UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2008
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-10989
VENTAS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 61-1055020 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
111 S. Wacker Drive, Suite 4800, Chicago, Illinois | 60606 | |
(Address of Principal Executive Offices) | (Zip Code) |
(877) 483-6827
(Registrants Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Name of Each Exchange on Which Registered |
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Common Stock, par value $0.25 per share | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. x
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
x |
Accelerated filer | ¨ | |||||
Non-accelerated filer |
¨ |
Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
The aggregate market value of shares of the Registrants common stock, par value $0.25 per share, held by non-affiliates of the Registrant, computed by reference to the closing price of the common stock on June 30, 2008, was approximately $5.8 billion. For purposes of the foregoing calculation only, all directors and executive officers of the Registrant have been deemed affiliates.
As of February 24, 2009, 143,404,798 shares of the Registrants common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrants definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 7, 2009 are incorporated by reference into Part III, Items 10 through 14 of this Annual Report on Form 10-K.
CAUTIONARY STATEMENTS
Unless otherwise indicated or except where the context otherwise requires, the terms we, us and our and other similar terms in this Annual Report on Form 10-K refer to Ventas, Inc. and its consolidated subsidiaries.
Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements regarding our or our tenants, operators, managers or borrowers expected future financial position, results of operations, cash flows, funds from operations, dividends and dividend plans, financing plans, business strategy, budgets, projected costs, capital expenditures, competitive positions, acquisitions, investment opportunities, merger integration, growth opportunities, dispositions, expected lease income, continued qualification as a real estate investment trust (REIT), plans and objectives of management for future operations, and statements that include words such as anticipate, if, believe, plan, estimate, expect, intend, may, could, should, will, and other similar expressions are forward-looking statements. These forward-looking statements are inherently uncertain, and security holders must recognize that actual results may differ from our expectations. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made.
Our actual future results and trends may differ materially from expectations depending on a variety of factors discussed in our filings with the Securities and Exchange Commission (the Commission). These factors include without limitation:
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The ability and willingness of our operators, tenants, borrowers, managers and other third parties to meet and/or perform their obligations under their respective contractual arrangements with us, including, in some cases, their obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities; |
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The ability of our operators, tenants, borrowers and managers to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to third parties, including without limitation obligations under their existing credit facilities and other indebtedness; |
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Our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions or investments, including those in different asset types and outside the United States; |
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The nature and extent of future competition; |
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The extent of future or pending healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates; |
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Increases in our cost of borrowing as a result of changes in interest rates and other factors; |
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The ability of our operators and managers, as applicable, to deliver high quality services, to attract and retain qualified personnel and to attract residents and patients; |
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The results of litigation affecting us; |
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Changes in general economic conditions and/or economic conditions in the markets in which we may, from time to time, compete, and the effect of those changes on our revenues and our ability to access the capital markets or other sources of funds; |
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Our ability to pay down, refinance, restructure and/or extend our indebtedness as it becomes due; |
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Our ability and willingness to maintain our qualification as a REIT due to economic, market, legal, tax or other considerations; |
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Final determination of our taxable net income for the year ended December 31, 2008 and for the year ending December 31, 2009; |
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The ability and willingness of our tenants to renew their leases with us upon expiration of the leases and our ability to reposition our properties on the same or better terms in the event such leases expire and are not renewed by our tenants or in the event we exercise our right to replace an existing tenant upon a default; |
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Risks associated with our senior living operating portfolio, such as factors causing volatility in our operating income and earnings generated by our properties, including without limitation national and regional economic conditions, costs of materials, energy, labor and services, employee benefit costs, insurance costs and professional and general liability claims, and the timely delivery of accurate property-level financial results for those properties; |
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The movement of U.S. and Canadian exchange rates; |
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Year-over-year changes in the Consumer Price Index and the effect of those changes on the rent escalators, including the rent escalator for Master Lease 2 with Kindred, and our earnings; |
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Our ability and the ability of our operators, tenants, borrowers and managers to obtain and maintain adequate liability and other insurance from reputable and financially stable providers; |
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The impact of increased operating costs and uninsured professional liability claims on the liquidity, financial condition and results of operations of our operators, tenants, borrowers and managers and the ability of our operators, tenants, borrowers and managers to accurately estimate the magnitude of those claims; |
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The ability and willingness of the lenders under our unsecured revolving credit facilities to fund, in whole or in part, borrowing requests made by us from time to time; |
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The impact of market or issuer events on the liquidity or value of our investments in marketable securities; and |
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The impact of any financial, accounting, legal or regulatory issues that may affect our major tenants, operators or managers. |
Many of these factors, some of which are described in greater detail under Risk Factors in Part I, Item 1A of this Annual Report on Form 10-K, are beyond our control and the control of our management.
Kindred, Brookdale Senior Living and Sunrise Information
Each of Kindred Healthcare, Inc. (together with its subsidiaries, Kindred), Brookdale Senior Living Inc. (together with its subsidiaries, which include Brookdale Living Communities, Inc. (Brookdale) and Alterra Healthcare Corporation (Alterra), Brookdale Senior Living) and Sunrise Senior Living, Inc. (together with its subsidiaries, Sunrise) is subject to the reporting requirements of the Commission and is required to file with the Commission annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Kindred, Brookdale Senior Living and Sunrise contained or referred to in this Annual Report on Form 10-K is derived from filings made by Kindred, Brookdale Senior Living or Sunrise, as the case may be, with the Commission or other publicly available information, or has been provided to us by Kindred, Brookdale Senior Living or Sunrise. We have not verified this information either through an independent investigation or by reviewing Kindreds, Brookdale Senior Livings or Sunrises public filings. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you that all of this information is accurate. Kindreds, Brookdale Senior Livings and Sunrises filings with the Commission can be found at the Commissions website at www.sec.gov. We are providing this data for informational purposes only, and you are encouraged to obtain Kindreds, Brookdale Senior Livings and Sunrises publicly available filings from the Commission.
PART I | ||||
Item 1. | 1 | |||
Item 1A. | 26 | |||
Item 1B. | 39 | |||
Item 2. | 39 | |||
Item 3. | 41 | |||
Item 4. | 41 | |||
PART II | ||||
Item 5. | 41 | |||
Item 6. | 44 | |||
Item 7. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
46 | ||
Item 7A. | 70 | |||
Item 8. | 71 | |||
Item 9. |
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
141 | ||
Item 9A. | 141 | |||
Item 9B. | 141 | |||
PART III | ||||
Item 10. | 141 | |||
Item 11. | 141 | |||
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
141 | ||
Item 13. |
Certain Relationships and Related Transactions, and Director Independence |
142 | ||
Item 14. | 142 | |||
PART IV | ||||
Item 15. | 142 |
ITEM 1. | Business |
BUSINESS
Overview
We are a REIT with a geographically diverse portfolio of seniors housing and healthcare properties in the United States and Canada. As of December 31, 2008, this portfolio consisted of 513 assets: 248 seniors housing communities, 192 skilled nursing facilities, 41 hospitals and 32 medical office buildings (MOBs) and other properties in 43 states and two Canadian provinces. With the exception of our seniors housing communities that are managed by Sunrise pursuant to long-term management agreements and the majority of our MOBs, we lease our properties to healthcare operating companies under triple-net or absolute-net leases, which require the tenants to pay all property-related expenses. We also had real estate loan investments relating to seniors housing and healthcare companies as of December 31, 2008.
We conduct substantially all of our business through our wholly owned subsidiaries, Ventas Realty, Limited Partnership (Ventas Realty), PSLT OP, L.P. and Ventas SSL, Inc., and ElderTrust Operating Limited Partnership (ETOP), in which we own substantially all of the partnership units. Our primary business consists of acquiring, financing and owning seniors housing and healthcare properties and leasing those properties to third parties or operating those properties through independent third party managers.
We were incorporated in Kentucky in 1983, commenced operations in 1985 and reorganized as a Delaware corporation in 1987. We operate through two reportable business segments: triple-net leased properties and senior living operations. See our Consolidated Financial Statements and the related notes, including Note 2Accounting Policies, included in Part II, Item 8 of this Annual Report on Form 10-K.
Our business strategy is comprised of three principal objectives: (1) portfolio diversification; (2) stable earnings and growth; and (3) maintaining a strong balance sheet and liquidity. While current conditions in the capital markets persist, maintaining a strong balance sheet and liquidity will be our primary focus.
Portfolio of Properties and Other Real Estate Investments
As of December 31, 2008, we had a 100% ownership interest in 444 of our properties. Of the remaining 69 properties, we had a 75% to 85% ownership interest in 61 seniors housing communities, with the minority interest in those communities being owned by Sunrise, and we had joint venture ownership interests in eight MOBs ranging from 50% to 99.7%. Our joint venture partners also typically provide management and leasing services for the MOBs.
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The following table provides an overview of our portfolio of properties and other real estate investments as of and for the year ended December 31, 2008:
Portfolio by Type |
# of
Properties |
# of
Beds/Units |
Revenue |
Percent
of Total Revenues |
Real Estate
Investments, at Cost (1) |
Percent of
Real Estate Investments (1) |
Real Estate
Investment Per Bed/Unit |
Number of
Locations (2) |
|||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
Seniors Housing and Healthcare Properties |
|||||||||||||||||||||
Seniors housing communities |
248 | 23,667 | $ | 628,971 | 67.1 | % | $ | 4,761,343 | 76.3 | % | $ | 201.2 | 36 | ||||||||
Skilled nursing facilities |
192 | 23,358 | 172,682 | 18.4 | 825,898 | 13.2 | 35.4 | 28 | |||||||||||||
Hospitals |
41 | 3,815 | 93,836 | 10.0 | 364,589 | 5.9 | 95.6 | 17 | |||||||||||||
MOBs (3) |
22 | | 28,118 | 3.0 | 277,761 | 4.5 | nm | 10 | |||||||||||||
Other properties |
8 | 122 | 950 | 0.1 | 7,133 | 0.1 | 58.5 | 1 | |||||||||||||
Total seniors housing and healthcare properties |
511 | 50,962 | 924,557 | 98.6 | % | $ | 6,236,724 | 100.0 | % | 45 | |||||||||||
Other Real Estate Investments |
|||||||||||||||||||||
Loans and investments |
8,847 | 0.9 | |||||||||||||||||||
$ | 933,404 | 99.5 | %(4) | ||||||||||||||||||
(1) | Includes assets held for sale at December 31, 2008. |
(2) | As of December 31, 2008, our seniors housing and healthcare properties were located in 43 states and two Canadian provinces and were operated or managed by 22 different third-party operators or managers. |
(3) | As of December 31, 2008, nineteen of our MOBs were operated by third-party managers and three were leased under triple-net leases. The table excludes two MOBs that were under development at December 31, 2008. |
(4) | The remainder of our total revenues is interest and other income. Revenues from properties held for sale as of December 31, 2008 are included in this presentation. Revenues from properties sold during 2008 are excluded from this presentation. |
nmnot meaningful.
Seniors Housing and Healthcare Properties
Seniors Housing Communities . Our seniors housing communities include independent and assisted living communities, and communities providing care for individuals with Alzheimers disease and other forms of dementia or memory loss. These communities offer residential units on a month-to-month basis primarily to elderly individuals requiring various levels of assistance. Basic services for residents of these communities include housekeeping, meals in a central dining area and group activities organized by the staff with input from the residents. More extensive care and personal supervision, at additional fees, are also available for such needs as eating, bathing, grooming, transportation, limited therapeutic programs and medication administration, all of which encourage the residents to live as independently as possible according to their abilities. These services are often met by home health providers, close coordination with the residents physician and skilled nursing facilities.
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Skilled Nursing Facilities . Our skilled nursing facilities typically provide nursing care services to the elderly and rehabilitation and restoration services, including physical, occupational and speech therapies, and other medical treatment for patients and residents who do not require the high technology, care-intensive setting of an acute care or rehabilitation hospital.
Hospitals . Substantially all of our hospitals are operated as long-term acute care hospitals, which are hospitals that have a Medicare average length of stay greater than 25 days, that serve medically complex, chronically ill patients who require a high level of monitoring and specialized care, but whose conditions do not necessitate the continued services of an intensive care unit. The operator of these hospitals has the capability to treat patients who suffer from multiple systemic failures or conditions such as neurological disorders, head injuries, brain stem and spinal cord trauma, cerebral vascular accidents, chemical brain injuries, central nervous system disorders, developmental anomalies and cardiopulmonary disorders. Chronic patients are often dependent on technology for continued life support, such as mechanical ventilators, total parenteral nutrition, respiration or cardiac monitors and dialysis machines, and, therefore, due to their severe medical conditions, these patients generally are not clinically appropriate for admission to a nursing facility or rehabilitation hospital. Our hospitals are freestanding facilities, and we do not own any hospitals within hospitals. We also own two rehabilitation hospitals devoted to the rehabilitation of patients with various neurological, musculoskeletal, orthopedic and other medical conditions following stabilization of their acute medical issues.
Medical Office Buildings . Our MOBs offer office space primarily to physicians and other healthcare businesses. While these properties are similar to commercial office buildings, they require more plumbing, electrical and mechanical systems to accommodate multiple physicians offices and examination rooms that may have sinks in every room, brighter lights and specialized medical equipment. MOBs are typically multi-tenant properties leased to multiple healthcare providers (hospitals and physician practices). As of December 31, 2008, we had two MOBs under development that are currently scheduled to open in 2009 or early 2010.
Other Properties . Our other properties consist of personal care facilities, which provide specialized care, including supported living services, neurorehabilitation, neurobehavioral management and vocational programs, for persons with acquired or traumatic brain injury.
Other Real Estate Investments
As of December 31, 2008, we held $112.5 million principal amount of first mortgage debt issued by a national provider of healthcare services, primarily skilled nursing care. We purchased this debt in June 2008 at a discount for $98.8 million, resulting in an effective interest rate to maturity of LIBOR plus 533 basis points. Interest on the loan is payable monthly at an annual rate of LIBOR plus 125 basis points, and the loan matures in January 2012, subject to a one-year extension, at the borrowers option, subject to certain conditions.
As of December 31, 2008, we held a receivable for three outstanding first mortgage loans (the Sunwest Loans) in the aggregate principal amount of $20.0 million. During the third quarter of 2008, the borrowers defaulted on certain of their obligations under the Sunwest Loans, including the monthly payment of principal and interest to us. We recorded a provision for loan losses on the Sunwest Loans of $6.0 million. See Note 8Loans Receivable of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
In December 2008, we sold five assets for $62.5 million, and the buyer issued a $10.0 million note to us as partial payment of the purchase price. The loan is payable in full in December 2011. Principal payments of $40,000 and interest payments at a rate of 8% in year one, 8.25% in year two and 8.5% in year three, are due and payable to us monthly. See Note 8Loans Receivable of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
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Geographic Diversification
Our portfolio of seniors housing and healthcare properties is broadly diversified by geographic location in the United States and Canada, with properties in only two states comprising more than 10% of our 2008 total revenues (including amounts in discontinued operations from properties held for sale at December 31, 2008). The following table shows our rental income and resident fees and services derived by geographic location for our portfolio of properties:
For the Year Ended
December 31, 2008 |
||||||
Rental Income and
Resident Fees and Services |
Percent of Total
Revenues |
|||||
(Dollars in thousands) | ||||||
Geographic Location |
||||||
California |
$ | 119,882 | 12.8 | % | ||
Illinois |
98,597 | 10.5 | ||||
Massachusetts |
54,261 | 5.8 | ||||
Pennsylvania |
52,194 | 5.6 | ||||
New Jersey |
45,992 | 4.9 | ||||
Florida |
36,628 | 3.9 | ||||
Colorado |
35,087 | 3.7 | ||||
New York |
33,819 | 3.6 | ||||
Georgia |
32,785 | 3.5 | ||||
Michigan |
30,000 | 3.2 | ||||
Other (33 states) |
309,834 | 33.1 | ||||
Total U.S. |
849,079 | 90.6 | % | |||
Canada (two Canadian provinces) |
75,478 | 8.0 | ||||
Total |
$ | 924,557 | 98.6 | % (1) | ||
(1) | The remainder of our total revenues is income from loans and investments and interest and other income. Revenues from properties held for sale as of December 31, 2008 are included in this presentation. Revenues from properties sold during 2008 are excluded from this presentation. |
Segment Information
As of December 31, 2008, we operated through two reportable business segments: triple-net leased properties and senior living operations. See Note 19Segment Information of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information about our business segments and the geographic diversification of our portfolio of properties.
Certificates of Need
A majority of our skilled nursing facilities and hospitals are located in states that have certificate of need (CON) requirements. A CON, which is issued by a governmental agency with jurisdiction over healthcare facilities, is at times required for expansion of existing facilities, construction of new facilities, addition of beds, acquisition of major items of equipment or introduction of new services. The CON rules and regulations may restrict our or our operators ability to expand our properties in certain circumstances.
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The following table shows the percentage of our rental income derived by skilled nursing facilities and hospitals in states with and without CON requirements:
For the Year Ended
December 31, 2008 |
|||||||||
Skilled
Nursing Facilities |
Hospitals | Total | |||||||
States with CON requirements |
72.4 | % | 48.4 | % | 64.1 | % | |||
States without CON requirements |
27.6 | 51.6 | 35.9 | ||||||
Total |
100.0 | % | 100.0 | % | 100.0 | % | |||
Significant Tenants and Operators
As of December 31, 2008, approximately 38.5%, 21.9% and 14.7% of our properties, based on the gross book value of real estate investments (including assets held for sale), were managed or operated by Sunrise, Brookdale Senior Living and Kindred, respectively. Approximately 45.4%, 25.5% and 12.8% of our total revenues and 21.9%, 38.0% and 19.2% of our total NOI (net operating income) (including amounts in discontinued operations) for the year ended December 31, 2008 were attributable to senior living operations managed by Sunrise, our master lease agreements with Kindred (the Kindred Master Leases) and our leases with Brookdale Senior Living, respectively. Sunrise became a manager of our properties as a result of our acquisition of the assets of Sunrise Senior Living Real Estate Investment Trust (Sunrise REIT) in April 2007. The Kindred Master Leases originated in our spin off of Kindred in May 1998, pursuant to which we transferred to Kindred our previous hospital, nursing facility and ancillary services businesses and we retained substantially all of the real property which we leased to Kindred. In addition to the lease transaction we entered into with Brookdale Senior Living in 2004, we became party to various lease agreements with Brookdale Senior Living in connection with our acquisition of Provident Senior Living Trust (Provident) in June 2005 and the subsequent combination of Brookdale and Alterra under Brookdale Senior Living.
Triple-Net Leased Properties
Each of our leases with Kindred and Brookdale Senior Living is a triple-net lease pursuant to which the tenant is required to pay all taxes, utilities and maintenance and repairs related to the properties and to maintain and pay all insurance covering the properties and their operations. In addition, the tenants are required to comply with the terms of the mortgage financing documents, if any, affecting the properties.
Because we lease a substantial portion of our triple-net leased properties to Kindred and Brookdale Senior Living and they are each a significant source of our total revenues, their financial condition and ability and willingness to satisfy their obligations under their respective leases and certain other agreements with us and their willingness to renew those leases upon expiration of the initial base terms thereof will significantly impact our revenues and our ability to service our indebtedness and to make distributions to our stockholders. We cannot assure you that Kindred or Brookdale Senior Living will have sufficient assets, income and access to financing to enable it to satisfy its obligations under its respective leases and other agreements with us, and any inability or unwillingness on its part to do so would have a material adverse effect on our business, financial condition, results of operations and liquidity, on our ability to service our indebtedness and other obligations and on our ability to make distributions to our stockholders, as required for us to continue to qualify as a REIT (a Material Adverse Effect). We also cannot assure you that Kindred and/or Brookdale Senior Living will elect to renew their respective leases with us upon expiration of the initial base terms or any renewal terms thereof or that, if such leases are not renewed, that we can reposition the affected properties on the same or better terms. See Risks FactorsRisks Arising from Our BusinessWe depend on Kindred and Brookdale Senior Living for a significant portion of our revenues and operating income; Any inability or unwillingness by Kindred or Brookdale Senior Living to satisfy its obligations under its agreements with us could have a Material Adverse Effect on us included in Item 1A of this Annual Report on Form 10-K.
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Kindred Master Leases . Under each Kindred Master Lease, the aggregate annual rent is referred to as Base Rent (as defined in the applicable Kindred Master Lease). Base Rent escalates on May 1 of each year at a specified rate over the Prior Period Base Rent (as defined in the applicable Kindred Master Lease) contingent upon the satisfaction of specified facility revenue parameters. The annual rent escalator is 2.7% under Kindred Master Leases 1, 3 and 4, and is based on year-over-year changes in the Consumer Price Index, with a floor of 2.25% and a ceiling of 4%, under Kindred Master Lease 2. Assuming the specified revenue parameters are met, Base Rent due under the Kindred Master Leases will be approximately $248.0 million from May 1, 2009 to April 30, 2010. See Note 3Revenues from Properties of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
The properties leased to Kindred pursuant to the Kindred Master Leases are grouped into bundles, with each bundle containing a varying number of properties. All properties within a bundle have primary terms ranging from ten to fifteen years from May 1, 1998 and, provided certain conditions are satisfied, are subject to three five-year renewal terms. Kindred has renewed, through April 30, 2013, its leases covering all 57 assets owned by us whose initial base term expired on April 30, 2008. The term for each of ten bundles will expire on April 30, 2010 unless Kindred provides us with a renewal notice with respect to such individual bundle, on or before April 30, 2009. The ten bundles expiring in 2010 contain an aggregate of 109 properties currently representing $123.9 million of annual Base Rent. Each bundle covers six to 20 assets, including at least one hospital. Kindred is required to continue to perform all of its obligations under the applicable lease for any assets that are not renewed until expiration of the term on April 30, 2010, including without limitation, payment of all rental amounts. For any assets that are not renewed, we will have at least one year to arrange for the repositioning of such assets with new operators. We own or have the rights to all licenses and CONs at the properties, and Kindred has extensive and detailed obligations to cooperate and ensure an orderly transition of the properties to another operator. We cannot assure you that we would be successful in identifying suitable replacement operators or that we will be able to enter into leases with new tenants or operators on terms as favorable to us as our current leases, if at all. See Risk FactorsRisks Arising from Our BusinessWe may be unable to reposition our properties on as favorable terms, or at all, if we have to replace any of our tenants or operators, and we may be subject to delays, limitations and expenses in repositioning our assets included in Item 1A of this Annual Report on Form 10-K.
Brookdale Senior Living Leases . Our leases with Brookdale have primary terms of fifteen years, commencing either January 28, 2004 (in the case of fifteen Grand Court properties we acquired in early 2004) or October 19, 2004 (in the case of the properties we acquired in connection with the Provident acquisition), and, provided certain conditions are satisfied, are subject to two ten-year renewal terms. Our leases with Alterra also have primary terms of fifteen years, commencing either October 20, 2004 or December 16, 2004 (both in the case of properties we acquired in connection with the Provident acquisition), and, provided certain conditions are satisfied, are subject to two five-year renewal terms. Brookdale Senior Living guarantees all obligations under these leases, and all of our Brookdale Senior Living leases are cross-defaulted.
Under the terms of the Brookdale leases assumed in connection with the Provident acquisition, Brookdale is obligated to pay base rent, which escalates on January 1 of each year, by an amount equal to the lesser of (i) four times the percentage increase in the Consumer Price Index during the immediately preceding year or (ii) 3%. Under the terms of the Brookdale leases with respect to our Grand Court properties, Brookdale is obligated to pay base rent, which escalates on February 1 of each year, by an amount equal to the greater of (i) 2% or (ii) 75% of the increase in the Consumer Price Index during the immediately preceding year. Under the terms of the Alterra leases, Alterra is obligated to pay base rent, which escalates either on January 1 or November 1 of each year by an amount equal to the lesser of (i) four times the percentage increase in the Consumer Price Index during the immediately preceding year or (ii) 2.5%. The aggregate annual contractual cash base rent expected from Brookdale Senior Living for 2009 is approximately $110.1 million, excluding variable interest Brookdale is obligated to pay as additional rent based on certain floating rate mortgage debt assumed by us during the Provident acquisition. The aggregate annual contractual GAAP rent (computed in accordance with U.S. generally accepted accounting principles (GAAP)), excluding the variable interest, expected from Brookdale Senior Living for 2009 is approximately $120.4 million. See Note 3Revenues from Properties and
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Note 13Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Senior Living Operations
We are party to management agreements with Sunrise pursuant to which Sunrise currently provides comprehensive accounting and property management services with respect to 79 of our seniors housing communities. Each management agreement has a term of 30 years from its effective date, the earliest of which began in 2004. See Note 3Revenues from Properties of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Although we have various rights as owner under the Sunrise management agreements, we rely on Sunrises personnel, good faith, expertise, historical performance, technical resources and information systems, proprietary information and judgment to manage our seniors housing communities efficiently and effectively. We also rely on Sunrise to set resident fees and otherwise operate those properties in compliance with our management agreements. Because a significant portion of our properties are managed by Sunrise, its inability to efficiently and effectively manage those properties and to provide timely and accurate accounting information with respect thereto could have a Material Adverse Effect on us. In addition, Sunrises inability or unwillingness to satisfy its obligations under our management agreements, a change in Sunrises senior management or any adverse developments in Sunrises business and affairs or financial condition could have a Material Adverse Effect on us. See Risk FactorsRisks Arising from Our BusinessThe properties managed by Sunrise account for a significant portion of our revenues and operating income; Adverse developments in Sunrises business and affairs or financial condition could have a Material Adverse Effect on us included in Item 1A of this Annual Report on Form 10-K.
Competition
We compete for real property investments with healthcare providers, other healthcare REITs, healthcare lenders, real estate partnerships, banks, insurance companies, private equity and other investors. Some of our competitors are significantly larger and have greater financial resources and lower costs of capital than we do. Increased competition makes it more challenging for us to identify and successfully capitalize on opportunities that meet our objectives. As a result, our ability to compete successfully for real property investments is impacted by numerous factors, including the availability of suitable acquisition or investment targets, our ability to negotiate acceptable terms for any such acquisition and the availability and cost of capital to us. See Risk FactorsRisks Arising from Our BusinessWe may encounter certain risks when implementing our business strategy to pursue investments in, and/or acquisitions or development of, additional seniors housing and/or healthcare assets included in Item 1A of this Annual Report on Form 10-K and Note 9Borrowing Arrangements of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Revenues from our properties are dependent on the ability of our operators and managers to compete with other seniors housing and healthcare operators and managers. These operators and managers compete on a local and regional basis for residents and patients at our properties on a number of different levels. Their ability to successfully attract and retain residents and patients depends upon several factors, including the scope and quality of services provided, the ability to attract and retain qualified personnel, the operational reputation of the operator or manager, physician referral patterns, physical appearance of the properties, other competitive systems of healthcare delivery within the community, population and demographics, and the financial condition of the operator or manager. Private, federal and state reimbursement programs and the effect of other laws and regulations also may have a significant impact on our operators and managers ability to compete successfully for residents and patients at the properties. See Risk FactorsRisks Arising from Our BusinessOur tenants, managers and operators may be adversely affected by increasing healthcare regulation and enforcement and Changes in the reimbursement rates or methods of payment from third-party payors, including the Medicare
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and Medicaid programs, could have a material adverse effect on certain of our tenants and operators included in Item 1A of this Annual Report on Form 10-K.
Employees
As of December 31, 2008, we had 63 full-time employees, none of whom are subject to a collective bargaining agreement. We consider the relationship with our employees to be good.
Insurance
We maintain and/or require in our existing leases and other agreements that our tenants, managers and operators maintain all applicable lines of insurance on our properties and their operations. For example, under the Kindred Master Leases, Kindred is required to maintain, at its expense, certain insurance coverage related to the properties under the Kindred Master Leases and Kindreds operations at those properties. We believe that our tenants, managers and operators are in substantial compliance with the insurance requirements contained in their respective leases and other agreements with us. However, we cannot assure you that Kindred or our other tenants, managers and operators will maintain such insurance, and any failure by them to do so could have a Material Adverse Effect on us. General and professional liability and casualty insurance covering our properties managed by Sunrise and the related operations is currently maintained by Sunrise in accordance with the standards contained in our management agreements. However, we may elect, on an annual basis, to opt in or out of the Sunrise insurance program. If for any reason we chose to opt out of the Sunrise insurance program, we would maintain general and professional liability and casualty insurance for our Sunrise-managed properties in accordance with the standards contained in the management agreements. The costs of the insurance program covering our Sunrise-managed properties are facility expenses paid from the revenues of these properties, regardless of who maintains the insurance.
We believe that the amount and scope of insurance coverage provided by our policies and the policies maintained by our tenants, managers and operators are customary for similarly situated companies in our industry. We cannot assure you that in the future such insurance will be available at a reasonable cost or that we or our tenants, managers and operators will be able to maintain adequate levels of insurance coverage. In addition, we cannot give any assurances as to the future financial viability of our insurers or that the insurance coverage provided will fully cover all losses on our properties upon the occurrence of a catastrophic event.
Due to historically high frequency and severity of professional liability claims against healthcare providers, the availability of professional liability insurance is limited and the premiums for such coverage remain very high. In addition, many healthcare providers are pursuing different organizational and corporate structures coupled with self-insurance programs that provide less insurance coverage. As a result, the tenants, managers and operators of our properties could incur large funded and unfunded professional liability expense, which could have a material adverse effect on their liquidity, financial condition and results of operations, and which, in turn, could affect adversely their ability to make rental payments under, or otherwise comply with the terms of, their leases with us or, with regard to our Sunrise-managed properties, adversely affect our results of operations. We cannot assure you that our tenants, managers and operators will continue to carry the insurance coverage required under the terms of their leases and other agreements with us or that we will continue to require the same levels of insurance under those leases and agreements.
Additional Information
We maintain a website at www.ventasreit.com. The information on our website is not incorporated by reference in this Annual Report on Form 10-K, and our web address is included as an inactive textual reference only.
We make available, free of charge, through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished
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pursuant to Section 13 or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Commission. In addition, our Guidelines on Governance, the charters for each of our Audit and Compliance, Nominating and Governance and Executive Compensation Committees and our Code of Ethics and Business Conduct are available on our website, and we will mail copies of the foregoing documents to stockholders, free of charge, upon request to Corporate Secretary, Ventas, Inc., 10350 Ormsby Park Place, Suite 300, Louisville, Kentucky 40223.
GOVERNMENTAL REGULATION
Healthcare Regulation
Overview
Seniors housing communities are subject to relatively few, if any, federal regulations. Instead, to the extent they are regulated, the regulation is conducted mainly by state and local laws governing licensure, provision of services, staffing requirements and other operational matters. These laws vary greatly from one jurisdiction to another. Although recent growth in the U.S. seniors housing industry has attracted the attention of various federal agencies which believe there should be more federal regulation of these properties, thus far, Congress has deferred to state regulation of seniors housing communities. However, as a result of this growth and increased federal scrutiny, some states have revised and strengthened their regulation of seniors housing communities, and more are expected to do the same in the future.
In contrast, skilled nursing facilities, hospitals and other healthcare facilities are subject to extensive and extremely complex federal, state and local laws and regulations relating to, among other things, licensure, conduct of operations, ownership and addition of facilities, provision of services, rate setting and billing, reimbursement, and confidentiality and security of health-related information. These laws authorize periodic inspections and investigations and identification of deficiencies that, if not corrected, can result in sanctions such as suspension or loss of licensure to operate and loss of rights to participate in government-funded healthcare programs. Regulatory agencies have substantial powers to affect the actions of the operators of these properties if they believe that there is an imminent threat to patient welfare, and, in some states, these powers can include assumption of interim control over facilities through receiverships.
While different properties within our portfolio may be more likely subject to certain types of regulation, we expect that the healthcare industry, in general, will continue to face increased regulation and pressure in the areas of fraud, waste and abuse, cost control, healthcare management and provision of services, among others. A significant expansion of applicable federal, state or local laws and regulations, new interpretations of existing laws and regulations or changes in enforcement priorities could have a material adverse effect on certain of our operators liquidity, financial condition and results of operations, which, in turn, could adversely impact their ability to make rental payments under, or otherwise comply with the terms of, their leases with us. In addition, efforts by third-party payors, such as the federal Medicare program, state Medicaid programs and private insurance carriers, including health maintenance organizations and other health plans, to impose greater discounts and more stringent cost controls upon operators (through changes in reimbursement rates and methodologies, discounted fee structures, the assumption by healthcare providers of all or a portion of the financial risk or otherwise) are expected to intensify and continue. Significant limits on the scope of services reimbursed and on reimbursement rates and fees could also have a material adverse effect on certain of our operators liquidity, financial condition and results of operations, which could affect adversely their ability to make rental payments under, and otherwise comply with the terms of, their leases with us.
Licensure and Certification
Participation in the Medicare and Medicaid programs generally requires the operators of our skilled nursing facilities to be licensed on an annual or bi-annual basis and certified annually through various regulatory agencies which determine compliance with federal, state and local laws. These legal requirements relate to the quality of
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the nursing care provided, qualifications of the administrative personnel and nursing staff, the adequacy of the physical plant and equipment and continuing compliance with the laws and regulations governing the operation of skilled nursing facilities. The failure of an operator to maintain or renew any required license or regulatory approval or to correct serious deficiencies identified in compliance surveys could prevent it from continuing operations at a property. A loss of licensure or certification could also adversely affect a skilled nursing facility operators ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely impact the operators ability to make rental payments under its leases with us.
Similarly, in order to receive Medicare and Medicaid reimbursement, our hospitals must meet the applicable conditions of participation set forth by the U.S. Department of Health and Human Services (HHS) relating to the type of hospital and its equipment, personnel and standard of medical care, as well as comply with state and local laws and regulations. Hospitals undergo periodic on-site licensure surveys, which generally are limited if the hospital is accredited by The Joint Commission (formerly the Joint Commission on Accreditation of Healthcare Organizations) or other recognized accreditation organizations. A loss of licensure or certification could adversely affect a hospitals ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely impact the operators ability to make rental payments under its leases with us.
Certificates of Need
Skilled nursing facilities and hospitals are subject to various state CON laws requiring governmental approval prior to the development or expansion of healthcare facilities and services. The approval process in these states generally requires a facility to demonstrate the need for additional or expanded healthcare facilities or services. CONs, where applicable, are sometimes necessary for expansion of existing facilities, construction of new facilities, changes in ownership or control of licensed facilities, addition of beds, investment in major capital equipment, introduction of new services or termination of services previously approved through the CON process. Over the last several years, in response to mounting Medicaid budget deficits, many states have begun to tighten CON controls, including through the imposition of moratoriums on new skilled nursing facilities and hospitals. Some states have also increased controls over licensing and change-of-ownership rules.
These CON laws and regulations may restrict an operators ability to expand our properties and grow its business in certain circumstances, which could have an effect on the operators revenues and, in turn, adversely impact us. In addition, in the event that any operator of our properties fails to make rental payments to us or to comply with applicable healthcare regulations, our ability to evict that operator and substitute another operator for a particular facility may be materially delayed or limited by CON laws, as well as by various state licensing and receivership laws and Medicare and Medicaid change-of-ownership rules. Such delays and limitations could have a material adverse effect on our ability to collect rent, to obtain possession of leased properties, or otherwise to exercise remedies for tenant default. We may also incur substantial additional expenses in connection with any such licensing, receivership or change-of-ownership proceedings.
Fraud and Abuse
Various federal and state laws and regulations prohibit a wide variety of fraud and abuse by healthcare providers who participate in, receive payments from or make or receive referrals for work in connection with government-funded healthcare programs, including Medicare and Medicaid. The federal laws include:
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The anti-kickback statute (Section 1128B(b) of the Social Security Act), which prohibits certain business practices and relationships that might affect the provision and cost of healthcare services reimbursable under Medicare, Medicaid and other federal healthcare programs, including the payment or receipt of remuneration for the referral of patients whose care will be paid by Medicare or other governmental programs; |
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The physician self-referral prohibition (Ethics in Patient Referral Act of 1989, commonly referred to as the Stark Law), which prohibits referrals by physicians of Medicare patients to providers of a broad |
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range of designated healthcare services with which the physicians (or their immediate family members) or Medicaid have ownership interests or certain other financial arrangements; |
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The False Claims Act, which prohibits any person from knowingly presenting false or fraudulent claims for payment to the federal government (including the Medicare and Medicaid programs); |
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The Civil Monetary Penalties Law, which authorizes HHS to impose civil penalties administratively for fraudulent acts; and |
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The Health Insurance Portability and Accountability Act of 1996 (commonly referred to as HIPAA), which among other things, protects the privacy and security of individually identifiable health information by limiting its use and disclosure. |
Sanctions for violating these federal laws include criminal and civil penalties that range from punitive sanctions, damage assessments, monetary penalties, imprisonment, denial of Medicare and Medicaid payments, and/or exclusion from the Medicare and Medicaid programs. These laws also impose an affirmative duty on operators to ensure that they do not employ or contract with persons excluded from the Medicare and other government programs.
Many states have adopted or are considering legislative proposals similar to the federal anti-fraud and abuse laws, some of which extend beyond the Medicare and Medicaid programs to prohibit the payment or receipt of remuneration for the referral of patients and physician self-referrals, regardless of whether the service was reimbursed by Medicare or Medicaid. Many states have also adopted or are considering legislative proposals to increase patient protections, such as minimum staffing levels, criminal background checks, and limiting the use and disclosure of patient specific health information. These state laws also impose criminal and civil penalties similar to the federal laws.
In the ordinary course of their business, the operators of our properties have been and are subject regularly to inquiries, investigations and audits by federal and state agencies that oversee these laws and regulations. Increased funding through recent federal and state legislation has led to significant growth in the number of investigations and enforcement actions over the past several years. Private enforcement of healthcare fraud has also increased, due in large part to amendments to the civil False Claims Act in 1986 that were designed to encourage private individuals to sue on behalf of the government. These whistleblower suits by private individuals, known as qui tam suits, may be filed by almost anyone, including present and former patients or nurses and other employees. HIPAA also created a series of new healthcare crimes.
As federal and state budget pressures continue, administrative agencies may continue to escalate their investigation and enforcement efforts to eliminate waste and to control fraud and abuse in governmental healthcare programs. A violation of any of these federal and state anti-fraud and abuse laws and regulations by an operator of our properties could have a material adverse effect on the operators liquidity, financial condition or results of operations, which could affect adversely its ability to make rental payments under, or otherwise comply with the terms of, its leases with us.
Healthcare Reform
Healthcare is one of the largest industries in the United States and continues to attract a great deal of legislative interest and public attention. In an effort to reduce federal spending on healthcare, the federal government enacted the Balanced Budget Act of 1997 (BBA), which fundamentally altered payment methodologies for the Medicare and Medicaid programs, resulting in substantial, and in some cases drastic, Medicare reimbursement reductions for healthcare providers. The BBA also afforded states greater flexibility in administering their Medicaid programs, including the ability to shift most Medicaid enrollees into managed care plans without first obtaining a federal waiver.
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To lessen the negative financial impact from implementation of the BBA, the federal government subsequently passed the following key statutes and regulations:
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The Balanced Budget Refinement Act of 1999 (BBRA); |
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The Medicare, Medicaid, and State Child Health Insurance Program Benefits Improvement and Protection Act of 2000 (BIPA); |
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The one-time administrative fix to increase skilled nursing facility payment rates by 3.26%, instituted by the Centers for Medicare & Medicaid Services (CMS), which began on October 1, 2003; |
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The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Modernization Act, sometimes referred to as the Drug Bill); |
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The Deficit Reduction Act of 2005 (Pub. L No. 109-171) (DRA); and |
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The Tax Relief and Health Care Act of 2006 (Pub. L. No. 109-432). |
The Medicare and Medicaid programs, including payment levels and methods, continue to evolve and are less predictable following the enactment of the BBA, notwithstanding these reform activities. We cannot assure you that future healthcare legislation or changes in the administration or implementation of governmental healthcare reimbursement programs will not have a material adverse effect on our operators liquidity, financial condition or results of operations, which could adversely affect their ability to make rental payments to, or otherwise comply with the terms of, their leases with us and which, in turn, could have a Material Adverse Effect on us.
Medicare Reimbursement; Long-Term Acute Care Hospitals
The BBA mandated the creation of a prospective payment system for long-term acute care hospitals (LTAC PPS), which became effective on October 1, 2002 for cost reporting periods commencing on or after that date. Under LTAC PPS, which classifies patients into distinct diagnostic groups based on clinical characteristics and expected resource needs, long-term acute care hospitals are reimbursed on a predetermined rate, rather than on a reasonable cost basis that reflects costs incurred. LTAC PPS requires payment for a Medicare beneficiary at a predetermined, per discharge amount for each defined patient category (called Long-Term CareDiagnosis Related Groups or LTC-DRGs), adjusted for differences in area wage levels.
Updates to LTAC PPS payment rates are established by regulators and published annually for the long-term acute care hospital rate year, which historically has been July 1 through June 30. However, effective for the 2010 rate year, as more fully explained below, annual rate updates will coincide with annual updates to the LTC-DRG classification system, which correspond to the federal fiscal year (October 1 through September 30).
On December 29, 2007, President Bush signed into law the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. No. 110-173) (the Medicare Extension Act). Section 114 of the Medicare Extension Act was intended to implement the recommendations of the Medicare Payment Advisory Commission (MedPAC), an independent agency established by the BBA to advise Congress on issues affecting the Medicare program, to better define long-term acute care hospitals and the patients they treat by using better patient and facility-level criteria. Long-term acute care hospitals must institute a patient review process to better assess patients upon admission and on a continuing basis for appropriateness of care, and, as a result of the Medicare Extension Act, CMS medical necessity reviews for long-term acute care hospitals will be significantly expanded. Section 114 of the Medicare Extension Act, among other things, also provided the following relief from recent long-term acute care hospital payment policy changes:
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It prevents CMS from applying the 25-percent rule, which limits payments from referring co-located hospitals, to freestanding and grandfathered long-term acute care hospitals for three years; |
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It modifies the application of the 25-percent rule to certain urban and rural long-term acute care hospitals-within-hospitals and satellite facilities for three years; |
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It prevents CMS from applying the very short stay outlier policy for three years; and |
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It prevents CMS from making any one-time adjustments to correct estimates used in implementing LTAC PPS for three years. |
Lastly, the Medicare Extension Act placed a partial-year freeze on long-term acute care hospital rates in the fourth quarter of fiscal year 2008 (April 1, 2008 through June 30, 2008) and introduced a moratorium on new long-term acute care hospitals and beds for three years.
On May 9, 2008, CMS published its final rule updating LTAC PPS payment rates for the 2009 rate year (July 1, 2008 through September 30, 2009). The final rule increased the standard federal payment rate for long-term acute care hospitals by 2.7% from the 2008 rate established by Congress in the Medicare Extension Act. The final rule included a 3.6% increase in the hospital market basket index, less a 0.9% adjustment to offset recent coding behavioral changes. The final rule also changed the annual rate update to October 1 (effective for the 2010 rate year) to coincide with the annual update to the severity-adjusted diagnosis-related group (MS-DRG) classifications and weights. CMS estimates that payments to long-term acute care hospitals under the final rule will increase by approximately $110 million in the first twelve months of the 2009 extended fifteen-month rate year.
On May 22, 2008, CMS published a final rule addressing two LTAC PPS payment policies mandated by the Medicare Extension Act. The rule delays the extension of the 25-percent rule to freestanding and grandfathered long-term acute care hospitals and increases the patient percentage thresholds for certain urban and rural long-term acute care hospitals-within-hospitals and satellite facilities for three years. The rule also sets forth policies on implementing the moratorium on new long-term acute care hospitals and beds imposed by the Medicare Extension Act.
On August 19, 2008, CMS published its final rule updating the inpatient prospective payment system (IPPS) for short-term and long-term acute care hospitals for the 2009 federal fiscal year (October 1, 2008 through September 30, 2009). On October 3, 2008, CMS published corrections to the final rule to implement changes required by Section 124 of the Medicare Improvements for Patients & Providers Act of 2008 (Pub. L. No. 110-275) (MIPPA). The final rule, as corrected, continues reforms intended to improve the accuracy of Medicare payments for inpatient acute care through the MS-DRG classifications and weights for short-term acute care hospitals and the severity-adjusted diagnosis-related group (MS-LTC-DRG) classification system for long-term acute care hospitals. CMS projects that aggregate annual spending under both classification systems will not change as a result of the reforms. However, CMS expects that payments would increase for hospitals serving more severely ill patients and decrease for hospitals serving patients who are less severely ill.
MedPAC has recommended increasing Medicare rates for long term acute care hospitals by 1.6% for fiscal year 2010. However, we cannot assure you that future updates to LTAC PPS, LTC-DRGs or Medicare reimbursement for long-term acute care hospitals will not materially adversely affect our operators, which, in turn, could have a Material Adverse Effect on us. See Risk FactorsRisks Arising from Our BusinessChanges in the reimbursement rates or methods of payment from third-party payors, including the Medicare and Medicaid programs, could have a material adverse effect on certain of our tenants and operators included in Item 1A of this Annual Report on Form 10-K.
Medicare Reimbursement; Skilled Nursing Facilities
The BBA also mandated the creation of a prospective payment system for skilled nursing facilities (SNF PPS) offering Part A covered services. Under SNF PPS, payment amounts are based upon classifications determined through assessments of individual Medicare patients in the skilled nursing facility, rather than on the facilitys reasonable costs. SNF PPS payments are made on a per diem basis for each resident and are generally
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intended to cover all inpatient services for Medicare patients, including routine nursing care, most capital-related costs associated with the inpatient stay, and ancillary services, such as respiratory therapy, occupational and physical therapy, speech therapy and certain covered drugs.
In response to widespread healthcare industry concern about the reductions in payments under the BBA, the federal government enacted the BBRA in 1999. The BBRA increased the per diem reimbursement rates for certain high acuity patients by 20% from April 1, 2000 until case mix refinements were implemented by CMS, as explained below. The BBRA also imposed a two-year moratorium on the annual cap mandated by the BBA on physical, occupational and speech therapy services provided to a patient by outpatient rehabilitation therapy providers, including Part B covered therapy services in nursing facilities. That moratorium was subsequently extended until December 31, 2005 pursuant to the Medicare Modernization Act, and, on January 1, 2006, the therapy limitations went into effect until the DRA was enacted. The DRA, signed into law on February 8, 2006, retroactively established an exception process for the payment of all claims above the therapy limits when such services are deemed medically necessary. The DRA process for obtaining relief from the therapy caps was extended through December 31, 2007 by the Tax Relief and Health Care Act of 2006 and further extended through June 30, 2008 by Section 105 of the Medicare Extension Act. On July 15, 2008, Congress passed the MIPPA, which, among other things, granted an eighteen-month extension of the Medicare Part B outpatient therapy cap exceptions process that had expired on June 30, 2008.
Pursuant to its final rule updating SNF PPS for the 2006 federal fiscal year, CMS refined the resource utilization groups (RUGs) used to determine the daily payment for beneficiaries in skilled nursing facilities by adding nine new payment categories. The result of this refinement, which became effective on January 1, 2006, was to eliminate the temporary add-on payments that Congress enacted as part of the BBRA.
Under its final rule updating LTC-DRGs for the 2007 federal fiscal year, CMS reduced reimbursement of uncollectible Medicare coinsurance amounts for all beneficiaries (other than beneficiaries of both Medicare and Medicaid) from 100% to 70% for skilled nursing facility cost reporting periods beginning on or after October 1, 2005. CMS estimated that this change in treatment of bad debt would result in a decrease in payments to skilled nursing facilities of $490 million over the five-year period from federal fiscal year 2006 to 2010. The rule also included various options for classifying and weighting patients transferred to a skilled nursing facility after a hospital stay less than the mean length of stay associated with that particular diagnosis-related group.
On August 8, 2008, CMS published its final rule updating SNF PPS payment rates for the 2009 federal fiscal year (October 1, 2008 through September 30, 2009). The final rule, among other things, updates the Medicare payment rate to skilled nursing facilities for the 2009 federal fiscal year by increasing the market basket by 3.4%. The final rule also delays a proposed recalibration of the case-mix indices for the resource utilization groups (RUGs) used to determine the daily payment for beneficiaries in skilled nursing facilities. The proposed recalibration was intended to revise the RUG payment rates to more accurately reflect the needs of patients and would have reduced payments to skilled nursing facilities by an estimated 3.3% in federal fiscal year 2009. CMS has indicated it will continue to evaluate the underlying data carefully for possible future adjustments. CMS estimates that, as a result of the market basket increase, payments to skilled nursing facilities will increase by $780 million in fiscal year 2009.
MedPAC has recommended stable Medicare rates for skilled nursing facilities for fiscal year 2010. We cannot assure you that future updates to SNF PPS, therapy services or Medicare reimbursement for skilled nursing facilities will not materially adversely impact our operators, which, in turn, could have a Material Adverse Effect on us. See Risk FactorsRisks Arising from Our BusinessChanges in the reimbursement rates or methods of payment from third-party payors, including the Medicare and Medicaid programs, could have a material adverse effect on certain of our tenants and operators included in Item 1A of this Annual Report on Form 10-K.
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Medicaid Reimbursement; Skilled Nursing Facilities
Approximately two-thirds of all nursing home residents are dependent on Medicaid. Medicaid reimbursement rates, however, typically are less than the amounts charged by the operators of our skilled nursing facilities. Although the federal government and the states share responsibility for financing Medicaid, states have a wide range of discretion, within certain federal guidelines, to determine eligibility and reimbursement methodology. In addition, federal legislation limits an operators ability to withdraw from the Medicaid program by restricting the eviction or transfer of Medicaid residents. For the last several years, many states have announced actual or potential budget shortfalls. As a result of these shortfalls, many states are attempting to slow the rate of growth in Medicaid expenditures by implementing freezes or cuts in Medicaid rates paid to providers, including hospitals and skilled nursing facilities, or by restricting eligibility and benefits.
In the DRA, Congress made changes to the Medicaid program that were estimated to result in $10 billion in savings to the federal government over the five years following enactment of the legislation, primarily through the accounting practices some states use to calculate their matched payments and revising the qualifications for individuals who are eligible for Medicaid benefits. The changes made by CMSs final rule updating SNF PPS for the 2006 federal fiscal year were also anticipated to reduce Medicaid payments to skilled nursing facility operators. In addition, as part of the Tax Relief and Health Care Act of 2006, Congress reduced the ceiling on taxes that states may impose on healthcare providers and which would qualify for federal financial participation under Medicaid by 0.5%, from 6% to 5.5%. Nationally, it was anticipated that this reduction should have a negligible effect, affecting only those states with taxes in excess of 5.5%. We have not ascertained the impact of this reduction on our skilled nursing facility operators.
Reimbursement methodologies continue to evolve. At this time, we cannot predict whether significant Medicaid rate freezes or cuts or other program changes will be adopted and if so, by how many states or whether the U.S. government will revoke, reduce or stop approving provider taxes that have the effect of increasing Medicaid payments to the states, or the impact of such actions on our operators. We also cannot assure you that payments under Medicaid are currently, or will be in the future, sufficient to fully reimburse our operators for the cost of providing skilled nursing services. Severe and widespread Medicaid rate cuts or freezes could have a material adverse effect on our skilled nursing facility operators, which, in turn, could have a Material Adverse Effect on us.
Recent Developments
On February 17, 2009, the President signed into law the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5) (the Recovery Act). The Recovery Act appropriates additional funds for health care improvement, expansion, and research. The Recovery Act, for example, temporarily increases federal payments to state Medicaid programs by $86.6 billion by, among other things, increasing the federal share of Medicaid payments to the states by 6.2% across the board, with additional funds available depending on a States rate. The Recovery Act requires states to promptly pay nursing facilities under their Medicaid program, and precludes states, as a condition of receiving the additional funding, from heightening their Medicaid eligibility requirements. The additional federal payments to state Medicaid programs under the Recovery Act may have a positive impact on our skilled nursing facility operators, although the precise impact and when it will occur, and whether it will in fact be positive, cannot be ascertained at this time.
The Presidents Budget, released on February 26, 2009, proposed certain adjustments to Medicaid, Medicare and Medicare Advantage Plans, which may or may not affect the operating income of the operators of our healthcare properties. The impact of these adjustments, if any, has not been determined.
Nursing Home Quality Initiative
In 2002, HHS launched the Nursing Home Quality Initiative program. This program, which is designed to provide consumers with comparative information about nursing home quality measures, rates nursing homes on
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various quality of care indicators. Since 2002, investigative and enforcement activities regarding nursing home quality compliance has intensified both on the federal and state administrative levels.
If the operators of certain of our properties are unable to achieve quality of care ratings that are comparable or superior to those of their competitors, patients may choose alternate facilities, which could cause operating revenues to decline. In the event the financial condition or operating revenues of these operators are adversely affected, the operators ability to make rental payments to us could be adversely affected, which, in turn, could have a Material Adverse Effect on us.
Environmental Regulation
As an owner of real property, we are subject to various federal, state and local laws and regulations regarding environmental, health and safety matters. These laws and regulations address, among other things, asbestos, polychlorinated biphenyls, fuel oil management, wastewater discharges, air emissions, radioactive materials, medical wastes, and hazardous wastes. In certain cases, the costs of complying with these laws and regulations and the penalties for non-compliance can be substantial. For example, although we do not generally operate or manage our properties, we may be held primarily or jointly and severally liable for costs relating to the investigation and clean-up of any property from which there is or has been a release or threatened release of a regulated material and any other affected properties, regardless of whether we knew of or caused the release. In addition to these costs, which are typically not limited by law or regulation and could exceed the propertys value, we could be liable for certain other costs, including governmental fines and injuries to persons, property or natural resources. See Risk FactorsRisks Arising from Our BusinessIf any of our properties are found to be contaminated, or if we become involved in any environmental disputes, we could incur substantial liabilities and costs included in Item 1A of this Annual Report on Form 10-K.
We are generally indemnified by the current operators of our properties for contamination caused by those operators. For example, under the Kindred Master Leases, Kindred has agreed to indemnify us against any environmental claims (including penalties and clean-up costs) resulting from any condition arising in, on or under, or relating to, the leased properties at any time on or after the lease commencement date for the applicable leased property and from any condition permitted to deteriorate on or after such date (including as a result of migration from adjacent properties not owned or operated by us or any of our affiliates other than Kindred and its direct affiliates). However, we cannot assure you that Kindred or another operator will have the financial capability or the willingness to satisfy any such environmental claims, and in the event Kindred or another operator is unable or unwilling to do so, we may be required to satisfy the claims. See Risk FactorsRisks Arising from Our BusinessWe depend on Kindred and Brookdale Senior Living for a significant portion of our revenues and operating income; Any inability or unwillingness by Kindred or Brookdale Senior Living or to satisfy its obligations under its agreements with us could have a Material Adverse Effect on us included in Item 1A of this Annual Report on Form 10-K.
We have also generally agreed to indemnify certain of our operators against any environmental claims (including penalties and clean-up costs) resulting from any condition arising in, on or under, or relating to, the leased properties at any time before the lease commencement date for the applicable leased property. We have agreed to indemnify Sunrise against any environmental claims (including penalties and clean-up costs) resulting from any conditions on our properties managed by Sunrise, unless Sunrise caused or contributed to those conditions.
We did not make any material capital expenditures in connection with environmental, health, and safety laws, ordinances and regulations in 2008 and do not expect that we will have to make any such material capital expenditures during 2009.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
This section summarizes certain U.S. federal income tax considerations that you may consider relevant as a holder of our common stock. It is not tax advice. The discussion does not address all aspects of taxation that may be relevant to particular stockholders in light of their personal investment or tax circumstances, nor does it apply to certain types of stockholders that are subject to special treatment under the federal income tax laws, such as insurance companies, tax-exempt organizations (except to the extent discussed below under Treatment of Tax-Exempt Stockholders), financial institutions, pass-through entities (or investors in such entities) or broker-dealers, and non-U.S. persons and foreign corporations (except to the extent discussed below under Special Tax Considerations for Non-U.S. Stockholders).
The statements in this section are based on the Internal Revenue Code of 1986, as amended (the Code), U.S. Treasury Regulations and administrative and judicial interpretations thereof. The laws governing the federal income tax treatment of REITs and their stockholders are highly technical and complex, and this summary is qualified in its entirety by the authorities listed above, as in effect on the date hereof. We cannot assure you that new laws, interpretations of law or court decisions, any of which may take effect retroactively, will not cause any statement in this section to be inaccurate.
Federal Income Taxation of Ventas
We elected REIT status beginning with the year ended December 31, 1999. Beginning with the 1999 tax year, we believe that we have satisfied the requirements to qualify as a REIT, and we intend to continue to qualify as a REIT for federal income tax purposes. If we continue to qualify for taxation as a REIT, we generally will not be subject to federal income tax on net income that we currently distribute to stockholders. This treatment substantially eliminates the double taxation (i.e., taxation at both the corporate and stockholder levels) that generally results from investment in a corporation.
Notwithstanding our qualification as a REIT, we will be subject to federal income tax on any undistributed taxable income, including undistributed net capital gains, at regular corporate rates. In addition, we will be subject to a 4% excise tax if we do not satisfy specific REIT distribution requirements. See Requirements for Qualification as a REITAnnual Distribution Requirements. Under certain circumstances, we may be subject to the alternative minimum tax on our undistributed items of tax preference. If we have (i) net income from the sale or other disposition of foreclosure property (see below) that is held primarily for sale to customers in the ordinary course of business or (ii) certain other non-qualifying income from foreclosure property, we will be subject to tax at the highest corporate rate on such income. See Requirements for Qualification as a REITAsset Tests. In addition, if we have net income from prohibited transactions (which are, in general, certain sales or other dispositions of property (other than foreclosure property) held primarily for sale to customers in the ordinary course of business), that income will be subject to a 100% tax.
We may also be subject to Built-in Gains Tax on any appreciated asset that we own or acquire that was previously owned by a C corporation (i.e., a corporation generally subject to full corporate level tax). If we dispose of any of these assets and recognize gain on the disposition of such asset during the ten-year period immediately after the assets were owned by a C corporation (either prior to our REIT election, or through stock acquisition or merger), then we generally will be subject to regular corporate income tax on the gain equal to the lower of (i) the recognized gain at the time of the disposition or (ii) the built-in gain in that asset as of the date it became a REIT asset. Effective January 1, 2009, our Kindred assets were no longer subject to Built-in Gains Tax. The 21 Brookdale assets we acquired in connection with our Provident acquisition will remain subject to Built-in Gains Tax until November 2014.
In addition, if we fail to satisfy the 75% gross income test or the 95% gross income test (as discussed below) and nonetheless maintain our qualification as a REIT because certain other requirements have been met, we will be subject to a 100% tax on the gross income attributable to the greater of the amount by which we failed the applicable test (or, for our 2001 through 2004 taxable years, a 90% test in lieu of the 95% test), multiplied by a
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fraction intended to reflect our profitability. If we violate one or more of the REIT asset tests (as discussed below) under certain circumstances, but the violation is due to reasonable cause and not willful neglect and we were to take certain remedial actions, we may avoid a loss of our REIT status by, among other things, paying a tax equal to the greater of $50,000 or the highest corporate tax rate multiplied by the net income generated by the non-qualifying asset during a specified period. If we fail to satisfy one or more requirements for REIT qualification, other than the 75% gross income test, the 95% gross income test or the assets tests, but nonetheless maintain our qualification as a REIT because certain other requirements have been met, we may be subject to a $50,000 penalty for each failure. Finally, we will incur a 100% excise tax on certain transactions with a taxable REIT subsidiary that are not conducted on an arms-length basis.
See Requirements for Qualification as a REIT below for other circumstances in which we may be required to pay federal taxes.
Requirements for Qualification as a REIT
To qualify as a REIT, we must meet the requirements discussed below, relating to our organization, sources of income, nature of assets and distributions of income to stockholders.
Organizational Requirements
The Code defines a REIT as a corporation, trust or association: (i) that is managed by one or more directors or trustees; (ii) the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest; (iii) that would be taxable as a domestic corporation, but for Sections 856 through 859 of the Code; (iv) that is neither a financial institution nor an insurance company subject to certain provisions of the Code; (v) the beneficial ownership of which is held by 100 or more persons during at least 335 days of a taxable year of twelve months, or during a proportionate part of a shorter taxable year (the 100 Shareholder Rule); (vi) not more than 50% in value of the outstanding stock of which is owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of each taxable year (the 5/50 Rule); (vii) that makes an election to be a REIT (or has made such election for a previous taxable year) and satisfies all relevant filing and other administrative requirements established by the Internal Revenue Service (IRS) that must be met in order to elect and to maintain REIT status; (viii) that uses a calendar year for federal income tax purposes; and (ix) that meets certain other tests, described below, regarding the nature of its income and assets.
We believe, but we cannot assure you, that we have satisfied and will continue to satisfy the organizational requirements. In order to prevent a concentration of ownership of our stock that would cause us to fail the 5/50 Rule or the 100 Shareholder Rule, we have placed certain restrictions on the transfer of our shares that are intended to prevent such concentration of share ownership. However, such restrictions may not prevent us from failing to meet these requirements, and thereby failing to qualify as a REIT.
In addition, to qualify as a REIT, a corporation may not have (as of the end of the taxable year) any earnings and profits that were accumulated in periods before it elected REIT status. We believe that we have not had any accumulated earnings and profits that are attributable to non-REIT periods, although the IRS is entitled to challenge that determination.
Gross Income Tests
To qualify as a REIT, we must satisfy two annual gross income requirements. First, at least 75% of our gross income (excluding gross income from prohibited transactions) for each taxable year must consist of defined types of income derived directly or indirectly from investments relating to real property or mortgages on real property (including pledges of equity interest in certain entities holding real property and also including rents from real property (as defined in the Code)) and, in certain circumstances, interest on certain types of temporary investment income. Second, at least 95% of our gross income (excluding gross income from prohibited
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transactions) for each taxable year must be derived from such real property or temporary investments, dividends, interest and gain from the sale or disposition of stock or securities, or from any combination of the foregoing.
We believe, but we cannot assure you, that we have been and will continue to be in compliance with the gross income tests. If we fail to satisfy one or both gross income tests for any taxable year, we may nevertheless qualify as a REIT for the year under certain relief provisions of the Code. If we were eligible to qualify under the relief provisions, a 100% tax would be imposed with respect to the income exceeding one or both of the gross income tests.
If we fail to satisfy one or both of the gross income tests and the relief provisions for any year, we will not qualify as a REIT for such year. Loss of our REIT status would have a Material Adverse Effect on us.
Asset Tests
At the close of each quarter of our taxable year, we must satisfy the following tests relating to the nature of our assets. First, at least 75% of the value of our total assets must be represented by cash or cash items (including certain receivables), government securities, real estate assets (including interest in real property and in mortgages on real property and shares in other qualifying REITs) or, in cases where we raise new capital through stock or long-term (maturity of at least five years) debt offerings, temporary investments in stock or debt instruments during the one-year period following our receipt of such capital (the 75% asset test). Second, of the investments not meeting the requirements of the 75% asset test, the value of any one issuers debt and equity securities owned by us (other than our interest in any entity classified as a partnership for federal income tax purposes, the stock of a taxable REIT subsidiary (as defined below) or the stock of a qualified REIT subsidiary) may not exceed 5% of the value of our total assets (the 5% asset test), and we may not own more than 10% of any one issuers outstanding voting securities (the 10% voting securities test) or 10% of the value of any one issuers outstanding securities, subject to limited safe harbor exceptions (the 10% value test). In addition, no more than 25% of the value of our assets can be represented by securities of taxable REIT subsidiaries (the 25% TRS test).
If we fail to satisfy the asset tests at the end of any quarter other than our first quarter, we may nevertheless continue to qualify as a REIT and maintain our REIT status if (i) we satisfied all of the asset tests at the close of the preceding calendar quarter and (ii) the discrepancy between the value of our assets and the asset test requirements arose from changes in the market values of our assets and was not wholly or partly caused by an acquisition of nonqualifying assets.
Furthermore, if we fail any of the asset tests discussed above at the end of any quarter without curing such failure within 30 days after the end of such quarter, we would fail to qualify as a REIT, unless we were to qualify under certain relief provisions enacted as part of the American Jobs Creation Act of 2004. Under one of these relief provisions, if we fail the 5% asset test, the 10% voting securities test or the 10% value test, we nevertheless would continue to qualify as a REIT if the failure is due to the ownership of assets having a total value not exceeding the lesser of 1% of our assets at the end of the relevant quarter or $10 million, and we were to dispose of such assets (or otherwise meet such asset tests) within six months after the end of the quarter in which the failure was identified. If we fail to meet any of the REIT asset tests for a particular quarter, but we do not qualify for the relief for de minimis failures that is described in the preceding sentence, then we would be deemed to have satisfied the relevant asset test if: (i) following our identification of the failure, we were to file a schedule with a description of each asset that caused the failure; (ii) the failure is due to reasonable cause and not willful neglect; (iii) we were to dispose of the non-qualifying asset (or otherwise meet the relevant asset test) within six months after the last day of the quarter in which the failure was identified; and (iv) we were to pay a penalty tax equal to the greater of $50,000 or the highest corporate tax rate multiplied by the net income generated by the non-qualifying asset during the period beginning on the first date of the failure and ending on the date we dispose of the asset (or otherwise cure the asset test failure). It is not possible to predict, however, whether in all circumstances we would be entitled to the benefit of these relief provisions. We intend to maintain adequate records of the value of our assets to ensure compliance with the asset tests and to take such other actions as may be required to comply with those tests.
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We believe, but we cannot assure you, that we have been and will continue to be in compliance with the 75% asset test, the 10% voting securities test, the 10% value test, the 5% asset test and the 25% TRS test. If we fail to satisfy any of these tests and the relief provisions, we would lose our REIT status, which would have a Material Adverse Effect on us.
Foreclosure Property
The foreclosure property rules permit us (by our election) to foreclose or repossess properties without being disqualified as a REIT as a result of receiving income that does not qualify under the gross income tests; however, a corporate tax is imposed upon such net non-qualifying income from foreclosure property. Detailed rules specify the calculation of the tax, and the after-tax amount would increase the dividends we would be required to distribute to stockholders each year. See Annual Distribution Requirements below.
Foreclosure property treatment will end on the first day on which we enter into a lease of the property that will give rise to income that is not good REIT income under Section 856(c)(3) of the Code. In addition, foreclosure property treatment will end if any construction takes place on the property (other than completion of a building, or other improvement more than 10% complete before default became imminent). Foreclosure property treatment is available for an initial period of three years and may, in certain circumstances, be extended for an additional three years. Foreclosure property treatment for qualified healthcare property is available for an initial period of two years and may, in certain circumstances, be extended for an additional four years.
Taxable REIT Subsidiaries
We are permitted to own up to 100% of a taxable REIT subsidiary or TRS. A TRS is a corporation subject to tax as a regular C corporation. Generally, a TRS can own assets that cannot be owned by a REIT and can perform otherwise impermissible tenant services (excluding the direct or indirect operation or management of a lodging or healthcare facility) which would otherwise disqualify the REITs rental income under the REIT income tests. There are certain limits on the ability of a TRS to deduct interest payments made to us. In addition, we will be obligated to pay a 100% penalty tax on some payments that we receive or on certain expenses deducted by the TRS if the economic arrangements between the REIT, the REITs tenants and the TRS are not comparable to similar arrangements among unrelated parties.
Annual Distribution Requirements
In order to be taxed as a REIT, we are required to distribute dividends (other than capital gain dividends) to our stockholders in an amount at least equal to (i) the sum of (A) 90% of our REIT taxable income (computed without regard to the dividends paid deduction and our net capital gain) and (B) 90% of the net income (after tax), if any, from foreclosure property, minus (ii) the sum of certain items of non-cash income. Such distributions must be paid in the taxable year to which they relate, or in the following taxable year if (i) they are (A) declared in October, November or December, (B) payable to stockholders of record on a specified date in any one of these months and (C) actually paid during January of such following year or (ii)(A) they are declared before we timely file our tax return for such year, (B) paid on or before the first regular dividend payment after such declaration, and (C) we elect on our federal income tax return for the prior year to have a specified amount of the subsequent dividend as treated as paid in the prior year. To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less than 100%, of our REIT taxable income, as adjusted, we will be subject to tax on the undistributed amount at regular capital gains and ordinary corporate tax rates except to the extent of net operating loss or capital loss carryforwards. If any taxes are paid in connection with the Built-in Gains Tax rules, these taxes will be deductible in computing REIT taxable income. Furthermore, if we fail to distribute during each calendar year (or, in the case of distributions with declaration and record dates falling in the last three months of the calendar year, by the end of January following such calendar year) at least the sum of (i) 85% of our REIT ordinary income for such year, (ii) 95% of our REIT capital gain net income for such year (other than long-term capital gain we elect to retain and treat as having been distributed to stockholders), and (iii) any undistributed taxable income from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of such required distribution over the amounts actually distributed.
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We believe, but we cannot assure you, that we have satisfied the annual distribution requirements for the year of our REIT election and each year thereafter through the year ended December 31, 2008. Although we intend to continue meeting the annual distribution requirements to qualify as a REIT for federal income tax purposes for the year ending December 31, 2009 and subsequent years, it is possible that economic, market, legal, tax or other considerations may limit our ability to meet such requirements. As a result, if we are not able to meet the annual distribution requirement, we would fail to qualify as a REIT. Moreover, if we distribute 100% of our REIT taxable income by taking advantage of the throwback rule described in clause (ii)(C) of the second sentence of the preceding paragraph, satisfying the REIT distribution requirement and generally avoiding corporate level tax, we may incur a 4% nondeductible excise tax.
In Revenue Procedure 2009-15, the IRS stated that it would treat stock dividends as distributions for purposes of satisfying the REIT distribution requirements for calendar years 2008 and 2009, provided that stockholders can elect to receive the distribution in either cash or stock, subject to certain limitations. Any stock so distributed would be taxable to the recipient. We may choose to declare stock dividends in accordance with Revenue Procedure 2009-15 or otherwise. Also, we have net operating loss carryforwards that we can use to reduce our annual distribution requirements. See Note 12Income Taxes of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Failure to Continue to Qualify
If we fail to satisfy one or more requirements for REIT qualification, other than an asset or income test violation of a type for which relief is otherwise available as described above, we would retain our REIT qualification if the failure is due to reasonable cause and not willful neglect and if we were to pay a penalty of $50,000 for each such failure. However, it is not possible to predict whether in all circumstances we would be entitled to the benefit of this relief provision.
If our election to be taxed as a REIT is revoked or terminated (e.g., due to a failure to meet the REIT qualification tests and no relief provisions were to apply), we would be subject to tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates (for all open tax years beginning with the year our REIT election is revoked or terminated) except to the extent of net operating loss and capital loss carryforwards. Distributions to stockholders would not be deductible by us, nor would they be required to be made. To the extent of current and accumulated earnings and profits, all distributions to stockholders would be taxable as ordinary income, and, subject to certain limitations in the Code, corporate stockholders may be eligible for the dividends received deduction. In addition, we would be prohibited from re-electing REIT status for the four taxable years following the year during which we ceased to qualify as a REIT, unless certain relief provisions of the Code applied. It is impossible to predict whether we would be entitled to such statutory relief.
Federal Income Taxation of U.S. Stockholders
As used herein, the term U.S. Stockholder means a holder of our common stock that for U.S. federal income tax purposes is: (i) an individual who is a citizen or resident of the United States; (ii) a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia; (iii) an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or (iv) any trust with respect to which (A) a U.S. court is able to exercise primary supervision over the administration of such trust or (B) an election has been made under applicable U.S. Treasury Regulations to retain its pre-August 20, 1996 classification as a U.S. person. If a partnership holds our common stock, the tax treatment of a partner will generally depend on the status of the partner and on the activities of the partnership. Partners of partnerships holding our stock should consult their tax advisors. This section assumes the U.S. Stockholder holds our common stock as a capital asset.
As long as we qualify as a REIT, distributions made to our taxable U.S. Stockholders out of current or accumulated earnings and profits (and not designated as capital gain dividends) generally will be taken into account by such U.S. Stockholders as ordinary income and will not be eligible for the qualified dividends rate
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generally available to non-corporate holders or for the dividends received deduction generally available to corporations. Distributions that are designated as capital gain dividends will be taxed as a capital gain (to the extent such distributions do not exceed our actual net capital gain for the taxable year) without regard to the period for which the stockholder has held its shares. The tax rates applicable to such capital gains are discussed below. Distributions in excess of current and accumulated earnings and profits will not be taxable to a stockholder to the extent that they do not exceed the adjusted basis of the stockholders shares (determined on a share-by-share basis), but rather will reduce the adjusted basis of those shares. To the extent that distributions in excess of current and accumulated earnings and profits exceed the adjusted basis of a stockholders shares, such distributions will be included in income as capital gains. The tax rate applicable to such capital gain will depend on the stockholders holding period for the shares. In addition, any distribution declared by us in October, November or December of any year and payable to a stockholder of record on a specified date in any such month shall be treated as both paid by us and received by the stockholder on December 31 of such year, provided that the distribution is actually paid by us during January of the following calendar year.
We may elect to treat all or a part of our undistributed net capital gain as if it had been distributed to our stockholders (including for purposes of the 4% excise tax discussed above under Requirements for Qualification as a REITAnnual Distribution Requirements). If we make such an election, our stockholders would be required to include in their income as long-term capital gain their proportionate share of our undistributed net capital gain, as designated by us. Each such stockholder would be deemed to have paid its proportionate share of the income tax imposed on us with respect to such undistributed net capital gain, and this amount would be credited or refunded to the stockholder. In addition, the tax basis of the stockholders shares would be increased by its proportionate share of undistributed net capital gains included in its income, less its proportionate share of the income tax imposed on us with respect to such gains.
Stockholders may not include in their individual income tax returns any of our net operating losses or net capital losses. Instead, such losses would be carried over by us for potential offset against our future income (subject to certain limitations). Taxable distributions from us and gain from the disposition of our common stock will not be treated as passive activity income, and, therefore, stockholders generally will not be able to apply any passive activity losses (such as losses from certain types of limited partnerships in which the stockholder is a limited partner) against such income. In addition, taxable distributions from us generally will be treated as investment income for purposes of the investment interest limitations.
We will notify stockholders after the close of our taxable year as to the portions of the distributions attributable to that year that constitute ordinary income, return of capital and capital gain. To the extent a portion of the distribution is designated as a capital gain dividend, we will notify stockholders as to the portion that is a 15% rate gain distribution and the portion that is an unrecaptured Section 1250 distribution. A 15% rate gain distribution is a capital gain distribution to domestic stockholders that are individuals, estates or trusts that is taxable at a maximum rate of 15%. An unrecaptured Section 1250 gain distribution would be taxable to taxable domestic stockholders that are individuals, estates or trusts at a maximum rate of 25%.
Taxation of U.S. Stockholders on the Disposition of Shares of Common Stock
In general, a U.S. Stockholder who is not a dealer in securities must treat any gain or loss realized upon a taxable disposition of our common stock as long-term capital gain or loss if the U.S. Stockholder has held the shares for more than one year, and otherwise as short-term capital gain or loss. However, a U.S. Stockholder must treat any loss upon a sale or exchange of shares of our common stock held for six months or less as a long-term capital loss to the extent of capital gain dividends and any other actual or deemed distributions from us which the U.S. Stockholder treats as long-term capital gain. All or a portion of any loss that a U.S. Stockholder realizes upon a taxable disposition of our common stock may be disallowed if the U.S. Stockholder purchases other shares of our common stock within 30 days before or after the disposition.
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Treatment of Tax-Exempt Stockholders
Tax-exempt organizations, including qualified employee pension and profit sharing trusts and individual retirement accounts (collectively, Exempt Organizations), generally are exempt from federal income taxation. However, they are subject to taxation on their unrelated business taxable income (UBTI). While many investments in real estate generate UBTI, the IRS has issued a published ruling that dividend distributions by a REIT to an exempt employee pension trust do not constitute UBTI, provided that the shares of the REIT are not otherwise used in an unrelated trade or business of the exempt employee pension trust. Based on that ruling, and subject to the exceptions discussed below, amounts distributed by us to Exempt Organizations generally should not constitute UBTI. However, if an Exempt Organization finances its acquisition of our common stock with debt, a portion of its income from us will constitute UBTI pursuant to the debt-financed property rules. Furthermore, social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans that are exempt from taxation under paragraphs (7), (9), (17) and (20), respectively, of Section 501(c) of the Code are subject to different UBTI rules, which generally will require them to characterize distributions from us as UBTI. In addition, in certain circumstances, a pension trust that owns more than 10% of our stock is required to treat a percentage of the dividends from us as UBTI.
