Ventas, Inc.

Good day, and thank you for standing by. Welcome to the VENTAS second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sarah Whitford, Director of Investor Relations.

Please go ahead. Thanks, Tammy. Good morning and welcome to the Ventas second quarter financial results conference call. Earlier this morning, we issued our second quarter earnings release supplemental and investor presentation. These materials are available on the Ventas website at ir.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 contemplated by such statements. For a more detailed discussion of those factors, please refer to our earnings release 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 reconciliation of these measures to the most closely comparable GAAP measures, please refer to our supplemental posted on the investor relations section of our website. This earnings call does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities or solicitation of any vote or approval. In connection with the proposed acquisition of New Senior, Ventas filed with the SEC a registration statement on Form S-4 that includes a preliminary prospectus for the Ventas common stock that will be issued in the proposed acquisition, and that also constitutes a preliminary proxy statement for a special meeting of New Senior stockholders to approve the proposed acquisition. The proxy statement prospectus and other documents filed by Ventas and New Senior with the SEC may be obtained free of charge at Ventas' investor relations website at ir.ventasrete.com or New Senior's investor relations website at ir.newseniorinv.com as applicable or at SEC's website at www.sec.gov. You should review such materials filed via SEC carefully because they contain or will contain important information about the proposed transaction, including information about Vantos and New Senior and their respective directors, executive officers, and other employees who may be deemed to be participants in the solicitation of proxies in respect of the proposed acquisition and a description of their direct and indirect interest by security holdings or otherwise. I will now turn the call over to Deborah A. Cafaro, Ventas Chairman and CEO.

