

   $ 0.34    $ 0.52
             

Diluted earnings per share:

     

Income from continuing operations attributable to common stockholders

   $ 0.34    $ 0.32

Discontinued operations

     0.00      0.20
             

Net income attributable to common stockholders

   $ 0.34    $ 0.52
             

NOTE 12—SEGMENT INFORMATION

As of March 31, 2010, we operated through two reportable business segments: triple-net leased properties and senior living operations. Our triple-net leased properties segment consists of acquiring, financing and owning seniors housing and healthcare properties in the United States and leasing those properties to healthcare operating companies under “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses. Our senior living operations segment consists of investments in seniors housing communities located in the United States and Canada for which we engage Sunrise to manage the operations.

Our MOB segment consists of leasing space primarily to physicians and other healthcare businesses and engaging third parties to manage those operations. Due to our limited operation of and allocation of capital to the MOBs, the MOB segment is not individually reported and is included in “All Other” because it does not meet necessary quantitative thresholds at the current time.

We evaluate performance of the combined properties in each segment based on NOI. There are no intersegment sales or transfers.

All other revenues consist primarily of rental income related to the MOBs, income from loans and investments and other miscellaneous income.

 

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Summary information by business segment is as follows:

For the three months ended March 31, 2010:

 

     Triple-Net
Leased
Properties
    Senior
Living
Operations
    All
Other
    Total  
     (In thousands)  

Revenues:

        

Rental income

   $ 116,989      $ —        $ 12,190      $ 129,179   

Resident fees and services

     —          108,486        —          108,486   

Income from loans and investments

     —          —          3,617        3,617   

Interest and other income

     205        13        45        263   
                                

Total revenues

   $ 117,194      $ 108,499      $ 15,852      $ 241,545   
                                

Segment net operating income

   $ 116,989      $ 33,809      $ 11,605      $ 162,403   

Interest and other income

     205        13        45        263   

Interest expense

     (21,832     (21,265     (1,203     (44,300

Depreciation and amortization

     (29,567     (17,963     (4,946     (52,476

General, administrative and professional fees

     —          —          (10,683     (10,683

Foreign currency gain

     —          106        —          106   

Merger-related expenses and deal costs

     (38     (711     (1,570     (2,319
                                

Income (loss) before income taxes, discontinued operations and noncontrolling interest

   $ 65,757      $ (6,011   $ (6,752   $ 52,994   
                                

For the three months ended March 31, 2009:

 

     Triple-Net
Leased
Properties
    Senior
Living
Operations
    All
Other
    Total  
     (In thousands)  

Revenues:

        

Rental income

   $ 114,050      $ —        $ 8,348      $ 122,398   

Resident fees and services

     —          102,939        —          102,939   

Income from loans and investments

     —          —          3,281        3,281   

Interest and other income

     116        8        162        286   
                                

Total revenues

   $ 114,166      $ 102,947      $ 11,791      $ 228,904   
                                

Segment net operating income

   $ 114,050      $ 30,485      $ 8,615      $ 153,150   

Interest and other income

     116        8        162        286   

Interest expense

     (22,109     (22,773     (1,048     (45,930

Depreciation and amortization

     (29,802     (17,124     (2,572     (49,498

General, administrative and professional fees

     —          —          (10,598     (10,598

Foreign currency gain

     —          6        —          6   

Loss on extinguishment of debt

     (37     —          (68     (105

Merger-related expenses and deal costs

     (174     (1,857     (23     (2,054
                                

Income (loss) before income taxes, discontinued operations and noncontrolling interest

   $ 62,044      $ (11,255   $ (5,532   $ 45,257   
                                

 

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     For the Three Months
Ended March 31
     2010    2009
     (In thousands)

Capital expenditures:

     

Triple-net leased properties (1)

   $ 11,992    $ 10,000

Senior living operations

     1,399      1,142

All other expenditures

     2,764      10,410
             

Total capital expenditures

   $ 16,155    $ 21,552
             

 

(1) 2009 includes $9.3 million from funds held in an Internal Revenue Code Section 1031 exchange escrow account with a qualified intermediary.

Our portfolio of properties and real estate investments are located in the United States and Canada. Revenues are attributed to an individual country based on the location of each property.

Geographic information regarding our business segments is as follows:

 

     For the Three Months
Ended March 31,
     2010    2009
     (In thousands)

Revenues:

     

United States

   $ 221,282    $ 212,296

Canada

     20,263      16,608
             

Total revenues

   $ 241,545    $ 228,904
             
     March 31,
2010
   December 31,
2009
     (In thousands)

Long-lived assets:

     

United States

   $ 4,645,897    $ 4,696,674

Canada

     425,487      418,036
             

Total long-lived assets

   $ 5,071,384    $ 5,114,710
             

NOTE 13—CONDENSED CONSOLIDATING INFORMATION

We and certain of our direct and indirect wholly owned subsidiaries (the “Wholly Owned Subsidiary Guarantors”) have fully and unconditionally guaranteed, on a joint and several basis, the obligation to pay principal and interest with respect to the senior notes of our subsidiaries, Ventas Realty and Ventas Capital Corporation (the “Issuers”). Ventas Capital Corporation is a wholly owned direct subsidiary of Ventas Realty that was formed to facilitate the offering of the senior notes and has no assets or operations. In addition, Ventas Realty and the Wholly Owned Subsidiary Guarantors have fully and unconditionally guaranteed, on a joint and several basis, the obligation to pay principal and interest with respect to our convertible notes. In April 2009, ElderTrust Operating Limited Partnership (“ETOP”), of which we owned substantially all of the partnership units, was liquidated and dissolved. Accordingly, the financial results of ETOP and its wholly owned subsidiaries are no longer separately reported but are now included among the Wholly Owned Subsidiary Guarantors. We have other subsidiaries (“Non-Guarantor Subsidiaries”) that are not included among the Wholly Owned Subsidiary Guarantors, and such subsidiaries are not obligated with respect to the senior notes or the convertible notes. Contractual and legal restrictions, including those contained in the instruments governing certain Non-Guarantor Subsidiaries’ outstanding indebtedness, may under certain circumstances restrict our ability to

 

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obtain cash from our Non-Guarantor Subsidiaries for the purpose of meeting our debt service obligations, including our guarantee of payment of principal and interest on the senior notes and our primary obligation to pay principal and interest on the convertible notes. Certain of our real estate assets are also subject to mortgages. The following summarizes our condensed consolidating information as of March 31, 2010 and December 31, 2009 and for the three months ended March 31, 2010 and 2009:

CONDENSED CONSOLIDATING BALANCE SHEET

As of March 31, 2010

 

    Ventas, Inc.     Wholly
Owned
Subsidiary
Guarantors
  Issuers     Non-Guarantor
Subsidiaries
  Consolidated
Elimination
    Consolidated
    (In thousands)