Special Tax Considerations for Non-U.S. Stockholders
The rules governing U.S. federal income taxation of nonresident alien individuals, foreign corporations, foreign estates and foreign trusts (collectively, Non-U.S. Stockholders) are complex, and the following is no more than a brief summary of those rules. Non-U.S. Stockholders should consult with their own tax advisors to determine the impact of federal, state, local and non-U.S. tax laws with regard to their ownership of our common stock, including any reporting requirements.
For purposes of this discussion, the term Non-U.S. Stockholder does not include any foreign stockholder whose investment in our stock is effectively connected with the conduct of a trade or business in the United States. Such a foreign stockholder, in general, will be subject to U.S. federal income tax with respect to its investment in our stock in the same manner as a U.S. Stockholder is taxed (subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals). In addition, a foreign corporation receiving income that is treated as effectively connected with a U.S. trade or business also may be subject to an additional 30% branch profits tax, unless an applicable tax treaty provides a lower rate or an exemption. Certain certification requirements must be satisfied in order for effectively connected income to be exempt from withholding.
Distributions to Non-U.S. Stockholders that are not attributable to gain from sales or exchanges by us of U.S. real property interests and are not designated by us as capital gain dividends (or deemed distributions of retained capital gains) will be treated as dividends of ordinary income to the extent that they are made out of our current or accumulated earnings and profits. Such distributions ordinarily will be subject to a withholding tax equal to 30% of the gross amount of the distribution unless an applicable tax treaty reduces or eliminates that tax. Distributions in excess of our current and accumulated earnings and profits will not be taxable to a stockholder to the extent that such distributions do not exceed the adjusted basis of the stockholders shares (determined on a share-by-share basis), but rather will reduce the adjusted basis of those shares. To the extent that distributions in excess of current and accumulated earnings and profits exceed the adjusted basis of a Non-U.S. Stockholders shares, such distributions will give rise to tax liability if the Non-U.S. Stockholder would otherwise be subject to tax on any gain from the sale or disposition of its shares, as described below.
We expect to withhold U.S. tax at the rate of 30% on the gross amount of any dividends, other than dividends treated as attributable to gain from sales or exchanges of U.S. real property interests and capital gain dividends, paid to a Non-U.S. Stockholder, unless (i) a lower treaty rate applies and the required IRS Form W-8BEN evidencing eligibility for that reduced rate is filed with us or the appropriate withholding agent or (ii) the Non-U.S. Stockholder files an IRS Form W-8ECI or a successor form with us or the appropriate withholding agent properly claiming that the distributions are effectively connected with the Non-U.S. Stockholders conduct of a U.S. trade or business.
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For any year in which we qualify as a REIT, distributions to a Non-U.S. Stockholder that owns more than 5% of our common shares at any time during the one-year period ending on the date of distribution and that are attributable to gain from sales or exchanges by us of U.S. real property interests will be taxed to a Non-U.S. Stockholder under the provisions of the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). Under FIRPTA, distributions attributable to gain from sales of U.S. real property interests are taxed to a Non-U.S. Stockholder as if such gain were effectively connected with a U.S. business. Accordingly, a Non-U.S. Stockholder that owns more than 5% of our shares will be taxed at the normal capital gain rates applicable to a U.S. Stockholder (subject to any applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals). Distributions subject to FIRPTA made to a Non-U.S. Stockholder that owns more than 5% of our shares also may be subject to 30% branch profits tax in the hands of a foreign corporate stockholder not entitled to treaty relief or exemption. Under FIRPTA, we are required to withhold 35% of any distribution to a Non-U.S. Stockholder that owns more than 5% of our shares which is or could be designated as a capital gain dividend attributable to U.S. real property interests. Moreover, if we designate previously made distributions as capital gain dividends attributable to U.S. real property interests, subsequent distributions (up to the amount of such prior distributions) will be treated as capital gain dividends subject to FIRPTA withholding. This amount is creditable against the Non-U.S. Stockholders FIRPTA tax liability. It should be noted that the 35% withholding tax rate on capital gain dividends paid to Non-U.S. Stockholders owning more than 5% of our shares is higher than the maximum rate on long-term capital gains of non-corporate persons. Capital gain dividends not attributable to gain on the sale or exchange of U.S. real property interests are not subject to U.S. taxation if there is no requirement of withholding.
If a Non-U.S. Stockholder does not own more than 5% of our shares at any time during the one-year period ending on the date of the distribution, the gain will not be considered to be effectively connected with a U.S. business. As such, a Non-U.S. Stockholder who does not own more than 5% of our shares would not be required to file a U.S. federal income tax return by receiving such a distribution. In this case, the distribution will be treated as a REIT dividend to that Non-U.S. Stockholder and taxed as a REIT dividend that is not a capital gain distribution (and subject to possible withholding), as described above. In addition, the branch profits tax will not apply to the distribution.
For so long as our common stock continues to be regularly traded on an established securities market, the sale of such stock by any Non-U.S. Stockholder who is not a Five Percent Non-U.S. Stockholder (as defined below) generally will not be subject to U.S. federal income tax (unless the Non-U.S. Stockholder is a nonresident alien individual who was present in the United States for more than 182 days during the taxable year of the sale and certain other conditions apply, in which case such gain will be subject to a 30% tax on a gross basis). A Five Percent Non-U.S. Stockholder is a Non-U.S. Stockholder who, at some time during the five-year period preceding such sale or disposition, beneficially owned (including under certain attribution rules) more than 5% of the total fair market value of our common stock (as outstanding from time to time).
In general, the sale or other taxable disposition of our common stock by a Five Percent Non-U.S. Stockholder also will not be subject to U.S. federal income tax if we are a domestically controlled REIT. A REIT is a domestically controlled REIT if, at all times during the five-year period preceding the disposition in question, less than 50% in value of its shares is held directly or indirectly by Non-U.S. Stockholders. Although we believe that we currently qualify as a domestically controlled REIT, because our common stock is publicly traded, we cannot assure you that we currently qualify or will qualify as a domestically controlled REIT at any time in the future. If we do not constitute a domestically controlled REIT, a Five Percent Non-U.S. Stockholder will be taxed in the same manner as a U.S. Stockholder with respect to gain on the sale of our common stock (subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals).
Information Reporting Requirements and Backup Withholding Tax
Information reporting to our stockholders and to the IRS will apply to the amount of distributions paid during each calendar year and distributions required to be treated as so paid during a calendar year, and the
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amount of tax withheld, if any, and to the proceeds of a sale or other disposition of our common stock. Under the backup withholding rules, a stockholder may be subject to backup withholding at the applicable rate (currently 28%) with respect to distributions paid and proceeds from a disposition of our common stock unless such holder (i) is a corporation, non-U.S. person or comes within certain other exempt categories and, when required, demonstrates this fact or (ii) provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with the applicable requirements of the backup withholding rules. A stockholder who does not provide us with its correct taxpayer identification number also may be subject to penalties imposed by the IRS.
Stockholders should consult their own tax advisors regarding their qualifications for an exemption from backup withholding and the procedure for obtaining such an exemption. Backup withholding is not an additional tax. Rather, the amount of any backup withholding with respect to a payment to a U.S. Stockholder will be allowed as a credit against the U.S. Stockholders U.S. federal income tax liability and may entitle the U.S. Stockholder to a refund, provided that the required information is furnished timely to the IRS.
As a general matter, backup withholding and information reporting will not apply to a payment of the proceeds of a sale of our common stock by or through a foreign office of a foreign broker. Information reporting (but not backup withholding) will apply, however, to a payment of the proceeds of a sale of our common stock by a foreign office of a broker that (i) is a U.S. person, (ii) is a foreign partnership that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States, or more than 50% of whose capital or profit interests are owned during certain periods by U.S. persons, or (iii) is a controlled foreign corporation for U.S. tax purposes, unless the broker has documentary evidence in its records that the holder is a Non-U.S. Stockholder and certain other conditions are satisfied, or the stockholder otherwise establishes an exemption. Payment to or through a U.S. office of a broker of the proceeds of a sale of our common stock is subject to both backup withholding and information reporting unless the stockholder certifies under penalties of perjury that the stockholder is a Non-U.S. Stockholder or otherwise establishes an exemption. A stockholder may obtain a refund of any amounts withheld under the backup withholding rules in excess of its U.S. federal income tax liability by timely filing the appropriate claim for a refund with the IRS.
Other Tax Consequences
State and Local Taxes
We and/or our stockholders may be subject to taxation by various states and localities, including those in which we or a stockholder transact business, own property or reside. The state and local tax treatment may differ from the federal income tax treatment described above. Consequently, stockholders should consult their own tax advisers regarding the effect of state and local tax laws, in addition to the federal, foreign and other tax laws, in connection with an investment in our common stock.
Possible Legislative or Other Actions Affecting Tax Consequences
You should recognize that our present federal income tax treatment may be modified by future legislative, judicial and administrative actions or decisions at any time, which may be retroactive in effect, and which could adversely affect the tax consequences of an investment in shares of our common stock. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department, resulting in statutory changes as well as promulgation of new, or revisions to existing, regulations and revised interpretations of established concepts.
On July 30, 2008, the Housing and Economic Recovery Tax Act of 2008 (the 2008 Act) was enacted into law. The 2008 Acts sections that affect the REIT provisions of the Code are generally effective for taxable years beginning after its date of enactment, and for us will generally mean that the new provisions apply from and after January 1, 2009, except as otherwise indicated below.
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The 2008 Act made the following changes to, or clarifications of, the REIT provisions of the Code that could be relevant for us:
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Taxable REIT Subsidiaries . The limit on the value of taxable REIT subsidiaries securities held by a REIT has been increased from 20% to 25% of the total value of such REITs assets. See Requirements for Qualification as a REITTaxable REIT Subsidiaries. |
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Rental Income from a TRS . A REIT is generally limited in its ability to earn qualifying rental income from a TRS. The 2008 Act permits a REIT to earn qualifying rental income from the lease of a qualified healthcare property to a TRS if an eligible independent contractor operates the property. In certain future circumstances, we may find it advantageous to lease properties to one or more TRSs in this manner. |
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Foreign Currency as Cash . Foreign currency that is the functional currency of a REIT or a qualified business unit of a REIT and is held for use in the normal course of business of such REIT or qualified business unit will be treated as cash for purposes of the 75% asset test. The foreign currency must not be derived from dealing, or engaging in substantial and regular trading in securities. See Requirements for Qualification as a REITAsset Tests. |
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Foreign Currency Gain . Under the 2008 Act, foreign currency gain earned after July 30, 2008 that qualifies as real estate foreign exchange gain is excluded from both the 75% and 95% gross income tests, while income from foreign currency gains that qualifies as passive foreign exchange gain is excluded from the 95% gross income test, but is treated as non-qualifying income for the 75% gross income test. Real estate foreign exchange gain is foreign currency gain attributable to (i) any item of income or gain which qualifies for purposes of the 75% gross income test, (ii) the acquisition or ownership of obligations secured by mortgages on real property or interests in real property, or (iii) becoming or being an obligor under debt obligations secured by mortgages on real property or on interests in real property. Real estate foreign exchange gain also includes foreign currency gain attributable to a qualified business unit (QBU) of the REIT if the QBU meets the 75% gross income test for the taxable year and the 75% asset test at the close of each quarter of the taxable year that the REIT directly or indirectly owned an interest in the QBU. Passive foreign exchange gain includes all real estate foreign exchange gain plus foreign currency gain attributable to (i) any item of income or gain which qualifies for purposes of the 95% gross income test, (ii) the acquisition or ownership of debt obligations, or (iii) becoming or being the obligor under debt obligations. The Treasury Department has the authority to expand the definitions of real estate foreign exchange and passive foreign exchange gain to include other items of foreign currency gain. |
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Expanded Prohibited Transactions Safe Harbor . The safe harbor from the prohibited transactions tax for certain sales of real estate assets is expanded by reducing the required minimum holding period from four years to two years, among other changes. |
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Hedging Income . Income from a hedging transaction entered into after July 30, 2008, that complies with identification procedures set out in U.S. Treasury Regulations and hedges indebtedness incurred or to be incurred by us to acquire or carry real estate assets will not constitute gross income for purposes of both the 75% and 95% gross income tests. |
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Reclassification Authority . The Secretary of the Treasury is given broad authority to determine whether particular items of gain or income recognized after July 30, 2008, qualify or not under the 75% and 95% gross income tests, or are to be excluded from the measure of gross income for such purposes. |
We cannot predict the likelihood of passage of any new tax legislation or other provisions either directly or indirectly affecting us or our stockholders or the value of an investment in our common stock.
ITEM 1A. | Risk Factors |
This section discusses the most significant factors that affect our business, operations and financial condition. It does not describe all risks and uncertainties applicable to us, our industry or ownership of our
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securities. If any of the following risks, as well as other risks and uncertainties that are not yet identified or that we currently think are not material, actually occur, we could be materially adversely affected. In that event, the value of our securities could decline.
We have grouped these risk factors into three general categories:
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Risks arising from our business; |
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Risks arising from our capital structure; and |
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Risks arising from our status as a REIT. |
Risks Arising from Our Business
We depend on Kindred and Brookdale Senior Living for a significant portion of our revenues and operating income; Any inability or unwillingness by Kindred or Brookdale Senior Living to satisfy its obligations under its agreements with us could have a Material Adverse Effect on us.
We lease a substantial portion of our properties to Kindred and Brookdale Senior Living, and they are each a significant source of our total revenues and operating income. Since the Kindred Master Leases and our leases with Brookdale Senior Living are triple-net leases, we depend on Kindred and Brookdale Senior Living not only for rental income, but also to pay insurance, taxes, utilities and maintenance and repair expenses in connection with the leased properties. Any inability or unwillingness by Kindred or Brookdale Senior Living to make rental payments to us or to otherwise satisfy its obligations under its agreements with us could have a Material Adverse Effect on us. Any failure by Kindred or Brookdale Senior Living to effectively conduct its operations could adversely affect its business reputation and ability to attract and retain patients and residents in its properties and also could have a Material Adverse Effect on us. Moreover, Kindred and certain subsidiaries of Brookdale Senior Living, namely Brookdale and Alterra, have agreed to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities arising in connection with their respective businesses. We cannot assure you that Kindred or such subsidiaries of Brookdale Senior Living will have sufficient assets, income, access to financing and insurance coverage to enable it to satisfy these indemnification obligations.
The properties managed by Sunrise account for a significant portion of our revenues and operating income; Adverse developments in Sunrises business and affairs or financial condition could have a Material Adverse Effect on us.
Sunrise currently manages 79 of our seniors housing communities pursuant to long-term management agreements. These properties represent a substantial portion of our portfolio, based on their gross book value, and account for a significant portion of our revenues and operating income. Although we have various rights as owner under the Sunrise management agreements, we rely on Sunrises personnel, good faith, expertise, historical performance, technical resources and information systems, proprietary information and judgment to manage our properties efficiently and effectively. We also rely on Sunrise to set resident fees, to provide accurate property-level financial results for our properties in a timely manner and to otherwise operate those properties in accordance with the terms of our management agreements and in compliance with all applicable laws and regulations. For example, we depend on Sunrises ability to attract and retain skilled management personnel who are responsible for the day-to-day operations of our seniors housing communities. A shortage of nurses or other trained personnel or general inflationary pressures may force Sunrise to enhance its pay and benefits package to compete effectively for such personnel, and Sunrise may not be able to offset such added costs by increasing the rates charged to residents. Any increase in these costs, which are included in the operating budget for each property, any failure by Sunrise to attract and retain qualified personnel, or any change in Sunrises senior management could adversely affect the income we receive from these properties and have a Material Adverse Effect on us.
In addition, any adverse developments in Sunrises business and affairs, financial strength or ability to operate our properties efficiently and effectively could have a Material Adverse Effect on us. As a result of the current economic and credit crisis and Sunrises weakened financial condition, as disclosed in Sunrises filings with the Commission and other public announcements, Sunrise may experience significant financial, legal,
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accounting or regulatory difficulties, which could result in, among other adverse events, acceleration of its indebtedness, the inability to renew or extend its revolving credit facility, the enforcement of default remedies by its counterparties or the commencement of insolvency proceedings under the U.S. Bankruptcy Code by or against Sunrise. Any one or a combination of these events could have a Material Adverse Effect on us.
The severe weakening economy could adversely impact our operating income and earnings, as well as the results of operations of our tenants and operators, which could impair their ability to meet their obligations to us.
The United States is experiencing a recession which is nearing the longest duration since the Great Depression. Continued concerns about the uncertainty over whether our economy will be adversely affected by inflation, deflation or stagflation, and the systemic impact of increased unemployment, volatile energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a severely distressed real estate market have contributed to increased market volatility and weakened business and consumer confidence. This difficult operating environment could adversely affect our ability to generate revenues and/or increase our costs at our Sunrise-managed properties, thereby reducing our operating income and earnings. It could also have an adverse impact on the ability of our tenants and operators to maintain occupancy rates in our properties, which could harm their financial condition. If these economic conditions continue, we may experience operating deficiencies at our Sunrise-managed properties and/or our tenants and operators may be unable to meet their rental payments and other obligations due to us, which could have a Material Adverse Effect on us.
We face potential adverse consequences of bankruptcy or insolvency by our tenants, operators, borrowers, managers and other obligors.
We are exposed to the risk that our tenants, operators, borrowers, managers or other obligors could become bankrupt or insolvent. Although our lease, loan and management agreements provide us with the right to exercise certain remedies in the event of default on the obligations owing to us or upon the occurrence of certain insolvency events, the bankruptcy and insolvency laws afford certain rights to a party that has filed for bankruptcy or reorganization. For example, a debtor-lessee may reject its lease with us in a bankruptcy proceeding. In such a case, our claim against the debtor-lessee for unpaid and future rents would be limited by the statutory cap of the U.S. Bankruptcy Code. This statutory cap might be substantially less than the remaining rent actually owed under the lease, and it is quite likely that any claim we might have for unpaid rent would not be paid in full. In addition, a debtor-lessee may assert in a bankruptcy proceeding that its lease should be re-characterized as a financing agreement. If such a claim is successful, our rights and remedies as a lender, compared to a landlord, would generally be more limited. Similarly, if a debtor-manager seeks bankruptcy protection, the automatic stay provisions of the U.S. Bankruptcy Code would preclude us from enforcing our remedies against the manager unless relief is first obtained from the court having jurisdiction over the bankruptcy case. In the event of an obligor bankruptcy, we may also be required to fund certain expenses and obligations (e.g. real estate taxes, debt costs and maintenance expenses) to preserve the value of our properties, avoid the imposition of liens on a property and/or transition a property to a new tenant, operator or manager.
We may be unable to reposition our properties on as favorable terms, or at all, if we have to replace any of our tenants or operators, and we may be subject to delays, limitations and expenses in repositioning our assets.
We cannot predict whether our tenants will renew existing leases upon the expiration of the terms thereof. If the Kindred Master Leases, our leases with Brookdale Senior Living or any of our other leases are not renewed, we would be required to reposition those properties with another tenant or operator. In certain circumstances, we could also exercise our right to replace any tenant or operator upon a default under the terms of the applicable lease. In case of non-renewal, our tenants are required to continue to perform all obligations (including the payment of all rental amounts) for any assets that are not renewed until expiration of the then current lease term. We generally have one year to arrange for the repositioning of non-renewed assets prior to the expiration of the lease term. If we exercise our right to replace a tenant upon a default under a
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lease, during any period that we are attempting to locate a suitable replacement tenant or operator, there could be a decrease or cessation of rental payments on those properties. We cannot assure you that we would be successful in identifying suitable replacements or entering into leases with new tenants or operators on terms as favorable to us as our current leases, if at all. In this event, we may be required to fund certain expenses and obligations (e.g. real estate taxes, debt costs and maintenance expenses) to preserve the value and avoid the imposition of liens on properties while they are being repositioned.
Our ability to reposition our properties with another suitable tenant or operator could be significantly delayed or limited by various state licensing receivership, CON or other laws, as well as by the Medicare and Medicaid change-of-ownership rules. We could also incur substantial additional expenses in connection with any licensing, receivership or change-of-ownership proceedings. These delays, limitations and expenses could materially delay or impact our ability to reposition our properties, collect rent, obtain possession of leased properties or otherwise to exercise remedies for tenant default and could have a Material Adverse Effect on us.
Our counterparties may not be able to satisfy their obligations to us due to the continued turmoil and uncertainty in the capital markets.
As a result of current economic conditions, including turmoil and uncertainty in the capital markets, credit markets have tightened significantly such that the ability to obtain new capital has become more challenging and more expensive. In addition, several large financial institutions have either recently failed or become dependent on the assistance of the U.S. federal government to continue to operate as a going concern. Interest rate fluctuations, financial market volatility or credit market disruptions could limit the ability of our tenants, operators and managers to obtain credit to finance their businesses on acceptable terms, which could adversely affect their ability to satisfy their obligations to us. Similarly, if any of our other counterparties, such as letter of credit issuers, insurance carriers, banking institutions, title companies and escrow agents, experiences difficulty in accessing capital or other sources of funds or fails to remain a viable entity, it could have a Material Adverse Effect on us.
We may be unable to successfully foreclose on the collateral securing our real estate loan investments, and even if we are successful in our foreclosure efforts, we may be unable to successfully reposition the properties, which may adversely affect our ability to recover our investments.
If a borrower defaults under one of our mortgage loans, we may have to foreclose on the loan, as we are doing with respect to the Sunwest Loans, or protect our interest by acquiring title to the property and thereafter making substantial improvements or repairs in order to maximize the propertys investment potential. The borrower may contest enforcement of foreclosure or other remedies, seek bankruptcy protection against our exercise of enforcement or other remedies and/or bring claims for lender liability in response to actions to enforce mortgage obligations. If the borrower seeks bankruptcy protection, the automatic stay provisions of the U.S. Bankruptcy Code would preclude us from enforcing foreclosure or other remedies against the borrower unless relief is first obtained from the court having jurisdiction over the bankruptcy case. Foreclosure-related costs, high loan-to-value ratios or declines in the value of the property may prevent us from realizing an amount equal to our mortgage loans upon foreclosure, and we may be required to record valuation allowance for such losses. Even if we are able to successfully foreclose on the collateral securing our real estate loan investments, we may inherit properties that we are unable to expeditiously reposition with new tenants or operators, if at all, which would adversely affect our ability to recover our investment.
We are exposed to various operational risks, liabilities and claims with respect to our operating assets that may adversely affect our ability to generate revenues and/or increase our costs and could have a Material Adverse Effect on us.
We are exposed to various operational risks, liabilities and claims with respect to our operating assets, including our Sunrise-managed properties and our medical office buildings, that may adversely affect our ability to generate revenues and/or increase our costs, thereby reducing our profitability. These risks include fluctuations
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in occupancy levels, the inability to achieve economic resident fees (including anticipated increases in those fees), rent control regulations, increases in costs of materials, energy, labor and services, national and regional economic conditions, the imposition of new or increased taxes, capital expenditure requirements, professional and general liability claims and the availability and costs of professional and general liability insurance. Any one or a combination of these factors could result in operating deficiencies at our operating assets which could have a Material Adverse Effect on us.
We may encounter certain risks when implementing our business strategy to pursue investments in, and/or acquisitions or development of, additional seniors housing and/or healthcare assets.
We intend to continue to pursue investments in, and/or acquisitions or development of, additional seniors housing and/or healthcare assets domestically and internationally, subject to the contractual restrictions contained in our unsecured revolving credit facilities and the indentures governing our outstanding senior notes. Investments in and acquisitions of these properties entail general risks associated with any real estate investment, including risks that the investment will fail to perform in accordance with expectations, that the estimates of the cost of improvements necessary for acquired properties will prove inaccurate or that the tenant, operator or manager will fail to meet performance expectations. In addition, any new development projects that we pursue would be subject to risks of construction delays or cost overruns that may increase project costs, new project commencement risks such as receipt of zoning, occupancy and other required governmental approvals and permits and the risk of incurring development costs in connection with projects that are not pursued to completion. Investments in and acquisitions of properties outside the United States would also expose us to legal, economic and market risks associated with operating in foreign countries, such as currency and tax risks. If we incur additional debt or issue equity securities, or both, to finance future investments, acquisitions or development activity, our leverage could increase or our per share financial results may be reduced.
When we attempt to finance, acquire or develop properties, we compete with healthcare providers, other healthcare REITs, healthcare lenders, real estate partnerships, banks, insurance companies, private equity and other investors, some of whom are significantly larger and have substantially greater financial resources than we do. Our ability to compete successfully for investment and acquisition opportunities is affected by many factors, including our cost of obtaining debt and equity capital at rates comparable to or better than our competitors. Increased competition makes it more challenging for us to identify and successfully capitalize on opportunities that meet our business objectives and could improve the bargaining power of property owners seeking to sell, thereby impeding our investment, acquisition and development activities. See BusinessCompetition included in Item 1 of this Annual Report on Form 10-K. Even if we succeed in identifying and competing for such opportunities, we could encounter unanticipated difficulties and expenditures relating to the properties or businesses we invest in or acquire, the investment or acquisition could divert managements attention from our existing business, or the value of such investment or acquisition could decrease substantially, some or all of which could have a Material Adverse Effect on us.
Furthermore, as we continue to implement our business strategy to pursue investments in, and/or acquisitions or development of, additional seniors housing and/or healthcare assets or businesses, we expect to increase the number of operators of our properties and, potentially, our business segments. We cannot assure you that we will have the capabilities to successfully monitor and manage a portfolio of properties with a growing number of operators and/or manage such businesses.
Our investments are concentrated in seniors housing and healthcare real estate, making us more vulnerable economically than if our investments were diversified.
We invest primarily in real estatein particular, seniors housing and healthcare properties. This concentration exposes us to all of the risks inherent in investments in real estate to a greater degree than if our portfolio was diversified, and these risks are magnified by the fact that our real estate investments are limited to properties used in the seniors housing or healthcare industries. If the current downturn in the real estate industry continues or intensifies, it could adversely affect the value of our properties and our ability to sell properties for a
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price or on terms acceptable to us. A downturn in the seniors housing or healthcare industries could negatively impact our operating income and earnings, as well as our operators ability to make rental payments to us, which, in turn, could have a Material Adverse Effect on us.
Because real estate investments are relatively illiquid, our ability to quickly sell or exchange any of our properties in response to changes in economic or other conditions will be limited. We cannot give any assurances that we will recognize full value for any property that we are required to sell for liquidity reasons. This inability to respond quickly to changes in the performance of our investments could adversely affect our business, results of operations and financial condition.
Furthermore, the healthcare industry is highly regulated, and changes in government regulation and reimbursement in the past have had material adverse consequences on the industry in general, which consequences may not have been contemplated by lawmakers and regulators. We cannot assure you that future changes in government regulation of healthcare will not have a material adverse effect on the healthcare industry, including our seniors housing and healthcare operations, tenants and operators. Our ability to invest in non-seniors housing or non-healthcare properties is restricted by the terms of our unsecured revolving credit facilities, so these adverse effects may be more pronounced than if we diversified our investments outside of real estate or outside of seniors housing or healthcare.
Our tenants, operators and managers may be adversely affected by increasing healthcare regulation and enforcement.
Over the last several years, the regulatory environment surrounding the long-term healthcare industry has intensified both in the amount and type of regulations and in the efforts to enforce those regulations. This is particularly true for large for-profit, multi-facility providers like Kindred, Brookdale Senior Living and Sunrise. The extensive federal, state and local laws and regulations affecting the healthcare industry include those relating to, among other things, licensure, conduct of operations, ownership of facilities, addition of facilities and equipment, allowable costs, services, prices for services, qualified beneficiaries, quality of care, patient rights, fraudulent or abusive behavior, and financial and other arrangements which may be entered into by healthcare providers. Changes in enforcement policies by federal and state governments have resulted in a significant increase in the number of inspections, citations of regulatory deficiencies and other regulatory sanctions, including terminations from the Medicare and Medicaid programs, bars on Medicare and Medicaid payments for new admissions, civil monetary penalties and even criminal penalties. See Governmental RegulationHealthcare Regulation included in Item 1 of this Annual Report on Form 10-K.
If our tenants, operators and managers fail to comply with the extensive laws, regulations and other requirements applicable to their businesses and the operation of our properties, they could become ineligible to receive reimbursement from governmental and private third-party payor programs, face bans on admissions of new patients or residents, suffer civil and/or criminal penalties and/or be required to make significant changes to their operations. Our tenants, operators and managers also could be forced to expend considerable resources responding to an investigation or other enforcement action under applicable laws or regulations. In such event, the results of operations and financial condition of our tenants, operators and managers and the results of operations of our properties operated or managed by those entities could be adversely affected, which, in turn, could have a Material Adverse Effect on us. We are unable to predict the future course of federal, state and local regulation or legislation, including the Medicare and Medicaid statutes and regulations, and any changes in the regulatory framework could likewise have a material adverse effect on our tenants, operators and managers, which, in turn, could have a Material Adverse Effect on us.
Changes in the reimbursement rates or methods of payment from third-party payors, including the Medicare and Medicaid programs, could have a material adverse effect on certain of our tenants and operators.
Kindred and certain of our other tenants and operators rely on reimbursement from third-party payors, including the Medicare and Medicaid programs, for substantially all of their revenues. There continue to be various federal and state legislative and regulatory proposals to implement cost-containment measures that limit
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payments to healthcare providers. See Governmental RegulationHealthcare Regulation included in Item 1 of this Annual Report on Form 10-K. In addition, private third-party payors have continued their efforts to control healthcare costs. We cannot assure you that adequate reimbursement levels will be available for services to be provided by Kindred and our other tenants and operators which are currently being reimbursed by Medicare, Medicaid or private payors. Significant limits by governmental and private third-party payors on the scope of services reimbursed and on reimbursement rates and fees could have a material adverse effect on the liquidity, financial condition and results of operations of certain of our tenants and operators, which could affect adversely their ability to make rental payments under, and otherwise comply with the terms of, their leases with us.
We have only limited rights to terminate our management agreements with Sunrise, and we may be unable to replace Sunrise if our management agreements are terminated or not renewed.
We and Sunrise are parties to long-term management agreements pursuant to which Sunrise currently provides comprehensive property management services with respect to 79 of our seniors housing communities. Each management agreement has a term of 30 years, but may be terminated by us upon the occurrence of an event of default by Sunrise in the performance of a material covenant or term thereof (including the revocation of any licenses or certificates necessary for operation), subject in each case to Sunrises rights to cure deficiencies. Each management agreement may also be terminated upon the occurrence of certain insolvency events relating to Sunrise. In addition, if a minimum number of properties fail to achieve a targeted NOI level for a given period, then we may terminate the management agreement on each property in such pool. This targeted NOI level for each property is based upon an expected operating income projection set at the commencement of the management agreement for the applicable property, with such projection escalating annually. However, various legal and contractual considerations may limit or delay our exercise of any or all of these termination rights.
In the event that our management agreements with Sunrise are terminated for any reason or are not renewed upon expiration of their terms, we will have to find another manager for the properties covered by those agreements. We believe there are a number of qualified national and regional seniors care providers that would be interested in managing our Sunrise-managed properties. However, we cannot assure you that we will be able to locate another suitable manager or, if we are successful in locating such a manager, that such manager will manage the properties effectively. Any such inability or lengthy delay in replacing Sunrise as manager following termination or non-renewal of our management agreements could have a Material Adverse Effect on us.
Our current and future investments in joint ventures could be adversely affected by our lack of sole decision-making authority, our reliance on our joint venture partners financial condition, any disputes that may arise between us and our joint venture partners and our exposure to potential losses from the actions of our joint venture partners.
As of December 31, 2008, we had a 75% to 85% ownership interest in 61 of our seniors housing communities, with the minority interests in those communities being owned by affiliates of Sunrise. In addition, we owned eight medical office buildings through joint ventures with partners who typically provide management and leasing services for the properties. These joint ventures involve risks not present with respect to our wholly owned properties, including the following:
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We may be prevented from taking actions that are opposed by our joint venture partners. As the managing member, we have authority to make all decisions for our Sunrise joint ventures except for a limited set of major decisions, which generally include: (a) the merger or disposition of substantially all the assets of the joint venture; (b) the sale of additional interests in the joint venture; (c) the dissolution of the joint venture; (d) the disposition of a property owned by the joint venture; and (e) the acquisition of any real property by the joint venture. Under our MOB joint venture arrangements, we may share decision-making authority with our joint venture partners regarding major decisions affecting the |
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ownership or operation of the joint venture and any property held jointly, such as the sale or financing of the property or the making of additional capital contributions for the benefit of the property; |
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Our ability to transfer our interest in a joint venture to a third party may be restricted. We can generally transfer our interest in the Sunrise joint ventures, without consent, to anyone other than large seniors housing operators or their majority investors. Prior consent of our MOB joint venture partners may be required for a sale or transfer to a third party of our interests in such joint ventures; |
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Our joint venture partners might become bankrupt or fail to fund their share of required capital contributions, which may delay construction or development of a property or increase our financial commitment to the joint venture. Generally, in our Sunrise joint ventures, if either member fails to make a required capital contribution to a joint venture after notice and a cure period, the non-defaulting member may (i) revoke the capital contribution funding notice, (ii) advance to the joint venture the amount of the required capital contribution on behalf of the defaulting member in the form of a loan to the defaulting member, with all of the defaulting members subsequent distributions being applied to the loan until repayment in full, or (iii) advance the capital on behalf of the defaulting member with a recalculation of each members proportionate interest in the joint venture pursuant to the applicable formula in the agreements. Many of our Sunrise joint venture agreements provide for a punitive reduction in the defaulting members proportionate interest in the event of an advance of capital by a non-defaulting member pursuant to option (iii); |
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Our joint venture partners may have business interests or goals with respect to the property that conflict with our business interests and goals, which could increase the likelihood of disputes regarding the ownership, management or disposition of the property; |
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Disputes may develop with our joint venture partners over decisions affecting the property or the joint venture, which may result in litigation or arbitration that would increase our expenses and distract our officers and/or directors from focusing their time and effort on our business and possibly disrupt the day-to-day operations of the property, such as delaying the implementation of important decisions until the conflict or dispute is resolved; and |
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We may suffer losses as a result of the actions of our joint venture partners with respect to our joint venture investments. |
We may be adversely affected by fluctuations in currency exchange rates.
We currently own twelve seniors housing communities in the Canadian provinces of Ontario and British Columbia. As a result, we are subject to fluctuations in U.S. and Canadian exchange rates which may, from time to time, have an impact on our financial condition and results of operations. Increases or decreases in the value of the Canadian dollar will impact the amount of our net income. In addition, if we increase our international presence through investments in, and/or acquisitions or development of, seniors housing and/or healthcare assets outside the United States, we may transact additional business in currencies other than U.S. or Canadian dollars. Although we may decide to pursue hedging alternatives, including borrowing in local currencies, to protect against foreign currency fluctuations, we cannot assure you that any such fluctuations will not have a Material Adverse Effect on us.
Our revenues from the seniors housing communities managed by Sunrise are dependent on private pay sources; Events which adversely affect the ability of seniors to afford our daily resident fees could cause our occupancy rates, resident fee revenues and results of operations to decline.
By and large, assisted and independent living services currently are not reimbursable under government reimbursement programs, such as Medicare and Medicaid. Hence, substantially all of the resident fee revenues generated by our Sunrise-managed properties are derived from private pay sources consisting of income or assets of residents or their family members. In general, due to the expense associated with building new properties and the staffing and other costs of providing services at these properties, only seniors with income or assets meeting
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or exceeding the comparable median in the regions where our properties are located typically can afford to pay the daily resident and care fees. The current economic downturn and decline in the housing market, as well as other events such as changes in demographics, could adversely affect the ability of seniors to afford these fees. If Sunrise is unable to attract and retain seniors with sufficient income, assets or other resources required to pay the fees associated with assisted and independent living services, our occupancy rates, resident fee revenues and results of operations could decline, which, in turn, could have a Material Adverse Effect on us.
Overbuilding in markets in which our seniors housing communities are located could adversely affect our future occupancy rates, operating margins and profitability.
Barriers to entry in the assisted living industry are not substantial. Consequently, the development of new seniors housing communities could outpace demand. If the development of new seniors housing communities outpaces demand for those communities in the markets in which our properties are located, those markets may become saturated. Overbuilding in our markets, therefore, could cause us to experience decreased occupancy, reduced operating margins and lower profitability.
Termination of resident lease agreements could adversely affect our revenues and earnings.
Applicable regulations governing assisted living communities generally require written resident lease agreements with each resident. Most of these regulations also require that each resident have the right to terminate the resident lease agreement for any reason on reasonable notice. Consistent with these regulations, the resident lease agreements signed by Sunrise with respect to our properties managed by it generally allow residents to terminate their lease agreements on 30 days notice. Thus, Sunrise cannot contract with residents to stay for longer periods of time, unlike typical apartment leasing arrangements with terms of up to one year or longer. In addition, the resident turnover rate in our seniors housing communities may be difficult to predict. If a large number of resident lease agreements terminate at or around the same time, and if our units remained unoccupied, then our revenues and earnings could be adversely affected, which, in turn, could have a Material Adverse Effect on us.
Significant legal actions could subject our tenants, operators and managers to increased operating costs and substantial uninsured liabilities, which could materially adversely affect their liquidity, financial condition and results of operation.
Although claims and costs of professional liability insurance seem to be growing at a slower pace, our tenants, operators and managers have experienced substantial increases in both the number and size of professional liability claims in recent years. In addition to large compensatory claims, plaintiffs attorneys continue to seek significant punitive damages and attorneys fees. Due to historically high frequency and severity of professional liability claims against healthcare providers, the availability of professional liability insurance has been restricted and the premiums on such insurance coverage remain very high. As a result, the insurance coverage of our tenants, operators and managers might not cover all claims against them or continue to be available to them at a reasonable cost. If our tenants, operators and managers are unable to maintain adequate insurance coverage or are required to pay punitive damages, they may be exposed to substantial liabilities.
Kindred insures its professional liability risks, in part, through a wholly owned, limited purpose insurance company. The limited purpose insurance company insures initial losses up to specified coverage levels per occurrence with no aggregate coverage limit. Coverage for losses in excess of those per occurrence levels is maintained through unaffiliated commercial insurance carriers up to an aggregate limit. The limited purpose insurance company then insures all claims in excess of the aggregate limit for the unaffiliated commercial insurance carriers. Kindred maintains general liability insurance and professional malpractice liability insurance in amounts and with deductibles which Kindred management has indicated that it believes are sufficient for its operations.
Our tenants, operators and managers, like Kindred, that insure any part of their general and professional liability risks through their own captive limited purpose entities generally estimate the future cost of general and professional
34
liability through actuarial studies which rely primarily on historical data. However, due to the rise in the number and severity of professional claims against healthcare providers, these actuarial studies may underestimate the future cost of claims, and we cannot assure you that our tenants, operators and managers reserves for future claims will be adequate to cover the actual cost of those claims. If the actual cost of claims is significantly higher than the reserves, our tenants, operators and managers liquidity, results of operations and financial condition and the results of operations at our properties could be materially adversely affected, which could have a Material Adverse Effect on us.
Our operators may be sued under a federal whistleblower statute.
Our operators who engage in business with the federal government may be sued under a federal whistleblower statute designed to combat fraud and abuse in the healthcare industry. See Governmental RegulationHealthcare Regulation included in Item 1 of this Annual Report on Form 10-K. These lawsuits can involve significant monetary damages and award bounties to private plaintiffs who successfully bring these suits. If any of these lawsuits were to be brought against our operators, such suits combined with increased operating costs and substantial uninsured liabilities could have a material adverse effect on the operators liquidity, financial condition and results of operation and on their ability to make rental payments to us, which, in turn, could have a Material Adverse Effect on us.
If any of our properties are found to be contaminated, or if we become involved in any environmental disputes, we could incur substantial liabilities and costs.
Under federal and state environmental laws and regulations, a current or former owner of real property may be liable for costs related to the investigation, removal and remediation of hazardous or toxic substances or petroleum that are released from or are present at or under, or that are disposed of in connection with such property. Owners of real property may also face other environmental liabilities, including government fines and penalties imposed by regulatory authorities and damages for injuries to persons, property or natural resources. Environmental laws and regulations often impose liability without regard to whether the owner was aware of, or was responsible for, the presence, release or disposal of hazardous or toxic substances or petroleum. In certain circumstances, environmental liability may result from the activities of a current or former operator of the property. Although we are generally indemnified by the current operators of our properties for contamination caused by them, these indemnities may not adequately cover all environmental costs. See Governmental RegulationEnvironmental Regulation included in Item 1 of this Annual Report on Form 10-K.
Our success depends, in part, on our ability to retain key personnel, and the loss of any one of them could adversely impact our business.
The success of our business depends, in part, on the leadership and performance of our executive management team and key employees. Our future performance will be substantially dependent on our ability to retain and motivate these individuals. Competition for these individuals is intense, and we cannot give any assurances that we will retain our key officers and employees or that we can attract or retain other highly qualified individuals in the future. Losing any one or more of these persons could have a Material Adverse Effect on us.
If the liabilities we have assumed in connection with acquisitions are greater than expected, or if there are unknown liabilities, our business could be materially and adversely affected.
We have assumed certain liabilities in connection with our past acquisitions, including, in some cases, contingent liabilities. As we integrate these acquisitions, we may learn additional information about the seller and liabilities that adversely affects us, such as:
|
Liabilities relating to the clean-up or remediation of undisclosed environmental conditions; |
|
Unasserted claims of vendors or other persons dealing with the seller; |
|
Liabilities, claims and litigation, whether or not incurred in the ordinary course of business, relating to periods prior to our acquisition; |
35
|
Claims for indemnification by general partners, directors, officers and others indemnified by the seller; and |
|
Liabilities for taxes relating to periods prior to our acquisition. |
As a result, we cannot assure you that our past acquisitions will be successful or will not, in fact, harm our business. Among other things, if the liabilities we have assumed are greater than expected, or if there are obligations relating to the acquired properties of which we were not aware at the time we completed the acquisition, our business could be materially adversely affected.
Risks Arising from Our Capital Structure
The recent and ongoing credit and liquidity crisis may limit our access to capital and have an adverse effect on our ability to meet our debt payments, make distributions to our stockholders or make future investments necessary to implement our business plan.
In order to meet our debt payments, make distribution to our stockholders or make future investments necessary to implement our business plan, we may need to raise additional capital. Recently, the global capital and credit markets have been experiencing a period of extraordinary turmoil and upheaval, characterized by the bankruptcy, failure or sale of various financial institutions and an unprecedented level of intervention from the U.S. federal government. This disruption in the credit markets, the repricing of credit risk and the deterioration of the financial and real estate markets have created increasingly difficult conditions for REITs and other companies to access capital or other sources of funds. These conditions include greater stock price volatility, significantly less liquidity, widening of credit spreads and a lack of price transparency. It is difficult to predict how long these conditions will persist and the extent to which our results of operation and financial condition may be adversely affected.
While we currently have no reason to believe that we will be unable to access our unsecured revolving credit facilities in the future, concern about the stability of the markets generally and the strength of borrowers specifically has led many lenders and institutional investors to reduce and, in some cases, cease funding to borrowers. In addition, the financial institutions that are parties to our unsecured revolving credit facilities might have incurred losses or might have reduced capital reserves on account of their prior lending to borrowers, their holdings of certain mortgage securities or their other financial relationships, in part because of the general weakening of the U.S. economy and the increased financial instability of many borrowers. As a result, these financial institutions might be or become capital constrained and might tighten their lending standards, or become insolvent. If they experience shortages of capital and liquidity, or if they experience excessive volumes of borrowing requests from other borrowers within a short period of time, these lenders might not be able or willing to honor their funding commitments to us, which would adversely affect our ability to draw on our unsecured revolving credit facilities and, over time, could negatively impact our ability to consummate acquisitions, repay indebtedness as it matures, fund capital expenditures or make distributions to our stockholders. Continued adverse conditions in the credit markets in future years could also adversely affect the availability and terms of future borrowings, renewals or refinancings.
Our options for addressing such capital constraints would include without limitation (i) obtaining commitments from the remaining banks in our lending group or from new banks to fund increased amounts under the terms of our unsecured revolving credit facilities, (ii) accessing the public capital markets, (iii) obtaining secured loans from government-sponsored entities, pension funds or similar sources, (iv) decreasing or eliminating our distributions to our stockholders or paying taxable stock dividends and/or (v) delaying or ceasing our acquisition and investment activity. As with other public companies, the availability of debt and equity capital depends, in part, on the trading levels of our bonds and the market price of our common stock, which, in turn, depends upon various market conditions that change from time to time. Among the market conditions and other factors that may affect our bond trading levels and the market price of our common stock is the markets perception of our financial condition, our growth potential and our current and future earnings and cash distributions. Our failure to meet the markets expectation with regard to future earnings and cash distributions
36
would likely adversely affect our bond trading levels and the market price of our common stock. If we cannot access capital or we cannot access capital at an acceptable cost, we may be required to liquidate one or more investments in properties at times that may not permit us to realize the maximum return on those investments, which could also result in adverse tax consequences to us. Moreover, certain healthcare regulations may constrain our ability to sell assets. We cannot assure you that we will be able to raise the necessary capital to meet our debt service obligations, make distributions to our stockholders or make future investments necessary to implement our business plan, and the failure to do so could have a Material Adverse Effect on us.
We may become more leveraged.
As of December 31, 2008, we had approximately $3.1 billion of indebtedness. Our unsecured revolving credit facilities and the indentures governing our outstanding senior notes permit us to incur substantial additional debt, and we may borrow additional funds, which may include secured borrowings. A high level of indebtedness would require us to dedicate a substantial portion of our cash flow from operations to the payment of debt service, thereby reducing the funds available to implement our business strategy and to make distributions to stockholders. A high level of indebtedness could also have the following consequences:
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Potential limits on our ability to adjust rapidly to changing market conditions and vulnerability in the event of a downturn in general economic conditions or in the real estate and/or healthcare industries; |
|
Potential impairment of our ability to obtain additional financing for our business strategy; and |
|
Potential downgrade in the rating of our debt securities by one or more rating agencies, which could have the effect of, among other things, increasing our cost of borrowing. |
In addition, from time to time we mortgage our properties to secure payment of indebtedness. If we are unable to meet our mortgage payments, then the encumbered properties could be foreclosed upon or transferred to the mortgagee with a consequent loss of income and asset value. A foreclosure on one or more of our properties could have a Material Adverse Effect on us.
We are exposed to increases in interest rates, which could reduce our profitability and adversely impact our ability to refinance existing debt, sell assets or engage in acquisition and investment activity, and our decision to hedge against interest rate risk might not be effective.
We receive a significant portion of our revenues by leasing our assets under long-term triple-net leases in which the rental rate is generally fixed with annual rent escalations, subject to certain limitations. Certain of our debt obligations are floating rate obligations with interest rate and related payments that vary with the movement of LIBOR, Bankers Acceptance or other indexes. The generally fixed rate nature of our revenues and the variable rate nature of certain of our obligations create interest rate risk. Although our operating assets provide a partial hedge against interest rate fluctuations, if interest rates rise, our interest costs for our existing floating rate debt and any new debt we incur would also increase. This increased cost could have the effect of reducing our profitability or making our lease and other revenues insufficient to meet our obligations, and could make the financing of any acquisition or investment activity more costly. Further, rising interest rates could limit our ability to refinance existing debt when it matures or cause us to pay higher rates upon refinancing. An increase in interest rates may also decrease the amount third parties are willing to pay for our assets, thereby limiting our ability to reposition our portfolio promptly in response to changes in economic or other conditions.
We may seek to manage our exposure to interest rate volatility by using hedging arrangements that involve risk, including the risk that counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate changes, that the amount of income we may earn from hedging transactions may be limited by federal tax provisions governing REITs, and that these arrangements may result in higher interest rates than we would otherwise have. Moreover, no amount of hedging activity can completely insulate us from the risks associated with changes in interest rates. Failure to hedge effectively against interest rate risk, if we choose to engage in such activities, could adversely affect our results of operations and financial condition.
37
Covenants in our unsecured revolving credit facilities, the indentures governing our senior notes and other debt instruments limit our operational flexibility and a covenant breach could materially adversely affect our operations.
The terms of our unsecured revolving credit facilities, the indentures governing our outstanding senior notes and other debt instruments require us to comply with a number of customary financial and other covenants, such as maintaining debt service coverage, leverage ratios and net worth requirements. Our continued ability to incur indebtedness and operate in general is subject to compliance with these covenants, which limit our operational flexibility. Breaches of these covenants could result in defaults under the applicable debt instruments, in addition to any other indebtedness cross-defaulted against such instruments, even if we satisfy our payment obligations. Financial and other covenants that limit our operational flexibility, as well as defaults resulting from a breach of any of these covenants in our debt instruments, could have a Material Adverse Effect on us.
Risks Arising from Our Status as a REIT
Loss of our status as a REIT would have significant adverse consequences to us and the value of our common stock.
If we lose our status as a REIT, we will face serious tax consequences that will substantially reduce the funds available for satisfying our obligations and for distribution to our stockholders for each of the years involved because:
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We would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to federal income tax at regular corporate rates; |
|
We also could be subject to the federal alternative minimum tax and possibly increased state and local taxes; and |
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Unless we are entitled to relief under statutory provisions, we could not elect to be subject to tax as a REIT for four taxable years following the year during which we were disqualified. |
In addition, in such event we would no longer be required to pay dividends to maintain REIT status. As a result of all these factors, our failure to qualify as a REIT also could impair our ability to implement our business strategy and would adversely affect the value of our common stock.
Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to remain qualified as a REIT. In addition, new legislation, regulations, administrative interpretations or court decisions may adversely affect our investors or our ability to remain qualified as a REIT for tax purposes. Although we believe that we qualify as a REIT, we cannot assure you that we will continue to qualify or remain qualified as a REIT for tax purposes.
The 90% distribution requirement will decrease our liquidity and may limit our ability to engage in otherwise beneficial transactions.
To comply with the 90% distribution requirement applicable to REITs and to avoid the nondeductible excise tax, we must make distributions to our stockholders. See Certain U.S. Federal Income Tax ConsiderationsRequirements for Qualification as a REITAnnual Distribution Requirements included in Item 1 of this Annual Report on Form 10-K. The indentures governing our outstanding senior notes permit us to make annual distributions to our stockholders in an amount equal to the minimum amount necessary to maintain our REIT status so long as the ratio of our Debt to Adjusted Total Assets (as each term is defined in the indentures) does not exceed 60% and to make additional distributions if we pass certain other financial tests. However, distributions may limit our ability to rely upon rental payments from our properties or subsequently acquired properties to finance investments, acquisitions or new developments.
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Although we anticipate that we generally will have sufficient cash or liquid assets to enable us to satisfy the REIT distribution requirement, it is possible that, from time to time, we may not have sufficient cash or other liquid assets to meet the 90% distribution requirement. This may be due to the timing differences between the actual receipt of income and actual payment of deductible expenses, on the one hand, and the inclusion of that income and deduction of those expenses in arriving at our taxable income, on the other hand. In addition, non-deductible expenses such as principal amortization or repayments or capital expenditures in excess of non-cash deductions also may cause us to fail to have sufficient cash or liquid assets to enable us to satisfy the 90% distribution requirement.
In the event that timing differences occur or we decide to retain cash or to distribute such greater amount as may be necessary to avoid income and excise taxation, we may borrow funds, issue additional equity securities (although we cannot assure you that we will be able to do so), pay taxable stock dividends, if possible, distribute other property or securities or engage in a transaction intended to enable us to meet the REIT distribution requirements. This may require us to raise additional capital to meet our obligations; however, see Risks Arising from Our Capital StructureThe recent and ongoing credit and liquidity crisis may limit our access to capital and have an adverse effect on our ability to meet our debt payments, make distributions to our stockholders or make future investments necessary to implement our business plan. The terms of our unsecured revolving credit facilities and the indentures governing our outstanding senior notes restrict our ability to engage in some of these transactions.
If we decide to pay taxable stock dividends to meet the REIT distribution requirements, your tax liability may be greater than the amount of cash you receive.
The IRS has recently issued Revenue Procedure 2009-15. Under this Revenue Procedure, the IRS will treat stock dividends as distributions for purposes of satisfying the REIT distribution requirements for calendar year 2009 if each stockholder can elect to receive the distribution in cash, even if the aggregate cash amount paid to all stockholders is limited, provided certain requirements are met. Accordingly, if we decide to pay a stock dividend in accordance with Revenue Procedure 2009-15, your tax liability with respect to such dividend may be significantly greater than the amount of cash you receive.
ITEM 1B. | Unresolved Staff Comments |
None.
ITEM 2. | Properties |
Seniors Housing and Healthcare Properties
As of December 31, 2008, we owned 513 assets: 248 seniors housing communities, 192 skilled nursing facilities, 41 hospitals and 32 MOBs and other properties in 43 states and two Canadian provinces. We believe that the asset type and geographic diversity of the properties makes our portfolio less susceptible to regional economic downturns and adverse changes in regulation or reimbursement rates or methodologies in any single state.
At December 31, 2008, we had mortgage loan obligations outstanding in the aggregate principal amount of $1.5 billion, secured by certain of our properties.
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The following table sets forth select information regarding the properties we owned as of December 31, 2008 for each geographic location in which we own property:
As of December 31, 2008 | ||||||||||||||||
Seniors Housing
Communities |
Skilled Nursing
Facilities |
Hospitals | MOBs (1) |
Other
Properties |
||||||||||||
Geographic Location |
Number of
Properties |
Units |
Number of
Facilities |
Licensed
Beds |
Number of
Hospitals |
Licensed
Beds |
Number of
Properties |
Number of
Properties |
||||||||
Alabama |
2 | 221 | 2 | 329 | | | | | ||||||||
Arizona |
8 | 663 | 4 | 591 | 2 | 109 | | | ||||||||
Arkansas |
6 | 390 | | | | | | | ||||||||
California |
26 | 3,304 | 9 | 1,132 | 5 | 417 | | | ||||||||
Colorado |
6 | 459 | 4 | 464 | 1 | 68 | 3 | | ||||||||
Connecticut |
4 | 458 | 6 | 736 | | | | | ||||||||
Florida |
14 | 1,453 | | | 6 | 511 | 6 | | ||||||||
Georgia |
10 | 837 | 4 | 537 | | | 2 | | ||||||||
Idaho |
1 | 70 | 7 | 624 | | | | | ||||||||
Illinois |
17 | 2,637 | | | 4 | 431 | | | ||||||||
Indiana |
9 | 1,001 | 13 | 1,883 | 1 | 59 | | | ||||||||
Kansas |
3 | 354 | | | | | | | ||||||||
Kentucky |
| | 27 | 3,054 | 3 | 760 | 1 | | ||||||||
Louisiana |
1 | 58 | | | 1 | 168 | | | ||||||||
Maine |
| | 8 | 654 | | | | | ||||||||
Maryland |
2 | 149 | | | | | | | ||||||||
Massachusetts |
10 | 1,259 | 26 | 2,712 | 2 | 109 | | | ||||||||
Michigan |
9 | 771 | | | | | | | ||||||||
Minnesota |
9 | 634 | 1 | 140 | | | | | ||||||||
Missouri |
1 | 173 | | | 2 | 227 | 1 | | ||||||||
Montana |
| | 2 | 276 | | | | | ||||||||
Nebraska |
1 | 136 | | | | | | | ||||||||
Nevada |
1 | 152 | 2 | 174 | 1 | 52 | | | ||||||||
New Hampshire |
| | 3 | 512 | | | | | ||||||||
New Jersey |
9 | 724 | 1 | 153 | | | 1 | | ||||||||
New Mexico |
2 | 344 | | | 1 | 61 | | | ||||||||
New York |
14 | 1,307 | | | | | | | ||||||||
North Carolina |
6 | 438 | 16 | 1,818 | 1 | 124 | | | ||||||||
Ohio |
16 | 1,152 | 12 | 1,626 | | | 2 | | ||||||||
Oklahoma |
| | | | 1 | 59 | | | ||||||||
Oregon |
| | 2 | 254 | | | | | ||||||||
Pennsylvania |
25 | 1,649 | 6 | 797 | 2 | 115 | 2 | | ||||||||
Rhode Island |
| | 2 | 201 | | | | | ||||||||
South Carolina |
2 | 120 | | | | | | | ||||||||
Tennessee |
5 | 338 | 3 | 397 | 1 | 49 | | | ||||||||
Texas |
3 | 262 | | | 7 | 496 | 3 | 8 | ||||||||
Utah |
1 | 79 | 5 | 620 | | | | | ||||||||
Vermont |
| | 1 | 160 | | | | | ||||||||
Virginia |
5 | 400 | 4 | 629 | | | | | ||||||||
Washington |
3 | 320 | 7 | 682 | | | | | ||||||||
West Virginia |
1 | 59 | | | | | | | ||||||||
Wisconsin |
4 | 172 | 11 | 1,825 | | | | | ||||||||
Wyoming |
| | 4 | 378 | | | 1 | | ||||||||
Total U.S. |
236 | 22,543 | 192 | 23,358 | 41 | 3,815 | 22 | 8 | ||||||||
British Columbia |
3 | 276 | | | | | | | ||||||||
Ontario |
9 | 848 | | | | | | | ||||||||
Total Canada |
12 | 1,124 | | | | | | | ||||||||
Total |
248 | 23,667 | 192 | 23,358 | 41 | 3,815 | 22 | 8 | ||||||||
(1) | The table excludes two MOBs that were under development as of December 31, 2008. |
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Corporate Offices
We lease our corporate offices in Louisville, Kentucky and Chicago, Illinois.
ITEM 3. | Legal Proceedings |
The information contained in Note 15Litigation of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K is incorporated by reference into this Item 3. Except as set forth therein, we are not a party to, nor is any of our property the subject of, any material pending legal proceedings.
ITEM 4. | Submission of Matters to a Vote of Security Holders |
Not applicable.
ITEM 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Market Information
Our common stock, par value $0.25 per share, is listed and traded on the New York Stock Exchange (the NYSE) under the symbol VTR. The following table sets forth, for the periods indicated, the high and low sales prices of our common stock as reported on the NYSE and the dividends declared per share.
Sales Price of
Common Stock |
Dividends
Declared |
||||||||
High | Low | ||||||||
2008 |
|||||||||
First Quarter |
$ | 48.09 | $ | 39.00 | $ | 0.5125 | |||
Second Quarter |
50.39 | 41.32 | 0.5125 | ||||||
Third Quarter |
52.00 | 38.84 | 0.5125 | ||||||
Fourth Quarter |
49.60 | 17.31 | 0.5125 | ||||||
2007 |
|||||||||
First Quarter |
$ | 47.97 | $ | 40.91 | $ | 0.475 | |||
Second Quarter |
45.14 | 34.90 | 0.475 | ||||||
Third Quarter |
43.19 | 31.38 | 0.475 | ||||||
Fourth Quarter |
47.49 | 39.37 | 0.475 |
As of February 24, 2009, there were 143,404,798 shares of our common stock outstanding held by approximately 2,816 stockholders of record.
Dividends and Distributions
We pay regular quarterly dividends to holders of our common stock so as to comply with the provisions of the Code governing REITs. On February 11, 2009, our Board of Directors declared the first quarterly installment of our 2009 dividend in the amount of $0.5125 per share, payable in cash on March 31, 2009 to stockholders of record on March 18, 2009. We expect to distribute 100% or more of our taxable net income to our stockholders for 2009. See Certain U.S. Federal Income Tax ConsiderationsRequirements for Qualification as a REITAnnual Distribution Requirements included in Part I, Item 1 of this Annual Report on Form 10-K.
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Our Board of Directors normally makes decisions regarding the nature, frequency and amount of our dividends on a quarterly basis. Because the Board considers a number of factors when making these decisions, including our current and future liquidity needs and position, current and projected results from operations and performance and credit quality of our tenants, operators, managers and borrowers, we cannot assure you that we will maintain the policy stated above. Please see Cautionary Statements and the risk factors included in Part I, Item 1A of this Annual Report on Form 10-K for a description of other factors that may affect our distribution policy.
Our stockholders may reinvest all or a portion of any cash distribution on their shares of our common stock by participating in our Distribution Reinvestment and Stock Purchase Plan, subject to the terms of the plan. See Note 16Capital Stock of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Director and Employee Stock Sales
Certain of our directors, executive officers and other employees have adopted and may, from time to time in the future, adopt non-discretionary, written trading plans that comply with Rule 10b5-1 under the Exchange Act, or otherwise monetize their equity-based compensation.
Each of our
Stock Repurchases
The table below summarizes repurchases of our common stock made during the quarter ended December 31, 2008:
Number of Shares
Repurchased (1) |
Average Price Per
Share |
||||
October 1 through October 31 |
| | |||
November 1 through November 30 |
| | |||
December 1 through December 31 |
14,507 | $ | 31.48 |
(1) | Repurchases represent shares withheld to pay taxes on the vesting of restricted stock granted to employees. |
The value of the shares withheld is the closing price of our common stock on the date the vesting occurs.
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Stock Performance Graph
The following performance graph compares the cumulative total return (including dividends) to the holders of our common stock from December 31, 2003 through December 31, 2008, with the cumulative total returns of the NYSE Composite Index, the FTSE NAREIT Composite REIT Index (the Composite REIT Index), the FTSE NAREIT Healthcare Equity REIT Index (the Healthcare REIT Index) and the Russell 1000 Index over the same period. The comparison assumes $100 was invested on December 31, 2003 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, as applicable. We have included the NYSE Composite Index in the performance graph because our common stock is listed on the NYSE. We have included the other indices because we believe that they are either most representative of the industry in which we compete, or otherwise provide a fair basis for comparison with Ventas, and are therefore particularly relevant to an assessment of our performance. The figures in the table below are rounded to the nearest dollar.
12/31/03 | 12/31/04 | 12/31/05 | 12/31/06 | 12/31/07 | 12/31/08 | |||||||||||||
Ventas |
$ | 100 | $ | 131 | $ | 161 | $ | 222 | $ | 249 | $ | 194 | ||||||
NYSE Composite Index |
100 | 115 | 126 | 151 | 165 | 100 | ||||||||||||
Composite REIT Index |
100 | 130 | 141 | 189 | 156 | 97 | ||||||||||||
Healthcare REIT Index |
100 | 121 | 123 | 178 | 182 | 160 | ||||||||||||
Russell 1000 Index |
100 | 111 | 118 | 137 | 145 | 90 |
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ITEM 6. | Selected Financial Data |
You should read the following selected financial data in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of this Annual Report on Form 10-K and our Consolidated Financial Statements and the notes thereto included in Item 8 of this Annual Report on Form 10-K, as acquisitions, divestitures, changes in accounting policies and other items impact the comparability of the financial data.
As of and For the Years Ended December 31, (1) | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Operating Data |
||||||||||||||||||||
Rental income |
$ | 487,436 | $ | 465,069 | $ | 388,167 | $ | 295,852 | $ | 207,375 | ||||||||||
Resident fees and services |
429,257 | 282,226 | | | | |||||||||||||||
Interest expense |
203,184 | 195,731 | 128,953 | 93,676 | 57,122 | |||||||||||||||
Property-level operating expenses |
306,944 | 198,125 | 3,171 | 2,576 | 1,337 | |||||||||||||||
General, administrative and professional fees |
40,651 | 36,425 | 26,136 | 25,075 | 18,124 | |||||||||||||||
Income from continuing operations applicable to common shares |
181,814 | 137,510 | 122,072 | 116,357 | 90,811 | |||||||||||||||
Discontinued operations |
44,474 | 139,609 | 9,358 | 14,226 | 30,089 | |||||||||||||||
Net income applicable to common shares |
226,288 | 277,119 | 131,430 | 130,583 | 120,900 | |||||||||||||||
Per Share Data |
||||||||||||||||||||
Income from continuing operations applicable to common shares, basic |
$ | 1.30 | $ | 1.12 | $ | 1.17 | $ | 1.22 | $ | 1.09 | ||||||||||
Net income applicable to common shares, basic |
$ | 1.62 | $ | 2.26 | $ | 1.26 | $ | 1.37 | $ | 1.45 | ||||||||||
Income from continuing operations applicable to common shares, diluted |
$ | 1.30 | $ | 1.12 | $ | 1.16 | $ | 1.21 | $ | 1.08 | ||||||||||
Net income applicable to common shares, diluted |
$ | 1.62 | $ | 2.25 | $ | 1.25 | $ | 1.36 | $ | 1.43 | ||||||||||
Dividends declared per common share |
$ | 2.05 | $ | 1.90 | $ | 1.58 | $ | 1.44 | $ | 1.30 | ||||||||||
Other Data |
||||||||||||||||||||
Net cash provided by operating activities |
$ | 364,175 | $ | 401,626 | $ | 238,867 | $ | 223,764 | $ | 149,958 | ||||||||||
Net cash used in investing activities |
(136,256 | ) | (1,175,192 | ) | (481,974 | ) | (615,041 | ) | (298,695 | ) | ||||||||||
Net cash (used in) provided by financing activities |
(80,247 | ) | 805,649 | 242,712 | 389,553 | 69,998 | ||||||||||||||
FFO applicable to common shares (2) |
416,042 | 377,656 | 249,668 | 213,203 | 150,322 | |||||||||||||||
Balance Sheet Data |
||||||||||||||||||||
Real estate investments, at cost |
$ | 6,160,630 | $ | 6,292,181 | $ | 3,707,837 | $ | 3,027,896 | $ | 1,512,211 | ||||||||||
Cash and cash equivalents |
176,812 | 28,334 | 1,246 | 1,641 | 3,365 | |||||||||||||||
Total assets |
5,769,984 | 5,716,628 | 3,253,800 | 2,639,118 | 1,126,935 | |||||||||||||||
Senior notes payable and other debt |
3,147,694 | 3,360,499 | 2,329,053 | 1,802,564 | 843,178 |
(1) |
Effective January 1, 2009, we adopted Financial Accounting Standards Board Staff Position No. APB 14-1 Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (APB14-1). See Managements Discussion and Analysis of Financial Condition and Results of OperationsRecently Adopted Accounting Standards included in Item 7 of this Annual Report on Form 10-K and Note 2Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for detail regarding the impact of APB 14-1 on our Consolidated Financial Statements for the years ended December 31, 2008, 2007 and |
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2006. APB 14-1 had no impact on our Consolidated Financial Statements for the years ended December 31, 2005 and 2004. |
(2) | We consider funds from operations (FFO) an appropriate measure of performance of an equity REIT, and we use the National Association of Real Estate Investment Trusts (NAREIT) definition of FFO. NAREIT defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of real estate property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO presented herein is not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies use the same definition. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of our financial performance or as an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is FFO indicative of sufficient cash flow to fund all of our needs. See Managements Discussion and Analysis of Financial Condition and Results of OperationsFunds from Operations included in Item 7 of this Annual Report on Form 10-K. |
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ITEM 7 . | Managements Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the consolidated results of operations and financial condition of Ventas, Inc. (together with its subsidiaries, unless otherwise indicated or except where the context otherwise requires, we, us or our). You should read this discussion in conjunction with our Consolidated Financial Statements and the notes thereto included in Item 8 of this Annual Report on Form 10-K. This Managements Discussion and Analysis will help you understand:
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Our corporate and operating environment; |
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2008 highlights and other recent developments; |
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Our critical accounting policies and estimates; |
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Our results of operations for the last three years; |
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Asset and liability management; |
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Our liquidity and capital resources; |
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Our cash flows; and |
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Contractual obligations. |
Corporate and Operating Environment
We are a real estate investment trust (REIT) with a geographically diverse portfolio of seniors housing and healthcare properties in the United States and Canada. As of December 31, 2008, this portfolio consisted of 513 assets: 248 seniors housing communities, 192 skilled nursing facilities, 41 hospitals and 32 medical office buildings (MOBs) and other properties in 43 states and two Canadian provinces. With the exception of 79 of our seniors housing communities that are managed by Sunrise Senior Living, Inc. (together with its subsidiaries, Sunrise) pursuant to long-term management agreements and the majority of our MOBs, we lease our properties to healthcare operating companies under triple-net or absolute net leases, which require the tenants to pay all property-related expenses. We also had real estate loan investments relating to seniors housing and healthcare companies as of December 31, 2008.
Our primary business consists of acquiring, financing and owning seniors housing and healthcare properties and leasing those properties to third parties or operating those properties through independent third-party managers. We operate through two reportable business segments: triple-net leased properties and senior living operations.
As of December 31, 2008, we had a 100% ownership interest in 444 of our properties. Of the remaining 69 properties, we had a 75% to 85% ownership interest in 61 seniors housing communities, with the minority interest in those communities being owned by Sunrise, and we had joint venture ownership interests in eight MOBs, ranging from 50% to 99.7%. Our joint venture partners also typically provide management and leasing services for these MOBs.
Our business strategy is comprised of three principal objectives: (1) portfolio diversification; (2) stable earnings and growth; and (3) maintaining a strong balance sheet and liquidity. While current conditions in the capital markets persist, maintaining a strong balance sheet and liquidity will be our primary focus.
Access to external capital is an important component of the success of our strategy. Generally, we attempt to match the long-term duration of most of our investments with long-term fixed-rate financing. At December 31, 2008, only 17.4% of our consolidated debt was variable rate debt. We intend to maintain an investment grade rating on our senior debt securities and manage various capital ratios and amounts within appropriate parameters
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to the extent it is reasonable to do so. As of December 31, 2008, we had credit ratings of BBB- (stable) from Standard & Poors Ratings Services, BBB- (positive) from Fitch Ratings and Ba1 (stable) from Moodys Investors Service on our senior unsecured debt securities.
Access to capital markets impacts our ability to repay existing indebtedness as it matures and to make future investments. Our cost of and ability to access capital depend on various factors, including general market conditions, interest rates, credit ratings on our securities, perception of our potential future earnings and cash distributions and the market price of our common stock.
2008 Highlights and Other Recent Developments
Liquidity and Balance Sheet
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We amended and extended our unsecured revolving credit facility (the U.S. credit facility) and entered into a new unsecured revolving credit facility (the Canadian credit facility) to expand our aggregate borrowing capacity to $850.0 million and set the maturity date at April 26, 2010. Under the Canadian credit facility, we may borrow up to $150.0 million or the equivalent in Canadian dollars. The U.S. credit facility includes a $150.0 million accordion feature that permits us to further expand our aggregate borrowing capacity to $1.0 billion upon satisfaction of certain conditions. Borrowings under our unsecured revolving credit facilities bear interest at a fluctuating rate per annum (based on U.S. or Canadian LIBOR, the Canadian Bankers Acceptance rate, or the U.S. or Canadian Prime rate) plus an applicable percentage based on our consolidated leverage. The applicable percentage was 0.75% at December 31, 2008. |
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We completed the sale of 9,236,083 shares of our common stock in two underwritten public offerings pursuant to our existing universal shelf registration statement and received aggregate proceeds of $409.0 million from the sales. |
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We purchased $124.4 million principal amount of our 8 3 / 4 % senior notes due 2009 and $52.0 million principal amount of our 6 3 / 4 % senior notes due 2010 in open market transactions and recorded a net gain on extinguishment of debt of $2.5 million. |
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We benefited in 2008 from the reversal of a previously recorded contingent liability in the amount of $23.3 million. We no longer expected to make any payments relating to that contingent liability and, therefore, the liability was removed from our Consolidated Balance Sheet and included in our income for the year. |
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We raised $126.7 million in ten-year 6.6% first mortgage financing on eight seniors housing communities. Our pro rata share of the proceeds was $107.2 million. |
Investments
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We purchased $112.5 million principal amount of first mortgage debt issued by a national provider of healthcare services, primarily skilled nursing care. We purchased the debt at a discount for $98.8 million, resulting in an effective interest rate to maturity of LIBOR plus 533 basis points. Interest on the loan is payable monthly at an annual rate of LIBOR plus 125 basis points, and the loan matures in 2012, subject to a one-year extension, at the borrowers option, subject to certain conditions. |
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We purchased a 47-unit seniors housing community located in Texas for $5.1 million and leased it to an affiliate of Capital Senior Living Corporation. |
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We purchased three MOBs for approximately $66.8 million, increasing our total MOB investments to over 1.5 million square feet. We own one of these MOBs through a joint venture with a partner that provides management and leasing services for the property. |
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We entered into an agreement giving us the exclusive right, as part of a joint venture, to develop up to ten identified MOBs on hospital campuses in eight states. This joint venture is with a nationally recognized private developer of MOBs and healthcare facilities. As of December 31, 2008, we had initially invested approximately $8.7 million in two MOBs that were both under development. These developments have $32.6 million of committed construction loans. |
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We purchased $70.0 million aggregate principal amount of three fixed rate and one variable rate unsecured corporate debt instruments issued by national healthcare companies, primarily at discounts for a total of $63.7 million. These debt investments mature between October 2012 and April 2016, and the effective interest rate for each investment is approximately 9%. |
Dispositions
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We sold seven healthcare assets in the second quarter for $69.1 million and recognized a gain from the sale of $25.9 million. |
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In the fourth quarter, we sold five seniors housing communities to the existing tenant for $62.5 million. We realized a gain from the sale of $21.5 million, $8.3 million of which was deferred and will be recognized over the next three years. |
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In January 2009, we sold four seniors housing assets for $58.7 million and expect to recognize a gain from the sale of approximately $11 million in the first quarter of 2009. |
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In February 2009, we sold a hospital and a MOB for $35 million in an all-cash transaction and expect to recognize a gain from the sale of $18 million in the first quarter of 2009. |
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires us to make estimates and judgments about future events that affect the reported amounts in the financial statements and the related disclosures. We base estimates on our experience and on various other assumptions believed to be reasonable under the circumstances. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting treatment would have been applied, resulting in a different presentation of our financial statements. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. We believe that the following critical accounting policies, among others, affect our more significant estimates and judgments used in the preparation of our financial statements. For more information regarding our critical accounting policies, please see Note 2Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Principles of Consolidation
The Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K include our accounts and the accounts of our wholly owned subsidiaries and joint venture entities over which we exercise control. All intercompany transactions and balances have been eliminated in consolidation, and net earnings are reduced by the portion of net earnings applicable to minority interests.
Long-Lived Assets and Intangibles
Investments in real estate assets are recorded at cost. We account for acquisitions using the purchase method. The cost of the properties acquired is allocated among tangible and recognized intangible assets and
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liabilities based upon estimated fair values in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations. We estimate fair values of the components of assets and liabilities acquired as of the acquisition date. Recognized intangibles include the value of acquired lease contracts, management agreements and related customer relationships.
Our method for allocating the purchase price paid to acquire investments in real estate requires us to make subjective assessments for determining fair value of the assets and liabilities acquired or assumed. This includes determining the value of the buildings and improvements, land and improvements, ground leases, tenant improvements, in-place tenant leases, above and/or below market leases, other intangibles embedded in contracts and any debt assumed. Each of these estimates requires significant judgment, and some of the estimates involve complex calculations. These allocation assessments have a direct impact on our results of operations, as amounts allocated to some assets and liabilities have different depreciation or amortization lives. Additionally, the amortization of value assigned to above and/or below market leases is recorded as a component of revenue, as compared to the amortization of in-place leases and other intangibles, which is included in depreciation and amortization in our Consolidated Statements of Income.
We estimate the fair value of buildings on an as-if-vacant basis, and depreciate the building value over the estimated remaining life of the building. We determine the allocated value of other fixed assets based upon the replacement cost and depreciate such value over their estimated remaining useful lives. We determine the value of land either based on real estate tax assessed values in relation to the total value of the asset or internal analyses of recently acquired and existing comparable properties within our portfolio. The fair value of in-place leases, if any, reflects (i) above and/or below market leases, if any, determined by discounting the difference between the estimated current market rent and the in-place rentals, the resulting intangible asset or liability of which is amortized to revenue over the remaining life of the associated lease plus any fixed rate renewal periods, if applicable, (ii) the estimated value of the cost to obtain tenants, including tenant allowances, tenant improvements and leasing commissions, which is amortized over the remaining life of the associated lease, and (iii) an estimated value of the absorption period to reflect the value of the rents and recovery costs foregone during a reasonable lease-up period, as if the acquired space was vacant, which is amortized over the remaining life of the associated lease. We also estimate the value of tenant or other customer relationships acquired by considering the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenants credit quality, expectations of lease renewals with the tenant, and the potential for significant, additional future leasing arrangements with the tenant. We amortize such value over the expected term of the associated arrangements or leases, which would include the remaining lives of the related leases and any expected renewal periods. The fair value of long-term debt is calculated by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings. Discount rates are approximated based on the rate we estimate we would incur to replace each instrument on the date of acquisition. Any fair value adjustments related to long-term debt are recognized as effective yield adjustments over the remaining term of the instrument.
