Ventas, Inc.

Good day, ladies and gentlemen, and welcome to the third quarter 2020 Ventas earnings conference call. At this time, our participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Sarah Whitford, Investor Relations. Please go ahead.

Good morning. Welcome to the Ventas Third Quarter Financial Results Conference Call. Earlier this morning, we issued our third quarter earnings release, supplemental, and investor presentation. These materials are available on the Ventas website at www.ventasrete.com. As a reminder, remarks made today may include forward-looking statements. including certain expectations related to COVID-19 and other matters. Forward-looking statements are subject to risks and uncertainties, and a variety of factors may cause actual results to differ materially from those concentrated by such statements. For a more detailed discussion of these factors, please refer to our earnings released for this quarter and to our most recent SEC filings, all of which are available on the Ventas website. Certain non-GAAP financial measures will also be discussed on this call. For a reconciliation of these measures to the most closely comparable gap measures, please refer to the Investor Relations section of our website. I will now turn over the call to Deborah A. Cafaro, Chairman and CEO.

Thank you, Sarah. Good morning to all of our shareholders and other participants. We want to welcome you to the Ventas Third Quarter 2020 Earnings Call. The Ventas team is dispersed but unified in spirit as we join you for today's call. I'd like to provide an overview of our consistent strategy, discuss our third quarter results, highlight how we are driving our research and innovation business forward, describe our competitive advantage in managing institutional third-party capital, and touch on the positive senior housing operating trends that continue into October. Our enterprise continues to benefit significantly from our steady commitment over decades and various cycles to asset class, operator, and geographical diversification. We aim to generate reliable growing cash flows from a high-quality, diverse portfolio of assets on a strong balance sheet. We've seen that staying disciplined about diversification has protected the downside and also provided myriad opportunities for our stakeholders. The current environment is certainly proving out the merits of this strategy. First, our diversified portfolio is enabling the company to remain strong and stable, despite the disruption occasioned by the COVID-19 pandemic, which has affected our different asset classes and geographies in non-correlated ways. Our medical office, research, and innovation business, and our healthcare triple net lease business now represent over half our enterprise. During the quarter, these asset classes have continued to perform well and led our third quarter performance, enabling us to deliver 75 cents of normalized FFO per share. Second, our diversified asset base with five verticals has given us the ability to continue successfully allocating capital over time and through cycles. For example, following the spinoff of our skilled nursing business, we invested in high-quality health systems with ARDIS, which is currently performing very well as hospitals have asserted their centrality to the health care delivery system in the U.S. Also, just as we did when we allocated capital to the medical office building business a decade earlier, in 2016 we entered the research and innovation business, and we have found significant opportunities to drive that business forward since then through both ground-up development and asset acquisitions. The addition of life sciences to our enterprise has provided uplift to our results, our investment activity, and our enterprise values. Two recent examples of the benefit of our diversified strategy include our investment in a $1 billion Class A trophy life science portfolio located in the premier South San Francisco life science cluster at a forward cap rate of 5% on cash NOI. The tenant base is a nice mix of public companies and a diverse group of early to mid-stage life science companies. The South San Francisco market consistently ranks as one of the elite life science clusters. Spurred by record capital flows into the life science sector, this market has less than 2% lab vacancy, unparalleled access to a large concentration of life science firms, and an extensive venture capital network going after the world-class talent pool. We also recently recommenced construction on a 400,000-square-foot state-of-the-art life sciences project known as One U City in the thriving research submarket of Philadelphia, bookended by Penn and Drexel. This project is designed to be LEED certified, and total estimated project costs are over $280 million. Similarly, we've invested on a geographically diversified basis, with over 30% of our shop portfolio now in Canada. Last year, we acquired the high-quality Le Groupe Maurice portfolio in Quebec. Building on the strong performance LGM has delivered and its history of successfully developing and leasing up senior communities for vibrant older adults, We are also investing nearly $420 million in ground-up development of new consumer-focused senior living communities, which are well underway. We do see areas where we can recycle capital, too. We have recently sold or placed under contract certain portfolios of senior living assets that are not long-term holds for us. We want to continue making senior housing a key part of our diversified portfolio because of the operational asset class upside post-pandemic, the demographically driven demand that is in front of us, and the continued improvement on the supply side. There remains a strong bid from private capital for senior living, which supports our conclusion. On the other side of the ledger, through our growing third-party institutional capital management platform, we also continue to diversify our capital sources, augment our investment capacity, expand our footprint, leverage our team and industry expertise, and improve our financial flexibility and liquidity, all of which are positive for our public shareholders. Having additional partners and tools to use at appropriate times and for customized situations provides a significant competitive advantage for Ventas and adds an incremental source of earnings. We already have over $3 billion in assets under management in our institutional third-party capital management platform. These forms include our successful open-end funds launched in March of this year that has already grown to nearly $2 billion and 2 million square feet in assets under management. Following the South San Francisco Life Sciences portfolio closing, when we raised over $600 million of discretionary new equity, Our fund exceeds $1 billion in equity capital and continues to have additional committed capital to accommodate new investments. We've also today announced a new joint venture with GIC, one of the most respected global real estate investors. This joint venture covers four research and innovation development projects currently in progress with approximately $930 million in estimated project costs. Our joint venture with GIC may be expanded to over $2 billion with other pre-identified future R&I development projects currently in our pipeline if they go forward. While maintaining a majority interest in all these projects and receiving market-based compensation, our GIC joint venture enables us to align with a strategic partner, improve our liquidity and financial profile, and accelerate our research and innovation development pipeline, including the recent construction commencement of the One U City project in Philadelphia. The success of our open-end fund and the GIC partnership demonstrate the tremendous market opportunity within life science, medical office, and senior housing real estate. And also, they are a testament to Ventas' excellent team and investment track record. Turning to the here and now, I'd like to provide some key observations about our U.S. senior housing operating portfolio. Importantly, in the third quarter, our operators continued to build on the improving trends that began in the second quarter. Our communities demonstrated sustained increases in leads and move-ins, which continued through October. While we are sober and clear-eyed about the recent increase in COVID-19 cases nationally, to a record level of nearly 120,000 confirmed cases today. We believe in the strength of the senior living business as we look toward the post-pandemic environment. We are also appreciative that HHS has recognized the crucial role senior living plays in protecting vulnerable older Americans. HHS has allocated CARES Act funding to the assisted living communities to partially mitigate the losses directly suffered because of the COVID-19 pandemic. Finally, we are encouraged by the progress being made by scientists and doctors on vaccines and treatments for COVID-19. Older Americans, including our residents, will be prioritized for vaccine distribution slated just behind first responders and frontline healthcare providers. Most of our operators have already registered with pharmacy distribution sources to administer the COVID-19 vaccine as soon as it becomes available. An effective, widely distributed vaccine will further improve conditions for a senior housing recovery. We are glad that we have significant embedded exposure to that upside in our diversified portfolio. Today, we published our Corporate Sustainability Report that showcases our longstanding commitment to and leadership in ESG sustainability. Among other things, this report discloses our new environmental goals, our consistent and growing investments in sustainability improvements in our portfolio, and our principles in practice, which is a series of case studies showing our actions on health and safety and COVID-19, describing our emergency preparedness, and demonstrating our customized framework to achieve greater gender and racial equality and social justice. In closing, let me reiterate that the long-term demographically driven thesis for healthcare real estate and for Ventas remains in place. I'm incredibly proud of our Ventas team. Our consistency and cohesion are great assets for all our stakeholders. All of us at Ventas have an abiding commitment to stay strong and stable and win the recovery. Justin?