Assets

           

Net real estate investments

  $ 9,356      $ 2,196,390   $ 744,952      $ 2,268,411   $ —        $ 5,219,109

Cash and cash equivalents

    75,670        6,034     —          51,025     —          132,729

Escrow deposits and restricted cash

    83        9,649     9,455        21,836     —          41,023

Deferred financing costs, net

    3,154        1,299     13,128        10,383     —          27,964

Investment in and advances to affiliates

    1,370,971        —       1,124,483        —       (2,495,454     —  

Other

    72,815        78,762     26,530        34,893     —          213,000
                                         

Total assets

  $ 1,532,049      $ 2,292,134   $ 1,918,548      $ 2,386,548   $ (2,495,454   $ 5,633,825
                                         

Liabilities and equity

           

Liabilities:

           

Senior notes payable and other debt

  $ 222,090      $ 400,029   $ 877,893      $ 1,198,159   $ —        $ 2,698,171

Intercompany loans

    (52,714     460,529     (407,815     —       —          —  

Accrued interest

    (105     1,584     28,783        5,511     —          35,773

Accounts payable and other liabilities

    27,365        65,216     26,317        64,676     —          183,574

Deferred income taxes

    252,687        —       —          —       —          252,687
                                         

Total liabilities

    449,323        927,358     525,178        1,268,346     —          3,170,205

Total equity

    1,082,726        1,364,776     1,393,370        1,118,202     (2,495,454     2,463,620
                                         

Total liabilities and equity

  $ 1,532,049      $ 2,292,134   $ 1,918,548      $ 2,386,548   $ (2,495,454   $ 5,633,825
                                         

 

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CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2009

 

    Ventas, Inc.     Wholly
Owned
Subsidiary
Guarantors
  Issuers     Non-Guarantor
Subsidiaries
  Consolidated
Elimination
    Consolidated
    (In thousands)

Assets

           

Net real estate investments

  $ 9,496      $ 2,185,897   $ 769,857      $ 2,281,347   $ —        $ 5,246,597

Cash and cash equivalents

    —          4,332     82,886        20,179     —          107,397

Escrow deposits and restricted cash

    215        9,093     12,766        17,758     —          39,832

Deferred financing costs, net

    1,192        1,407     15,577        11,076     —          29,252

Investment in and advances to affiliates

    1,169,609        —       1,308,403        —       (2,478,012     —  

Other

    3        76,154     82,346        34,664     —          193,167
                                         

Total assets

  $ 1,180,515      $ 2,276,883   $ 2,271,835      $ 2,365,024   $ (2,478,012   $ 5,616,245
                                         

Liabilities and equity

           

Liabilities:

           

Senior notes payable and other debt

  $ 220,942      $ 370,299   $ 876,987      $ 1,201,873   $ —        $ 2,670,101

Intercompany loans

    (45,563     453,763     (408,200     —       —          —  

Accrued interest

    (3,552     5,117     10,732        5,677     —          17,974

Accounts payable and other liabilities

    15,696        66,862     42,580        65,307     —          190,445

Deferred income taxes

    253,665        —       —          —       —          253,665
                                         

Total liabilities

    441,188        896,041     522,099        1,272,857     —          3,132,185

Total equity

    739,327        1,380,842     1,749,736        1,092,167     (2,478,012     2,484,060
                                         

Total liabilities and equity

  $ 1,180,515      $ 2,276,883   $ 2,271,835      $ 2,365,024   $ (2,478,012   $ 5,616,245
                                         

 

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CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Three Months Ended March 31, 2010

 

    Ventas, Inc.     Wholly
Owned
Subsidiary
Guarantors
  Issuers     Non-Guarantor
Subsidiaries
  Consolidated
Elimination
    Consolidated  
   

(In thousands)

 

Revenues:

           

Rental income

  $ 593      $ 40,404   $ 69,704      $ 18,478   $ —        $ 129,179   

Resident fees and services

    —          29,118     —          79,368     —          108,486   

Income from loans and investments

    1,430        412     1,775        —       —          3,617   

Equity earnings in affiliates

    54,131        432     —          —       (54,563     —     

Interest and other income

    207        6     21        29     —          263   
                                           

Total revenues

    56,361        70,372     71,500        97,875     (54,563     241,545   

Expenses:

           

Interest

    1,236        5,129     20,736        17,199     —          44,300   

Depreciation and amortization

    391        21,857     9,708        20,520     —          52,476   

Property-level operating expenses

    (2     21,399     129        57,353     —          78,879   

General, administrative and professional fees

    (13     4,231     5,108        1,357     —          10,683   

Foreign currency (gain) loss

    (140     33     —          1     —          (106

Merger-related expenses and deal costs

    2,269        50     —          —       —          2,319   

Intercompany interest

    (1,170     8,130     (7,136     176     —          —     
                                           

Total expenses

    2,571        60,829     28,545        96,606     —          188,551   
                                           

Income before income taxes, discontinued operations and noncontrolling interest

    53,790        9,543     42,955        1,269     (54,563     52,994   

Income tax (expense) benefit

    (1,011     725     —          —       —          (286
                                           

Income from continuing operations

    52,779        10,268     42,955        1,269     (54,563     52,708   

Discontinued operations

    (160     340     280        —       —          460   
                                           

Net income

    52,619        10,608     43,235        1,269     (54,563     53,168   

Net income attributable to noncontrolling interest, net of tax

    —          —       —          549     —          549   
                                           

Net income attributable to common stockholders

  $ 52,619      $ 10,608   $ 43,235      $ 720   $ (54,563   $ 52,619   
                                           

 

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CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Three Months Ended March 31, 2009

 

    Ventas, Inc.     Wholly
Owned
Subsidiary
Guarantors
    Issuers     Non-Guarantor
Subsidiaries
    Consolidated
Elimination
    Consolidated  
    (In thousands)  

Revenues:

           

Rental income

  $ 577      $ 37,444      $ 67,763      $ 16,614      $ —        $ 122,398   

Resident fees and services

    —          26,227        —          76,712        —          102,939   

Income from loans and investments

    —          —          3,281        —          —          3,281   

Equity earnings in affiliates

    73,747        619        —          —          (74,366     —     

Interest and other income

    1        6        261        18        —          286   
                                               

Total revenues

    74,325        64,296        71,305        93,344        (74,366     228,904   

Expenses:

           

Interest

    1,079        5,559        24,725        14,567        —          45,930   

Depreciation and amortization

    162        20,589        10,099        18,648        —          49,498   

Property-level operating expenses

    —          19,405        112        55,951        —          75,468   

General, administrative and professional fees

    41        3,597        5,694        1,266        —          10,598   

Foreign currency loss (gain)

