1.5 billion
TRANSCRIPT
EXCELLENCE.SUSTAINED.
ACQUISITION OF WEXFORD LIFE SCIENCE AND MEDICAL REAL ESTATE LEASED BY LEADING UNIVERSITIES, ACADEMIC MEDICAL CENTERS AND RESEARCH COMPANIESJULY 2016
1
FORWARD-LOOKING STATEMENTS
This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, among others, statements of expectations, beliefs, future plans and strategies, anticipated results from operations and developments and other matters that are not historical facts. The forward-looking statements are based on management’s beliefs as well as on a number of assumptions concerning future events. Readers of these materials are cautioned not to put undue reliance on these forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors that could cause actual events or results to differ materially from those expressed or implied by the forward-looking statements. The most important factors that could prevent the Company from achieving its stated goals include, but are not limited to: (a) the ability and willingness of the Company’s tenants, operators, borrowers, managers and other third parties to satisfy their obligations under their respective contractual arrangements with the Company, including, in some cases, their obligations to indemnify, defend and hold the Company harmless from and against various claims, litigation and liabilities; (b) the ability of the Company’s tenants, operators, borrowers and managers to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to third parties, including without limitation obligations under their existing credit facilities and other indebtedness; (c) the Company’s success in implementing its business strategy and the Company's ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions and investments, including investments in different asset types and outside the United States; (d) macroeconomic conditions such as a disruption of or a lack of access to the capital markets, changes in the debt rating on U.S. government securities, default or delay in payment by the United States of its obligations, and changes in the federal or state budgets resulting in the reduction or nonpayment of Medicare or Medicaid reimbursement rates; (e) the nature and extent of future competition, including new construction in the markets in which the Company’s seniors housing communities and medical office buildings are located; (f) the extent of future or pending healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates; (g) increases in the Company’s borrowing costs as a result of changes in interest rates and other factors; (h) the ability of the Company’s tenants, operators and managers, as applicable, to comply with laws, rules and regulations in the operation of the Company’s properties, to deliver high-quality services, to attract and retain qualified personnel and to attract residents and patients; (i) the Company’s ability and willingness to maintain its qualification as a REIT in light of economic, market, legal, tax and other considerations; (j) the ability and willingness of the Company’s tenants to renew their leases with the Company upon expiration of the leases, the Company’s ability to reposition its properties on the same or better terms in the event of nonrenewal or in the event the Company exercises its right to replace an existing tenant or manager, and obligations, including indemnification obligations, the Company may incur in connection with the replacement of an existing tenant or manager; (k) consolidation activity in the seniors housing and healthcare industries resulting in a change of control of, or a competitor’s investment in, one or more of the Company’s tenants, operators, borrowers or managers or significant changes in the senior management of the Company’s tenants, operators, borrowers or managers; and (l) the other factors set forth in the Company‘s periodic filings with the Securities and Exchange Commission.
TRANSACTION OVERVIEW
ACQUISITION OF HIGH-QUALITY LIFE SCIENCE AND MEDICAL REAL ESTATE LEASED BY LEADING UNIVERSITIES, ACADEMIC MEDICAL CENTERS AND RESEARCH COMPANIES
Transaction Description
VentasImpact
Timing
Ventas to acquire substantially all of the university-affiliated life science and medical real estate of
Wexford Science & Technology (“Wexford”) from affiliates of Blackstone Real Estate Partners VIII L.P.