Impairment of Long-Lived Assets
We periodically evaluate our long-lived assets, primarily consisting of our investments in real estate, for impairment indicators in accordance with SFAS No. 144, Accounting for the Impairment and Disposal of Long-Lived Assets. If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying operations and adjust the net book value of leased properties and other long-lived assets to fair value if the sum of the expected future undiscounted cash flows including sales proceeds is less than book value. An impairment loss is recognized at the time we make any such determination. Future events could occur which would cause us to conclude that impairment indicators exist and an impairment loss is warranted.
Marketable Debt and Equity Securities
We record marketable debt and equity securities as available-for-sale in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. These securities are classified as a
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component of other assets on our Consolidated Balance Sheets. These securities are recorded at fair market value, with unrealized gains and losses recorded in stockholders equity as a component of accumulated other comprehensive income on our Consolidated Balance Sheets. Interest income, including discount or premium amortization, on marketable debt securities and gains or losses on securities sold, which are based on the specific identification method, are reported in income from loans and investments on our Consolidated Statements of Income.
Loans Receivable
Loans receivable are stated at the unpaid principal balance net of any deferred origination fees, purchase discounts or premiums and/or valuation allowances. Net deferred origination fees are comprised of loan fees collected from the borrower net of certain direct costs. Net deferred origination fees and purchase discounts or premiums are amortized to income over the contractual life of the loan using the effective interest method. We evaluate the collectibility of loans and other amounts receivable from third parties based on a number of factors, including (i) corporate and facility-level financial and operational reports, (ii) compliance with the financial covenants set forth in the loan or lease agreement, (iii) the financial stability of the borrower or tenant and any guarantor, (iv) the payment history of the borrower or tenant and (v) current economic conditions. Our level of reserves, if any, for loans and other amounts receivable from third parties fluctuates depending upon all of these factors.
Revenue Recognition
Certain of our leases, excluding our master lease agreements with Kindred Healthcare, Inc. (together with its subsidiaries, Kindred) (the Kindred Master Leases), but including the majority of our leases with Brookdale Senior Living Inc. (together with its subsidiaries, Brookdale Senior Living), provide for periodic and determinable increases in base rent. Base rental revenues under these leases are recognized on a straight-line basis over the term of the applicable lease. Income on our straight-line revenue is recognized when collectibility is reasonably assured. In the event we determine that collectibility of straight-line revenue is not reasonably assured, we establish an allowance for estimated losses. Recognizing rental income on a straight-line basis results in recognized revenue exceeding cash amounts contractually due from our tenants during the first half of the term for leases that have straight-line treatment.
Certain of our other leases, including the Kindred Master Leases, provide for an annual increase in rental payments only if certain revenue parameters or other substantive contingencies are met. We recognize the increased rental revenue under these leases only if the revenue parameters or other substantive contingencies are met, rather than on a straight-line basis over the term of the applicable lease. We recognize income from rent, lease termination fees and other income once all of the following criteria are met in accordance with Securities and Exchange Commission (the Commission) Staff Accounting Bulletin 104: (i) the agreement has been fully executed and delivered; (ii) services have been rendered; (iii) the amount is fixed or determinable; and (iv) collectibility is reasonably assured.
Resident fees and services are recognized monthly as services are provided. Move in fees, which are a component of resident fees and services, are recognized on a straight-line basis over the term of the applicable lease agreement. Lease agreements with residents generally have a term of one year and are cancelable by the resident with 30 days notice.
Gain on Sale of Assets
We recognize sales of assets only upon the closing of the transaction with the purchaser. Payments received from purchasers prior to closing are recorded as deposits and classified as other assets on our Consolidated Balance Sheets. Gains on assets sold are recognized using the full accrual method upon closing when the collectibility of the sale price is reasonably assured, we are not obligated to perform significant activities after the
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sale to earn the profit, we have received adequate initial investment from the buyer, and other profit recognition criteria have been satisfied. Gains may be deferred in whole or in part until the sales satisfy the requirements of gain recognition on sales of real estate under SFAS No. 66, Accounting for Sales of Real Estate.
Federal Income Tax
Since we have elected to be treated as a REIT under the applicable provisions of the Internal Revenue Code of 1986, as amended (the Code), prior to our acquisition of the assets of Sunrise Senior Living Real Estate Investment Trust (Sunrise REIT) in April 2007 we made no provision for federal income tax purposes, and we will continue to make no provision for REIT income and expense. As a result of the Sunrise REIT acquisition, we now record income tax expense or benefit with respect to certain of our entities which are taxed as taxable REIT subsidiaries under provisions similar to those applicable to regular corporations and not under the REIT provisions.
We account for deferred income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, we determine deferred tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. An increase or decrease in the deferred tax liability that results from a change in circumstances, and which causes a change in our judgment about expected future tax consequences of events, would be included in the tax provision when the changes in circumstances and our judgment occurs. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards. A valuation allowance is provided if we believe it is more likely than not that all or some portion of the deferred tax asset will not be realized. An increase or decrease in the valuation allowance that results from a change in circumstances, and which causes a change in our judgment about the realizability of the related deferred tax asset, would be included in the tax provision when the changes in circumstances and our judgment occurs.
Recently Adopted Accounting Standards
In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for income taxes when it is uncertain how an income or expense item should be treated on an income tax return. FIN 48 describes when and in what amount an uncertain tax item should be recorded in the financial statements and provides guidance on recording interest and penalties and accounting and reporting for income taxes in interim periods. We adopted FIN 48 on January 1, 2007. See Note 12Income Taxes of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
On January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value and provides guidance for measuring fair value and the necessary disclosures. SFAS No. 157 does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. The adoption did not have a material impact on our Consolidated Financial Statements.
SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS No. 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entitys own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).
Level one inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Level two inputs are inputs other than quoted prices included in level one that are
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observable for the asset or liability, either directly or indirectly. Level two inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability, other than quoted prices, such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level three inputs are unobservable inputs for the asset or liability, which are typically based on an entitys own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
In February 2008, the FASB issued Staff Position No. 157-2, Effective Date of FASB Statement No. 157 (FSP No. 157-2), which delays the adoption date of SFAS No. 157 for nonfinancial assets and liabilities. We adopted FSP No. 157-2 on January 1, 2009. The adoption did not have a material impact on our Consolidated Financial Statements.
On January 1, 2009, we adopted SFAS No. 141(R), Business Combinations; SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51; and Financial Accounting Standards Board Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (APB 14-1).
SFAS No. 141(R) requires the acquiring entity in a business combination to measure the assets acquired, liabilities assumed (including contingencies) and any noncontrolling interests at their fair values on the acquisition date. The statement also requires that acquisition-related transaction costs be expensed as incurred, that acquired research and development value be capitalized, and that acquisition-related restructuring costs be capitalized only if they meet certain criteria. SFAS No. 141(R) did not have a material impact on our Consolidated Financial Statements at the time of adoption.
SFAS No. 160 changes the reporting for minority interests, which must now be characterized as noncontrolling interests and classified as a component of consolidated equity. The calculation of income and earnings per share continues to be based on income amounts attributable to the parent and is characterized as net income from controlling interests. As the ownership of a subsidiary increases or decreases, SFAS No. 160 requires that any difference between the consideration paid and the adjustment to the noncontrolling interest balance be recorded as a component of equity in additional paid-in capital, so long as we maintain a controlling ownership interest. The adoption of SFAS No. 160 also did not have a material impact on our Consolidated Financial Statements.
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APB 14-1 specifies that issuers of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) should separately account for the liability and equity components in a manner that will reflect the entitys nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. The following table summarizes the impact that the adoption of APB 14-1 is expected to have on our Consolidated Financial Statements.
As Reported |
2008 | 2007 | 2006 | |||||||||
(In thousands, except per share amounts) | ||||||||||||
Deferred financing costs, net |
$ | 20,598 | $ | 22,836 | $ | 18,415 | ||||||
Senior notes payable and other debt |
3,147,694 | 3,360,499 | 2,329,053 | |||||||||
Capital in excess of par value |
2,244,596 | 1,821,294 | 766,470 | |||||||||
Retained earnings (deficit) |
(110,407 | ) | (47,846 | ) | (84,176 | ) | ||||||
Interest expense |
203,184 | 195,731 | 128,953 | |||||||||
Net income applicable to common shares |
226,288 | 277,119 | 131,430 | |||||||||
Earnings per common sharediluted |
1.62 | 2.25 | 1.25 | |||||||||
As Adjusted |
2008 | 2007 | 2006 | |||||||||
(In thousands, except per share amounts) | ||||||||||||
Deferred financing costs, net |
$ | 22,032 | $ | 24,683 | $ | 20,636 | ||||||
Senior notes payable and other debt |
3,136,998 | 3,346,530 | 2,312,020 | |||||||||
Capital in excess of par value |
2,264,125 | 1,840,823 | 785,999 | |||||||||
Retained earnings (deficit) |
(114,092 | ) | (51,284 | ) | (84,452 | ) | ||||||
Interest expense |
206,869 | 199,169 | 129,229 | |||||||||
Net income applicable to common shares |
222,603 | 273,681 | 131,154 | |||||||||
Earnings per common sharediluted |
1.59 | 2.22 | 1.25 |
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Results of Operations
The tables below show our results of operations for each year and the absolute dollar and percentage changes in those results from year to year (dollars in thousands).
Years Ended December 31, 2008 and 2007
Year Ended
December 31, |
Change | ||||||||||||||
2008 | 2007 | $ | % | ||||||||||||
Revenues: |
|||||||||||||||
Rental income |
$ | 487,436 | $ | 465,069 | $ | 22,367 | 4.8 | % | |||||||
Resident fees and services |
429,257 | 282,226 | 147,031 | 52.1 | |||||||||||
Income from loans and investments |
8,847 | 2,586 | 6,261 | >100 | |||||||||||
Interest and other income |
4,226 | 2,839 | 1,387 | 48.9 | |||||||||||
Total revenues |
929,766 | 752,720 | 177,046 | 23.5 | |||||||||||
Expenses: |
|||||||||||||||
Interest |
203,184 | 195,731 | 7,453 | 3.8 | |||||||||||
Depreciation and amortization |
231,802 | 227,463 | 4,339 | 1.9 | |||||||||||
Property-level operating expenses |
306,944 | 198,125 | 108,819 | 54.9 | |||||||||||
General, administrative and professional fees (including non-cash stock-based compensation expense of $9,976 and $7,493 for the years ended 2008 and 2007, respectively) |
40,651 | 36,425 | 4,226 | 11.6 | |||||||||||
Foreign currency gain |
(162 | ) | (24,280 | ) | 24,118 | (99.3 | ) | ||||||||
Gain on extinguishment of debt |
(2,398 | ) | (88 | ) | (2,310 | ) | >100 | ||||||||
Merger-related expenses |
4,460 | 2,979 | 1,481 | 49.7 | |||||||||||
Total expenses |
784,481 | 636,355 | 148,126 | 23.3 | |||||||||||
Income before reversal of contingent liability, income taxes, minority interest and discontinued operations |
145,285 | 116,365 | 28,920 | 24.9 | |||||||||||
Reversal of contingent liability |
23,328 | | 23,328 | nm | |||||||||||
Income tax benefit, net of minority interest |
15,885 | 28,042 | (12,157 | ) | (43.4 | ) | |||||||||
Income before minority interest and discontinued operations |
184,498 | 144,407 | 40,091 | 27.8 | |||||||||||
Minority interest, net of tax |
2,684 | 1,698 | 986 | 58.1 | |||||||||||
Income from continuing operations |
181,814 | 142,709 | 39,105 | 27.4 | |||||||||||
Discontinued operations |
44,474 | 139,609 | (95,135 | ) | (68.1 | ) | |||||||||
Net income |
226,288 | 282,318 | (56,030 | ) | (19.8 | ) | |||||||||
Preferred stock dividends and issuance costs |
| 5,199 | (5,199 | ) | nm | ||||||||||
Net income applicable to common shares |
$ | 226,288 | $ | 277,119 | $ | (50,831 | ) | (18.3 | )% | ||||||
nmnot meaningful
Revenues
The increase in our 2008 rental income primarily reflects $6.7 million of additional rent resulting from the annual escalators in the rent paid under the Kindred Master Leases effective May 1, 2007 and 2008 and $15.0 million in additional rent relating to triple-net leased properties and MOBs acquired during 2007 and 2008. See Note 5Acquisitions of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. Rental income included in discontinued operations was $14.0 million and $24.7 million for the years ended December 31, 2008 and 2007, respectively.
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Revenues related to our triple-net leased properties segment are received directly from the tenant operator of the property based on the terms of the lease and are generally fixed amounts, with annual escalators (subject to certain limitations). Therefore, while occupancy information is relevant to the operations of the tenant, our revenues and financial results are not directly impacted by the overall occupancy levels or profits at the triple-net leased properties. Looking forward, some of our lease escalators are tied to annual increases in the Consumer Price Index, which recently have trended negatively, and we are likely to see less growth in our rental income from these escalators as long as deflationary conditions continue.
The increase in resident fees and services during 2008 can be attributed primarily to the fact that we did not acquire the Sunrise REIT properties until late April 2007. See Note 5Acquisitions of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. These amounts consist of all amounts earned from residents at our seniors housing communities that are managed by Sunrise, including rental fees related to resident leases, extended health care fees and other ancillary service income. Average occupancy rates related to these properties were as follows:
Occupancy | ||||||||||
Number of
Communities (1) |
For the Year Ended
December 31, |
|||||||||
2008 | 2007 | 2008 | 2007 (2) | |||||||
Stabilized Communities |
77 | 72 | 91 | % | 93 | % | ||||
Lease-Up Communities |
2 | 7 | 55 | % | 57 | % | ||||
Total |
79 | 79 | 89 | % | 90 | % | ||||
Occupancy | ||||||||||
Number of
Communities (1) |
For the Year Ended
December 31, |
|||||||||
2008 | 2007 | 2008 | 2007 (2) | |||||||
Same-Store Stabilized Communities |
72 | 72 | 91 | % | 93 | % | ||||
Same-Store Lease-Up Communities |
7 | 7 | 70 | % | 57 | % | ||||
Total |
79 | 79 | 89 | % | 90 | % | ||||
(1) | Includes those communities which were in the respective portfolios as of December 31; five communities were moved from lease-up to stabilized in 2008. |
(2) | Occupancy for the period from May 1, 2007 through December 31, 2007 as properties were not acquired until late April 2007. |
Income from loans and investments increased during 2008 primarily due to interest earned on a $50.0 million marketable debt security purchased in early April 2008 and a first mortgage debt investment of $98.8 million made in late 2008, partially offset by a gain on the sale of marketable equity securities recognized in the second quarter of 2007.
The increase in our interest and other income during 2008 is primarily attributable to the resolution in September 2008 of a legal dispute.
Expenses
Interest expense included in discontinued operations was $6.3 million and $10.6 million for the years ended December 31, 2008 and 2007, respectively. Total interest expense, including interest allocated to discontinued operations, increased $3.1 million in 2008 over 2007, primarily due to $13.8 million of additional interest from higher loan balances as a result of our 2008 acquisition and loan activity, partially offset by a $11.6 million reduction in interest from lower effective interest rates and a $2.6 million loss due to early repayment of bridge
55
financing in 2007 related to the Sunrise REIT acquisition. Interest expense includes $7.1 million and $5.5 million of amortized deferred financing costs for the years ended December 31, 2008 and 2007, respectively. Our effective interest rate decreased to 6.4% for the year ended December 31, 2008, from 6.8% for the year ended December 31, 2007.
Depreciation and amortization expense increased primarily due to additional depreciation relating to the properties acquired during 2008 and 2007, partially offset by a decrease in amortization expense of approximately $26.9 million related to in-place lease intangibles primarily related to the Sunrise REIT acquisition. These in-place lease intangibles were fully amortized during the second quarter of 2008. See Note 5Acquisitions of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Property-level operating expenses increased primarily due to the Sunrise REIT acquisition, a $6.0 million provision for loan losses recorded in the third quarter of 2008, and a $4.0 million increase related to the growth of our MOB business. Our results for 2007 reflect only eight months of the Sunrise-related expenses due to the late April 2007 acquisition date.
The increase in general, administrative and professional fees is a result of our enterprise growth, an increase in non-cash stock-based compensation and dead deal costs.
The foreign currency gain for the year ended December 31, 2007 primarily relates to the Canadian call option contracts we entered into in conjunction with the Sunrise REIT acquisition. See Note 2Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. No similar contracts were in place for the comparable 2008 period.
The gain on extinguishment of debt in 2008 primarily represents the purchase of $124.4 million principal amount of our 8 3 / 4 % senior notes due 2009 and $52.0 million principal amount of our 6 3 / 4 % senior notes due 2010 in open market transactions for a discount. The gain on extinguishment of debt in 2007 represents the purchase of $5.0 million principal amount of our outstanding 7 1 / 8 % senior notes due 2015 in an open market transaction for a discount.
Merger-related expenses for 2008 and 2007 primarily consisted of expenses relating to our litigation with HCP, Inc. arising out of the Sunrise REIT acquisition. Merger-related expenses for 2007 also included incremental costs directly related to the acquisition.
Other
We had a $23.3 million deferred tax liability to be utilized for any built-in gains tax related to the disposition of certain assets owned or deemed to be owned by us prior to our REIT election in 1999. The ten-year period in which these assets were subject to built-in gains tax ended on December 31, 2008. Because we had no pending or planned dispositions of these assets through December 31, 2008, we did not expect to pay any amounts related to this contingent liability. Therefore, this contingent liability was no longer required, and $23.3 million was reversed into income during the third quarter of 2008.
Income tax benefit represents a deferred benefit which is due solely to our taxable REIT subsidiaries as a direct result of the Sunrise REIT acquisition. See Note 12Income Taxes of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Minority interest, net of tax primarily represents Sunrises share of net income from its ownership percentage in 61 of our seniors housing communities.
Preferred stock dividends and issuance costs in 2007 related to the 700,000 shares of our Series A Senior Preferred Stock that were issued to fund a portion of the Sunrise REIT acquisition, all of which we redeemed in
56
May 2007 using the proceeds from the sale of our common stock. See Note 5Acquisitions of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Discontinued Operations
The decrease in discontinued operations is primarily the result of a gain of $129.5 million recognized in 2007 from the sale of 22 assets compared to a gain of $39.0 million recognized in 2008 from the sale of twelve assets. See Note 6Dispositions of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Years Ended December 31, 2007 and 2006
Year Ended
December 31, |
Change | |||||||||||||
2007 | 2006 | $ | % | |||||||||||
Revenues: |
||||||||||||||
Rental income |
$ | 465,069 | $ | 388,167 | $ | 76,902 | 19.8 | % | ||||||
Resident fees and services |
282,226 | | 282,226 | nm | ||||||||||
Income from loans and investments |
2,586 | 7,014 | (4,428 | ) | (63.1 | ) | ||||||||
Interest and other income |
2,839 | 2,770 | 69 | 2.5 | ||||||||||
Total revenues |
752,720 | 397,951 | 354,769 | 89.1 | ||||||||||
Expenses: |
||||||||||||||
Interest |
195,731 | 128,953 | 66,778 | 51.8 | ||||||||||
Depreciation and amortization |
227,463 | 110,754 | 116,709 | >100 | ||||||||||
Property-level operating expenses |
198,125 | 3,171 | 194,954 | nm | ||||||||||
General, administrative and professional fees (including non-cash stock-based compensation expense of $7,493 and $3,046 for the years ended 2007 and 2006, respectively) |
36,425 | 26,136 | 10,289 | 39.4 | ||||||||||
Foreign currency gain |
(24,280 | ) | | (24,280 | ) | nm | ||||||||
(Gain) loss on extinguishment of debt |
(88 | ) | 1,273 | (1,361 | ) | >100 | ||||||||
Merger-related expenses |
2,979 | | 2,979 | nm | ||||||||||
Rent reset costs |
| 7,361 | (7,361 | ) | nm | |||||||||
Total expenses |
636,355 | 277,648 | 358,707 | >100 | ||||||||||
Income before reversal of contingent liability, income taxes, minority interest and discontinued operations |
116,365 | 120,303 | (3,938 | ) | (3.3 | ) | ||||||||
Reversal of contingent liability |
| 1,769 | (1,769 | ) | nm | |||||||||
Income tax benefit, net of minority interest |
28,042 | | 28,042 | nm | ||||||||||
Income before minority interest and discontinued operations |
144,407 | 122,072 | 22,335 | 18.3 | ||||||||||
Minority interest, net of tax |
1,698 | | 1,698 | nm | ||||||||||
Income from continuing operations |
142,709 | 122,072 | 20,637 | 16.9 | ||||||||||
Discontinued operations |
139,609 | 9,358 | 130,251 | >100 | ||||||||||
Net income |
282,318 | 131,430 | 150,888 | >100 | ||||||||||
Preferred stock dividends and issuance costs |
5,199 | | 5,199 | nm | ||||||||||
Net income applicable to common shares |
$ | 277,119 | $ | 131,430 | $ | 145,689 | >100 | % | ||||||
nmnot meaningful
Revenues
The increase in our 2007 rental income, excluding rental income allocated to discontinued operations, primarily reflects (i) $26.4 million of additional rent resulting from the annual escalator in the rent paid under the Kindred Master Leases effective May 1, 2007 and the Kindred rent reset that was effective July 19, 2006, (ii) $7.6 million in additional rent relating to the properties acquired during 2007 (excluding the Sunrise REIT
57
properties), (iii) $41.1 million in additional rent relating to the full year effect in 2007 of properties acquired during 2006, and various other escalations in the rent paid on our existing properties. See Note 5Acquisitions of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. Rental income included in discontinued operations was $24.7 million and $30.3 million for the years ended December 31, 2007 and 2006, respectively.
Resident fees and services are a direct result of the Sunrise REIT acquisition and are attributed to the period from April 26, 2007 through December 31, 2007. See Note 5Acquisitions of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. These amounts consist of all amounts earned from residents at our seniors housing communities that are managed by Sunrise, including rental fees related to resident leases, extended health care fees and other ancillary service income.
Income from loans and investments, which includes amortization of deferred fees, decreased $4.4 million in 2007 primarily due to the repayment of a bridge loan we made in 2006 to affiliates of the seller of 64 properties we currently lease to Senior Care, Inc. (Senior Care). The bridge loan bore interest at a rate of approximately 10.4% and was repaid upon consummation of the Senior Care acquisition in November 2006. See Note 5Acquisitions of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. We recognized approximately $3.4 million of interest income from this loan during 2006. Additionally, three of the six first mortgage loans we issued during 2005 were repaid in May 2007, representing a decrease in income from loans and investments of approximately $0.8 million.
Expenses
Interest expense included in discontinued operations was $10.6 million and $12.1 million for the years ended December 31, 2007 and 2006, respectively. Total interest expense, including interest allocated to discontinued operations, increased $65.2 million in 2007 over 2006, primarily due to $71.8 million of additional interest from higher loan balances as a result of our 2007 acquisition and loan activity, partially offset by a $9.2 million reduction in interest from lower effective interest rates. In 2007, we also recognized a $2.6 million expense for upfront fees on bridge financing related to the Sunrise REIT acquisition. Interest expense includes $5.5 million and $3.3 million of amortized deferred financing costs for the years ended December 31, 2007 and 2006, respectively. Our effective interest rate decreased to 6.8% for the year ended December 31, 2007, from 7.3% for the year ended December 31, 2006.
Depreciation and amortization expense increased primarily due to depreciation relating to the properties acquired during 2007 and 2006. Additionally, we incurred amortization expense of approximately $56.1 million related to in-place lease intangibles from the Sunrise REIT acquisition. See Note 5Acquisitions of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Property-level operating expenses increased primarily due to the Sunrise REIT acquisition. Property-level operating expenses include all expenses related to our MOB operations and all amounts incurred for the operations of our seniors housing communities managed by Sunrise for the period from April 26, 2007 through December 31, 2007, such as labor, food, utilities, marketing, management and other property operating costs.
The increase in general, administrative and professional fees is due primarily to increased stock-based compensation and increases in other general and administrative items resulting from our enterprise growth.
The foreign currency gain for the year ended December 31, 2007 primarily relates to the Canadian call option contracts we entered into in conjunction with the Sunrise REIT acquisition. See Note 2Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. No similar contracts were in place for the comparable 2006 period.
The gain on extinguishment of debt in 2007 represents the purchase of $5.0 million principal amount of our outstanding 7 1 / 8 % senior notes due 2015 in an open market transaction for a discount. The loss on
58
extinguishment of debt in 2006 represents the write-off of unamortized deferred financing costs related to the refinancing of our previous secured revolving credit facility during the second quarter of 2006.
Merger-related expenses in 2007 consisted of incremental costs directly related to the Sunrise REIT acquisition and expenses relating to our litigation with HCP, Inc. arising out of the acquisition.
In connection with the rent reset process under the Kindred Master Leases, we incurred approximately $7.4 million of one-time costs which we expensed during 2006. These costs included fees of the final appraisers and third party experts, consulting fees and legal fees and expenses. No similar costs were incurred during 2007.
During 2006, we were notified by the Internal Revenue Service (IRS) that it had completed its audit of our 2001 federal tax return with no additional tax being due. Accordingly, we reversed into income a previously recorded $1.8 million tax liability related to uncertainties surrounding the outcome of this audit. No similar activity occurred during 2007.
Income tax benefit represents a deferred benefit which is due solely to our taxable REIT subsidiaries as a direct result of the Sunrise REIT acquisition. See Note 12Income Taxes of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Minority interest, net of tax primarily represents Sunrises share of net income from the Sunrise REIT properties based on its ownership percentage in 61 of our seniors housing communities.
Preferred stock dividends and issuance costs related to the 700,000 shares of our Series A Senior Preferred Stock that were issued to fund a portion of the Sunrise REIT acquisition, all of which we redeemed in May 2007 using the proceeds from the sale of our common stock. See Note 5Acquisitions of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Discontinued Operations
The increase in discontinued operations is primarily due to the $129.5 million gain on sale of real estate assets recognized in the second quarter of 2007 resulting primarily from the sale of 22 properties to Kindred. See Note 6Dispositions of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Funds from Operations
Our funds from operations (FFO) for the five years ended December 31, 2008 are summarized in the following table:
For the Year Ended December 31, | |||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
(In thousands) | |||||||||||||||||||
Net income applicable to common shares |
$ | 226,288 | $ | 277,119 | $ | 131,430 | $ | 130,583 | $ | 120,900 | |||||||||
Adjustments: |
|||||||||||||||||||
Real estate depreciation and amortization |
231,079 | 226,354 | 109,370 | 79,283 | 42,128 | ||||||||||||||
Real estate depreciation related to minority interest |
(6,251 | ) | (3,749 | ) | | | | ||||||||||||
Loss on real estate disposals |
| | | 175 | | ||||||||||||||
Discontinued operations: |
|||||||||||||||||||
Gain on sale of real estate assets |
(39,026 | ) | (129,478 | ) | | (5,114 | ) | (19,428 | ) | ||||||||||
Depreciation on real estate assets |
3,952 | 7,410 | 8,868 | 8,276 | 6,722 | ||||||||||||||
FFO applicable to common shares |
416,042 | 377,656 | 249,668 | 213,203 | 150,322 | ||||||||||||||
Preferred stock dividends and issuance costs |
| 5,199 | | | | ||||||||||||||
FFO |
$ | 416,042 | $ | 382,855 | $ | 249,668 | $ | 213,203 | $ | 150,322 | |||||||||
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Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values, instead, have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. To overcome this problem, we consider FFO an appropriate measure of performance of an equity REIT, and we use the National Association of Real Estate Investment Trusts (NAREIT) definition of FFO. NAREIT defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of real estate property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
FFO presented herein is not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies use the same definition. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of our financial performance or as an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is FFO necessarily indicative of sufficient cash flow to fund all of our needs. We believe that in order to facilitate a clear understanding of our consolidated historical operating results, FFO should be examined in conjunction with net income as presented in the Consolidated Financial Statements and data included elsewhere in this Annual Report on Form 10-K.
Asset/Liability Management
Asset/liability management is a key element of our overall risk management program. The objective of asset/liability management is to support the achievement of our business strategies while maintaining appropriate risk levels. The asset/liability management process focuses on a variety of risks, including market risk (primarily interest rate risk and foreign currency exchange risk) and credit risk. Effective management of these risks is an important determinant of the absolute levels and variability of our FFO and net worth. The following discussion addresses our integrated management of assets and liabilities, including the use of derivative financial instruments. We do not use derivative financial instruments for speculative purposes.
Market Risk
Market risks relating to our financial instruments result primarily from changes in U.S. or Canadian LIBOR rates, the Canadian Bankers Acceptance rate or the U.S. or Canadian Prime rates. Our exposure to market risk for changes in interest rates relate primarily to borrowings under our unsecured revolving credit facilities, certain of our mortgage loans that are floating rate obligations and mortgage loans receivable.
While interest rate fluctuations will generally not affect our fixed rate debt obligations unless such instruments mature, or until such time that we would be required to refinance such debt, they will affect the fair value of our fixed rate instruments. If interest rates have risen at the time our fixed rate debt matures, or at such time we would be required to refinance such debt, our profitability could be adversely affected by the additional cost of borrowings. Conversely, lower interest rates at the time our debt matures or at the time of refinancing may lower our overall borrowing costs. We continuously monitor our level of floating rate debt with respect to total debt and other factors, including our assessment of the current and future economic environment.
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To highlight the sensitivity of our fixed rate debt to changes in interest rates, the following summary shows the effects of a hypothetical instantaneous change of 100 basis points (BPS) in interest rates as of December 31, 2008 and 2007:
As of December 31, | ||||||
2008 | 2007 | |||||
(In thousands) | ||||||
Gross book value |
$ | 2,592,730 | $ | 2,879,907 | ||
Fair value (1) |
2,436,620 | 3,002,090 | ||||
Fair value reflecting change in interest rates: (1) |
||||||
-100 BPS |
2,538,334 | 3,134,816 | ||||
+100 BPS |
2,340,746 | 2,877,929 |
(1) | The change in fair value of fixed rate debt was due primarily to debt repayments and overall changes in interest rates. |
The table below sets forth certain information with respect to our debt, excluding premiums and discounts (dollars in thousands):
As of December 31, | ||||||||
2008 | 2007 | |||||||
Balance: |
||||||||
Fixed rate |
$ | 2,592,730 | $ | 2,879,907 | ||||
Variable rate |
546,410 | 467,769 | ||||||
Total |
$ | 3,139,140 | $ | 3,347,676 | ||||
Percent of total debt: |
||||||||
Fixed rate |
82.6 | % | 86.0 | % | ||||
Variable rate |
17.4 | 14.0 | ||||||
Total |
100.0 | % | 100.0 | % | ||||
Weighted average interest rate at end of period: |
||||||||
Fixed rate |
6.5 | % | 6.7 | % | ||||
Variable rate |
2.3 | % | 5.5 | % | ||||
Total weighted average rate |
5.8 | % | 6.5 | % |
The increase in our outstanding variable rate debt from December 31, 2007 is primarily attributable to additional net borrowings under our unsecured revolving credit facilities and additional borrowings related to 2008 acquisitions. Pursuant to the terms of certain leases with one of our tenants, if interest rates increase on certain debt that we have totaling $97.5 million as of December 31, 2008, our tenant is required to pay us additional rent (on a dollar-for-dollar basis) in an amount equal to the increase in interest expense resulting from the increased interest rates. Therefore, the increase in interest expense related to this debt is equally offset by an increase in additional rent due to us from the tenant. Assuming a one percentage point increase in the interest rate related to the variable rate debt, and assuming no change in the outstanding balance as of December 31, 2008, interest expense for 2009 (inclusive of the $97.5 million) would increase and our net income would decrease by approximately $4.5 million, or $0.03 per common share on a diluted basis. The fair value of our fixed and variable rate debt is based on current interest rates at which we could obtain similar borrowings.
In the past, we mitigated some interest rate risk through an interest rate swap agreement designed to hedge against rising interest rates. However, the swap expired on June 30, 2008, and we do not currently have any interest rate swap agreements in effect, nor do we expect to enter into any additional interest rate swap agreements at this time. We may, however, engage in hedging strategies in the future, depending on managements analysis of the interest rate and foreign currency exchange rate environments and the costs and risks of such strategies. We do not enter into market risk sensitive instruments for trading purposes.
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We are subject to fluctuations in U.S. and Canadian exchange rates which may, from time to time, have an impact on our financial condition and results of operations. Increases or decreases in the value of the Canadian dollar will impact the amount of net income we earn from our Canadian operations. Based on 2008 results, if the Canadian exchange rate were to increase or decrease by $0.10, our net income would decrease or increase, as applicable, by approximately $0.2 million per year. If we increase our international presence through investments in, and/or acquisitions or development of, seniors housing and/or healthcare assets outside the United States, we may also decide to transact additional business in currencies other than U.S. or Canadian dollars. Although we may decide to pursue hedging alternatives (including additional borrowings in local currencies) to protect against foreign currency fluctuations, we cannot assure you that any such fluctuations will not have a material adverse effect on our business, financial condition, results of operations and liquidity, on our ability to service our indebtedness and on our ability to make distributions to our stockholders, as required for us to continue to qualify as a REIT (a Material Adverse Effect).
We also have investments in marketable debt securities where we earn interest on a fixed and floating rate basis. These investments are classified as available for sale and are recorded at fair market value with unrealized gains and losses recorded as a component of stockholders equity. Interest rate fluctuations and market conditions will cause the fair market value of these investments to change. As of December 31, 2008, the fair market value of our marketable debt securities was $51.6 million, with an original cost of $63.7 million.
During 2008, we purchased $112.5 million principal amount of first mortgage debt issued by a national provider of healthcare services, primarily skilled nursing care. We purchased the debt at a discount for $98.8 million, resulting in an effective interest rate to maturity of LIBOR plus 533 basis points. Interest on the loan is payable monthly at an annual rate of LIBOR plus 125 basis points, and the loan matures in January 2012, subject to a one-year extension, at the borrowers option, subject to certain conditions.
As of December 31, 2008, we held a receivable for three outstanding first mortgage loans (the Sunwest Loans) in the aggregate principal amount of $20.0 million. During 2008, we recorded a provision for loan losses on the Sunwest Loans of $6.0 million as a result of certain defaults by the borrower.
As of December 31, 2008, the fair value of our loans receivable was $111.9 million and was based on our estimates of currently prevailing rates for comparable loans. See Note 8Loans Receivable and Note 10Fair Value of Financial Instruments of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Credit Risk
We receive a significant portion of our revenue by leasing our assets under long-term triple-net leases in which the rental rate is generally fixed with annual escalators, subject to certain limitations. Some of our triple-net lease escalators are tied to the Consumer Price Index, with caps, floors or collars. We also earn revenue from residents and tenants at our operating assets. Historically, most of our revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) were derived from assets subject to long-term triple-net leases. Currently, 22.3% of our EBITDA is derived from non-triple-net leases (our senior living operations and MOBs) where rental rates may fluctuate upon lease rollovers and renewals due to economic or market conditions.
For the years ended December 31, 2008 and 2007, Kindred accounted for $241.2 million, or 25.5%, of our total revenues and 38.0% of our total NOI (net operating income) (including amounts in discontinued operations), and $240.6 million, or 30.8%, of our total revenues and 41.5% of our total NOI (including amounts in discontinued operations), respectively. For the years ended December 31, 2008 and 2007, Brookdale Senior Living accounted for $121.5 million, or 12.8%, of our total revenues and 19.2% of our total NOI (including amounts in discontinued operations), and $122.8 million, or 15.7%, of our total revenues and 21.2% of our total NOI (including amounts in discontinued operations), respectively. This concentration of rental revenues creates
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credit risk. As a result, Kindreds and Brookdale Senior Livings financial condition and ability to meet their rental payments and other obligations to us has a significant impact on our results of operations and our ability to make distributions to our stockholders. Any failure by Kindred or Brookdale Senior Living to effectively conduct its operations could have a material adverse effect on its business reputation or on its ability to enlist and maintain patients in its facilities, which could also affect its ability to pay rent to us. See Risk FactorsRisks Arising from Our BusinessWe depend on Kindred and Brookdale Senior Living for a significant portion of our revenues and operating income; Any inability or unwillingness of Kindred or Brookdale Senior Living to satisfy its obligations under its agreements with us could have a Material Adverse Effect on us included in Part I, Item 1A of this Annual Report on Form 10-K and Note 4Concentration of Credit Risk of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. We regularly monitor the credit risk under our lease agreements with our tenants by, among other things, (i) reviewing and analyzing information regarding the healthcare industry generally, publicly available information regarding tenants, and information provided by the tenants and borrowers under our lease and other agreements, and (ii) having periodic discussions with tenants, borrowers and their representatives.
Approximately 20.0% of our EBITDA and 45.4% of our total revenues (including amounts in discontinued operations) for the year ended December 31, 2008 were attributable to senior living operations managed by Sunrise. Approximately 36.2% of our total revenues (including amounts in discontinued operations) for the year ended December 31, 2007 were attributable to senior living operations managed by Sunrise for the period from April 26, 2007 (the date of the Sunrise REIT acquisition) through December 31, 2007.
We are party to management agreements with Sunrise pursuant to which Sunrise currently provides comprehensive property management and accounting services with respect to 79 of our seniors housing communities. Each management agreement has a term of 30 years from its effective date, the earliest of which began in 2004. Pursuant to the management agreements, we pay Sunrise a base management fee of 6% of resident fees and similar revenues, subject to reduction based on below target performance relating to NOI for a pool of properties. The minimum management fee assessable under these agreements is 5% of resident fees and similar revenues of the properties. We also pay incentive fees if a pool of properties exceeds aggregate performance targets relating to NOI; provided, however, that total management fees, including incentive fees, shall not exceed 8% of resident fees and similar revenues. In 2008, we paid a 5.75% management fee for 71 properties and management fees of between 6% and 10.4% for eight properties. The management agreements also specify that we (or the joint venture to which we are party, as applicable) will reimburse Sunrise for direct or indirect costs necessary to manage our seniors housing communities.
We may terminate our management agreements upon the occurrence of an event of default by Sunrise in the performance of a material covenant or term thereof (including the revocation of any licenses or certificates necessary for operation), subject in each case to Sunrises rights to cure deficiencies. Each management agreement may also be terminated upon the occurrence of certain insolvency events relating to Sunrise. In addition, if a minimum number of properties fail to achieve a targeted NOI level for a given period, then we may terminate the management agreement on each property in such pool. This targeted NOI level for each property is based upon an expected operating income projection set at the commencement of the management agreement for the applicable property, with such projection escalating annually. However, various legal and contractual considerations may limit or delay our exercise of any or all of these termination rights.
We own a 75% to 85% ownership interest in 61 of our seniors housing communities pursuant to joint venture agreements, with the minority interests in these joint ventures being owned by Sunrise. These joint ventures are each managed by a board of managers, which we control. As the controlling member, we have authority to make all decisions for our Sunrise joint ventures except for a limited set of major decisions, which generally include: (a) the merger or disposition of substantially all the assets of the joint venture; (b) the sale of
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additional interests in the joint venture; (c) the dissolution of the joint venture; (d) the disposition of a senior housing community owned by the joint venture; and (e) the acquisition of any real property. We can generally transfer our interest in a Sunrise joint venture, without consent, to anyone other than large seniors housing operators or their majority investors. Generally, Sunrise must obtain our prior consent for any direct or indirect transfer of its interest in a joint venture. With limited exceptions, profits and losses of the joint venture are allocated pro rata to each member. If either member fails to make a required capital contribution to a joint venture after notice and a cure period, the non-defaulting member may (i) revoke the capital contribution funding notice, (ii) advance to the joint venture the amount of the required capital contribution on behalf of the defaulting member in the form of a loan to the defaulting member, with all of the defaulting members subsequent distributions being applied to the loan until repayment in full, or (iii) advance the capital on behalf of the defaulting member with a recalculation of each members proportionate interest in the joint venture pursuant to the applicable formula in the agreements. Many of our Sunrise joint venture agreements provide for a punitive reduction in the defaulting members proportionate interest in the event of an advance of capital by a non-defaulting member pursuant to option (iii). The joint ventures are generally limited to incurring new or refinanced mortgage indebtedness in excess of 75% of the market value of its properties.
See
Risk FactorsRisks Arising from Our BusinessThe properties managed by Sunrise account for a significant portion of our revenues and operating income; Adverse developments in Sunrises business and affairs or financial condition
Lease Expirations
As our triple-net leases expire, we are exposed to the risks that our tenants may elect not to renew and, in such event, that we may be unable to reposition our properties on the same or better terms, if at all. The following table summarizes our triple-net lease expirations scheduled to occur over the next ten years (dollars in thousands).
Number of
Tenants |
Total Area in
Square Feet |
2008 Annual
Rental Income |
% of 2008 Total Rental
Income (1) |
|||||||
2009 |
| | $ | | | % | ||||
2010 |
117 | 5,259,703 | 124,726 | 27.1 | ||||||
2011 |
| | | | ||||||
2012 |
6 | 361,280 | 4,080 | 0.9 | ||||||
2013 |
95 | 4,496,794 | 117,657 | 25.6 | ||||||
2014 |
3 | 366,089 | 3,113 | 0.7 | ||||||
2015 |
22 | 2,140,306 | 22,149 | 4.8 | ||||||
2016 |
1 | 35,417 | 1,054 | 0.2 | ||||||
2017 |
| | | | ||||||
2018 |
1 | 31,919 | 360 | 0.1 |
(1) | Total 2008 rental income excludes triple-net rental income included in discontinued operations. |
The failure of our tenants to renew our leases could have a Material Adverse Effect on us. See Risk FactorsRisks Arising from Our BusinessWe may be unable to reposition our properties on as favorable terms, or at all, if we have to replace any of our tenants or operators, and we may be subject to delays, limitations and expenses in repositioning our assets included
Liquidity and Capital Resources
During 2008, our principal sources of liquidity were proceeds from our common stock offerings, issuance of mortgage debt, borrowings under our revolving credit facilities, asset dispositions and cash flows from
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operations. During the next twelve months, our principal liquidity needs are to: (i) fund normal operating expenses; (ii) meet our debt service requirements; (iii) repay $118.1 million of debt maturing; (iv) fund capital expenditures; (v) fund investments and/or commitments; and (vi) make distributions to our stockholders to maintain our REIT qualification under the Code. We believe that these needs will be satisfied by cash flows from operations, debt financings, proceeds from sales of assets and borrowings under our unsecured revolving credit facilities. However, if these sources of capital are not available and/or if we make acquisitions and investments, we may be required to obtain funding from additional borrowings, assumption of debt from the seller, dispositions of assets (in whole or in part through joint venture arrangements with third parties) and issuance of secured or unsecured long-term debt or other securities. We expect to be able to extend, refinance, renew or replace a substantial portion of our unsecured revolving credit facilities prior to their maturity in April 2010, but we cannot give any assurances as to whether we will be able to extend, refinance, renew or replace any portion of our unsecured revolving credit facilities or as to the timing or terms of any such extension, refinancing, renewal or replacement. See Risk FactorsRisks Arising from Our Capital StructureThe recent and ongoing credit and liquidity crisis may limit our access to capital and have an adverse effect on our ability to meet our debt payments, make distributions to our stockholders or make future investments necessary to implement our business plan included in Part I, Item 1A of this Annual Report on Form 10-K.
As of December 31, 2008, we had $176.8 million of unrestricted cash and cash equivalents, consisting primarily of investments in U.S. treasury money market funds and cash related to our seniors housing communities that is deposited and held in property-level accounts. Funds maintained in the property-level accounts are used primarily for the payment of property-level expenses and certain capital expenditures. A portion of the cash maintained in these property-level accounts is distributed to us monthly. At December 31, 2008, we also had escrow deposits and restricted cash of $55.9 million and unused credit availability of $546.0 million under our unsecured revolving credit facilities.
Unsecured Revolving Credit Facilities
Our unsecured revolving credit facilities mature in April 2010 and permit us to borrow up to an aggregate of $850.0 million. Of this amount, we may borrow up to $150.0 million or the equivalent in Canadian dollars under the Canadian credit facility. The U.S. credit facility includes a $150.0 million accordion feature that permits us to further expand our aggregate borrowing capacity to $1.0 billion upon satisfaction of certain conditions. Borrowings under our unsecured revolving credit facilities bear interest at a fluctuating rate per annum (based on U.S. or Canadian LIBOR, Canadian Bankers Acceptance rate, or the U.S. or Canadian Prime rate) plus an applicable percentage based on our consolidated leverage. The applicable percentage was 0.75% at December 31, 2008.
The agreements governing our unsecured revolving credit facilities subject us to a number of restrictive covenants. See Note 9Borrowing Arrangements of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Lehman Commercial Paper, Inc. (Lehman) is a named lender under our unsecured revolving credit facilities and has a $20 million funding commitment (approximately 2% of the aggregate borrowing capacity under our unsecured revolving credit facilities) to us. Lehman has defaulted on its obligations to fund our borrowing requests, and we are seeking an assignment of this portion of our unsecured revolving credit facilities, through Lehmans Chapter 11 proceeding, to a third party investor who we believe represents the economic interest in such obligation. We cannot give any assurances as to whether or when an assignment of Lehmans interest in our unsecured revolving credit facilities may occur. We also cannot give any assurances that the other lenders under our unsecured revolving credit facilities will continue to fund their respective portions of our borrowing requests. While we currently have no reason to believe that we will be unable to access our unsecured revolving credit facilities in the future, concern about the stability of the markets generally and the strength of borrowers specifically has led many lenders and institutional investors to reduce and, in some cases, cease funding to borrowers. The economic downturn and credit crisis have resulted in the bankruptcy or merger of
65
many financial institutions, like Lehman, that could adversely impact our ability to draw on our unsecured revolving credit facilities. If we are unable to access our unsecured revolving credit facilities, our liquidity and financial condition could be adversely affected.
As of February 20, 2009, we had $410.6 million outstanding under our unsecured revolving credit facilities due April 2010 and approximately $392.3 million of unrestricted cash and cash equivalents, for a net amount of $18.3 million.
Convertible Senior Notes
As of December 31, 2008, we had $230.0 million aggregate principal amount of our 3 7 / 8 % Convertible Senior Notes due 2011 (the Convertible Notes) outstanding. The Convertible Notes are convertible at the option of the holder (i) prior to September 15, 2011, upon the occurrence of specified events and (ii) on or after September 15, 2011, at any time prior to the close of business on the second business day prior to the stated maturity, in each case into cash up to the principal amount of the Convertible Notes and cash or shares of our common stock, at our election, in respect of any conversion value in excess of the principal amount at the current conversion rate of 22.6262 shares per $1,000 principal amount of notes (which equates to a current conversion price of approximately $44.20 per share). The conversion rate is subject to adjustment in certain circumstances, including the payment of a quarterly dividend in excess of $0.395 per share. To the extent the market price of our common stock exceeds the conversion price our earnings per share will be diluted.
Pursuant to the registration rights agreement entered into in connection with our initial offering of the Convertible Notes, we have filed a shelf registration statement covering resales by the holders of shares of our common stock, if any, issued upon conversion of the Convertible Notes. We will not receive any proceeds in connection with any such resales.
The indenture governing the Convertible Notes subjects us to a number of restrictive covenants. See Note 9Borrowing Arrangements of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. Certain of our subsidiaries have fully and unconditionally guaranteed the Convertible Notes.
Effective January 1, 2009, we adopted APB 14-1, which requires us to separately account for the liability and equity component in a manner that reflects our nonconvertible debt borrowing rate when interest cost is recognized. See Note 2Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Senior Notes
As of December 31, 2008, we had the following series of senior notes (collectively, the Senior Notes) issued by our subsidiaries, Ventas Realty, Limited Partnership and Ventas Capital Corporation, outstanding:
|
$49.8 million principal amount of 8 3 / 4 % Senior Notes due 2009 (the 2009 Senior Notes); |
|
$123.0 million principal amount of 6 3 / 4 % Senior Notes due 2010 (the 2010 Senior Notes); |
|
$191.8 million principal amount of 9% Senior Notes due 2012 (the 2012 Senior Notes); |
|
$175.0 million principal amount of 6 5 / 8 % Senior Notes due 2014 (the 2014 Senior Notes); |
|
$170.0 million principal amount of 7 1 / 8 % Senior Notes due 2015 (the 2015 Senior Notes); |
|
$200.0 million principal amount of 6 1 / 2 % Senior Notes due 2016 (the 2016 Senior Notes); and |
|
$225.0 million principal amount of the 6 3 / 4 % Senior Notes due 2017 (the 2017 Senior Notes). |
66
During 2008, we purchased $124.4 million principal amount of our outstanding 2009 Senior Notes and $52.0 million principal amount of our outstanding 2010 Senior Notes in open market transactions. As a result of these purchases, we recorded a $2.5 million gain on the extinguishment of debt in 2008. In 2007, we purchased $5.0 million principal amount of our outstanding 2015 Senior Notes in an open market transaction. We may, from time to time, seek to retire or purchase additional amounts of the outstanding Senior Notes for cash and/or in exchange for equity securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, prospects for future access to capital and other factors. The amounts involved may be material.
The indentures governing the Senior Notes subject us to a number of restrictive covenants. See Note 9Borrowing Arrangements of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. We and certain of our subsidiaries have fully and unconditionally guaranteed the Senior Notes.
Dividends
In order to continue to qualify as a REIT, we must make annual distributions to our stockholders of at least 90% of REIT taxable income (excluding net capital gain). Our quarterly dividends in 2008 aggregated $2.05 per share, which is greater than 100% of our 2008 estimated taxable income. We also intend to pay dividends greater than 100% of taxable income for 2009. On February 11, 2009, our Board of Directors declared a quarterly dividend of $0.5125 per share, payable in cash on March 31, 2009 to holders of record on March 18, 2009.
We expect that REIT taxable income will be less than cash flow due to the allowance of depreciation and other non-cash deductions in computing REIT taxable income. Although we anticipate that we generally will have sufficient cash or liquid assets to enable us to satisfy the 90% distribution requirement, it is possible that from time to time we may not have sufficient cash or other liquid assets to meet the 90% distribution requirement or we may decide to retain cash or distribute such greater amount as may be necessary to avoid income and excise taxation. If we do not have sufficient cash or liquid assets to enable us to satisfy the 90% distribution requirement, or if we desire to retain cash, we may borrow funds, issue additional equity securities, pay taxable stock dividends, if possible, distribute other property or securities or engage in a transaction intended to enable us to meet the REIT distribution requirements or any combination of the foregoing. See Certain U.S. Federal Income Tax ConsiderationsRequirements for Qualification as a REITAnnual Distribution Requirements included in Part I, Item I of this Annual Report on Form 10-K.
Capital Expenditures
Capital expenditures to maintain and improve our triple-net leased properties are generally the responsibility of our tenants. Accordingly, we do not believe that we will incur any major expenditures in connection with these properties. After the terms of the triple-net leases expire, or in the event that the tenants are unable or unwilling to meet their obligations under those leases, we anticipate funding any capital expenditures for which we may become responsible by cash flows from operations or through additional borrowings. With respect to our operating assets, including our communities that are managed by Sunrise and our MOBs, we expect that capital expenditures will be funded by the cash flows from the properties or through additional borrowings. To the extent that unanticipated expenditures or significant borrowings are required, our liquidity may be affected adversely. Our ability to borrow funds may be restricted in certain circumstances by the terms of our unsecured revolving credit facilities and the indentures governing our outstanding Senior Notes. Our ability to borrow may also be limited by our lenders ability and willingness to fund, in whole or in part, borrowing requests under our unsecured revolving credit facilities.
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Equity Offerings
In 2008, we sold 9,236,083 shares of our common stock in underwritten public offerings pursuant to our existing universal shelf registration statement. We received aggregate proceeds of $409.0 million from the sales, which we used to repay indebtedness outstanding under our unsecured revolving credit facilities and for working capital and other general corporate purposes.
In May 2007, we completed the sale of 26,910,000 shares of our common stock in an underwritten public offering pursuant to our existing universal shelf registration statement. We received $1.05 billion in net proceeds from the sale, which we used along with the proceeds from our disposition of certain Kindred assets (see Note 6Dispositions of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K) and borrowings under our unsecured revolving credit facility to redeem all of our outstanding Series A Senior Preferred Stock and to repay our indebtedness under the senior interim loan used to fund a portion of the Sunrise REIT acquisition.
Our automatic universal shelf registration statement, filed with the Commission in April 2006, relates to the sale, from time to time, of an indeterminate amount of debt securities and related guarantees, common stock, preferred stock, depositary shares and warrants. The registration statement will expire in April 2009 pursuant to the Commissions rules, and we intend to replace it with a new universal shelf registration statement upon expiration.
Other
During 2008 and 2007, we assumed facility-level mortgage debt in connection with certain property acquisitions, including the Sunrise REIT acquisition. See Note 5Acquisitions of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
All facility-level mortgage debt outstanding was approximately $1.5 billion and $1.6 billion as of December 31, 2008 and 2007, respectively.
We received proceeds of $6.2 million and $9.8 million for the years ended December 31, 2008 and 2007, respectively, from the exercises of outstanding stock options. Future proceeds from the exercises of stock options will be primarily affected by the future performance of our stock price and the number of options outstanding. Options outstanding have increased to 1.4 million as of December 31, 2008, from 0.9 million as of December 31, 2007.
We issued approximately 18,400 and 20,750 shares of common stock under our Distribution Reinvestment and Stock Purchase Plan, for net proceeds of $0.7 million and $0.8 million for the years ended December 31, 2008 and 2007, respectively. We currently offer a 1% discount on the purchase price of our stock to shareholders who reinvest their dividends and/or make optional cash purchases of common stock through the plan. Each month or quarter, as applicable, we may lower or eliminate the discount without prior notice, thereby affecting the future proceeds that we receive from this plan.
Cash Flows
Cash Flows from Operating Activities
Net cash provided by operating activities was $364.2 million and $401.6 million for the years ended December 31, 2008 and 2007, respectively. The decrease in 2008 is attributable to changes in working capital, partially offset by higher FFO resulting from a full year of our senior living operations, accretive acquisitions and rent escalations from our triple-net lease tenants.
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Cash Flows from Investing Activities
Net cash used in investing activities was $136.3 million and $1.2 billion for the years ended December 31, 2008 and 2007, respectively. These activities consisted primarily of: (i) investments in real estate ($53.8 million and $1.3 billion in 2008 and 2007, respectively); (ii) capital expenditures ($16.4 million and $8.2 million in 2008 and 2007, respectively); (iii) investments in loans receivable and marketable debt securities ($172.5 million in 2008); (iv) proceeds from mortgage loans ($0.1 million and $15.8 million in 2008 and 2007, respectively); (v) the sale of marketable equity securities ($7.8 million in 2007); and (vi) proceeds from real estate disposals ($104.2 million and $157.4 million in 2008 and 2007, respectively).
Cash Flows from Financing Activities
Net cash used in financing activities totaled $80.2 million for the year ended December 31, 2008 and included $288.8 million of cash dividend payments to common stockholders and $416.9 million of aggregate principal payments on mortgage obligations. The uses were partially offset by proceeds of $408.5 million from the issuance of common stock, $140.3 million related to the issuance of debt and $73.4 million of net borrowings on our unsecured revolving credit facilities.
Net cash provided by financing
activities totaled $805.6 million for the year ended December 31, 2007 and included proceeds of $1.2 billion in bridge financing, $1.05 billion from the issuance of common stock, $176.6 million of net borrowings on our unsecured
revolving credit facility and our previous Canadian credit facility and $53.8 million from the issuance of other debt. Uses consisted of (i) $1.2 billion for repayment of the bridge financing, (ii) $286.2 million of cash dividend payments
Contractual Obligations
The following table summarizes the effect that minimum debt (which includes principal and interest payments) and other material noncancelable commitments are expected to have on our cash flow in future periods as of December 31, 2008.
Total |
Less than
1 year (4) |
1-3 years (5) | 3-5 years (6) |
More than
5 years (7) |
|||||||||||
(In thousands) | |||||||||||||||
Long-term debt obligations (1) (2) |
$ | 4,205,902 | $ | 361,750 | $ | 1,248,611 | $ | 902,735 | $ | 1,692,806 | |||||
Acquisition commitments (3) |
17,093 | 17,093 | | | | ||||||||||
Operating and ground lease obligations |
83,180 | 1,426 | 2,421 | 2,059 | 77,274 | ||||||||||
Total |
$ | 4,306,175 | $ | 380,269 | $ | 1,251,032 | $ | 904,794 | $ | 1,770,080 | |||||
(1) | Amounts represent contractual amounts due, including interest. Includes $300.2 million outstanding on our unsecured revolving credit facilities; we had $176.8 million of unrestricted cash and cash equivalents at December 31, 2008. |
(2) | Interest on variable rate debt was based on forward rates obtained as of December 31, 2008. |
(3) | Includes commitments for the purchase of one hospital and additional fundings related to our two MOBs that were under development at December 31, 2008. |
(4) | Includes $49.8 million outstanding principal amount of the 2009 Senior Notes. |
(5) | Includes outstanding principal amounts of $123.0 million of the 2010 Senior Notes, $230.0 million of the Convertible Notes and $300.2 million under our unsecured revolving credit facilities that mature in 2010; we had $176.8 million in unrestricted cash and cash equivalents at December 31, 2008. |
(6) | Includes $191.8 million outstanding principal amount of the 2012 Senior Notes. |
(7) | Includes outstanding principal amounts of $175.0 million of the 2014 Senior Notes, $170.0 million of the 2015 Senior Notes, $200.0 million of the 2016 Senior Notes and $225.0 million of the 2017 Senior Notes. |
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As of December 31, 2008, we had $12.9 million of unrecognized tax benefits under the provisions of FIN 48 that have been excluded from the table above, as we are unable to make a reasonable reliable estimate of the period of cash settlement, if any, with the respective tax authority.
ITEM 7A. | Quantitative and Qualitative Disclosures About Market Risk |
The information set forth in Item 7 of this Annual Report on Form 10-K under Managements Discussion and Analysis of Financial Condition and Results of OperationsAsset/Liability Management is incorporated by reference into this Item 7A.
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ITEM 8. | Financial Statements and Supplementary Data |
Ventas, Inc.
Index to Consolidated Financial Statements and Financial Statement Schedules
71
MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Ventas, Inc. (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Companys internal control over financial reporting based on the framework established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management has determined that the Companys internal control over financial reporting as of December 31, 2008 was effective.
The effectiveness of the Companys internal control over financial reporting as of December 31, 2008 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report included herein.
72
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors
Ventas, Inc.
We have audited the accompanying consolidated balance sheets of Ventas, Inc. as of December 31, 2008 and 2007, and the related consolidated statements of income, shareholders equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedule listed in the accompanying index to the financial statements and schedule. These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ventas, Inc. at December 31, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
As discussed in Note 2 to the consolidated financial statements, in 2006 Ventas, Inc. changed its method of accounting for stock-based compensation.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Ventas Inc.s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2009 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
26 February 2009
73
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Stockholders and Board of Directors
Ventas, Inc.
We have audited Ventas, Inc.s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Ventas, Inc.s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Ventas, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2008 consolidated financial statements and financial statement schedule of Ventas, Inc. and our report dated February 26, 2009 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
26 February 2009
74
CONSOLIDATED BALANCE SHEETS
As of December 31, 2008 and 2007
(In thousands, except per share amounts)
2008 | 2007 | |||||||
Assets |
||||||||
Real estate investments: |
||||||||
Land |
$ | 555,015 | $ | 572,092 | ||||
Buildings and improvements |
5,593,024 | 5,718,273 | ||||||
Construction in progress |
12,591 | 1,816 | ||||||
6,160,630 | 6,292,181 | |||||||
Accumulated depreciation |
(987,691 | ) | (816,352 | ) | ||||
Net real estate property |
5,172,939 | 5,475,829 | ||||||
Loans receivable, net |
123,289 | 19,998 | ||||||
Net real estate investments |
5,296,228 | 5,495,827 | ||||||
Cash and cash equivalents |
176,812 | 28,334 | ||||||
Escrow deposits and restricted cash |
55,866 | 54,077 | ||||||
Deferred financing costs, net |
20,598 | 22,836 | ||||||
Notes receivable-related parties |
| 2,092 | ||||||
Other |
220,480 | 113,462 | ||||||
Total assets |
$ | 5,769,984 | $ | 5,716,628 | ||||
Liabilities and stockholders equity |
||||||||
Liabilities: |
||||||||
Senior notes payable and other debt |
$ | 3,147,694 | $ | 3,360,499 | ||||
Deferred revenue |
7,057 | 9,065 | ||||||
Accrued interest |
21,931 | 20,790 | ||||||
Accounts payable and other accrued liabilities |
168,198 | 173,576 | ||||||
Deferred income taxes |
257,499 | 297,590 | ||||||
Total liabilities |
3,602,379 | 3,861,520 | ||||||
Minority interest |
19,137 | 31,454 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued |
| | ||||||
Common stock, $0.25 par value; 300,000 shares authorized; 143,302 and 133,665 shares issued at December 31, 2008 and 2007, respectively |
35,825 | 33,416 | ||||||
Capital in excess of par value |
2,244,596 | 1,821,294 | ||||||
Accumulated other comprehensive (loss) income |
(21,089 | ) | 17,416 | |||||
Retained earnings (deficit) |
(110,407 | ) | (47,846 | ) | ||||
Treasury stock, 15 and 14 shares at December 31, 2008 and 2007, respectively |
(457 | ) | (626 | ) | ||||
Total stockholders equity |
2,148,468 | 1,823,654 | ||||||
Total liabilities and stockholders equity |
$ | 5,769,984 | $ | 5,716,628 | ||||
See accompanying notes.
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CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2008, 2007 and 2006
(In thousands, except per share amounts)
2008 | 2007 | 2006 | |||||||||
Revenues: |
|||||||||||
Rental income |
$ | 487,436 | $ | 465,069 | $ | 388,167 | |||||
Resident fees and services |
429,257 | 282,226 | | ||||||||
Income from loans and investments |
8,847 | 2,586 | 7,014 | ||||||||
Interest and other income |
4,226 | 2,839 | 2,770 | ||||||||
Total revenues |
929,766 | 752,720 | 397,951 | ||||||||
Expenses: |
|||||||||||
Interest |
203,184 | 195,731 | 128,953 | ||||||||
Depreciation and amortization |
231,802 | 227,463 | 110,754 | ||||||||
Property-level operating expenses |
306,944 | 198,125 | 3,171 | ||||||||
General, administrative and professional fees (including non-cash stock-based compensation expense of $9,976, $7,493 and $3,046 for the years ended December 31, 2008, 2007 and 2006, respectively) |
40,651 | 36,425 | 26,136 | ||||||||
Foreign currency gain |
(162 | ) | (24,280 | ) | | ||||||
(Gain) loss on extinguishment of debt |
(2,398 | ) | (88 | ) | 1,273 | ||||||
Merger-related expenses |
4,460 | 2,979 | | ||||||||
Rent reset costs |
| | 7,361 | ||||||||
Total expenses |
784,481 | 636,355 | 277,648 | ||||||||
Income before reversal of contingent liability, income taxes, minority interest and discontinued operations |
145,285 | 116,365 | 120,303 | ||||||||
Reversal of contingent liability |
23,328 | | 1,769 | ||||||||
Income tax benefit, net of minority interest |
15,885 | 28,042 | | ||||||||
Income before minority interest and discontinued operations |
184,498 | 144,407 | 122,072 | ||||||||
Minority interest, net of tax |
2,684 | 1,698 | | ||||||||
Income from continuing operations |
181,814 | 142,709 | 122,072 | ||||||||
Discontinued operations |
44,474 | 139,609 | 9,358 | ||||||||
Net income |
226,288 | 282,318 | 131,430 | ||||||||
Preferred stock dividends and issuance costs |
| 5,199 | | ||||||||
Net income applicable to common shares |
$ | 226,288 | $ | 277,119 | $ | 131,430 | |||||
Earnings per common share: |
|||||||||||
Basic: |
|||||||||||
Income from continuing operations applicable to common shares |
$ | 1.30 | $ | 1.12 | $ | 1.17 | |||||
Discontinued operations |
0.32 | 1.14 | 0.09 | ||||||||
Net income applicable to common shares |
$ | 1.62 | $ | 2.26 | $ | 1.26 | |||||
Diluted: |
|||||||||||
Income from continuing operations applicable to common shares |
$ | 1.30 | $ | 1.12 | $ | 1.16 | |||||
Discontinued operations |
0.32 | 1.13 | 0.09 | ||||||||
Net income applicable to common shares |
$ | 1.62 | $ | 2.25 | $ | 1.25 | |||||
Weighted average shares used in computing earnings per common share: |
|||||||||||
Basic |
139,572 | 122,597 | 104,206 | ||||||||
Diluted |
139,912 | 123,012 | 104,731 |
See accompanying notes.
76
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
For the Years Ended December 31, 2008, 2007 and 2006
(In thousands, except per share amounts)
Common
Stock Par Value |
Capital in
Excess of Par Value |
Unearned
Compensation on Restricted Stock |
Accumulated
Other Comprehensive Income (Loss) |
Retained
Earnings (Deficit) |
Treasury
Stock |
Total | |||||||||||||||||||||
Balance at January 1, 2006 |
$ | 25,927 | $ | 692,650 | $ | (713 | ) | $ | (143 | ) | $ | (50,402 | ) | $ | | $ | 667,319 | ||||||||||
Comprehensive Income: |
|||||||||||||||||||||||||||
Net income applicable to common shares |
| | | | 131,430 | | 131,430 | ||||||||||||||||||||
Unrealized gain on interest rate swap |
| | | 810 | | | 810 | ||||||||||||||||||||
Reclassification adjustment for realized gain on interest rate swap included in net income during the year |
| | | (359 | ) | | | (359 | ) | ||||||||||||||||||
Unrealized gain on marketable securities |
| | | 729 | | | 729 | ||||||||||||||||||||
Comprehensive income |
| | | | | | 132,610 | ||||||||||||||||||||
Dividends to common stockholders$1.58 per share |
| | | | (165,204 | ) | | (165,204 | ) | ||||||||||||||||||
Issuance of common stock |
427 | 64,573 | | | | | 65,000 | ||||||||||||||||||||
Issuance of common stock for stock plans |
191 | 9,545 | | | | 170 | 9,906 | ||||||||||||||||||||
Grant of restricted stock, net of forfeitures |
| 415 | | | | (170 | ) | 245 | |||||||||||||||||||
Reclassification of unearned compensation on restricted stock to capital in excess of par value |
| (713 | ) | 713 | | | | | |||||||||||||||||||
Balance at December 31, 2006 |
26,545 | 766,470 | | 1,037 | (84,176 | ) | | 709,876 | |||||||||||||||||||
Comprehensive Income: |
|||||||||||||||||||||||||||
Net income applicable to common shares |
| | | | 277,119 | | 277,119 | ||||||||||||||||||||
Foreign currency translation |
| | | 18,651 | | | 18,651 | ||||||||||||||||||||
Unrealized loss on interest rate swap |
| | | (995 | ) | | | (995 | ) | ||||||||||||||||||
Reclassification adjustment for realized gain on interest rate swap included in net income during the year |
| | | (548 | ) | | | (548 | ) | ||||||||||||||||||
Realized gain on marketable securities |
| | | (729 | ) | | | (729 | ) | ||||||||||||||||||
Comprehensive income |
| | | | | | 293,498 | ||||||||||||||||||||
Dividends to common stockholders$1.90 per share |
| | | | (240,789 | ) | | (240,789 | ) | ||||||||||||||||||
Issuance of common stock |
6,727 | 1,038,986 | | | | | 1,045,713 | ||||||||||||||||||||
Issuance of common stock for stock plans |
106 | 15,395 | | | | 434 | 15,935 | ||||||||||||||||||||
Grant of restricted stock, net of forfeitures |
38 | 443 | | | | (1,060 | ) | (579 | ) | ||||||||||||||||||
Balance at December 31, 2007 |
33,416 | 1,821,294 | | 17,416 | (47,846 | ) | (626 | ) | 1,823,654 | ||||||||||||||||||
Comprehensive Income: |
|||||||||||||||||||||||||||
Net income applicable to common shares |
| | | | 226,288 | | 226,288 | ||||||||||||||||||||
Foreign currency translation |
| | | (26,142 | ) | | | (26,142 | ) | ||||||||||||||||||
Unrealized loss on interest rate swaps |
| | | (579 | ) | | | (579 | ) | ||||||||||||||||||
Reclassification adjustment for realized loss on interest rate swap included in net income during the year |
| | | 1,103 | | | 1,103 | ||||||||||||||||||||
Unrealized loss on marketable debt securities |
| | | (12,887 | ) | | | (12,887 | ) | ||||||||||||||||||
Comprehensive income |
| | | | | | 187,783 | ||||||||||||||||||||
Dividends to common stockholders$2.05 per share |
| | | | (288,849 | ) | | (288,849 | ) | ||||||||||||||||||
Issuance of common stock |
2,309 | 406,231 | | | | | 408,540 | ||||||||||||||||||||
Issuance of common stock for stock plans |
64 | 15,901 | | | | 1,047 | 17,012 | ||||||||||||||||||||
Grant of restricted stock, net of forfeitures |
36 | 1,170 | | | | (878 | ) | 328 | |||||||||||||||||||
Balance at December 31, 2008 |
$ | 35,825 | $ | 2,244,596 | $ | | $ | (21,089 | ) | $ | (110,407 | ) | $ | (457 | ) | $ | 2,148,468 | ||||||||||
See accompanying notes.
77
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2008, 2007 and 2006
(In thousands)
2008 | 2007 | 2006 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Net income |
$ | 226,288 | $ | 282,318 | $ | 131,430 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
Depreciation and amortization (including amounts in discontinued operations) |
235,754 | 235,045 | 119,653 | |||||||||
Amortization of deferred revenue and lease intangibles, net |
(9,344 | ) | (9,819 | ) | (2,412 | ) | ||||||
Other amortization expenses |
309 | 2,456 | 3,253 | |||||||||
Stock-based compensation |
9,976 | 7,493 | 3,046 | |||||||||
Straight-lining of rental income |
(14,652 | ) | (17,311 | ) | (19,963 | ) | ||||||
Reversal of contingent liability |
(23,328 | ) | | (1,769 | ) | |||||||
(Gain) loss on extinguishment of debt |
(168 | ) | | 1,273 | ||||||||
Gain on sale of assets (including amounts in discontinued operations) |
(39,026 | ) | (129,478 | ) | | |||||||
Net gain on sale of marketable equity securities |
| (864 | ) | (1,379 | ) | |||||||
Loss on bridge financing |
| 2,550 | | |||||||||
Income tax benefit |
(15,885 | ) | (28,042 | ) | | |||||||
Provision for loan losses |
5,994 | | | |||||||||
Other |
3,298 | 222 | 488 | |||||||||
Changes in operating assets and liabilities: |
||||||||||||
(Increase) decrease in other assets |
(3,541 | ) | 47,528 | (41,684 | ) | |||||||
Increase (decrease) in accrued interest |
1,100 | (4,906 | ) | 5,511 | ||||||||
(Decrease) increase in accounts payable and other liabilities |
(12,600 | ) | 14,434 | 41,420 | ||||||||
Net cash provided by operating activities |
364,175 | 401,626 | 238,867 | |||||||||
Cash flows from investing activities: |
||||||||||||
Net investment in real estate property |
(53,801 | ) | (1,348,354 | ) | (490,311 | ) | ||||||
Proceeds from real estate disposals |
104,183 | 157,400 | | |||||||||
Investment in loans receivable |
(108,826 | ) | | (191,068 | ) | |||||||
Purchase of marketable debt securities |
(63,680 | ) | | | ||||||||
Proceeds from sale of securities |
| 7,773 | | |||||||||
Proceeds from loans receivable |
135 | 15,803 | 195,411 | |||||||||
Capital expenditures |
(16,359 | ) | (8,188 | ) | (368 | ) | ||||||
Escrow funds returned from an Internal Revenue Code Section 1031 exchange |
| | 9,902 | |||||||||
Purchase of marketable equity securities |
| | (5,530 | ) | ||||||||
Other |
2,092 | 374 | (10 | ) | ||||||||
Net cash used in investing activities |
(136,256 | ) | (1,175,192 | ) | (481,974 | ) | ||||||
Cash flows from financing activities: |
||||||||||||
Net change in borrowings under revolving credit facilities |
73,366 | 176,586 | (32,200 | ) | ||||||||
Issuance of bridge financing |
| 1,230,000 | | |||||||||
Repayment of bridge financing |
| (1,230,000 | ) | | ||||||||
Proceeds from debt |
140,262 | 53,832 | 449,005 | |||||||||
Repayment of debt |
(416,896 | ) | (184,613 | ) | (16,084 | ) | ||||||
Debt and preferred stock issuance costs |
| (4,300 | ) | | ||||||||
Payment of deferred financing costs |
(3,857 | ) | (7,856 | ) | (4,876 | ) | ||||||
Issuance of common stock, net |
408,540 | 1,045,713 | 831 | |||||||||
Cash distribution to preferred stockholders |
| (3,449 | ) | | ||||||||
Cash distribution to common stockholders |
(288,849 | ) | (282,739 | ) | (160,598 | ) | ||||||
Other |
7,187 | 12,475 | 6,634 | |||||||||
Net cash (used in) provided by financing activities |
(80,247 | ) | 805,649 | 242,712 | ||||||||
Net increase (decrease) in cash and cash equivalents |
147,672 | 32,083 | (395 | ) | ||||||||
Effect of foreign currency translation on cash and cash equivalents |
806 | (4,995 | ) | | ||||||||
Cash and cash equivalents at beginning of year |
28,334 | 1,246 | 1,641 | |||||||||
Cash and cash equivalents at end of year |
$ | 176,812 | $ | 28,334 | $ | 1,246 | ||||||
Supplemental disclosure of cash flow information: |
||||||||||||
Interest paid including swap payments and receipts |
$ | 202,360 | $ | 207,478 | $ | 133,653 | ||||||
Supplemental schedule of non-cash activities: |
||||||||||||
Assets and liabilities assumed from acquisitions: |
||||||||||||
Real estate investments |
$ | 33,967 | $ | 1,199,787 | $ | 189,262 | ||||||
Other assets acquired |
1,684 | 157,865 | 835 | |||||||||
Debt assumed |
34,629 | 970,301 | 125,633 | |||||||||
Deferred taxes |
| 306,225 | | |||||||||
Minority interest |
685 | 32,730 | | |||||||||
Other liabilities |
337 | 48,396 | (536 | ) | ||||||||
Issuance of common stock |
| | 65,000 |
See accompanying notes.
78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1Description of Business
Ventas, Inc. (together with its subsidiaries, unless otherwise indicated or except where the context otherwise requires, we, us or our) is a real estate investment trust (REIT) with a geographically diverse portfolio of seniors housing and healthcare properties in the United States and Canada. As of December 31, 2008, this portfolio consisted of 513 assets: 248 seniors housing communities, 192 skilled nursing facilities, 41 hospitals and 32 medical office buildings (MOBs) and other properties in 43 states and two Canadian provinces. With the exception of 79 of our seniors housing communities that are managed by Sunrise Senior Living, Inc. (together with its subsidiaries, Sunrise) pursuant to long-term management agreements and the majority of our MOBs, we lease our properties to healthcare operating companies under triple-net or absolute net leases, which require the tenants to pay all property-related expenses. Kindred Healthcare, Inc. (together with its subsidiaries, Kindred) leased 203 of our properties and Brookdale Senior Living Inc. (together with its subsidiaries, which include Brookdale Living Communities, Inc. (Brookdale) and Alterra Healthcare Corporation (Alterra), Brookdale Senior Living) leased 83 of our properties as of December 31, 2008. We also had real estate loan investments relating to seniors housing and healthcare third parties as of December 31, 2008.