    43        (26     (14     (9     —          (6

Loss on extinguishment of debt

    —          —          37        68        —          105   

Merger-related expenses and deal costs

    —          1,853        201        —          —          2,054   

Intercompany interest

    (681     11,855        (11,176     2        —          —     
                                               

Total expenses

    644        62,832        29,678        90,493        —          183,647   
                                               

Income before income taxes, discontinued operations and noncontrolling interest

    73,681        1,464        41,627        2,851        (74,366     45,257   

Income tax benefit

    547        —          —          —          —          547   
                                               

Income from continuing operations

    74,228        1,464        41,627        2,851        (74,366     45,804   

Discontinued operations

    —          (1,716     19,520        11,361        —          29,165   
                                               

Net income

    74,228        (252     61,147        14,212        (74,366     74,969   

Net (loss) income attributable to noncontrolling interest, net of tax

    —          (375     —          1,116        —          741   
                                               

Net income attributable to common stockholders

  $ 74,228      $ 123      $ 61,147      $ 13,096      $ (74,366   $ 74,228   
                                               

 

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Three Months Ended March 31, 2010

 

    Ventas, Inc.     Wholly
Owned
Subsidiary
Guarantors
    Issuers     Non-Guarantor
Subsidiaries
    Consolidated
Elimination
  Consolidated  
    (In thousands)  

Net cash (used in) provided by operating activities

  $ (5,802   $ 31,141      $ 69,458      $ 20,764      $ —     $ 115,561   

Net cash (used in) provided by investing activities

    —          (26,606     120        (3,519     —       (30,005

Cash flows from financing activities:

           

Net change in borrowings under revolving credit facilities

    —          29,089        —          —          —       29,089   

Proceeds from debt

    —          —          —          196        —       196   

Repayment of debt

    —          (2,642     —          (5,165     —       (7,807

Net change in intercompany debt

    403,337        (149,180     (1,946     (252,211     —       —     

Payment of deferred financing costs

    —          (8     (1,105     —          —       (1,113

Cash distribution (to) from affiliates

    (242,153     119,908        (150,260     272,505        —       —     

Cash distribution to common stockholders

    (83,881     —          —          —          —       (83,881

Contributions from noncontrolling interest

    —          —          —          265        —       265   

Distributions to noncontrolling interest

    —          —          —          (1,989     —       (1,989

Other

    4,169        —          —          —          —       4,169   
                                             

Net cash provided by (used in) financing activities

    81,472        (2,833     (153,311     13,601        —       (61,071
                                             

Net increase (decrease) in cash and cash equivalents

    75,670        1,702        (83,733     30,846        —       24,485   

Effect of foreign currency translation on cash and cash equivalents

    —          —          847        —          —       847   

Cash and cash equivalents at beginning of period

    —          4,332        82,886        20,179        —       107,397   
                                             

Cash and cash equivalents at end of period

  $ 75,670      $ 6,034      $ —        $ 51,025      $ —     $ 132,729   
                                             

 

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Three Months Ended March 31, 2009

 

    Ventas, Inc.     Wholly
Owned
Subsidiary
Guarantors
    Issuers     Non-Guarantor
Subsidiaries
    Consolidated
Elimination
  Consolidated  
    (In thousands)  

Net cash provided by (used in) operating activities

  $ 2,025      $ 15,676      $ 96,926      $ (1,071   $ —     $ 113,556   

Net cash (used in) provided by investing activities.

    —          (36,938     18,152        57,420        —       38,634   

Cash flows from financing activities:

           

Net change in borrowings under revolving credit facilities

    —          (69,391     (17,655     —          —       (87,046

Proceeds from debt

    —          —          —          9,201        —       9,201   

Repayment of debt

    —          20,960        (25,904     (69,413     —       (74,357

Net change in intercompany debt

    (37,049     53,048        (15,999     —          —       —     

Payment of deferred financing costs

    —          (986     (8,479     (102     —       (9,567

Cash distribution from (to) affiliates

    104,921        14,516        (133,108     13,671        —       —     

Cash distribution to common stockholders

    (73,546     —          —          —          —       (73,546

Distributions to noncontrolling interest

    —          —          —          (1,414     —       (1,414

Other

    3,649        —          —          —          —       3,649   
                                             

Net cash (used in) provided by financing activities

    (2,025     18,147        (201,145     (48,057     —       (233,080
                                             

Net (decrease) increase in cash and cash equivalents

    —          (3,115     (86,067     8,292        —       (80,890

Effect of foreign currency translation on cash and cash equivalents

    —          —          (116     —          —       (116

Cash and cash equivalents at beginning of period

    —          10,325        144,918        21,569        —       176,812   
                                             

Cash and cash equivalents at end of period

  $ —        $ 7,210      $ 58,735      $ 29,861      $ —     $ 95,806   
                                             

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statements

Unless otherwise indicated or except where the context otherwise requires, the terms “we,” “us” and “our” and other similar terms in this Quarterly Report on Form 10-Q refer to Ventas, Inc. and its consolidated subsidiaries.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements regarding our or our tenants’, operators’, managers’ or borrowers’ expected future financial position, results of operations, cash flows, funds from operations, dividends and dividend plans, financing plans, business strategy, budgets, projected costs, operating metrics, capital expenditures, competitive positions, acquisitions, investment opportunities, merger integration, growth opportunities, dispositions, 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 our expectations. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made.

Our actual future results and trends may differ materially from expectations depending on a variety of factors discussed in our filings with the Securities and Exchange Commission (the “SEC”). These factors include without limitation:

 

   

The ability and willingness of our tenants, operators, borrowers, managers and other third parties to meet and/or perform the obligations under their respective contractual arrangements with us, including, in some cases, their obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities;

 

   

The ability of our tenants, operators, borrowers and managers to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to third parties, including without limitation obligations under their existing credit facilities and other indebtedness;

 

   

Our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions or investments, including those in different asset types and outside the United States;

 

   

The nature and extent of future competition;

 

   

The extent of future or pending healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates;

 

   

Increases in our cost of borrowing as a result of changes in interest rates and other factors;

 

   

The ability of our operators and managers, as applicable, to deliver high quality services, to attract and retain qualified personnel and to attract residents and patients;

 

   

The results of litigation affecting us;

 

   

Changes in general economic conditions and/or economic conditions in the markets in which we may, from time to time, compete, and the effect of those changes on our revenues and our ability to access the capital markets or other sources of funds;

 

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Our ability to pay down, refinance, restructure and/or extend our indebtedness as it becomes due;

 

   

Our ability and willingness to maintain our qualification as a REIT due to economic, market, legal, tax or other considerations;

 

   

Final determination of our taxable net income for the year ended December 31, 2009 and for the year ending December 31, 2010;

 

   