Deborah A. Well done. Your first public company merger. Congratulations. Well, good morning, everyone. I want to welcome our shareholders and other participants to the Ventas Second Quarter 2021 Earnings Call. Ventas delivered an outstanding second quarter, and we have strong momentum across the board in health and safety, capital deployment and access, realization of the benefits of prior successful investments, financial strength, and most importantly, in portfolio growth, led by our high-quality shop business with significant contributions from office and stability in our triple net lease business. We see a clear path to growth in our demographically driven diversified enterprise through capturing the embedded upside in our senior housing business, the benefit of external investments, reliable cash flow from our office and triple net businesses, and delivery and stabilization of ongoing developments, primarily in the life sciences, research and innovation, and Canadian senior housing areas. our experienced team is committed to winning the recovery for all of our stakeholders. Let me first turn to our second quarter results. We posted 73 cents of normalized FFO per share, which is above the high end of our previously provided guidance. I'm delighted that our same store property portfolio grew 3.6% sequentially. our outperformance was driven by shop, which produced $111 million in quarterly NOI, a recovery of $50 million of annualized NOI, representing industry-leading growth in same-store cash NOI and occupancy. July continued these positive shop trends for the fifth consecutive month of occupancy growth. Importantly, by the end of July, leads reached their highest level since the pandemic began. Justin will unpack these trends more fully in his remarks. As a result, we've never been more confident that the senior living business is supported by powerful demand that is growing and resilient, while supply remains constrained. If the last 18 months have taught us anything, it is that as soon as our communities and care providers are ready to welcome residents and their families, we experience a surge of leads and move-ins almost immediately, which then builds sustainably and rapidly. That said, given the macro uncertainty in the COVID-19 environment, particularly the national and regional rise in cases and the measures that have been taken or may be taken to contain COVID spread, the path to full recovery may not be a straight line, but we believe it will point inexorably upward. In our third quarter outlook, we have assumed the increase in COVID cases throughout the U.S. may have some impact on the velocity of leasing and expenses. Rounding out our portfolio performance, office grew nicely in the quarter and our triple net portfolio continued its stability. Peace efforts to increase leasing, keep high retention rates, improve customer relationships, and grow NOI are showing results. Our on-campus and affiliated MOB strategy with leading health systems continues to shine. Turning to health systems, our investment in Ardent also continues to deliver benefits. In addition to strong cash flow coverage on our $1.3 billion leasehold position, our 10% equity stake in the Arden Enterprise is benefiting from excellent Arden results, and our prior purchase of $200 million of Arden Senior Notes recently paid off with a $15 million prepayment fee, providing us with a 13% unlevered return on our investment in the Arden Notes, When all is said and done, I believe and hope that our ardent investment in real estate, equity, and debt will prove to be one of our best risk-adjusted return investments. Turning to other capital allocation priorities, we certainly are on our front foot regarding external investments. In total, in 2021, we have over $3.5 billion in investments completed, pending, or underway with another $1 billion life science research and innovation pipeline with our exclusive development partner, Wexford, right behind that. Our team is also busy evaluating attractive deals across our asset classes. This year to date, we have already reviewed about as many investment opportunities as we saw in all of 2019. We will pursue those that meet our multi-factor investment philosophy, which is focused on growing reliable cash flow and favorable risk-adjusted returns, taking into account factors such as cost per square foot or unit, downside protection, and ultimate potential for cash flow growth and asset appreciation. Our $2.3 billion pending investment in New Senior announced in the second quarter is a great example. In this deal, we are acquiring over 100 high-quality independent living communities that are well invested and located in advantaged markets at compelling pricing. The per-unit cost is estimated to be 20% to 30% below replacement costs. The 5% cash going in cap rate is expected to grow to a 6% cap rate on expected 2022 NOI with upside as the senior housing recovery continues. And the FFO multiple of less than 12 times post synergized 2022 estimated FFO are all attractive valuation metrics. I commend Susan Givens and her team for doing a tremendous job creating and realizing value for their stakeholders. We are also confident that Ventas shareholders will receive immediate and long-term accretion and upside from the deal as senior housing recovers and the large middle market demographic expands significantly in the near term. As Justin will describe, the new senior portfolio also fits in with our senior housing strategy and framework. New senior also performed well in Q2 and into July, with occupancy increasing in its same-store portfolio for five straight months. A unique strategic advantage of the new senior transaction is the longstanding relationship we have with the principal managers of the portfolio, Atria and Holiday, two leading operators who recently combined to form the second largest senior housing manager. As a one-third owner of Atria, we are excited about the opportunities the combination creates, We will directly benefit from growth in Atria's management platform, and we welcome the combination of Atria and Holiday's talent in Atria's advanced enterprise. Congratulations to Atria for pulling together this industry-changing transaction. Switching to our attractive life science research and innovation business, it continues to provide us with value-creating opportunities to invest capital. The Ventus Life Science portfolio now exceeds 9 million square feet, is located in three of the top five cluster markets, includes three ongoing development projects, and is affiliated with over 16 of the nation's top research universities. We also have an incremental $1 billion in potential projects we are working on with Westford. The first and largest new life science project in the pipeline, totaling about half a billion dollars in cost, is gaining steam. expected to be 60% pre-leased to a major public research university that ranks in the top 5% of NIH funding. This project will be located on the West Coast and should break ground in the first half of 2022. Wexford, with its exceptional reputation among universities, is also exploring significant additional life science potential projects beyond those in our existing pipeline. North of the border, we continue to invest capital in high-end, large-scale, independent living communities with our partner Le Groupe Maurice in Quebec. We have always tried to create value through both internal and external growth, and we're pleased that we've returned to being a net acquirer in 2021. Our team is active and engaged beyond our announced deals and our pipeline of potential investments across asset classes. To fund new investments, we have access to significant liquidity and a wide array of capital sources, including the asset dispositions and receipt of loan repayments, as Bob will describe in greater detail. The demand for senior housing has been robust and sustainable, proving out the value proposition our communities and care providers offer to seniors and their families. The shop recovery has begun, and we've started capturing the significant upside embedded in our existing senior housing portfolio from both pandemic recovery and the 17.5% growth in the senior population projected over the next few years. Our diversified business model continues to provide uplift and stability to our enterprise. We are investing nearly $4 billion in announced deals and development projects, and our access to and pricing of capital are positive. In closing, the U.S. is in the midst of an impressive economic recovery that, together with demographic demand for all our asset classes, will benefit our business. We embrace the opportunity to take on any near-term challenges that are temporarily caused by the strength and speed of this recovery, especially because now, unlike last year in the beginning of 2021, our employees, residents, tenants, and caregivers are largely safe and healthy. As a team at Ventas, we're incredibly pleased about the results we've delivered and the strength and momentum we've demonstrated. Justin, over to you.