We conduct substantially all of our business through our wholly owned subsidiaries, Ventas Realty, Limited Partnership (Ventas Realty), PSLT OP, L.P. and Ventas SSL, Inc., and ElderTrust Operating Limited Partnership (ETOP), in which we own substantially all of the partnership units. Our primary business consists of acquiring, financing and owning seniors housing and healthcare properties and leasing those properties to third parties or operating those properties through independent third party managers.
Note 2Accounting Policies
Principles of Consolidation
The accompanying Consolidated Financial Statements include our accounts and the accounts of our wholly owned subsidiaries and joint venture entities over which we exercise control. All intercompany transactions and balances have been eliminated in consolidation, and net earnings are reduced by the portion of net earnings applicable to minority interests.
Accounting Estimates
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of rental revenues and expenses during the reporting period. Actual results could differ from those estimates.
Long-Lived Assets and Intangibles
Investments in real estate assets are recorded at cost. We account for acquisitions using the purchase method. The cost of the properties acquired is allocated among tangible and recognized intangible assets and liabilities based upon estimated fair values in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations. We estimate fair values of the components of assets and liabilities acquired as of the acquisition date. Recognized intangibles include the value of acquired lease contracts, management agreements and related customer relationships.
Our method for determining fair value varies with the categorization of the asset or liability acquired. We estimate the fair value of buildings on an as-if-vacant basis, and depreciate the building value over the estimated remaining life of the building. We determine the allocated value of other fixed assets based upon the replacement cost and depreciate such value over their estimated remaining useful lives. We determine the value of land either
79
based on real estate tax assessed values in relation to the total value of the asset or internal analyses of recently acquired and existing comparable properties within our portfolio. The fair value of in-place leases, if any, reflects (i) above and/or below market leases, if any, determined by discounting the difference between the estimated current market rent and the in-place rentals, the resulting intangible asset or liability of which is amortized to revenue over the remaining life of the associated lease plus any fixed rate renewal periods, if applicable, (ii) the estimated value of the cost to obtain tenants, including tenant allowances, tenant improvements and leasing commissions, which is amortized over the remaining life of the associated lease, and (iii) an estimated value of the absorption period to reflect the value of the rents and recovery costs foregone during a reasonable lease-up period, as if the acquired space was vacant, which is amortized over the remaining life of the associated lease. We also estimate the value of tenant or other customer relationships acquired by considering the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenants credit quality, expectations of lease renewals with the tenant, and the potential for significant, additional future leasing arrangements with the tenant. We amortize such value over the expected term of the associated arrangements or leases, which would include the remaining lives of the related leases and any expected renewal periods. The fair value of long-term debt is calculated by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings. Discount rates are approximated based on the rate we estimate we would incur to replace each instrument on the date of acquisition. Any fair value adjustments related to long-term debt are recognized as effective yield adjustments over the remaining term of the instrument.
Fixtures and equipment, with a net book value of $73.3 million and $110.2 million at December 31, 2008 and 2007, respectively, is included in net real estate property on our Consolidated Balance Sheets. Depreciation is recorded on the straight-line basis, using estimated useful lives ranging from 20 to 50 years for buildings and improvements and three to ten years for fixtures and equipment. Depreciation is discontinued when a property is identified as held for sale.
Impairment of Long-Lived Assets
We periodically evaluate our long-lived assets, primarily consisting of our investments in real estate, for impairment indicators in accordance with SFAS No. 144 Accounting for the Impairment and Disposal of Long-Lived Assets. If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying operations. We adjust the net book value of leased properties and other long-lived assets to fair value, if the sum of the expected future undiscounted cash flows including sales proceeds is less than book value. An impairment loss is recognized at the time we make any such determination. Future events could occur which would cause us to conclude that impairment indicators exist and an impairment loss is warranted. We did not record any impairment charges for the years ended December 31, 2008, 2007 and 2006.
Assets Held for Sale and Discontinued Operations
Certain long-lived assets are classified as held-for-sale in accordance with SFAS No. 144. Long-lived assets to be disposed of are reported at the lower of their carrying amount or their fair value less cost to sell and are no longer depreciated. Discontinued operations is defined in SFAS No. 144 as a component of an entity that has either been disposed of or is deemed to be held for sale if both the operations and cash flows of the component have been or will be eliminated from ongoing operations as a result of the disposal transaction and the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. We have classified six assets totaling $62.5 million as assets held for sale and recorded these assets as a component of other assets on the Consolidated Balance Sheets as of December 31, 2008. As of December 31, 2008, $38.8 million of mortgage debt related to these assets was recorded as a component of senior notes payable and other debt on the Consolidated Balance Sheets. The operations for these assets are included as a component of discontinued operations on the Consolidated Statements of Income for the years ended December 31, 2008, 2007 and 2006. The results of operations and gain or loss on assets sold or held for sale are reflected in our
80
Consolidated Statements of Income as discontinued operations for all periods presented. Interest expense allocated to discontinued operations has been estimated based on a proportional allocation of rental income and identified mortgage interest, or some combination thereof.
Loans Receivable
Loans receivable are stated at the unpaid principal balance net of any deferred origination fees, purchase discounts or premiums and/or valuation allowances. Net deferred origination fees are comprised of loan fees collected from the borrower net of certain direct costs. Net deferred origination fees and purchase discounts or premiums are amortized to income over the contractual life of the loan using the effective interest method. We evaluate the collectibility of loans and other amounts receivable from third parties based on a number of factors, including (i) corporate and facility-level financial and operational reports, (ii) compliance with the financial covenants set forth in the loan or lease agreement, (iii) the financial stability of the applicable borrower or tenant and any guarantor, (iv) the payment history of the borrower or tenant, and (v) current economic conditions. Our level of reserves, if any, for loans and other amounts receivable from third parties fluctuates depending upon all of these factors. The valuation allowance for loan losses was $5.5 million and $0 million at December 31, 2008 and 2007, respectively. See Note 8Loans Receivable.
Cash Equivalents
Cash equivalents consist of highly liquid investments with a maturity date of three months or less when purchased. These investments are stated at cost, which approximates fair value.
Escrow Deposits and Restricted Cash
Escrow deposits consist of amounts held by us or lenders to provide for future real estate tax and insurance expenditures and tenant improvements related to our operations and properties. Restricted cash represents amounts paid to us for security deposits and other purposes.
Deferred Financing Costs
Deferred financing costs are amortized as a component of interest expense over the terms of the related borrowings using a method that approximates a level yield, and are net of accumulated amortization of approximately $19.0 million and $13.5 million at December 31, 2008 and 2007, respectively. Amortized costs of approximately $7.1 million, $5.5 million and $3.3 million were included in interest expense for the years ended December 31, 2008, 2007 and 2006, respectively.
Marketable Debt and Equity Securities
We record marketable debt and equity securities as available-for-sale in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. These securities are classified as a component of other assets on our Consolidated Balance Sheets. These securities are recorded at fair market value, with unrealized gains and losses recorded in stockholders equity as a component of accumulated other comprehensive income on our Consolidated Balance Sheets. Interest income, including discount or premium amortization, on marketable debt securities and gains or losses on securities sold, which are based on the specific identification method, are reported in income from loans and investments on our Consolidated Statements of Income. During the years ended December 31, 2008, 2007 and 2006, we realized gains related to the sale of various equity securities of $0, $0.9 million and $1.4 million, respectively.
Derivative Instruments
We use derivative instruments to protect against the risk of interest rate movements on future cash flows under our variable rate debt agreements and the risk of foreign currency exchange rate movements. In accordance
81
with SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities, as amended, derivative instruments are reported at fair value on our Consolidated Balance Sheets. Changes in the fair value of derivatives are recognized as adjustments to net income if the derivative does not qualify for hedge accounting. If the derivative is deemed to be eligible for hedge accounting, such changes are reported in accumulated other comprehensive income, exclusive of ineffectiveness amounts, which are recognized as adjustments to net income.
In January 2007, we entered into two Canadian call options in conjunction with our agreement to acquire the assets of Sunrise Senior Living Real Estate Investment Trust (Sunrise REIT). See Note 5Acquisitions. We paid an aggregate purchase price of $8.5 million for these contracts, which had an aggregate notional call amount of Cdn $750.0 million at a Cdn $1.18 strike price. These contracts were settled on April 26, 2007, the acquisition date, and we received cash of $33.2 million upon settlement. For the year ended December 31, 2007, we recognized gains related to these call option contracts of $24.7 million, which is included in our Consolidated Statements of Income as a foreign currency gain.
Fair Values of Financial Instruments
The following methods and assumptions were used in estimating fair value disclosures for financial instruments.
|
Cash and cash equivalents: The carrying amount of cash and cash equivalents, which is unrestricted, reported in our Consolidated Balance Sheets approximates fair value because of the short maturity of these instruments. |
|
Loans receivable: The fair value of loans receivable is estimated by discounting the future cash flows using the current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. See discussion above regarding valuation allowances for loan losses. |
|
Notes receivable-related parties: The fair value of notes receivable-related parties is estimated using a discounted cash flow analysis, using interest rates being offered for similar loans to borrowers with similar credit ratings. |
|
Senior notes payable and other debt: The fair values of borrowings are estimated by discounting the future cash flows using current interest rates at which similar borrowings could be made by us. |
Revenue Recognition
Certain of our leases, excluding our master lease agreements with Kindred (the Kindred Master Leases) but including the majority of our leases with Brookdale Senior Living, provide for periodic and determinable increases in base rent. Base rental revenues under these leases are recognized on a straight-line basis over the terms of the applicable lease. Income on our straight-line revenue is recognized when collectibility is reasonably assured. In the event we determine that collectibility of straight-line revenue is not reasonably assured, we establish an allowance for estimated losses. Recognizing rental income on a straight-line basis results in recognized revenue exceeding cash amounts contractually due from our tenants during the first half of the term for leases that have straight-line treatment. The cumulative excess is included in other assets, net of allowances, on our Consolidated Balance Sheets and totaled $68.2 million and $54.5 million at December 31, 2008 and 2007, respectively.
Certain of our other leases, including the Kindred Master Leases, provide for an annual increase in rental payments only if certain revenue parameters or other substantive contingencies are met. We recognize the increased rental revenue under these leases only if the revenue parameters or other substantive contingencies are met, rather than on a straight-line basis over the term of the applicable lease. We recognize income from rent, lease termination fees and other income when all of the following criteria are met in accordance with the
82
Securities and Exchange Commission (the Commission) Staff Accounting Bulletin 104: (i) the agreement has been fully executed and delivered; (ii) services have been rendered; (iii) the amount is fixed or determinable; and (iv) collectibility is reasonably assured.
Resident fees and services are recognized monthly as services are provided. Move-in fees, a component of resident fees and services, are recognized on a straight-line basis over the term of the applicable lease agreement. Lease agreements with residents generally have a term of one year and are cancelable by the resident with 30 days notice.
Stock-Based Compensation
We account for stock-based compensation in accordance with SFAS No. 123(R), Share-Based Payment (SFAS No. 123(R)), which is a revision to SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123). SFAS No. 123(R) supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB Opinion No. 25). Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123, except that SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative under SFAS No. 123(R). See Note 11Stock-Based Compensation.
Gain on Sale of Assets
We recognize sales of assets only upon the closing of the transaction with the purchaser. Payments received from purchasers prior to closing are recorded as deposits and classified as other assets on our Consolidated Balance Sheets. Gains on assets sold are recognized using the full accrual method upon closing when the collectibility of the sales price is reasonably assured, we are not obligated to perform significant activities after the sale to earn the profit, we have received adequate initial investment from the buyer, and other profit recognition criteria have been satisfied. Gains may be deferred in whole or in part until the sales satisfy the requirements of gain recognition on sales of real estate under SFAS No. 66, Accounting for Sales of Real Estate.
Federal Income Tax
Since we have elected to be treated as a real estate investment trust (REIT) under the applicable provisions of the Internal Revenue Code of 1986, as amended (the Code), prior to our acquisition of the assets of Sunrise REIT in April 2007 we made no provision for federal income tax purposes, and we will continue to make no provision for REIT income and expense. As a result of the Sunrise REIT acquisition, we now record income tax expense or benefit with respect to certain of our entities which are taxed as taxable REIT subsidiaries under provisions similar to those applicable to regular corporations and not under the REIT provisions.
Deferred income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. An increase or decrease in the deferred tax liability that results from a change in circumstances, and which causes a change in our judgment about expected future tax consequences of events, would be included in the tax provision when the changes in circumstances and our judgment occurs. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards. A valuation allowance is provided if we believe it is more likely than not that all or some portion of the deferred tax asset will not be realized. An increase or decrease in the valuation allowance that results from a change in circumstances, and which causes a change in our judgment about the realizability of the related deferred tax asset, would be included in the tax provision when the changes in circumstances and our judgment occurs.
83
Foreign Currency
Certain of our subsidiaries functional currencies are the local currencies of their respective countries. We translate the results of operations of our foreign subsidiaries into U.S. dollars using average rates of exchange in effect during the period, whereas balance sheet accounts are translated using exchange rates in effect at the end of the period. Resulting currency translation adjustments are recorded in accumulated other comprehensive income, a component of stockholders equity, in our Consolidated Balance Sheets. Transaction gains and losses are recorded in our Consolidated Statements of Income.
Segment Reporting
As of December 31, 2008, we operated through two reportable business segments: triple-net leased properties and senior living operations. Our triple-net leased properties segment consists of acquiring, financing and owning seniors housing and healthcare properties in the United States and leasing those properties to healthcare operating companies under triple-net or absolute-net leases, which require the tenants to pay all property-related expenses. Our senior living operations segment consists of investments in seniors housing communities located in the United States and Canada for which we engage Sunrise to manage the operations.
We acquired the senior living operations segment on April 26, 2007, pursuant to the purchase of the Sunrise REIT properties. With the addition of these properties, we believed segment differentiation would be appropriate based on the different economic and legal structures used to acquire and own those assets. Prior to the acquisition, we operated through one reportable segmentinvestment in real estatewhich included the triple-net leased properties and our MOBs. Our MOB business consists of leasing space primarily to physicians and other healthcare businesses and engaging third parties to manage those operations. Due to our limited operation of and allocation of capital to the MOBs, we separated them from the triple-net leased properties segment. However, the MOB segment is not individually reported and is included in All Other because it does not meet the quantitative thresholds of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information at the current time. See Note 19Segment Information.
Recently Adopted Accounting Standards
In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for income taxes when it is uncertain how an income or expense item should be treated on an income tax return. FIN 48 describes when and in what amount an uncertain tax item should be recorded in the financial statements and provides guidance on recording interest and penalties and accounting and reporting for income taxes in interim periods. We adopted FIN 48 on January 1, 2007. See Note 12Income Taxes.
On January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value and provides guidance for measuring fair value and the necessary disclosures. SFAS No. 157 does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. The adoption did not have a material impact on our Consolidated Financial Statements.
SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS No. 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entitys own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).
Level one inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Level two inputs are inputs other than quoted prices included in level one that are
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observable for the asset or liability, either directly or indirectly. Level two inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability, other than quoted prices, such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level three inputs are unobservable inputs for the asset or liability, which are typically based on an entitys own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
We determined the valuation of our current investments in marketable securities using level one inputs, which utilize quoted prices in active markets for identical assets or liabilities that we have the ability to access. Additionally, we determined the valuation allowance for loan losses recorded in 2008 based off of level three inputs. See Note 8Loans Receivable.
In February 2008, the FASB issued Staff Position No. 157-2, Effective Date of FASB Statement No. 157 (FSP No. 157-2), which delays the adoption date of SFAS No. 157 for nonfinancial assets and liabilities. We adopted FSP No. 157-2 on January 1, 2009. The adoption did not have a material impact on our Consolidated Financial Statements.
On January 1, 2009, we adopted SFAS No. 141(R), Business Combinations, SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51, and FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (APB 14-1).
SFAS No. 141(R) requires the acquiring entity in a business combination to measure the assets acquired, liabilities assumed (including contingencies) and any noncontrolling interests at their fair values on the acquisition date. The statement also requires that acquisition-related transaction costs be expensed as incurred, that acquired research and development value be capitalized and that acquisition-related restructuring costs be capitalized only if they meet certain criteria. SFAS No. 141(R) did not have a material impact on our Consolidated Financial Statements at the time of adoption.
SFAS No. 160 changes the reporting for minority interests, which now must be characterized as noncontrolling interests and classified as a component of consolidated equity. The calculation of income and earnings per share continues to be based on income amounts attributable to the parent and is characterized as net income from controlling interests. As the ownership of a subsidiary increases or decreases, SFAS No. 160 requires any difference between the consideration paid and the adjustment to the noncontrolling interest balance be recorded as a component of equity in additional paid-in capital, so long as we maintain a controlling ownership interest. The adoption did not have a material impact on our Consolidated Financial Statements.
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APB 14-1 specifies that issuers of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) should separately account for the liability and equity components in a manner that will reflect the entitys nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. The following table summarizes the impact that the adoption of APB 14-1 is expected to have on our Consolidated Financial Statements.
As Reported |
2008 | 2007 | 2006 | |||||||||
(In thousands, except per share amounts) | ||||||||||||
Deferred financing costs, net |
$ | 20,598 | $ | 22,836 | $ | 18,415 | ||||||
Senior notes payable and other debt |
3,147,694 | 3,360,499 | 2,329,053 | |||||||||
Capital in excess of par value |
2,244,596 | 1,821,294 | 766,470 | |||||||||
Retained earnings (deficit) |
(110,407 | ) | (47,846 | ) | (84,176 | ) | ||||||
Interest expense |
203,184 | 195,731 | 128,953 | |||||||||
Net income applicable to common shares |
226,288 | 277,119 | 131,430 | |||||||||
Earnings per common sharediluted |
1.62 | 2.25 | 1.25 | |||||||||
As Adjusted |
2008 | 2007 | 2006 | |||||||||
(In thousands, except per share amounts) | ||||||||||||
Deferred financing costs, net |
$ | 22,032 | $ | 24,683 | $ | 20,636 | ||||||
Senior notes payable and other debt |
3,136,998 | 3,346,530 | 2,312,020 | |||||||||
Capital in excess of par value |
2,264,125 | 1,840,823 | 785,999 | |||||||||
Retained earnings (deficit) |
(114,092 | ) | (51,284 | ) | (84,452 | ) | ||||||
Interest expense |
206,869 | 199,169 | 129,229 | |||||||||
Net income applicable to common shares |
222,603 | 273,681 | 131,154 | |||||||||
Earnings per common sharediluted |
1.59 | 2.22 | 1.25 |
The adoption of APB 14-1 did not have any impact on our Consolidated Financial Statements for any years prior to 2006.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Note 3Revenues from Properties
Triple-Net Leased Properties
Approximately 25.5%, 30.8% and 51.6% of our total revenues and 38.0%, 41.5% and 52.3% of our total NOI (net operating income) (including amounts in discontinued operations) for the years ended December 31, 2008, 2007 and 2006, respectively, were derived from our four Kindred Master Leases.
Approximately 12.8%, 15.7% and 28.6% of our total revenues and 19.2%, 21.2% and 29.0% of our total NOI (including amounts in discontinued operations) for the years ended December 31, 2008, 2007 and 2006, respectively, were derived from our lease agreements with Brookdale Senior Living. Each of the Kindred Master Leases and our leases with Brookdale Senior Living is a triple-net lease pursuant to which the tenant is required to pay all insurance, taxes, utilities and maintenance and repairs related to the properties. In addition, the tenants are required to comply with the terms of the mortgage financing documents, if any, affecting the properties.
Each of Kindred and Brookdale Senior Living is subject to the reporting requirements of the Commission and is required to file with the Commission annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Kindred and Brookdale Senior Living contained or referred to in this Annual Report on Form 10-K is derived from filings made by Kindred or
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Brookdale Senior Living, as the case may be, with the Commission or other publicly available information, or has been provided to us by Kindred or Brookdale Senior Living. We have not verified this information either through an independent investigation or by reviewing Kindreds or Brookdale Senior Livings public filings. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you that all of this information is accurate. Kindreds and Brookdale Senior Livings filings with the Commission can be found at the Commissions website at www.sec.gov. We are providing this data for informational purposes only, and you are encouraged to obtain Kindreds and Brookdale Senior Livings publicly available filings from the Commission.
Kindred Master Leases . Under each Kindred Master Lease, the aggregate annual rent is referred to as Base Rent (as defined in the applicable Kindred Master Lease). Base Rent escalates on May 1 of each year at a specified rate over the Prior Period Base Rent (as defined in the applicable Kindred Master Lease), contingent upon the satisfaction of the specified facility revenue parameters. The annual rent escalator is 2.7% under Kindred Master Leases 1, 3 and 4, and is based on year-over-year changes in the Consumer Price Index, with a floor of 2.25% and a ceiling of 4%, under Kindred Master Lease 2, in all cases contingent only upon satisfaction of the aforementioned revenue parameters.
The properties leased to Kindred pursuant to the Kindred Master Leases are grouped into bundles, with each bundle containing a varying number of properties. All properties within a bundle have primary terms ranging from ten to fifteen years from May 1, 1998 and, provided certain conditions are satisfied, are subject to three five-year renewal terms. Kindred has renewed, through April 30, 2013, its leases covering all 57 assets owned by us whose initial base term expired on April 30, 2008. The term for each of ten bundles will expire on April 30, 2010 unless Kindred provides us with a renewal notice with respect to such individual bundle, on or before April 30, 2009. The ten bundles expiring in 2010 contain an aggregate of 109 properties, currently representing $123.9 million of annual Base Rent. Each bundle covers six to 20 assets, including at least one hospital. Kindred is required to continue to perform all of its obligations under the applicable lease for any assets that are not renewed until expiration of the term on April 30, 2010, including without limitation, payment of all rental amounts. For any assets that are not renewed, we will have at least one year to arrange for the repositioning of such assets with new operators. We own or have the rights to all licenses and CONs at the properties, and Kindred has extensive and detailed obligations to cooperate and ensure an orderly transition of all properties to another operator. We cannot assure you that we would be successful in identifying suitable replacement operators or that we will be able to enter into leases with new tenants or operators on terms as favorable to us as our current leases, if at all.
Brookdale Senior Living Leases . Our leases with Brookdale have primary terms of fifteen years, commencing either January 28, 2004 (in the case of fifteen Grand Court properties we acquired in early 2004) or October 19, 2004 (in the case of the properties we acquired in connection with the Provident acquisition), and, provided certain conditions are satisfied, are subject to two ten-year renewal terms. Our leases with Alterra also have primary terms of fifteen years, commencing either October 20, 2004 or December 16, 2004 (both in the case of properties we acquired in connection with the Provident acquisition), and, provided certain conditions are satisfied, are subject to two five-year renewal terms. Brookdale Senior Living guarantees all obligations under these leases, and all of our Brookdale Senior Living leases are cross-defaulted.
Under the terms of the Brookdale leases assumed in connection with the Provident acquisition, Brookdale is obligated to pay base rent, which escalates on January 1 of each year, by an amount equal to the lesser of (i) four times the percentage increase in the Consumer Price Index during the immediately preceding year or (ii) 3%. Under the terms of the Brookdale leases with respect to the Grand Court properties, Brookdale is obligated to pay base rent, which escalates on February 1 of each year, by an amount equal to the greater of (i) 2% or (ii) 75% of the increase in the Consumer Price Index during the immediately preceding year. Under the terms of the Alterra leases, Alterra is obligated to pay base rent, which escalates either on January 1 or November 1 of each year by an amount equal to the lesser of (i) four times the percentage increase in the Consumer Price Index during the immediately preceding year or (ii) 2.5%. We recognize rent revenue under the Brookdale and Alterra leases on a straight-line basis. See Note 13Commitments and Contingencies.
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The future contracted minimum rentals, excluding contingent rent escalations, but with straight-line rents where applicable, for all of our triple-net leases are as follows:
Kindred |
Brookdale
Senior Living |
Other | Total | |||||||||
(In thousands) | ||||||||||||
2009 |
$ | 241,724 | $ | 120,422 | $ | 99,988 | $ | 462,134 | ||||
2010 |
159,156 | 120,421 | 101,101 | 380,678 | ||||||||
2011 |
117,873 | 120,428 | 102,826 | 341,127 | ||||||||
2012 |
117,873 | 120,435 | 104,532 | 342,840 | ||||||||
2013 |
39,291 | 120,443 | 104,289 | 264,023 | ||||||||
Thereafter |
| 702,406 | 684,075 | 1,386,481 | ||||||||
Total |
$ | 675,917 | $ | 1,304,555 | $ | 1,196,811 | $ | 3,177,283 | ||||
Senior Living Operations
Approximately 20.0% of our EBITDA (earnings before interest, taxes, depreciation and amortization) and 45.4% of our total revenues (including amounts in discontinued operations) for the year ended December 31, 2008 were attributable to senior living operations managed by Sunrise. Approximately 36.2% of our total revenues (including amounts in discontinued operations) for the year ended December 31, 2007 were attributable to senior living operations managed by Sunrise for the period from April 26, 2007 (the date of the Sunrise REIT acquisition) through December 31, 2007.
We are party to management agreements with Sunrise pursuant to which Sunrise currently provides comprehensive property management and accounting services with respect to 79 of our seniors housing communities. Each management agreement has a term of 30 years from its effective date, the earliest of which began in 2004. Pursuant to the management agreements, we pay Sunrise a base management fee of 6% of resident fees and similar revenues, subject to reduction based on below target performance relative to NOI for a pool of properties. The minimum management fee assessable under these agreements is 5% of resident fees and similar revenues of the properties. We also pay incentive fees if a pool of properties exceeds aggregate performance targets relative to NOI; provided, however, that total management fees, including incentive fees, shall not exceed 8% of resident fees and similar revenues. In 2008, we paid a 5.75% management fee for 71 properties and management fees of between 6% and 10.4% for eight properties. The management agreements also specify that we (or the joint venture to which we are party, as applicable) will reimburse Sunrise for direct or indirect costs necessary to manage our seniors housing communities.
We may terminate our management agreements upon the occurrence of an event of default by Sunrise in the performance of a material covenant or term thereof (including the revocation of any licenses or certificates necessary for operation), subject in each case to Sunrises rights to cure deficiencies. Each management agreement may also be terminated upon the occurrence of certain insolvency events relating to Sunrise. In addition, if a minimum number of properties fail to achieve a targeted NOI level for a given period, then we may terminate the management agreement on each property in such pool. This targeted NOI level for each property is based upon an expected operating income projection set at the commencement of the management agreement for the applicable property, with such projection escalating annually. However, various legal and contractual considerations may limit or delay our exercise of any or all of these termination rights.
Under the terms of our agreements between us and Sunrise, we have, among other things, a right of first offer to acquire seniors housing communities developed by Sunrise in Canada. In addition, we have a right of first offer to acquire seniors housing communities developed by Sunrise in the United States within a demographically defined radius of any of the properties acquired by us in the Sunrise REIT acquisition. Sunrise has agreed to cooperate with us in connection with our compliance with the REIT rules under the Code, and in connection with our financial reporting obligations.
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We own a 75% to 85% ownership interest in 61 of our seniors housing communities pursuant to joint venture agreements, with the minority interests in these joint ventures being owned by Sunrise. These joint ventures are each managed by a board of managers, which we control. As the controlling member, we have authority to make all decisions for our Sunrise joint ventures except for a limited set of major decisions, which generally include: (a) the merger or disposition of substantially all the assets of the joint venture; (b) the sale of additional interests in the joint venture; (c) the dissolution of the joint venture; (d) the disposition of a senior housing community owned by the joint venture; and (e) the acquisition of any real property. We can generally transfer our interest in a Sunrise joint venture, without consent, to anyone other than large seniors housing operators or their majority investors. Generally, Sunrise must obtain our prior consent for any direct or indirect transfer of its interest in a joint venture. With limited exceptions, profits and losses of the joint venture are allocated pro rata to each member. If either member fails to make a required capital contribution to a joint venture after notice and a cure period, the non-defaulting member may (i) revoke the capital contribution funding notice, (ii) advance to the joint venture the amount of the required capital contribution on behalf of the defaulting member in the form of a loan to the defaulting member, with all of the defaulting members subsequent distributions being applied to the loan until repayment in full, or (iii) advance the capital on behalf of the defaulting member with a recalculation of each members proportionate interest in the joint venture pursuant to the applicable formula in the agreements. Many of our Sunrise joint venture agreements provide for a punitive reduction in the defaulting members proportionate interest in the event of an advance of capital by a non-defaulting member pursuant to option (iii). The joint ventures are generally limited to incurring new or refinanced mortgage indebtedness in excess of 75% of the market value of its properties.
Sunrise is subject to the reporting requirements of the Commission and is required to file with the Commission annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Sunrise contained or referred to in this Annual Report on Form 10-K is derived from filings made by Sunrise with the Commission or other publicly available information, or has been provided to us by Sunrise. We have not verified this information either through an independent investigation or by reviewing Sunrises public filings. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you that all of this information is accurate. Sunrises filings with the Commission can be found at the Commissions website at www.sec.gov. We are providing this data for informational purposes only, and you are encouraged to obtain Sunrises publicly available filings from the Commission.
Note 4Concentration of Credit Risk
As of December 31, 2008, approximately 38.5%, 21.9% and 14.7% of our properties, based on the gross book value of real estate investments (including assets held for sale), were managed or operated by Sunrise, Brookdale Senior Living and Kindred, respectively. Seniors housing communities and skilled nursing facilities constituted approximately 74.9% and 13.0%, respectively, of our portfolio, based on the gross book value of real estate investments (including assets held for sale), as of December 31, 2008, with the remaining properties consisting of hospitals, MOBs and other healthcare assets. These properties were located in 43 states, with properties in only two states accounting for more than 10% of our total revenues (including amounts in discontinued operations related to properties held for sale at December 31, 2008) during the year ended December 31, 2008, and two Canadian provinces. Properties in two states accounted for more than 10% of our total revenues (including amounts in discontinued operations) for the years ended December 31, 2007 and 2006, respectively.
In view of the fact that Kindred and Brookdale Senior Living lease a substantial portion of our triple-net leased properties and are each a significant source of our revenues and operating income, their financial condition and ability and willingness to satisfy their obligations under their respective leases and other agreements with us, as well as their willingness to renew those leases upon expiration of the terms thereof, have a considerable impact on our results of operations and our ability to service our indebtedness and to make distributions to our stockholders. We cannot assure you that Kindred or Brookdale Senior Living will have
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sufficient assets, income and access to financing to enable it to satisfy its obligations under its respective leases and other agreements with us, and any inability or unwillingness on its part to do so would have a material adverse effect on our business, financial condition, results of operations and liquidity, on our ability to service our indebtedness and on our ability to make distributions to our stockholders, as required for us to continue to qualify as a REIT (a Material Adverse Effect). We also cannot assure you that Kindred or Brookdale Senior Living will elect to renew its respective leases with us upon expiration of the initial base terms or any renewal terms thereof.
Unlike Kindred and Brookdale Senior Living, Sunrise does not lease properties from us, but rather acts as a property manager for all of our senior living operations. Therefore, while we are not directly exposed to credit risk with Sunrise, Sunrises inability to efficiently and effectively manage our properties and to provide timely and accurate accounting information with respect thereto could have a Material Adverse Effect on us. Although we have various rights as owner under the Sunrise management agreements, we rely on Sunrises personnel, good faith, expertise, historical performance, technical resources and information systems, proprietary information and judgment to manage our seniors housing communities efficiently and effectively. We also rely on Sunrise to set resident fees and otherwise operate those properties pursuant to our management agreements. Any adverse developments in Sunrises business and affairs or financial condition, including without limitation, the acceleration of its indebtedness, the inability to renew or extend its revolving credit facility, the enforcement of default remedies by its counterparties, or the commencement of insolvency proceedings under the U.S. Bankruptcy Code by or against Sunrise could have a Material Adverse Effect on us.
Note 5Acquisitions of Real Estate Property
The following summarizes our acquisitions in 2008, 2007 and 2006. We completed these acquisitions primarily to invest in additional seniors housing and healthcare properties with an expected yield on investment, as well as to diversify our portfolio and revenue base and reduce our dependence on any single operator, geography or asset type for our revenue.
2008 Acquisitions
We purchased a 47-unit seniors housing community located in Texas for an aggregate purchase price of $5.1 million. The purchase price was allocated to building and improvements based upon estimated fair value. This property is being leased to an affiliate of Capital Senior Living Corporation.
Also throughout 2008, we purchased three MOBs for an aggregate purchase price of $66.8 million, inclusive of assumed debt of $34.6 million at the time of the acquisitions. The purchase price was allocated between land, building and improvements, tenant improvements and lease intangibles of $4.6 million, $59.1 million, $3.0 million and $0.1 million, respectively, based upon their estimated fair values. One of these MOBs is owned through a joint venture with a partner that provides management and leasing services for the property.
Additionally, we entered into an agreement giving us the exclusive right, as part of a joint venture, to develop up to ten identified MOBs on hospital campuses in eight states. This joint venture is with a nationally recognized private developer of MOBs and healthcare facilities. As of December 31, 2008, we had initially invested approximately $8.7 million in two MOBs that were both under development.
Sunrise REIT Acquisition
In 2007, we acquired from Sunrise REIT 77 communities managed by Sunrise for approximately $2.0 billion, including assumption of debt. We acquired a 100% interest in eighteen seniors housing communities and a 75% to 85% interest in 59 additional seniors housing communities, with the minority interest in those 59 communities being owned by affiliates of Sunrise. Of these 77 communities, 66 are located in metropolitan areas of nineteen U.S. states and eleven are located in the Canadian provinces of Ontario and British Columbia.
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We funded the Sunrise REIT acquisition through $530.0 million of borrowings under a senior interim loan, an equity-backed facility providing for the issuance of 700,000 shares of our Series A Senior Preferred Stock, with a liquidation preference of $1,000 per share, and the assumption of $861.1 million of existing mortgage debt. In May 2007, we completed the sale of 26,910,000 shares of our common stock in an underwritten public offering pursuant to our shelf registration statement. We used the net proceeds from the sale ($1.05 billion), along with the proceeds of the disposition of certain of our Kindred assets (see Note 6Dispositions) and borrowings under our unsecured revolving credit facility, to redeem all of our Series A Senior Preferred Stock and to repay our indebtedness under the senior interim loan. For the year ended December 31, 2007, we expensed $5.2 million of preferred stock dividends and issuance costs related to the Series A Senior Preferred Stock and $5.0 million of fees and interest associated with the senior interim loan (the latter of which is included in interest expense in our Consolidated Statements of Income for the year ended December 31, 2007).
Later in 2007, we acquired 80% interests in two seniors housing communities, one located in Staten Island, New York for approximately $25.5 million, inclusive of our share of assumed debt of $15.3 million, and one in Vaughan, Ontario for approximately Cdn $43.6 million, inclusive of our share of assumed construction debt of Cdn $23.3 million. The joint venture for the Vaughan, Ontario property has the ability to borrow an additional Cdn $5.8 million under the existing construction loan for capital improvements.
We incurred $4.5 million and $3.0 million of merger-related expenses (that were not capitalized) in connection with the Sunrise REIT acquisition during the years ended December 31, 2008 and 2007, respectively. Merger-related expenses include incremental costs directly related to the acquisition and expenses relating to our litigation with HCP, Inc. (HCP) (see Note 15Litigation).
Other 2007 Acquisitions
During 2007, we acquired two additional seniors housing communities for an aggregate purchase price of $18.5 million, inclusive of assumed debt of $9.0 million at the time of the acquisition. The purchase price was allocated between land and buildings and improvements of $0.7 million and $17.8 million, respectively, based upon their estimated fair values. These properties are being leased to affiliates of Senior Care, Inc. (Senior Care).
Also throughout 2007, we acquired eight MOBs, in seven separate transactions, for an aggregate purchase price of $150.5 million, inclusive of assumed debt of $21.5 million at the time of the acquisitions. The purchase price was allocated between land and buildings and improvements of $7.6 million and $142.9 million, respectively, based upon their estimated fair values. Five of these MOBs are owned through joint ventures with two different partners that provide management and leasing services for the properties. The joint venture partners have minority interests in the properties ranging from less than 1% to less than 9%.
Senior Care
In November 2006, we acquired a portfolio of 64 seniors housing and healthcare properties for aggregate consideration of $602.4 million, consisting of approximately $422.6 million in cash, the assumption of $114.8 million of mortgage debt that was repaid in January 2007 and 1,708,279 shares of our common stock. The portfolio includes 40 assisted living communities, four multi-level retirement communities, eighteen skilled nursing facilities and two rehabilitation hospitals in fifteen states.
The properties are being leased to affiliates of Senior Care, pursuant to the terms of a triple-net master lease having an initial term of fifteen years and two five-year extensions. Approximately 5.3% and 6.1% of our total revenues (including amounts in discontinued operations) for the years ended December 31, 2008 and 2007, respectively, were derived from our lease agreements with Senior Care.
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Other 2006 Acquisitions
Also during 2006, we acquired eight seniors housing communities, in five separate transactions, for an aggregate purchase price of $74.3 million, including assumed debt of $10.8 million at the time of the
acquisitions. The seniors housing communities are leased to various operators under triple-net leases, each having initial terms ranging from ten to fifteen years and initially providing aggregate, annual cash base rent of approximately $6.2
Unaudited Pro Forma
The following table illustrates the effect on net income and earnings per share as if we had consummated our 2008 and 2007 acquisitions and issuances of common stock as of the beginning of each of the years ended December 31, 2008 and 2007:
For the Year Ended
December 31, |
||||||
2008 | 2007 | |||||
(In thousands, except per
share amounts) |
||||||
Revenues |
$ | 934,525 | $ | 919,297 | ||
Income from continuing operations applicable to common shares |
181,441 | 132,387 | ||||
Discontinued operations |
44,474 | 134,409 | ||||
Net income applicable to common shares |
225,915 | 266,796 | ||||
Earnings per common share: |
||||||
Basic: |
||||||
Income from continuing operations applicable to common shares |
$ | 1.27 | $ | 0.99 | ||
Discontinued operations |
0.31 | 1.01 | ||||
Net income applicable to common shares |
$ | 1.58 | $ | 2.00 | ||
Diluted: |
||||||
Income from continuing operations applicable to common shares |
$ | 1.27 | $ | 0.99 | ||
Discontinued operations |
0.31 | 1.01 | ||||
Net income applicable to common shares |
$ | 1.58 | $ | 2.00 | ||
Weighted average shares used in computing earnings per common share: |
||||||
Basic |
142,872 | 133,140 | ||||
Diluted |
143,212 | 133,555 |
Note 6Dispositions
Pursuant to SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we present separately, as discontinued operations, in all periods presented the results of operations for all assets held for sale or disposed of on or after January 1, 2002.
In February 2009, we sold a hospital and a MOB for $35 million. The net book value of these assets, $16.2 million, is reflected as held for sale at December 31, 2008. We expect to record a gain from the sale of approximately $18 million. The operations for these assets have been reported as discontinued operations for the years ended December 31, 2008, 2007 and 2006.
In January 2009, we sold four seniors housing assets for an aggregate sale price of $58.7 million. The net book value of these assets, $46.3 million, is reflected as held for sale at December 31, 2008. As of December 31, 2008, we had $38.8 million of mortgage debt related to these four assets which is included in senior notes payable and other debt in our Consolidated Balance Sheet. We expect to record a gain from the sale of approximately $11 million. The operations for these assets have been reported as discontinued operations for the years ended December 31, 2008, 2007 and 2006.
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In December 2008, we sold five seniors housing communities to the current tenant for an aggregate sale price of $62.5 million. We realized a gain from the sale of these assets of $21.5 million in the fourth quarter of 2008, $8.3 million of which was deferred and will be recognized over the next three years. The deferred gain resulted from a $10.0 million loan that we made to the buyer in conjunction with the sale. See Note 8Loans Receivable for further discussion on this loan.
In April 2008, we sold seven properties for $69.1 million. We recognized a net gain from the sale of these assets of $25.9 million in the second quarter of 2008. In addition, we received a lease termination fee from the tenant of $1.6 million.
In June 2007, we completed the sale of 22 properties to Kindred for $171.5 million in net cash proceeds. Of these net proceeds, $14.1 million was held in escrow for use in a Code Section 1031 exchange and subsequently used in the second half of 2007 for other acquisitions. See Note 5Acquisitions. In addition, Kindred paid us a lease termination fee of $3.5 million. We recognized a net gain on the sale of assets of $129.5 million during the year ended December 31, 2007.
We did not make any dispositions during the year ended December 31, 2006.
Set forth below is a summary of the results of operations of properties sold or held for sale during the years ended December 31, 2008, 2007 and 2006, all of which were included in our triple-net leased properties segment, with the exception of one MOB held for sale at December 31, 2008 (included in all other for segment reporting purposes):
2008 | 2007 | 2006 | |||||||
(In thousands) | |||||||||
Revenues: |
|||||||||
Rental income |
$ | 13,963 | $ | 24,659 | $ | 30,282 | |||
Interest and other income |
1,700 | 3,655 | 116 | ||||||
15,663 | 28,314 | 30,398 | |||||||
Expenses: |
|||||||||
Interest |
6,263 | 10,602 | 12,141 | ||||||
Depreciation and amortization |
3,952 | 7,581 | 8,899 | ||||||
10,215 | 18,183 | 21,040 | |||||||
Income before gain on sale of real estate assets |
5,448 | 10,131 | 9,358 | ||||||
Gain on sale of real estate assets |
39,026 | 129,478 | | ||||||
Discontinued operations |
$ | 44,474 | $ | 139,609 | $ | 9,358 | |||
Note 7Intangibles
At December 31, 2008, intangible lease assets, comprised of above market resident leases, in-place resident leases and other intangibles were $7.4 million, $88.6 million and $2.2 million, respectively. At December 31, 2007, intangible lease assets, comprised of above market resident leases, in-place resident leases and other intangibles, were $7.3 million, $81.2 million and $2.6 million, respectively. At December 31, 2008 and 2007, the accumulated amortization of the intangible assets was $89.2 and $58.4 million, respectively. The weighted average amortization period of intangible assets at December 31, 2008 was approximately five years.
At December 31, 2008, intangible lease liabilities, comprised of below market resident leases, were $12.2 million. At December 31, 2007, intangible lease liabilities, comprised of below market resident leases, were $9.8 million. At December 31, 2008 and 2007, the accumulated amortization of the intangible liabilities was $10.0 million and $6.6 million, respectively. The weighted average amortization period of intangible liabilities at December 31, 2008 was approximately five years.
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Note 8Loans Receivable
On June 30, 2008, we purchased $112.5 million principal amount of first mortgage debt issued by a national provider of healthcare services, primarily skilled nursing care. We purchased the debt at a discount for $98.8 million, resulting in an effective interest rate to maturity of LIBOR plus 533 basis points. Interest on the loan is payable monthly at an annual rate of LIBOR plus 125 basis points, and the loan matures in January 2012, subject to a one-year extension, at the borrowers option, subject to certain conditions.
As of December 31, 2008, we held a receivable for three outstanding first mortgage loans (the Sunwest Loans) in the aggregate principal amount of $20.0 million. These loans, made in 2005, originally accrued interest at a non-default annual rate of 9%. During the third quarter of 2008, the borrowers defaulted on certain of their obligations under the Sunwest Loans, including the monthly payment of principal and interest to us. The Sunwest Loans are secured by four seniors housing communities containing approximately 300 units and are jointly and severally guaranteed by Sunwest Management, Inc. (Sunwest) and two of its principals. We have appointed receivers at, and initiated foreclosure actions on, each asset securing the Sunwest Loans. We have also commenced a collection and enforcement action against the guarantors. One of the principal guarantors has filed for protection under Chapter 11 of the U.S. Bankruptcy Code, and our action to collect under his guarantee is currently stayed. We intend to vigorously pursue all of our rights and remedies and take all appropriate actions to fully recover amounts due to us under the Sunwest Loans and the guarantees. However, due to the current unfavorable capital markets and economic environment, we recorded a provision for loan losses on the Sunwest Loans of $6.0 million, which was based on estimated discounted cash flows and other valuation metrics, including the fair value of the collateral. This amount is included as a component of property-level operating expenses on our Consolidated Statement of Income for the year ended December 31, 2008. Although we cannot give any assurances regarding the value of our recovery on the collateral for the Sunwest Loans, we currently anticipate the estimated fair value of the foreclosed assets, if foreclosure proceedings are successful, we may take ownership of the facilities and engage healthcare operators to operate the facilities under a management or lease arrangement, or we may sell one or more of the facilities. These loans were classified as non-accrual in the fourth quarter of 2008 and the accrual of interest was discontinued.
In December 2008, we sold five assets for $62.5 million, and the buyer issued a $10.0 million note to us as partial payment of the purchase price. The loan is payable in full in December 2011. Principal payments of $40,000 and interest payments at a rate of 8% in year one, 8.25% in year two and 8.5% in year three, are due and payable to us monthly. We recorded the loan, which is guaranteed by a publicly traded company and secured by real estate collateral, at its fair market value of $8.3 million and will amortize the discount to interest income over the next three years.
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Note 9Borrowing Arrangements
The following is a summary of our long-term debt and certain interest rate and maturity information as of December 31, 2008 and 2007:
2008 | 2007 | |||||||
(In thousands) | ||||||||
Unsecured revolving credit facilities due 2010 (1) |
$ | 300,207 | $ | 238,970 | ||||
8 3 / 4 % Senior Notes due 2009 |
49,807 | 174,217 | ||||||
6 3 / 4 % Senior Notes due 2010 |
122,980 | 175,000 | ||||||
3 7 / 8 % Convertible Senior Notes due 2011 |
230,000 | 230,000 | ||||||
9% Senior Notes due 2012 |
191,821 | 191,821 | ||||||
6 5 / 8 % Senior Notes due 2014 |
175,000 | 175,000 | ||||||
7 1 / 8 % Senior Notes due 2015 |
170,000 | 170,000 | ||||||
6 1 / 2 % Senior Notes due 2016 |
200,000 | 200,000 | ||||||
6 3 / 4 % Senior Notes due 2017 |
225,000 | 225,000 | ||||||
Mortgage loans and other |
1,474,325 | 1,567,668 | ||||||
Total |
3,139,140 | 3,347,676 | ||||||
Unamortized fair value adjustment |
14,256 | 19,669 | ||||||
Unamortized commission fees and discounts |
(5,702 | ) | (6,846 | ) | ||||
Senior notes payable and other debt |
$ | 3,147,694 | $ | 3,360,499 | ||||
(1) | On December 31, 2008, we had $176.8 million of unrestricted cash and cash equivalents, for a net amount of $123.4 million. |
Unsecured Revolving Credit Facilities
We currently have $850.0 million of unsecured revolving credit facilities that mature on April 26, 2010, comprised of a $700.0 million U.S. credit facility and a $150.0 million Canadian credit facility. Under the Canadian credit facility, we may borrow up to $150.0 million or the equivalent in Canadian dollars. The U.S. credit facility includes a $150.0 million accordion feature that permits us to further expand our aggregate borrowing capacity to $1.0 billion upon satisfaction of certain conditions.
Borrowings under our unsecured revolving credit facilities bear interest at a fluctuating rate per annum (based on U.S. or Canadian LIBOR, the Canadian Bankers Acceptance rate, or the U.S. or Canadian Prime rate) plus an applicable percentage based on our consolidated leverage. The applicable percentage was 0.75% at December 31, 2008, 2007 and 2006.
Lehman Commercial Paper, Inc. (Lehman) is a named lender under our unsecured revolving credit facilities and has a $20 million funding commitment (approximately 2% of the aggregate borrowing capacity under our unsecured revolving credit facilities) to us. Lehman has defaulted on its obligations to fund our borrowing requests, and we are seeking an assignment of this portion of our unsecured revolving credit facilities, through Lehmans Chapter 11 proceeding, to a third party investor who we believe represents the economic interest in such obligation. We cannot give any assurances as to whether or when an assignment of Lehmans interest in our unsecured revolving credit facilities may occur.
We incurred losses on extinguishment of debt in the amount of $1.3 million for the year ended December 31, 2006 representing the write-off of unamortized deferred financing costs related to our previous secured revolving credit facility.
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Convertible Senior Notes
As of December 31, 2008, we had $230.0 million aggregate principal amount of our 3 7 / 8 % Convertible Senior Notes due 2011 (the Convertible Notes) outstanding. The Convertible Notes are convertible at the option of the holder (i) prior to September 15, 2011, upon the occurrence of specified events and (ii) on or after September 11, 2011, at any time prior to the close of business on the second business day prior to the stated maturity, in each case into cash up to the principal amount of the Convertible Notes and cash or shares of our common stock, at our election, in respect of any conversion value in excess of the principal amount at the current conversion rate of 22.6262 shares per $1,000 principal amount of notes (which equates to a conversion price of approximately $44.20 per share). The conversion rate is subject to adjustment in certain circumstances, including the payment of a quarterly dividend in excess of $0.395 per share. To the extent the market price of our common stock exceeds the conversion price, our earnings per share will be diluted. The Convertible Notes had a minimal dilutive impact per share for the year ended December 31, 2008. See Note 14Earnings Per Share.
The Convertible Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Ventas Realty and by certain of our other direct and indirect subsidiaries. The Convertible Notes are part of our and the guarantors general unsecured obligations, ranking equal in right of payment with all of our and the guarantors existing and future senior obligations and ranking senior to all of our and the guarantors existing and future subordinated indebtedness. However, the Convertible Notes are effectively subordinated to our and the guarantors secured indebtedness, if any, to the extent of the value of the assets securing that indebtedness. The Convertible Notes are also structurally subordinated to preferred equity and indebtedness, whether secured or unsecured, of our subsidiaries that do not guarantee the Convertible Notes.
We may not redeem the Convertible Notes prior to maturity except to the extent necessary to preserve our status as a REIT.
If we experience certain kinds of changes of control, holders may require us to repurchase all or a portion of their Convertible Notes for cash at a purchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus any accrued and unpaid interest to the date of purchase.
Senior Notes
As of December 31, 2008, we had the following series of senior notes (collectively, the Senior Notes) issued by our subsidiaries, Ventas Realty and Ventas Capital Corporation (collectively, the Issuers), outstanding:
|
$49.8 million principal amount of 8 3 / 4 % Senior Notes due 2009 (the 2009 Senior Notes); |
|
$123.0 million principal amount of 6 3 / 4 % Senior Notes due 2010 (the 2010 Senior Notes); |
|
$191.8 million principal amount of 9% Senior Notes due 2012 (the 2012 Senior Notes); |
|
$175.0 million principal amount of 6 5 / 8 % Senior Notes due 2014 (the 2014 Senior Notes); |
|
$170.0 million principal amount of 7 1 / 8 % Senior Notes due 2015 (the 2015 Senior Notes); |
|
$200.0 million principal amount of 6 1 / 2 % Senior Notes due 2016 (the 2016 Senior Notes); and |
|
$225.0 million principal amount of the 6 3 / 4 % Senior Notes due 2017 (the 2017 Senior Notes). |
We issued the 2016 Senior Notes and 2017 Senior Notes at initial discounts to par value of 1 / 2 % and 5 / 8 %, respectively. We issued $50 million of our 2014 Senior Notes at a 1% discount to par value.
During 2008, we purchased $124.4 million principal amount of 2009 Senior Notes and $52.0 million principal amount of 2010 Senior Notes in open market transactions and reported a net gain on extinguishment of debt of $2.5 million. In August 2007, we purchased $5.0 million principal amount of 2015 Senior Notes in an open market transaction and reported a gain on extinguishment of debt of $0.1 million during the year ended December 31, 2007.
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The Senior Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by us and by certain of our direct and indirect subsidiaries. The Senior Notes are part of our and the guarantors general unsecured obligations, ranking equal in right of payment with all of our and the guarantors existing and future senior obligations and ranking senior to all of our and the guarantors existing and future subordinated indebtedness. However, the Senior Notes are effectively subordinated to our and the guarantors secured indebtedness, if any, to the extent of the value of the assets securing that indebtedness. The Senior Notes are also structurally subordinated to the preferred equity and indebtedness, whether secured or unsecured, of our subsidiaries that do not guarantee the Senior Notes.
The Issuers may redeem each series of Senior Notes, in whole at any time or in part from time to time, prior to maturity at varying redemption prices set forth in the applicable indenture, plus, in each case, accrued and unpaid interest thereon to the redemption date. In addition, at certain times, the Issuers may redeem up to 35% of the aggregate principal amount of each series of Senior Notes with the net cash proceeds from certain equity offerings at the redemption price set forth in the applicable indenture, plus accrued and unpaid interest thereon to the redemption date.
If we experience certain kinds of changes of control, the Issuers must make an offer to repurchase the Senior Notes, in whole or in part, at a purchase price in cash equal to 101% of the principal amount of the Senior Notes, plus any accrued and unpaid interest to the date of purchase; provided, however, that in the event Moodys Investors Service and S&P Ratings Services have confirmed their ratings at Ba3 or higher and BB- or higher on the Senior Notes and certain other conditions are met, this repurchase obligation will not apply.
Mortgages
At December 31, 2008, we had outstanding 113 mortgage loans totaling $1.47 billion that are collateralized by the underlying assets of the properties. The loans generally bear interest at fixed rates ranging from 5.4% to 8.5% per annum, except for fourteen loans having aggregate outstanding principal balances totaling $246.2 million which bear interest at the lenders variable rates ranging from 1.1% to 3.9% per annum as of December 31, 2008. At December 31, 2008, the weighted average annual rate on our fixed rate mortgage loans was 6.4%, and the weighted average annual rate on our variable rate mortgage loans was 2.4%. The loans had a weighted average maturity of 7.0 years as of December 31, 2008.
Scheduled Maturities of Borrowing Arrangements and Other Provisions
As of December 31, 2008, our indebtedness had the following maturities (in thousands):
Principal Amount
Due at Maturity |
Unsecured
Revolving Credit Facilities (1) |
Scheduled
Periodic Amortization |
Total
Maturities |
|||||||||
2009 |
$ | 125,442 | $ | | $ | 25,475 | $ | 150,917 | ||||
2010 |
289,780 | 300,207 | 25,997 | 615,984 | ||||||||
2011 |
278,931 | | 24,978 | 303,909 | ||||||||
2012 |
498,325 | | 21,461 | 519,786 | ||||||||
2013 |
150,962 | | 15,811 | 166,773 | ||||||||
Thereafter |
1,292,867 | | 88,904 | 1,381,771 | ||||||||
Total maturities |
$ | 2,636,307 | $ | 300,207 | $ | 202,626 | $ | 3,139,140 | ||||
(1) | On December 31, 2008, we had $176.8 million of unrestricted cash and cash equivalents, for a net amount of $123.4 million. |
The principal amounts due at maturity above reflect our intent to extend $54.5 million of 2009 maturities to 2010 as a result of extension options with the lenders. In connection with the disposition of a property subsequent to December 31, 2008, $7.3 million of 2009 maturities were transferred to the buyer, so the as adjusted 2009 principal amounts due at maturity are $118.1 million.
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As of December 31, 2008, our joint venture partners share of total debt was $159.9 million.
The instruments governing certain of our indebtedness contain covenants that limit our ability and the ability of certain of our subsidiaries to, among other things, (i) incur debt; (ii) make certain dividends, distributions and investments; (iii) enter into certain transactions; (iv) merge, consolidate or transfer certain assets; and (v) sell assets. We and certain of our subsidiaries are also required to maintain total unencumbered assets of at least 150% of this groups unsecured debt. Our unsecured revolving credit facilities also require us to maintain certain financial covenants pertaining to, among other things, our consolidated leverage, secured debt, fixed charge coverage and net worth.
As of December 31, 2008, we were in compliance with all of these covenants.
Derivatives and Hedging
In the normal course of business, we are exposed to the effect of interest rate movements on future cash flows under our variable rate debt agreements and the effect of foreign currency exchange rate movements. We limit these risks by following established risk management policies and procedures, including the use of derivative instruments.
For interest rate exposures, derivatives are used primarily to fix the rate on debt based on floating rate indices and to manage the cost of borrowing obligations. We prohibit the use of derivative instruments for trading or speculative purposes. Further, we have a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivative is designed to hedge, we do not anticipate any material adverse effect on our net income or financial position in the future from the use of derivatives.
The interest rate swap agreement that we entered into in 2001 expired on June 30, 2008, and we do not currently have any interest rate swap agreements in effect.
In January 2007, we entered into two Canadian call options in conjunction with our agreement to acquire the assets of Sunrise REIT. See Note 5Acquisitions. We paid an aggregate purchase price of $8.5 million for these contracts, which had an aggregate notional call amount of Cdn $750.0 million at a Cdn $1.18 strike price. These contracts were settled on April 26, 2007, the acquisition date, and we received cash of $33.2 million upon settlement. For the year ended December 31, 2007, we recognized gains related to call option contracts of $24.3 million, which is included as a foreign currency gain on our Consolidated Statement of Income for the year ended December 31, 2007.
Unamortized Fair Value Adjustment
As of December 31, 2008, the unamortized fair value adjustment related to the long-term debt we assumed in connection with the Sunrise REIT acquisition and various MOB acquisitions was $14.3 million and is recognized as effective yield adjustments over the remaining term of the instruments. The estimated aggregate amortization of the fair value adjustment related to long-term debt for each of the next five years follows: 2009 $2.8 million; 2010 $2.9 million; 2011 $2.9 million; 2012 $2.3 million; and 2013 $1.4 million.
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Note 10Fair Values of Financial Instruments
As of December 31, 2008 and 2007, the carrying amounts and fair values of our financial instruments were as follows:
2008 | 2007 | |||||||||||||||
Carrying
Amount |
Fair Value |
Carrying
Amount |
Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Cash and cash equivalents |
$ | 176,812 | $ | 176,812 | $ | 28,334 | $ | 28,334 | ||||||||
Loans receivable |
123,289 | 111,942 | 19,998 | 22,148 | ||||||||||||
Notes receivable - related parties |
| | 2,092 | 2,125 | ||||||||||||
Interest rate swap agreement |
| | (503 | ) | (503 | ) | ||||||||||
Senior notes payable and other debt, gross |
(3,139,140 | ) | (2,949,268 | ) | (3,347,676 | ) | (3,471,199 | ) |
Fair value estimates are subjective in nature and depend on a number of important assumptions, including estimates of future cash flows, risks, discount rates and relevant comparable market information associated with each financial instrument. The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented above are not necessarily indicative of the amounts we would realize in a current market exchange.
Note 11Stock-Based Compensation
Compensation Plans
We have six plans under which options to purchase common stock and/or shares or units of restricted stock have been, or may be, granted to officers, employees and non-employee directors, one plan under which executive officers may receive common stock in lieu of compensation and two plans under which certain directors have received or may receive common stock in lieu of director fees (the following are collectively referred to as the Plans): (1) the 1987 Incentive Compensation Program (Employee Plan); (2) the 2000 Incentive Compensation Plan (Employee Plan); (3) the 2004 Stock Plan for Directors; (4) the TheraTx, Incorporated 1996 Stock Option/Stock Issuance Plan; (5) the Common Stock Purchase Plan for Directors (the Directors Stock Purchase Plan); (6) the Executive Deferred Stock Compensation Plan; (7) the Nonemployee Directors Deferred Stock Compensation Plan; (8) the 2006 Incentive Plan; and (9) the 2006 Stock Plan for Directors.
During the year ended December 31, 2008, option and restricted stock grants and stock issuances could only be made under the Executive Deferred Stock Compensation Plan, the Nonemployee Directors Deferred Stock Compensation Plan, the 2006 Incentive Plan and the 2006 Stock Plan for Directors. The 2000 Incentive Compensation Plan (Employee Plan) and the 2004 Stock Plan for Directors expired on December 31, 2006, and no additional grants were permitted under those Plans after that date. Additional grants are also not permitted under the 1987 Incentive Compensation Program (Employee Plan) or the TheraTx, Incorporated 1996 Stock Option/Stock Issuance Plan. In addition, the Directors Stock Purchase Plan terminated in accordance with its terms during 2007.
The number of shares reserved and the number of shares available for future grants or issuance under these Plans as of December 31, 2008 are as follows:
|
Executive Deferred Stock Compensation Plan500,000 shares are reserved for issuance to our executive officers in lieu of the payment of all or a portion of their salary, at their option, and, as of December 31, 2008, 500,000 shares were available for future issuance. |
|
Nonemployee Directors Deferred Stock Compensation Plan500,000 shares are reserved for issuance to nonemployee directors in lieu of the payment of all or a portion of their retainer and meeting fees, at their option, and, as of December 31, 2008, 466,540 shares were available for future issuance. |
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|
2006 Incentive Plan5,000,000 shares are reserved for grants or issuance to employees and 3,813,003 were available for future grants or issuance as of December 31, 2008. This plan replaced the 2000 Incentive Compensation Plan (Employee Plan). |
|
2006 Stock Plan for Directors400,000 shares are reserved for grants or issuance to non-employee directors and 328,685 were available for future grants or issuance as of December 31, 2008. This plan replaced the 2004 Stock Plan for Directors. |
Under the Plans (other than the Executive Deferred Stock Compensation Plan, the Directors Stock Purchase Plan and the Nonemployee Director Deferred Stock Compensation Plan), options are exercisable at the market price on the date of grant, expire ten years from the date of grant, and vest over varying periods ranging from one to five years. Vesting of certain options may accelerate upon a change of control of Ventas, as defined in the applicable Plan, and other events.
We have also granted options and restricted stock to certain officers, employees and non-employee directors outside of the Plans. These options and shares of restricted stock vest over varying periods, and the options are exercisable at the market price on the date of grant and expire ten years from the date of grant. As of December 31, 2008, options for 4,000 shares had been granted outside of the Plans to certain non-employee directors and remained outstanding.
Effective January 1, 2006, we adopted the fair value provisions for share-based awards pursuant to SFAS No. 123(R), using the modified-prospective transition method. Under that transition method, compensation cost recognized in 2006 includes: (i) compensation cost for all share-based awards granted prior to, but not yet vested as of January 1, 2006, based on the attribution method and grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (ii) compensation cost for all share-based awards granted subsequent to January 1, 2006, based on the grant date fair value as estimated in accordance with the provisions of SFAS No. 123(R), all recognized on a straight-line basis as the requisite service periods are rendered. Results for prior periods have not been restated. Compensation costs related to stock options for the years ended December 31, 2008, 2007 and 2006 were $2.3 million, $1.9 million and $0.9 million, respectively.
Stock Options
In determining the estimated fair value of our stock options as of the date of grant, we used the Black-Scholes option pricing model with the following assumptions:
2008 | 2007 | 2006 | |||||||
Risk-free interest rate |
2.48 | % | 4.65 | % | 4.57 | % | |||
Dividend yield |
5.75 | % | 4.83 | % | 4.95 | % | |||
Volatility factors of the expected market price for our common stock |
21.0 | % | 21.0 | % | 15.0 | % | |||
Weighted average expected life of options |
3.5 years | 6.0 years | 6.5 years |
The following is a summary of stock option activity in 2008:
Activity |
Shares |
Range of Exercise
Prices |
Weighted Average
Exercise Price |
Weighted
Average Remaining Contractual Life (years) |
Intrinsic
Value ($000s) |
|||||||||
Outstanding as of December 31, 2007 |
950,395 | $ | 3.31 - $43.26 | $ | 28.52 | |||||||||
Options granted |
720,834 | 41.54 - 45.25 | 41.67 | |||||||||||
Options exercised |
(255,115 | ) | 3.31 - 42.32 | 24.31 | ||||||||||
Options canceled |
(60,230 | ) | 4.93 - 20.81 | 15.06 | ||||||||||
Outstanding as of December 31, 2008 |
1,355,884 | 3.31 - 45.25 | 36.90 | 8.0 | $ | 3,422 | ||||||||
Exercisable as of December 31, 2008 |
811,941 | $ | 3.31 - $45.25 | $ | 33.63 | 7.2 | $ | 3,421 | ||||||
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A summary of the status of our nonvested stock options as of December 31, 2008 and changes during the year then ended follows:
Activity |
Shares |
Weighted Average
Grant Date Fair Value |
||||
Nonvested at beginning of year |
246,779 | $ | 4.83 | |||
Granted |
720,834 | 3.87 | ||||
Vested |
(423,670 | ) | 4.11 | |||
Forfeited |
| | ||||
Nonvested at end of year |
543,943 | $ | 4.12 | |||
As of December 31, 2008, there was $912,000 of total unrecognized compensation cost related to nonvested stock options granted under the Plans. We expect to recognize that cost over a weighted average period of 1.2 years. Proceeds received from options exercised under the Plans for the years ended December 31, 2008, 2007 and 2006 were $6.2 million, $9.5 million and $6.6 million, respectively.
Restricted Stock
The market value of shares of restricted stock and restricted stock units on the date of the award is recognized as stock-based compensation expense over the service period, with charges to general and administrative expenses of approximately $7.7 million in 2008, $5.6 million in 2007 and $2.1 million in 2006. Restricted stock generally vests over two- to five-year periods. The vesting of certain restricted shares may accelerate upon a change of control of Ventas, as defined in the applicable Plan, and other events.
A summary of the status of our nonvested restricted stock units and restricted stock as of December 31, 2008, and changes during the year ended December 31, 2008 follows:
Restricted
Stock Units |
Weighted Average
Grant Date Fair Value |
Restricted
Shares |
Weighted Average
Grant Date Fair Value |
|||||||||
Nonvested at December 31, 2007 |
7,503 | $ | 38.72 | 313,561 | $ | 41.58 | ||||||
Granted |
4,011 | 45.25 | 166,196 | 41.60 | ||||||||
Vested |
(5,064 | ) | 36.98 | (131,069 | ) | 39.73 | ||||||
Forfeited |
| | (5,033 | ) | 40.82 | |||||||
Nonvested at December 31, 2008 |
6,450 | $ | 44.14 | 343,655 | $ | 42.31 | ||||||
As of December 31, 2008, there was $10.5 million unrecognized compensation cost related to nonvested restricted stock under the Plans. We expect to recognize that cost over a weighted average of 2.0 years.
Employee and Director Stock Purchase Plan
We have in effect an Employee and Director Stock Purchase Plan (ESPP) under which our employees and directors may purchase shares of our common stock at a discount. Pursuant to the terms of the ESPP, on each purchase date, participants may purchase shares of common stock at a price not less than 90% of the market price on that date, with respect to the employee tax-favored portion of the plan, and not less than 95% of the market price on that date, with respect to the additional employee and director portion of the plan. We have reserved 2,500,000 shares for issuance under the ESPP. As of December 31, 2008, 24,856 shares had been purchased under the ESPP and 2,475,144 shares were available for future issuance.
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Employee Benefit Plan
We maintain a 401(K) plan that allows for eligible employees to defer compensation subject to certain limitations imposed by the Code. We make a contribution for each qualifying employee of up to 3% of his or her salary, subject to limitations, regardless of the employees individual contribution. During 2008, 2007 and 2006, our contributions were approximately $164,000, $106,000 and $85,600, respectively.
Note 12Income Taxes
We have elected to be taxed as a REIT under the Code commencing with the year ended December 31, 1999. We have elected for certain of our subsidiaries to be treated as taxable REIT subsidiaries (TRS or TRS entities), which are subject to federal and state income taxes. The TRS entities were created or acquired in connection with the Sunrise REIT acquisition. All entities other than the TRS entities are collectively referred to as the REIT within this Note 12.
We intend to continue to operate in such a manner as to enable us to qualify as a REIT. Our actual qualification and taxation as a REIT depends upon our ability to meet, on a continuing basis, distribution levels, stock ownership, and the various qualification tests. During the years ended December 31, 2008, 2007 and 2006, our tax treatment of distributions per common share was as follows:
2008 | 2007 | 2006 | |||||||||
Tax treatment of distributions: |
|||||||||||
Ordinary income |
$ | 1.9025 | $ | 1.2872 | $ | 1.5450 | |||||
Long-term capital gain |
0.0712 | 0.9621 | | ||||||||
Unrecaptured Section 1250 gain |
0.0763 | 0.0457 | | ||||||||
Distribution reported for 1099-DIV purposes |
2.0500 | 2.2950 | 1.5450 | ||||||||
Add: Dividend declared in current year and taxable in following year |
| | 0.3950 | ||||||||
Less: Dividend declared in prior year and taxable in current year |
| (0.3950 | ) | (0.3600 | ) | ||||||
Distributions declared per common share outstanding |
$ | 2.0500 | $ | 1.9000 | $ | 1.5800 | |||||
No net provision for income taxes was recorded in our Consolidated Financial Statements for the year ended December 31, 2006 due to our belief that we qualified as a REIT and the distribution of more than 100% of our 2006 taxable income as a dividend. We believe we have met the annual distribution requirement by payment of at least 90% of our estimated taxable income for 2008, 2007 and 2006. As a result of the TRS entities created and acquired in 2007, the consolidated provision (benefit) for income taxes for the years ended December 31, 2008 and 2007 is as follows (in thousands):
2008 | 2007 | |||||||
Current |
$ | 3,010 | $ | 908 | ||||
Deferred |
(18,895 | ) | (28,950 | ) | ||||
Total |
$ | (15,885 | ) | $ | (28,042 | ) | ||
The deferred tax benefit for the years ended December 31, 2008 and 2007 was reduced by income tax expense of $1.7 million and $1.1 million, respectively, related to the minority interest share of net income. For the tax years ended December 31, 2008 and 2007, the Canadian income tax benefit included in the consolidated benefit for income taxes was $3.1 million and $7.2 million, respectively.
Although the TRS entities did not pay any federal income taxes for the year ended December 31, 2008, federal income tax payments for these TRS entities may increase in future years as we exhaust net operating loss carryforwards and as our senior living operations segment grows. Such increases could be significant.
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Income tax expense computed by applying the federal corporate tax rate for the years ended December 31, 2008 and 2007 is reconciled to the income tax benefit as follows (in thousands):
2008 | 2007 | |||||||
Tax at statutory rate on earnings from continuing operations before minority interest and income taxes |
$ | 50,850 | $ | 40,728 | ||||
State income taxes, net of federal benefit |
(445 | ) | (2,787 | ) | ||||
Increase in valuation allowance |
1,170 | | ||||||
Increase in FIN 48 liability |
3,010 | | ||||||
Tax at statutory rate on earnings not subject to federal income taxes |
(71,254 | ) | (67,327 | ) | ||||
Other differences |
784 | 1,344 | ||||||
Income tax benefit |
$ | (15,885 | ) | $ | (28,042 | ) | ||
The REIT made no income tax payments for the year ended December 31, 2008 and 2006. Tax payments of $2.1 million related to built-in gains tax were made for the year ended December 31, 2007.
In connection with the Sunrise REIT acquisition, we established a beginning net deferred tax liability of $306.3 million related to temporary differences between the financial reporting and tax bases of assets and liabilities acquired (primarily property and related assets, net of net operating loss carryforwards).
Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. The tax effects of temporary differences and carryforwards included in the net deferred tax liabilities at December 31, 2008 and 2007 are summarized as follows (in thousands):
2008 | 2007 | |||||||
Property, primarily differences in depreciation and amortization, the tax basis of land assets and the treatment of interests and certain costs |
$ | (291,481 | ) | $ | (315,835 | ) | ||
Operating loss and interest deduction carryforwards |
70,302 | 57,483 | ||||||
Expense accruals and other |
275 | 87 | ||||||
Valuation allowance |
(36,595 | ) | (39,325 | ) | ||||
Net deferred tax liabilities |
$ | (257,499 | ) | $ | (297,590 | ) | ||
Due to the uncertainty of the realization of certain deferred tax assets, we established valuation allowances. The majority of these valuation allowances related to the net operating loss (NOL) carryforward related to the REIT where there was uncertainty regarding its realization.
The net difference between tax bases and the reported amount of REIT assets and liabilities for federal income tax purposes was approximately $497.1 million and $485.1 million less than the book bases of those assets and liabilities for financial reporting purposes for the years ended December 31, 2008 and 2007, respectively.
We are subject to corporate level taxes for any asset dispositions during the ten-year period immediately after the assets were owned by a C corporation (either prior to our REIT election, through stock acquisition or merger) (built-in gains tax). The amount of income potentially subject to this special corporate level tax is generally equal to the lesser of (i) the excess of the fair value of the asset over its adjusted tax basis as of the date it became a REIT asset or (ii) the actual amount of gain. Some but not all future gains could be offset by available NOLs. We had a $23.3 million deferred tax liability as of December 31, 2007 to be utilized for any built-in gains tax related to the disposition of assets owned prior to our REIT election in 1999. The ten-year period in which these assets were subject to built-in gains tax ended on December 31, 2008. Because we did not have any dispositions of these assets through December 31, 2008, we do not expect to pay any amounts related to this contingent liability. Therefore, this contingent liability was no longer required, and $23.3 million was reversed into income during 2008.
103
Generally, we are subject to audit under the statute of limitations by the Internal Revenue Service (IRS) for the year ended December 31, 2005 and subsequent years and are subject to audit by state taxing authorities for the year ended December 31, 2004 and subsequent years. The potential impact on income tax expense of years open under the statute of limitations for Canadian entities acquired as part of the Sunrise REIT acquisition is not expected to be material.
During 2006, we were notified by the IRS that it had completed its audit of our 2001 federal tax return with no additional tax being due. Accordingly, our Consolidated Statement of Income for the year ended December 31, 2006 reflects the reversal into income of a previously recorded $1.8 million tax liability related to uncertainties surrounding the outcome of that audit.
We have a combined NOL carryforward of $109.7 million at December 31, 2008 related to the TRS entities and an NOL carryforward related to the REIT of $88.6 million. These amounts can be used to offset future taxable income (and/or taxable income for prior years if audits of any prior years return determine that amounts are owed), if any. The REIT will be entitled to utilize NOLs and tax credit carryforwards only to the extent that REIT taxable income exceeds our deduction for dividends paid. The NOL carryforwards begin to expire in 2024 with respect to the TRS entities and in 2020 for the REIT.
As a result of the uncertainties relating to the ultimate utilization of existing REIT NOLs, no net deferred tax benefit has been ascribed to REIT NOL carryforwards as of December 31, 2008 and 2007. The IRS may challenge our entitlement to these tax attributes during its review of the tax returns for the previous tax years. We believe we are entitled to these tax attributes, but we cannot give any assurances as to the outcome of these matters.
On January 1, 2007, we adopted FIN 48. As a result of applying the provisions of FIN 48, we recognized no change in the liability for unrecognized tax benefits, and no adjustment in accumulated earnings as of January 1, 2007. Our policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense.
The following table summarizes the activity related to our unrecognized tax benefits (in thousands):
2008 | 2007 | |||||
Balance as of January 1 |
$ | 9,384 | $ | | ||
Additions to tax positions related to the current year |
3,486 | 9,384 | ||||
Balance as of December 31 |
$ | 12,870 | $ | 9,384 | ||
Included in the unrecognized tax benefits of $12.9 million at December 31, 2008 was $12.9 million of tax benefits that, if recognized, would reduce our annual effective tax rate. We accrued no penalties. Interest of $360,000 related to the unrecognized tax benefits was accrued during 2008. We expect our unrecognized tax benefits to increase by $3.0 million during 2009.
Note 13Commitments and Contingencies
Assumption of Certain Operating Liabilities and Litigation
As a result of the structure of the Sunrise REIT acquisition, we may be subject to various liabilities of Sunrise REIT arising out of the ownership or operation of the Sunrise REIT properties prior to the acquisition. If the liabilities we have assumed are greater than expected, or if there are obligations relating to the Sunrise REIT properties of which we were not aware at the time of completion of the Sunrise REIT acquisition, such liabilities and/or obligations could have a Material Adverse Effect on us.
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Similarly, in connection with Providents acquisition of certain Brookdale-related and Alterra-related entities in 2005 and our subsequent acquisition of Provident, Brookdale and Alterra agreed, among other things, to indemnify and hold Provident (and, as a result of the Provident acquisition, us) harmless from and against certain liabilities arising out of the ownership or operation of such entities prior to their acquisition by Provident.