o 23 operating properties representing 4.1 million square feet (91% of total)
o 2 development properties providing near-term growth and 9 development sites principally
contiguous to existing assets
Ventas will enter into a management and exclusive pipeline agreement with Wexford
o Wexford will be independently owned and operated by its experienced, existing management team
o Pipeline of near term, attractive investment opportunities
Anticipated to close in fourth quarter of 2016 subject to satisfaction of customary closing conditions
2
Valuation
Transaction estimated to be $0.07-$0.091 accretive to normalized FFO per share in 2017 on leverage
neutral basis
Pro Forma, acquired properties will represent approximately 5% of Ventas’s total NOI
Cash NOI in 2017 expected to be $94.6 million
The acquisition will increase Ventas’s NOI contribution from private pay assets to 84%
Total transaction consideration of $1.5 billion plus $33 million of assumed liabilities
o $1.4 billion for the 23 operating properties, representing a 2017 estimated cash yield of 6.8%1
o $88 million for the 2 development properties, representing an estimated stabilized yield of 7.5%1,
inclusive of post-closing capital funding
o $50 million for the 9 development sites
Purchase price implies value per square foot of $339 for the operating properties
1 There can be no assurance that this estimate will be achieved
STRATEGIC AND FINANCIAL BENEFITS
Consistent with Ventas’s strategy of driving reliable income and growth from a diversified portfolio
Reinforces Ventas‘s position as the premier capital provider at the intersection of healthcare and real estate
Adds 25 new, high-quality properties with long-term leases to highly-rated tenants
Establishes new platform for growth in attractive, institutional life science space with aligned expert team
3
Accretive transaction on a leverage neutral basis at an attractive valuation
Enhanced sustainability profile
THE ACQUISITION WILL ENHANCE VENTAS’S DIVERSIFICATION AND ADD A PLATFORM FOR GROWTH
Ventas Current Ventas Pro Forma
Asset
Mix
Op
erato
r M
ix
Note: All percentages based on 1Q16 annualized NOI
Private pay: 84%
4
SHOP 31%
SH - NNN26%
MOB 20%
Specialty Hosp. 8%
Acute Care Hosp. 5%
SNF 4%
Loans & Other 6%
SHOP 30%
SH - NNN25%
MOB 19%Acquired
properties5%
Specialty Hosp. 7%
Acute Care Hosp. 5%
SNF 4%
Loans & Other 6%
Atria 19% Lillbridge11%
Kindred 9%
Sunrise 9%
Brookdale9%
Ardent 6%Elmcroft 4%
PMB 4%
Holiday 3%
All Other26%
Atria 18% Lillibridge11%
Kindred 9%
Sunrise 9%
Brookdale8%
Ardent 5%
Wexford 5%Elmcroft 4%
PMB 3%
Holiday 3%
All Other25%
Private pay: 83%
ENSURING EXCELLENCE. SUSTAINED.
ADVANTAGE
PROPERTIES PLATFORMS
PEOPLE
OUR PEOPLEOUR PROCESSESOUR CULTURE
LEADING OPERATORS ACROSS THE SITES OF CARE
ADVANTAGED REAL ESTATE ASSETS IN
ATTRACTIVE MARKETS
5
THE VENTAS ADVANTAGE
Disciplined capital allocation to create value for shareholders while maintaining balance sheet strength
HIGH-QUALITY OPERATING PORTFOLIO WITH INSTITUTIONAL-QUALITY TENANTS
4.1 million square feet of purpose-built real estate with average age of 6 years
Located on or contiguous to major campuses
High Quality Properties New Relationships with Institutional-Quality Tenants
PROPERTIES PLATFORMS
PEOPLE
6
13 LEED-certified buildings
Note: Statistics represent 23 operating properties
Class A Operating Properties Excellent Amenities for Tenants
ADDITIONAL GROWTH FROM NEAR-TERMDEVELOPMENT PROPERTIES
The Chesterfield
Duke(Durham, NC)
W.F. Innovation Quarter –Bailey Power Plant
Property
University
Endowment1
Life sciences R&D spend2
Location
Square feet
Tenants
Opening
7
$7.3 billion
$868 million
On-campus
286K
2017
Duke University
Wake Forest(Winston Salem, NC)
$1.2 billion
$172 million
Adjacent to campus
111K
2017 / 2018
Wake Forest
1 2015 endowments; National Association of College and University Business Officers and Commonfund Institute22014 data from National Science Foundation
PLATFORMS
PEOPLE
PROPERTIES
LONG-TERM RELIABLE CASH FLOW GROWTH
8
Attractive Lease Rollover Profile (by sq. ft.)