The ability and willingness of our tenants to renew their leases with us upon expiration of the leases and our ability to reposition our properties on the same or better terms in the event such leases expire and are not renewed by our tenants or in the event we exercise our right to replace an existing tenant upon a default;

 

   

Risks associated with our senior living operating portfolio, such as factors causing volatility in our operating income and earnings generated by our 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 the timely delivery of accurate property-level financial results for those properties;

 

   

The movement of U.S. and Canadian exchange rates;

 

   

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 Healthcare, Inc. (together with its subsidiaries, “Kindred”), and our earnings;

 

   

Our ability and the ability of our tenants, operators, borrowers and managers to obtain and maintain adequate liability and other insurance from reputable and financially stable providers;

 

   

The impact of increased operating costs and uninsured professional liability claims on the liquidity, financial condition and results of operations of our tenants, operators, borrowers and managers and the ability of our tenants, operators, borrowers and managers to accurately estimate the magnitude of those claims;

 

   

The ability and willingness of the lenders under our unsecured revolving credit facilities to fund, in whole or in part, borrowing requests made by us from time to time;

 

   

The impact of market or issuer events on the liquidity or value of our investments in marketable securities; and

 

   

The impact of any financial, accounting, legal or regulatory issues that may affect us or our major tenants, operators and managers.

Many of these factors are beyond our control and the control of our management.

Kindred, Brookdale Senior Living and Sunrise Information

Each of Kindred, Brookdale Senior Living Inc. (together with its subsidiaries, which include Brookdale Living Communities, Inc. (“Brookdale”) and Alterra Healthcare Corporation (“Alterra”), “Brookdale Senior Living”) and Sunrise Senior Living, Inc. (together with its subsidiaries, “Sunrise”) is subject to the reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Kindred, Brookdale Senior Living and Sunrise contained or referred to in this Quarterly Report on Form 10-Q is derived from filings made by Kindred, Brookdale Senior Living or Sunrise, as the case may be, with the SEC or other publicly available information, or has been provided to us by Kindred, Brookdale Senior Living or Sunrise. We have not verified this information either through an independent investigation or by reviewing Kindred’s, Brookdale Senior Living’s or Sunrise’s public filings. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you that all of this information is accurate. Kindred’s,

 

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Brookdale Senior Living’s and Sunrise’s filings with the SEC can be found at the SEC’s website at www.sec.gov. We are providing this data for informational purposes only, and you are encouraged to obtain Kindred’s, Brookdale Senior Living’s and Sunrise’s publicly available filings from the SEC.

Company Overview

We are a REIT with a geographically diverse portfolio of seniors housing and healthcare properties in the United States and Canada. As of March 31, 2010, this portfolio consisted of 505 assets: 244 seniors housing communities, 187 skilled nursing facilities, 40 hospitals and 34 medical office buildings (“MOBs”) and other properties in 43 states and two Canadian provinces. With the exception of our seniors housing communities that are managed by Sunrise pursuant to long-term management agreements and the majority of our MOBs, we lease our properties to healthcare operating companies under “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses. We also had real estate loan investments relating to seniors housing and healthcare companies or properties as of March 31, 2010.

We conduct substantially all of our business through our wholly owned subsidiaries, Ventas Realty, Limited Partnership (“Ventas Realty”), PSLT OP, L.P. and Ventas SSL, Inc. Our primary business consists of acquiring, financing and owning seniors housing and healthcare properties and leasing those properties to third parties or operating those properties through independent third-party managers.

Our business strategy is comprised of three principal objectives: (1) portfolio diversification; (2) stable earnings and growth; and (3) maintaining a strong balance sheet and liquidity.

As of March 31, 2010, approximately 38.9%, 21.7% and 14.0% of our properties, based on the gross book value of real estate investments (including assets held for sale), were managed or operated by Sunrise, Brookdale Senior Living and Kindred, respectively. Approximately 44.7%, 12.6% and 25.2% of our total revenues and 20.8%, 18.7% and 37.4% of our total net operating income (“NOI,” which is defined as total revenues, less interest and other income and property-level operating expenses) (including amounts in discontinued operations) for the three months ended March 31, 2010 were attributable to senior living operations managed by Sunrise, our leases with Brookdale Senior Living and our master lease agreements with Kindred (the “Kindred Master Leases”), respectively. Approximately 20.9% of our earnings before interest, taxes, depreciation and amortization (including of non-cash stock-based compensation), excluding merger-related expenses and deal costs and gains and losses on real estate disposals (“Adjusted EBITDA”) (including amounts in discontinued operations) for the three months ended March 31, 2010 were attributable to our senior living operations managed by Sunrise. Seniors housing communities and skilled nursing facilities constituted approximately 73.9% and 12.5%, respectively, of our portfolio, based on the gross book value of real estate investments (including assets held for sale), as of March 31, 2010. See “Non-GAAP Financial Measures” for further discussion and reconciliations of NOI and Adjusted EBITDA to our net income, as computed in accordance with U.S. generally accepted accounting principles (“GAAP”).

2010 Highlights

 

   

Since January 1, 2010, we received additional lending commitments totaling $235.0 million for the portion of our unsecured revolving credit facilities maturing in 2012. As a result, we have $1.0 billion of total committed capital under our revolving credit facilities all of which will mature April 26, 2012.

 

   

In February 2010, Moody’s Investors Service upgraded our unsecured debt rating to Baa3 from Ba1, with a stable outlook.

 

   

In March 2010, Standard & Poor’s revised the outlook on our corporate credit rating to positive from stable. Our unsecured debt is currently rated BBB (stable) by Fitch, BBB- (positive) by Standard & Poor’s and Baa3 (stable) by Moody’s.

 

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In March 2010, our Board of Directors increased the first quarter 2010 dividend by 4.4 percent to $0.535 per share. The first quarter cash dividend was paid on March 31, 2010 to stockholders of record on March 12, 2010.

Recent Developments Regarding Government Regulation

Healthcare Legislation

In March 2010, the President signed into law the Patient Protection and Affordable Care Act, along with a reconciliation measure, the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”). The passage of the Affordable Care Act has resulted in comprehensive reform legislation which is expected to expand health care coverage to millions of currently uninsured people beginning in 2014. To help fund this expansion, the Affordable Care Act outlines certain reductions in Medicare reimbursement rates for various healthcare providers, including long-term acute care hospitals and skilled nursing facilities, as well as certain other changes to Medicare payment methodology.

The Affordable Care Act, among other things, reduces the inflationary market basket increase included in standard federal payment rates for long-term acute care hospitals by 25 basis points in fiscal year 2010, 50 basis points in fiscal year 2011, 10 basis points in fiscal years 2012 and 2013, 30 basis points in fiscal year 2014, 20 basis points in fiscal years 2015 and 2016, and 75 basis points in fiscal years 2017 through 2019. In addition, under the Affordable Care Act, long-term acute care hospitals and skilled nursing facilities will be subject to a rate adjustment, beginning in fiscal year 2012, to reflect improvements in productivity. The Affordable Care Act also extends for two years the long-term acute care hospital payment policy changes provided by the Medicare, Medicaid, and SCHIP Extension Act of 2007 and delays the implementation of the RUG-IV classification model for skilled nursing facilities until fiscal year 2012.