We cannot give any assurances that Kindred or such Brookdale Senior Living subsidiaries will have sufficient assets, income and access to financing to enable them to satisfy, or that they will be willing to satisfy, their respective obligations under these arrangements. If Kindred or such Brookdale Senior Living subsidiaries do not satisfy or otherwise honor their respective obligations to indemnify, defend and hold us harmless under their respective contractual arrangements with us, then we may be liable for the payment and performance of such obligations and may have to assume the defense of such claims or litigation, which could have a Material Adverse Effect on us.
Brookdale Leases
Subject to certain limitations and restrictions, and provided Brookdale has not waived its rights, if during the first six years of the initial term of our Brookdale leases (affecting 21 properties) assumed in connection with the Provident acquisition (i.e., through December 2010) we, either voluntarily or at Brookdales request, obtain new mortgage debt or refinance existing mortgage debt on property covered by a Brookdale lease, then we may be required to pay Brookdale the net proceeds from any such mortgage debt financing or refinancing. Also, subject to certain limitations and conditions, and provided Brookdale has not waived its rights, Brookdale may request that we obtain new mortgage debt or refinance existing mortgage debt on the property covered by the Brookdale leases, and we have agreed to use commercially reasonable efforts to pursue any such financing or refinancing from the holder of the then existing mortgage debt on the applicable Brookdale property. In connection with any such financing or refinancing, the rent for the applicable Brookdale property will be increased using a recomputed lease basis increased by an amount equal to the net financed proceeds paid to Brookdale plus (with limited exceptions) any fees, penalties, premiums or other costs related to such financing or refinancing. If the monthly debt service on any financed or refinanced proceeds paid to Brookdale exceeds the rent increase attributable to those financed or refinanced proceeds, then Brookdale is required to pay the excess. In addition, under certain circumstances, Brookdale will also be required to pay additional amounts relating to increases in debt service and other costs relating to any such financing or refinancing.
105
Note 14Earnings Per Share
The following table shows the amounts used in computing basic and diluted earnings per common share:
For the Year Ended December 31, | |||||||||
2008 | 2007 | 2006 | |||||||
(In thousands, except per share amounts) | |||||||||
Numerator for basic and diluted earnings per share: |
|||||||||
Income from continuing operations |
$ | 181,814 | $ | 142,709 | $ | 122,072 | |||
Preferred stock dividends and issuance costs |
| 5,199 | | ||||||
Income from continuing operations applicable to common shares |
181,814 | 137,510 | 122,072 | ||||||
Discontinued operations |
44,474 | 139,609 | 9,358 | ||||||
Net income applicable to common shares |
$ | 226,288 | $ | 277,119 | $ | 131,430 | |||
Denominator: |
|||||||||
Denominator for basic earnings per shareweighted average shares |
139,572 | 122,597 | 104,206 | ||||||
Effect of dilutive securities: |
|||||||||
Stock options |
223 | 383 | 511 | ||||||
Restricted stock awards |
17 | 14 | 14 | ||||||
Convertible notes |
100 | 18 | | ||||||
Dilutive potential common stock |
340 | 415 | 525 | ||||||
Denominator for diluted earnings per shareadjusted weighted average shares |
139,912 | 123,012 | 104,731 | ||||||
Basic earnings per share: |
|||||||||
Income from continuing operations applicable to common shares |
$ | 1.30 | $ | 1.12 | $ | 1.17 | |||
Discontinued operations |
0.32 | 1.14 | 0.09 | ||||||
Net income applicable to common shares |
$ | 1.62 | $ | 2.26 | $ | 1.26 | |||
Diluted earnings per share: |
|||||||||
Income from continuing operations applicable to common shares |
$ | 1.30 | $ | 1.12 | $ | 1.16 | |||
Discontinued operations |
0.32 | 1.13 | 0.09 | ||||||
Net income applicable to common shares |
$ | 1.62 | $ | 2.25 | $ | 1.25 | |||
There were 940, 500, 222,200, 11,500 anti-dilutive options outstanding for the years ended December 31, 2008, 2007 and 2006, respectively.
Note 15Litigation
Legal Proceedings Defended and Indemnified by Third Parties
Kindred, Brookdale, Alterra, Sunrise and our other tenants, operators and managers are parties to certain legal actions and regulatory investigations arising in the normal course of their business. In certain cases, the tenant, operator or manager, as applicable, has agreed to indemnify, defend and hold us harmless against these actions and investigations. We cannot assure you that the resolution of any litigation or investigations, either individually or in the aggregate, would not have a material adverse effect on Kindreds, Brookdales, Alterras, Sunrises or such other tenants, operators and managers liquidity, financial condition or results of operations, which, in turn, could have a Material Adverse Effect on us.
106
Litigation Related to the Sunrise REIT Acquisition
On May 3, 2007, we filed a lawsuit against HCP, Inc. (HCP) in the United States District Court for the Western District of Kentucky, entitled Ventas, Inc. v. HCP, Inc. , Case No. 07-cv-238-JGH. We assert claims of tortious interference with contract and tortious interference with prospective business advantage. The complaint alleges that HCP interfered with our purchase agreement to acquire the assets and liabilities of Sunrise REIT and with the process for unitholder consideration of the purchase agreement. The complaint alleges, among other things, that HCP made certain improper and misleading public statements and/or offers to acquire Sunrise REIT and that HCPs actions caused us to suffer substantial damages, including, among other things, the payment of materially greater consideration to acquire Sunrise REIT resulting from the substantial increase in the purchase price that was agreed to in the original purchase agreement and the delay in closing the acquisition, as well as the negative movements in the foreign currency exchange rates and the per share price of our common equity during such delay. We are seeking monetary relief and punitive damages against HCP. On July 2, 2007, HCP filed its response to our complaint, along with a motion to dismiss the lawsuit. On December 19, 2007, the District Court denied HCPs motion to dismiss. On April 8, 2008, HCP filed a motion requesting permission from the District Court to add a counterclaim against us. The counterclaim alleges that Sunrise REIT failed to conduct a fair sale process when it put itself up for sale in 2006 and that we, as the alleged successor to Sunrise REIT, are now responsible for those actions. On July 25, 2008, the District Court granted HCPs motion to amend its answer to include the counterclaim. HCP is seeking compensatory and punitive damages. On November 13, 2008, HCP filed a motion requesting permission to amend its counterclaim to assert an additional count for an alleged negligent misrepresentation made by Sunrise REIT for which HCP contends that we, as the alleged successor of Sunrise REIT, are responsible. On December 8, 2008, the District Court granted HCP permission to amend its counterclaim, subject to our right to file a motion challenging all of HCPs counterclaims on the pleadings. On December 23, 2008, we filed a motion challenging all of HCPs counterclaims on the pleadings. That motion is pending. The District Court has scheduled a trial by jury in this matter to commence August 18, 2009. We intend to pursue our claims in the action and contest HCPs counterclaim (which we believe has no merit) vigorously, although we cannot assure you that we will prevail in the action, or, if we do prevail, of the amount of recovery that may be awarded to us or if we do not prevail, the amount that we may be required to pay. We are unable at this time to estimate the possible loss or range of loss for the potential counterclaim in this action, and therefore, no provision for liability, if any, resulting from this litigation has been made in our Consolidated Financial Statements as of December 31, 2008.
Other Litigation
We are a plaintiff in an action seeking a declaratory judgment and damages entitled Ventas Realty, Limited Partnership et al. v. Black Diamond CLO 1998-1 Ltd., et al. , Case No. 99 C107076, filed November 22, 1999 in the Circuit Court of Jefferson County, Kentucky. Two of the defendants have asserted counterclaims against us under theories of breach of contract, tortious interference with contract and abuse of process. We dispute the material allegations contained in the counterclaims and we intend to continue to pursue our claims and defend the counterclaims vigorously. We do not expect to suffer any loss for the counterclaims in this action, and therefore, no provision for liability resulting from this litigation has been made in our Consolidated Financial Statements as of December 31, 2008.
We are party to various other lawsuits, investigations and claims (some of which may not be insured) arising in the normal course of our business, including without limitation, in connection with the operations of our seniors housing communities managed by Sunrise. It is the opinion of management that, except as set forth in this Note 15, the disposition of these actions, investigations and claims will not, individually or in the aggregate, have a Material Adverse Effect on us. However, we are unable to predict the ultimate outcome of pending litigation, investigations and claims, and if managements assessment of our liability with respect to these actions, investigations and claims is incorrect, such actions, investigations and claims could have a Material Adverse Effect on us.
107
Note 16Capital Stock
At December 31, 2008 and 2007, our authorized capital stock consisted of 300,000,000 shares of common stock, par value $0.25 per share, and 10,000,000 shares of preferred stock, par value $1.00 per share.
In 2008, we sold 9,236,083 shares of our common stock in underwritten public offerings pursuant to our existing universal shelf registration statement. We received $408.5 million in net proceeds from the sales, which we used to repay indebtedness outstanding under our unsecured revolving credit facilities and for working capital and other general corporate purposes.
In May 2007, we completed the sale of 26,910,000 shares of our common stock in an underwritten public offering pursuant to our existing universal shelf registration statement. We received $1.05 billion in net proceeds from the sale, which we used along with the proceeds of the disposition of the Kindred assets (see Note 6Dispositions) and borrowings under our unsecured revolving credit facility to redeem all of our outstanding Series A Senior Preferred Stock and to repay our indebtedness under the senior interim loan used to fund a portion of the Sunrise REIT acquisition.
Our automatic universal shelf registration statement, filed with the Commission in April 2006, relates to the sale, from time to time, of an indeterminate amount of debt securities and related guarantees, common stock, preferred stock, depositary shares and warrants. The registration statement expires in April 2009 pursuant to the Commissions rules, and we intend to replace it with a new universal shelf registration statement upon expiration.
Excess Share Provision
In order to preserve our ability to maintain REIT status, our Certificate of Incorporation provides that if a person acquires beneficial ownership of greater than 9% of our outstanding common stock or 9.9% of our outstanding preferred stock, the shares that are beneficially owned in excess of such limit are deemed to be excess shares. These shares are automatically deemed transferred to a trust for the benefit of a charitable institution or other qualifying organization selected by our Board of Directors. The trust is entitled to all dividends with respect to the shares and the trustee may exercise all voting power over the shares.
We have the right to buy the excess shares for a purchase price equal to the lesser of (i) the price per share in the transaction that created the excess shares, or (ii) the market price on the date we buy the shares, and we may defer payment of the purchase price for the excess shares for up to five years. If we do not purchase the excess shares, the trustee of the trust is required to transfer the excess shares at the direction of the Board of Directors. The owner of the excess shares is entitled to receive the lesser of the proceeds from the sale of the excess shares or the original purchase price for such excess shares; any additional amounts are payable to the beneficiary of the trust.
The Board of Directors is empowered to grant waivers from the excess share provisions of our Certificate of Incorporation.
Distribution Reinvestment and Stock Purchase Plan
We have in effect a Distribution Reinvestment and Stock Purchase Plan (DRIP), under which existing stockholders may purchase shares of common stock by reinvesting all or a portion of the cash distribution on their shares of our common stock. In addition, existing stockholders, as well as new investors, may purchase shares of common stock under the DRIP by making optional cash payments. We currently offer a 1% discount on the purchase price of our stock to shareholders who reinvest their dividends and/or make optional cash purchases of common stock through the DRIP. The amount and availability of this discount is at our discretion. The granting of a discount for one month or quarter, as applicable, will not insure the availability or amount of a discount in future periods, and each month or quarter, as applicable, we may lower or eliminate the discount without prior notice. We may also, without prior notice, change our determination as to whether common shares will be purchased by the plan administrator directly from us or in the open market.
108
Note 17Related Party Transactions
During 1998, we acquired eight personal care facilities and related facilities for approximately $7.1 million from Tangram Rehabilitation Network, Inc. (Tangram). Tangram is a wholly owned subsidiary of Res-Care, Inc. (Res-Care) of which a member of our Board of Directors is the Chairman of the Board. We lease the Tangram facilities to Tangram pursuant to a master lease agreement which is guaranteed by Res-Care. For the years ended December 31, 2008, 2007 and 2006, Tangram has paid us approximately $949,800, $917,000 and $897,000, respectively, in base rent payments.
At December 31, 2007, we had loans receivable of approximately $2.1 million, due from certain current and former executive officers. Both of these
Note 18Quarterly Financial Information (Unaudited)
Summarized unaudited consolidated quarterly information for the years ended December 31, 2008 and 2007 is provided below.
For the Year Ended December 31, 2008 | ||||||||||||
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
|||||||||
Revenues (1) |
$ | 228,744 | $ | 230,503 | $ | 236,562 | $ | 233,957 | ||||
Income from continuing operations applicable to
|
$ | 30,584 | $ | 42,894 | $ | 63,810 | $ | 44,526 | ||||
Discontinued operations (1) |
1,468 | 28,172 | 885 | 13,949 | ||||||||
Net income applicable to common shares |
$ | 32,052 | $ | 71,066 | $ | 64,695 | $ | 58,475 | ||||
Earnings per share: |
||||||||||||
Basic: |
||||||||||||
Income from continuing operations applicable to common shares |
$ | 0.23 | $ | 0.31 | $ | 0.45 | $ | 0.31 | ||||
Discontinued operations |
0.01 | 0.20 | 0.01 | 0.10 | ||||||||
Net income applicable to common shares |
$ | 0.24 | $ | 0.51 | $ | 0.46 | $ | 0.41 | ||||
Diluted: |
||||||||||||
Income from continuing operations applicable to common shares |
$ | 0.22 | $ | 0.31 | $ | 0.45 | $ | 0.31 | ||||
Discontinued operations |
0.01 | 0.20 | 0.01 | 0.10 | ||||||||
Net income applicable to common shares |
$ | 0.23 | $ | 0.51 | $ | 0.46 | $ | 0.41 | ||||
Dividends declared per share |
$ | 0.5125 | $ | 0.5125 | $ | 0.5125 | $ | 0.5125 |
(1) | The amounts presented for the three months ended March 31, 2008, June 30, 2008 and September 30, 2008 are not equal to the same amounts previously reported in our Quarterly Reports on Form 10-Q as a result of discontinued operations consisting of properties sold in 2008 and properties reflected as held for sale as of December 31, 2008. |
109
For the Three Months Ended | ||||||||||||
March 31,
2008 |
June 30,
2008 |
September 30,
2008 |
||||||||||
(In thousands, except per share amounts) | ||||||||||||
Revenues, previously reported in Form 10-Q |
$ | 231,764 | $ | 233,513 | $ | 238,554 | ||||||
Revenues, previously reported in Form 10-Q, subsequently reclassified to discontinued operations |
(3,020 | ) | (3,010 | ) | (1,992 | ) | ||||||
Total revenues disclosed in Form 10-K |
$ | 228,744 | $ | 230,503 | $ | 236,562 | ||||||
Income from continuing operations applicable to common shares, previously reported in Form 10-Q |
$ | 31,098 | $ | 43,407 | $ | 64,073 | ||||||
Income from continuing operations applicable to common shares, previously reported in Form 10-Q, subsequently reclassified to discontinued operations |
(514 | ) | (513 | ) | (263 | ) | ||||||
Income from continuing operations applicable to common shares disclosed in Form 10-K |
$ | 30,584 | $ | 42,894 | $ | 63,810 | ||||||
Discontinued operations, previously reported in Form 10-Q |
$ | 954 | $ | 27,659 | $ | 622 | ||||||
Discontinued operations from properties sold subsequent to the respective reporting period |
514 | 513 | 263 | |||||||||
Discontinued operations disclosed in Form 10-K |
$ | 1,468 | $ | 28,172 | $ | 885 | ||||||
110
For the Year Ended December 31, 2007 | ||||||||||||
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
|||||||||
Revenues (1) |
$ | 114,552 | $ | 188,938 | $ | 221,489 | $ | 227,741 | ||||
Income from continuing operations (1) |
$ | 43,205 | $ | 44,149 | $ | 26,982 | $ | 28,373 | ||||
Preferred stock dividends and issuance costs |
| 5,199 | | | ||||||||
Income from continuing operations applicable to
|
43,205 | 38,950 | 26,982 | 28,373 | ||||||||
Discontinued operations (1) |
1,901 | 135,648 | 1,032 | 1,028 | ||||||||
Net income applicable to common shares |
$ | 45,106 | $ | 174,598 | $ | 28,014 | $ | 29,401 | ||||
Earnings per share: |
||||||||||||
Basic: |
||||||||||||
Income from continuing operations applicable to common shares |
$ | 0.41 | $ | 0.33 | $ | 0.20 | $ | 0.21 | ||||
Discontinued operations |
0.02 | 1.16 | 0.01 | 0.01 | ||||||||
Net income applicable to common shares |
$ | 0.43 | $ | 1.49 | $ | 0.21 | $ | 0.22 | ||||
Diluted: |
||||||||||||
Income from continuing operations applicable to common shares |
$ | 0.40 | $ | 0.33 | $ | 0.20 | $ | 0.21 | ||||
Discontinued operations |
0.02 | 1.15 | 0.01 | 0.01 | ||||||||
Net income applicable to common shares |
$ | 0.42 | $ | 1.48 | $ | 0.21 | $ | 0.22 | ||||
Dividends declared per share |
$ | 0.475 | $ | 0.475 | $ | 0.475 | $ | 0.475 |
(1) | The amounts presented for 2007 are not equal to the same amounts previously reported in our Current Report on Form 8-K filed with the Commission on November 24, 2008 as a result of discontinued operations consisting of properties reflected as held for sale as of December 31, 2008. |
For the Year Ended December 31, 2007 | ||||||||||||||||
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
|||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||
Revenues, previously reported in Form 8-K |
$ | 116,421 | $ | 190,921 | $ | 223,492 | $ | 229,737 | ||||||||
Revenues, previously reported in Form 8-K, subsequently reclassified to discontinued operations |
(1,869 | ) | (1,983 | ) | (2,003 | ) | (1,996 | ) | ||||||||
Total revenues disclosed in Form 10-K |
$ | 114,552 | $ | 188,938 | $ | 221,489 | $ | 227,741 | ||||||||
Income from continuing operations, previously reported in Form 8-K |
$ | 43,360 | $ | 44,369 | $ | 27,226 | $ | 28,612 | ||||||||
Income from continuing operations, previously reported in Form 8-K, subsequently reclassified to discontinued operations |
(155 | ) | (220 | ) | (244 | ) | (239 | ) | ||||||||
Income from continuing operations disclosed in Form 10-K |
$ | 43,205 | $ | 44,149 | $ | 26,982 | $ | 28,373 | ||||||||
Income from continuing operations applicable to common shares, previously reported in Form 8-K |
$ | 43,360 | $ | 39,170 | $ | 27,226 | $ | 28,612 | ||||||||
Income from continuing operations applicable to common shares, previously reported in Form 8-K, subsequently reclassified to discontinued operations |
(155 | ) | (220 | ) | (244 | ) | (239 | ) | ||||||||
Income from continuing operations applicable to common shares disclosed in Form 10-K |
$ | 43,205 | $ | 38,950 | $ | 26,982 | $ | 28,373 | ||||||||
Discontinued operations, previously reported in Form 8-K |
$ | 1,746 | $ | 135,428 | $ | 788 | $ | 789 | ||||||||
Discontinued operations from properties sold subsequent to the respective reporting period |
155 | 220 | 244 | 239 | ||||||||||||
Discontinued operations disclosed in Form 10-K |
$ | 1,901 | $ | 135,648 | $ | 1,032 | $ | 1,028 | ||||||||
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Note 19Segment Information
As of December 31, 2008, we operated through two reportable business segments: triple-net leased properties and senior living operations. Our triple-net leased properties segment consists of acquiring, financing and owning seniors housing and healthcare properties in the United States and leasing those properties to healthcare operating companies under triple-net or absolute-net leases, which require the tenants to pay all property-related expenses. Our senior living operations segment consists of investments in seniors housing communities located in the United States and Canada for which we engage Sunrise to manage the operations.
We acquired the senior living operations segment on April 26, 2007, pursuant to the purchase of the Sunrise REIT properties. With the addition of these properties, we believed segment differentiation would be appropriate based on the different economic and legal structures used to acquire and own those assets. Prior to the acquisition, we operated through one reportable segmentinvestment in real estatewhich included the triple-net leased properties and our MOBs. Our MOB segment consists of leasing space primarily to physicians and other healthcare businesses and engaging third parties to manage those operations. Due to our limited operation of and allocation of capital to the MOBs, we separated them from the triple-net leased properties segment. However, the MOBs segment is not individually reported and is included in All Other because it does not meet the quantitative thresholds of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information at the current time.
We evaluate performance of the combined properties in each segment based on net operating income before interest (excluding income from loans and investments), income taxes, depreciation and amortization, rent reset costs, reversal of contingent liability, foreign currency gains/losses, general, administrative and professional fees, merger-related expenses and minority interest. There are no intersegment sales or transfers.
All other revenues consist primarily of rental income related to the MOBs, income from loans and investments and other miscellaneous income. All other assets consist primarily of MOB assets and corporate assets including cash, restricted cash, deferred financing costs, notes receivable, and miscellaneous accounts receivable.
Summary information by business segment is as follows:
For the year ended December 31, 2008:
Triple-Net
Leased Properties |
Senior
Living Operations |
All Other | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Revenues: |
||||||||||||||||
Rental income |
$ | 459,643 | $ | | $ | 27,793 | $ | 487,436 | ||||||||
Resident fees and services |
| 429,257 | | 429,257 | ||||||||||||
Income from loans and investments |
| | 8,847 | 8,847 | ||||||||||||
Interest and other income |
2,133 | 338 | 1,755 | 4,226 | ||||||||||||
Total revenues |
$ | 461,776 | $ | 429,595 | $ | 38,395 | $ | 929,766 | ||||||||
Segment net operating income |
$ | 459,643 | $ | 138,813 | $ | 20,140 | $ | 618,596 | ||||||||
Interest and other income |
2,133 | 338 | 1,755 | 4,226 | ||||||||||||
Merger-related expenses |
| (4,460 | ) | | (4,460 | ) | ||||||||||
Interest expense |
(103,780 | ) | (95,595 | ) | (3,809 | ) | (203,184 | ) | ||||||||
Depreciation and amortization |
(122,094 | ) | (98,511 | ) | (11,197 | ) | (231,802 | ) | ||||||||
General, administrative and professional fees |
| | (40,651 | ) | (40,651 | ) | ||||||||||
Foreign currency gain |
| 162 | | 162 | ||||||||||||
Gain on extinguishment of debt |
1,868 | 530 | | 2,398 | ||||||||||||
Minority interest |
| (2,510 | ) | (174 | ) | (2,684 | ) | |||||||||
Net income (loss) before taxes and discontinued operations |
$ | 237,770 | $ | (61,233 | ) | $ | (33,936 | ) | $ | 142,601 | ||||||
112
For the year ended December 31, 2007:
Triple-Net
Leased Properties |
Senior
Living Operations |
All Other | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Revenues: |
||||||||||||||||
Rental income |
$ | 450,757 | $ | | $ | 14,312 | $ | 465,069 | ||||||||
Resident fees and services |
| 282,226 | | 282,226 | ||||||||||||
Income from loans and investments |
| | 2,586 | 2,586 | ||||||||||||
Interest and other income |
1,970 | 832 | 37 | 2,839 | ||||||||||||
Total revenues |
$ | 452,727 | $ | 283,058 | $ | 16,935 | $ | 752,720 | ||||||||
Segment net operating income |
$ | 450,757 | $ | 90,137 | $ | 10,862 | $ | 551,756 | ||||||||
Interest and other income |
1,970 | 832 | 37 | 2,839 | ||||||||||||
Merger-related expenses |
| (2,979 | ) | | (2,979 | ) | ||||||||||
Interest expense |
(129,250 | ) | (64,547 | ) | (1,934 | ) | (195,731 | ) | ||||||||
Depreciation and amortization |
(122,104 | ) | (101,223 | ) | (4,136 | ) | (227,463 | ) | ||||||||
General, administrative and professional fees |
| | (36,425 | ) | (36,425 | ) | ||||||||||
Foreign currency gain |
| 24,280 | | 24,280 | ||||||||||||
Gain on extinguishment of debt |
88 | | | 88 | ||||||||||||
Minority interest |
| (1,721 | ) | 23 | (1,698 | ) | ||||||||||
Net income (loss) before taxes and discontinued operations |
$ | 201,461 | $ | (55,221 | ) | $ | (31,573 | ) | $ | 114,667 | ||||||
For the year ended December 31, 2006: |
||||||||||||||||
Triple-Net
Leased Properties |
Senior
Living Operations |
All Other | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Revenues: |
||||||||||||||||
Rental income |
$ | 381,016 | $ | | $ | 7,151 | $ | 388,167 | ||||||||
Income from loans and investments |
| | 7,014 | 7,014 | ||||||||||||
Interest and other income |
2,734 | | 36 | 2,770 | ||||||||||||
Total revenues |
$ | 383,750 | $ | | $ | 14,201 | $ | 397,951 | ||||||||
Segment net operating income |
$ | 381,016 | $ | | $ | 10,994 | $ | 392,010 | ||||||||
Interest and other income |
2,734 | | 36 | 2,770 | ||||||||||||
Interest expense |
(127,534 | ) | | (1,419 | ) | (128,953 | ) | |||||||||
Depreciation and amortization |
(108,790 | ) | | (1,964 | ) | (110,754 | ) | |||||||||
General, administrative and professional fees |
| | (26,136 | ) | (26,136 | ) | ||||||||||
Loss on extinguishment of debt |
(1,273 | ) | | | (1,273 | ) | ||||||||||
Rent reset costs |
(7,361 | ) | | | (7,361 | ) | ||||||||||
Net income (loss) before taxes and discontinued operations |
$ | 138,792 | $ | | $ | (18,489 | ) | $ | 120,303 | |||||||
113
As of December 31, | ||||||
2008 | 2007 | |||||
(In thousands) | ||||||
Assets: |
||||||
Triple-net leased properties |
$ | 3,127,561 | $ | 3,011,920 | ||
Senior living operations |
2,362,282 | 2,506,780 | ||||
All other assets |
280,141 | 197,928 | ||||
Total assets |
$ | 5,769,984 | $ | 5,716,628 | ||
For the Year Ended December 31, | |||||||||
2008 | 2007 | 2006 | |||||||
(In thousands) | |||||||||
Capital expenditures: |
|||||||||
Triple-net leased properties |
$ | 11,487 | $ | 10,107 | $ | 490,311 | |||
Senior living operations |
7,301 | 1,231,083 | | ||||||
All other expenditures |
51,372 | 127,636 | 368 | ||||||
Total capital expenditures |
$ | 70,160 | $ | 1,368,826 | $ | 490,679 | |||
Our portfolio of properties and real estate investments are located in the United States and Canada. Revenues are attributed to an individual country based on the location of each property.
Geographic information regarding our business segments is as follows:
For the Year Ended December 31, | |||||||||
2008 | 2007 | 2006 | |||||||
(In thousands) | |||||||||
Revenue: |
|||||||||
United States |
$ | 854,388 | $ | 705,828 | $ | 397,951 | |||
Canada |
75,378 | 46,892 | | ||||||
Total revenues |
$ | 929,766 | $ | 752,720 | $ | 397,951 | |||
As of December 31, | ||||||
2008 | 2007 | |||||
(In thousands) | ||||||
Long-lived assets: |
||||||
United States |
$ | 4,786,734 | $ | 5,024,678 | ||
Canada |
386,205 | 451,151 | ||||
Total long-lived assets |
$ | 5,172,939 | $ | 5,475,829 | ||
114
Note 20Condensed Consolidating Information
We and certain of our direct and indirect wholly owned subsidiaries (the Wholly Owned Subsidiary Guarantors) have fully and unconditionally
guaranteed, on a joint and several basis, the obligation to pay principal and interest with respect to the Senior Notes of the Issuers. Ventas Capital Corporation is a wholly owned direct subsidiary of Ventas Realty that was formed to facilitate the
offering of the Senior Notes and has no assets or operations. In addition, Ventas Realty and the Wholly Owned Subsidiary Guarantors have fully and unconditionally guaranteed, on a joint and several basis, the obligation to pay principal and interest
with respect to our Convertible Notes. ETOP, of which we own substantially all of the partnership units, and certain of its wholly owned subsidiaries (the ETOP Subsidiary Guarantors and collectively, with the Wholly Owned Subsidiary
Guarantors, the Guarantors), have also provided a guarantee, on a joint and several basis, of the Senior Notes and the Convertible Notes. We have other subsidiaries (Non-Guarantor Subsidiaries) that are not included among the
Guarantors, and such subsidiaries are not obligated with respect to the Senior Notes or the Convertible Notes. Contractual and legal restrictions, including those contained in the instruments governing certain Non-Guarantor Subsidiaries
outstanding indebtedness, may under certain circumstances restrict our ability to obtain cash from our Non-Guarantor Subsidiaries for the purpose of meeting our debt service obligations, including our guarantee of payment of principal and interest
on the Senior Notes and our primary obligation to pay principal and interest on the Convertible Notes. Certain of our real estate assets are also subject to mortgages. The following summarizes our condensed consolidating information as of
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2008
Ventas, Inc. |
ETOP and
ETOP Subsidiary Guarantors |
Wholly
Owned Subsidiary Guarantors |
Issuers |
Non-
Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | ||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||
Net real estate investments |
$ | 10,144 | $ | 49,785 | $ | 2,144,350 | $ | 852,203 | $ | 2,239,746 | $ | | $ | 5,296,228 | ||||||||||
Cash and cash equivalents |
| | 10,325 | 144,918 | 21,569 | | 176,812 | |||||||||||||||||
Escrow deposits and restricted cash |
216 | | 9,398 | 21,128 | 25,124 | | 55,866 | |||||||||||||||||
Deferred financing costs, net |
318 | | 672 | 11,243 | 8,365 | | 20,598 | |||||||||||||||||
Notes receivable-related parties |
| | | | | | | |||||||||||||||||
Investment in and advances to affiliates |
1,170,475 | 9,039 | | 1,119,378 | | (2,298,892 | ) | | ||||||||||||||||
Other |
11 | 935 | 57,799 | 84,612 | 77,123 | | 220,480 | |||||||||||||||||
Total assets |
$ | 1,181,164 | $ | 59,759 | $ | 2,222,544 | $ | 2,233,482 | $ | 2,371,927 | $ | (2,298,892 | ) | $ | 5,769,984 | |||||||||
Liabilities and stockholders equity |
||||||||||||||||||||||||
Liabilities: |
||||||||||||||||||||||||
Senior notes payable and other debt |
$ | 227,214 | $ | | $ | 442,098 | $ | 1,351,526 | $ | 1,126,856 | $ | | $ | 3,147,694 | ||||||||||
Intercompany |
(940 | ) | 7,500 | 491,696 | (498,256 | ) | | | | |||||||||||||||
Deferred revenue |
11 | | 518 | 3,617 | 2,911 | | 7,057 | |||||||||||||||||
Accrued interest |
| | 1,733 | 15,721 | 4,477 | | 21,931 | |||||||||||||||||
Accounts payable and other accrued liabilities |
12,578 | 37 | 67,700 | 29,957 | 57,926 | | 168,198 | |||||||||||||||||
Deferred income taxes |
257,499 | | | | | | 257,499 | |||||||||||||||||
Total liabilities |
496,362 | 7,537 | 1,003,745 | 902,565 | 1,192,170 | | 3,602,379 | |||||||||||||||||
Minority interest |
393 | | | | 18,744 | | 19,137 | |||||||||||||||||
Total stockholders equity |
684,409 | 52,222 | 1,218,799 | 1,330,917 | 1,161,013 | (2,298,892 | ) | 2,148,468 | ||||||||||||||||
Total liabilities and stockholders equity |
$ | 1,181,164 | $ | 59,759 | $ | 2,222,544 | $ | 2,233,482 | $ | 2,371,927 | $ | (2,298,892 | ) | $ | 5,769,984 | |||||||||
115
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2007
Ventas, Inc. |
ETOP and
ETOP Subsidiary Guarantors |
Wholly
Owned Subsidiary Guarantors |
Issuers |
Non-
Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | ||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||
Net real estate investments |
$ | 10,793 | $ | 51,923 | $ | 2,233,454 | $ | 874,031 | $ | 2,325,626 | $ | | $ | 5,495,827 | ||||||||||
Cash and cash equivalents |
| | 6,040 | 494 | 21,800 | | 28,334 | |||||||||||||||||
Escrow deposits and restricted cash |
214 | | 24,618 | 6,341 | 22,904 | | 54,077 | |||||||||||||||||
Deferred financing costs, net |
419 | | 401 | 14,101 | 7,915 | | 22,836 | |||||||||||||||||
Notes receivable-related parties |
1,717 | | | 375 | | | 2,092 | |||||||||||||||||
Investment in and advances to affiliates |
1,114,775 | 9,039 | | 956,394 | | (2,080,208 | ) | | ||||||||||||||||
Other |
| 714 | 55,430 | 15,433 | 41,885 | | 113,462 | |||||||||||||||||
Total assets |
$ | 1,127,918 | $ | 61,676 | $ | 2,319,943 | $ | 1,867,169 | $ | 2,420,130 | $ | (2,080,208 | ) | $ | 5,716,628 | |||||||||
Liabilities and stockholders equity |
||||||||||||||||||||||||
Liabilities: |
||||||||||||||||||||||||
Senior notes payable and other debt |
$ | 226,323 | $ | 400 | $ | 606,806 | $ | 1,457,168 | $ | 1,069,802 | $ | | $ | 3,360,499 | ||||||||||
Intercompany loans |
(44,347 | ) | 7,500 | 569,778 | (541,655 | ) | 8,724 | | | |||||||||||||||
Deferred revenue |
(8 | ) | | 568 | 5,463 | 3,042 | | 9,065 | ||||||||||||||||
Accrued interest |
(796 | ) | 3 | 3,287 | 16,621 | 1,675 | | 20,790 | ||||||||||||||||
Accounts payable and other accrued liabilities |
12,264 | 112 | 65,875 | 43,369 | 51,956 | | 173,576 | |||||||||||||||||
Deferred income taxes |
297,590 | | | | | | 297,590 | |||||||||||||||||
Total liabilities |
491,026 | 8,015 | 1,246,314 | 980,966 | 1,135,199 | | 3,861,520 | |||||||||||||||||
Minority interest |
393 | | 21 | 2,115 | 28,925 | | 31,454 | |||||||||||||||||
Total stockholders equity |
636,499 | 53,661 | 1,073,608 | 884,088 | 1,256,006 | (2,080,208 | ) | 1,823,654 | ||||||||||||||||
Total liabilities and stockholders equity |
$ | 1,127,918 | $ | 61,676 | $ | 2,319,943 | $ | 1,867,169 | $ | 2,420,130 | $ | (2,080,208 | ) | $ | 5,716,628 | |||||||||
116
CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 2008
Ventas,
Inc. |
ETOP and
ETOP Subsidiary Guarantors |
Wholly
Owned Subsidiary Guarantors |
Issuers |
Non-
Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||
Rental income |
$ | 2,296 | $ | 5,812 | $ | 144,502 | $ | 273,658 | $ | 61,168 | $ | | $ | 487,436 | ||||||||||||||
Resident fees and services |
| | 109,038 | | 320,219 | | 429,257 | |||||||||||||||||||||
Income from loans and investments |
| | | 8,847 | | | 8,847 | |||||||||||||||||||||
Equity earnings (loss) in affiliates |
191,524 | (6 | ) | 5,602 | | | (197,120 | ) | | |||||||||||||||||||
Interest and other income |
73 | | 184 | 3,539 | 430 | | 4,226 | |||||||||||||||||||||
Total revenues |
193,893 | 5,806 | 259,326 | 286,044 | 381,817 | (197,120 | ) | 929,766 | ||||||||||||||||||||
Expenses: |
||||||||||||||||||||||||||||
Interest |
160 | 27 | 31,925 | 107,114 | 63,958 | | 203,184 | |||||||||||||||||||||
Depreciation and amortization |
648 | 2,152 | 90,155 | 42,696 | 96,151 | | 231,802 | |||||||||||||||||||||
Property-level operating expenses |
| | 73,787 | 6,515 | 226,642 | | 306,944 | |||||||||||||||||||||
General, administrative and professional fees |
6,045 | 362 | 13,561 | 16,320 | 4,363 | | 40,651 | |||||||||||||||||||||
Foreign currency loss (gain) |
126 | | (227 | ) | | (61 | ) | | (162 | ) | ||||||||||||||||||
Loss (gain) on extinguishment of debt |
| | 30 | (1,869 | ) | (559 | ) | | (2,398 | ) | ||||||||||||||||||
Merger-related expenses (gain) |
| | 3,922 | 815 | (277 | ) | | 4,460 | ||||||||||||||||||||
Intercompany interest |
(161 | ) | (336 | ) | 48,269 | (48,708 | ) | 936 | | | ||||||||||||||||||
Total expenses |
6,818 | 2,205 | 261,422 | 122,883 | 391,153 | | 784,481 | |||||||||||||||||||||
Income (loss) before reversal of contingent liability, income taxes, minority interest and discontinued operations |
187,075 | 3,601 | (2,096 | ) | 163,161 | (9,336 | ) | (197,120 | ) | 145,285 | ||||||||||||||||||
Reversal of contingent liability |
23,328 | | | | | | 23,328 | |||||||||||||||||||||
Income tax benefit, net of minority interest |
15,885 | | | | | | 15,885 | |||||||||||||||||||||
Income (loss) before minority interest and discontinued operations |
226,288 | 3,601 | (2,096 | ) | 163,161 | (9,336 | ) | (197,120 | ) | 184,498 | ||||||||||||||||||
Minority interest, net of tax |
| | (1,752 | ) | | 4,436 | | 2,684 | ||||||||||||||||||||
Income (loss) from continuing operations |
226,288 | 3,601 | (344 | ) | 163,161 | (13,772 | ) | (197,120 | ) | 181,814 | ||||||||||||||||||
Discontinued operations |
| | | 36,924 | 7,550 | | 44,474 | |||||||||||||||||||||
Net income (loss) applicable to common shares |
$ | 226,288 | $ | 3,601 | $ | (344 | ) | $ | 200,085 | $ | (6,222 | ) | $ | (197,120 | ) | $ | 226,288 | |||||||||||
117
CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 2007
Ventas,
Inc. |
ETOP and
ETOP Subsidiary Guarantors |
Wholly
Owned Subsidiary Guarantors |
Issuers |
Non-
Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||
Rental income |
$ | 2,248 | $ | 670 | $ | 142,821 | $ | 271,283 | $ | 48,047 | $ | | $ | 465,069 | ||||||||||||||
Resident fees and services |
| | 73,714 | | 208,512 | | 282,226 | |||||||||||||||||||||
Income from loans and investments |
| | | 2,586 | | | 2,586 | |||||||||||||||||||||
Equity earnings (loss) in affiliates |
250,530 | (227 | ) | 6,154 | | | (256,457 | ) | | |||||||||||||||||||
Interest and other income |
82 | (2 | ) | 362 | 1,460 | 937 | | 2,839 | ||||||||||||||||||||
Total revenues |
252,860 | 441 | 223,051 | 275,329 | 257,496 | (256,457 | ) | 752,720 | ||||||||||||||||||||
Expenses: |
||||||||||||||||||||||||||||
Interest |
875 | (2,842 | ) | 32,164 | 117,584 | 47,950 | | 195,731 | ||||||||||||||||||||
Depreciation and amortization |
648 | 441 | 91,094 | 44,698 | 90,582 | | 227,463 | |||||||||||||||||||||
Property-level operating expenses |
| | 51,057 | | 147,068 | | 198,125 | |||||||||||||||||||||
General, administrative and professional fees |
1,337 | 409 | 12,374 | 19,198 | 3,107 | | 36,425 | |||||||||||||||||||||
Foreign currency loss (gain) |
120 | | 12 | (24,317 | ) | (95 | ) | | (24,280 | ) | ||||||||||||||||||
Gain on extinguishment of debt |
| | | (88 | ) | | | (88 | ) | |||||||||||||||||||
Merger-related expenses |
| | 2,198 | 739 | 42 | | 2,979 | |||||||||||||||||||||
Intercompany interest |
(4,396 | ) | (233 | ) | 30,586 | (26,791 | ) | 834 | | | ||||||||||||||||||
Total expenses |
(1,416 | ) | (2,225 | ) | 219,485 | 131,023 | 289,488 | | 636,355 | |||||||||||||||||||
Income (loss) before income taxes, minority interest and discontinued operations |
254,276 | 2,666 | 3,566 | 144,306 | (31,992 | ) | (256,457 | ) | 116,365 | |||||||||||||||||||
Income tax benefit, net of minority interest |
28,042 | | | | | | 28,042 | |||||||||||||||||||||
Income (loss) before minority interest and discontinued operations |
282,318 | 2,666 | 3,566 | 144,306 | (31,992 | ) | (256,457 | ) | 144,407 | |||||||||||||||||||
Minority interest, net of tax |
| | (1,076 | ) | | 2,774 | | 1,698 | ||||||||||||||||||||
Income (loss) from continuing operations |
282,318 | 2,666 | 4,642 | 144,306 | (34,766 | ) | (256,457 | ) | 142,709 | |||||||||||||||||||
Discontinued operations |
| 657 | | 138,745 | 207 | | 139,609 | |||||||||||||||||||||
Net income (loss) |
282,318 | 3,323 | 4,642 | 283,051 | (34,559 | ) | (256,457 | ) | 282,318 | |||||||||||||||||||
Preferred stock dividends and issuance costs |
5,199 | | | | | | 5,199 | |||||||||||||||||||||
Net income (loss) applicable to common shares |
$ | 277,119 | $ | 3,323 | $ | 4,642 | $ | 283,051 | $ | (34,559 | ) | $ | (256,457 | ) | $ | 277,119 | ||||||||||||
118
CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 2006
Ventas,
Inc. |
ETOP and
ETOP Subsidiary Guarantors |
Wholly
Owned Subsidiary Guarantors |
Issuers |
Non-
Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | ||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||
Rental income |
$ | 2,317 | $ | 634 | $ | 100,623 | $ | 243,012 | $ | 41,581 | $ | | $ | 388,167 | ||||||||||
Income from loans and investments |
| | | 7,014 | | | 7,014 | |||||||||||||||||
Equity earnings (loss) in affiliates |
128,902 | (99 | ) | 4,179 | | | (132,982 | ) | | |||||||||||||||
Interest and other income |
79 | (116 | ) | 37 | 2,412 | 358 | | 2,770 | ||||||||||||||||
Total revenues |
131,298 | 419 | 104,839 | 252,438 | 41,939 | (132,982 | ) | 397,951 | ||||||||||||||||
Expenses: |
||||||||||||||||||||||||
Interest |
86 | (2,904 | ) | 25,747 | 89,029 | 16,995 | | 128,953 | ||||||||||||||||
Depreciation and amortization |
673 | 440 | 48,716 | 45,057 | 15,868 | | 110,754 | |||||||||||||||||
Property-level operating expenses |
| | | 904 | 2,267 | | 3,171 | |||||||||||||||||
General, administrative and professional fees |
878 | 402 | 6,266 | 16,029 | 2,561 | | 26,136 | |||||||||||||||||
Rent reset costs |
| | | 7,361 | | | 7,361 | |||||||||||||||||
Loss on extinguishment of debt |
| | | 1,273 | | | 1,273 | |||||||||||||||||
Intercompany interest |
| (115 | ) | | (600 | ) | 715 | | | |||||||||||||||
Total expenses |
1,637 | (2,177 | ) | 80,729 | 159,053 | 38,406 | | 277,648 | ||||||||||||||||
Income before reversal of contingent liability and discontinued operations |
129,661 | 2,596 | 24,110 | 93,385 | 3,533 | (132,982 | ) | 120,303 | ||||||||||||||||
Reversal of contingent liability |
1,769 | | | | | | 1,769 | |||||||||||||||||
Income from continuing operations |
131,430 | 2,596 | 24,110 | 93,385 | 3,533 | (132,982 | ) | 122,072 | ||||||||||||||||
Discontinued operations |
| 561 | | 8,605 | 192 | | 9,358 | |||||||||||||||||
Net income applicable to common shares |
$ | 131,430 | $ | 3,157 | $ | 24,110 | $ | 101,990 | $ | 3,725 | $ | (132,982 | ) | $ | 131,430 | |||||||||
119
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2008
Ventas, Inc. |
ETOP and
ETOP Subsidiary Guarantors |
Wholly
Owned Subsidiary Guarantors |
Issuers |
Non-
Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | |||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||
Net cash provided by operating activities |
$ | 548 | $ | 7,445 | $ | 75,734 | $ | 175,741 | $ | 104,707 | $ | | $ | 364,175 | |||||||||||||
Net cash provided by (used in) investing activities |
1,717 | (306 | ) | (35,255 | ) | (73,663 | ) | (28,749 | ) | | (136,256 | ) | |||||||||||||||
Cash flows from financing activities: |
|||||||||||||||||||||||||||
Net change in borrowings under revolving credit facilities |
| | (27,574 | ) | 100,940 | | | 73,366 | |||||||||||||||||||
Proceeds from debt |
| | | | 140,262 | | 140,262 | ||||||||||||||||||||
Repayment of debt |
| (2,002 | ) | (136,228 | ) | (206,835 | ) | (71,831 | ) | | (416,896 | ) | |||||||||||||||
Net change in intercompany debt |
43,407 | | (78,082 | ) | 43,399 | (8,724 | ) | | | ||||||||||||||||||
Payment of deferred financing costs |
| | (811 | ) | (1,099 | ) | (1,947 | ) | | (3,857 | ) | ||||||||||||||||
Issuance of common stock |
408,540 | | | | | | 408,540 | ||||||||||||||||||||
Cash distribution (to) from affiliates |
(172,582 | ) | (5,105 | ) | 207,153 | 105,135 | (134,601 | ) | | | |||||||||||||||||
Cash distribution to common stockholders |
(288,817 | ) | (32 | ) | | | | | (288,849 | ) | |||||||||||||||||
Other |
7,187 | | | | | | 7,187 | ||||||||||||||||||||
Net cash (used in) provided by financing activities |
(2,265 | ) | (7,139 | ) | (35,542 | ) | 41,540 | (76,841 | ) | | (80,247 | ) | |||||||||||||||
Net increase (decrease) in cash and cash equivalents |
| | 4,937 | 143,618 | (883 | ) | | 147,672 | |||||||||||||||||||
Effect of foreign currency translation on cash and cash equivalents |
| | | 806 | | | 806 | ||||||||||||||||||||
Cash and cash equivalents at beginning of year |
| | 5,388 | 494 | 22,452 | | 28,334 | ||||||||||||||||||||
Cash and cash equivalents at end of year |
$ | | $ | | $ | 10,325 | $ | 144,918 | $ | 21,569 | $ | | $ | 176,812 | |||||||||||||
120
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2007
Ventas, Inc. |
ETOP and
ETOP Subsidiary Guarantors |
Wholly
Owned Subsidiary Guarantors |
Issuers |
Non-
Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | |||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||
Net cash provided by operating activities |
$ | 22,852 | $ | 5,309 | $ | 67,384 | $ | 212,004 | $ | 94,077 | $ | | $ | 401,626 | |||||||||||||
Net cash (used in) provided by investing activities |
(1 | ) | | (567,237 | ) | 180,755 | (788,709 | ) | | (1,175,192 | ) | ||||||||||||||||
Cash flows from financing activities: |
|||||||||||||||||||||||||||
Net change in borrowings under revolving credit facilities |
| | 84,286 | 92,300 | | | 176,586 | ||||||||||||||||||||
Issuance of bridge financing |
| | | 1,230,000 | | | 1,230,000 | ||||||||||||||||||||
Repayment of bridge financing |
| | | (1,230,000 | ) | | | (1,230,000 | ) | ||||||||||||||||||
Proceeds from debt |
| | | | 53,832 | | 53,832 | ||||||||||||||||||||
Repayment of debt |
| (13 | ) | (126,158 | ) | (5,001 | ) | (53,441 | ) | | (184,613 | ) | |||||||||||||||
Net change in intercompany debt |
(44,347 | ) | | 453,502 | (409,155 | ) | | | | ||||||||||||||||||
Debt and preferred stock issuance costs |
(4,300 | ) | | | | | | (4,300 | ) | ||||||||||||||||||
Payment of deferred financing costs |
| | (497 | ) | (275 | ) | (7,084 | ) | | (7,856 | ) | ||||||||||||||||
Issuance of common stock |
1,045,713 | | | | | | 1,045,713 | ||||||||||||||||||||
Cash distribution to preferred stockholders |
(3,449 | ) | | | | | | (3,449 | ) | ||||||||||||||||||
Cash distribution (to) from affiliates |
(746,388 | ) | (5,177 | ) | 70,294 | (65,853 | ) | 747,124 | | | |||||||||||||||||
Cash distribution to common stockholders |
(282,620 | ) | (119 | ) | | | | | (282,739 | ) | |||||||||||||||||
Other |
12,540 | | 24,466 | (65 | ) | (24,466 | ) | | 12,475 | ||||||||||||||||||
Net cash (used in) provided by financing activities |
(22,851 | ) | (5,309 | ) | 505,893 | (388,049 | ) | 715,965 | | 805,649 | |||||||||||||||||
Net increase in cash and cash equivalents |
| | 6,040 | 4,710 | 21,333 | | 32,083 | ||||||||||||||||||||
Effect of foreign currency translation on cash and cash equivalents |
| | | (4,995 | ) | | | (4,995 | ) | ||||||||||||||||||
Cash and cash equivalents at beginning of year |
| | | 779 | 467 | | 1,246 | ||||||||||||||||||||
Cash and cash equivalents at end of year |
$ | | $ | | $ | 6,040 | $ | 494 | $ | 21,800 | $ | | $ | 28,334 | |||||||||||||
121
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2006
Ventas, Inc. |
ETOP and
ETOP Subsidiary Guarantors |
Wholly
Owned Subsidiary Guarantors |
Issuers |
Non-
Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | |||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||
Net cash provided by operating activities |
$ | 608 | $ | 4,618 | $ | 56,465 | $ | 160,833 | $ | 16,343 | $ | | $ | 238,867 | |||||||||||||
Net cash provided by (used in) investing activities |
| | 167 | (481,640 | ) | (501 | ) | | (481,974 | ) | |||||||||||||||||
Cash flows from financing activities: |
|||||||||||||||||||||||||||
Net change in borrowings under revolving credit facilities |
| | | (32,200 | ) | | | (32,200 | ) | ||||||||||||||||||
Proceeds from debt |
225,469 | | | 221,462 | 2,074 | | 449,005 | ||||||||||||||||||||
Repayment of debt |
| (11 | ) | (11,501 | ) | | (4,572 | ) | | (16,084 | ) | ||||||||||||||||
Payment of deferred financing costs |
| | | (4,876 | ) | | | (4,876 | ) | ||||||||||||||||||
Issuance of common stock, net |
831 | | | | | | 831 | ||||||||||||||||||||
Cash distribution (to) from affiliates |
(73,232 | ) | (4,321 | ) | (45,131 | ) | 136,173 | (13,489 | ) | | | ||||||||||||||||
Cash distribution to stockholders |
(160,311 | ) | (287 | ) | | | | | (160,598 | ) | |||||||||||||||||
Other |
6,634 | | (3,376 | ) | | 3,376 | | 6,634 | |||||||||||||||||||
Net cash (used in) provided by financing activities |
(609 | ) | (4,619 | ) | (60,008 | ) | 320,559 | (12,611 | ) | | 242,712 | ||||||||||||||||
Net (decrease) increase in cash and cash equivalents |
(1 | ) | (1 | ) | (3,376 | ) | (248 | ) | 3,231 | | (395 | ) | |||||||||||||||
Cash and cash equivalents at beginning of year |
1 | 1 | | 1,027 | 612 | | 1,641 | ||||||||||||||||||||
Cash and cash equivalents at end of year |
$ | | $ | | $ | (3,376 | ) | $ | 779 | $ | 3,843 | $ | | $ | 1,246 | ||||||||||||
Note 21ETOP Condensed Consolidating Information
ETOP, of which we own substantially all of the partnership interests, and the ETOP Subsidiary Guarantors have provided full and unconditional guarantees, on a joint and several basis with us and certain of our direct and indirect wholly owned subsidiaries, of the obligation to pay principal and interest with respect to the Senior Notes and the Convertible Notes. See Note 20Condensed Consolidating Information. Certain of ETOPs other direct and indirect wholly owned subsidiaries (the ETOP Non-Guarantor Subsidiaries) have not provided a guarantee of the Senior Notes or the Convertible Notes and, therefore, are not directly obligated with respect to the Senior Notes or the Convertible Notes.
Contractual and legal restrictions, including those contained in the instruments governing certain of the ETOP Non-Guarantor Subsidiaries outstanding indebtedness, may under certain circumstances restrict ETOPs (and therefore our) ability to obtain cash from the ETOP Non-Guarantor Subsidiaries for the purpose of satisfying ETOPs and our debt service obligations, including ETOPs and our guarantee of payment of principal and interest on the Senior Notes and our primary obligation to pay principal and interest on the Convertible Notes. See Note 9Borrowing Arrangements. Certain of the ETOP Subsidiary Guarantors properties are subject to mortgages.
122
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2008
ETOP and
ETOP Subsidiary Guarantors |
ETOP
Non-Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | |||||||||
(In thousands) | ||||||||||||
Assets |
||||||||||||
Net real estate investments |
$ | 49,785 | $ | 33,690 | $ | | $ | 83,475 | ||||
Escrow deposits and restricted cash |
| 8,731 | | 8,731 | ||||||||
Investment in and advances to affiliates |
9,039 | | | 9,039 | ||||||||
Other |
935 | 48,083 | | 49,018 | ||||||||
Total assets |
$ | 59,759 | $ | 90,504 | $ | | $ | 150,263 | ||||
Liabilities and partners capital |
||||||||||||
Liabilities: |
||||||||||||
Notes payable and other debt |
$ | | $ | 62,289 | $ | | $ | 62,289 | ||||
Note payable to affiliate |
7,500 | | | 7,500 | ||||||||
Accrued interest |
| 403 | | 403 | ||||||||
Accounts payable and other accrued liabilities |
37 | 3,240 | | 3,277 | ||||||||
Total liabilities |
7,537 | 65,932 | | 73,469 | ||||||||
Total partners capital |
52,222 | 24,572 | | 76,794 | ||||||||
Total liabilities and partners capital |
$ | 59,759 | $ | 90,504 | $ | | $ | 150,263 | ||||
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2007
ETOP and
ETOP Subsidiary Guarantors |
ETOP
Non-Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | |||||||||
(In thousands) | ||||||||||||
Assets |
||||||||||||
Net real estate investments |
$ | 51,923 | $ | 82,974 | $ | | $ | 134,897 | ||||
Escrow deposits and restricted cash |
| 7,536 | | 7,536 | ||||||||
Investment in and advances to affiliates |
9,039 | | | 9,039 | ||||||||
Other |
714 | 1,534 | | 2,248 | ||||||||
Total assets |
$ | 61,676 | $ | 92,044 | $ | | $ | 153,720 | ||||
Liabilities and partners capital |
||||||||||||
Liabilities: |
||||||||||||
Notes payable and other debt |
$ | 400 | $ | 63,891 | $ | | $ | 64,291 | ||||
Note payable to affiliate |
7,500 | | | 7,500 | ||||||||
Accrued interest |
3 | 413 | | 416 | ||||||||
Accounts payable and other accrued liabilities |
112 | 3,071 | | 3,183 | ||||||||
Total liabilities |
8,015 | 67,375 | | 75,390 | ||||||||
Total partners capital |
53,661 | 24,669 | | 78,330 | ||||||||
Total liabilities and partners capital |
$ | 61,676 | $ | 92,044 | $ | | $ | 153,720 | ||||
123
CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 2008
ETOP and
ETOP Subsidiary Guarantors |
ETOP
Non-Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | |||||||||||
(In thousands) | ||||||||||||||
Revenues: |
||||||||||||||
Rental income |
$ | 5,812 | $ | 5,876 | $ | | $ | 11,688 | ||||||
Interest and other income |
| | | | ||||||||||
Equity loss in affiliates |
(6 | ) | | 6 | | |||||||||
Total revenues |
5,806 | 5,876 | 6 | 11,688 | ||||||||||
Expenses: |
||||||||||||||
Interest |
27 | 2,032 | | 2,059 | ||||||||||
Depreciation and amortization |
2,152 | 1,540 | | 3,692 | ||||||||||
Property-level operating expenses |
| 1,575 | | 1,575 | ||||||||||
General, administrative and professional fees |
362 | 486 | | 848 | ||||||||||
Intercompany interest |
(336 | ) | 936 | | 600 | |||||||||
Total expenses |
2,205 | 6,569 | | 8,774 | ||||||||||
Net income (loss) from continuing operations |
3,601 | (693 | ) | 6 | 2,914 | |||||||||
Discontinued operations |
| 687 | | 687 | ||||||||||
Net income (loss) |
$ | 3,601 | $ | (6 | ) | $ | 6 | $ | 3,601 | |||||
CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 2007
ETOP and
ETOP Subsidiary Guarantors |
ETOP
Non-Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | |||||||||||
(In thousands) | ||||||||||||||
Revenues: |
||||||||||||||
Rental income |
$ | 5,754 | $ | 5,777 | $ | | $ | 11,531 | ||||||
Interest and other income |
153 | 3 | | 156 | ||||||||||
Equity loss in affiliates |
(227 | ) | | 227 | | |||||||||
Total revenues |
5,680 | 5,780 | 227 | 11,687 | ||||||||||
Expenses: |
||||||||||||||
Interest |
36 | 2,074 | | 2,110 | ||||||||||
Depreciation and amortization |
2,145 | 1,517 | | 3,662 | ||||||||||
Property-level operating expenses |
| 1,597 | | 1,597 | ||||||||||
General, administrative and professional fees |
409 | 643 | | 1,052 | ||||||||||
Intercompany interest |
(233 | ) | 833 | | 600 | |||||||||
Total expenses |
2,357 | 6,664 | | 9,021 | ||||||||||
Net income (loss) from continuing operations |
3,323 | (884 | ) | 227 | 2,666 | |||||||||
Discontinued operations |
| 657 | | 657 | ||||||||||
Net income (loss) |
$ | 3,323 | $ | (227 | ) | $ | 227 | $ | 3,323 | |||||
124
CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 2006
ETOP and
ETOP Subsidiary Guarantors |
ETOP
Non-Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | |||||||||||
(In thousands) | ||||||||||||||
Revenues: |
||||||||||||||
Rental income |
$ | 5,722 | $ | 5,699 | $ | | $ | 11,421 | ||||||
Interest and other income |
| 10 | | 10 | ||||||||||
Equity loss in affiliates |
(99 | ) | | 99 | | |||||||||
Total revenues |
5,623 | 5,709 | 99 | 11,431 | ||||||||||
Expenses: |
||||||||||||||
Interest |
35 | 2,121 | | 2,156 | ||||||||||
Depreciation and amortization |
2,144 | 1,490 | | 3,634 | ||||||||||
Property-level operating expenses |
| 1,448 | | 1,448 | ||||||||||
General, administrative and professional fees |
402 | 595 | | 997 | ||||||||||
Intercompany interest |
(115 | ) | 715 | | 600 | |||||||||
Total expenses |
2,466 | 6,369 | | 8,835 | ||||||||||
Net income (loss) from continuing operations |
3,157 | (660 | ) | 99 | 2,596 | |||||||||
Discontinued operations |
| 561 | | 561 | ||||||||||
Net income (loss) |
$ | 3,157 | $ | (99 | ) | $ | 99 | $ | 3,157 | |||||
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2008
ETOP and
ETOP Subsidiary Guarantors |
ETOP
Non-Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | ||||||||||||
(In thousands) | |||||||||||||||
Net cash provided by operating activities |
$ | 5,440 | $ | 2,005 | $ | | $ | 7,445 | |||||||
Net cash used in investing activities |
| (306 | ) | | (306 | ) | |||||||||
Net cash used in financing activities |
(5,440 | ) | (1,699 | ) | | (7,139 | ) | ||||||||
Net change in cash and cash equivalents |
| | | | |||||||||||
Cash and cash equivalents at beginning of year |
| | | | |||||||||||
Cash and cash equivalents at end of year |
$ | | $ | | $ | | $ | | |||||||
125
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2007
ETOP and
ETOP Subsidiary Guarantors |
ETOP
Non-Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | ||||||||||||
(In thousands) | |||||||||||||||
Net cash provided by operating activities |
$ | 5,309 | $ | 2,187 | $ | | $ | 7,496 | |||||||
Net cash used in investing activities |
| (135 | ) | | (135 | ) | |||||||||
Net cash used in financing activities |
(5,309 | ) | (2,388 | ) | | (7,697 | ) | ||||||||
Net decrease in cash and cash equivalents |
| (336 | ) | | (336 | ) | |||||||||
Cash and cash equivalents at beginning of year |
| 336 | | 336 | |||||||||||
Cash and cash equivalents at end of year |
$ | | $ | | $ | | $ | | |||||||
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2006
ETOP and
ETOP Subsidiary Guarantors |
ETOP
Non-Guarantor Subsidiaries |
Consolidated
Elimination |
Consolidated | ||||||||||||
(In thousands) | |||||||||||||||
Net cash provided by operating activities |
$ | 4,618 | $ | 2,873 | $ | | $ | 7,491 | |||||||
Net cash used in investing activities |
| (259 | ) | | (259 | ) | |||||||||
Net cash used in financing activities |
(4,619 | ) | (2,716 | ) | | (7,335 | ) | ||||||||
Net decrease in cash and cash equivalents |
(1 | ) | (102 | ) | | (103 | ) | ||||||||
Cash and cash equivalents at beginning of year |
1 | 438 | | 439 | |||||||||||
Cash and cash equivalents at end of year |
$ | | $ | 336 | $ | | $ | 336 | |||||||
126
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2008
(Dollars in Thousands)
Facility
|
Facility Name |
Location |
Initial Cost to
Company |
Costs
Capitalized Subsequent to Acquisition |
Gross Amount
Carried at Close of Period |
Total |
Accumulated
Depreciation |
NBV |
Date of
Construction |
Date
Acquired |
Life on
Which Depreciation in Income Statement is Computed |
|||||||||||||||||||||||||
City |
State /
|
Land |
Buildings and
Improvements |
Land |
Buildings and
Improvements |
|||||||||||||||||||||||||||||||
KINDRED SKILLED NURSING FACILITIES | ||||||||||||||||||||||||||||||||||||
791 |
Whitesburg Gardens Health Care Center | Huntsville | AL | $ | 534 | $ | 4,216 | $ | | $ | 534 | $ | 4,216 | $ | 4,750 | $ | 2,978 | $ | 1,772 | 1968 | 1991 | 25 years | ||||||||||||||
824 |
Kindred Healthcare Center of Mobile | Mobile | AL | 5 | 2,981 | | 5 | 2,981 | 2,986 | 1,747 | 1,239 | 1967 | 1992 | 29 years | ||||||||||||||||||||||
436 |
Valley Healthcare & Rehab Center | Tucson | AZ | 383 | 1,954 | | 383 | 1,954 | 2,337 | 1,249 | 1,088 | 1964 | 1993 | 28 years | ||||||||||||||||||||||
743 |
Desert Life Rehab & Care Center | Tucson | AZ | 611 | 5,117 | | 611 | 5,117 | 5,728 | 3,658 | 2,070 | 1979 | 1982 | 37 years | ||||||||||||||||||||||
851 |
Villa Campana Health Center | Tucson | AZ | 533 | 2,201 | | 533 | 2,201 | 2,734 | 1,076 | 1,658 | 1983 | 1993 | 35 years | ||||||||||||||||||||||
853 |
Kachina Point Health Care & Rehab | Sedona | AZ | 364 | 4,179 | | 364 | 4,179 | 4,543 | 2,520 | 2,023 | 1983 | 1984 | 45 years | ||||||||||||||||||||||
148 |
Village Square Nursing & Rehab Center | San Marcos | CA | 766 | 3,507 | | 766 | 3,507 | 4,273 | 1,333 | 2,940 | 1989 | 1993 | 42 years | ||||||||||||||||||||||
150 |
Nob Hill Healthcare Center | San Francisco | CA | 1,902 | 7,531 | | 1,902 | 7,531 | 9,433 | 4,361 | 5,072 | 1967 | 1993 | 28 years | ||||||||||||||||||||||
167 |
Canyonwood Nursing & Rehab Center | Redding | CA | 401 | 3,784 | | 401 | 3,784 | 4,185 | 1,686 | 2,499 | 1989 | 1989 | 45 years | ||||||||||||||||||||||
210 |
The Californian Care Center | Bakersfield | CA | 1,438 | 5,609 | | 1,438 | 5,609 | 7,047 | 2,469 | 4,578 | 1988 | 1992 | 40 years | ||||||||||||||||||||||
335 |
Lawton Healthcare Center | San Francisco | CA | 943 | 514 | | 943 | 514 | 1,457 | 397 | 1,060 | 1962 | 1996 | 20 years | ||||||||||||||||||||||
350 |
Valley Gardens Healthcare & Rehab Center | Stockton | CA | 516 | 3,405 | | 516 | 3,405 | 3,921 | 1,616 | 2,305 | 1988 | 1988 | 29 years | ||||||||||||||||||||||
411 |
Alta Vista Healthcare Center | Riverside | CA | 376 | 1,669 | | 376 | 1,669 | 2,045 | 1,056 | 989 | 1966 | 1992 | 29 years | ||||||||||||||||||||||
525 |
La Veta Healthcare Center | Orange | CA | 47 | 1,459 | | 47 | 1,459 | 1,506 | 883 | 623 | 1964 | 1992 | 28 years | ||||||||||||||||||||||
738 |
Bay View Nursing & Rehab Center | Alameda | CA | 1,462 | 5,981 | | 1,462 | 5,981 | 7,443 | 3,517 | 3,926 | 1967 | 1993 | 45 years | ||||||||||||||||||||||
744 |
Cherry Hills Health Care Center | Englewood | CO | 241 | 2,180 | | 241 | 2,180 | 2,421 | 1,328 | 1,093 | 1960 | 1995 | 30 years | ||||||||||||||||||||||
745 |
Aurora Care Center | Aurora | CO | 197 | 2,328 | | 197 | 2,328 | 2,525 | 1,305 | 1,220 | 1962 | 1995 | 30 years | ||||||||||||||||||||||
859 |
Castle Garden Care Center | Northglenn | CO | 501 | 8,294 | | 501 | 8,294 | 8,795 | 4,504 | 4,291 | 1971 | 1993 | 29 years | ||||||||||||||||||||||
873 |
Brighton Care Center | Brighton | CO | 282 | 3,377 | | 282 | 3,377 | 3,659 | 1,923 | 1,736 | 1969 | 1992 | 30 years | ||||||||||||||||||||||
562 |
Andrew House Healthcare | New Britain | CT | 247 | 1,963 | | 247 | 1,963 | 2,210 | 1,066 | 1,144 | 1967 | 1992 | 29 years | ||||||||||||||||||||||
563 |
Camelot Nursing & Rehab Center | New London | CT | 202 | 2,363 | | 202 | 2,363 | 2,565 | 1,343 | 1,222 | 1969 | 1994 | 28 years | ||||||||||||||||||||||
566 |
Windsor Rehab & Healthcare Center | Windsor | CT | 368 | 2,520 | | 368 | 2,520 | 2,888 | 1,566 | 1,322 | 1965 | 1994 | 30 years | ||||||||||||||||||||||
567 |
Nutmeg Pavilion Healthcare | New London | CT | 401 | 2,776 | | 401 | 2,776 | 3,177 | 1,743 | 1,434 | 1968 | 1992 | 29 years | ||||||||||||||||||||||
568 |
Parkway Pavilion Healthcare | Enfield | CT | 337 | 3,607 | | 337 | 3,607 | 3,944 | 2,245 | 1,699 | 1968 | 1994 | 28 years | ||||||||||||||||||||||
1221 |
Courtland Gardens Health Center Inc. | Stamford | CT | 1,126 | 9,399 | | 1,126 | 9,399 | 10,525 | 2,992 | 7,533 | 1956 | 1990 | 45 years | ||||||||||||||||||||||
155 |
Savannah Rehab & Nursing Center | Savannah | GA | 213 | 2,772 | | 213 | 2,772 | 2,985 | 1,577 | 1,408 | 1968 | 1993 | 28.5 years | ||||||||||||||||||||||
645 |
Specialty Care of Marietta | Marietta | GA | 241 | 2,782 | | 241 | 2,782 | 3,023 | 1,676 | 1,347 | 1968 | 1993 | 28.5 years | ||||||||||||||||||||||
660 |
Savannah Specialty Care Center | Savannah | GA | 157 | 2,219 | | 157 | 2,219 | 2,376 | 1,476 | 900 | 1972 | 1991 | 26 years | ||||||||||||||||||||||
1228 |
Lafayette Nursing & Rehab Center | Fayetteville | GA | 598 | 6,623 | | 598 | 6,623 | 7,221 | 4,200 | 3,021 | 1989 | 1995 | 20 years | ||||||||||||||||||||||
216 |
