Ventas, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Q1 2020 Ventus Earnings Conference Call. At this time, all participant lines are in a listen-only mode. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to turn the conference over to your speaker today, Mr. Juan Santafaria.

Thanks, Cindy. Good morning and welcome to the Ventus Conference Call to review the company's announcement today. regarding its results for the first quarter ended March 31, 2020. As we start, let me express that all projections and predictions and certain other statements to be made during this conference call may be considered forward-looking statements within the meaning of the federal securities law. The company cautions that these forward-looking statements are subject to many risks, uncertainties, and contingencies, and stockholders and others should recognize that actual results may differ materially from the company's expectations, whether expressed or implied. Ventas expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any changes in expectations. Additional information about the factors that may affect the company's operations and results is included in the company's annual report on Form 10-K for the year ended December 31, 2019 and the company's other SEC filings. Please note the quantitative reconciliations between each non-GAAP financial measure referenced on this conference call and its most directly comparable gap measure, as well as the company's supplemental disclosure schedule, are available in the investor relations section of our website at www.ventilesreit.com. Before I hand the call off to Deborah A. Cafaro, Chairman and CEO of the company, I'd like to note that we posted an investor presentation this morning on our website, which includes a COVID-19 business update that is helpful information that the team will reference in our prepared remarks. With those formalities out of the way, I'll hand it over to Debbie.

Thank you, Juan, and good morning to all of our shareholders and other participants, and welcome to the Ventas First Quarter 2020 Earnings Call. I sincerely hope that you and yours are safe and healthy. Today, the Ventas team is working remotely, but we are together in spirit as we outline our outstanding first quarter results, describe the challenging conditions in the markets, the economy, and our company brought on by the terrible COVID-19 pandemic, discuss near-term business trends, and evaluate the macro outlook. At this time, we face unprecedented conditions nationally and globally created by the pandemic. Those of us in real estate who have been around a long time have managed through many severe crises over the decades, including the 9-11 terrorist attacks and the great financial crisis, and the deep recessions that followed both. Yet today's complex mix of public health, remote working, economic, operational, and market conditions make this pandemic a uniquely challenging adversary. Let me begin today by setting the stage and then outlining the swift and decisive actions we have taken to ensure that Ventas remains strong and stable. As we rolled into March, we were excited to see how our previously announced initiatives were gaining traction and making an impact, and how well our overall enterprise and each of our business lines were performing. You can see the power of our diversified business model in the strong, normalized FFO per share results we reported today at 97 cents per share, inclusive of the financial impact of COVID-19 toward the end of the quarter. In short, we were hitting on all cylinders with terrific momentum today. As soon as we realized the potential scope and impact of the novel coronavirus in February and early in March, we identified as our key priority the health and safety of Ventas employees and their families and the employees, patients, and senior living residents in our 1,200 healthcare sites. Although this particular crisis reflects a unique combination of forces, our experience, deep analysis based on early real-time input, and core principles have given us a solid framework for action. Here are some of the strong measures we have taken to preserve and protect the company and the many stakeholders who depend upon us. We have devoted significant efforts to support our tenants and operators across our portfolio during the COVID-19 pandemic. We've established financial support programs for those who are experiencing financial hardship. We've assisted operators who may be eligible for complex and varied government programs. And we've leveraged our national scale to help operators source supplies, including scarce personal protective equipment, or PPEs. and today we've announced a powerful new initiative for Ventus senior living operators. Ventus will be providing access to COVID-19 testing kits and analysis from Mayo Clinic Laboratories without charge to certain of our senior housing operators to further enhance safety at Ventus communities by accelerating employee testing. Ventas and Atria, working through Atria's ongoing relationship, have secured access to testing capacity in excess of 30,000. Atria is already nearly done testing all of its 14,000 U.S. on-site and regional staff. With approximately 9,000 results in, less than 1% of Atria's employee tests have been returned positive. Combined with digital tracking and tracing and appropriate use of PPE, Atria is building a new normal model to run its senior housing business safely and thoughtfully. In a positive sign, Atria has moved in 300 residents since early March, all under full quarantine and PPE protocols. Ventas plans to make available to certain of its other operators at least 10,000 COVID-19 test kits and analysis from Mayo Clinic Labs. ESL will be the next Ventas operator to use this testing for its Ventas communities and is already getting ready to test all of its staff in May. We look forward to finding more ways to work with Mayo Clinic Labs and our operators to further enhance safety at our communities for residents and caregivers. We will continue to evaluate additional action as appropriate. Second on our action hit list, we moved early to review and implement our pre-existing business continuity plans so we could maintain a high level of productivity and manage a seamless