We are currently analyzing the financial implications of the Affordable Care Act on the operators of our properties. We cannot assure you that existing or future healthcare reform legislation or changes in the administration or implementation of governmental and non-governmental healthcare reimbursement programs will not have a material adverse effect on our operators’ liquidity, financial condition or results of operations, or on their ability to satisfy their obligations to us, which, in turn, could have a material adverse effect on our business, financial condition, results of operations and liquidity, on our ability to service our indebtedness and other obligations and on our ability to make distributions to our stockholders, as required for us to continue to qualify as a REIT (a “Material Adverse Effect”).

Medicare Reimbursement; Long-Term Acute Care Hospitals

On April 19, 2010, the Centers for Medicare & Medicaid Services (“CMS”) placed on public display for an expected May 4, 2010 publication its proposed rule updating the prospective payment system for long-term acute care hospitals (LTAC PPS) for the 2011 fiscal year (October 1, 2010 through September 30, 2011). Under the proposed rule, the LTAC PPS standard federal payment rate would decrease by 0.1% in fiscal year 2011, reflecting a 2.4% increase in the market basket index, less a 2.5% adjustment to account for an increase in case-mix in fiscal year 2008 and 2009 that CMS attributes to changes in documentation and coding practices, rather than patient severity. Despite this decrease, CMS estimates that net payments to long-term acute care hospitals under the proposed rule would increase by approximately $41 million, or 0.8%, in fiscal year 2011 due to area wage adjustments, as well as increases in high-cost and short-stay outlier payments.

This rule is a proposed rule and is not final. Comments on the proposed rule may be submitted to CMS through June 18, 2010. The proposed rule also does not reflect statutory changes made by the Affordable Care Act. We are currently analyzing the financial implications of this proposed rule on the operators of our long-term acute care hospitals.

 

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We cannot assure you that the final rule issued by CMS or other future updates to LTAC PPS or Medicare reimbursement for long-term acute care hospitals will not materially adversely affect our operators, which, in turn, could have a Material Adverse Effect on us.

Critical Accounting Policies and Estimates

Our Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q have been prepared in accordance with GAAP for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”). GAAP requires us to make estimates and assumptions about 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 on various other assumptions believed 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, it is possible that different accounting treatment would have been applied, resulting in a different presentation of our financial statements. From time to time, we re-evaluate our estimates and assumptions, and in the event estimates or assumptions 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. The critical accounting policies that affect our more significant estimates and assumptions used in the preparation of our Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q are described in our Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on February 19, 2010.

 

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Results of Operations

Three Months Ended March 31, 2010 and 2009

The table below shows our results of operations for the three months ended March 31, 2010 and 2009 and the dollar and percentage changes in those results from period to period.

 

     For the Three Months
Ended March 31,
    Change  
     2010     2009     $     %  

Revenues:

        

Rental income

   $ 129,179      $ 122,398      $ 6,781      5.5

Resident fees and services

     108,486        102,939        5,547      5.4   

Income from loans and investments

     3,617        3,281        336      10.2   

Interest and other income

     263        286        (23   (8.0
                          

Total revenues

     241,545        228,904        12,641      5.5   

Expenses:

        

Interest

     44,300        45,930        (1,630   (3.5

Depreciation and amortization

     52,476        49,498        2,978      6.0   

Property-level operating expenses

     78,879        75,468        3,411      4.5   

General, administrative and professional fees (including non-cash stock-based compensation expense of $3,032 and $3,059 for the three months ended 2010 and 2009, respectively)

     10,683        10,598        85      0.8   

Foreign currency gain

     (106     (6     (100   > 100   

Loss on extinguishment of debt

     —          105        (105   nm   

Merger-related expenses and deal costs

     2,319        2,054        265      12.9   
                          

Total expenses

     188,551        183,647        4,904      2.7   
                          

Income before income taxes, discontinued operations and noncontrolling interest

     52,994        45,257        7,737      17.1   

Income tax (expense) benefit

     (286     547        (833   > 100   
                          

Income from continuing operations

     52,708        45,804        6,904      15.1   

Discontinued operations

     460        29,165        (28,705   (98.4
                          

Net income

     53,168        74,969        (21,801   (29.1

Net income attributable to noncontrolling interest (net of tax of $419 and $390 for the three months ended 2010 and 2009, respectively)

     549        741        (192   (25.9
                          

Net income attributable to common stockholders

   $ 52,619      $ 74,228      $ (21,609   (29.1 )% 
                          

 

nm—not meaningful

Revenues

The increase in our first quarter 2010 rental income over the same period in 2009 primarily reflects $1.5 million of additional rent resulting from the annual escalators in the rent paid under the Kindred Master Leases effective May 1, 2009, $3.8 million in additional rent relating to MOBs acquired or developed during 2009 and various other escalations in the rent paid on our other existing properties. Rental income included in discontinued operations was $0.5 million and $2.5 million for the three months ended March 31, 2010 and 2009, respectively.

Revenues related to our triple-net leased properties segment consist of fixed rental amounts (subject to annual escalations) received directly from our tenants based on the terms of the applicable leases and generally do not depend on the operating performance of our properties. Therefore, while occupancy information is relevant to the operations of our tenants, our revenues and financial results are not directly impacted by the overall occupancy levels or profits at the triple-net leased properties.

 

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Resident fees and services consist primarily of all amounts earned from residents at our seniors housing communities that are managed by Sunrise, including rental fees related to resident leases, extended health care fees and other ancillary service income. The increase in resident fees and services during the first quarter of 2010 over the same period in 2009 is attributed primarily to a decrease in the average Canadian dollar exchange rate, which had a favorable impact of $3.3 million in 2010, and higher average daily rates in our communities. Average occupancy rates related to these properties were as follows:

 

               Average Resident Occupancy  
     Number of Communities    For the Three Months
Ended March 31,
 
     2010    2009    2010     2009  

Stabilized Communities

   78    78    88.4   89.0

Lease-Up Communities

   1    1    85.1   63.8
              

Total

   79    79    88.3   88.1
              

Same-Store Stabilized Communities

   78    78    88.4   89.0

Income from loans and investments increased during the first quarter of 2010 over the same period in 2009 primarily due to interest earned on the investments we made during 2009.

