Ventas and Sunrise Senior Living Revise Management Agreement to Capitalize on Senior Housing Recovery

Rhea-AI Summary

Ventas, Inc. (NYSE: VTR) has revised its management agreement with Sunrise Senior Living to enhance performance across 92 senior housing communities. The agreement aligns incentives towards Net Operating Income (NOI) growth, particularly as the senior housing industry recovers. Key terms include a new management fee structure focused on NOI, incentive payments for achieving growth targets, and enhanced operational flexibility. While the near-term financial impact is expected to be immaterial, the partnership aims to position Ventas for long-term profitability and success in the evolving market.

Positive

• Revised agreement promotes alignment between Ventas and Sunrise for better performance.
• New management fee structure emphasizes NOI performance, benefiting financial growth.
• Incentive payments linked to mutually agreed NOI targets support profitable growth.

Negative

• None.

Mutually Beneficial Agreement to Incentivize Accelerated NOI Performance at 92 Ventas Senior Housing Communities Operated by Sunrise

Advances Ventas’s Right Asset, Right Market, Right Operator ^TM Senior Housing Strategy

CHICAGO--(BUSINESS WIRE)-- Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) announced today that it has entered into a revised, mutually beneficial and highly aligned management agreement with Sunrise Senior Living (“Sunrise”) to drive enhanced performance and value in Ventas’s portfolio of 92 high-end senior living communities managed by Sunrise.

“At this important juncture, we are pleased to reach this agreement for our market-leading assisted living communities operated by Sunrise,” said J. Justin Hutchens, Ventas’s EVP of Senior Housing. “We are confident the new agreement aligns incentives toward profitable growth. Our enhanced partnership with Sunrise represents the latest step to advance our senior housing strategy and position the portfolio to capture the upside from the senior housing growth trajectory.”

“Sunrise and Ventas have had a successful partnership since 2007, and we are excited to continue to enhance our relationship with today’s announcement,” said Jack R. Callison, Chief Executive Officer of Sunrise. “The revised management agreement further aligns both parties to drive the success of the communities for the benefit of both Ventas and Sunrise stakeholders.”

The revised management agreement provides strong alignment between Ventas and Sunrise while simultaneously incentivizing Net Operating Income (“NOI”) growth at a key inflection point in the ongoing senior housing industry recovery. The near-term financial impact to Ventas is expected to be immaterial. Key terms of the agreement include:

• A new management fee structure, with increased weighting toward NOI performance, and reduced emphasis on revenue;
• Incentive payments upon achieving mutually agreed upon NOI growth targets;
• Enhanced operating flexibility to optimize the go-forward portfolio through selective dispositions;
• Simplification through consolidation of multiple contracts into a single master agreement while maintaining the existing average term through 2035;
• Expansion of data collaboration and analytics further enhancing Ventas Operational Insights^TM platform combined with Sunrise’s operational expertise to drive outperformance; and
• Agreement to assist and cooperate with achieving customary industry-leading Environment, Social and Governance (ESG) commitments in the management contracts with a particular focus on Diversity, Equity and Inclusion.

About Ventas

Ventas Inc., an S&P 500 company, operates at the intersection of two large and dynamic industries – healthcare and real estate. Fueled by powerful demographic demand from growth in the aging population, Ventas owns a diversified portfolio of over 1,200 properties in the United States, Canada, and the United Kingdom. Ventas uses the power of its capital to unlock the value of senior living communities; life science, research & innovation properties; medical office & outpatient facilities, hospitals and other healthcare real estate. A globally recognized real estate investment trust, Ventas follows a successful long-term strategy, proven over more than 20 years, built on diversification of property types, capital sources and industry leading partners, financial strength and flexibility, consistent and reliable growth and industry leading ESG achievements, managed by a collaborative and experienced team dedicated to its stakeholders.

Cautionary Statements

Certain of the information contained herein, including intra-quarter operating information and number of confirmed cases of COVID-19, has been provided by our operators and we have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you of its accuracy.

