Ventas Earnings Call Insights: Sequester Impact and Acquisition Opportunities
Ventas (NYSE:VTR) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.
Jana Galan – Bank of America Merrill Lynch: This is Jana for Jeff. It is good to see your tenant triple-net rent coverages remain strong and (they are reflecting) the fourth quarter. I was curious that in your conversations with Kindred, or some of your hospital operators, have they seen any impact from the sequester in April? So you think we won’t really see this show up in numbers, until the third quarter reporting?
Debra A. Cafaro – Chairman and CEO: Good question. Yes. Our coverages were good and ticked up a little bit in some cases in the triple-net portfolio. I would say just talking about the government reimbursed portion of our business, I would say that, remember that the operators got an almost 2% Medicare rate increase in the fourth quarter of 2012 and sequestration doesn’t really take effect until April 1. So those are essentially a push, if you want to think about it that way.
Jana Galan – Bank of America Merrill Lynch: Then any input from your operators on how they are thinking about their budget with what CMS may announce shortly?
Debra A. Cafaro – Chairman and CEO: We would expect the CMS preliminary rules regarding fiscal year 2014 rates to be coming out really any day now and be finalized later in the summer and we should know very shortly what that preliminary rule is, which again, I want to remind everyone it’s subject to a (comment) period and then often changes and improves in between these initial publication and finalization.
Michael Bilerman – Citi: Good morning. Manny Korchman is on with me as well. Debbie just wanted to go – your comments about the pipeline being robust, acquisition opportunities abound and you talked about the balance sheet being astonishingly good and being in great shape. I’m just curious, as you think about your capacity to acquire today. Arguably you have access to capital markets when you need it depending on what transaction you do. But how should we think about what volume of transactions you could do prior to either selling assets or selling new equity in terms of how much you would be able to bring on balance sheet today as you look at the cost?
Debra A. Cafaro – Chairman and CEO: I think you are right. We obviously have fantastic access to the capital markets. I think one of the Company’s hallmarks is that we are aggressive and drive growth but we also make sure that we always have great liquidity. So if the markets are there we will use them, but we know that we have a good safety net in our existing liquidity. When we look at our acquisition opportunities they are really plentiful and we are as busy as we have ever been. I would say that when we look at the numbers we could easily acquire over $1 billion really and be very comfortable with our balance sheet without the need of any additional equity components.
Michael Bilerman – Citi: How should we think about the types of deal, I mean if there is elephant hunting in terms of large transactions that’s getting you excited about opportunities or is it a lot of singles and doubles either from the existing portfolio where you are buying out partners or smaller type portfolios in the couple of hundred million dollar range? How should we think about your excitement about transactions today?
Debra A. Cafaro – Chairman and CEO: Well in a word, yes, to all of those. I mean we are seeing great kind of follow on transactions with existing partners. We are seeing great follow on with our current tenants, some of whom came from NHP. We are seeing regional deals and we are seeing large, very large portfolio transactions. So I think the strategy of putting our various legacy companies together, whether it’s the Lillibridge, Cogdell, NHP, Atria, all of those are channels for continued internal and external growth and that’s when I say the strategy is working, and we’re executing, that’s really what I mean.
Michael Bilerman – Citi: Then just on the loan buybacks or the loan – I guess you sold off some loans in the quarter. Looking on Page 2 of the Supp, so that balance it comes down on your mortgage loans from 635 to 490, but the yield went up and if just do the potato math, it would say that you sold a $145 million of loans at 7.6%. I thought I heard you said you sold some high yielding loans, but it appears that the balance actually is better today than it was before?
Debra A. Cafaro – Chairman and CEO: Yeah. I mean basically we’re – as I said, we’re making sure to manage – we made some high quality, well-structured, very attractive, risk adjusted return loans in the fourth quarter and our plan has been to syndicate or sell off parts of those and we have started to do that. I think the rate ticked up a little bit, because we may have had a few loan payoffs of lower yielding loans. Also we sold these later in the quarter, so that may have affected the weighted average, so we may see that tick down next quarter, Michael.