Hillcrest Rehab Care Center | Boise | ID | 256 | 3,593 | | 256 | 3,593 | 3,849 | 1,144 | 2,705 | 1977 | 1998 | 45 years | ||||||||||||||||||||||
218 |
Cascade Rehab & Care Center | Caldwell | ID | 312 | 2,050 | | 312 | 2,050 | 2,362 | 729 | 1,633 | 1974 | 1998 | 45 years | ||||||||||||||||||||||
221 |
Lewiston Rehab & Care Center | Lewiston | ID | 133 | 3,982 | | 133 | 3,982 | 4,115 | 2,647 | 1,468 | 1964 | 1984 | 29 years | ||||||||||||||||||||||
222 |
Nampa Care Center | Nampa | ID | 252 | 2,810 | | 252 | 2,810 | 3,062 | 2,618 | 444 | 1950 | 1983 | 25 years | ||||||||||||||||||||||
223 |
Weiser Rehab & Care Center | Weiser | ID | 157 | 1,760 | | 157 | 1,760 | 1,917 | 1,808 | 109 | 1963 | 1983 | 25 years | ||||||||||||||||||||||
225 |
Aspen Park Healthcare | Moscow | ID | 261 | 2,571 | | 261 | 2,571 | 2,832 | 1,892 | 940 | 1955 | 1990 | 25 years | ||||||||||||||||||||||
409 |
Mountain Valley Care & Rehab | Kellogg | ID | 68 | 1,280 | | 68 | 1,280 | 1,348 | 1,246 | 102 | 1971 | 1984 | 25 years | ||||||||||||||||||||||
111 |
Rolling Hills Health Care Center | New Albany | IN | 81 | 1,894 | | 81 | 1,894 | 1,975 | 1,192 | 783 | 1984 | 1993 | 25 years |
127
Facility
|
Facility Name |
Location |
Initial Cost to
Company |
Costs
Capitalized Subsequent to Acquisition |
Gross Amount
Carried at Close of Period |
Total |
Accumulated
Depreciation |
NBV |
Date of
Construction |
Date
Acquired |
Life on
Which Depreciation in Income Statement is Computed |
|||||||||||||||||
City |
State /
|
Land |
Buildings and
Improvements |
Land |
Buildings and
Improvements |
|||||||||||||||||||||||
112 |
Royal Oaks Healthcare & Rehab Center | Terre Haute | IN | 418 | 5,779 | | 418 | 5,779 | 6,197 | 1,851 | 4,346 | 1995 | 1995 | 45 years | ||||||||||||||
113 |
Southwood Health & Rehab Center | Terre Haute | IN | 90 | 2,868 | | 90 | 2,868 | 2,958 | 1,763 | 1,195 | 1988 | 1993 | 25 years | ||||||||||||||
131 |
Harrison Health and Rehabilitation Center | Corydon | IN | 125 | 6,068 | | 125 | 6,068 | 6,193 | 1,464 | 4,729 | N/A | 1998 | 45 years | ||||||||||||||
209 |
Valley View Health Care Center | Elkhart | IN | 87 | 2,665 | | 87 | 2,665 | 2,752 | 1,662 | 1,090 | 1985 | 1993 | 25 years | ||||||||||||||
213 |
Wildwood Healthcare Center | Indianapolis | IN | 134 | 4,983 | | 134 | 4,983 | 5,117 | 3,047 | 2,070 | 1988 | 1993 | 25 years | ||||||||||||||
269 |
Meadowvale Health & Rehab Center | Bluffton | IN | 7 | 787 | | 7 | 787 | 794 | 435 | 359 | 1962 | 1995 | 22 years | ||||||||||||||
290 |
Bremen Health Care Center | Bremen | IN | 109 | 3,354 | | 109 | 3,354 | 3,463 | 1,627 | 1,836 | 1982 | 1996 | 45 years | ||||||||||||||
294 |
Windsor Estates Health & Rehab Center | Kokomo | IN | 256 | 6,625 | | 256 | 6,625 | 6,881 | 3,076 | 3,805 | 1962 | 1995 | 35 years | ||||||||||||||
406 |
Muncie Health Care & Rehab | Muncie | IN | 108 | 4,202 | | 108 | 4,202 | 4,310 | 2,519 | 1,791 | 1980 | 1993 | 25 years | ||||||||||||||
407 |
Parkwood Health Care Center | Lebanon | IN | 121 | 4,512 | | 121 | 4,512 | 4,633 | 2,730 | 1,903 | 1977 | 1993 | 25 years | ||||||||||||||
694 |
Wedgewood Healthcare Center | Clarksville | IN | 119 | 5,115 | | 119 | 5,115 | 5,234 | 2,374 | 2,860 | 1985 | 1995 | 35 years | ||||||||||||||
780 |
Columbus Health & Rehab Center | Columbus | IN | 345 | 6,817 | | 345 | 6,817 | 7,162 | 4,731 | 2,431 | 1966 | 1991 | 25 years | ||||||||||||||
277 |
Rosewood Health Care Center | Bowling Green | KY | 248 | 5,371 | | 248 | 5,371 | 5,619 | 3,288 | 2,331 | 1970 | 1990 | 30 years | ||||||||||||||
278 |
Oakview Nursing & Rehab Center | Calvert City | KY | 124 | 2,882 | | 124 | 2,882 | 3,006 | 1,763 | 1,243 | 1967 | 1990 | 30 years | ||||||||||||||
280 |
Winchester Centre for Health/Rehab | Winchester | KY | 137 | 6,120 | | 137 | 6,120 | 6,257 | 3,707 | 2,550 | 1967 | 1990 | 30 years | ||||||||||||||
281 |
Riverside Manor Health Care | Calhoun | KY | 103 | 2,119 | | 103 | 2,119 | 2,222 | 1,313 | 909 | 1963 | 1990 | 30 years | ||||||||||||||
282 |
Maple Manor Healthcare Center | Greenville | KY | 59 | 3,187 | | 59 | 3,187 | 3,246 | 1,967 | 1,279 | 1968 | 1990 | 30 years | ||||||||||||||
782 |
Danville Center for Health & Rehab | Danville | KY | 322 | 3,538 | | 322 | 3,538 | 3,860 | 1,833 | 2,027 | 1962 | 1995 | 30 years | ||||||||||||||
784 |
Northfield Center for Health & Rehab | Louisville | KY | 285 | 1,555 | | 285 | 1,555 | 1,840 | 1,055 | 785 | 1969 | 1985 | 30 years | ||||||||||||||
785 |
Hillcrest Health Care Center | Owensboro | KY | 544 | 2,619 | | 544 | 2,619 | 3,163 | 2,596 | 567 | 1963 | 1982 | 22 years | ||||||||||||||
787 |
Woodland Terrace Health Care Facility. | Elizabethtown | KY | 216 | 1,795 | | 216 | 1,795 | 2,011 | 1,871 | 140 | 1969 | 1982 | 26 years | ||||||||||||||
864 |
Harrodsburg Health Care Center | Harrodsburg | KY | 137 | 1,830 | | 137 | 1,830 | 1,967 | 1,321 | 646 | 1974 | 1985 | 35 years | ||||||||||||||
198 |
Harrington House Nursing & Rehab Center | Walpole | MA | 4 | 4,444 | | 4 | 4,444 | 4,448 | 1,783 | 2,665 | 1991 | 1991 | 45 years | ||||||||||||||
327 |
Laurel Ridge Rehab & Nursing Center | Jamaica Plain | MA | 194 | 1,617 | | 194 | 1,617 | 1,811 | 1,099 | 712 | 1968 | 1989 | 30 years | ||||||||||||||
501 |
Blue Hills Alzheimers Care Center | Stoughton | MA | 511 | 1,026 | | 511 | 1,026 | 1,537 | 1,237 | 300 | 1965 | 1982 | 28 years | ||||||||||||||
503 |
Brigham Manor Nursing & Rehab Center | Newburyport | MA | 126 | 1,708 | | 126 | 1,708 | 1,834 | 1,362 | 472 | 1806 | 1982 | 27 years | ||||||||||||||
506 |
Presentation Nursing & Rehab Center | Brighton | MA | 184 | 1,220 | | 184 | 1,220 | 1,404 | 1,173 | 231 | 1968 | 1982 | 28 years | ||||||||||||||
507 |
Country Manor Rehab & Nursing Center | Newburyport | MA | 199 | 3,004 | | 199 | 3,004 | 3,203 | 2,346 | 857 | 1968 | 1982 | 27 years | ||||||||||||||
508 |
Crawford Skilled Nursing & Rehab Center | Fall River | MA | 127 | 1,109 | | 127 | 1,109 | 1,236 | 1,006 | 230 | 1968 | 1982 | 29 years | ||||||||||||||
513 |
Hallmark Nursing & Rehab Center | New Bedford | MA | 202 | 2,694 | | 202 | 2,694 | 2,896 | 2,154 | 742 | 1968 | 1982 | 26 years | ||||||||||||||
514 |
Sachem Nursing & Rehab Center | East Bridgewater | MA | 529 | 1,238 | | 529 | 1,238 | 1,767 | 1,417 | 350 | 1968 | 1982 | 27 years | ||||||||||||||
516 |
Hammersmith House Nursing Care Center | Saugus | MA | 112 | 1,919 | | 112 | 1,919 | 2,031 | 1,452 | 579 | 1965 | 1982 | 28 years | ||||||||||||||
517 |
Oakwood Rehab & Nursing Center | Webster | MA | 102 | 1,154 | | 102 | 1,154 | 1,256 | 1,022 | 234 | 1967 | 1982 | 31 years | ||||||||||||||
518 |
Timberlyn Heights Nursing & Alzheimers Center |
Great Barrington | MA | 120 | 1,305 | | 120 | 1,305 | 1,425 | 1,138 | 287 | 1968 | 1982 | 29 years | ||||||||||||||
526 |
The Eliot Healthcare Center | Natick | MA | 249 | 1,328 | | 249 | 1,328 | 1,577 | 1,149 | 428 | 1996 | 1982 | 31 years | ||||||||||||||
529 |
Bolton Manor Nursing Home | Marlborough | MA | 222 | 2,431 | | 222 | 2,431 | 2,653 | 1,798 | 855 | 1973 | 1984 | 34.5 years | ||||||||||||||
532 |
Hillcrest Nursing Center | Fitchburg | MA | 175 | 1,461 | | 175 | 1,461 | 1,636 | 1,451 | 185 | 1957 | 1984 | 25 years | ||||||||||||||
534 |
Country Gardens Skilled Nursing & Rehab | Swansea | MA | 415 | 2,675 | | 415 | 2,675 | 3,090 | 2,086 | 1,004 | 1969 | 1984 | 27 years | ||||||||||||||
537 |
Quincy Rehab & Nursing Center | Quincy | MA | 216 | 2,911 | | 216 | 2,911 | 3,127 | 2,537 | 590 | 1965 | 1984 | 24 years | ||||||||||||||
539 |
Newton & Wellesley Alzheimer Center | Wellesley | MA | 297 | 3,250 | | 297 | 3,250 | 3,547 | 2,308 | 1,239 | 1971 | 1984 | 30 years | ||||||||||||||
542 |
Den-Mar Rehab & Nursing Center | Rockport | MA | 23 | 1,560 | | 23 | 1,560 | 1,583 | 1,254 | 329 | 1963 | 1985 | 30 years | ||||||||||||||
573 |
Eagle Pond Rehab & Living Center | South Dennis | MA | 296 | 6,896 | | 296 | 6,896 | 7,192 | 3,133 | 4,059 | 1985 | 1987 | 50 years | ||||||||||||||
581 |
Blueberry Hill Healthcare | Beverly | MA | 129 | 4,290 | | 129 | 4,290 | 4,419 | 2,864 | 1,555 | 1965 | 1968 | 40 years | ||||||||||||||
582 |
Colony House Nursing & Rehab Center | Abington | MA | 132 | 999 | | 132 | 999 | 1,131 | 1,029 | 102 | 1965 | 1969 | 40 years | ||||||||||||||
584 |
Franklin Skilled Nursing & Rehab Center | Franklin | MA | 156 | 757 | | 156 | 757 | 913 | 775 | 138 | 1967 | 1969 | 40 years | ||||||||||||||
585 |
Great Barrington Rehab & Nursing Center | Great Barrington | MA | 60 | 1,142 | | 60 | 1,142 | 1,202 | 1,102 | 100 | 1967 | 1969 | 40 years |
128
Facility
|
Facility Name |
Location |
Initial Cost to
Company |
Costs
Capitalized Subsequent to Acquisition |
Gross Amount
Carried at Close of Period |
Total |
Accumulated
Depreciation |
NBV |
Date of
Construction |
Date
Acquired |
Life on
Which Depreciation in Income Statement is Computed |
|||||||||||||||||
City |
State /
|
Land |
Buildings and
Improvements |
Land |
Buildings and
Improvements |
|||||||||||||||||||||||
587 |
River Terrace Healthcare | Lancaster | MA | 268 | 957 | | 268 | 957 | 1,225 | 1,047 | 178 | 1969 | 1969 | 40 years | ||||||||||||||
588 |
Walden Rehab & Nursing Center | Concord | MA | 181 | 1,347 | | 181 | 1,347 | 1,528 | 1,339 | 189 | 1969 | 1968 | 40 years | ||||||||||||||
544 |
Augusta Rehabilitation Center | Augusta | ME | 152 | 1,074 | | 152 | 1,074 | 1,226 | 864 | 362 | 1968 | 1985 | 30 years | ||||||||||||||
545 |
Eastside Rehab & Living Center | Bangor | ME | 316 | 1,349 | | 316 | 1,349 | 1,665 | 1,008 | 657 | 1967 | 1985 | 30 years | ||||||||||||||
546 |
Winship Green Nursing Center | Bath | ME | 110 | 1,455 | | 110 | 1,455 | 1,565 | 1,019 | 546 | 1974 | 1985 | 35 years | ||||||||||||||
547 |
Brewer Rehab & Living Center | Brewer | ME | 228 | 2,737 | | 228 | 2,737 | 2,965 | 1,789 | 1,176 | 1974 | 1985 | 33 years | ||||||||||||||
549 |
Kennebunk Nursing Center | Kennebunk | ME | 99 | 1,898 | | 99 | 1,898 | 1,997 | 1,216 | 781 | 1977 | 1985 | 35 years | ||||||||||||||
550 |
Norway Rehab & Living Center | Norway | ME | 133 | 1,658 | | 133 | 1,658 | 1,791 | 1,073 | 718 | 1972 | 1985 | 39 years | ||||||||||||||
554 |
Westgate Manor | Bangor | ME | 287 | 2,718 | | 287 | 2,718 | 3,005 | 1,960 | 1,045 | 1969 | 1985 | 31 years | ||||||||||||||
555 |
Brentwood Manor Rehab & Nursing Center | Yarmouth | ME | 181 | 2,789 | | 181 | 2,789 | 2,970 | 1,897 | 1,073 | 1945 | 1985 | 45 years | ||||||||||||||
416 |
Park Place Health Care Center | Great Falls | MT | 600 | 6,311 | | 600 | 6,311 | 6,911 | 3,594 | 3,317 | 1963 | 1993 | 28 years | ||||||||||||||
433 |
Parkview Acres Care & Rehab Center | Dillon | MT | 207 | 2,578 | | 207 | 2,578 | 2,785 | 1,479 | 1,306 | 1965 | 1993 | 29 years | ||||||||||||||
116 |
Pettigrew Rehab & Healthcare Center | Durham | NC | 101 | 2,889 | | 101 | 2,889 | 2,990 | 1,731 | 1,259 | 1969 | 1993 | 28 years | ||||||||||||||
137 |
Sunnybrook Healthcare & Rehab Specialists | Raleigh | NC | 187 | 3,409 | | 187 | 3,409 | 3,596 | 2,376 | 1,220 | 1971 | 1991 | 25 years | ||||||||||||||
143 |
Raleigh Rehab & Healthcare Center | Raleigh | NC | 316 | 5,470 | | 316 | 5,470 | 5,786 | 3,788 | 1,998 | 1969 | 1991 | 25 years | ||||||||||||||
146 |
Rose Manor Health Care Center | Durham | NC | 200 | 3,527 | | 200 | 3,527 | 3,727 | 2,351 | 1,376 | 1972 | 1991 | 26 years | ||||||||||||||
188 |
Cypress Pointe Rehab & HC Center | Wimington | NC | 233 | 3,710 | | 233 | 3,710 | 3,943 | 2,275 | 1,668 | 1966 | 1993 | 28.5 years | ||||||||||||||
191 |
Silas Creek Manor | Winston-Salem | NC | 211 | 1,893 | | 211 | 1,893 | 2,104 | 1,098 | 1,006 | 1966 | 1993 | 28.5 years | ||||||||||||||
307 |
Lincoln Nursing Center | Lincoln | NC | 39 | 3,309 | | 39 | 3,309 | 3,348 | 2,155 | 1,193 | 1976 | 1986 | 35 years | ||||||||||||||
704 |
Guardian Care of Roanoke Rapids | Roanoke Rapids | NC | 339 | 4,132 | | 339 | 4,132 | 4,471 | 2,799 | 1,672 | 1967 | 1991 | 25 years | ||||||||||||||
706 |
Guardian Care of Henderson | Henderson | NC | 206 | 1,997 | | 206 | 1,997 | 2,203 | 1,148 | 1,055 | 1957 | 1993 | 29 years | ||||||||||||||
707 |
Rehab & Nursing Center of Monroe | Monroe | NC | 185 | 2,654 | | 185 | 2,654 | 2,839 | 1,646 | 1,193 | 1963 | 1993 | 28 years | ||||||||||||||
711 |
Kinston Rehab and Healthcare Center | Kinston | NC | 186 | 3,038 | | 186 | 3,038 | 3,224 | 1,684 | 1,540 | 1961 | 1993 | 29 years | ||||||||||||||
713 |
Guardian Care of Zebulon | Zebulon | NC | 179 | 1,933 | | 179 | 1,933 | 2,112 | 1,112 | 1,000 | 1973 | 1993 | 29 years | ||||||||||||||
723 |
Guardian Care of Rocky Mount | Rocky Mount | NC | 240 | 1,732 | | 240 | 1,732 | 1,972 | 1,253 | 719 | 1975 | 1997 | 25 years | ||||||||||||||
724 |
Rehab & Health Center of Gastonia | Gastonia | NC | 158 | 2,359 | | 158 | 2,359 | 2,517 | 1,424 | 1,093 | 1968 | 1992 | 29 years | ||||||||||||||
726 |
Guardian Care of Elizabeth City | Elizabeth City | NC | 71 | 561 | | 71 | 561 | 632 | 632 | | 1977 | 1982 | 20 years | ||||||||||||||
806 |
Chapel Hill Rehab & Healthcare Center | Chapel Hill | NC | 347 | 3,029 | | 347 | 3,029 | 3,376 | 1,817 | 1,559 | 1984 | 1993 | 28 years | ||||||||||||||
591 |
Dover Rehab & Living Center | Dover | NH | 355 | 3,797 | | 355 | 3,797 | 4,152 | 2,882 | 1,270 | 1969 | 1990 | 25 years | ||||||||||||||
592 |
Greenbriar Terrace Healthcare | Nashua | NH | 776 | 6,011 | | 776 | 6,011 | 6,787 | 4,191 | 2,596 | 1963 | 1990 | 25 years | ||||||||||||||
593 |
Hanover Terrace Healthcare | Hanover | NH | 326 | 1,825 | | 326 | 1,825 | 2,151 | 1,033 | 1,118 | 1969 | 1993 | 29 years | ||||||||||||||
640 |
Las Vegas Healthcare & Rehab Center | Las Vegas | NV | 454 | 1,018 | | 454 | 1,018 | 1,472 | 478 | 994 | 1940 | 1992 | 30 years | ||||||||||||||
641 |
Torrey Pines Care Center | Las Vegas | NV | 256 | 1,324 | | 256 | 1,324 | 1,580 | 815 | 765 | 1971 | 1992 | 29 years | ||||||||||||||
560 |
Franklin Woods Health Care Center | Columbus | OH | 190 | 4,712 | | 190 | 4,712 | 4,902 | 2,129 | 2,773 | 1986 | 1992 | 38 years | ||||||||||||||
569 |
Chillicothe Nursing & Rehab Center | Chillicothe | OH | 128 | 3,481 | | 128 | 3,481 | 3,609 | 2,392 | 1,217 | 1976 | 1985 | 34 years | ||||||||||||||
570 |
Pickerington Nursing & Rehab Center | Pickerington | OH | 312 | 4,382 | | 312 | 4,382 | 4,694 | 1,993 | 2,701 | 1984 | 1992 | 37 years | ||||||||||||||
571 |
Logan Health Care Center | Logan | OH | 169 | 3,750 | | 169 | 3,750 | 3,919 | 2,187 | 1,732 | 1979 | 1991 | 30 years | ||||||||||||||
572 |
Winchester Place Nursing & Rehab Center | Canal Winchester | OH | 454 | 7,149 | | 454 | 7,149 | 7,603 | 4,728 | 2,875 | 1974 | 1993 | 28 years | ||||||||||||||
577 |
Minerva Park Nursing & Rehab Center | Columbus | OH | 210 | 3,684 | | 210 | 3,684 | 3,894 | 1,192 | 2,702 | 1973 | 1997 | 45 years | ||||||||||||||
634 |
Cambridge Health & Rehab Center | Cambridge | OH | 108 | 2,642 | | 108 | 2,642 | 2,750 | 1,662 | 1,088 | 1975 | 1993 | 25 years | ||||||||||||||
635 |
Coshocton Health & Rehab Center | Coshocton | OH | 203 | 1,979 | | 203 | 1,979 | 2,182 | 1,236 | 946 | 1974 | 1993 | 25 years | ||||||||||||||
868 |
Lebanon Country Manor | Lebanon | OH | 105 | 3,617 | | 105 | 3,617 | 3,722 | 1,976 | 1,746 | 1984 | 1986 | 43 years | ||||||||||||||
452 |
Sunnyside Care Center | Salem | OR | 1,512 | 2,249 | | 1,512 | 2,249 | 3,761 | 1,196 | 2,565 | 1981 | 1991 | 30 years | ||||||||||||||
453 |
Medford Rehab & Healthcare Center | Medford | OR | 362 | 4,610 | | 362 | 4,610 | 4,972 | 2,674 | 2,298 | N/A | 1991 | 34 years | ||||||||||||||
1237 |
Wyomissing Nursing & Rehab Center | Reading | PA | 61 | 5,095 | | 61 | 5,095 | 5,156 | 1,596 | 3,560 | 1966 | 1993 | 45 years | ||||||||||||||
1224 |
Health Havens Nursing & Rehab Center | E. Providence | RI | 174 | 2,643 | | 174 | 2,643 | 2,817 | 848 | 1,969 | 1962 | 1990 | 45 years |
129
Facility
|
Facility Name |
Location |
Initial Cost to
Company |
Costs
Capitalized Subsequent to Acquisition |
Gross Amount
Carried at Close of Period |
Total |
Accumulated
Depreciation |
NBV |
Date of
Construction |
Date
Acquired |
Life on
Which Depreciation in Income Statement is Computed |
||||||||||||||||||
City |
State /
|
Land |
Buildings and
Improvements |
Land |
Buildings and
Improvements |
||||||||||||||||||||||||
1231 |
Oak Hill Nursing & Rehab Center | Pawtucket | RI | 91 | 6,724 | | 91 | 6,724 | 6,815 | 2,134 | 4,681 | 1966 | 1990 | 45 years | |||||||||||||||
132 |
Madison Healthcare & Rehab Center | Madison | TN | 168 | 1,445 | | 168 | 1,445 | 1,613 | 867 | 746 | 1968 | 1992 | 29 years | |||||||||||||||
822 |
Primacy Healthcare & Rehab Center | Memphis | TN | 1,222 | 8,344 | | 1,222 | 8,344 | 9,566 | 4,230 | 5,336 | 1980 | 1990 | 37 years | |||||||||||||||
884 |
Masters Health Care Center | Algood | TN | 524 | 4,370 | | 524 | 4,370 | 4,894 | 2,601 | 2,293 | 1981 | 1987 | 38 years | |||||||||||||||
140 |
Wasatch Care Center | Ogden | UT | 373 | 597 | | 373 | 597 | 970 | 561 | 409 | 1964 | 1990 | 25 years | |||||||||||||||
230 |
Crosslands Rehab & Health Care Center | Sandy | UT | 334 | 4,300 | | 334 | 4,300 | 4,634 | 1,858 | 2,776 | 1987 | 1992 | 40 years | |||||||||||||||
247 |
Saint George Care & Rehab Center | St George | UT | 419 | 4,465 | | 419 | 4,465 | 4,884 | 2,427 | 2,457 | 1976 | 1993 | 29 years | |||||||||||||||
655 |
Federal Heights Rehab & Nursing Center | Salt Lake City | UT | 201 | 2,322 | | 201 | 2,322 | 2,523 | 1,375 | 1,148 | 1962 | 1992 | 29 years | |||||||||||||||
690 |
Wasatch Valley Rehabilitation | Salt Lake City | UT | 389 | 3,545 | | 389 | 3,545 | 3,934 | 2,035 | 1,899 | 1962 | 1995 | 29 years | |||||||||||||||
825 |
Nansemond Point Rehab & HC Center | Suffolk | VA | 534 | 6,990 | | 534 | 6,990 | 7,524 | 3,810 | 3,714 | 1963 | 1991 | 32 years | |||||||||||||||
826 |
Harbour Point Med. & Rehab Center | Norfolk | VA | 427 | 4,441 | | 427 | 4,441 | 4,868 | 2,591 | 2,277 | 1969 | 1993 | 28 years | |||||||||||||||
829 |
River Pointe Rehab & HC Center | Virginia Beach | VA | 770 | 4,440 | | 770 | 4,440 | 5,210 | 3,171 | 2,039 | 1953 | 1991 | 25 years | |||||||||||||||
842 |
Bay Pointe Medical & Rehab Center | Virginia Beach | VA | 805 | 2,886 | (380 | ) | 425 | 2,886 | 3,311 | 1,614 | 1,697 | 1971 | 1993 | 29 years | ||||||||||||||
559 |
Birchwood Terrace Healthcare | Burlington | VT | 15 | 4,656 | | 15 | 4,656 | 4,671 | 3,359 | 1,312 | 1965 | 1990 | 27 years | |||||||||||||||
114 |
Arden Rehab & Healthcare Center | Seattle | WA | 1,111 | 4,013 | | 1,111 | 4,013 | 5,124 | 2,291 | 2,833 | 1950 | 1993 | 28.5 years | |||||||||||||||
127 |
Northwest Continuum Care Center | Longview | WA | 145 | 2,563 | | 145 | 2,563 | 2,708 | 1,505 | 1,203 | 1955 | 1992 | 29 years | |||||||||||||||
158 |
Bellingham Health Care & Rehab Center | Bellingham | WA | 441 | 3,824 | | 441 | 3,824 | 4,265 | 2,197 | 2,068 | 1972 | 1993 | 28.5 years | |||||||||||||||
165 |
Rainier Vista Care Center | Puyallup | WA | 520 | 4,780 | | 520 | 4,780 | 5,300 | 2,073 | 3,227 | 1986 | 1991 | 40 years | |||||||||||||||
168 |
Lakewood Healthcare Center | Lakewood | WA | 504 | 3,511 | | 504 | 3,511 | 4,015 | 1,648 | 2,367 | 1989 | 1989 | 45 years | |||||||||||||||
180 |
Vancouver Healthcare & Rehab Center | Vancouver | WA | 449 | 2,964 | | 449 | 2,964 | 3,413 | 1,766 | 1,647 | 1970 | 1993 | 28 years | |||||||||||||||
462 |
Queen Anne Healthcare | Seattle | WA | 570 | 2,750 | | 570 | 2,750 | 3,320 | 1,649 | 1,671 | 1970 | 1993 | 29 years | |||||||||||||||
289 |
San Luis Medical & Rehab Center | Green Bay | WI | 259 | 5,299 | | 259 | 5,299 | 5,558 | 3,446 | 2,112 | N/A | 1996 | 25 years | |||||||||||||||
765 |
Eastview Medical & Rehab Center | Antigo | WI | 200 | 4,047 | | 200 | 4,047 | 4,247 | 2,740 | 1,507 | 1962 | 1991 | 28 years | |||||||||||||||
766 |
Colonial Manor Medical & Rehab Center | Wausau | WI | 169 | 3,370 | | 169 | 3,370 | 3,539 | 1,842 | 1,697 | 1964 | 1995 | 30 years | |||||||||||||||
767 |
Colony Oaks Care Center | Appleton | WI | 353 | 3,571 | | 353 | 3,571 | 3,924 | 2,244 | 1,680 | 1967 | 1993 | 29 years | |||||||||||||||
769 |
North Ridge Med. & Rehab Center | Manitowoc | WI | 206 | 3,785 | | 206 | 3,785 | 3,991 | 2,259 | 1,732 | 1964 | 1992 | 29 years | |||||||||||||||
770 |
Vallhaven Care Center | Neenah | WI | 337 | 5,125 | | 337 | 5,125 | 5,462 | 3,085 | 2,377 | 1966 | 1993 | 28 years | |||||||||||||||
771 |
Kennedy Park Med. & Rehab Center | Schofield | WI | 301 | 3,596 | | 301 | 3,596 | 3,897 | 3,295 | 602 | 1966 | 1982 | 29 years | |||||||||||||||
773 |
Mt. Carmel Med. & Rehab Center | Burlington | WI | 274 | 7,205 | | 274 | 7,205 | 7,479 | 3,772 | 3,707 | 1971 | 1991 | 30 years | |||||||||||||||
775 |
Sheridan Medical Complex | Kenosha | WI | 282 | 4,910 | | 282 | 4,910 | 5,192 | 3,368 | 1,824 | 1964 | 1991 | 25 years | |||||||||||||||
776 |
Woodstock Health & Rehab Center | Kenosha | WI | 562 | 7,424 | | 562 | 7,424 | 7,986 | 5,279 | 2,707 | 1970 | 1991 | 25 years | |||||||||||||||
774/4631 |
Mt. Carmel Health & Rehab Center | Milwaukee | WI | 2,678 | 25,867 | | 2,678 | 25,867 | 28,545 | 16,489 | 12,056 | 1958 | 1991 | 30 years | |||||||||||||||
441 |
Mountain Towers Healthcare & Rehab | Cheyenne | WY | 342 | 3,468 | | 342 | 3,468 | 3,810 | 1,910 | 1,900 | 1964 | 1992 | 29 years | |||||||||||||||
481 |
South Central Wyoming HC & Rehab | Rawlins | WY | 151 | 1,738 | | 151 | 1,738 | 1,889 | 986 | 903 | 1955 | 1993 | 29 years | |||||||||||||||
482 |
Wind River Healthcare & Rehab Center | Riverton | WY | 179 | 1,559 | | 179 | 1,559 | 1,738 | 874 | 864 | 1967 | 1992 | 29 years | |||||||||||||||
483 |
Sage View Care Center | Rock Springs | WY | 287 | 2,392 | | 287 | 2,392 | 2,679 | 1,376 | 1,303 | 1964 | 1993 | 30 years | |||||||||||||||
TOTAL KINDRED SKILLED NURSING FACILITIES |
54,493 | 567,946 | (380 | ) | 54,113 | 567,946 | 622,059 | 340,943 | 281,116 | ||||||||||||||||||||
NON-KINDRED SKILLED NURSING FACILITIES |
|||||||||||||||||||||||||||||
3829 |
McCreary Health & Rehabilitation Center | Pine Knot | KY | 73 | 2,443 | | 73 | 2,443 | 2,516 | 151 | 2,365 | 1990 | 2006 | 35 years | |||||||||||||||
3830 |
New Colonial Health & Rehabilitation Center |
Bardstown | KY | 38 | 2,829 | | 38 | 2,829 | 2,867 | 175 | 2,692 | 1968 | 2006 | 35 years | |||||||||||||||
3831 |
New Glasgow Health & Rehabilitation Center |
Glasgow | KY | 21 | 2,997 | | 21 | 2,997 | 3,018 | 186 | 2,832 | 1968 | 2006 | 35 years |
130
Facility
|
Facility Name |
Location |
Initial Cost to
Company |
Costs
Capitalized Subsequent to Acquisition |
Gross Amount
Carried at Close of Period |
Total |
Accumulated
Depreciation |
NBV |
Date of
Construction |
Date
Acquired |
Life on
Which Depreciation in Income Statement is Computed |
||||||||||||||||||
City |
State /
|
Land |
Buildings and
Improvements |
Land |
Buildings and
Improvements |
||||||||||||||||||||||||
3832 |
New Green Valley Health & Rehabilitation Center |
Carrollton | KY | 29 | 2,325 | | 29 | 2,325 | 2,354 | 144 | 2,210 | 1978 | 2006 | 35 years | |||||||||||||||
3833 |
New Hart County Health Center | Horse Cave | KY | 68 | 6,059 | | 68 | 6,059 | 6,127 | 375 | 5,752 | 1993 | 2006 | 35 years | |||||||||||||||
3834 |
New Heritage Hall Health & Rehabilitation Center |
Lawrenceburg | KY | 38 | 3,920 | | 38 | 3,920 | 3,958 | 243 | 3,715 | 1973 | 2006 | 35 years | |||||||||||||||
3835 |
New Jackson Manor | Annville | KY | 131 | 4,442 | | 131 | 4,442 | 4,573 | 275 | 4,298 | 1989 | 2006 | 35 years | |||||||||||||||
3836 |
New Jefferson Manor | Louisville | KY | 2,169 | 4,075 | | 2,169 | 4,075 | 6,244 | 252 | 5,992 | 1982 | 2006 | 35 years | |||||||||||||||
3837 |
New Jefferson Place | Louisville | KY | 1,307 | 9,175 | | 1,307 | 9,175 | 10,482 | 568 | 9,914 | 1991 | 2006 | 35 years | |||||||||||||||
3838 |
New Meadowview Health & Rehabilitation Center |
Louisville | KY | 317 | 4,666 | | 317 | 4,666 | 4,983 | 289 | 4,694 | 1973 | 2006 | 35 years | |||||||||||||||
3839 |
New Monroe Health & Rehabilitation Center | Tompkinsville | KY | 32 | 8,756 | | 32 | 8,756 | 8,788 | 542 | 8,246 | 1969 | 2006 | 35 years | |||||||||||||||
3840 |
New North Hardin Health & Rehabilitation Center |
Radcliff | KY | 218 | 11,944 | | 218 | 11,944 | 12,162 | 739 | 11,423 | 1986 | 2006 | 35 years | |||||||||||||||
3841 |
New Professional Care Health & Rehabilitation Center | Hartford | KY | 22 | 7,905 | | 22 | 7,905 | 7,927 | 489 | 7,438 | 1967 | 2006 | 35 years | |||||||||||||||
3842 |
New Rockford Manor Health & Rehabilitation Center | Louisville | KY | 364 | 9,568 | | 364 | 9,568 | 9,932 | 592 | 9,340 | 1975 | 2006 | 35 years | |||||||||||||||
3843 |
New Summerfield Health & Rehabilitation Center |
Louisville | KY | 1,089 | 10,756 | | 1,089 | 10,756 | 11,845 | 666 | 11,179 | 1979 | 2006 | 35 years | |||||||||||||||
3844 |
New Tanbark Health & Rehabilitation Center | Lexington | KY | 868 | 6,061 | | 868 | 6,061 | 6,929 | 375 | 6,554 | 1989 | 2006 | 35 years | |||||||||||||||
3845 |
Summit Manor Health & Rehabilitation Center |
Columbia | KY | 38 | 12,510 | | 38 | 12,510 | 12,548 | 774 | 11,774 | 1965 | 2006 | 35 years | |||||||||||||||
3764 |
Bear Creek Care & Rehab Center | Rochester | MN | 639 | 3,497 | | 639 | 3,497 | 4,136 | 3,339 | 797 | N/A | 1982 | 28 years | |||||||||||||||
2505 |
Lopatcong Center | Phillipsburg | NJ | 1,490 | 12,336 | | 1,490 | 12,336 | 13,826 | 2,399 | 11,427 | 1982 | 2004 | 30 years | |||||||||||||||
2701 |
Regency Manor | Columbus | OH | 606 | 16,424 | | 606 | 16,424 | 17,030 | 2,698 | 14,332 | 1883 | 2004 | 35 years | |||||||||||||||
2702 |
Burlington House | Cincinnati | OH | 918 | 5,087 | | 918 | 5,087 | 6,005 | 833 | 5,172 | 1989 | 2004 | 35 years | |||||||||||||||
3920 |
Marietta Convalescent Center | Marietta | OH | 158 | 3,266 | 75 | 158 | 3,341 | 3,499 | 2,068 | 1,431 | N/A | 1993 | 25 years | |||||||||||||||
2506 |
Wayne Center | Wayne | PA | 662 | 6,872 | | 662 | 6,872 | 7,534 | 1,294 | 6,240 | 1875 | 2004 | 30 years | |||||||||||||||
2507 |
Belvedere Nursing & Rehab | Chester | PA | 822 | 7,203 | | 822 | 7,203 | 8,025 | 1,388 | 6,637 | 1899 | 2004 | 30 years | |||||||||||||||
2508 |
Chapel Manor | Philadelphia | PA | 1,595 | 13,982 | | 1,595 | 13,982 | 15,577 | 2,695 | 12,882 | 1948 | 2004 | 30 years | |||||||||||||||
2509 |
Pennsburg Manor | Pennsburg | PA | 1,091 | 7,871 | | 1,091 | 7,871 | 8,962 | 1,580 | 7,382 | 1982 | 2004 | 30 years | |||||||||||||||
3852 |
Balanced Care at Bloomsburg | Bloomsburg | PA | 621 | 1,371 | | 621 | 1,371 | 1,992 | 85 | 1,907 | 1997 | 2006 | 35 years | |||||||||||||||
TOTAL NON-KINDRED SKILLED NURSING FACILITIES |
15,424 | 188,340 | 75 | 15,424 | 188,415 | 203,839 | 25,214 | 178,625 | |||||||||||||||||||||
TOTAL FOR SKILLED NURSING FACILITIES |
69,917 | 756,286 | (305 | ) | 69,537 | 756,361 | 825,898 | 366,157 | 459,741 | ||||||||||||||||||||
KINDRED HOSPITALS | |||||||||||||||||||||||||||||
4656 |
Kindred Hospital Phoenix | Phoenix | AZ | 226 | 3,359 | | 226 | 3,359 | 3,585 | 2,022 | 1,563 | N/A | 1992 | 30 years | |||||||||||||||
4658 |
Kindred Hospital Tucson | Tucson | AZ | 130 | 3,091 | | 130 | 3,091 | 3,221 | 2,291 | 930 | N/A | 1994 | 25 years | |||||||||||||||
4644 |
Kindred Hospital Brea | Brea | CA | 3,144 | 2,611 | | 3,144 | 2,611 | 5,755 | 840 | 4,915 | 1990 | 1995 | 40 years | |||||||||||||||
4807 |
Kindred Hospital Ontario | Ontario | CA | 523 | 2,988 | | 523 | 2,988 | 3,511 | 2,099 | 1,412 | N/A | 1994 | 25 years | |||||||||||||||
4822 |
Kindred Hospital San Francisco Bay Area | San Leandro | CA | 2,735 | 5,870 | | 2,735 | 5,870 | 8,605 | 5,362 | 3,243 | N/A | 1993 | 25 years | |||||||||||||||
4842 |
Kindred Hospital Westminster | Westminster | CA | 727 | 7,384 | | 727 | 7,384 | 8,111 | 5,962 | 2,149 | N/A | 1993 | 20 years | |||||||||||||||
4848 |
Kindred Hospital San Diego | San Diego | CA | 670 | 11,764 | | 670 | 11,764 | 12,434 | 8,261 | 4,173 | N/A | 1994 | 25 years | |||||||||||||||
4665 |
Kindred Hospital Denver | Denver | CO | 896 | 6,367 | | 896 | 6,367 | 7,263 | 5,172 | 2,091 | N/A | 1994 | 20 years | |||||||||||||||
4602 |
Kindred Hospital So. Florida Coral Gables Campus |
Coral Gables | FL | 1,071 | 5,348 | | 1,071 | 5,348 | 6,419 | 3,918 | 2,501 | N/A | 1992 | 30 years |
131
Facility
|
Facility Name |
Location |
Initial Cost to
Company |
Costs
Capitalized Subsequent to Acquisition |
Gross Amount
Carried at Close of Period |
Total |
Accumulated
Depreciation |
NBV |
Date of
Construction |
Date
Acquired |
Life on
Which Depreciation in Income Statement is Computed |
|||||||||||||||||
City |
State /
|
Land |
Buildings and
Improvements |
Land |
Buildings and
Improvements |
|||||||||||||||||||||||
4611 |
Kindred Hospital Bay Area St. Petersburg Campus |
St. Petersburg | FL | 1,401 | 16,706 | | 1,401 | 16,706 | 18,107 | 10,266 | 7,841 | 1968 | 1997 | 40 years | ||||||||||||||
4652 |
Kindred Hospital North Florida | Green Cove Springs | FL | 145 | 4,613 | | 145 | 4,613 | 4,758 | 3,151 | 1,607 | N/A | 1994 | 20 years | ||||||||||||||
4674 |
Kindred Hospital Central Tampa | Tampa | FL | 2,732 | 7,676 | | 2,732 | 7,676 | 10,408 | 3,355 | 7,053 | 1970 | 1993 | 40 years | ||||||||||||||
4876 |
Kindred Hospital So. Florida Hollywood Campus |
Hollywood | FL | 605 | 5,229 | | 605 | 5,229 | 5,834 | 3,672 | 2,162 | 1937 | 1995 | 20 years | ||||||||||||||
4645/4646 |
Kindred Hospital So. Florida Ft. Lauderdale Campus |
Ft. Lauderdale | FL | 1,758 | 14,080 | | 1,758 | 14,080 | 15,838 | 10,270 | 5,568 | N/A | 1989 | 30 years | ||||||||||||||
4615 |
Kindred Hospital Sycamore | Sycamore | IL | 77 | 8,549 | | 77 | 8,549 | 8,626 | 5,517 | 3,109 | N/A | 1993 | 20 years | ||||||||||||||
4637 |
Kindred Hospital Chicago North Campus |
Chicago | IL | 1,583 | 19,980 | | 1,583 | 19,980 | 21,563 | 13,795 | 7,768 | N/A | 1995 | 25 years | ||||||||||||||
4690 |
Kindred Hospital Chicago Northlake Campus |
Northlake | IL | 850 | 6,498 | | 850 | 6,498 | 7,348 | 4,319 | 3,029 | N/A | 1991 | 30 years | ||||||||||||||
4871 |
Kindred Hospital Chicago Lakeshore Campus |
Chicago | IL | 1,513 | 9,525 | | 1,513 | 9,525 | 11,038 | 9,099 | 1,939 | 1995 | 1976 | 20 years | ||||||||||||||
4638 |
Kindred Hospital Indianapolis | Indianapolis | IN | 985 | 3,801 | | 985 | 3,801 | 4,786 | 2,554 | 2,232 | N/A | 1993 | 30 years | ||||||||||||||
4633 |
Kindred Hospital Louisville | Louisville | KY | 3,041 | 12,279 | | 3,041 | 12,279 | 15,320 | 9,033 | 6,287 | N/A | 1995 | 20 years | ||||||||||||||
4666 |
Kindred Hospital New Orleans | New Orleans | LA | 648 | 4,971 | | 648 | 4,971 | 5,619 | 3,449 | 2,170 | 1968 | 1978 | 20 years | ||||||||||||||
4673 |
Kindred Hospital Boston North Shore | Peabody | MA | 543 | 7,568 | | 543 | 7,568 | 8,111 | 3,679 | 4,432 | 1974 | 1993 | 40 years | ||||||||||||||
4688 |
Kindred Hospital Boston | Boston | MA | 1,551 | 9,796 | | 1,551 | 9,796 | 11,347 | 7,539 | 3,808 | N/A | 1994 | 25 years | ||||||||||||||
4612 |
Kindred Hospital Kansas City | Kansas City | MO | 277 | 2,914 | | 277 | 2,914 | 3,191 | 2,071 | 1,120 | N/A | 1992 | 30 years | ||||||||||||||
4680/4681 |
Kindred Hospital St. Louis | St. Louis | MO | 1,126 | 2,087 | | 1,126 | 2,087 | 3,213 | 1,501 | 1,712 | N/A | 1991 | 40 years | ||||||||||||||
4662 |
Kindred Hospital Greensboro | Greensboro | NC | 1,010 | 7,586 | | 1,010 | 7,586 | 8,596 | 5,678 | 2,918 | N/A | 1994 | 20 years | ||||||||||||||
4664 |
Kindred Hospital Albuquerque | Albuquerque | NM | 11 | 4,253 | | 11 | 4,253 | 4,264 | 1,817 | 2,447 | 1985 | 1993 | 40 years | ||||||||||||||
4647 |
Kindred Hospital Las Vegas Sahara | Las Vegas | NV | 1,110 | 2,177 | | 1,110 | 2,177 | 3,287 | 879 | 2,408 | 1980 | 1994 | 40 years | ||||||||||||||
4618 |
Kindred Hospital Oklahoma City | Oklahoma City | OK | 293 | 5,607 | | 293 | 5,607 | 5,900 | 3,262 | 2,638 | N/A | 1993 | 30 years | ||||||||||||||
4614 |
Kindred Hospital Philadelphia | Philadelphia | PA | 135 | 5,223 | | 135 | 5,223 | 5,358 | 2,175 | 3,183 | N/A | 1995 | 35 years | ||||||||||||||
4619 |
Kindred Hospital Pittsburgh | Oakdale | PA | 662 | 12,854 | | 662 | 12,854 | 13,516 | 6,554 | 6,962 | N/A | 1996 | 40 years | ||||||||||||||
4628 |
Kindred Hospital Chattanooga | Chattanooga | TN | 756 | 4,415 | | 756 | 4,415 | 5,171 | 3,101 | 2,070 | N/A | 1993 | 22 years | ||||||||||||||
4635 |
Kindred Hospital San Antonio | San Antonio | TX | 249 | 11,413 | | 249 | 11,413 | 11,662 | 6,207 | 5,455 | N/A | 1993 | 30 years | ||||||||||||||
4653 |
Kindred Hospital Tarrant County Ft Worth SW Campus |
Ft. Worth | TX | 2,342 | 7,458 | | 2,342 | 7,458 | 9,800 | 6,504 | 3,296 | 1987 | 1986 | 20 years | ||||||||||||||
4654 |
Kindred Hospital Houston NW Campus |
Houston | TX | 1,699 | 6,788 | | 1,699 | 6,788 | 8,487 | 3,542 | 4,945 | 1986 | 1985 | 40 years | ||||||||||||||
4660 |
Kindred Hospital Mansfield | Mansfield | TX | 267 | 2,462 | | 267 | 2,462 | 2,729 | 1,459 | 1,270 | N/A | 1990 | 40 years | ||||||||||||||
4668 |
Kindred Hospital Ft. Worth | Ft. Worth | TX | 648 | 10,608 | | 648 | 10,608 | 11,256 | 6,530 | 4,726 | N/A | 1994 | 34 years | ||||||||||||||
4685 |
Kindred Hospital Houston | Houston | TX | 33 | 7,062 | | 33 | 7,062 | 7,095 | 4,845 | 2,250 | N/A | 1994 | 20 years | ||||||||||||||
TOTAL FOR KINDRED HOSPITALS |
38,172 | 272,960 | | 38,172 | 272,960 | 311,132 | 181,750 | 129,382 | ||||||||||||||||||||
NON-KINDRED HOSPITALS | ||||||||||||||||||||||||||||
3828 |
Gateway Rehabilitation Hospital at Florence |
Florence | KY | 3,600 | 4,924 | | 3,600 | 4,924 | 8,524 | 305 | 8,219 | 2001 | 2006 | 35 years | ||||||||||||||
3864 |
Highlands Regional Rehabilitation Hospital |
El Paso | TX | 1,900 | 23,616 | | 1,900 | 23,616 | 25,516 | 1,462 | 24,054 | 1999 | 2006 | 35 years | ||||||||||||||
TOTAL FOR NON-KINDRED HOSPITALS |
5,500 | 28,540 | | 5,500 | 28,540 | 34,040 | 1,767 | 32,273 | ||||||||||||||||||||
TOTAL FOR HOSPITALS | 43,672 | 301,500 | | 43,672 | 301,500 | 345,172 | 183,517 | 161,655 |
132
Facility
|
Facility Name |
Location |
Initial Cost to
Company |
Costs
Capitalized Subsequent to Acquisition |
Gross Amount
Carried at Close of Period |
Total |
Accumulated
Depreciation |
NBV |
Date of
Construction |
Date
Acquired |
Life on
Which Depreciation in Income Statement is Computed |
|||||||||||||||||
City |
State /
|
Land |
Buildings and
Improvements |
Land |
Buildings and
Improvements |
|||||||||||||||||||||||
BROOKDALE SENIORS HOUSING FACILITIES |
||||||||||||||||||||||||||||
2424 |
The Springs of East Mesa | Mesa | AZ | 2,747 | 24,918 | | 2,747 | 24,918 | 27,665 | 4,310 | 23,355 | 1986 | 2005 | 35 years | ||||||||||||||
3219 |
Sterling House of Mesa | Mesa | AZ | 655 | 6,998 | | 655 | 6,998 | 7,653 | 1,190 | 6,463 | 1998 | 2005 | 35 years | ||||||||||||||
3225 |
Clare Bridge of Oro Valley | Oro Valley | AZ | 666 | 6,169 | | 666 | 6,169 | 6,835 | 1,049 | 5,786 | 1998 | 2005 | 35 years | ||||||||||||||
3227 |
Sterling House of Peoria | Peoria | AZ | 598 | 4,872 | | 598 | 4,872 | 5,470 | 828 | 4,642 | 1998 | 2005 | 35 years | ||||||||||||||
3236 |
Clare Bridge of Tempe | Tempe | AZ | 611 | 4,066 | | 611 | 4,066 | 4,677 | 691 | 3,986 | 1997 | 2005 | 35 years | ||||||||||||||
3238 |
Sterling House on East Speedway | Tucson | AZ | 506 | 4,745 | | 506 | 4,745 | 5,251 | 807 | 4,444 | 1998 | 2005 | 35 years | ||||||||||||||
2426 |
Woodside Terrace | Redwood City | CA | 7,669 | 66,691 | | 7,669 | 66,691 | 74,360 | 11,739 | 62,621 | 1988 | 2005 | 35 years | ||||||||||||||
2428 |
The Atrium | San Jose | CA | 6,240 | 66,329 | | 6,240 | 66,329 | 72,569 | 10,787 | 61,782 | 1987 | 2005 | 35 years | ||||||||||||||
2429 |
Brookdale Place | San Marcos | CA | 4,288 | 36,204 | | 4,288 | 36,204 | 40,492 | 6,452 | 34,040 | 1987 | 2005 | 35 years | ||||||||||||||
3206 |
Wynwood of Colorado Springs | Colorado Springs | CO | 715 | 9,279 | | 715 | 9,279 | 9,994 | 1,577 | 8,417 | 1997 | 2005 | 35 years | ||||||||||||||
3220 |
Wynwood of Pueblo | Pueblo | CO | 840 | 9,403 | | 840 | 9,403 | 10,243 | 1,598 | 8,645 | 1997 | 2005 | 35 years | ||||||||||||||
2420 |
The Gables at Farmington | Farmington | CT | 3,995 | 36,310 | | 3,995 | 36,310 | 40,305 | 6,276 | 34,029 | 1984 | 2005 | 35 years | ||||||||||||||
2435 |
Chatfield | West Hartford | CT | 2,493 | 22,833 | | 2,493 | 22,833 | 25,326 | 3,934 | 21,392 | 1989 | 2005 | 35 years | ||||||||||||||
2403 |
The Grand Court Fort Myers (Waterford Place) |
Fort Myers | FL | 1,065 | 9,586 | | 1,065 | 9,586 | 10,651 | 1,535 | 9,116 | 1988 | 2004 | 35 years | ||||||||||||||
2414 |
The Grand Court Tavares | Tavares | FL | 431 | 3,881 | | 431 | 3,881 | 4,312 | 713 | 3,599 | 1985 | 2004 | 35 years | ||||||||||||||
2436 |
The Classic at West Palm Beach | West Palm Beach | FL | 3,758 | 33,072 | | 3,758 | 33,072 | 36,830 | 5,793 | 31,037 | 1990 | 2005 | 35 years | ||||||||||||||
3226 |
Sterling House of Pensacola | Pensacola | FL | 633 | 6,087 | | 633 | 6,087 | 6,720 | 1,035 | 5,685 | 1998 | 2005 | 35 years | ||||||||||||||
3235 |
Clare Bridge of Tallahassee | Tallahassee | FL | 667 | 6,168 | | 667 | 6,168 | 6,835 | 1,048 | 5,787 | 1998 | 2005 | 35 years | ||||||||||||||
3241 |
Clare Bridge of West Melbourne | West Melbourne | FL | 586 | 5,481 | | 586 | 5,481 | 6,067 | 932 | 5,135 | 2000 | 2005 | 35 years | ||||||||||||||
3245 |
Clare Bridge Cottage of Winter Haven | Winter Haven | FL | 232 | 3,006 | | 232 | 3,006 | 3,238 | 511 | 2,727 | 1997 | 2005 | 35 years | ||||||||||||||
3246 |
Sterling House of Winter Haven | Winter Haven | FL | 438 | 5,549 | | 438 | 5,549 | 5,987 | 943 | 5,044 | 1997 | 2005 | 35 years | ||||||||||||||
3239 |
Wynwood of Twin Falls | Twin Falls | ID | 703 | 6,153 | | 703 | 6,153 | 6,856 | 1,046 | 5,810 | 1997 | 2005 | 35 years | ||||||||||||||
2408 |
The Grand Court Belleville | Belleville | IL | 370 | 3,333 | | 370 | 3,333 | 3,703 | 536 | 3,167 | 1984 | 2004 | 35 years | ||||||||||||||
2415 |
Seasons at Glenview | Northbrook | IL | 1,988 | 39,762 | | 1,988 | 39,762 | 41,750 | 5,705 | 36,045 | 1999 | 2004 | 35 years | ||||||||||||||
2416 |
The Hallmark | Chicago | IL | 11,057 | 107,517 | | 11,057 | 107,517 | 118,574 | 18,089 | 100,485 | 1990 | 2005 | 35 years | ||||||||||||||
2417 |
The Kenwood of Lake View | Chicago | IL | 3,072 | 26,668 | | 3,072 | 26,668 | 29,740 | 4,698 | 25,042 | 1950 | 2005 | 35 years | ||||||||||||||
2418 |
The Heritage | Des Plaines | IL | 6,871 | 60,165 | | 6,871 | 60,165 | 67,036 | 10,560 | 56,476 | 1993 | 2005 | 35 years | ||||||||||||||
2421 |
Devonshire of Hoffman Estates | Hoffman Estates | IL | 3,886 | 44,130 | | 3,886 | 44,130 | 48,016 | 7,007 | 41,009 | 1987 | 2005 | 35 years | ||||||||||||||
2423 |
The Devonshire | Lisle | IL | 7,953 | 70,400 | | 7,953 | 70,400 | 78,353 | 12,301 | 66,052 | 1990 | 2005 | 35 years | ||||||||||||||
2432 |
Hawthorn Lakes | Vernon Hills | IL | 4,439 | 35,044 | | 4,439 | 35,044 | 39,483 | 6,430 | 33,053 | 1987 | 2005 | 35 years | ||||||||||||||
2433 |
The Willows | Vernon Hills | IL | 1,147 | 10,041 | | 1,147 | 10,041 | 11,188 | 1,762 | 9,426 | 1999 | 2005 | 35 years | ||||||||||||||
2422 |
Berkshire of Castleton | Indianapolis | IN | 1,280 | 11,515 | | 1,280 | 11,515 | 12,795 | 1,998 | 10,797 | 1986 | 2005 | 35 years | ||||||||||||||
3209 |
Sterling House of Evansville | Evansville | IN | 357 | 3,765 | | 357 | 3,765 | 4,122 | 640 | 3,482 | 1998 | 2005 | 35 years | ||||||||||||||
3218 |
Sterling House of Marion | Marion | IN | 207 | 3,570 | | 207 | 3,570 | 3,777 | 607 | 3,170 | 1998 | 2005 | 35 years | ||||||||||||||
3230 |
Sterling House of Portage | Portage | IN | 128 | 3,649 | | 128 | 3,649 | 3,777 | 620 | 3,157 | 1999 | 2005 | 35 years | ||||||||||||||
3232 |
Sterling House of Richmond | Richmond | IN | 495 | 4,124 | | 495 | 4,124 | 4,619 | 701 | 3,918 | 1998 | 2005 | 35 years | ||||||||||||||
2412 |
The Grand Court Overland Park | Overland Park | KS | 2,297 | 20,676 | | 2,297 | 20,676 | 22,973 | 3,078 | 19,895 | 1988 | 2004 | 35 years | ||||||||||||||
3216 |
Clare Bridge of Leawood | Leawood | KS | 117 | 5,127 | | 117 | 5,127 | 5,244 | 871 | 4,373 | 2000 | 2005 | 35 years | ||||||||||||||
3237 |
Clare Bridge Cottage of Topeka | Topeka | KS | 370 | 6,825 | | 370 | 6,825 | 7,195 | 1,160 | 6,035 | 2000 | 2005 | 35 years | ||||||||||||||
2425 |
River Bay Club | Quincy | MA | 6,101 | 57,862 | | 6,101 | 57,862 | 63,963 | 9,831 | 54,132 | 1986 | 2005 | 35 years | ||||||||||||||
2401 |
The Grand Court Adrian | Adrian | MI | 601 | 5,411 | | 601 | 5,411 | 6,012 | 944 | 5,068 | 1988 | 2004 | 35 years |
133
Facility
|
Facility Name |
Location |
Initial Cost to
Company |
Costs
Capitalized Subsequent to Acquisition |
Gross Amount
Carried at Close of Period |
Total |
Accumulated
Depreciation |
NBV |
Date of
Construction |
Date
Acquired |
Life on
Which Depreciation in Income Statement is Computed |
|||||||||||||||||
City |
State /
|
Land |
Buildings and
Improvements |
Land |
Buildings and
Improvements |
|||||||||||||||||||||||
2407 |
The Grand Court Farmington Hills | Farmington Hills | MI | 847 | 7,620 | | 847 | 7,620 | 8,467 | 1,195 | 7,272 | 1989 | 2004 | 35 years | ||||||||||||||
3224 |
Wynwood of Northville | Northville | MI | 407 | 6,068 | | 407 | 6,068 | 6,475 | 1,031 | 5,444 | 1996 | 2005 | 35 years | ||||||||||||||
3240 |
Wynwood of Utica | Utica | MI | 1,142 | 11,808 | | 1,142 | 11,808 | 12,950 | 2,007 | 10,943 | 1996 | 2005 | 35 years | ||||||||||||||
2419 |
Edina Park Plaza | Edina | MN | 3,621 | 33,141 | | 3,621 | 33,141 | 36,762 | 5,712 | 31,050 | 1998 | 2005 | 35 years | ||||||||||||||
3203 |
Sterling House of Blaine | Blaine | MN | 150 | 1,675 | | 150 | 1,675 | 1,825 | 285 | 1,540 | 1997 | 2005 | 35 years | ||||||||||||||
3208 |
Clare Bridge of Eden Prairie | Eden Prairie | MN | 301 | 6,228 | | 301 | 6,228 | 6,529 | 1,059 | 5,470 | 1998 | 2005 | 35 years | ||||||||||||||
3211 |
Sterling House of Inver Grove Heights |
Inver Grove Heights |
MN | 253 | 2,655 | | 253 | 2,655 | 2,908 | 451 | 2,457 | 1997 | 2005 | 35 years | ||||||||||||||
3223 |
Clare Bridge of North Oaks | North Oaks | MN | 1,057 | 8,296 | | 1,057 | 8,296 | 9,353 | 1,410 | 7,943 | 1998 | 2005 | 35 years | ||||||||||||||
3229 |
Clare Bridge of Plymouth | Plymouth | MN | 679 | 8,675 | | 679 | 8,675 | 9,354 | 1,474 | 7,880 | 1998 | 2005 | 35 years | ||||||||||||||
2405 |
The Grand Court Kansas City I | Kansas City | MO | 1,250 | 11,249 | | 1,250 | 11,249 | 12,499 | 1,727 | 10,772 | 1989 | 2004 | 35 years | ||||||||||||||
3204 |
Clare Bridge of Cary | Cary | NC | 724 | 6,466 | | 724 | 6,466 | 7,190 | 1,099 | 6,091 | 1997 | 2005 | 35 years | ||||||||||||||
3244 |
Clare Bridge of Winston-Salem | Winston-Salem | NC | 368 | 3,497 | | 368 | 3,497 | 3,865 | 594 | 3,271 | 1997 | 2005 | 35 years | ||||||||||||||
2434 |
Brendenwood | Voorhees | NJ | 3,158 | 29,909 | | 3,158 | 29,909 | 33,067 | 5,084 | 27,983 | 1987 | 2005 | 35 years | ||||||||||||||
3242 |
Clare Bridge of Westampton | Westampton | NJ | 881 | 4,741 | | 881 | 4,741 | 5,622 | 806 | 4,816 | 1997 | 2005 | 35 years | ||||||||||||||
2404 |
The Grand Court Albuquerque | Albuquerque | NM | 1,382 | 12,440 | | 1,382 | 12,440 | 13,822 | 2,104 | 11,718 | 1991 | 2004 | 35 years | ||||||||||||||
2430 |
Ponce de Leon | Santa Fe | NM | | 28,178 | | | 28,178 | 28,178 | 4,561 | 23,617 | 1986 | 2005 | 35 years | ||||||||||||||
2406 |
The Grand Court Las Vegas | Las Vegas | NV | 679 | 6,107 | | 679 | 6,107 | 6,786 | 1,091 | 5,695 | 1987 | 2004 | 35 years | ||||||||||||||
2427 |
The Gables at Brighton | Rochester | NY | 1,131 | 9,498 | | 1,131 | 9,498 | 10,629 | 1,697 | 8,932 | 1988 | 2005 | 35 years | ||||||||||||||
3205 |
Villas of Sherman Brook | Clinton | NY | 947 | 7,528 | | 947 | 7,528 | 8,475 | 1,280 | 7,195 | 1991 | 2005 | 35 years | ||||||||||||||
3212 |
Wynwood of Kenmore | Kenmore | NY | 1,487 | 15,170 | | 1,487 | 15,170 | 16,657 | 2,578 | 14,079 | 1995 | 2005 | 35 years | ||||||||||||||
3221 |
Clare Bridge of Niskayuna | Niskayuna | NY | 1,021 | 8,333 | | 1,021 | 8,333 | 9,354 | 1,416 | 7,938 | 1997 | 2005 | 35 years | ||||||||||||||
3222 |
Wynwood of Niskayuna | Niskayuna | NY | 1,884 | 16,103 | | 1,884 | 16,103 | 17,987 | 2,737 | 15,250 | 1996 | 2005 | 35 years | ||||||||||||||
3228 |
Clare Bridge of Perinton | Pittsford | NY | 611 | 4,066 | | 611 | 4,066 | 4,677 | 691 | 3,986 | 1997 | 2005 | 35 years | ||||||||||||||
3234 |
Villas of Summerfield | Syracuse | NY | 1,132 | 11,434 | | 1,132 | 11,434 | 12,566 | 1,943 | 10,623 | 1991 | 2005 | 35 years | ||||||||||||||
3243 |
Clare Bridge of Williamsville | Williamsville | NY | 839 | 3,841 | | 839 | 3,841 | 4,680 | 653 | 4,027 | 1997 | 2005 | 35 years | ||||||||||||||
2402 |
The Grand Court Dayton | Dayton | OH | 636 | 5,721 | | 636 | 5,721 | 6,357 | 1,133 | 5,224 | 1987 | 2004 | 35 years | ||||||||||||||
2410 |
The Grand Court Findlay | Findlay | OH | 385 | 3,464 | | 385 | 3,464 | 3,849 | 606 | 3,243 | 1984 | 2004 | 35 years | ||||||||||||||
2413 |
The Grand Court Springfield | Springfield | OH | 250 | 2,250 | | 250 | 2,250 | 2,500 | 446 | 2,054 | 1986 | 2004 | 35 years | ||||||||||||||
3200 |
Sterling House of Alliance | Alliance | OH | 392 | 6,283 | | 392 | 6,283 | 6,675 | 1,068 | 5,607 | 1998 | 2005 | 35 years | ||||||||||||||
3201 |
Clare Bridge Cottage of Austintown | Austintown | OH | 151 | 3,087 | | 151 | 3,087 | 3,238 | 525 | 2,713 | 1999 | 2005 | 35 years | ||||||||||||||
3202 |
Sterling House of Beaver Creek | Beavercreek | OH | 587 | 5,381 | | 587 | 5,381 | 5,968 | 915 | 5,053 | 1998 | 2005 | 35 years | ||||||||||||||
3207 |
Sterling House of Westerville | Columbus | OH | 267 | 3,600 | | 267 | 3,600 | 3,867 | 612 | 3,255 | 1999 | 2005 | 35 years | ||||||||||||||
3233 |
Sterling House of Salem | Salem | OH | 634 | 4,659 | | 634 | 4,659 | 5,293 | 792 | 4,501 | 1998 | 2005 | 35 years | ||||||||||||||
2411 |
The Grand Court Lubbock | Lubbock | TX | 720 | 6,479 | | 720 | 6,479 | 7,199 | 1,015 | 6,184 | 1984 | 2004 | 35 years | ||||||||||||||
2409 |
The Grand Court Bristol | Bristol | VA | 648 | 5,835 | | 648 | 5,835 | 6,483 | 994 | 5,489 | 1985 | 2004 | 35 years | ||||||||||||||
2431 |
Park Place | Spokane | WA | 1,622 | 12,895 | | 1,622 | 12,895 | 14,517 | 2,359 | 12,158 | 1915 | 2005 | 35 years | ||||||||||||||
3217 |
Clare Bridge of Lynwood | Lynwood | WA | 1,219 | 9,573 | | 1,219 | 9,573 | 10,792 | 1,627 | 9,165 | 1999 | 2005 | 35 years | ||||||||||||||
3231 |
Clare Bridge of Puyallup | Puyallup | WA | 1,055 | 8,298 | | 1,055 | 8,298 | 9,353 | 1,410 | 7,943 | 1998 | 2005 | 35 years | ||||||||||||||
3210 |
Sterling House of Fond du Lac | Fond du Lac | WI | 196 | 1,603 | | 196 | 1,603 | 1,799 | 272 | 1,527 | 2000 | 2005 | 35 years | ||||||||||||||
3213 |
Clare Bridge of Kenosha | Kenosha | WI | 551 | 5,431 | 2,707 | 551 | 8,138 | 8,689 | 953 | 7,736 | 2000 | 2005 | 35 years | ||||||||||||||
3214 |
Clare Bridge Cottage of La Crosse | La Crosse | WI | 621 | 4,056 | 1,088 | 621 | 5,144 | 5,765 | 702 | 5,063 | 2004 | 2005 | 35 years | ||||||||||||||
3215 |
Sterling House of La Crosse | La Crosse | WI | 644 | 5,831 | 2,592 | 644 | 8,423 | 9,067 | 1,021 | 8,046 | 1998 | 2005 | 35 years | ||||||||||||||
TOTAL FOR BROOKDALE SENIORS HOUSING FACILITIES |
129,801 | 1,256,556 | 6,387 | 129,801 | 1,262,943 | 1,392,744 | 213,467 | 1,179,277 |
134
Facility
|
Facility Name |
Location |
Initial Cost to
Company |
Costs
Capitalized Subsequent to Acquisition |
Gross Amount
Carried at Close of Period |
Total |
Accumulated
Depreciation |
NBV |
Date of
Construction |
Date
Acquired |
Life on
Which Depreciation in Income Statement is Computed |
||||||||||||||||||
City |
State /
|
Land |
Buildings and
Improvements |
Land |
Buildings and
Improvements |
||||||||||||||||||||||||
SUNRISE SENIORS HOUSING FACILITIES |
|||||||||||||||||||||||||||||
4064 |
Sunrise of Scottsdale | Scottsdale | AZ | 2,229 | 27,575 | (258 | ) | 2,238 | 27,308 | 29,546 | 1,356 | 28,190 | 2007 | 2007 | 35 years | ||||||||||||||
4012 |
Sunrise of Sunnyvale | Sunnyvale | CA | 2,933 | 34,361 | 76 | 2,933 | 34,437 | 37,370 | 1,912 | 35,458 | 2000 | 2007 | 35 years | |||||||||||||||
4016 |
Sunrise of Westlake Village | Westlake Village | CA | 4,935 | 30,722 | 42 | 4,935 | 30,764 | 35,699 | 1,577 | 34,122 | 2004 | 2007 | 35 years | |||||||||||||||
4018 |
Sunrise of Yorba Linda | Yorba Linda | CA | 1,689 | 25,240 | 32 | 1,689 | 25,272 | 26,961 | 1,331 | 25,630 | 2002 | 2007 | 35 years | |||||||||||||||
4023 |
Sunrise of La Costa | Carlsbad | CA | 4,890 | 20,590 | 80 | 4,898 | 20,662 | 25,560 | 1,672 | 23,888 | 1999 | 2007 | 35 years | |||||||||||||||
4035 |
Sunrise of San Mateo | San Mateo | CA | 2,682 | 35,335 | 238 | 2,682 | 35,573 | 38,255 | 1,738 | 36,517 | 1999 | 2007 | 35 years | |||||||||||||||
4043 |
Sunrise of Canyon Crest | Riverside | CA | 5,486 | 19,658 | 246 | 5,489 | 19,901 | 25,390 | 1,332 | 24,058 | 2006 | 2007 | 35 years | |||||||||||||||
4045 |
Sunrise of Mission Viejo | Mission Viejo | CA | 3,802 | 24,560 | 67 | 3,802 | 24,627 | 28,429 | 1,679 | 26,750 | 1998 | 2007 | 35 years | |||||||||||||||
4047 |
Sunrise of Pacific Palisades | Pacific Palisades | CA | 4,458 | 17,064 | 41 | 4,458 | 17,105 | 21,563 | 1,333 | 20,230 | 2001 | 2007 | 35 years | |||||||||||||||
4050 |
Sunrise of Sterling Canyon | Valencia | CA | 3,868 | 29,293 | 367 | 3,883 | 29,645 | 33,528 | 1,838 | 31,690 | 1998 | 2007 | 35 years | |||||||||||||||
4055 |
Sunrise of Fair Oaks | Fair Oaks | CA | 1,456 | 23,679 | 821 | 2,166 | 23,790 | 25,956 | 1,574 | 24,382 | 2001 | 2007 | 35 years | |||||||||||||||
4066 |
Sunrise of Rocklin | Rocklin | CA | 1,378 | 23,565 | 230 | 1,374 | 23,799 | 25,173 | 1,151 | 24,022 | 2007 | 2007 | 35 years | |||||||||||||||
4009 |
Sunrise of Cherry Creek | Denver | CO | 1,621 | 28,370 | 53 | 1,621 | 28,423 | 30,044 | 1,602 | 28,442 | 2000 | 2007 | 35 years | |||||||||||||||
4030 |
Sunrise of Pinehurst | Denver | CO | 1,417 | 30,885 | 46 | 1,417 | 30,931 | 32,348 | 2,187 | 30,161 | 1998 | 2007 | 35 years | |||||||||||||||
4059 |
Sunrise of Orchard | Littleton | CO | 1,813 | 22,183 | 156 | 1,813 | 22,339 | 24,152 | 1,509 | 22,643 | 1997 | 2007 | 35 years | |||||||||||||||
4061 |
Sunrise of Westminster | Westminster | CO | 2,649 | 16,243 | 108 | 2,671 | 16,329 | 19,000 | 1,155 | 17,845 | 2000 | 2007 | 35 years | |||||||||||||||
4028 |
Sunrise of Stamford | Stamford | CT | 4,612 | 28,533 | 63 | 4,612 | 28,596 | 33,208 | 1,980 | 31,228 | 1999 | 2007 | 35 years | |||||||||||||||
4053 |
Sunrise of East Cobb | Marietta | GA | 1,797 | 23,420 | 100 | 1,798 | 23,519 | 25,317 | 1,474 | 23,843 | 1997 | 2007 | 35 years | |||||||||||||||
4056 |
Sunrise of Huntcliff I | Atlanta | GA | 4,232 | 66,161 | 413 | 4,240 | 66,566 | 70,806 | 4,270 | 66,536 | 1987 | 2007 | 35 years | |||||||||||||||
4057 |
Sunrise of Huntcliff II | Atlanta | GA | 2,154 | 17,137 | 49 | 2,154 | 17,186 | 19,340 | 1,061 | 18,279 | 1998 | 2007 | 35 years | |||||||||||||||
4058 |
Sunrise of Ivey Ridge | Alpharetta | GA | 1,507 | 18,516 | 68 | 1,507 | 18,584 | 20,091 | 1,279 | 18,812 | 1998 | 2007 | 35 years | |||||||||||||||
4014 |
Sunrise of Park Ridge | Park Ridge | IL | 5,533 | 39,557 | 50 | 5,533 | 39,607 | 45,140 | 2,180 | 42,960 | 1998 | 2007 | 35 years | |||||||||||||||
4015 |
Sunrise of Lincoln Park | Chicago | IL | 3,485 | 26,687 | 5 | 3,485 | 26,692 | 30,177 | 1,352 | 28,825 | 2003 | 2007 | 35 years | |||||||||||||||
4021 |
Sunrise of Glen Ellyn | Glen Ellyn | IL | 2,455 | 34,064 | 47 | 2,455 | 34,111 | 36,566 | 2,326 | 34,240 | 2000 | 2007 | 35 years | |||||||||||||||
4024 |
Sunrise of Naperville | Naperville | IL | 1,946 | 28,538 | 78 | 1,952 | 28,610 | 30,562 | 2,038 | 28,524 | 1999 | 2007 | 35 years | |||||||||||||||
4036 |
Sunrise of Willowbrook | Willowbrook | IL | 1,454 | 60,738 | 146 | 1,454 | 60,884 | 62,338 | 2,416 | 59,922 | 2000 | 2007 | 35 years | |||||||||||||||
4040 |
Sunrise of Bloomingdale | Bloomingdale | IL | 1,287 | 38,625 | 49 | 1,289 | 38,672 | 39,961 | 2,348 | 37,613 | 2000 | 2007 | 35 years | |||||||||||||||
4042 |
Sunrise of Buffalo Grove | Buffalo Grove | IL | 2,154 | 28,021 | 22 | 2,154 | 28,043 | 30,197 | 1,769 | 28,428 | 1999 | 2007 | 35 years | |||||||||||||||
4060 |
Sunrise of Palos Park | Palos Park | IL | 2,363 | 42,205 | 187 | 2,363 | 42,392 | 44,755 | 2,539 | 42,216 | 2001 | 2007 | 35 years | |||||||||||||||
4052 |
Sunrise of Baton Rouge | Baton Rouge | LA | 1,212 | 23,547 | 15 | 1,212 | 23,562 | 24,774 | 1,454 | 23,320 | 2000 | 2007 | 35 years | |||||||||||||||
4032 |
Sunrise of Norwood | Norwood | MA | 2,230 | 30,968 | 323 | 2,230 | 31,291 | 33,521 | 1,547 | 31,974 | 1997 | 2007 | 35 years | |||||||||||||||
4051 |
Sunrise of Arlington | Arlington | MA | 86 | 34,393 | 76 | 86 | 34,469 | 34,555 | 2,206 | 32,349 | 2001 | 2007 | 35 years | |||||||||||||||
4033 |
Sunrise of Columbia | Columbia | MD | 1,780 | 23,083 | 250 | 1,780 | 23,333 | 25,113 | 1,142 | 23,971 | 1996 | 2007 | 35 years | |||||||||||||||
4034 |
Sunrise of Rockville | Rockville | MD | 1,039 | 39,216 | 227 | 1,039 | 39,443 | 40,482 | 1,911 | 38,571 | 1997 | 2007 | 35 years | |||||||||||||||
4008 |
Sunrise of North Ann Arbor | Ann Arbor | MI | 1,703 | 15,857 | 153 | 1,708 | 16,005 | 17,713 | 1,008 | 16,705 | 2000 | 2007 | 35 years | |||||||||||||||
4031 |
Sunrise of Troy | Troy | MI | 1,758 | 23,727 | 41 | 1,761 | 23,765 | 25,526 | 1,638 | 23,888 | 2001 | 2007 | 35 years | |||||||||||||||
4038 |
Sunrise of Bloomfield Hills | Bloomfield Hills | MI | 3,736 | 27,657 | 1,287 | 3,737 | 28,943 | 32,680 | 1,584 | 31,096 | 2006 | 2007 | 35 years | |||||||||||||||
4046 |
Sunrise of Northville | Plymouth | MI | 1,445 | 26,090 | 89 | 1,445 | 26,179 | 27,624 | 1,712 | 25,912 | 1999 | 2007 | 35 years | |||||||||||||||
4048 |
Sunrise of Rochester | Rochester | MI | 2,774 | 38,666 | 90 | 2,774 | 38,756 | 41,530 | 2,396 | 39,134 | 1998 | 2007 | 35 years | |||||||||||||||
4054 |
Sunrise of Edina | Edina | MN | 3,181 | 24,224 | 129 | 3,181 | 24,353 | 27,534 | 1,644 | 25,890 | 1999 | 2007 | 35 years | |||||||||||||||
4017 |
Sunrise of North Hills | Raleigh | NC | 749 | 37,091 | 217 | 749 | 37,308 | 38,057 | 1,905 | 36,152 | 2000 | 2007 | 35 years | |||||||||||||||
4019 |
Sunrise of Providence | Charlotte | NC | 1,976 | 19,472 | 34 | 1,976 | 19,506 | 21,482 | 1,248 | 20,234 | 1999 | 2007 | 35 years | |||||||||||||||
4001 |
Sunrise of Morris Plains | Morris Plains | NJ | 1,492 | 32,052 | 54 | 1,492 | 32,106 | 33,598 | 1,834 | 31,764 | 1997 | 2007 | 35 years | |||||||||||||||
4002 |
Sunrise of Old Tappan | Old Tappan | NJ | 2,985 | 36,795 | 60 | 2,985 | 36,855 | 39,840 | 2,152 | 37,688 | 1997 | 2007 | 35 years | |||||||||||||||
4005 |
Sunrise of Wayne | Wayne | NJ | 1,288 | 24,990 | 44 | 1,288 | 25,034 | 26,322 | 1,454 | 24,868 | 1996 | 2007 | 35 years | |||||||||||||||
4006 |
Sunrise of Westfield | Westfield | NJ | 5,057 | 23,803 | 140 | 5,057 | 23,943 | 29,000 | 1,450 | 27,550 | 1996 | 2007 | 35 years | |||||||||||||||
4025 |
Sunrise of East Brunswick | East Brunswick | NJ | 2,784 | 26,173 | 66 | 2,784 | 26,239 | 29,023 | 1,942 | 27,081 | 1999 | 2007 | 35 years |
135
Facility
|
Facility Name |
Location |
Initial Cost to
Company |
Costs
Capitalized Subsequent to Acquisition |
Gross Amount
Carried at Close of Period |
Total |
Accumulated
Depreciation |
NBV |
Date of
Construction |
Date
Acquired |
Life on
Which Depreciation in Income Statement is Computed |
||||||||||||||||||
City |
State /
|
Land |
Buildings and
Improvements |
Land |
Buildings and
Improvements |
||||||||||||||||||||||||
4029 |
Sunrise of Woodcliff Lake | Woodcliff Lake | NJ | 3,493 | 30,801 | 75 | 3,493 | 30,876 | 34,369 | 2,219 | 32,150 | 2000 | 2007 | 35 years | |||||||||||||||
4062 |
Sunrise of Wall | Wall | NJ | 1,053 | 19,101 | 58 | 1,055 | 19,157 | 20,212 | 1,258 | 18,954 | 1999 | 2007 | 35 years | |||||||||||||||
4011 |
Sunrise of New City | New City | NY | 1,906 | 27,323 | 55 | 1,906 | 27,378 | 29,284 | 1,597 | 27,687 | 1999 | 2007 | 35 years | |||||||||||||||
4027 |
Sunrise of North Lynbrook | Lynbrook | NY | 4,622 | 38,087 | 60 | 4,622 | 38,147 | 42,769 | 2,747 | 40,022 | 1999 | 2007 | 35 years | |||||||||||||||
4044 |
Sunrise of Fleetwood | Mount Vernon | NY | 4,381 | 28,434 | 70 | 4,381 | 28,504 | 32,885 | 1,984 | 30,901 | 1999 | 2007 | 35 years | |||||||||||||||
4049 |
Sunrise of Smithtown | Smithtown | NY | 2,853 | 25,621 | 348 | 2,982 | 25,840 | 28,822 | 1,931 | 26,891 | 1999 | 2007 | 35 years | |||||||||||||||
4063 |
Sunrise of Staten Island | Staten Island | NY | 7,237 | 23,910 | (349 | ) | 7,281 | 23,517 | 30,798 | 1,624 | 29,174 | 2006 | 2007 | 35 years | ||||||||||||||
4010 |
Sunrise of Cuyahoga Falls | Cuyahoga Falls | OH | 626 | 10,239 | 68 | 626 | 10,307 | 10,933 | 644 | 10,289 | 2000 | 2007 | 35 years | |||||||||||||||
4013 |
Sunrise of Parma | Cleveland | OH | 695 | 16,641 | 28 | 695 | 16,669 | 17,364 | 964 | 16,400 | 2000 | 2007 | 35 years | |||||||||||||||
4003 |
Sunrise of Granite Run | Media | PA | 1,272 | 31,781 | 58 | 1,272 | 31,839 | 33,111 | 1,743 | 31,368 | 1997 | 2007 | 35 years | |||||||||||||||
4004 |
Sunrise of Abington | Abington | PA | 1,838 | 53,660 | 93 | 1,857 | 53,734 | 55,591 | 3,029 | 52,562 | 1997 | 2007 | 35 years | |||||||||||||||
4007 |
Sunrise of Haverford | Haverford | PA | 941 | 25,872 | 142 | 947 | 26,008 | 26,955 | 1,481 | 25,474 | 1997 | 2007 | 35 years | |||||||||||||||
4020 |
Sunrise of Westtown | West Chester | PA | 1,547 | 22,996 | 38 | 1,557 | 23,024 | 24,581 | 1,904 | 22,677 | 1999 | 2007 | 35 years | |||||||||||||||
4022 |
Sunrise of Exton | Exton | PA | 1,123 | 17,765 | 59 | 1,125 | 17,822 | 18,947 | 1,197 | 17,750 | 2000 | 2007 | 35 years | |||||||||||||||
4041 |
Sunrise of Blue Bell | Blue Bell | PA | 1,765 | 23,920 | 132 | 1,770 | 24,047 | 25,817 | 1,599 | 24,218 | 2006 | 2007 | 35 years | |||||||||||||||
4037 |
Sunrise of Hillcrest | Dallas | TX | 2,616 | 27,680 | (78 | ) | 2,616 | 27,602 | 30,218 | 1,502 | 28,716 | 2006 | 2007 | 35 years | ||||||||||||||
4065 |
Sunrise of Sandy | Sandy | UT | 2,576 | 22,987 | 5 | 2,600 | 22,968 | 25,568 | 1,240 | 24,328 | 2007 | 2007 | 35 years | |||||||||||||||
4000 |
Sunrise of Springfield | Springfield | VA | 4,440 | 18,834 | 359 | 4,440 | 19,193 | 23,633 | 1,113 | 22,520 | 1997 | 2007 | 35 years | |||||||||||||||
4026 |
Sunrise of Richmond | Richmond | VA | 1,120 | 17,446 | 53 | 1,123 | 17,496 | 18,619 | 1,262 | 17,357 | 1999 | 2007 | 35 years | |||||||||||||||
4039 |
Sunrise of Alexandria | Alexandria | VA | 88 | 14,811 | 126 | 102 | 14,923 | 15,025 | 1,221 | 13,804 | 1998 | 2007 | 35 years | |||||||||||||||
4069 |
Sunrise of Beacon Hill | *Victoria | BC | 8,332 | 29,970 | (6,944 | ) | 6,804 | 24,554 | 31,358 | 1,362 | 29,996 | 2001 | 2007 | 35 years | ||||||||||||||
4073 |
Sunrise of Lynn Valley | *Vancouver | BC | 11,759 | 37,424 | (8,992 | ) | 9,603 | 30,588 | 40,191 | 1,662 | 38,529 | 2002 | 2007 | 35 years | ||||||||||||||
4077 |
Sunrise of Vancouver | *Vancouver | BC | 6,649 | 31,937 | (151 | ) | 6,649 | 31,786 | 38,435 | 1,838 | 36,597 | 2005 | 2007 | 35 years | ||||||||||||||
4067 |
Sunrise of Unionville | *Markham | ON | 2,322 | 41,140 | (7,912 | ) | 1,901 | 33,649 | 35,550 | 1,793 | 33,757 | 2000 | 2007 | 35 years | ||||||||||||||
4068 |
Sunrise of Mississauga | *Mississauga | ON | 3,554 | 33,631 | (6,768 | ) | 2,902 | 27,515 | 30,417 | 1,496 | 28,921 | 2000 | 2007 | 35 years | ||||||||||||||
4070 |
Sunrise of Burlington | *Burlington | ON | 1,173 | 24,448 | (51 | ) | 1,173 | 24,397 | 25,570 | 1,374 | 24,196 | 2001 | 2007 | 35 years | ||||||||||||||
4071 |
Sunrise of Oakville | *Oakville | ON | 2,753 | 37,489 | (76 | ) | 2,753 | 37,413 | 40,166 | 1,985 | 38,181 | 2002 | 2007 | 35 years | ||||||||||||||
4072 |
Sunrise of Richmond Hill | *Richmond Hill | ON | 2,155 | 41,254 | (7,890 | ) | 1,762 | 33,757 | 35,519 | 1,794 | 33,725 | 2002 | 2007 | 35 years | ||||||||||||||
4074 |
Sunrise of Windsor | *Windsor | ON | 1,813 | 20,882 | (38 | ) | 1,820 | 20,837 | 22,657 | 1,159 | 21,498 | 2001 | 2007 | 35 years | ||||||||||||||
4075 |
Sunrise of Aurora | *Aurora | ON | 1,570 | 36,113 | (6,861 | ) | 1,282 | 29,540 | 30,822 | 1,667 | 29,155 | 2002 | 2007 | 35 years | ||||||||||||||
4076 |
Sunrise of Erin Mills | *Mississauga | ON | 1,957 | 27,020 | (5,225 | ) | 1,598 | 22,154 | 23,752 | 1,354 | 22,398 | 2007 | 2007 | 35 years | ||||||||||||||
4078 |
Sunrise, Thorne Mill on Steeles | *Vaughan | ON | 2,563 | 57,513 | (9,051 | ) | 1,076 | 49,949 | 51,025 | 1,777 | 49,248 | 2003 | 2007 | 35 years | ||||||||||||||
TOTAL FOR SUNRISE SENIORS HOUSING FACILITIES |
212,352 | 2,286,059 | (51,642 | ) | 206,122 | 2,240,647 | 2,446,769 | 133,725 | 2,313,044 | ||||||||||||||||||||
OTHER SENIORS HOUSING FACILITIES |
|||||||||||||||||||||||||||||
3106 |
CaraVita Village | Montgomery | AL | 779 | 8,507 | 651 | 779 | 9,158 | 9,937 | 1,063 | 8,874 | 1987 | 2005 | 35 years | |||||||||||||||
3800 |
Elmcroft of Halcyon | Montgomery | AL | 220 | 5,476 | | 220 | 5,476 | 5,696 | 339 | 5,357 | 1999 | 2006 | 35 years | |||||||||||||||
3605 |
West Shores | Hot Springs | AR | 1,326 | 10,904 | | 1,326 | 10,904 | 12,230 | 1,109 | 11,121 | 1988 | 2005 | 35 years | |||||||||||||||
3821 |
Elmcroft of Blytheville | Blytheville | AR | 294 | 2,946 | | 294 | 2,946 | 3,240 | 182 | 3,058 | 1997 | 2006 | 35 years | |||||||||||||||
3822 |
Elmcroft of Maumelle | Maumelle | AR | 1,252 | 7,601 | | 1,252 | 7,601 | 8,853 | 471 | 8,382 | 1997 | 2006 | 35 years | |||||||||||||||
3823 |
Elmcroft of Mountain Home | Mountain Home | AR | 204 | 8,971 | | 204 | 8,971 | 9,175 | 555 | 8,620 | 1997 | 2006 | 35 years | |||||||||||||||
3824 |
Elmcroft of Pocahontas | Pocahontas | AR | 575 | 2,026 | | 575 | 2,026 | 2,601 | 125 | 2,476 | 1997 | 2006 | 35 years | |||||||||||||||
3825 |
Elmcroft of Sherwood | Sherwood | AR | 1,320 | 5,693 | | 1,320 | 5,693 | 7,013 | 352 | 6,661 | 1997 | 2006 | 35 years | |||||||||||||||
3601 |
Cottonwood Village | Cottonwood | AZ | 1,200 | 15,124 | | 1,200 | 15,124 | 16,324 | 1,516 | 14,808 | 1986 | 2005 | 35 years | |||||||||||||||
2803 |
Fairwood Manor | Anaheim | CA | 2,464 | 7,908 | | 2,464 | 7,908 | 10,372 | 1,129 | 9,243 | 1977 | 2005 | 35 years |
136
Facility
|
Facility Name |
Location |
Initial Cost to
Company |
Costs
Capitalized Subsequent to Acquisition |
Gross Amount
Carried at Close of Period |
Total |
Accumulated
Depreciation |
NBV |
Date of
Construction |
Date
Acquired |
Life on
Which Depreciation in Income Statement is Computed |
|||||||||||||||||
City |
State /
|
Land |
Buildings and
Improvements |
Land |
Buildings and
Improvements |
|||||||||||||||||||||||
2804 |
Summerville at Heritage Place | Tracy | CA | 1,110 | 13,296 | | 1,110 | 13,296 | 14,406 | 1,448 | 12,958 | 1986 | 2005 | 35 years | ||||||||||||||
2813 |
Barrington Court Alzheimers Residence | Danville | CA | 360 | 4,640 | | 360 | 4,640 | 5,000 | 394 | 4,606 | 1999 | 2006 | 35 years | ||||||||||||||
2815 |
Somer Park Residence for Memory Impaired | Roseville | CA | 220 | 2,380 | | 220 | 2,380 | 2,600 | 204 | 2,396 | 1996 | 2006 | 35 years | ||||||||||||||
3604 |
Villa Santa Barbara | Santa Barbara | CA | 1,219 | 12,426 | | 1,219 | 12,426 | 13,645 | 1,256 | 12,389 | 1977 | 2005 | 35 years | ||||||||||||||
3805 |
Las Villas Del Norte | Escondido | CA | 2,791 | 32,632 | | 2,791 | 32,632 | 35,423 | 2,020 | 33,403 | 1986 | 2006 | 35 years | ||||||||||||||
3806 |
Rancho Vista | Vista | CA | 6,730 | 21,828 | | 6,730 | 21,828 | 28,558 | 1,351 | 27,207 | 1982 | 2006 | 35 years | ||||||||||||||
3807 |
ActivCare at Point Loma | San Diego | CA | 2,117 | 6,865 | | 2,117 | 6,865 | 8,982 | 425 | 8,557 | 1999 | 2006 | 35 years | ||||||||||||||
3808 |
ActivCare at La Mesa | La Mesa | CA | 2,431 | 6,101 | | 2,431 | 6,101 | 8,532 | 378 | 8,154 | 1997 | 2006 | 35 years | ||||||||||||||
3809 |
Mountview Retirement Residence | Montrose | CA | 1,089 | 15,449 | | 1,089 | 15,449 | 16,538 | 956 | 15,582 | 1974 | 2006 | 35 years | ||||||||||||||
3810 |
Grossmont Gardens | La Mesa | CA | 9,104 | 59,349 | | 9,104 | 59,349 | 68,453 | 3,674 | 64,779 | 1964 | 2006 | 35 years | ||||||||||||||
3811 |
Las Villas Del Carlsbad | Carlsbad | CA | 1,760 | 30,469 | | 1,760 | 30,469 | 32,229 | 1,886 | 30,343 | 1987 | 2006 | 35 years | ||||||||||||||
2802 |
Summerville at South Windsor | South Windsor | CT | 2,187 | 12,682 | | 2,187 | 12,682 | 14,869 | 1,710 | 13,159 | 1999 | 2004 | 35 years | ||||||||||||||