Expenses

Total interest expense, including interest allocated to discontinued operations of $0.2 million and $0.9 million for the three months ended March 31, 2010 and 2009, respectively, decreased $2.3 million in the first quarter of 2010 over the same period in 2009, primarily due to a $8.4 million reduction in interest from lower loan balances, partially offset by a $5.5 million increase in interest from higher effective interest rates. Interest expense includes $1.8 million and $1.5 million of amortized deferred financing fees for the three months ended March 31, 2010 and 2009, respectively. Our effective interest rate increased to 6.6% for the three months ended March 31, 2010, from 5.6% for the three months ended March 31, 2009 due to the higher outstanding balances on our revolving credit facilities maintained during the first quarter of 2009 at lower rates during the credit crisis. As a result of the increased interest expense attributable to these revolving credit borrowings at a significantly lower rate, our effective interest rate from the first quarter of 2009 was lower. A decrease in the average Canadian dollar exchange rate had an unfavorable impact on interest expense of $0.3 million for the three months ended March 31, 2010, compared to the same period in 2009.

Depreciation and amortization expense increased primarily due to properties we acquired or developed during the period from April 1, 2009 through March 31, 2010.

Property-level operating expenses primarily include expenses incurred for our senior living operations, such as labor, food, utilities, marketing, management and other property operating costs, operating expenses of our MOBs and loan receivable valuation allowances. The increase in property-level operating expenses in the first quarter of 2010 over 2009 primarily reflects $1.3 million of additional expenses relating to MOBs we acquired or developed during 2009 and a decrease in the average Canadian dollar exchange rate, which had an unfavorable impact of $2.4 million in 2010.

Merger-related expenses and deal costs consisted of expenses relating to our litigation with HCP, Inc. arising out of our Sunrise Senior Living REIT (“Sunrise REIT”) acquisition and deal costs required by GAAP to be expensed rather than capitalized into the asset value.

Other

Income tax expense/benefit before noncontrolling interest represents amounts related to our taxable REIT subsidiaries as a result of the Sunrise REIT acquisition. The change from an income tax benefit to an income tax

 

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expense in 2010 is primarily due to increased NOI at our seniors housing communities managed by Sunrise. Excluding income taxes related to noncontrolling interest, we have net tax benefit in both periods. See “Note 9Income Taxes” of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

Discontinued operations for the first quarter of 2010 include a $0.1 million net gain on the sale of one asset sold during 2010 and a gain on sale of assets of $0.1 million related to a deferred gain recorded in 2008. Discontinued operations for the same period in 2009 include a $27.8 million gain on the sale of seven assets sold during the first quarter of 2009 and a gain on sale of assets of $0.1 million related to a deferred gain recorded in 2008. See “Note 4—Dispositions” of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

Net income attributable to noncontrolling interest primarily represents Sunrise’s share of net income from its ownership percentage in 60 of our seniors housing communities.

Non-GAAP Financial Measures

We believe that net income, as defined by GAAP, is the most appropriate earnings measurement. However, we consider other non-GAAP financial measures to be useful supplemental measures of our operating performance. A non-GAAP financial measure is generally defined as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure. Set forth below are descriptions of the non-GAAP financial measures we consider relevant to our business and useful to investors, as well as reconciliations of these measures to our most directly comparable GAAP financial measure.

Our non-GAAP financial measures presented herein are not necessarily comparable to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. These measures should not be considered as alternatives to net income (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. We believe that in order to facilitate a clear understanding of our consolidated historical operating results, these measures should be examined in conjunction with net income as presented in our Consolidated Financial Statements and data included elsewhere in this Quarterly Report on Form 10-Q.

Funds From Operations and Normalized Funds From Operations and Funds Available for Distribution

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, we consider Funds From Operations (“FFO”) and normalized FFO and Funds Available for Distribution (“FAD”) appropriate measures of performance of an equity REIT, and we use the National Association of Real Estate Investment Trusts (“NAREIT”) definition of FFO. NAREIT defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of real estate property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. We define “normalized FFO” as FFO excluding (a) gains and losses on the sales of assets, including marketable securities, (b) merger-related costs and expenses and deal costs and expenses, including expenses relating to our lawsuit against HCP, (c) the impact of any expenses related to asset impairment and valuation allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts or premiums incurred as a result of early debt retirement or payment of our debt, including hedging transactions, and (d) the non-cash effect of income tax benefits/expenses. Normalized FAD represents normalized FFO excluding straight-line rental adjustments and routine capital expenditures.

 

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Our FFO and normalized FFO and FAD for the three months ended March 31, 2010 and 2009 are summarized in the following table. The increase in our first quarter 2010 FFO over the prior year is primarily due to rental increases from our triple-net leased portfolio, higher NOI at our senior living and MOB operating portfolios and lower interest expense.

 

     For the Three Months
Ended March 31,
 
     2010     2009  
     (In thousands)  

Net income attributable to common stockholders

   $ 52,619      $ 74,228   

Adjustments:

    

Real estate depreciation and amortization

     52,247        49,328   

Real estate depreciation related to noncontrolling interest

     (1,726     (1,620

Discontinued operations:

    

Gain on sale of real estate assets

     (184     (27,871

Depreciation on real estate assets

     61        410   
                

FFO

     103,017        94,475   

Adjustments:

    

Income tax benefit

     (133     (937

Loss on extinguishment of debt

     —          105   

Merger-related expenses and deal costs

     2,319        2,054   
                

Normalized FFO

     105,203        95,697   

Straight-lining of rental income

     (2,449     (2,938

Routine capital expenditures

     (597     (1,144
                

Normalized FAD

   $ 102,157      $ 91,615   
                

Adjusted EBITDA

We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization (including of non-cash stock-based compensation), excluding merger-related expenses and deal costs and gains and losses on real estate disposals. We believe that Adjusted EBITDA is an important supplemental measure to net income and cash flow from operating activities because it provides additional information to assess and evaluate the performance of our operations. We also consider it to be a profitability measure which indicates our ability to service debt. The following is a reconciliation of Adjusted EBITDA to net income (including amounts in discontinued operations) for the three months ended March 31, 2010 and 2009:

 

     For the Three Months
Ended March 31,
 
     2010     2009  
     (In thousands)  

Net income

   $ 53,168      $ 74,969   

Adjustments:

    

Interest

     44,459        46,809   

Loss on extinguishment of debt

     —          105   

Taxes (including amounts in general, administrative and professional fees)

     536        (245

Depreciation and amortization

     52,537        49,908   

Non-cash stock-based compensation expense

     3,032        3,059   

Merger-related expenses and deal costs

     2,319        2,054   

Gain on sale of real estate assets

     (184     (27,871
                

Adjusted EBITDA

   $ 155,867      $ 148,788   
                

 

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NOI

We define NOI as total revenues, less interest and other income and property-level operating expenses. We believe that NOI is an important supplemental measure to net income and cash flow from operating activities because it allows us to evaluate the operating performance of our properties at the property level on an unleveraged basis. The following is a reconciliation of NOI (including amounts in discontinued operations) for the three months ended March 31, 2010 and 2009:

 

     For the Three Months
Ended March 31,
     2010    2009
     (In thousands)

Total revenues

   $ 242,041    $ 231,487

Less:

     

Interest and other income

     263      409

Property-level operating expenses

     78,879      75,468
             

NOI

   $ 162,899    $ 155,610
             

Liquidity and Capital Resources

During the three months ended March 31, 2010, our principal sources of liquidity were cash flows from operations, borrowings under our unsecured revolving credit facilities and cash on hand. For the remainder of 2010, our principal liquidity needs are to: (i) fund normal operating expenses; (ii) meet our debt service requirements; (iii) repay maturing mortgage debt; (iv) fund capital expenditures for our senior living operations and our MOBs; (v) fund acquisitions, investments and/or commitments; and (vi) make distributions to our stockholders to maintain our REIT qualification under the Internal Revenue Code. We believe that these needs will be satisfied by cash flows from operations, cash on hand, debt financings, proceeds from sales of assets and borrowings under our unsecured revolving credit facilities. However, if these sources of capital are not available and/or if we make significant acquisitions and investments, we may be required to obtain funding from additional borrowings, assume debt from the seller, dispose of assets (in whole or in part through joint venture arrangements with third parties) and/or issue secured or unsecured long-term debt or other securities.

As of March 31, 2010, we had a total of $132.7 million of unrestricted cash and cash equivalents, consisting primarily of investments in U.S. treasury money market funds and cash related to our senior living operations that is deposited and held in property-level accounts. Funds maintained in the property-level accounts are used primarily for the payment of property-level expenses and certain capital expenditures. A portion of the cash maintained in these property-level accounts is distributed to us monthly. At March 31, 2010, we also had escrow deposits and restricted cash of $41.0 million, and unused credit availability of $961.8 million under our unsecured revolving credit facilities.

Unsecured Revolving Credit Facilities

At March 31, 2010, our aggregate borrowing capacity under the unsecured revolving credit facilities was $1.0 billion, of which $875.0 million matures on April 26, 2012 and $125.0 million matured on April 26, 2010. Borrowings under our unsecured revolving credit facilities bear interest at a fluctuating rate per annum (based on U.S. or Canadian LIBOR, the Canadian Bankers’ Acceptance rate, or the U.S. or Canadian Prime rate), plus an applicable percentage based on our consolidated leverage. At March 31, 2010, the applicable percentage was 0.75% for 2010 maturities and 2.80% for 2012 maturities. Our unsecured revolving credit facilities have a 20 basis point facility fee. As of April 21, 2010, we had $8.4 million outstanding under our unsecured revolving credit facilities. At the time of filing, we have $1.0 billion of total committed capital under our revolving credit facilities all of which will mature April 26, 2012.

 

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Cash Flows

The following is a summary of our sources and uses of cash flows for the three months ended March 31, 2010 and 2009:

 

     For the Three Months
Ended March 31,
    Change  
     2010     2009     $     %  

Cash and cash equivalents at beginning of period

   $ 107,397      $ 176,812      $ (69,415   (39.3 )% 

Net cash provided by operating activities

     115,561        113,556        2,005      1.8   

Net cash (used in) provided by investing activities

     (30,005     38,634        (68,639   (177.7

Net cash used in financing activities

     (61,071     (233,080     172,009      (73.8

Effect of foreign currency translation on cash and cash equivalents

     847        (116     963      nm   
                          

Cash and cash equivalents at end of period

   $ 132,729      $ 95,806      $ 36,923      38.5
                          

 

nm—not meaningful

Cash Flows from Operating Activities

The increase in our net cash provided by operating activities for the three months ended March 31, 2010 was due primarily to higher FFO during that period as a result of rental increases from our triple-net leased portfolio, higher NOI at our senior living and MOB operating portfolios and lower interest expense.

Cash Flows from Investing Activities

Investing activities during the three months ended March 31, 2010 and 2009 consisted primarily of our investments in real estate ($11.9 million and $8.4 million in 2010 and 2009, respectively), investments in loans receivable ($15.8 million and $7.4 million in 2010 and 2009, respectively) and capital expenditures ($4.3 million and $3.9 million in 2010 and 2009, respectively), offset by proceeds from loans receivable ($1.2 million and $1.7 million in 2010 and 2009, respectively) and proceeds from real estate disposals ($0.8 million and $56.6 million in 2010 and 2009, respectively).

Cash Flows from Financing Activities

Net cash used in financing activities for the three months ended March 31, 2010 consisted primarily of $83.9 million of cash dividend payments to common stockholders, $7.8 million of aggregate principal payments on mortgage obligations, $2.0 million of distributions to noncontrolling interest and $1.1 million of payments for deferred financing costs, offset by $29.1 million of proceeds from borrowings under our unsecured revolving credit facilities.

Net cash used in financing activities for the three months ended March 31, 2009 consisted primarily of $87.0 million of payments made on our unsecured revolving credit facilities, $73.5 million of cash dividend payments to common stockholders, $25.9 million of senior note repurchases, $48.5 million of aggregate principal payments on mortgage obligations and $9.6 million of payments for deferred financing costs, offset by $9.2 million of proceeds from the issuance of debt.

Capital Expenditures

Our tenants generally bear the responsibility to maintain and improve our triple-net leased properties. Accordingly, we do not expect to incur any major capital expenditures in connection with these properties. After the terms of the triple-net leases expire, or in the event that the tenants are unable or unwilling to meet their obligations under those leases, we anticipate funding any capital expenditures for which we may become

 

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responsible by cash flows from operations or through additional borrowings. With respect to our MOBs and our senior living communities managed by Sunrise, we expect that capital expenditures will be funded by the cash flows from the properties or through additional borrowings. To the extent that unanticipated expenditures or significant borrowings are required, our liquidity may be affected adversely. Our ability to borrow funds may be restricted in certain circumstances by the terms of our unsecured revolving credit facilities and the indentures governing our outstanding senior notes. Our ability to borrow may also be limited by our lenders’ ability and willingness to fund, in whole or in part, borrowing requests under our unsecured revolving credit facilities.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion of our exposure to various market risks contains forward-looking statements that involve risks and uncertainties. These projected results have been prepared utilizing certain assumptions considered reasonable in light of information currently available to us. Nevertheless, because of the inherent unpredictability of interest rates as well as other factors, actual results could differ materially from those projected in such forward-looking information.

We are exposed to market risk for changes in interest rates on borrowings under our unsecured revolving credit facilities, certain of our mortgage loans that are floating rate obligations and mortgage loans receivable. These market risks result primarily from changes in U.S. or Canadian LIBOR rates, the Canadian Bankers’ Acceptance rate or the U.S. or Canadian Prime rates. We continuously monitor our level of floating rate debt with respect to total debt and other factors, including our assessment of the current and future economic environment.