Excellent Credit Profile (by revenue)
(>$40 PSF ismostly Bostonand Seattle)
PLATFORMS
PEOPLE
PROPERTIES
3% 2% 5% 9%4%
77%
2016 2017 2018 2019 2020 Thereafter
<10% maturing by 2018
Weighted average lease term of 10 years with 2% fixed annual rent escalators
Other27%
Universities w/ avg. Aa2 rating
67%
Investment grade7%
$1bn+ mkt cap26%
Excellentcredit tenants
73%
ADVANTAGED REAL ESTATE CONTIGUOUS TO UNIVERSITY AND MEDICAL CAMPUSES
PROPERTIES PLATFORMS
PEOPLE
9
Downtown Crossing
100 College Street
Downtown Crossing
300 George Street
University of Maryland BioPark
UMB II
Wake Forest Innovation Quarter
635@Vine and 525@Vine
Wake Forest Innovation Quarter Biotech Place
U. Of M. Life Science & Technology
Park
Cortex Innovation Community@4240
Hershey Center for Applied Research
University of Maryland BioPark
UMB I
uCity Square 3737 Market Street
New Haven100% leased
501K SF
New HavenYale
98% leased
480K SF
BaltimoreUMD Balt.
97% leased
237K SF
Winston-SalemWake Forest
99% leased
476K SF
MiamiU. Miami
97% leased
259K SF BaltimoreUMD Balt.
93% leased
77K SF
PhiladelphiaUPenn
100% leased
224K SF
Winston-SalemWake Forest
100% leased
242K SF
HummelstownPenn State
95% leased
81K SF
St. LouisWash U.
97% leased
203K SF
ENHANCES VENTAS’S RELATIONSHIPS WITH LEADING UNIVERSITIES, ACADEMIC MEDICAL CENTERS AND RESEARCH COMPANIES
10
Geographic Presence and University Affiliations Key Highlights for Leading Tenants
PLATFORMS
PEOPLE
PROPERTIES
MSA with Lillibridge presence
No. Tenant Sq. ft. (000s)Credit Rating / market cap
1 Wake Forest 661 Aa3
2 Alexion 517 $27bn1
3 Yale 283 Aaa
4 Penn Medicine 268 Aa1
5 Univ. of Maryland 145 Aa1
6 Old Dominion 122 A12
7 Inmar 243 B2
8 Therapeutic Proteins 86 NR
9 Paragon 58 NR
10 Eisai, Inc. 169 $16bn3
Total 2,552
Top 10 Tenants by Revenue
1 Alexion is not rated; has market capitalization of $27 billion2 Only rated by S&P; Moody’s equivalent rating is displayed3 Eisai is a Japanese company not rated by Moody’s or S&P; has market capitalization of
US $16 billion
Relationships with 11 top research universities which account for 10% of all university life science R&D spending
Average university credit rating of Aa2 (49% of rev.)
ESTABLISHES LIFE SCIENCE AND MEDICAL REAL ESTATE PLATFORM FOR GROWTH
WEXFORD OVERVIEW
Business Highlights
900
2,600
4,500
2010A 2013A 2016PF1 Includes 2 development properties
Portfolio Growth (sq. ft. 000s)
Wexford is the leading real estate development company focused exclusively on partnering with universities, academic medical centers and research companies
Management owned, 36 employees, vertically integrated
History of growing portfolio and expanding university relationships
Highly experienced senior team with proven track record
Unique Value Proposition
Focus on Universities
Target Tenants
Target Real Estate
• Reliable, financially strong institutions
• Long-term commitment to space
• Drivers of innovation and economic activity
• Partnerships lead to opportunities for follow on projects (e.g. MOB, Hospital)
• Top tier universities and research companies as anchor tenants
• Tenants focused on biopharma R&D, outpatient surgery, life science innovation and education
• Substantial endowments and financial capabilities
• Directly on or contiguous to campus centers
• Strategically important to university
• Innovative designs to create environments attractive to millennials
• Dense urban locations
CAGR: 31%
PROPERTIES PLATFORMS
PEOPLE
11
1
EXCLUSIVE PIPELINE FOR GROWTH
Atria ($ million investment) Lillibridge ($ million investment)
PROPERTIES PLATFORMS
PEOPLE
$3,150
$5,639
2Q11 1Q16
$717
$5,185
3Q10 1Q16
12