2807 |
The Plaza at Bonita Springs | Bonita Springs | FL | 1,540 | 10,783 | | 1,540 | 10,783 | 12,323 | 1,738 | 10,585 | 1989 | 2005 | 35 years | ||||||||||||||
2808 |
The Plaza at Boynton Beach | Boynton Beach | FL | 2,317 | 16,218 | | 2,317 | 16,218 | 18,535 | 2,471 | 16,064 | 1999 | 2005 | 35 years | ||||||||||||||
2809 |
The Plaza at Deer Creek | Deerfield | FL | 1,399 | 9,791 | | 1,399 | 9,791 | 11,190 | 1,769 | 9,421 | 1999 | 2005 | 35 years | ||||||||||||||
2810 |
The Plaza at Jensen Beach | Jensen Beach | FL | 1,831 | 12,820 | | 1,831 | 12,820 | 14,651 | 2,053 | 12,598 | 1999 | 2005 | 35 years | ||||||||||||||
3102 |
Highland Terrace | Inverness | FL | 269 | 4,108 | | 269 | 4,108 | 4,377 | 499 | 3,878 | 1997 | 2005 | 35 years | ||||||||||||||
3801 |
Elmcroft of Timberlin Parc | Jacksonville | FL | 455 | 5,905 | | 455 | 5,905 | 6,360 | 366 | 5,994 | 1998 | 2006 | 35 years | ||||||||||||||
3100 |
Winterville Retirement | Winterville | GA | 243 | 7,418 | | 243 | 7,418 | 7,661 | 862 | 6,799 | 1999 | 2005 | 35 years | ||||||||||||||
3101 |
Greenwood Gardens | Marietta | GA | 706 | 3,132 | | 706 | 3,132 | 3,838 | 417 | 3,421 | 1997 | 2005 | 35 years | ||||||||||||||
3103 |
Peachtree Estates | Dalton | GA | 501 | 5,229 | | 501 | 5,229 | 5,730 | 643 | 5,087 | 2000 | 2005 | 35 years | ||||||||||||||
3104 |
Tara Plantation | Cumming | GA | 1,381 | 7,707 | | 1,381 | 7,707 | 9,088 | 919 | 8,169 | 1998 | 2005 | 35 years | ||||||||||||||
3107 |
The Sanctuary at Northstar | Kennesaw | GA | 906 | 5,614 | | 906 | 5,614 | 6,520 | 654 | 5,866 | 2001 | 2005 | 35 years | ||||||||||||||
3826 |
Elmcroft of Martinez | Martinez | GA | 408 | 6,764 | | 408 | 6,764 | 7,172 | 290 | 6,882 | 1997 | 2007 | 35 years | ||||||||||||||
3603 |
The Harrison | Indianapolis | IN | 1,200 | 5,740 | | 1,200 | 5,740 | 6,940 | 645 | 6,295 | 1985 | 2005 | 35 years | ||||||||||||||
3606 |
Georgetowne Place | Fort Wayne | IN | 1,315 | 18,185 | | 1,315 | 18,185 | 19,500 | 1,724 | 17,776 | 1987 | 2005 | 35 years | ||||||||||||||
3607 |
Towne Centre | Merrillville | IN | 1,291 | 27,709 | | 1,291 | 27,709 | 29,000 | 4,214 | 24,786 | 1987 | 2006 | 35 years | ||||||||||||||
3827 |
Elmcroft of Muncie | Muncie | IN | 244 | 11,218 | | 244 | 11,218 | 11,462 | 481 | 10,981 | 1998 | 2007 | 35 years | ||||||||||||||
2510 |
Heritage Woods | Agawam | MA | 1,249 | 4,625 | | 1,249 | 4,625 | 5,874 | 1,074 | 4,800 | 1997 | 2004 | 30 years | ||||||||||||||
2805 |
The Village at Farm Pond | Framingham | MA | 5,819 | 33,361 | | 5,819 | 33,361 | 39,180 | 4,033 | 35,147 | 1999 | 2004 | 35 years | ||||||||||||||
2806 |
Whitehall Estate | Hyannis | MA | 1,277 | 9,063 | | 1,277 | 9,063 | 10,340 | 1,033 | 9,307 | 1999 | 2005 | 35 years | ||||||||||||||
3608 |
Rose Arbor | Maple Grove | MN | 1,140 | 12,421 | | 1,140 | 12,421 | 13,561 | 1,812 | 11,749 | 2000 | 2006 | 35 years | ||||||||||||||
3609 |
Wildflower Lodge | Maple Grove | MN | 504 | 5,035 | | 504 | 5,035 | 5,539 | 737 | 4,802 | 1981 | 2006 | 35 years | ||||||||||||||
3802 |
Elmcroft of Little Avenue | Charlotte | NC | 250 | 5,077 | | 250 | 5,077 | 5,327 | 314 | 5,013 | 1997 | 2006 | 35 years | ||||||||||||||
3846 |
Elmcroft of Northridge | Raleigh | NC | 184 | 3,592 | | 184 | 3,592 | 3,776 | 222 | 3,554 | 1984 | 2006 | 35 years | ||||||||||||||
3602 |
Crown Pointe | Omaha | NE | 1,316 | 11,950 | | 1,316 | 11,950 | 13,266 | 1,225 | 12,041 | 1985 | 2005 | 35 years | ||||||||||||||
3600 |
The Amberleigh | Amherst | NY | 3,498 | 19,097 | | 3,498 | 19,097 | 22,595 | 2,094 | 20,501 | 1988 | 2005 | 35 years | ||||||||||||||
3812 |
Outlook Pointe at Ontario | Mansfield | OH | 523 | 7,968 | | 523 | 7,968 | 8,491 | 493 | 7,998 | 1998 | 2006 | 35 years | ||||||||||||||
3813 |
Outlook Pointe at Medina | Medina | OH | 661 | 9,788 | | 661 | 9,788 | 10,449 | 606 | 9,843 | 1999 | 2006 | 35 years | ||||||||||||||
3814 |
Outlook Pointe at Washington Township | Miamisburg | OH | 1,235 | 12,611 | | 1,235 | 12,611 | 13,846 | 781 | 13,065 | 1998 | 2006 | 35 years | ||||||||||||||
3816 |
Outlook Pointe at Sagamore Hills | Sagamore Hills | OH | 980 | 12,604 | | 980 | 12,604 | 13,584 | 780 | 12,804 | 2000 | 2006 | 35 years | ||||||||||||||
3847 |
Outlook Pointe at Lima | Lima | OH | 490 | 3,368 | | 490 | 3,368 | 3,858 | 209 | 3,649 | 1998 | 2006 | 35 years | ||||||||||||||
3848 |
Outlook Pointe at Xenia | Xenia | OH | 653 | 2,801 | | 653 | 2,801 | 3,454 | 173 | 3,281 | 1999 | 2006 | 35 years |
137
Facility
|
Facility Name |
Location |
Initial Cost to
Company |
Costs
Capitalized Subsequent to Acquisition |
Gross Amount
Carried at Close of Period |
Total |
Accumulated
Depreciation |
NBV |
Date of
Construction |
Date
Acquired |
Life on
Which Depreciation in Income Statement is Computed |
||||||||||||||||||
City |
State /
|
Land |
Buildings and
Improvements |
Land |
Buildings and
Improvements |
||||||||||||||||||||||||
2501 |
Berkshire Commons | Reading | PA | 470 | 4,301 | | 470 | 4,301 | 4,771 | 872 | 3,899 | 1997 | 2004 | 30 years | |||||||||||||||
2502 |
Lehigh | Macungie | PA | 420 | 4,406 | | 420 | 4,406 | 4,826 | 871 | 3,955 | 1997 | 2004 | 30 years | |||||||||||||||
2503 |
Sanatoga Court | Pottstown | PA | 360 | 3,233 | | 360 | 3,233 | 3,593 | 657 | 2,936 | 1997 | 2004 | 30 years | |||||||||||||||
2504 |
Highgate at Paoli Pointe | Paoli | PA | 1,151 | 9,079 | | 1,151 | 9,079 | 10,230 | 1,650 | 8,580 | 1997 | 2004 | 30 years | |||||||||||||||
2511 |
Mifflin Court | Shillington | PA | 689 | 4,265 | | 689 | 4,265 | 4,954 | 700 | 4,254 | 1997 | 2004 | 35 years | |||||||||||||||
3815 |
Elmcroft of Shippensburg | Shippensburg | PA | 203 | 7,634 | | 203 | 7,634 | 7,837 | 473 | 7,364 | 1999 | 2006 | 35 years | |||||||||||||||
3817 |
Elmcroft of Dillsburg | Dillsburg | PA | 432 | 7,797 | | 432 | 7,797 | 8,229 | 483 | 7,746 | 1998 | 2006 | 35 years | |||||||||||||||
3818 |
Elmcroft of Lebanon | Lebanon | PA | 240 | 7,336 | | 240 | 7,336 | 7,576 | 454 | 7,122 | 1999 | 2006 | 35 years | |||||||||||||||
3849 |
Elmcroft of Allison Park | Allison Park | PA | 1,171 | 5,686 | | 1,171 | 5,686 | 6,857 | 352 | 6,505 | 1986 | 2006 | 35 years | |||||||||||||||
3850 |
Elmcroft of Altoona | Duncansville | PA | 331 | 4,729 | | 331 | 4,729 | 5,060 | 293 | 4,767 | 1997 | 2006 | 35 years | |||||||||||||||
3851 |
Elmcroft of Berwick | Berwick | PA | 111 | 6,741 | | 111 | 6,741 | 6,852 | 417 | 6,435 | 1998 | 2006 | 35 years | |||||||||||||||
3853 |
Elmcroft of Chippewa | Beaver Falls | PA | 1,394 | 8,586 | | 1,394 | 8,586 | 9,980 | 532 | 9,448 | 1998 | 2006 | 35 years | |||||||||||||||
3854 |
Elmcroft of Lewisburg | Lewisburg | PA | 232 | 5,666 | | 232 | 5,666 | 5,898 | 351 | 5,547 | 1999 | 2006 | 35 years | |||||||||||||||
3855 |
Elmcroft of Reedsville | Lewistown | PA | 189 | 5,170 | | 189 | 5,170 | 5,359 | 320 | 5,039 | 1998 | 2006 | 35 years | |||||||||||||||
3856 |
Elmcroft of Loyalsock | Montoursville | PA | 413 | 3,412 | | 413 | 3,412 | 3,825 | 211 | 3,614 | 1999 | 2006 | 35 years | |||||||||||||||
3857 |
Elmcroft of Reading | Reading | PA | 638 | 4,942 | | 638 | 4,942 | 5,580 | 306 | 5,274 | 1998 | 2006 | 35 years | |||||||||||||||
3858 |
Elmcroft of Saxonburg | Saxonburg | PA | 770 | 5,949 | | 770 | 5,949 | 6,719 | 368 | 6,351 | 1994 | 2006 | 35 years | |||||||||||||||
3859 |
Elmcroft of South Beaver | Darlington | PA | 627 | 3,220 | | 627 | 3,220 | 3,847 | 199 | 3,648 | 1984 | 2006 | 35 years | |||||||||||||||
3860 |
Elmcroft of State College | State College | PA | 320 | 7,407 | | 320 | 7,407 | 7,727 | 459 | 7,268 | 1997 | 2006 | 35 years | |||||||||||||||
3105 |
The Inn at Seneca | Seneca | SC | 365 | 2,768 | | 365 | 2,768 | 3,133 | 351 | 2,782 | 1999 | 2005 | 35 years | |||||||||||||||
3803 |
Elmcroft of Florence | Florence | SC | 108 | 7,620 | | 108 | 7,620 | 7,728 | 472 | 7,256 | 1998 | 2006 | 35 years | |||||||||||||||
3804 |
Elmcroft of Hamilton Place | Chattanooga | TN | 87 | 4,248 | | 87 | 4,248 | 4,335 | 263 | 4,072 | 1998 | 2006 | 35 years | |||||||||||||||
3819 |
Elmcroft of Kingsport | Kingsport | TN | 22 | 7,815 | | 22 | 7,815 | 7,837 | 484 | 7,353 | 2000 | 2006 | 35 years | |||||||||||||||
3861 |
Elmcroft of Hendersonville | Hendersonville | TN | 174 | 2,586 | | 174 | 2,586 | 2,760 | 160 | 2,600 | 1999 | 2006 | 35 years | |||||||||||||||
3862 |
Elmcroft of West Knoxville | Knoxville | TN | 439 | 10,697 | | 439 | 10,697 | 11,136 | 662 | 10,474 | 2000 | 2006 | 35 years | |||||||||||||||
3863 |
Elmcroft of Lebanon | Lebanon | TN | 180 | 7,086 | | 180 | 7,086 | 7,266 | 439 | 6,827 | 2000 | 2006 | 35 years | |||||||||||||||
3610 |
Whitley Place | Keller | TX | | 5,100 | | | 5,100 | 5,100 | 134 | 4,966 | 1998 | 2008 | 35 years | |||||||||||||||
3865 |
Elmcroft of Chesterfield | Richmond | VA | 829 | 6,534 | | 829 | 6,534 | 7,363 | 404 | 6,959 | 1999 | 2006 | 35 years | |||||||||||||||
3820 |
Elmcroft of Martinsburg | Martinsburg | WV | 248 | 8,320 | | 248 | 8,320 | 8,568 | 515 | 8,053 | 1999 | 2006 | 35 years | |||||||||||||||
TOTAL FOR OTHER SENIORS HOUSING FACILITIES |
89,150 | 777,308 | 651 | 89,150 | 777,959 | 867,109 | 71,726 | 795,383 | |||||||||||||||||||||
TOTAL FOR SENIORS HOUSING FACILITIES |
431,303 | 4,319,923 | (44,604 | ) | 425,073 | 4,281,549 | 4,706,622 | 418,918 | 4,287,704 | ||||||||||||||||||||
PERSONAL CARE FACILITIES |
|||||||||||||||||||||||||||||
3718,19,21-28 |
ResCare - Tangram - 8 sites | San Marcos | TX | 616 | 6,517 | | 616 | 6,517 | 7,133 | 3,340 | 3,793 | N/A | 1998 | 20 years | |||||||||||||||
TOTAL FOR PERSONAL CARE FACILITIES |
616 | 6,517 | | 616 | 6,517 | 7,133 | 3,340 | 3,793 | |||||||||||||||||||||
MEDICAL OFFICE BUILDINGS |
|||||||||||||||||||||||||||||
2951 |
Potomac Medical Plaza | Aurora | CO | 2,401 | 9,118 | 885 | 2,442 | 9,962 | 12,404 | 1,072 | 11,332 | 1986 | 2007 | 35 years | |||||||||||||||
2952 |
Briargate Medical Campus | Colorado Springs | CO | 1,238 | 12,301 | 141 | 1,238 | 12,442 | 13,680 | 622 | 13,058 | 2002 | 2007 | 35 years | |||||||||||||||
2953 |
Printers Park Medical Plaza | Colorado Springs | CO | 2,641 | 47,507 | 51 | 2,659 | 47,540 | 50,199 | 2,633 | 47,566 | 1999 | 2007 | 35 years | |||||||||||||||
3071 |
Parker II MOB | Parker | CO | | 3,457 | | | 3,457 | 3,457 | | 3,457 | CIP | CIP | N/A | |||||||||||||||
2902 |
JFK Medical Plaza | Lake Worth | FL | 453 | 1,711 | 79 | 453 | 1,790 | 2,243 | 219 | 2,024 | 1999 | 2004 | 35 years | |||||||||||||||
2903 |
Palms West Building 6 | Loxahatchee | FL | 965 | 2,678 | 8 | 965 | 2,686 | 3,651 | 339 | 3,312 | 2000 | 2004 | 35 years |
138
Facility
|
Facility Name |
Location |
Initial Cost to Company |
Costs
Capitalized Subsequent to Acquisition |
Gross Amount
Carried at Close of Period |
Total |
Accumulated
Depreciation |
NBV |
Date of
Construction |
Date
Acquired |
Life on
Which Depreciation in Income Statement is Computed |
||||||||||||||||||||||||||
City |
State /
|
Land |
Buildings and
Improvements |
Land |
Buildings and
Improvements |
||||||||||||||||||||||||||||||||
2904 |
Regency Medical Park Phase II | Melbourne | FL | 770 | 3,809 | 19 | 770 | 3,828 | 4,598 | 468 | 4,130 | 1998 | 2004 | 35 years | |||||||||||||||||||||||
2905 |
Regency Medical Office Park Phase I | Melbourne | FL | 590 | 3,156 | 18 | 590 | 3,174 | 3,764 | 388 | 3,376 | 1995 | 2004 | 35 years | |||||||||||||||||||||||
2906 |
University Medical Office Building | Tamarac | FL | | 6,690 | | | 6,690 | 6,690 | 318 | 6,372 | 2006 | 2007 | 35 years | |||||||||||||||||||||||
2907 |
Aventura Medical Arts Building | Aventura | FL | | 25,361 | 843 | | 26,204 | 26,204 | 1,239 | 24,965 | 2006 | 2007 | 35 years | |||||||||||||||||||||||
3006 |
Eastside Physicians Center | Snellville | GA | 1,289 | 25,019 | | 1,289 | 25,019 | 26,308 | 339 | 25,969 | 1994 | 2008 | 35 years | |||||||||||||||||||||||
3007 |
Eastside Physicians Plaza | Snellville | GA | 294 | 12,948 | | 294 | 12,948 | 13,242 | 156 | 13,086 | 2003 | 2008 | 35 years | |||||||||||||||||||||||
2950 |
Broadway Medical Office Building | Kansas City | MO | 1,300 | 12,506 | 954 | 1,300 | 13,460 | 14,760 | 1,452 | 13,308 | 1976 | 2007 | 35 years | |||||||||||||||||||||||
3004 |
Lacey Branch Office Building | Forked River | NJ | 63 | 621 | | 63 | 621 | 684 | 118 | 566 | 1996 | 2004 | 30 years | |||||||||||||||||||||||
2925 |
Anderson Medical Arts Building I | Cincinnati | OH | | 9,632 | 99 | | 9,731 | 9,731 | 566 | 9,165 | 1984 | 2007 | 35 years | |||||||||||||||||||||||
2926 |
Anderson Medical Arts Building II | Cincinnati | OH | | 15,123 | 105 | | 15,228 | 15,228 | 791 | 14,437 | 2007 | 2007 | 35 years | |||||||||||||||||||||||
3002 |
Professional Office Building I | Upland | PA | | 6,283 | 208 | | 6,491 | 6,491 | 1,216 | 5,275 | 1978 | 2004 | 30 years | |||||||||||||||||||||||
3003 |
DCMH Medical Office Building | Drexel Hill | PA | | 10,424 | 519 | | 10,943 | 10,943 | 2,046 | 8,897 | 1984 | 2004 | 30 years | |||||||||||||||||||||||
3070 |
Greenville MOB | Greenville | SC | | 8,962 | | | 8,962 | 8,962 | | 8,962 | CIP | CIP | N/A | |||||||||||||||||||||||
2901 |
Abilene Medical Commons I | Abilene | TX | 179 | 1,611 | | 179 | 1,611 | 1,790 | 203 | 1,587 | 2000 | 2004 | 35 years | |||||||||||||||||||||||
3060 |
Bayshore Surgery Center MOB | Pasadena | TX | 765 | 9,123 | 137 | 765 | 9,260 | 10,025 | 1,060 | 8,965 | 2001 | 2005 | 35 years | |||||||||||||||||||||||
3061 |
Bayshore Rehabilitation Center MOB | Pasadena | TX | 95 | 1,128 | | 95 | 1,128 | 1,223 | 126 | 1,097 | 1988 | 2005 | 35 years | |||||||||||||||||||||||
3021/3020 |
Casper WY MOB | Casper | WY | 3,015 | 26,513 | | 3,015 | 26,513 | 29,528 | 388 | 29,140 | 2008 | 2008 | 35 years | |||||||||||||||||||||||
TOTAL FOR MEDICAL OFFICE BUILDINGS | 16,058 | 255,681 | 4,066 | 16,117 | 259,688 | 275,805 | 15,759 | 260,046 | |||||||||||||||||||||||||||||
TOTAL FOR ALL PROPERTIES | $ | 561,566 | $ | 5,639,907 | $ | (40,843 | ) | $ | 555,015 | $ | 5,605,615 | $ | 6,160,630 | $ | 987,691 | $ | 5,172,939 | ||||||||||||||||||||
* | Includes the impact of movements in the foreign currency exchange rate between acquisition date and December 31, 2008. |
139
VENTAS, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2008
For the Years Ended December 31, | |||||||||||
2008 | 2007 | 2006 | |||||||||
(In thousands) | |||||||||||
Reconciliation of real estate: |
|||||||||||
Carrying cost: |
|||||||||||
Balance at beginning of period |
$ | 6,292,181 | $ | 3,707,837 | $ | 3,027,896 | |||||
Additions during period: |
|||||||||||
Acquisitions |
93,901 | 2,619,050 | 679,573 | ||||||||
Capital expenditures |
16,359 | 8,188 | 368 | ||||||||
Dispositions: |
|||||||||||
Sale of assets |
(173,399 | ) | (82,274 | ) | | ||||||
Foreign currency translation |
(68,412 | ) | 39,380 | | |||||||
Balance at end of period |
$ | 6,160,630 | $ | 6,292,181 | $ | 3,707,837 | |||||
Accumulated depreciation: |
|||||||||||
Balance at beginning of period |
$ | 816,352 | $ | 659,584 | $ | 541,346 | |||||
Additions during period: |
|||||||||||
Depreciation expense |
200,132 | 175,494 | 118,238 | ||||||||
Acquisitionsminority interest share |
| 20,482 | | ||||||||
Dispositions: |
|||||||||||
Sale of assets |
(30,355 | ) | (40,212 | ) | | ||||||
Foreign currency translation |
1,562 | 1,004 | | ||||||||
Balance at end of period |
$ | 987,691 | $ | 816,352 | $ | 659,584 | |||||
140
ITEM 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Not applicable.
ITEM 9A. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2008. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of December 31, 2008, at the reasonable assurance level.
Internal Control over Financial Reporting
The information set forth under Management Report on Internal Control over Financial Reporting and Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting included in Part II, Item 8 of this Annual Report on Form 10-K is incorporated by reference into this Item 9A.
Internal Control Changes
During the fourth quarter of 2008, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. | Other Information |
Not
ITEM 10. | Directors, Executive Officers and Corporate Governance |
The information required by this Item 10 is incorporated by reference to the material under the headings Proposal 1Election of Directors, Executive Officers, Corporate Governance and Section 16(a) Beneficial Ownership Reporting Compliance in our definitive Proxy Statement for the 2009 Annual Meeting of Stockholders, which we will file with the Commission not later than April 30, 2009.
ITEM 11. | Executive Compensation |
The information required by this Item 11 is incorporated by reference to the material under the headings Non-Employee Director Compensation and Executive Compensation Matters in our definitive Proxy Statement for the 2009 Annual Meeting of Stockholders, which we will file with the Commission not later than April 30, 2009.
ITEM 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
The information required by this Item 12 is incorporated by reference to the material under the headings Equity Compensation Plan Information and Security Ownership of Principal Stockholders, Directors and Executive Officers in our definitive Proxy Statement for the 2009 Annual Meeting of Stockholders, which we will file with the Commission not later than April 30, 2009.
141
ITEM 13. | Certain Relationships and Related Transactions, and Director Independence |
The information required by this Item 13 is incorporated by reference to the material under the headings Transactions with Related Persons and Corporate Governance in our definitive Proxy Statement for the 2009 Annual Meeting of Stockholders, which we will file with the Commission not later than April 30, 2009.
ITEM 14. | Principal Accountant Fees and Services |
The information required by this Item 14 is incorporated by reference to the material under the heading Audit Matters in our definitive Proxy Statement for the 2009 Annual Meeting of Stockholders, which we will file with
ITEM 15. | Exhibits and Financial Statement Schedules |
Financial Statements and Financial Statement Schedules
The following documents have been included in Part II, Item 8 of this Annual Report on Form 10-K:
All other schedules have been omitted because they are inapplicable, not required or the
142
Exhibits
Exhibit
|
Description of Document |
Location of Document |
||
3.1 |
Amended and Restated Certificate of Incorporation of Ventas, Inc., as amended. | Incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008. | ||
3.2 |
Third Amended and Restated Bylaws of Ventas, Inc. | Incorporated by reference to Exhibit 3.2 to our Annual Report on Form 10-K for the year ended December 31, 1997. | ||
4.1 |
Specimen common stock certificate. | Incorporated by reference to Exhibit 4.1 to our Annual Report on Form 10-K for the year ended December 31, 1998. | ||
4.2 |
Ventas, Inc. Distribution Reinvestment and Stock Purchase Plan. | Incorporated by reference to our Registration Statement on Form S-3, filed on November 28, 2008, File No. 333-155770. | ||
4.3 |
Registration Rights Agreement dated as of December 1, 2006 by and among Ventas, Inc. and Banc of America Securities LLC, J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Initial Purchasers. | Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K, filed on December 6, 2006. | ||
4.4 |
Certain instruments with respect to long-term debt of Ventas, Inc. and its consolidated subsidiaries are not filed herewith pursuant to Item 601(b)(4)(iii) of Regulation S-K, since the total amount of securities authorized under each such instrument does not exceed 10% of the total assets of Ventas, Inc. and its subsidiaries on a consolidated basis. Ventas, Inc. agrees to furnish a copy of any such instrument to the Commission upon request. | |||
10.1.1 |
Second Amended and Restated Master Lease Agreement No. 1 dated as of April 27, 2007 for lease executed by Ventas Realty, Limited Partnership, as Lessor, and Kindred Healthcare, Inc. and Kindred Healthcare Operating, Inc., as Tenant. | Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on May 3, 2007. | ||
10.1.2 |
Second Amended and Restated Master Lease Agreement No. 2 dated as of April 27, 2007 for lease executed by Ventas Realty, Limited Partnership, as Lessor, and Kindred Healthcare, Inc. and Kindred Healthcare Operating, Inc., as Tenant. | Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed on May 3, 2007. | ||
10.1.3 |
Second Amended and Restated Master Lease Agreement No. 3 dated as of April 27, 2007 for lease executed by Ventas Realty, Limited Partnership, as Lessor, and Kindred Healthcare, Inc. and Kindred Healthcare Operating, Inc., as Tenant. | Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K, filed on May 3, 2007. |
143
Exhibit
|
Description of Document |
Location of Document |
||
10.1.4 |
Second Amended and Restated Master Lease Agreement No. 4 dated as of April 27, 2007 for lease executed by Ventas Realty, Limited Partnership, as Lessor, and Kindred Healthcare, Inc. and Kindred Healthcare Operating, Inc., as Tenant. | Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K, filed on May 3, 2007. | ||
10.2.1 |
Form of Property Lease Agreement with respect to the Brookdale properties. | Incorporated by reference to Exhibit 10.13 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.2.2 |
Form of Lease Guaranty with respect to the Brookdale properties. | Incorporated by reference to Exhibit 10.16 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.2.3 |
Schedule of Agreements Substantially Identical in All Material Respects to the agreements incorporated by reference as Exhibits 10.2.1 and 10.2.2 to this Annual Report on Form 10-K, pursuant to Instruction 2 to Item 601 of Regulation S-K. | Incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. | ||
10.2.4.1 |
Agreement Regarding Leases dated as of October 19, 2004 by and between Brookdale Provident Properties LLC and PSLT-BLC Properties Holdings, LLC. | Incorporated by reference to Exhibit 10.14 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.2.4.2 |
Letter Agreement dated March 28, 2005 by and among Brookdale Provident Properties LLC, PSLT-BLC Properties Holdings, LLC and Ventas Provident, LLC (successor to Provident Senior Living Trust). | Incorporated by reference to Exhibit 10.19 to Amendment No. 4 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on April 11, 2005, File No. 333-120206. | ||
10.2.4.3 |
First Amendment to Agreement Regarding Leases dated as of February 11, 2009 by and between PSLT-BLC Properties Holdings, LLC, Brookdale Provident Properties LLC, Brookdale Provident Management LLC and Ventas Provident, LLC. | Filed herewith. | ||
10.2.5 |
Guaranty of Agreement Regarding Leases dated as of October 19, 2004 by Brookdale Living Communities, Inc. in favor of PSLT-BLC Properties Holdings, LLC. | Incorporated by reference to Exhibit 10.15 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.2.6.1 |
Tax Matters Agreement dated as of June 18, 2004 by and among Fortress Brookdale Acquisition LLC, BLC Senior Holdings, Inc. and Ventas Provident, LLC (successor to Provident Senior Living Trust). | Incorporated by reference to Exhibit 10.17 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. |
144
Exhibit
|
Description of Document |
Location of Document |
||
10.2.6.2 |
Letter Agreement dated March 28, 2005 by and among Fortress Brookdale Acquisition LLC, Brookdale Living Communities, Inc. and Ventas Provident, LLC (successor to Provident Senior Living Trust) relating to the Tax Matters Agreement. | Incorporated by reference to Exhibit 10.20 to Amendment No. 4 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on April 11, 2005, File No. 333-120206. | ||
10.2.7.1 |
Stock Purchase Agreement, dated as of June 18, 2004, among Fortress Brookdale Acquisition LLC, Ventas Provident, LLC (successor to Provident Senior Living Trust) and BLC Senior Holdings, Inc. | Incorporated by reference to Exhibit 10.10 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.2.7.2 |
Amendment No. 1 to Stock Purchase Agreement dated as of August 2, 2004 among Fortress Brookdale Acquisition LLC, Ventas Provident, LLC (successor to Provident Senior Living Trust) and BLC Senior Holdings, Inc. | Incorporated by reference to Exhibit 10.11 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.2.7.3 |
Amendment No. 2 to Stock Purchase Agreement dated as of October 17, 2004 among Fortress Brookdale Acquisition LLC, Ventas Provident, LLC (successor to Provident Senior Living Trust) and BLC Senior Holdings, Inc. | Incorporated by reference to Exhibit 10.12 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.2.8 |
Amended and Restated Stock Purchase Agreement, dated as of October 19, 2004, between Alterra Healthcare Corporation and Ventas Provident, LLC (successor to Provident Senior Living Trust). | Incorporated by reference to Exhibit 10.18 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.3.1 |
Credit and Guaranty Agreement dated as of April 26, 2006 among Ventas Realty, Limited Partnership, as borrower, Ventas, Inc. and the other guarantors named therein, as guarantors, Bank of America, N.A., as Administrative Agent, Issuing Bank and Swingline Lender, and the lenders identified therein. | Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 2, 2006. | ||
10.3.2 |
Modification Agreement dated as of March 30, 2007 to Credit and Guaranty Agreement among Ventas Realty, Limited Partnership, the Guarantors and Lenders signatory thereto and Bank of America, N.A. | Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2007. | ||
10.3.3 |
First Amendment dated as of July 27, 2007 to Credit and Guaranty Agreement among Ventas Realty, Limited Partnership, the Guarantors and Lenders signatory thereto and Bank of America, N.A. | Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on August 1, 2007. |
145
Exhibit
|
Description of Document |
Location of Document |
||
10.3.4 |
Second Amendment dated as of March 13, 2008 to Credit and Guaranty Agreement among Ventas Realty, Limited Partnership and the other Borrowers identified therein, the Guarantors and Lenders Signatory thereto and Bank of America, N.A. | Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008. | ||
10.4 |
Letter Agreement dated as of January 14, 2007 between Ventas, Inc. and Sunrise Senior Living, Inc. | Incorporated by reference to Exhibit 10.4 to our Annual Report on Form 10-K for the year ended December 31, 2006. | ||
10.5.1 |
Agreement Regarding Leases dated as of November 7, 2006 by and between Senior Care Operations Holdings, LLC and Ventas Realty, Limited Partnership. | Incorporated by reference to Exhibit 10.9.1 to our Annual Report on Form 10-K for the year ended December 31, 2006. | ||
10.5.2 |
Guaranty of Agreement Regarding Leases dated as of November 7, 2006 by Senior Care, Inc. in favor of Ventas Realty, Limited Partnership. | Incorporated by reference to Exhibit 10.9.2 to our Annual Report on Form 10-K for the year ended December 31, 2006. | ||
10.6 |
Interim Loan and Guaranty Agreement dated as of April 26, 2007 among Ventas, Inc., Ventas Realty, Limited Partnership, Merrill Lynch Capital Corporation, as Administrative Agent, Citigroup Global Markets Inc., as Syndication Agent, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Book Runners, and the lenders referred to therein. | Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on May 1, 2007. | ||
10.7 |
Purchase Agreement dated April 26, 2007 between Ventas, Inc., Ventas Realty, Limited Partnership and the Purchasers named therein. | Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed on May 1, 2007. | ||
10.8* |
Ventas, Inc. 2000 Incentive Compensation Plan, as amended. | Incorporated by reference to Exhibit 10.14.1 to our Annual Report on Form 10-K for the year ended December 31, 2004. | ||
10.9* |
Ventas, Inc. 2004 Stock Plan for Directors, as amended. | Incorporated by reference to Exhibit 10.16.1 to our Annual Report on Form 10-K for the year ended December 31, 2004. | ||
10.10.1* |
Ventas, Inc. 2006 Incentive Plan, as amended. | Filed herewith. | ||
10.10.2* |
Form of Stock Option Agreement2006 Incentive Plan. | Incorporated by reference to Exhibit 10.15.2 to our Annual Report on Form 10-K for the year ended December 31, 2006. | ||
10.10.3* |
Form of Restricted Stock Agreement2006 Incentive Plan. | Incorporated by reference to Exhibit 10.15.3 to our Annual Report on Form 10-K for the year ended December 31, 2006. | ||
10.11.1* |
Ventas, Inc. 2006 Stock Plan for Directors, as amended. | Filed herewith. | ||
10.11.2* |
Form of Stock Option Agreement2006 Stock Plan for Directors. | Filed herewith. |
146
Exhibit
|
Description of Document |
Location of Document |
||
10.11.3* |
Form of Restricted Stock Agreement2006 Stock Plan for Directors. | Filed herewith. | ||
10.11.4* |
Form of Restricted Stock Unit Agreement2006 Stock Plan for Directors. | Filed herewith. | ||
10.12.1* |
Ventas Executive Deferred Stock Compensation Plan, as amended. | Filed herewith. | ||
10.12.2* |
Deferral Election Form under the Ventas Executive Deferred Stock Compensation Plan. | Filed herewith. | ||
10.13.1* |
Ventas Nonemployee Directors Deferred Stock Compensation Plan, as amended. | Filed herewith. | ||
10.13.2* |
Deferral Election Form under the Ventas Nonemployee Directors Deferred Stock Compensation Plan. | Filed herewith. | ||
10.14.1* |
Amended and Restated Employment Agreement dated as of December 28, 2006 between Ventas, Inc. and Debra A. Cafaro. | Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on January 5, 2007. | ||
10.14.2* |
Amendment dated as of December 31, 2008 to Amended and Restated Employment Agreement between Ventas, Inc. and Debra A. Cafaro. | Filed herewith. | ||
10.15.1* |
Employment Agreement dated as of July 31, 1998 between Ventas, Inc. and T. Richard Riney. | Incorporated by reference to Exhibit 10.15.2.1 to our Annual Report on Form 10-K for the year ended December 31, 2002. | ||
10.15.2* |
Amendment dated as of September 30, 1999 to Employment Agreement between Ventas, Inc. and T. Richard Riney. | Incorporated by reference to Exhibit 10.15.2.2 to our Annual Report on Form 10-K for the year ended December 31, 2002. | ||
10.15.3* |
Amendment dated as of March 19, 2007 to Employment Agreement between Ventas, Inc. and T. Richard Riney. | Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on March 23, 2007. | ||
10.15.4* |
Amendment dated as of December 31, 2008 to Employment Agreement between Ventas, Inc. and T. Richard Riney. | Filed herewith. | ||
10.15.5* |
Change-in-Control Severance Agreement dated as of May 1, 1998 between Ventas, Inc. and T. Richard Riney. | Incorporated by reference to Exhibit 10.15.2.3 to our Annual Report on Form 10-K for the year ended December 31, 2002. | ||
10.15.6* |
Amendment dated as of September 30, 1999 to Change-in-Control Severance Agreement between Ventas, Inc. and T. Richard Riney. | Incorporated by reference to Exhibit 10.15.2.4 to our Annual Report on Form 10-K for the year ended December 31, 2002. | ||
10.15.7* |
Amendment dated as of March 19, 2007 to Change-in-Control Severance Agreement between Ventas, Inc. and T. Richard Riney. | Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on March 23, 2007. | ||
10.15.8* |
Amendment dated as of December 31, 2008 to Change-in-Control Severance Agreement between Ventas, Inc. and T. Richard Riney. | Filed herewith. | ||
10.16.1* |
Amended and Restated Employment Agreement dated as of December 31, 2004 between Ventas, Inc. and Richard A. Schweinhart. | Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on January 6, 2005. |
147
Exhibit
|
Description of Document |
Location of Document |
||
10.16.2* |
Amendment dated as of March 19, 2007 to Amended and Restated Employment Agreement between Ventas, Inc. and Richard A. Schweinhart. | Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed on March 23, 2007. | ||
10.16.3* |
Amendment dated as of December 31, 2008 to Amended and Restated Employment Agreement between Ventas, Inc. and Richard A. Schweinhart. | Filed herewith. | ||
10.17.1* |
Employment Agreement dated as of September 18, 2002 between Ventas, Inc. and Raymond J. Lewis. | Incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2002. | ||
10.17.2* |
Amendment dated as of March 19, 2007 to Employment Agreement between Ventas, Inc. and Raymond J. Lewis. | Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K, filed on March 23, 2007. | ||
10.17.3* |
Amendment dated as of December 31, 2008 to Employment Agreement between Ventas, Inc. and Raymond J. Lewis. | Filed herewith. | ||
10.18* |
Ventas Employee and Director Stock Puchase Plan, as amended. | Filed herewith. | ||
10.19 |
First Amended and Restated Agreement of Limited Partnership of Ventas Realty, Limited Partnership. | Incorporated by reference to Exhibit 3.5 to our Registration Statement on Form S-4, as amended, File No. 333-89312. | ||
10.20.1 |
Second Amended and Restated Agreement of Limited Partnership of ETOP. | Incorporated by reference to Exhibit 10.1 to ElderTrusts Annual Report on Form 10-K for the year ended December 31, 1997. | ||
10.20.2 |
Second Amendment to Second Amended and Restated Agreement of Limited Partnership of ETOP, dated October 13, 1999. | Incorporated by reference to Exhibit 3.2 to ElderTrusts Annual Report on Form 10-K for the year ended December 31, 1999. | ||
10.20.3 |
Consent of General Partner and Third Amendment to Second Amended and Restated Agreement of Limited Partnership of ETOP, dated June 7, 2005. | Incorporated by reference to Exhibit 4.1 to ETOPs Current Report on Form 8-K filed on June 10, 2005. | ||
10.21.1 |
Amended and Restated Agreement of Limited Partnership of PSLT OP, L.P. | Incorporated by reference to Exhibit 10.9 to Provident Senior Living Trusts Registration Statement on Form S-11, as amended, File No. 333-120206. | ||
10.21.2 |
Supplement to the Amended and Restated Agreement of Limited Partnership of PSLT OP, L.P., dated as of August 3, 2004. | Incorporated by reference to Exhibit 10.10 to Provident Senior Living Trusts Registration Statement on Form S-11, as amended, File No. 333-120206. | ||
12 |
Statement Regarding Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends. | Filed herewith. | ||
21 |
Subsidiaries of Ventas, Inc. | Filed herewith. | ||
23 |
Consent of Ernst & Young LLP. | Filed herewith. |
148
Exhibit
|
Description of Document |
Location of Document |
||
31.1 |
Certification of Debra A. Cafaro, Chairman, President and Chief Executive Officer, pursuant to Rule 13a-14(a) under the Exchange Act. | Filed herewith. | ||
31.2 |
Certification of Richard A. Schweinhart, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) under the Exchange Act. | Filed herewith. | ||
32.1 |
Certification of Debra A. Cafaro, Chairman, President and Chief Executive Officer, pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. 1350. | Filed herewith. | ||
32.2 |
Certification of Richard A. Schweinhart, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. 1350. | Filed herewith. | ||
99.1 |
Settlement Agreement dated as of April 10, 2007 between Ventas, Inc. and Sunrise REIT. | Incorporated by reference to Exhibit 99.2 to our Current Report on Form 8-K, filed on April 12, 2007. |
* | Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(c) of Form 10-K. |
149
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 27, 2009
VENTAS, INC. | ||
By: |
/ S / D EBRA A. C AFARO |
|
Debra A. Cafaro | ||
Chairman, President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature |
Title |
Date |
||
/ S / D EBRA A. C AFARO Debra A. Cafaro |
Chairman, President and Chief Executive Officer (Principal Executive Officer) |
February 27, 2009 | ||
/ S / R ICHARD A. S CHWEINHART Richard A. Schweinhart |
Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
February 27, 2009 | ||
/ S / R OBERT J. B REHL Robert J. Brehl |
Chief Accounting Officer and Controller (Principal Accounting Officer) |
February 27, 2009 | ||
/ S / D OUGLAS C ROCKER II Douglas Crocker II |
Director | February 27, 2009 | ||
/ S / R ONALD G. G EARY Ronald G. Geary |
Director | February 27, 2009 | ||
/ S / J AY M. G ELLERT Jay M. Gellert |
Director | February 27, 2009 | ||
/ S / R OBERT D. R EED Robert D. Reed |
Director | February 27, 2009 | ||
/ S / S HELI Z. R OSENBERG Sheli Z. Rosenberg |
Director | February 27, 2009 | ||
/ S / J AMES D. S HELTON James D. Shelton |
Director | February 27, 2009 | ||
/ S / T HOMAS C. T HEOBALD Thomas C. Theobald |
Director | February 27, 2009 | ||
150
EXHIBIT INDEX
Exhibit
|
Description of Document |
Location of Document |
||
3.1 |
Amended and Restated Certificate of Incorporation of Ventas, Inc., as amended. | Incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008. | ||
3.2 |
Third Amended and Restated Bylaws of Ventas, Inc. | Incorporated by reference to Exhibit 3.2 to our Annual Report on Form 10-K for the year ended December 31, 1997. | ||
4.1 |
Specimen common stock certificate. | Incorporated by reference to Exhibit 4.1 to our Annual Report on Form 10-K for the year ended December 31, 1998. | ||
4.2 |
Ventas, Inc. Distribution Reinvestment and Stock Purchase Plan. | Incorporated by reference to our Registration Statement on Form S-3, filed on November 28, 2008, File No. 333-155770. | ||
4.3 |
Registration Rights Agreement dated as of December 1, 2006 by and among Ventas, Inc. and Banc of America Securities LLC, J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Initial Purchasers. | Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K, filed on December 6, 2006. | ||
4.4 |
Certain instruments with respect to long-term debt of Ventas, Inc. and its consolidated subsidiaries are not filed herewith pursuant to Item 601(b)(4)(iii) of Regulation S-K, since the total amount of securities authorized under each such instrument does not exceed 10% of the total assets of Ventas, Inc. and its subsidiaries on a consolidated basis. Ventas, Inc. agrees to furnish a copy of any such instrument to the Commission upon request. | |||
10.1.1 |
Second Amended and Restated Master Lease Agreement No. 1 dated as of April 27, 2007 for lease executed by Ventas Realty, Limited Partnership, as Lessor, and Kindred Healthcare, Inc. and Kindred Healthcare Operating, Inc., as Tenant. | Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on May 3, 2007. | ||
10.1.2 |
Second Amended and Restated Master Lease Agreement No. 2 dated as of April 27, 2007 for lease executed by Ventas Realty, Limited Partnership, as Lessor, and Kindred Healthcare, Inc. and Kindred Healthcare Operating, Inc., as Tenant. | Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed on May 3, 2007. | ||
10.1.3 |
Second Amended and Restated Master Lease Agreement No. 3 dated as of April 27, 2007 for lease executed by Ventas Realty, Limited Partnership, as Lessor, and Kindred Healthcare, Inc. and Kindred Healthcare Operating, Inc., as Tenant. | Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K, filed on May 3, 2007. |
151
Exhibit
|
Description of Document |
Location of Document |
||
10.1.4 |
Second Amended and Restated Master Lease Agreement No. 4 dated as of April 27, 2007 for lease executed by Ventas Realty, Limited Partnership, as Lessor, and Kindred Healthcare, Inc. and Kindred Healthcare Operating, Inc., as Tenant. | Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K, filed on May 3, 2007. | ||
10.2.1 |
Form of Property Lease Agreement with respect to the Brookdale properties. | Incorporated by reference to Exhibit 10.13 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.2.2 |
Form of Lease Guaranty with respect to the Brookdale properties. | Incorporated by reference to Exhibit 10.16 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.2.3 |
Schedule of Agreements Substantially Identical in All Material Respects to the agreements incorporated by reference as Exhibits 10.2.1 and 10.2.2 to this Annual Report on Form 10-K, pursuant to Instruction 2 to Item 601 of Regulation S-K. | Incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. | ||
10.2.4.1 |
Agreement Regarding Leases dated as of October 19, 2004 by and between Brookdale Provident Properties LLC and PSLT-BLC Properties Holdings, LLC. | Incorporated by reference to Exhibit 10.14 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.2.4.2 |
Letter Agreement dated March 28, 2005 by and among Brookdale Provident Properties LLC, PSLT-BLC Properties Holdings, LLC and Ventas Provident, LLC (successor to Provident Senior Living Trust). | Incorporated by reference to Exhibit 10.19 to Amendment No. 4 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on April 11, 2005, File No. 333-120206. | ||
10.2.4.3 |
First Amendment to Agreement Regarding Leases dated as of February 11, 2009 by and between PSLT-BLC Properties Holdings, LLC, Brookdale Provident Properties LLC, Brookdale Provident Management LLC and Ventas Provident, LLC. | Filed herewith. | ||
10.2.5 |
Guaranty of Agreement Regarding Leases dated as of October 19, 2004 by Brookdale Living Communities, Inc. in favor of PSLT-BLC Properties Holdings, LLC. | Incorporated by reference to Exhibit 10.15 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.2.6.1 |
Tax Matters Agreement dated as of June 18, 2004 by and among Fortress Brookdale Acquisition LLC, BLC Senior Holdings, Inc. and Ventas Provident, LLC (successor to Provident Senior Living Trust). | Incorporated by reference to Exhibit 10.17 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. |
152
Exhibit
|
Description of Document |
Location of Document |
||
10.2.6.2 |
Letter Agreement dated March 28, 2005 by and among Fortress Brookdale Acquisition LLC, Brookdale Living Communities, Inc. and Ventas Provident, LLC (successor to Provident Senior Living Trust) relating to the Tax Matters Agreement. | Incorporated by reference to Exhibit 10.20 to Amendment No. 4 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on April 11, 2005, File No. 333-120206. | ||
10.2.7.1 |
Stock Purchase Agreement, dated as of June 18, 2004, among Fortress Brookdale Acquisition LLC, Ventas Provident, LLC (successor to Provident Senior Living Trust) and BLC Senior Holdings, Inc. | Incorporated by reference to Exhibit 10.10 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.2.7.2 |
Amendment No. 1 to Stock Purchase Agreement dated as of August 2, 2004 among Fortress Brookdale Acquisition LLC, Ventas Provident, LLC (successor to Provident Senior Living Trust) and BLC Senior Holdings, Inc. | Incorporated by reference to Exhibit 10.11 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.2.7.3 |
Amendment No. 2 to Stock Purchase Agreement dated as of October 17, 2004 among Fortress Brookdale Acquisition LLC, Ventas Provident, LLC (successor to Provident Senior Living Trust) and BLC Senior Holdings, Inc. | Incorporated by reference to Exhibit 10.12 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.2.8 |
Amended and Restated Stock Purchase Agreement, dated as of October 19, 2004, between Alterra Healthcare Corporation and Ventas Provident, LLC (successor to Provident Senior Living Trust). | Incorporated by reference to Exhibit 10.18 to Amendment No. 2 to Provident Senior Living Trusts Registration Statement on Form S-11, filed on January 18, 2005, File No. 333-120206. | ||
10.3.1 |
Credit and Guaranty Agreement dated as of April 26, 2006 among Ventas Realty, Limited Partnership, as borrower, Ventas, Inc. and the other guarantors named therein, as guarantors, Bank of America, N.A., as Administrative Agent, Issuing Bank and Swingline Lender, and the lenders identified therein. | Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 2, 2006. | ||
10.3.2 |
Modification Agreement dated as of March 30, 2007 to Credit and Guaranty Agreement among Ventas Realty, Limited Partnership, the Guarantors and Lenders signatory thereto and Bank of America, N.A. | Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2007. | ||
10.3.3 |
First Amendment dated as of July 27, 2007 to Credit and Guaranty Agreement among Ventas Realty, Limited Partnership, the Guarantors and Lenders signatory thereto and Bank of America, N.A. | Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on August 1, 2007. | ||
10.3.4 |
Second Amendment dated as of March 13, 2008 to Credit and Guaranty Agreement among Ventas Realty, Limited Partnership and the other Borrowers identified therein, the Guarantors and Lenders Signatory thereto and Bank of America, N.A. | Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008. |
153
Exhibit
|
Description of Document |
Location of Document |
||
10.4 |
Letter Agreement dated as of January 14, 2007 between Ventas, Inc. and Sunrise Senior Living, Inc. | Incorporated by reference to Exhibit 10.4 to our Annual Report on Form 10-K for the year ended December 31, 2006. | ||
10.5.1 |
Agreement Regarding Leases dated as of November 7, 2006 by and between Senior Care Operations Holdings, LLC and Ventas Realty, Limited Partnership. | Incorporated by reference to Exhibit 10.9.1 to our Annual Report on Form 10-K for the year ended December 31, 2006. | ||
10.5.2 |
Guaranty of Agreement Regarding Leases dated as of November 7, 2006 by Senior Care, Inc. in favor of Ventas Realty, Limited Partnership. | Incorporated by reference to Exhibit 10.9.2 to our Annual Report on Form 10-K for the year ended December 31, 2006. | ||
10.6 |
Interim Loan and Guaranty Agreement dated as of April 26, 2007 among Ventas, Inc., Ventas Realty, Limited Partnership, Merrill Lynch Capital Corporation, as Administrative Agent, Citigroup Global Markets Inc., as Syndication Agent, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Book Runners, and the lenders referred to therein. | Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on May 1, 2007. | ||
10.7 |
Purchase Agreement dated April 26, 2007 between Ventas, Inc., Ventas Realty, Limited Partnership and the Purchasers named therein. | Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed on May 1, 2007. | ||
10.8* |
Ventas, Inc. 2000 Incentive Compensation Plan, as amended. | Incorporated by reference to Exhibit 10.14.1 to our Annual Report on Form 10-K for the year ended December 31, 2004. | ||
10.9* |
Ventas, Inc. 2004 Stock Plan for Directors, as amended. | Incorporated by reference to Exhibit 10.16.1 to our Annual Report on Form 10-K for the year ended December 31, 2004. | ||
10.10.1* |
Ventas, Inc. 2006 Incentive Plan, as amended. | Filed herewith. | ||
10.10.2* |
Form of Stock Option Agreement2006 Incentive Plan. | Incorporated by reference to Exhibit 10.15.2 to our Annual Report on Form 10-K for the year ended December 31, 2006. | ||
10.10.3* |
Form of Restricted Stock Agreement2006 Incentive Plan. | Incorporated by reference to Exhibit 10.15.3 to our Annual Report on Form 10-K for the year ended December 31, 2006. | ||
10.11.1* |
Ventas, Inc. 2006 Stock Plan for Directors, as amended. | Filed herewith. | ||
10.11.2* |
Form of Stock Option Agreement2006 Stock Plan for Directors. | Filed herewith. | ||
10.11.3* |
Form of Restricted Stock Agreement2006 Stock Plan for Directors. | Filed herewith. | ||
10.11.4* |
Form of Restricted Stock Unit Agreement2006 Stock Plan for Directors. | Filed herewith. | ||
10.12.1* |
Ventas Executive Deferred Stock Compensation Plan, as amended. | Filed herewith. |
154
Exhibit
|
Description of Document |
Location of Document |
||
10.12.2* |
Deferral Election Form under the Ventas Executive Deferred Stock Compensation Plan. | Filed herewith. | ||
10.13.1* |
Ventas Nonemployee Directors Deferred Stock Compensation Plan, as amended. | Filed herewith. | ||
10.13.2* |
Deferral Election Form under the Ventas Nonemployee Directors Deferred Stock Compensation Plan. | Filed herewith. | ||
10.14.1* |
Amended and Restated Employment Agreement dated as of December 28, 2006 between Ventas, Inc. and Debra A. Cafaro. | Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on January 5, 2007. | ||
10.14.2* |
Amendment dated as of December 31, 2008 to Amended and Restated Employment Agreement between Ventas, Inc. and Debra A. Cafaro. | Filed herewith. | ||
10.15.1* |
Employment Agreement dated as of July 31, 1998 between Ventas, Inc. and T. Richard Riney. | Incorporated by reference to Exhibit 10.15.2.1 to our Annual Report on Form 10-K for the year ended December 31, 2002. | ||
10.15.2* |
Amendment dated as of September 30, 1999 to Employment Agreement between Ventas, Inc. and T. Richard Riney. | Incorporated by reference to Exhibit 10.15.2.2 to our Annual Report on Form 10-K for the year ended December 31, 2002. | ||
10.15.3* |
Amendment dated as of March 19, 2007 to Employment Agreement between Ventas, Inc. and T. Richard Riney. | Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on March 23, 2007. | ||
10.15.4* |
Amendment dated as of December 31, 2008 to Employment Agreement between Ventas, Inc. and T. Richard Riney. | Filed herewith. | ||
10.15.5* |
Change-in-Control Severance Agreement dated as of May 1, 1998 between Ventas, Inc. and T. Richard Riney. | Incorporated by reference to Exhibit 10.15.2.3 to our Annual Report on Form 10-K for the year ended December 31, 2002. | ||
10.15.6* |
Amendment dated as of September 30, 1999 to Change-in-Control Severance Agreement between Ventas, Inc. and T. Richard Riney. | Incorporated by reference to Exhibit 10.15.2.4 to our Annual Report on Form 10-K for the year ended December 31, 2002. | ||
10.15.7* |
Amendment dated as of March 19, 2007 to Change-in-Control Severance Agreement between Ventas, Inc. and T. Richard Riney. | Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on March 23, 2007. | ||
10.15.8* |
Amendment dated as of December 31, 2008 to Change-in-Control Severance Agreement between Ventas, Inc. and T. Richard Riney. | Filed herewith. | ||
10.16.1* |
Amended and Restated Employment Agreement dated as of December 31, 2004 between Ventas, Inc. and Richard A. Schweinhart. | Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on January 6, 2005. | ||
10.16.2* |
Amendment dated as of March 19, 2007 to Amended and Restated Employment Agreement between Ventas, Inc. and Richard A. Schweinhart. | Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed on March 23, 2007. |
155
Exhibit
|
Description of Document |
Location of Document |
||
10.16.3* |
Amendment dated as of December 31, 2008 to Amended and Restated Employment Agreement between Ventas, Inc. and Richard A. Schweinhart. | Filed herewith. | ||
10.17.1* |
Employment Agreement dated as of September 18, 2002 between Ventas, Inc. and Raymond J. Lewis. | Incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2002. | ||
10.17.2* |
Amendment dated as of March 19, 2007 to Employment Agreement between Ventas, Inc. and Raymond J. Lewis. | Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K, filed on March 23, 2007. | ||
10.17.3* |
Amendment dated as of December 31, 2008 to Employment Agreement between Ventas, Inc. and Raymond J. Lewis. | Filed herewith. | ||
10.18* |
Ventas Employee and Director Stock Purchase Plan, as amended. | Filed herewith. | ||
10.19 |
First Amended and Restated Agreement of Limited Partnership of Ventas Realty, Limited Partnership. | Incorporated by reference to Exhibit 3.5 to our Registration Statement on Form S-4, as amended, File No. 333-89312. | ||
10.20.1 |
Second Amended and Restated Agreement of Limited Partnership of ETOP. | Incorporated by reference to Exhibit 10.1 to ElderTrusts Annual Report on Form 10-K for the year ended December 31, 1997. | ||
10.20.2 |
Second Amendment to Second Amended and Restated Agreement of Limited Partnership of ETOP, dated October 13, 1999. | Incorporated by reference to Exhibit 3.2 to ElderTrusts Annual Report on Form 10-K for the year ended December 31, 1999. | ||
10.20.3 |
Consent of General Partner and Third Amendment to Second Amended and Restated Agreement of Limited Partnership of ETOP, dated June 7, 2005. | Incorporated by reference to Exhibit 4.1 to ETOPs Current Report on Form 8-K filed on June 10, 2005. | ||
10.21.1 |
Amended and Restated Agreement of Limited Partnership of PSLT OP, L.P. | Incorporated by reference to Exhibit 10.9 to Provident Senior Living Trusts Registration Statement on Form S-11, as amended, File No. 333-120206. | ||
10.21.2 |
Supplement to the Amended and Restated Agreement of Limited Partnership of PSLT OP, L.P., dated as of August 3, 2004. | Incorporated by reference to Exhibit 10.10 to Provident Senior Living Trusts Registration Statement on Form S-11, as amended, File No. 333-120206. | ||
12 |
Statement Regarding Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends. | Filed herewith. | ||
21 |
Subsidiaries of Ventas, Inc. | Filed herewith. | ||
23 |
Consent of Ernst & Young LLP. | Filed herewith. | ||
31.1 |
Certification of Debra A. Cafaro, Chairman, President and Chief Executive Officer, pursuant to Rule 13a-14(a) under the Exchange Act. | Filed herewith. |
156
Exhibit
|
Description of Document |
Location of Document |
||
31.2 |
Certification of Richard A. Schweinhart, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) under the Exchange Act. | Filed herewith. | ||
32.1 |
Certification of Debra A. Cafaro, Chairman, President and Chief Executive Officer, pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. 1350. | Filed herewith. | ||
32.2 |
Certification of Richard A. Schweinhart, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. 1350. | Filed herewith. | ||
99.1 |
Settlement Agreement dated as of April 10, 2007 between Ventas, Inc. and Sunrise REIT. | Incorporated by reference to Exhibit 99.2 to our Current Report on Form 8-K, filed on April 12, 2007. |
* | Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(c) of Form 10-K. |
157
Exhibit 10.2.4.3
FIRST AMENDMENT TO AGREEMENT REGARDING LEASES
(Brookdale Provident Properties)
THIS FIRST AMENDMENT TO AGREEMENT REGARDING LEASES (this Amendment ) is made and entered into as of the 11 th day of February, 2009, by and between PSLT-BLC PROPERTIES HOLDINGS, LLC , a Delaware limited liability company ( Landlord Holdings ), and BROOKDALE PROVIDENT PROPERTIES, LLC , a Delaware limited liability company ( Tenant Holdings ) and is joined for certain limited purposes by BROOKDALE PROVIDENT MANAGEMENT, LLC , a Delaware limited liability company ( Manager ), by the Brookdale Lessees, and by VENTAS PROVIDENT, LLC , a Delaware limited liability company ( Ventas Provident ), successor-in-interest to Provident Senior Living Trust, a Maryland real estate investment trust ( Provident Senior Living ).
WHEREAS, Landlord Holdings, Tenant Holdings and, for certain limited purposes, Manager, the Brookdale Lessees and Provident Senior Living are parties to that certain Agreement Regarding Leases dated as of October 19, 2004 (the Agreement Regarding Leases ), which has been modified by that certain Letter Agreement, dated as of October 19, 2004, and that certain Letter Agreement, dated as of March 28, 2005, each executed by Landlord Holdings and Tenant Holdings;
WHEREAS, Brookdale Living Communities, Inc., a Delaware corporation ( Second Tier Guarantor ) has delivered that certain Guaranty of Agreement Regarding Leases dated October 19, 2004, in favor of Landlord Holdings (the Second Tier Guaranty );
WHEREAS, simultaneously herewith, Brookdale Senior Living Inc., a Delaware corporation ( Parent Guarantor , and, together with Second Tier Guarantor, collectively, Guarantor ) has executed and delivered that certain guaranty of, among other things, the Agreement Regarding Leases and the Second Tier Guaranty (the Parent Guaranty and, together with the Second Tier Guaranty, collectively, the Guaranty ). Parent Guarantor is the parent and holder of 100% of the equity in Second Tier Guarantor;
WHEREAS, simultaneously herewith, the Provident Lessors and the Brookdale Lessees have executed and delivered that certain First Amendment to Leases. Landlord Holdings is the parent and holder of 100% equity in each of the Provident Lessors and Tenant Holdings is the parent and holder of 100% equity in each of the Brookdale Lessees;
WHEREAS, initially capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Agreement Regarding Leases;
WHEREAS, Landlord Holdings and Tenant Holdings desire to amend the Agreement Regarding Leases as hereinafter set forth in this Amendment.
NOW, THEREFORE , for good and valuable consideration, the receipt and sufficiency of which are acknowledged hereby, the parties hereto, intending to be legally bound, agree to incorporate the foregoing recitals as if the same were more particularly set forth in the body of this Amendment and further agree as follows:
1. Amendments . The Agreement Regarding Leases is hereby amended as set forth in this Section 1 .
1.1 The definitions of the capitalized terms in the recitals to this Amendment (including Guarantor) shall be deemed incorporated into the Agreement Regarding Leases.
1.2 The term Guaranty shall mean both the Parent Guaranty and the Second Tier Guaranty.
1.3 For the purpose of calculating the Lease Coverage Ratio, (i) the term Total Revenues shall not include any revenue received from any Affiliate of Tenant Holdings except rent, if any, from such Affiliate paid pursuant to a sublease approved by Landlord Holdings for which Landlord Holdings also expressly approved inclusion of such revenue in connection with the approval of such sublease (which Landlord Holdings may approve or deny in its sole and absolute discretion), and (ii) community fees actually collected during the period in question shall be considered revenue for the purposes of calculation of Total Revenues to the extent that such fees are fully earned by Tenant Holdings upon receipt and are non-refundable to the resident (or if refundable, to the extent the right to the refund expires).
1.4 Section 7(a)(xiv) of the Agreement Regarding Leases is hereby deleted and replaced with the following: if an Event of Default (as defined in the Parent Guaranty) shall have occurred under the Parent Guaranty or if the Second Tier Guarantor fails to perform any of the terms, covenants or conditions contained in the Second Tier Guaranty beyond any applicable notice and cure periods set forth therein.
1.5 Any Event of Default (as defined in the Agreement Regarding Leases) occurring as a result of the insolvency, whether actual or potential, of either of Tenant Holdings or Guarantor, may be waived by Landlord Holdings by written notice to Tenant Holdings, and such notice may be revoked at any time by written notice from Landlord Holdings.
2. Representations and Warranties of Tenant Holdings . Without limiting in any way any representation or warranty in the Agreement Regarding Leases or any document executed in connection therewith (collectively, the Lease Documents ), Tenant Holdings represents and warrants to Landlord Holdings that as of the date hereof:
2.1 Organization and Good Standing . Tenant Holdings and each Brookdale Lessee is duly organized, validly existing and in good standing under the laws of the State of its organization. Tenant Holdings and each Brookdale Lessee is qualified to do business in and is in good standing under the laws of the State in which the Facility leased by such Brookdale Lessee is located. Tenant Holdings and each Brookdale Lessee has delivered to Landlord Holdings true and complete copies of the documents, certificates and agreements pursuant to which Tenant Holdings and such Brookdale Lessee is organized to do business.
2.2 Power and Authority . Tenant Holdings has the power and authority to execute, deliver and perform this Amendment. Tenant Holdings has taken all requisite action necessary to authorize the execution, delivery and performance of Tenant Holdings obligations under this Amendment.
2.3 Consents . The execution, delivery and performance of this Amendment will not require any consent, approval, authorization, order, or declaration of, or any filing or registration with, any court, any Governmental Authority, or any other Person.
2.4 No Violation . The execution, delivery and performance of this Amendment (i) do not and will not conflict with, and do not and will not result in a breach of, any of Tenant Holdings organization documents; and (ii) do not and will not violate any order, writ, injunction, decree, statute, rule or regulation applicable to Tenant Holdings, any Brookdale Lessee or any of the Facilities.
2.5 Full and Accurate Disclosure . No statement of fact made by or on behalf of Tenant Holdings or any Brookdale Lessee in this Amendment or in any other document or certificate delivered to Landlord Holdings by Tenant Holdings or any Brookdale Lessee contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements contained herein or therein not misleading, including, without limitation, all of the financial information delivered by Tenant Holdings or any Brookdale Lessee prior or simultaneous to the execution of this Amendment, all of which Tenant Holdings hereby acknowledges were relied upon by Landlord Holdings in executing this Amendment. There is no fact presently known to Tenant Holdings which has not been disclosed to Landlord Holdings which has a material adverse effect.
2.6 Enforceability . This Amendment constitutes a legal, valid and binding obligation of Tenant Holdings, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally and general principles of equity.
2.7 No Defaults . To Tenant Holdings actual knowledge, (i) no Event of Default under the Agreement Regarding Leases or default under any of the other Lease Documents has occurred and (ii) no event has occurred or circumstance exists that, with the passage of time, giving of notice or both would become such an Event of Default or default.
2.8 No Offsets or Defenses . Through the date of this Amendment, and to Tenant Holdings knowledge, Tenant Holdings neither has, nor claims any offset, defense, claim, right of set-off or counterclaim against Landlord Holdings under, arising out of or in connection with this Amendment, the Agreement Regarding Leases or any of the other Lease Documents. In addition, Tenant Holdings covenants and agrees with Landlord Holdings that if any offset, defense, claim, right of set-off or counterclaim exists of which Tenant Holdings has knowledge as of the date of this Amendment, Tenant Holdings hereby irrevocably and expressly waives the right to assert such matter.
2.9 Damage or Injury . Since the date of the Agreement Regarding Leases, no Facility has been materially injured or damaged by fire or other Casualty except as Tenant Holdings may have previously disclosed to Landlord Holdings in writing.
2.10 Change . Since the date of the Agreement Regarding Leases, no material adverse change with respect to Tenant Holdings, any Facility or any Brookdale Lessee has occurred.
2.11 Representation and Warranties in Lease Agreement . All of the representations and warranties in Section 13(a) in the Agreement Regarding Leases are hereby re-made by Tenant Holdings and are true and correct as of the date hereof in all material respects.
3. Modifications . This Amendment may not be amended, modified or otherwise changed in any manner except by a writing executed by all of the parties hereto.
4. Severability . In case any provision of this Amendment shall be invalid, illegal, or unenforceable, such provision shall be deemed to have been modified to the extent necessary to make it valid, legal, and enforceable. The validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
5. Successors and Assigns . This Amendment applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, and permitted successors and assigns.
6. Governing Law . In all respects, the law of the State of New York shall govern the validity of and enforceability of the obligations of the parties set forth herein, but all provisions hereof relating to the creation of the leasehold estate and remedies set forth in the Agreement Regarding Leases, as amended hereby, shall be governed by the laws of the State in which each applicable Facility that is the subject of dispute is located.