transition to remote working arrangements. With an interdisciplinary team of Ventas leaders coordinating our efforts, strong IT support and capabilities, full buy-in by our employees, and enhanced communication, the company experienced no downtime, and we've been highly effective during these challenging times. I'm so proud of how Ventas employees have reacted and rallied, and I want to thank them for their extraordinary efforts. Third, we're pleased that we've reached a positive consensual resolution of our holiday lease. After receiving full rents from Holiday since lease inception in 2013 through the end of the first quarter 2020, we have now received an additional $100 million in cash and secured notes. We've entered into a new management agreement with Holiday for our 26 independent living assets, and we've terminated the holiday lease. all effective April 1. This management structure retains our upside in our 26 communities and provides us with operational flexibility. We appreciate Holiday Management's engagement and cooperation to complete this transaction. Fourth, we were excited to augment our leadership team with Justin Hutchins and Kerry Roberts when they joined Ventas on March 4th. Justin and Kerry have added new energy and insight to our tight-knit group at this crucial time. They've already made many meaningful contributions to Ventas as we've collaborated to analyze and attack the business challenges presented by the pandemic. Our experience has instilled in us the importance of liquidity in a crisis. As a result, we showed the courage of our convictions in mid-March by drawing on our revolver and then issuing senior notes, generating $3.3 billion in liquidity. This financial flexibility will serve us well as we manage through to the other side of the COVID-19 pandemic. In addition, we further enhanced our financial flexibility by acting immediately to reduce 2020 capital expenditures by $300 million, mainly by pausing certain of our previously announced ground-up developments that were not yet substantially underway. We are also carefully reviewing other areas of our company for cost savings, including general and administrative expenses. At the same time, we promptly withdrew our financial guidance on March 17th, nearly two months ago, when our early analysis informed by real-time data led us to conclude that our financial performance could be materially affected by the pandemic. Our foresight proved correct, and we fulfilled our commitment to transparency to our stakeholders by the actions we took in a timely way. Finally, Benpuff has served and continues to work tirelessly as a proactive and evidence-based advocate for seniors with federal policymakers. Working with industry groups and in alliance with senior living CEOs, we are demonstrating the crucial role senior living care providers play in protecting our senior population that is particularly vulnerable to this novel coronavirus. While we've taken plenty of action, policymakers have done exponentially more. The Fed, the administration, and Congress have implemented a comprehensive array of bold policy actions to partially mitigate the virus's severe implications for public health, capital markets, and the economy. Many businesses and households, including many of our tenants and operators, have already benefited from this arsenal of federal programs. With this powerful support and more financial relief likely to follow, it's our responsibility now to take action to safely and responsibly move our company toward a new normal. As we do so, our visibility is limited and uncertainty remains very high. Indeed, we face a COVID-19 paradox. On the one side, reputable models and even certain government projections show an expected increase in COVID-19 confirmed cases and mortality numbers in many jurisdictions. These expectations, if they materialize, could derail even the best laid plans for economic recovery. And this morning, we saw historic levels of unemployment claims in the U.S. On the other hand, there is palpable optimism in the air, as most states plan staged reopenings of their economies and businesses. Many companies, including ours, are preparing for a gradual return to office work. Patients and physicians are scheduling appointments and elective procedures. Families are making deposits for senior housing move-ins. Universities are planning to welcome students in the fall. And most importantly, our best scientific and medical minds are racing to find treatments, cures, and vaccines for the coronavirus. We're proud to say that many of our key research and innovation university relationships and tenants, including Duke, Wake Forest, Penn, Yale, and Integral Molecular, are at the forefront of this research. All these promising developments provide hope for a speedier and sustained bounce back. We don't have to know how these opposing trends will play out. Our job is to preserve and protect our company and our stakeholders and be ready for a variety of scenarios and opportunities. Before closing, I want to address our dividend in the context of this COVID-19 uncertainty. As you know, we declared and paid our last quarterly dividend in April. Because we normally pay our next dividend in July, our board will consider the dividend in mid to late June. As it always does, our responsible and experienced board will make a decision using its good faith business judgment, taking into account all of the information available to it at that time. In a situation like the fast-moving, rapidly-changing global pandemic, we have the advantage of aggregating and analyzing the best and most current information available in order to make the optimal decision. The cycle-tested Venpas team and the company are well-prepared to manage through current conditions and to take further action as necessary. Guided by our experience, analysis, and ethics, we will safeguard our employees, our senior housing residents and caregivers, our capital, and our reputation so that Ventus will remain a leading healthcare property owner in the businesses and geographies where we invest, a desirable employer, and an attractive investment vehicle. And now, for the first time, I'm pleased to ask Justin Hutchins to address you about Ventas' senior housing business.