Wexford is an established life science and medical real estate platform for growth
• Ventas experience successfully growing platforms
• Exclusive pipeline with Wexford creates significant channel for long-term growth
• Several existing development projects provide opportunities for near-term growth
Drexel, Old Dominion,
IIT$88
Wake Forest$172 Penn State
$250
Miami$254
Maryland$382
Wash. U.$586 Yale
$640
U. of Penn$656
Duke$868
Current tenants,
10%
Other potential tenants,
90%
TOTAL ADDRESSABLE MARKET OPPORTUNITY
13
Current Tenants 2014 R&D ($ million)Growth Opportunities
Total University Life Science R&D Spend
$38 billion in Total
$4 billion in Total• Large and fragmented market
place
o $38 billion total university life science R&D spend across +100 universities
o Growing R&D spend to address increasing aging population and chronic illnesses
• Current tenants account for 10% of university life science R&D spend
o Strong tenant demand at existing universities fueling additional growth opportunities
o Opportunity for Ventas to expand to other leading universities
Source: National Science Foundation
Global life science R&D market is ~$200 billion in spend
12.3K drugs are in R&D pipelines, growing 5.3% since 2005
University life science is $38 billion market, growing 3.6% since 2005
Higher FDA approval rates & upcoming patent expirations have driven consistent growth in the R&D pipeline
Large phama’s record cash balances, demand for larger pipelines and a lack of organic growth continues to fuel M&A
Demand driven by prevalence of chronic diseases, the leading source of hospital admits, mortality and healthcare cost
LIFE SCIENCE INDUSTRY EXPERIENCING CONTINUED GROWTH
University Life Sciences Research Spending
14
Overview
$9bn $12bn
$15bn
$21bn$4bn
$6bn$28bn
$38bn
2005 2014
Biological sciences Medical sciences Other
+3.6%
+4.0%
+3.7%
+3.2%
CAGRUniversities & Research institutions
have increased R&D spending
Chronically Ill Individuals in US ($ millions)Biotech M&A Market ($ billions)
$78bn$100bn
$131bn$158bn
$150bn$173bn
$210bn
$259bn
2012 2013 2014 2015
Global Healthcare M&A Volume (deals below $10 billion)
Pharma/Biotech Services Medtech
Pharma/Biotech M&A has grown at a +27% CAGR since 2012
118 125 133 141 149 157 164 171
1995 2000 2005 2010 2015 2020 2025 2030
In 2015, 48% of US population has at least 1 chronic illness and 24% have at least 2
Source: Projection of Chronic Illness Prevalence and Cost inflation (Wu, Shin-Yi et al. 2000); National Science Foundation; CDA CDERNote: Latest data as of 2014; federal scientific research funding represents total funds that are committed by federal agencies to support science-related research at higher education institutions across the U.S.
LIFE SCIENCES REAL ESTATE – $50 BILLION MARKET
Overview
Life science is ~$50 billion of the $1 trillion healthcare real estate pie
Life science facilities are highly specialized facilities used by life science and tech
companies to conduct R&D
Tenants include: pharmaceutical, biotech, medical device companies and
academic/research institutions
5%
10%
15%
31%
39%
$11.1B
$6.5B$1.5B
$4.4B
$26.5B
$50.0B
ARE BMR Wexford HCP Other
Outpatient
Facilities / MOBsLife Science / Biotech Facilities
Post-Acute
Facilities
Private Pay
Seniors Housing
Hospitals
$1T
Domestic
RE Market
15
Market Sizing
TRANSACTION HIGHLIGHTS SUMMARY
Reliable income and growth
Reinforces Ventas‘s position as the premier capital provider at the intersection of healthcare and real estate
Advantaged properties with leading tenants
Best platforms
16
Disciplined capital allocation: accretion and attractive valuation
Environmental, social and governance leadership