Thursday, healthcare real estate investment trust Ventas Inc. (VTR), said its second quarter FFO declined 3.9% from last year, hurt by lower net operating income at its senior living operating portfolio. The company's quarterly normalized FFO, however, grew 7.6% from the year-ago period, driven by higher rentals from the its triple-net lease portfolio. Providing an update to its forecast, Ventas raised its full year 2009 FFO outlook.
Ventas said FFO, as defined by the National Association of Real Estate Investment Trusts or NAREIT, was $96.6 million for the second quarter of 2009, down 3.9% from $100.5 million in the prior year quarter. FFO per share decreased 12.5% to $0.63 from $0.72 in the previous year quarter.
Normalized FFO increased 7.6% to $105.1 million, from $97.8 million in the comparable period last year. Normalized FFO per share was $0.68 in the second quarter of 2009, compared to $0.70 in the comparable 2008 period.
Normalized FFO per share for the quarter benefited from rental increases from the company's triple-net lease portfolio, including the May 2009 rent increase with Kindred Healthcare, Inc. (KND).
On average, ten analysts polled by Thomson Reuters expected the company to earn $0.62 per share for the quarter. Analysts' estimate typically excludes special items.
The Louisville, Kentucky-based company reported net income attributable to common stockholders for the second quarter of $88.38 million or $0.57 per share, compared of $70.15 million or $0.51 per share in the year-ago quarter.
Total revenues for the quarter increased to $231.99 million from $229.03 million in the prior-year quarter.
The company's operating portfolio contains 79 senior housing communities in North America, managed by Sunrise Senior Living Inc. (SRZ). Ventas owns 100% of 19 of these communities and has a partnership share of between 75% and 85% in the remaining 60 communities, with Sunrise owning the noncontrolling interest in those 60 communities.
Net operating income after management fees or NOI for those 79 communities declined to $33.9 million from $38.0 million in the second quarter of 2008.
NOI in the year-ago quarter was benefited from about $4 million of property-level expense credits and reconciliations that did not recur in the second quarter of 2009. In addition, unfavorable movements in the Canadian dollar exchange rate had a negative impact on NOI of $0.8 million for the second quarter of 2009 compared to the second quarter of 2008.
Total expenses for the quarter eased to $185.42 million from $190.89 million in the previous year quarter.
Cash flow from operations for the second quarter increased 17.4% to $81.6 million, compared to the second quarter of 2008.
In June 2009, Ventas raised $114.2 million in a ten-year, 6.76% first mortgage financing secured by 16 assisted, independent and dementia seniors housing communities under triple-net leases. The valuation on the assets represented a 6.8% cap rate on annual cash rent and loan proceeds exceeded ten times Ventas's annual cash rent on the mortgaged properties.
In June 2009, the company sold six underperforming skilled nursing facilities to Kindred for total cash consideration of $58 million, or $75,000 per bed, including a $2.3 million lease termination fee. Ventas recognized a gain from the sale of about $38.9 million in the second quarter of 2009.
During the second quarter, Ventas repaid or purchased in open market transactions or by cash tender offers $385.6 million of its senior notes. The company recognized a net loss on extinguishment of debt of about $6 million in the second quarter of 2009.
In July 2009, Fitch Ratings upgraded Ventas's unsecured debt rating to BBB from BBB-, with a stable outlook.
For the six-month period, the company reported net income applicable to common shares of $162.61 million or $1.09 per share, compared to $101.31 million or $0.74 per share in the previous year. Normalized FFO for the six-month period, increased 6.1% to $200.8 million from $189.2 million last year. Normalized FFO per common share decreased to $1.35 from $1.37 in the prior year.
Total revenues for the first half of fiscal 2009 increased to $461.43 million from $456.32 million a year ago. Looking ahead, Ventas currently expects its 2009 normalized FFO in the range between $2.55 per share and $2.62 per share, improving its previously announced 2009 guidance of $2.48 - $2.58 per share. Normalized FFO per share in 2008 was $2.71.
Analysts currently expect the company to report earnings of $2.54 per share for fiscal 2009.
Ventas is currently trading at $35.70, up $2.36 or 7.08%, on a volume of 3.48 million shares. The stock has been moving in a range of $17.31 - $52.00 for the past 52 weeks, with an average three-month volume of about 3.14 million shares.
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