This press release includes 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. Forward-looking statements include, among other things, statements regarding our and our officers’ intent, belief or expectation as identified by the use of words such as “may,” “will,” “project,” “expect,” “believe,” “intend,” “anticipate,” “seek,” “target,” “forecast,” “plan,” “potential,” “opportunity,” “estimate,” “could,” “would,” “should” and other comparable and derivative terms or the negatives thereof.

Forward-looking statements are based on management’s beliefs as well as on a number of assumptions concerning future events. You should not 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. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made. You are urged to carefully review the disclosures we make concerning risks and uncertainties that may affect our business and future financial performance, including those made below and in our filings with the Securities and Exchange Commission, such as in the section titled “Cautionary Statements — Summary Risk Factors,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

Certain factors that could affect our future results and our ability to achieve our stated goals include, but are not limited to: (a) the impact of the ongoing COVID-19 pandemic and its extended consequences, including of the Delta, Omicron or any other variant, on our revenue, level of profitability, liquidity and overall risk exposure and the implementation and impact of regulations related to the CARES Act and other stimulus legislation and any future COVID-19 relief measures; (b) our ability to achieve the anticipated benefits and synergies from, and effectively integrate, our acquisitions and investments, including our acquisition of New Senior Investment Group Inc.; (c) our exposure and the exposure of our tenants, managers and borrowers to complex healthcare and other regulation and the challenges and expense associated with complying with such regulation; (d) the potential for significant general and commercial claims, legal actions, regulatory proceedings or enforcement actions that could subject us or our tenants, managers or borrowers to increased operating costs and uninsured liabilities; (e) the impact of market and general economic conditions, including economic and financial market events, inflation, changes in interest rates, supply chain pressures, events that affect consumer confidence, our occupancy rates and resident fee revenues, and the actual and perceived state of the real estate markets, labor markets and public capital markets; (f) our ability, and the ability of our tenants, managers and borrowers, to navigate the trends impacting our or their businesses and the industries in which we or they operate; (g) the risk of bankruptcy, insolvency or financial deterioration of our tenants, managers, borrowers and other obligors and our ability to foreclose successfully on the collateral securing our loans and other investments in the event of a borrower default; (h) our ability to identify and consummate future investments in or dispositions of healthcare assets and effectively manage our portfolio opportunities and our investments in co-investment vehicles, joint ventures and minority interests; (i) risks related to development, redevelopment and construction projects; (j) our ability to attract and retain talented employees; (k) the limitations and significant requirements imposed upon our business as a result of our status as a REIT and the adverse consequences (including the possible loss of our status as a REIT) that would result if we are not able to comply; (l) the risk of changes in healthcare law or regulation or in tax laws, guidance and interpretations, particularly as applied to REITs, that could adversely affect us or our tenants, managers or borrowers; (m) increases in our borrowing costs as a result of becoming more leveraged or as a result of changes in interest rates and phasing out of LIBOR rates; (n) our reliance on third parties to operate a majority of our assets and our limited control and influence over such operations and results; (o) our dependency on a limited number of tenants and managers for a significant portion of our revenues and operating income; (p) the adequacy of insurance coverage provided by our policies and policies maintained by our tenants, managers or other counterparties; (q) the occurrence of cyber incidents that could disrupt our operations, result in the loss of confidential information or damage our business relationships and reputation; (r) the impact of merger, acquisition and investment activity in the healthcare industry or otherwise affecting our tenants, managers or borrowers; (s) disruptions to the management and operations of our business and the uncertainties caused by activist investors; and (t) the risk of catastrophic or extreme weather and other natural events and the physical effects of climate change.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220505005875/en/

Sarah Whitford

(877) 4-VENTAS

Source: Ventas, Inc.

FAQ

What is the recent agreement between Ventas and Sunrise?

Ventas has revised its management agreement with Sunrise Senior Living to enhance performance across 92 senior housing communities.

How will the revised management agreement affect VTR's financial performance?

The near-term financial impact of the revised agreement is expected to be immaterial, but it aligns incentives for future growth.

What are the key changes in the management agreement for VTR?

Key changes include a new fee structure focused on NOI performance, incentive payments for growth targets, and enhanced operational flexibility.

When was the agreement between Ventas and Sunrise announced?

The agreement was announced on May 5, 2022.