Interest rate fluctuations generally do not affect our fixed rate debt obligations until such instruments mature. However, changes in interest rates will affect the fair value of our fixed rate instruments. If interest rates have risen at the time our fixed rate debt matures or at the time we refinance such debt, our future earnings and cash flows could be adversely affected by the additional cost of borrowings. Conversely, lower interest rates at the time our debt matures or at the time of refinancing may lower 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 (BPS) in interest rates as of March 31, 2010 and December 31, 2009:

 

     As of
March 31,
2010
   As of
December 31,
2009
     (In thousands)

Gross book value

   $ 2,472,966    $ 2,477,225

Fair value (1)

     2,914,281      2,572,472

Fair value reflecting change in interest rates: (1)

     

-100 BPS

     2,969,353      2,681,982

+100 BPS

     2,862,781      2,469,655

 

(1) The change in fair value of fixed rate debt was due primarily to overall changes in interest rates.

 

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The table below sets forth certain information with respect to our debt, excluding premiums and discounts:

 

     As of
March 31,
2010
    As of
December 31,
2009
    As of
March 31,
2009
 
     (Dollars in thousands)  

Balance:

      

Fixed rate

   $ 2,472,966      $ 2,477,225      $ 2,519,874   

Variable rate

     255,373        224,436        424,249   
                        

Total

   $ 2,728,339      $ 2,701,661      $ 2,944,123   
                        

Percent of total debt:

      

Fixed rate

     90.6     91.7     85.6

Variable rate

     9.4     8.3     14.4
                        

Total

     100.0     100.0     100.0
                        

Weighted average interest rate at end of period:

      

Fixed rate

     6.3     6.3     6.5

Variable rate

     1.8     2.1     2.9

Total weighted average rate

     5.9     6.0     6.0

The increase in our outstanding variable rate debt from December 31, 2009 is primarily attributable to additional borrowings under our unsecured revolving credit facilities. Pursuant to the terms of certain leases with one of our tenants, if interest rates increase on certain debt that we have totaling $80.0 million as of March 31, 2010, our tenant is required to pay us additional rent (on a dollar-for-dollar basis) in an amount equal to the increase in interest expense resulting from the increased interest rates. Therefore, the increase in interest expense related to this debt is equally offset by an increase in additional rent due to us from the tenant. Assuming a one percentage point increase in the interest rate related to the variable rate debt, and assuming no change in the outstanding balance as of March 31, 2010, interest expense for 2010 would increase by approximately $2.1 million, or $0.01 per common share on a diluted basis. The fair value of our fixed and variable rate debt is based on current interest rates at which we could obtain similar borrowings.

We have investments in marketable debt securities on which we earn interest on a fixed rate basis. We record these investments as available-for-sale at fair market value, with unrealized gains and losses recorded as a component of stockholders’ equity. Interest rate fluctuations and market conditions will cause the fair market value of these investments to change. As of March 31, 2010 and December 31, 2009, the fair market value of our marketable debt securities, which had an original cost of $58.7 million, was $65.1 million and $65.0 million, respectively.

As of March 31, 2010, the fair value of our loans receivable was $149.2 million and was based on our estimates of currently prevailing rates for comparable loans.

We are subject to fluctuations in U.S. and Canadian exchange rates which may, from time to time, have an impact on our financial condition and results of operations. Increases or decreases in the value of the Canadian dollar will impact the amount of net income we earn from our Canadian operations. Based on results for the three months ended March 31, 2010, if the Canadian dollar exchange rate were to increase or decrease by $0.10, our net income would decrease or increase, as applicable, by less than $0.1 million for the three-month period. If we increase our international presence through investments in, and/or acquisitions or development of, seniors housing and/or healthcare assets outside the United States, we may also decide to transact additional business in currencies other than U.S. or Canadian dollars. Although we may decide to pursue hedging alternatives (including additional borrowings in local currencies) to protect against foreign currency fluctuations, we cannot assure you that any such fluctuations will not have a Material Adverse Effect on us.

We may engage in hedging strategies to manage our exposure to market risks in the future, depending on an analysis of the interest rate and foreign currency exchange rate environments and the costs and risks of such strategies. We do not use derivative financial instruments for speculative purposes.

 

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2010. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of March 31, 2010, at the reasonable assurance level.

Internal Control Over Financial Reporting

In January 2010, we implemented an Enterprise Resource Planning (“ERP”) system, which included a new general ledger system. Various internal controls were modified due to the new ERP system. We believe that the system has enhanced internal control over financial reporting. Other than the implementation of the new ERP system and related changes in internal controls, there were no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II—OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

The information contained in “Note 8—Litigation” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated by reference into this Item 1. Except as set forth therein, there have been no material developments in the legal proceedings reported in our Annual Report on Form 10-K for the year ended December 31, 2009.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below summarizes repurchases of our common stock made during the quarter ended March 31, 2010:

 

     Number of Shares
Repurchased (1)
   Average Price
Per Share

January 1 through January 31

   56,339    $ 43.61

February 1 through February 28

   5,348      44.19

March 1 through March 31

   9,598      48.62

 

(1) Repurchases represent shares withheld to pay taxes on the vesting of restricted stock or the exercise of options granted to employees. The value of the shares withheld is the closing price of our common stock on the date the vesting or exercise occurs.

 

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ITEM 6. EXHIBITS

 

Exhibit
Number

  

Description of Document

   Location of Document
31.1    Certification of Debra A. Cafaro, Chairman, President and Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.    Filed herewith.
31.2    Certification of Richard A. Schweinhart, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.    Filed herewith.
32.1    Certification of Debra A. Cafaro, Chairman, President and Chief Executive Officer, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350.    Filed herewith.
32.2    Certification of Richard A. Schweinhart, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350.    Filed herewith.
101    Interactive Data File.    Filed herewith.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 30, 2010

 

VENTAS, INC.
By:   /s/    DEBRA A. CAFARO        
  Debra A. Cafaro
 

Chairman, President and

Chief Executive Officer

By:   /s/    RICHARD A. SCHWEINHART        
  Richard A. Schweinhart
 

Executive Vice President and

Chief Financial Officer

 

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EXHIBIT INDEX

 

Exhibit
Number

  

Description of Document

   Location of Document
31.1    Certification of Debra A. Cafaro, Chairman, President and Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.    Filed herewith.
31.2    Certification of Richard A. Schweinhart, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.    Filed herewith.
32.1    Certification of Debra A. Cafaro, Chairman, President and Chief Executive Officer, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350.    Filed herewith.
32.2    Certification of Richard A. Schweinhart, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350.    Filed herewith.
101    Interactive Data File.    Filed herewith.

 

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