7. Amendment Controlling; Full Force and Effect . This Amendment is considered by the parties to the Agreement Regarding Leases to be an integral part of such Agreement Regarding Leases. If there is any conflict between the terms of the Agreement Regarding Leases and this Amendment, the terms of this Amendment shall control. Except as expressly amended herein, all other terms, agreements, and conditions of the Agreement Regarding Leases shall remain unmodified and in full force and effect and none of the representations, warranties or covenants contained herein shall limit in any way any representation, warranty or covenant contained in any Lease Document. This Amendment shall constitute a Lease Document as defined herein.
8. Counterparts/Fax Signatures . This Amendment may be executed in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts when taken together will constitute one and the same agreement. Confirmation of the execution of this Amendment by telex or by telecopy or telefax of a facsimile page(s) executed by the parties shall have the same effect as an original.
[Signature Pages to Follow]
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written.
LANDLORD HOLDINGS : | ||||||||||
PSLT-BLC PROPERTIES HOLDINGS, LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: |
PSLT OP, LP, a Delaware limited partnership, its sole member |
|||||||||
By: | PSLT GP, LLC, a Delaware limited liability company, its sole member | |||||||||
By: | Ventas Provident, LLC, a Delaware limited liability company, its sole member | |||||||||
By: |
/s/ T. Richard Riney |
|||||||||
Name: | T. Richard Riney | |||||||||
Title: | Executive Vice President and Secretary |
TENANT HOLDINGS : | ||
BROOKDALE PROVIDENT PROPERTIES, LLC, | ||
a Delaware limited liability company | ||
By: |
/s/ Eric W. Hoaglund |
|
Name: | Eric W. Hoaglund | |
Title: | Vice President and Assistant Secretary |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
Manager joins into this Amendment for the purposes set forth in Paragraph 29 of the Agreement Regarding Leases:
Manager :
BROOKDALE PROVIDENT MANAGEMENT, LLC, | ||
a Delaware limited liability company | ||
By: |
/s/ Eric W. Hoaglund |
|
Name: | Eric W. Hoaglund | |
Title: | Vice President and Assistant Secretary |
Each of the Brookdale Lessees joins into this Amendment for the purposes set forth in Paragraph 14 and Paragraph 30 of the Agreement Regarding Leases:
BROOKDALE LESSEES : | ||||
BLC-SPRINGS AT EAST MESA, LLC, | ||||
a Delaware limited liability company | ||||
By: |
/s/ Eric W. Hoaglund |
|||
Name: | Eric W. Hoaglund | |||
Title: | Vice President and Assistant Secretary | |||
BLC-WOODSIDE TERRACE, L.P, a Delaware limited partnership |
||||
By: | BLC-Woodside Terrace, LLC, | |||
a Delaware Limited Liability company | ||||
By: |
/s/ Eric W. Hoaglund |
|||
Name: | Eric W. Hoaglund | |||
Title: | Vice President and Assistant Secretary |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
BLC-ATRIUM OF SAN JOSE, L.P., | ||||
a Delaware Limited partnership | ||||
By: | BLC-Atrium of San Jose, LLC, | |||
a Delaware limited liability company | ||||
By: |
/s/ Eric W. Hoaglund |
|||
Name: | Eric W. Hoaglund | |||
Title: | Vice President and Assistant Secretary | |||
BLC-BROOKDALE PLACE OF SAN MARCOS, L.P., a Delaware limited partnership |
||||
By: | BLC-Brookdale Place of San Marcos, LLC, | |||
a Delaware limited liability company | ||||
By: |
/s/ Eric W. Hoaglund |
|||
Name: | Eric W. Hoaglund | |||
Title: | Vice President and Assistant Secretary | |||
BLC-GABLES AT FARMINGTON, LLC, a Delaware limited liability company |
||||
By: |
/s/ Eric W. Hoaglund |
|||
Name: | Eric W. Hoaglund | |||
Title: | Vice President and Assistant Secretary | |||
BLC-CHATFIELD, LLC, a Delaware limited liability company |
||||
By: |
/s/ Eric W. Hoaglund |
|||
Name: | Eric W. Hoaglund | |||
Title: | Vice President and Assistant Secretary |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
BROOKDALE LIVING COMMUNITIES OF FLORIDA, INC., | ||
a Delaware corporation | ||
By: |
/s/ Eric W. Hoaglund |
|
Name: | Eric W. Hoaglund | |
Title: | Vice President and Assistant Secretary | |
BLC-THE HALLMARK LLC, a Delaware limited liability company |
||
By: |
/s/ Eric W. Hoaglund |
|
Name: | Eric W. Hoaglund | |
Title: | Vice President and Assistant Secretary | |
BLC-KENWOOD OF LAKE VIEW, LLC, a Delaware limited liability company |
||
By: |
/s/ Eric W. Hoaglund |
|
Name: | Eric W. Hoaglund | |
Title: | Vice President and Assistant Secretary | |
BLC-THE HERITAGE OF DES PLAINES, LLC. a Delaware limited liability company |
||
By: |
/s/ Eric W. Hoaglund |
|
Name: | Eric W. Hoaglund | |
Title: | Vice President and Assistant Secretary | |
BLC-DEVONSHIRE OF HOFFMAN ESTATES, LLC, a Delaware limited liability company |
||
By: |
/s/ Eric W. Hoaglund |
|
Name: | Eric W. Hoaglund | |
Title: | Vice President and Assistant Secretary |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
BLC-DEVONSHIRE OF LISLE, LLC, | ||||
a Delaware limited liability company | ||||
By: |
/s/ Eric W. Hoaglund |
|||
Name: | Eric W. Hoaglund | |||
Title: | Vice President and Assistant Secretary | |||
BLC-THE WILLOWS, LLC, a Delaware limited liability company |
||||
By: |
/s/ Eric W. Hoaglund |
|||
Name: | Eric W. Hoaglund | |||
Title: | Vice President and Assistant Secretary | |||
BLC-HAWTHORNE LAKES, LLC, a Delaware limited liability company |
||||
By: |
/s/ Eric W. Hoaglund |
|||
Name: | Eric W. Hoaglund | |||
Title: | Vice President and Assistant Secretary | |||
BLC-THE BERKSHIRE OF CASTLETON, L.P., a Delaware limited partnership |
||||
By: | BLC-The Berkshire of Castleton, LLC, | |||
a Delaware limited liability company, its general partner | ||||
By: |
/s/ Eric W. Hoaglund |
|||
Name: | Eric W. Hoaglund | |||
Title: | Vice President and Assistant Secretary |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
BLC-RIVER BAY CLUB, LLC, | ||
a Delaware limited liability company | ||
By: |
/s/ Eric W. Hoaglund |
|
Name: | Eric W. Hoaglund | |
Title: | Vice President and Assistant Secretary | |
BLC-EDINA PARK PLAZA, LLC, a Delaware limited liability company |
||
By: |
/s/ Eric W. Hoaglund |
|
Name: | Eric W. Hoaglund | |
Title: | Vice President and Assistant Secretary | |
BLC-BRENDENWOOD, LLC, a Delaware limited liability company |
||
By: |
/s/ Eric W. Hoaglund |
|
Name: | Eric W. Hoaglund | |
Title: | Vice President and Assistant Secretary | |
BLC-PONCE DE LEON, LLC, a Delaware limited liability company |
||
By: |
/s/ Eric W. Hoaglund |
|
Name: | Eric W. Hoaglund | |
Title: | Vice President and Assistant Secretary |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
BLC-THE GABLES AT BRIGHTON, LLC, |
||
a Delaware limited liability company | ||
By: |
/s/ Eric W. Hoaglund |
|
Name: | Eric W. Hoaglund | |
Title: | Vice President and Assistant Secretary | |
BLC-PARK PLACE, LLC, a Delaware limited liability company |
||
By: |
/s/ Eric W. Hoaglund |
|
Name: | Eric W. Hoaglund | |
Title: | Vice President and Assistant Secretary |
Each of the Provident Lessors joins into this Amendment for the purposes set forth in Paragraph 31 of the Agreement Regarding Leases:
PROVIDENT LESSORS :
BROOKDALE LIVING COMMUNITIES OF ARIZONA-EM, LLC, a Delaware limited liability company |
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By: | PSLT-BLC Properties Holdings, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | PSLT OP, LP, | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: | PSLT GP, LLC, | |||||||||||
a Delaware limited liability company, its sole general partner | ||||||||||||
By: | Ventas Provident, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: |
/s/ T. Richard Riney |
|||||||||||
Name: | T. Richard Riney | |||||||||||
Title: | Executive Vice President and Secretary |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
BROOKDALE LIVING COMMUNITIES OF CALIFORNIA-RC, LLC,
a Delaware limited liability company | ||||||||||||
By: | PSLT-BLC Properties Holdings, LLC, | |||||||||||
a Delaware limited liability company, its sole member |
||||||||||||
By: | PSLT OP, L.P., | |||||||||||
a Delaware limited partnership, its sole member |
||||||||||||
By: | PSLT GP, LLC, | |||||||||||
a Delaware limited liability company, its sole general partner |
||||||||||||
By: | Ventas Provident, LLC, | |||||||||||
a Delaware limited liability company, its sole member |
||||||||||||
By: |
/s/ T. Richard Riney |
|||||||||||
Name: | T. Richard Riney | |||||||||||
Title: | Executive Vice President and Secretary |
BROOKDALE LIVING COMMUNITIES OF CALIFORNIA, LLC,
a Delaware limited liability company | ||||||||||||
By: | PSLT-BLC Properties Holdings, LLC, | |||||||||||
a Delaware limited liability company, its sole member |
||||||||||||
By: | PSLT OP, L.P., | |||||||||||
a Delaware limited partnership, its sole member |
||||||||||||
By: | PSLT GP, LLC, | |||||||||||
a Delaware limited liability company, its sole general partner |
||||||||||||
By: | Ventas Provident, LLC, | |||||||||||
a Delaware limited liability company, its sole member |
||||||||||||
By: |
/s/ T. Richard Riney |
|||||||||||
Name: | T. Richard Riney | |||||||||||
Title: | Executive Vice President and Secretary |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
BLC OF CALIFORNIA-SAN MARCOS, L.P., |
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a Delaware limited partnership | ||||||||||||||
By: | Brookdale Living Communities of California-San Marcos, LLC, | |||||||||||||
a Delaware limited liability company | ||||||||||||||
By: | PSLT-BLC Properties Holdings, LLC, | |||||||||||||
a Delaware limited liability company, its sole member | ||||||||||||||
By: | PSLT OP, L.P., | |||||||||||||
a Delaware limited partnership, its sole member | ||||||||||||||
By: | PSLT GP, LLC, | |||||||||||||
a Delaware limited liability company, its sole general partner | ||||||||||||||
By: | Ventas Provident, LLC, | |||||||||||||
a Delaware limited liability company, its sole member | ||||||||||||||
By: |
/s/ T. Richard Riney |
|||||||||||||
Name: | T. Richard Riney | |||||||||||||
Title: | Executive Vice President and Secretary |
BROOKDALE LIVING COMMUNITIES OF CONNECTICUT, LLC,
a Delaware limited liability company
By: |
/s/ T. Richard Riney |
|
Name: |
T. Richard Riney | |
Title: |
Manager |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
PSLT-BLC PROPERTIES HOLDINGS, LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: | PSLT OP, L.P., | |||||||||
a Delaware limited partnership, its sole member | ||||||||||
By: | PSLT GP, LLC, | |||||||||
a Delaware limited liability company, its sole general partner | ||||||||||
By: | Ventas Provident, LLC, | |||||||||
a Delaware limited liability company, its sole member | ||||||||||
By: |
/s/ T. Richard Riney |
|||||||||
Name: | T. Richard Riney | |||||||||
Title: | Executive Vice President and Secretary |
BROOKDALE LIVING COMMUNITIES OF FLORIDA-CL, LLC,
a Delaware limited liability company
By: | PSLT-BLC Properties Holdings, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | PSLT OP, L.P., | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: | PSLT GP, LLC, | |||||||||||
a Delaware limited liability company, its sole general partner | ||||||||||||
By: | Ventas Provident, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: |
/s/ T. Richard Riney |
|||||||||||
Name: | T. Richard Riney | |||||||||||
Title: | Executive Vice President and Secretary |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
BROOKDALE LIVING COMMUNITIES OF ILLINOIS-2960, LLC, |
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a Delaware limited liability company | ||||||||||||||
By: | PSLT-BLC Properties Holdings, LLC, | |||||||||||||
a Delaware limited liability company, its sole member | ||||||||||||||
By: | PSLT OP, L.P., | |||||||||||||
a Delaware limited partnership, its sole member | ||||||||||||||
By: | PSLT GP, LLC, | |||||||||||||
a Delaware limited liability company, its sole general partner | ||||||||||||||
By: | Ventas Provident, LLC, | |||||||||||||
a Delaware limited liability company, its sole member | ||||||||||||||
By: |
/s/ T. Richard Riney |
|||||||||||||
Name: | T. Richard Riney | |||||||||||||
Title: | Executive Vice President and Secretary |
BROOKDALE LIVING COMMUNITIES OF ILLINOIS-HV, LLC,
a Delaware limited liability company |
||
By: |
/s/ T. Richard Riney |
|
Name: |
T. Richard Riney | |
Title: |
Manager |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
RIVER OAKS PARTNERS, |
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an Illinois partnership | ||||||||||||||
By: | Brookdale Holdings, LLC, | |||||||||||||
a Delaware limited liability company, its general partner |
||||||||||||||
By: | PSLT-BLC Properties Holdings, LLC, | |||||||||||||
a Delaware limited liability company, its sole member |
||||||||||||||
By: | PSLT OP, L.P., | |||||||||||||
a Delaware limited partnership, its sole member |
||||||||||||||
By: | PSLT GP, LLC, | |||||||||||||
a Delaware limited liability company, its sole general partner |
||||||||||||||
By: | Ventas Provident, LLC, | |||||||||||||
a Delaware limited liability company, its sole member |
||||||||||||||
By: |
/s/ T. Richard Riney |
|||||||||||||
Name: | T. Richard Riney | |||||||||||||
Title: |
Executive Vice President and Secretary |
BROOKDALE LIVING COMMUNITIES OP ILLINOIS-HOFFMAN ESTATES, LLC, |
||
a Delaware limited liability company | ||
By: |
/s/ T. Richard Riney |
|
Name: | T. Richard Riney | |
Title: | Manager |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
THE PONDS OF PEMBROKE LIMITED PARTNERSHIP, |
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an Illinois limited partnership |
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By: | Brookdale Holdings, LLC, | |||||||||||||
a Delaware limited liability company, its general partner | ||||||||||||||
By: | PSLT-BLC Properties Holdings, LLC, | |||||||||||||
a Delaware limited liability company, its sole member | ||||||||||||||
By: | PSLT OP, L.P., | |||||||||||||
a Delaware limited partnership, its sole member | ||||||||||||||
By: | PSLT GP, LLC, | |||||||||||||
a Delaware limited liability company, its sole general partner | ||||||||||||||
By: | Ventas Provident, LLC, | |||||||||||||
a Delaware limited liability company, its sole member | ||||||||||||||
By: |
/s/ T. Richard Riney |
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Name: | T. Richard Riney | |||||||||||||
Title: | Executive Vice President and Secretary |
BROOKDALE LIVING COMMUNITIES OF ILLINOIS-II, LLC, |
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a Delaware limited liability company | ||||||||||||||
By: | PSLT-BLC Properties Holdings, LLC, | |||||||||||||
a Delaware limited liability company, its sole member | ||||||||||||||
By: | PSLT OP, L.P., | |||||||||||||
a Delaware limited partnership, its sole member | ||||||||||||||
By: | PSLT GP, LLC, | |||||||||||||
a Delaware limited liability company, its sole general partner | ||||||||||||||
By: | Ventas Provident, LLC, | |||||||||||||
a Delaware limited liability company, its sole member | ||||||||||||||
By: |
/s/ T. Richard Riney |
|||||||||||||
Name: | T. Richard Riney | |||||||||||||
Title: | Executive Vice President and Secretary |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
BROOKDALE LIVING COMMUNITIES OF MASSACHUSETTS-RB, LLC, |
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a Delaware limited liability company | ||||||||||||
By: | PSLT-BLC Properties Holdings, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | PSLT OP, L.P., | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: | PSLT GP, LLC, | |||||||||||
a Delaware limited liability company, its sole general partner | ||||||||||||
By: | Ventas Provident, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: |
/s/ T. Richard Riney |
|||||||||||
Name: | T. Richard Riney | |||||||||||
Title: | Executive Vice President and Secretary |
BROOKDALE LIVING COMMUNITIES OF MINNESOTA, LLC, |
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a Delaware limited liability company | ||||||||||||
By: | PSLT-BLC Properties Holdings, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | PSLT OP, L.P., | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: | PSLT GP, LLC, | |||||||||||
a Delaware limited liability company, its sole general partner | ||||||||||||
By: | Ventas Provident, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: |
/s/ T. Richard Riney |
|||||||||||
Name: | T. Richard Riney | |||||||||||
Title: | Executive Vice President and Secretary |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
BROOKDALE LIVING COMMUNITIES OF NEW JERSEY, LLC, |
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a Delaware limited liability company | ||||||||||||||
By: | PSLT-BLC Properties Holdings, LLC, | |||||||||||||
a Delaware limited liability company, its sole member | ||||||||||||||
By: | PSLT OP, L.P., | |||||||||||||
a Delaware limited partnership, its sole member | ||||||||||||||
By: | PSLT GP, LLC, | |||||||||||||
a Delaware limited liability company, its sole general partner | ||||||||||||||
By: | Ventas Provident, LLC, | |||||||||||||
a Delaware limited liability company, its sole member | ||||||||||||||
By: |
/s/ T. Richard Riney |
|||||||||||||
Name: | T. Richard Riney | |||||||||||||
Title: | Executive Vice President and Secretary |
BROOKDALE LIVING COMMUNITIES OF NEW YORK-GB, LLC, |
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a Delaware limited liability company | ||||||||||||||
By: | PSLT-BLC Properties Holdings, LLC, | |||||||||||||
a Delaware limited liability company, its sole member | ||||||||||||||
By: | PSLT OP, L.P., | |||||||||||||
a Delaware limited partnership, its sole member | ||||||||||||||
By: | PSLT GP, LLC, | |||||||||||||
a Delaware limited liability company, its sole general partner | ||||||||||||||
By: | Ventas Provident, LLC, | |||||||||||||
a Delaware limited liability company, its sole member | ||||||||||||||
By: |
/s/ T. Richard Riney |
|||||||||||||
Name: | T. Richard Riney | |||||||||||||
Title: | Executive Vice President and Secretary |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
BROOKDALE LIVING COMMUNITIES OF WASHINGTON-PP, LLC, |
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a Delaware limited Liability company | ||||||||||||
By: | PSLT-BLC Properties Holdings, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: | PSLT OP, L.P., | |||||||||||
a Delaware limited partnership, its sole member | ||||||||||||
By: | PSLT GP, LLC, | |||||||||||
a Delaware limited liability company, its sole general partner | ||||||||||||
By: | Ventas Provident, LLC, | |||||||||||
a Delaware limited liability company, its sole member | ||||||||||||
By: |
/s/ T. Richard Riney |
|||||||||||
Name: | T. Richard Riney | |||||||||||
Title: | Executive Vice President and Secretary |
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
Ventas Provident joins into this Amendment for the purposes set forth in Paragraph 5 of the Agreement Regarding Leases:
VENTAS PROVIDENT : |
||
VENTAS PROVIDENT, LLC, |
||
a Delaware limited liability company | ||
By: |
/s/ T. Richard Riney |
|
Name: | T. Richard Riney | |
Title: | Executive Vice President and Secretary |
Exhibit 10.10.1
VENTAS, INC.
2006 INCENTIVE PLAN
[As amended December 8, 2008]
ARTICLE 1
Purpose
The purpose of the Ventas, Inc. 2006 Incentive Plan (Plan) is to advance the interest of Ventas, Inc., a Delaware corporation ( Company ), its subsidiaries and its stockholders by encouraging employees who will largely be responsible for the long-term success and development of the Company. The Plan is also intended to provide flexibility to the Company in attracting, retaining and motivating employees and promoting their efforts on behalf of the Company.
ARTICLE 2
Definitions and Construction
2.1. Definitions . As used in the Plan, terms defined parenthetically immediately after their use shall have the respective meanings provided by such definitions, and the terms set forth below shall have the following meanings (in either case, such terms shall apply equally to both the singular and plural forms of the terms defined):
(a) Award shall mean, individually or collectively, a grant under the Plan of Options, Restricted Stock, Restricted Stock Units, LTIP Units, SARs, Performance Units, stock awards and cash awards.
(b) Board shall mean the Board of Directors of the Company.
(c) Cause shall mean, unless otherwise defined in an agreement evidencing an Award, a felony conviction of a Participant or the failure of a Participant to contest prosecution for a felony, or a Participants willful misconduct or dishonesty, any of which is determined by the Committee to be directly and materially harmful to the business or reputation of the Company or its Subsidiaries.
(d) A Change in Control shall have the same meaning as provided in the employment or change in control agreement with the Participant, or if no such agreement exists, unless otherwise defined in an agreement evidencing an Award, shall mean any of the following events:
(1) An acquisition (other than directly from the Company) of any voting securities of the Company ( Voting Securities ) by any Person immediately after which such Person has beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) ( Beneficial Ownership and/or Beneficially Owned ) of 20% or more of the combined voting power of the Companys then outstanding Voting
Securities; provided, however, that in determining whether a Change in Control has occurred, Voting Securities which are acquired in a Non-Control Acquisition (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A Non-Control Acquisition shall mean an acquisition by (i) the Company or any Subsidiary, (ii) an employee benefit plan (or a trust forming a part thereof) maintained by the Company or any Subsidiary, or (iii) any Person in connection with a Non-Control Transaction (as hereinafter defined);
(2) The individuals who, as of May 31, 2006, are members of the Board ( Incumbent Board ) cease for any reason to constitute at least a majority of the Board; provided, however, that if the election, or nomination for election by the Companys stockholders, of any new director was approved by a vote of at least a majority of the Incumbent Board, such new director shall, for purposes of the Plan, be considered as a member of the Incumbent Board; provided, further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened election contest (as described in former Rule 14a-11 promulgated under the Exchange Act) ( Election Contest ) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board ( Proxy Contest ) including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest;
(3) Approval by stockholders of the Company and the occurrence of:
(A) A merger, consolidation or reorganization involving the Company, unless such is a Non-Control Transaction. For purposes of the Plan, the term Non-Control Transaction shall mean a merger, consolidation or reorganization of the Company in which:
(i) the stockholders of the Company, immediately before such merger, consolidation or reorganization, own, directly or indirectly immediately following such merger, consolidation or reorganization, at least a majority of the combined voting power of the voting securities of the corporation or entity resulting from such merger or consolidation or reorganization ( Surviving Corporation ) over which any Person has Beneficial Ownership in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization;
(ii) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least a majority of the members of the board of directors or equivalent body of the Surviving Corporation; and
(iii) no Person (other than the Company, any Subsidiary, any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation, or any Person who, immediately
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prior to such merger, consolidation or reorganization had Beneficial Ownership of 20% or more of the then outstanding Voting Securities) has Beneficial Ownership of 20% or more of the combined voting power of the Surviving Corporations then outstanding voting securities;
(B) A complete liquidation or dissolution of the Company; or
(C) The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary); or
(4) Any other event that the Committee shall determine constitutes an effective Change in Control of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person ( Subject Person ) acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person; provided, however, that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the then outstanding Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
With respect to any Award that constitutes a deferral of compensation subject to the requirements of Section 409A of the Code ( 409A Award ) but only to the extent necessary for such 409A Award to comply with Section 409A of the Code, a Change in Control must constitute a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A(a)(2)(A)(v) of the Code for any acceleration of the timing of payment of the 409A Award because of the Change in Control. The preceding sentence shall not affect the vesting of any Award.
(e) Code shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
(f) Committee shall mean the committee described in Section 3.1 or, as applicable, any other committee or any officer to whom the Board or the Committee has delegated authority in accordance with Section 3.1.
(g) Disability shall mean the total disability as determined by the Committee in accordance with standards and procedures similar to those under the Companys long-term disability plan, or, if none, a physical or mental infirmity which the Committee determines impairs the Participants ability to perform substantially his or her duties for a period of 180 consecutive days.
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(h) Employee shall mean an individual who is a full-time employee of the Company, a Subsidiary or a partnership or limited liability company in which the Company or its Subsidiaries own a majority interest.
(i) Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to time.
(j) Fair Market Value of the Shares shall mean, as of any applicable date, the closing sale price of the Shares on the New York Stock Exchange or any national or regional stock exchange on which the Shares are traded, or if no such reported sale of the Shares shall have occurred on such date, on the next preceding date on which there was such a reported sale. If there shall be any material alteration in the present system of reporting sale prices of the Shares, or if the Shares shall no longer be listed on the New York Stock Exchange or a national or regional stock exchange, the fair market value of the Shares as of a particular date shall be determined by such method as shall be determined by the Committee.
(k) ISOs shall have the meaning given such term in Section 6.1.
(l) LTIP Unit shall mean an OP Unit granted pursuant to Section 8.1.
(m) LTIP Unit Agreement shall mean an agreement evidencing a LTIP Unit Award, as described in Section 8.2.
(n) Nonexecutive Employees shall mean Employees who are not executive officers of the Company.
(o) NQSOs shall have the meaning given such term in Section 6.1.
(p) OP means the applicable operating partnership of the Company.
(q) Option shall mean an option to purchase Shares granted pursuant to Article 6.
(r) Option Agreement shall mean an agreement evidencing the grant of an Option as described in Section 6.2.
(s) Option Exercise Price shall mean the purchase price per Share subject to an Option, which shall not be less than the Fair Market Value of the Share on the date of grant (110% of Fair Market Value in the case of an ISO granted to a Ten Percent Shareholder).
(t) OP Unit shall mean a unit of partnership interest in an OP.
(u) Participant shall mean any Employee selected by the Committee to receive an Award under the Plan.
(v) Partnership Agreement shall mean the Partnership Agreement from the applicable OP, as same may be amended or restated from time to time.
(w) Performance Goals shall have the meaning given such term in Section 9.4.
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(x) Performance Period shall have the meaning given such term in Section 9.3.
(y) Performance Unit shall mean the right to receive a payment from the Company upon the achievement of specified Performance Goals as set forth in a Performance Unit Agreement.
(z) Performance Unit Agreement shall mean an agreement evidencing a Performance Unit Award, as described in Section 9.2.
(aa) Person shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a group as defined in Section 13(d).
(bb) Plan shall mean this Ventas, Inc. 2006 Incentive Plan as the same may be amended from time to time.
(cc) Restricted Award Agreement shall mean an agreement evidencing a Restricted Stock Award or Restricted Stock Unit Award, as described in Section 7.2.
(dd) Restricted Stock shall mean Shares granted pursuant to Article 7 as to which the restrictions have not expired.
(ee) Restricted Stock Unit shall mean an Award granted pursuant to Article 7 denominated in units of the Companys common stock.
(ff) Restriction Period shall mean the period determined by the Committee during which the transfer of Shares or Op Units is limited in some way or Shares or Restricted Stock Units or LTIP Units are otherwise restricted or subject to forfeiture as provided in Article 7 or 8.
(gg) Retirement shall mean retirement by a Participant in accordance with the terms of the Companys retirement or pension plans.
(hh) Shares shall mean the shares of the Companys common stock, par value $.25 per share.
(ii) Subsidiary shall mean, with respect to any company, any corporation or other Person of which a majority of its voting power, equity securities, or equity interest is owned directly or indirectly by such company.
(jj) Ten Percent Shareholder shall mean an Employee who, at the time an ISO is granted, owns (within the meaning of Section 422(b)(6) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company.
2.2. Gender and Number . Except where otherwise indicated by the context, reference to the masculine gender shall include the feminine gender, the plural shall include the singular and the singular shall include the plural.
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2.3. Severability . In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
ARTICLE 3
Administration
3.1. The Committee . The Plan shall be administered by a Committee appointed by the Board consisting of one or more directors of the Company or the entire Board of the Company. To the extent deemed appropriate by the Board, members of the Committee shall be outside directors within the meaning of Section 162(m) of the Code (or any successor provision thereto).
Notwithstanding the foregoing, the Board may delegate responsibility for granting Awards and otherwise administering the Plan with respect to designated classes of Employees to one or more different committees consisting of one or more members of the Board, subject to such limitations as the Board deems appropriate. To the extent consistent with applicable law, the Board or the Committee may authorize one or more officers of the Company to grant Awards to designated classes of Employees, within limits specifically prescribed by the Board or the Committee. The Board has delegated the ability to grant Awards to Nonexecutive Employees to a Board committee comprised of the Chief Executive Officer. Consistent with this paragraph, the Board or Committee shall each year establish an annual allotment of Shares with respect to which such Board committee or Company officer authorized pursuant to this paragraph may grant Awards to Nonexecutive Employees. Unless another amount shall otherwise be determined by the Board or Committee by authorized action, an annual allotment of ten thousand (10,000) Shares or Op Units is hereby established with respect to which such Board committee or Company officer is authorized pursuant to this paragraph to grant each year. Any Shares or Op Units within such annual allotment with respect to which Awards are not granted with respect to such annual period shall be automatically added to the annual allotment available pursuant to this paragraph in each succeeding year for Awards to Nonexecutive Employees until such Shares or Op Units are used for Awards. If and to the extent an Award granted pursuant to this paragraph shall expire or terminate for any reason without having been exercised in full, or shall be forfeited, the Shares (including Restricted Stock) or Op Units associated with such Awards shall again become available for Awards pursuant to this paragraph.
The Committee shall meet at such times and places as it determines and may meet through a telephone conference call. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board.
3.2. Authority of the Committee . Subject to the provisions of the Plan, the Committee shall have full authority to:
(a) select Participants to whom Awards are granted;
(b) determine the size, types and frequency of Awards granted under the Plan;
-6-
(c) determine the terms and conditions of Awards, including any restrictions or conditions to the Awards, which need not be identical;
(d) accelerate the exercisability of any Award, for any reason;
(e) construe and interpret the Plan and any agreement or instrument entered into under the Plan; and
(f) establish, amend and rescind rules and regulations for the Plans administration.
The Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan. The Committee may delegate its authority as identified hereunder; provided, however, that such delegation is permitted by law. The Committee (or the Board, in the absence of any such Committee) shall have the discretion to determine for purposes of the Plan whether any participant in the Plan (i) is or remains (or is not or does not remain) a full-time employee of the Company, and (ii) shall have incurred (or shall not have incurred) a termination of employment.
3.3. Decisions Binding . All determinations and decisions made by the Committee pursuant to the provisions of the Plan, and all related orders or resolutions of the Board, shall be final, conclusive and binding upon all persons, including the Company, its stockholders, Employees, Participants and their estates and beneficiaries.
3.4. Section 16 and 409A Compliance; Bifurcation of Plan . It is the intention of the Company that the Plan and the administration of the Plan comply in all respects with Section 16(b) of the Exchange Act and Section 409A of the Code and the rules and regulations promulgated thereunder to the extent deemed appropriate by the Committee. If any Plan provision, or any aspect of the administration of the Plan, is found not to be in compliance with Section 16(b) of the Exchange Act or Section 409A of the Code, the provision or administration shall be deemed null and void to the extent deemed appropriate by the Committee, and the Plan shall be construed in favor of its meeting the requirements of Rule 16b-3 promulgated under the Exchange Act and Section 409A of the Code to the extent deemed appropriate by the Committee. Notwithstanding anything in the Plan to the contrary, the Board or the Committee, in its discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to Participants who are subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Participants.
Notwithstanding anything contained in the Plan to the contrary, the Company intends that Awards payable under the Plan shall satisfy the requirements for exemption from, or compliance with, Section 409A of the Code and that all terms and provisions shall be interpreted, operated and administered to satisfy such requirements. To the extent Section 409A of the Code is applicable to any Award, it is intended that such 409A Award complies with the deferral, payout and other limitations and restrictions imposed under Section 409A of the Code.
Regardless of what may be contained in any Award agreement, to the extent that any 409A Award treated as payable upon a separation from service pursuant to Section 409A of the Code (as determined, and in accordance with the methodology selected by the Company, consistent with Section 409A of the Code) (Separation from Service), then, if payment is
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triggered by reason of the Separation from Service and on the date of the Participants Separation from Service, the Participant is a Specified Employee, then to the extent required for the Participant not to incur additional taxes pursuant to Section 409A of the Code, no payment with respect to the 409A Award shall be made to the Participant earlier than the earlier of (i) six (6) months after the Participants Separation from Service; or (ii) the date of the Participants death. Should the limitation set forth in the preceding sentence result in payment later than otherwise provided in the Plan or 409A Award, on the first day any such payment may be made without incurring additional tax pursuant to Section 409A of the Code, such payment shall be made to the Participant in a lump sum. Notwithstanding anything contained in the Plan or Award to the contrary, the date on which a Participants Separation from Service occurs shall be treated as the Participants termination of employment or service date or comparable concept for purposes of determining the timing of payments under the Plan and Award to the extent necessary to have such payments under the Plan and Award be exempt from or comply with the requirements of Section 409A of the Code; provided, however, this sentence shall have no impact on whether or not an Award becomes vested. No 409A Award shall be subject to acceleration or to any change in the specified time or method of payment, except as permitted by Section 409A of the Code or as otherwise provided under the Plan or Award and consistent with Section 409A of the Code.
These last three paragraphs of this Section 3.4 are not intended to impose any restrictions on Awards other than those required for the Participant not to incur additional tax under Code Section 409A and shall be interpreted and operated accordingly. Notwithstanding any other provision in the Plan, the Company makes no representation that Awards granted under the Plan shall be exempt from, or comply with, Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to Awards granted under the Plan. No provision of the Plan shall be interpreted or construed to transfer any liability for failure to comply with Section 409A from the Participant or any other individual to the Company.
ARTICLE 4
Shares Available Under the Plan
4.1. Number of Shares . Subject to adjustment as provided in Section 4.2, the number of Shares and Op Units reserved for issuance upon the exercise of Awards and the payment of benefits in connection with Awards is 5,000,000 and the maximum number of Shares and Op Units with respect to which Awards may be granted to any Participant under the Plan shall be 5,000,000. Any Shares or Op Units issued under the Plan may be, in whole or in part, of original issuance or held in treasury. If and to the extent an Award shall expire or terminate for any reason without having been exercised in full, or shall be forfeited, the Shares (including Restricted Stock) or Op Units associated with such Awards shall again become available for Awards under the Plan.
4.2. Adjustments in Authorized Shares and Outstanding Awards . In the event of a merger, reorganization, consolidation, recapitalization, reclassification, split-up, spin-off, separation, liquidation, stock dividend, stock split, reverse stock split, property dividend, share repurchase, share combination, share exchange, issuance of warrants, rights or debentures, or other change in the corporate structure of the Company affecting the Shares or Op Units, the Committee may substitute or adjust the total number and class of Shares, Op Units or other stock
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or securities which may be issued under the Plan, and the number, class and/or price of Shares or Op Units subject to outstanding Awards, as it determines to be appropriate and equitable to prevent dilution or enlargement of the rights of Participants and to preserve, without exceeding, the value of any outstanding Awards; and further provided, that the number of Shares or Op Units subject to any Award shall always be a whole number. In the case of ISOs, such adjustments shall be made in such a manner so as not to constitute a modification within the meaning of Section 424(h)(3) of the Code and only to the extent otherwise permitted by Sections 422 and 424 of the Code. Any adjustments pursuant to this Section 4.2 to Awards that are considered Section 409A Awards are intended to be made only if permitted by Section 409A of the Code and only in a manner in compliance with the requirements of Section 409A of the Code and any adjustments made pursuant to this Section 4.2 to Awards that are not considered 409A Awards are intended to be made only if and in such a manner that after such adjustment the Awards either continue not to be 409A Awards or comply with the requirements of Section 409A of the Code.
ARTICLE 5
Eligibility and Participation
All Employees are eligible to receive Awards under the Plan. In selecting Employees to receive Awards under the Plan, as well as in determining the number of Shares or Op Units subject to, and the other terms and conditions applicable to, each Award, the Committee shall take into consideration such factors as it deems relevant in promoting the purposes of the Plan, including the duties of the Employees, their present and potential contribution to the success of the Company and their anticipated number of years of active service as employees.
ARTICLE 6
Stock Options
6.1. Grant of Options . Subject to the terms and provisions of the Plan, the Committee may grant Options to Participants at any time and from time to time, in the form of options which are intended to qualify as incentive stock options within the meaning of Section 422 of the Code ( ISOs ), Options which are not intended to so qualify ( NQSOs ) or a combination thereof. All ISOs must be granted within ten years from the date on which the Plan was adopted by the Board, and may only be granted to employees of the Company or any subsidiary corporation (within the meaning of Section 424(f)) and may not exceed the maximum limit set forth in Section 4.1. The Option Exercise Price shall not be less than the Fair Market Value of the underlying Share on the date of grant.
6.2. Option Agreement . Each Option shall be evidenced by an Option Agreement that shall specify the Option Exercise Price, the duration of the Option, the number of Shares to which the Option relates and such other provisions as the Committee may determine or which are required by the Plan. The Option Agreement shall also specify whether the Option is intended to be an ISO or a NQSO and shall include such provisions applicable to the particular type of Option granted.
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6.3. Duration of Options . Each Option shall expire at such time as is determined by the Committee at the time of grant; provided, however, that no Option shall be exercised later than the tenth anniversary of its grant (fifth anniversary in the case of an ISO granted to a Ten Percent Shareholder).
6.4. Exercise of Options . Options shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall approve at the time of grant, which need not be the same for each grant or for each Participant. The Committee may accelerate the exercisability of any Option. Options shall be exercised, in whole or in part, by delivery to the Company of a written notice of exercise, setting forth the number of Shares with respect to which the Option is to be exercised and accompanied by full payment of the Option Exercise Price and all applicable withholding taxes.
6.5. Payment of Option Exercise Price . The Option Exercise Price for Shares as to which an Option is exercised shall be paid to the Company in full at the time of exercise either (a) in cash in the form of currency or other cash equivalent acceptable to the Company, (b) by tendering Shares (by either actual delivery or by attestation) having a Fair Market Value (determined as of the close of the business day immediately preceding the day on which the Option is exercised) equal to the Option Exercise Price (provided such Shares have been held by the Participant for at least six months prior to their tender), (c) any other reasonable consideration that the Committee may deem appropriate or (d) by a combination of the forms of consideration described in (a), (b) and (c) of this Section 6.5. The Committee may permit the cashless exercise of Options as described in Regulation T promulgated by the Federal Reserve Board, subject to applicable securities law restrictions and assuming the cashless exercise is completed in a transaction independent of the Company and appropriately structured to avoid any adverse accounting consequences to the Company, or by any other means which the Committee determines to be consistent with the Plans purpose and applicable law.
6.6. Vesting Upon Change in Control . Upon a Change in Control, any then outstanding Options held by Participants shall become fully vested and immediately exercisable.
6.7. Termination of Employment . The Committee determines the treatment of Options upon termination of employment of a Participant. Unless the Committee determines otherwise, the treatment of Options upon termination of employment of a Participant shall be as set forth in this Section 6.7. If the employment of a Participant is terminated for Cause, all then outstanding Options of such Participant, whether or not exercisable, shall terminate immediately. Unless the Committee determines otherwise, if the employment of a Participant is terminated for any reason other than for Cause, death, Disability or Retirement, to the extent then outstanding Options of such Participant are exercisable, such Options may be exercised by such Participant or such Participants personal representative at any time prior to the expiration date of the Options or within 180 days after the date of such termination of employment, whichever is earlier. In the event of the Retirement of a Participant, to the extent then outstanding Options of such Participant are exercisable, such Options may be exercised by the Participant (a) in the case of NQSOs, within two years after the date of Retirement and (b) in the case of ISOs, within 90 days after Retirement; provided, however, that no such Options may be exercised on a date subsequent to their expiration. In the event of the death or Disability of a Participant while employed by the Company or a Subsidiary, all then outstanding Options of such Participant shall
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become fully vested and immediately exercisable, and may be exercised at any time (a) in the case of NQSOs, within two years after the date of death or determination of Disability and (b) in the case of ISOs, within one year after the date of death or determination of Disability; provided, however, that no such Options may be exercised on a date subsequent to their expiration. In the event of the death of a Participant, the Option may be exercised by the person or persons to whom rights pass by will or by the laws of descent and distribution, or if appropriate, the legal representative of the deceased Participants estate. In the event of the Disability of a Participant, Options may be exercised by the Participant, or if such Participant is incapable of exercising the Options, by such Participants legal representative.
6.8. Transferable Options . The Committee may, in its discretion by appropriate provision in the Participants Option Agreement, authorize all or a portion of any NQSOs to be granted to a Participant be on terms which permit transfer by such Participant to (i) the spouse, children or grandchildren of the Participant ( Immediate Family Members ), (ii) a trust or trusts for the exclusive benefit of such Participant and/or his Immediate Family Members, or (iii) a partnership or limited liability company in which such Participant and/or his Immediate Family Members are the only partners or members, as applicable; provided that (a) there may be no consideration for any such transfer (other than interests in such partnership or limited liability company), (b) the Option Agreement must expressly provide for transferability in a manner consistent with the Section and (c) subsequent transfers of transferable NQSOs shall be prohibited except by will or the laws of descent and distribution. Following transfer, any such NQSOs shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of this Article 6 (excluding Section 6.7) the term Participant shall be deemed to refer to the transferee. The events of termination of employment as set forth in Section 6.7 shall continue to be applied with respect to the original Participant. Any transferred NQSOs shall be exercisable by the transferee only to the extent, and for the periods, specified in the Option Agreement.
6.9. Certificate Legend . For any Shares issued upon exercise of an ISO, the Company may legend such Shares as it deems appropriate.
6.10. Committee Determination of Option Terms . Notwithstanding anything to the contrary in Section 6.4 or Section 6.7, the Committee determines the period of time the Option is exercisable (provided that no Option shall be exercised later than the tenth anniversary of its grant) and to the extent that the Option Agreement provides for exercisability of the Option during a period when Section 6.4 or Section 6.7 would not otherwise permit exercise of the Option, the Option Agreement shall control as to such exercisability.
ARTICLE 7
Restricted Stock and Restricted Stock Units
7.1. Grant of Restricted Stock and Restricted Stock Units . Subject to the terms and provisions of the Plan, the Committee may grant Restricted Stock or Restricted Stock Units, as elected by the Participant, to Participants at any time and from time to time and upon such terms and conditions as it may determine.
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7.2. Restricted Award Agreement . Each grant of Restricted Stock or Restricted Stock Unit shall be evidenced by a Restricted Award Agreement which shall specify the Restriction Period, the number of shares of Restricted Stock or Restricted Stock Units granted, and payment date for Restricted Stock Units, as determined by the Participant, and such other provisions as the Committee may determine and which are required by the Plan.
7.3. Non-Transferability of Restricted Stock and Restricted Stock Units . Except as provided in this Article 7, shares of Restricted Stock and Restricted Stock Units may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until the end of the applicable Restriction Period or later as specified in the Restricted Award Agreement, or upon earlier satisfaction of any other conditions determined at the time of grant specified in the Restricted Award Agreement.
7.4. Other Restrictions . The Committee may impose such other restrictions on any shares of Restricted Stock or any Restricted Stock Units as it may deem advisable, including, without limitation, restrictions based upon the achievement of Performance Goals, years of service and/or restrictions under applicable Federal or state securities laws. The Committee may provide that any share of Restricted Stock shall be held (together with a stock power executed in blank by the Participant) in custody by the Company until any or all restrictions thereon shall have lapsed.
7.5. Reacquisition of Restricted Stock and Forfeiture of Restricted Stock Units . The Committee shall determine and set forth in a Participants Restricted Award Agreement such events upon which a Participants shares of Restricted Stock shall be reacquired by the Company or Restricted Stock Units shall be forfeited, which may include, without limitation, the termination of a Participants employment during the Restriction Period or the nonachievement of Performance Goals. Any such forfeited shares of Restricted Stock held by a Participant which are to be reacquired by the Company shall be immediately returned to the Company by the Participant, and the Participant shall only receive the amount, if any, paid by the Participant for such Restricted Stock.
7.6. Certificate Legend . In addition to any legends placed on certificates pursuant to Section 7.4, each certificate representing shares of Restricted Stock shall bear the following legend:
The sale or other transfer of the shares represented by this Certificate, whether voluntary, involuntary or by operation of law, is subject to certain restrictions on transfer as set forth in the Ventas, Inc. 2006 Incentive Plan, and in the related Restricted Stock Agreement. A copy of the Plan and such Restricted Stock Agreement may be obtained from the Secretary of Ventas, Inc.
7.7. Lapse of Restrictions Generally . Except as otherwise provided in this Article 7, shares of Restricted Stock shall be delivered to the Participant and no longer subject to reacquisition after the last day of the Restriction Period and Restricted Stock Units shall be fully vested after the last day of the Restriction Period and shall be paid as set forth in the Restricted Award Agreement; provided, however, that if the restriction relates to the achievement of a Performance Goal, the Restriction Period shall not end until the Committee has certified in
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writing that the Performance Goal has been met. Once the shares of Restricted Stock are released from their restrictions, the Participant shall be entitled to have the legend required by Section 7.6 removed from the Participants share certificate, which certificate shall thereafter represent Shares free from any and all restrictions under the Plan.
7.8. Lapse of Restrictions Upon Change in Control . Upon a Change in Control, any restrictions and other conditions pertaining to then outstanding shares of Restricted Stock and Restricted Stock Units held by Participants, including, but not limited to, vesting requirements, shall lapse and such Restricted Stock shall thereafter be immediately free from any and all restrictions under the Plan and such Restricted Stock Units shall be paid as set forth in the Restricted Award Agreement.
7.9. Voting Rights; Dividends and Other Distributions . During the Restriction Period, Participants holding shares of Restricted Stock may exercise full voting rights, and shall be entitled to receive all dividends and other distributions paid, with respect to such Restricted Stock. If any dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions as the shares of Restricted Stock with respect to which they were paid.
On each dividend or other distribution date with respect to Shares, a cash dollar amount equal to the amount of cash dividends or the fair market value of property other than Shares that would have been paid or distributed on a number of Shares equal to the number of Restricted Stock Units held by Participants as of the close of business on the record date for such dividend or distribution shall be paid in cash to such Participants. If any dividend or distribution with respect to Shares is payable in Shares, Participants shall be credited with an additional number of Restricted Stock Units equal to the product of the number of Restricted Stock Units held by such Participants on the record date for such dividend or distribution multiplied by the number of Shares (including fractions thereof) distributable as a dividend or distribution on a Share. Restricted Stock Units which are credited to Participants pursuant to the preceding sentence shall be subject to the same terms and conditions of the Plan, the Restricted Award Agreement and elections applicable with respect to such Restricted Stock Units with respect to which they relate.
7.10. Termination of Employment . Unless the Committee determines otherwise, if the employment of a Participant is terminated for any reason other than death or Disability prior to the expiration of the Restriction Period applicable to any shares of Restricted Stock then held by the Participant, such Shares shall thereupon be immediately reacquired by and returned to the Company, and the Participant shall only receive the amount, if any, paid by the Participant for such Restricted Stock. Unless the Committee determines otherwise, if the employment of a Participant is terminated for any reason other than death or Disability prior to the expiration of the Restriction Period applicable to any Restricted Stock Units, such Restricted Stock Units shall thereupon be immediately forfeited. Unless the Committee determines otherwise, if the employment of a Participant is terminated as a result of death or Disability prior to the expiration of the Restriction Period applicable to any Shares of Restricted Stock or Restricted Stock Units then held by the Participant, any restrictions and other conditions pertaining to such Shares or Restricted Stock Units then held by the Participant, including, but not limited to, vesting requirements, shall immediately lapse and such Shares of Restricted Stock shall thereafter be immediately transferable and nonforfeitable and such Restricted Stock Units shall be paid as set forth in the Restricted Award Agreement. Notwithstanding anything in the Plan to the contrary,
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except in the case of Restricted Stock or Restricted Stock Units for which a Performance Goal must be achieved, the Committee may determine, in its sole discretion, in the case of any termination of a Participants employment other than for Cause, that the restrictions on some or all of the Shares of Restricted Stock or on the Restricted Stock Units awarded to a Participant shall immediately lapse and such Shares of Restricted Stock shall thereafter be immediately transferable and nonforfeitable and such Restricted Stock Units shall be immediately vested and be paid as set forth in the Restricted Award Agreement.
ARTICLE 8
LTIP Units
8.1. Grant of LTIP Units . Subject to the terms and provisions of the Plan, the Committee may grant LTIP Units to Participants at any time and from time to time and upon such terms and conditions as it may determine including, without limitation, as an alternative to other Awards.
8.2. Award Agreement . Each grant of LTIP Units shall be evidenced by a LTIP Unit Award Agreement which shall specify the Restriction Period, the number of LTIP Units granted and such other provisions as the Committee may determine and which are required by the Plan.
8.3. Non-Transferability of LTIP Units . Except as provided in this Article 8, LTIP Units may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until the end of the applicable Restriction Period or later as specified in the LTIP Unit Award Agreement or Partnership Agreement, or upon earlier satisfaction of any other conditions determined at the time of grant specified in the LTIP Unit Award Agreement.
8.4. Other Restrictions . The Committee may impose such other restrictions on any LTIP Units as it may deem advisable, including, without limitation, restrictions based upon the achievement of Performance Goals, years of service and/or restrictions under applicable Federal or state securities laws.
8.5. Reacquisition or Forfeiture of LTIP Units . The Committee shall determine and set forth in a Participants LTIP Unit Award Agreement such events upon which a Participants LTIP Units shall be reacquired by the Company or shall be forfeited, which may include, without limitation, the termination of a Participants employment during the Restriction Period or the nonachievement of Performance Goals.
8.6. Lapse of Restrictions Upon Change in Control . Upon a Change in Control, any Plan restrictions and other conditions pertaining to then outstanding LTIP Units, including, but not limited to, vesting requirements, shall lapse and such LTIP Units shall thereafter be immediately free from any and all restrictions under the Plan but shall remain subject to any restrictions set forth in the Partnership Agreement.
8.7. Distributions . The right to distributions with respect to the LTIP Units shall be determined as set forth in the LTIP Unit Award Agreement and Partnership Agreement.
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8.8. Termination of Employment . Unless the Committee determines otherwise, if the employment of a Participant is terminated for any reason other than death or Disability prior to the expiration of the Restriction Period applicable to any LTIP Units then held by the Participant, such LTIP Units shall thereupon be immediately forfeited. Unless the Committee determines otherwise, if the employment of a Participant is terminated as a result of death or Disability prior to the expiration of the Restriction Period applicable to any LTIP Units then held by the Participant, any restrictions and other conditions pertaining to such LTIP Units then held by the Participant, including, but not limited to, vesting requirements, shall immediately lapse and such LTIP Units shall thereafter be immediately nonforfeitable subject to the terms of the Partnership Agreement. Notwithstanding anything in the Plan to the contrary, except in the case of LTIP Units for which a Performance Goal must be achieved, the Committee may determine, in its sole discretion, in the case of any termination of a Participants employment other than for Cause, that the restrictions on some or all of the LTIP Units awarded to a Participant shall immediately lapse and such LTIP Units shall thereafter be immediately nonforfeitable subject to the terms of the Partnership Agreement.
ARTICLE 9
Performance Units
9.1. Grant of Performance Units . The Committee may, from time to time and upon such terms and conditions as it may determine, grant Performance Units which will become payable to a Participant upon certification in writing by the Committee that the Performance Goals related thereto have been achieved. If the Performance Goals are achieved in full, and the Participant remains employed with the Company as of the end of the relevant Performance Period, the Participant will be allocated Shares equal to the number of Performance Units initially awarded to the Participant for the relevant Performance Period. Each award of Performance Units may provide for the allocation of fewer Performance Units in the event of partial fulfillment of Performance Goals.
9.2. Performance Unit Agreement . Each Performance Unit grant shall be evidenced by a Performance Unit Agreement that shall specify the Performance Goals, the Performance Period and the number of Performance Units to which it pertains.
9.3. Performance Period . The period of performance ( Performance Period ) with respect to each Performance Unit shall be such period of time, which shall not be less than six months, nor more than five years, as determined by the Committee, for the measurement of the extent to which Performance Goals are attained.
9.4. Performance Goals . The goals ( Performance Goals ) that are to be achieved with respect to each Performance Unit, (or Restricted Stock, Restricted Stock Unit, LTIP Units, stock award or cash award subject to a requirement that Performance Goals be achieved), shall be those objectives established by the Committee as it deems appropriate, and which may be expressed in terms of (a) earnings per Share, (b) Share price, (c) pre-tax profit, (d) net earnings, (e) return on equity or assets, (f) revenues, (g) funds from operations per Share, (h) total stockholder return, (i) tenant diversification, (j) asset diversification, (k) payor diversification, (l) geographic diversification, (m) any combination of the foregoing, or (n) such other goals as the
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Committee may determine. Performance Goals may be in respect of the performance of the Company and its Subsidiaries (which may be on a consolidated basis), a Subsidiary, a division or other operating unit of the Company. Performance Goals may be absolute or relative and may be expressed in terms of a progression within a specified range. The Committee shall establish Performance Goals applicable to a particular fiscal year within 90 days of the commencement of such fiscal year, provided that the outcome of the Performance Goal is substantially uncertain at the time of its adoption. To the extent deemed appropriate by the Committee, the Performance Goals with respect to a Performance Period shall be established by the Committee in order to comply with Rule 16b-3 under the Exchange Act and Section 162(m) of the Code, as applicable. The Committee shall determine the target levels of performance that must be achieved with respect to each criteria that is identified in a Performance Goal in order for a Performance Goal to be treated as attained in whole or in part. In the event that the Performance Goals are based on more than one business criteria, the Committee may determine to make a grant of an Award upon attainment of the Performance Goal relating to any one or more of such criteria.
9.5. Termination of Employment . Unless the Committee determines otherwise, if the employment of a Participant shall terminate prior to the expiration of the Performance Period for any reason other than for death or Disability, the Performance Units then held by the Participant shall terminate. Unless the Committee determines otherwise, in the case of termination of employment by reason of death or Disability of a Participant prior to the expiration of the Performance Period, then all Performance Units which are potentially available under an outstanding Award and which have not been issued shall be fully vested in, paid and issued to Participant or, in the case of Participants death, shall be vested in, paid and issued to Participants estate, as of the date of the Participants death.
9.6. Payment Upon Change In Control . Upon a Change in Control, any and all outstanding Performance Units which are potentially available under any outstanding Award shall become fully vested and immediately payable.
9.7. Payment of Performance Units . Subject to such terms and conditions as the Committee may impose, and unless otherwise provided in the Performance Unit Agreement, Performance Units shall be payable within 90 days following the end of the Performance Period during which the Participant attained at least the minimum acceptable level of achievement under the Performance Goals, or 90 days following a Change in Control, as applicable. The Committee, in its discretion, may determine at the time of payment required in connection with a Performance Unit whether such payment shall be made (a) solely in cash, (b) solely in Shares (valued at the Fair Market Value of the Shares on the date of payment) or (c) a combination of cash and Shares; provided, however, that if a Performance Unit becomes payable upon a Change in Control, the Performance Unit shall be paid solely in cash.
9.8. Designation of Beneficiary . Each Participant may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom the right to receive payments under a Performance Unit is to be paid in case of the Participants death before receiving any or all such payment. Each such designation shall revoke all prior designations by the Participant, shall be in a form prescribed by the Company and shall be effective only when filed by the Participant in writing with the Committee during the Participants lifetime. In the absence of any such designation, benefits remaining unpaid at the Participants death shall be paid to the Participants estate.
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9.9. No Rights as Stockholder . The award of Performance Units to a Participant shall not create any rights in such Participant as a stockholder of the Company, until the payment of any Shares associated with such Performance Units.
ARTICLE 10
Stock Appreciation Rights
10.1. Grant of Stock Appreciation Rights . An SAR is a right to receive, without payment to the Company, a number of Shares, cash or any combination thereof, the amount of which is determined pursuant to the formula set forth in Section 10.5. An SAR may be granted (a) with respect to any Option granted under the Plan, either concurrently with the grant of such Option or at such later time as determined by the Committee (as to all or any portion of the Shares subject to the Option) or (b) alone, without reference to any Option.
10.2. Number of SARs . Each SAR granted to any Participant shall relate to such number of Shares as the Committee shall determine, subject to adjustment as provided in Section 4.2. If an SAR is granted in conjunction with an Option, the number of Shares to which the SAR pertains shall be reduced by the same number for which the holder of the Option exercises the related Option.
10.3. Duration . Subject to early termination as herein provided, the term of each SAR shall be as determined by the Committee, but shall not exceed ten years from the date of grant. Unless otherwise provided by the Committee, each SAR shall become exercisable at such time or times, to such extent and upon such conditions as the Option, if any, to which it relates is exercisable. The Committee may, in its discretion, accelerate the exercisability of any SAR.
10.4. Exercise . A holder may exercise an SAR, in whole or in part, by giving written notice to the Company, specifying the number of SARs which such Participant wishes to exercise. Upon receipt of such written notice, the Company shall deliver, within 90 days thereafter, to the exercising holder, certificates for the Shares or cash or both as determined by the Committee, to which the Participant is entitled pursuant to Section 10.5.
10.5. Payment .
(a) Number of Shares . Subject to the right of the Committee to deliver cash in lieu of Shares (which, as it pertains to officers and directors of the Company, shall comply with all requirements of the Exchange Act and regulations adopted thereunder), the number of Shares which shall be issuable upon the exercise of an SAR shall be determined by dividing (i) the number of Shares to which the SAR is exercised multiplied by the amount of the appreciation in such Shares (for this purpose, the appreciation shall be the amount by which the Fair Market Value of the Shares subject to the SAR on the date of exercise exceeds (x) in the case of an SAR related to an Option, the Option Exercise Price of the Shares under the Option or (y) in the case of an SAR granted alone without reference to a related Option, an amount that the Committee determined at the time of grant to be the Fair Market Value of a Share, subject to adjustment as provided in Section 4.2) by (ii) the Fair Market Value of a Share on the exercise date.
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(b) Cash . In lieu of issuing Shares upon the exercise of an SAR, the Committee may elect, in its sole discretion, to pay the holder of the SAR cash equal to the Fair Market Value on the exercise date of any or all of the Shares which would otherwise be issuable. No fractional Shares shall be issued upon exercise of an SAR; instead, the holder of the SAR shall be entitled to receive a cash adjustment equal to the same fraction of the Fair Market Value of a Share on the exercise date or to purchase the portion necessary to make a whole Share at its Fair Market Value on the date of exercise.
10.6. Vesting Upon Change in Control . Upon a Change in Control, each then outstanding SAR held by Participants shall become fully vested and immediately exercisable.
10.7. SAR Agreement . Each SAR shall be evidenced by an SAR Agreement that shall further specify the terms and conditions of such Award. Any terms and conditions of the Award shall be consistent with the terms of the Plan.
ARTICLE 11
Stock and Cash Awards
A stock award consists of the transfer by the Company to a Participant of Shares, without other payment therefor, as additional compensation for services to the Company. A cash award consists of a monetary payment made by the Company to a Participant as additional compensation for services to the Company. The Committee shall determine, in its sole discretion, the amount of any stock or cash award. Stock and cash awards may be subject to the terms and conditions, which may vary from time to time and among Participants, as the Committee deems appropriate. The maximum amount of a cash award which may be granted to a Participant during any calendar year under the Plan shall not be greater than $10,000,000. Payment of a stock or cash award will normally depend on meeting Performance Goals. Each award of stock or cash may provide for lesser payment in the event of partial fulfillment of Performance Goals.
ARTICLE 12
Amendment, Modification and Termination
12.1. Effective Date . The Plan shall become effective as of May 31, 2006 ( Effective Date ) provided it is approved by the holders of a majority of the outstanding Shares present or represented and entitled to vote on the Plan at a stockholders meeting. The Plan shall be rescinded and all Options, Shares of Restricted Stock, Restricted Stock Units, LTIP Units, SARs, Performance Units and other Awards granted shall be null and void unless within 12 months from the date of the adoption of the Plan by the Board it shall have been approved by the holders of a majority of the outstanding Shares present or represented and entitled to vote on the Plan at a stockholders meeting.
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12.2. Termination Date . The Plan shall terminate on the earliest to occur of (a) the tenth anniversary of the Effective Date of the Plan, (b) the date when all Shares and Op Units available under the Plan shall have been acquired pursuant to the exercise of Awards and the payment of all benefits in connection with Awards has been made or (c) such other date as the Board may determine in accordance with Section 12.3.
12.3. Amendment, Modification and Termination . The Board may, at any time, amend, modify or terminate the Plan. Without the approval of the stockholders of the Company ( to the extent required by the Code and the rules promulgated thereunder, any national securities exchange or system on which the Shares are then listed or reported or a regulatory body having jurisdiction with respect hereto), however, no such amendment or modification may make a material revision to the Plan. Without limitation on the preceding sentence, no amendment may increase the number of Share or Op Units available under the Plan without the approval of the stockholders of the Company.
12.4. Awards Previously Granted . No amendment, modification or termination of the Plan shall in any manner adversely affect any outstanding Award without the written consent of the Participant holding such Award.
12.5. No Repricing . Except for the adjustments set forth in Section 4.2, there shall be no change in the exercise price of an Option without the approval of the stockholders of the Company.
ARTICLE 13
Non-Transferability
Except as expressly provided in the Plan, a Participants rights under the Plan may not be assigned, pledged or otherwise transferred other than by will or the laws of descent and distribution, except that upon a Participants death, the Participants rights to payment pursuant to a Performance Unit may be transferred to a beneficiary designated in accordance with Section 9.8. Except as expressly provided in the Plan, during a Participants lifetime, an Award may be exercised only by such Participant.
ARTICLE 14
No Granting of Employment Rights
Neither the Plan, nor any action taken under the Plan, shall be construed as giving any Employee the right to become a Participant, nor shall an Award under the Plan be construed as giving a Participant any right with respect to continuance of employment by the Company. The Company expressly reserves the right to terminate, whether by dismissal, discharge or otherwise, a Participants employment at any time, with or without Cause, except as may otherwise be provided by any written agreement between the Company and the Participant.
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ARTICLE 15
Withholding
15.1. Tax Withholding . A Participant shall remit to the Company an amount sufficient to satisfy Federal, state and local taxes (including the Participants FICA and Medicare obligation) required by law to be withheld with respect to any grant, exercise or payment made under or as a result of the Plan.
15.2. Share Withholding . If the Company has a withholding obligation upon the issuance of Shares or Op Units under the Plan, a Participant may, subject to the discretion of the Committee, elect to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the withholding tax is to be determined equal only to the minimum amount required to be withheld under applicable law. Notwithstanding the foregoing, the Committee may, by the adoption of rules or otherwise, modify the provisions of this Section 15.2 or impose such other restrictions or limitations on such elections as may be necessary to ensure that such elections will be exempt transactions under Section 16(b) of the Exchange Act.
ARTICLE 16
Indemnification
No member of the Board or the Committee, nor any officer or Employee acting on behalf of the Board or the Committee, shall be personally liable for any action, determination or interpretation taken or made with respect to the Plan, and all members of the Board, the Committee and each officer or Employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination or interpretation.
ARTICLE 17
Successors
All obligations of the Company with respect to Awards granted under the Plan shall be binding on any successor to the Company, whether the existence of such successor is a result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company.
ARTICLE 18
Governing Law
To the extent not preempted by Federal law, the Plan, and all agreements under the Plan, shall be governed by, and construed in accordance with, the laws of the State of Delaware without regard to its conflict of laws rules. Furthermore, the Plan and all Option Agreements relating to ISOs shall be interpreted to the extent deemed appropriate by the Committee so as to qualify as incentive stock options under the Code.
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Exhibit 10.11.1
VENTAS, INC.
2006 STOCK PLAN
FOR DIRECTORS
[As amended October 16, 2007 and December 8, 2008]
ARTICLE 1. PURPOSE
The purpose of the Ventas, Inc. 2006 Stock Plan for Directors (Plan) is to promote the interests of Ventas, Inc., its subsidiaries and stockholders, by allowing the Company to attract and retain highly qualified directors by permitting them to obtain or increase their proprietary interest in the Company.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1 Definitions . As used in the Plan, terms defined parenthetically immediately after their use shall have the respective meanings provided by such definitions, and the terms set forth below shall have the following meanings (in either case, such terms shall apply equally to both the singular and plural forms of the terms defined):
(a) Award shall mean, individually or collectively, a grant under the Plan of Options, Restricted Stock, Restricted Stock Units or Other Stock-Based Awards.
(b) Award Agreement shall mean, individually or collectively, an Option Agreement, Restricted Award Agreement, or an agreement evidencing an Other Stock-Based Award.
(c) Board shall mean the Board of Directors of the Company.
(d) Cause shall mean, unless otherwise defined in an Award Agreement, a felony conviction of a Director or the failure of a Director to contest prosecution for a felony, or a Directors willful misconduct or dishonesty, any of which is determined by the Committee to be directly and materially harmful to the business or reputation of the Company or its Subsidiaries.
(e) Change in Control shall mean any of the following events:
(1) An acquisition (other than directly from the Company) of any voting securities of the Company (Voting Securities) by any Person immediately after which such Person has beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) (Beneficial Ownership and/or Beneficially Owned) of 20% or more of the combined voting power of the Companys then outstanding Voting Securities; provided, however, that in determining whether a Change in Control has occurred, Voting Securities which are acquired in a Non-Control Acquisition (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A Non-Control Acquisition shall mean an acquisition by (i) the Company or any Subsidiary, (ii) an employee benefit plan (or a trust forming a part thereof) maintained by the Company or any Subsidiary, or (iii) any Person in connection with a Non-Control Transaction (as hereinafter defined);
(2) The individuals who, as of May 31, 2006, are members of the Board (Incumbent Board) cease for any reason to constitute at least a majority of the Board; provided, however, that if the election, or nomination for election by the Companys stockholders, of any new director was approved by a vote of at least a majority of the Incumbent Board, such new director shall, for purposes of the Plan, be considered as a member of the Incumbent Board; provided, further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened election contest (as described in the former Rule 14a-11 promulgated under the Exchange Act) (Election Contest) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (Proxy Contest) including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest;
(3) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the Company, unless such is a Non-Control Transaction. For purposes of the Plan, the term Non-Control Transaction shall mean a merger, consolidation or reorganization of the Company in which:
(i) the stockholders of the Company, immediately before such merger, consolidation or reorganization, own, directly or indirectly immediately following such merger, consolidation or reorganization, at least a majority of the combined voting power of the voting securities of the corporation or entity resulting from such merger or consolidation or reorganization (Surviving Corporation) over which any Person has Beneficial Ownership in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization;
(ii) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least a majority of the members of the board of directors or equivalent body of the Surviving Corporation; and
(iii) no Person (other than the Company, any Subsidiary, any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation, or any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of 20% or more of the then outstanding Voting Securities) has Beneficial Ownership of 20% or more of the combined voting power of the Surviving Corporations then outstanding voting securities;
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(B) A complete liquidation or dissolution of the Company; or
(C) An agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary); or
(4) Any other event that the Committee shall determine constitutes an effective Change in Control of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (Subject Person) acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person; provided, however, that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the then outstanding Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
With respect to any Award that constitutes a deferral of compensation subject to the requirements of Section 409A of the Code (409A Award) but only to the extent necessary for such 409A Award to comply with Section 409A of the Code, a Change in Control must constitute a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A(a)(2)(A)(v) of the Code for any acceleration of the timing of payment of the 409A Award because of the Change in Control. The preceding sentence shall not affect the vesting of any Award.
(f) Code shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.
(g) Committee shall mean the Committee provided for in Section 7.1.
(h) Company shall mean Ventas, Inc., a Delaware corporation.
(i) Director shall mean a member of the Board who is not an employee of the Company or any Subsidiary.
(j) Disability shall mean the total disability as determined by the Committee in accordance with standards and procedures similar to those under the Companys long-term disability plan, or, if none, a physical or mental infirmity which the Committee determines impairs the Participants ability to perform substantially his or her duties for a period of 180 consecutive days.
(k) Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to time.
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(l) Fair Market Value of the Shares shall mean, as of any applicable date, the closing sale price of the Shares on the New York Stock Exchange or any national or regional stock exchange on which the Shares are traded, or if no such reported sale of the Shares shall have occurred on such date, on the next preceding date on which there was such a reported sale. If there shall be any material alteration in the present system of reporting sale prices of the Shares, or if the Shares shall no longer be listed on the New York Stock Exchange or a national or regional stock exchange, the fair market value of the Shares as of a particular date shall be determined by such method as shall be determined by the Committee.
(m) LTIP Unit shall mean an OP Unit granted to a Director pursuant to Article 6 that may be subject to restrictions as determined by the Committee.
(n) OP means the applicable operating partnership of the Company.
(o) Option shall mean an option granted to an Optionee pursuant to the Plan.
(p) Option Agreement shall mean a written agreement between the Company and an Optionee evidencing the granting of an Option and containing terms and conditions concerning the exercise of the Option.
(q) Optionee shall mean a Director who has been granted an Option or the personal representative, heir or legatee of an Optionee who has the right to exercise the Option upon the death of the Optionee.
(r) Op Unit shall mean a unit of partnership interest in an OP.
(s) Other Stock-Based Award shall mean any right granted under Article 6.
(t) Person shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14 (d) thereof, including a group as defined in Section 13(d).
(u) Plan shall mean this Ventas, Inc. 2006 Stock Plan for Directors, as the same may be amended from time to time.
(v) Restricted Award Agreement shall mean an agreement evidencing a Restricted Stock Award or Restricted Stock Unit Award, as described in Section 5.3.
(w) Restricted Stock shall mean Shares granted pursuant to Article 5 as to which the restrictions have not expired.
(x) Restricted Stock Unit shall mean an Award granted pursuant to Article 5 denominated in units of the Companys common stock.
(y) Restriction Period shall mean the period set forth in Section 5.1 or determined by the Committee during which the transfer of Shares is limited in some way or Shares or Restricted Stock Units are otherwise restricted or subject to forfeiture as provided in Article 5.
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(z) Shares shall mean the shares of the Companys common stock, par value $.25 per share.
(aa) Subsidiary shall mean, with respect to any company, any corporation or other Person of which a majority of its voting power, equity securities or equity interest is owned directly or indirectly by such company.
2.2 Gender and Number . Except where otherwise indicated by the context, reference to the masculine gender shall include the feminine gender, the plural shall include the singular and the singular shall include the plural.
2.3 Severability . In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
ARTICLE 3. SHARES SUBJECT TO THE PLAN
Subject to the adjustments provided for in Article 8, the aggregate number of Shares or Op Units to be delivered upon exercise of all Awards and the payment of benefits in connection with Awards granted under the Plan shall not exceed 400,000 Shares or Op Units. Such Shares or OP Units may be of original issuance or held in treasury. If and to the extent an Award shall expire or terminate for any reason without having been exercised in full or shall be forfeited, the Shares (including Restricted Stock) or OP Units associated with such Awards shall again become available for Awards under the Plan.
ARTICLE 4. TERMS AND CONDITIONS OF OPTIONS
4.1 Non-Discretionary Grants . On January 1 of each year during the term of the Plan, each Director (i) who is elected a director at the preceding annual meeting of shareholders or who has been appointed a director by the Board during the preceding year and (ii) who is acting as a director on January 1, shall receive a grant of an Option for Shares in a number determined by the Committee. Such Options shall have the following terms and conditions:
(a) The exercise price of the Option shall be equal to 100% of the Fair Market Value of the Shares on the date the Option is granted.
(b) The term of the Option shall be ten years from the date of grant unless sooner terminated as provided herein.
(c) The Option shall be exercisable in two equal annual installments, with the first installment becoming exercisable on the date of grant of the Option and the second installment becoming exercisable on the first anniversary of the date of grant of the Option. Notwithstanding the provisions of this Section 4.1, upon a Change in Control or the death, Disability or retirement of the Director, the Optionee (or, if appropriate, the legal representative of the Optionees estate) shall have the right to exercise the Option in full as to all Shares subject to the Option.
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4.2 Termination of Option .
(a) If the Optionee ceases to be a director of the Company for any reason other than death, Disability, retirement or removal for Cause, the Option shall terminate six months after the Optionee ceases to be a director of the Company (unless the Optionee dies during such period), or on the Options expiration date, if earlier, and shall be exercisable during such period after the Optionee ceases to be a director of the Company only with respect to the number of Shares which the Optionee was entitled to purchase on the day preceding the day on which the Optionee ceased to be a director.
(b) If the Optionee ceases to be a director of the Company because of removal for Cause, the Option shall terminate on the date of the Optionees removal.
(c) In the event of the Optionees death, Disability or retirement while a director of the Company, or the Optionees death within six months after the Optionee ceases to be a director (other than by reason of removal for Cause), the Option shall terminate upon the earlier to occur of (A) 12 months after the date of the Optionees death, Disability or retirement, or (B) the Options expiration date. The Option shall be fully exercisable during such period.
4.3 Restrictions on Transferability of Option . The Option shall not be transferable by the Optionee otherwise than by bequest or the laws of descent and distribution, and shall be exercisable during the Optionees lifetime only by the Optionee; provided, however, that the Optionee may, subject to any restrictions under Section 16(b) of the Exchange Act, transfer the Options to (i) the Optionees spouse or lineal descendants (Immediate Family Members), (ii) trusts for the exclusive benefit of such Optionee and/or his Immediate Family Members, or (iii) a partnership or limited liability company in which such Optionee and/or his Immediate Family Members are the only partners or members, as applicable; provided that (a) there may be no consideration for any such transfer (other than interests in such partnership or limited liability company) and (b) subsequent transfers of any transferred Option shall be prohibited other than by bequest or the laws of descent and distribution. Following transfer, any such Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of the Plan (excluding Section 4.2) the term Optionee shall be deemed to refer to the transferee. Notwithstanding the above, the provisions of Section 4.2 concerning the termination of an Option shall continue to be applied with respect to the original Optionee. Any transferred Option shall be exercisable by the transferee only to the extent, and for the periods, specified in the Option Agreement.
4.4 Payment of Exercise Price . The exercise price shall be paid in cash at the time of exercise or by means of a cashless exercise through a third party, except that in lieu of all or part of the cash or third-party cashless exercise, the Optionee may tender to the Company Shares already owned by the Optionee having a Fair Market Value equal to the exercise price, less any cash paid. Any Company Shares tendered to the Company pursuant to this provision must have been held by the Optionee for at least six months prior to exercise. The Fair Market Value of such tendered Shares shall be determined as of the close of the business day immediately preceding the day on which the Option is exercised.
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4.5 Discretionary Grants . Subject to the terms and provisions of the Plan, the Committee may grant Options in addition to the Options specified in Section 4.1 at any time and from time to time. The Committee shall determine the terms and conditions of Options granted pursuant to this Section 4.5 but in no event shall the exercise price of such Options be less than 100% of the Fair Market Value of Shares on the date the Option is granted.
4.6 Option Agreement . Each Option shall be evidenced by an Option Agreement which shall set forth the number of Shares for which the Option was granted, the provisions set forth in this Article 4 relating to the Option and such other terms and conditions consistent with the Plan.
ARTICLE 5. TERMS AND CONDITIONS OF RESTRICTED STOCK
5.1 Non-Discretionary Grants . On January 1 of each year during the term of the Plan, each Director (i) who is elected a director at the preceding annual meeting of stockholders or who has been appointed a director by the Board during the preceding year and (ii) who is acting as a director on such January 1 in any year during the term of the Plan shall receive a grant of shares of Restricted Stock or Restricted Stock Units, as elected by the Director, in a number determined by the Committee. On the initial election by the stockholders of a Director to the Board who is not and has not been a member of the Board, or if earlier, on the initial appointment by the Board of a Director, such Director shall receive a grant of shares of Restricted Stock or Restricted Stock Units, as elected by the Director, in a number determined by the Committee. The restrictions on the transfer of shares of Restricted Stock granted pursuant to this Section 5.1 shall lapse with respect to one-half of the shares of Restricted Stock granted on the first anniversary of the date of such grant provided the recipient of the grant is a director of the Board at such time and with respect to the remaining one-half of the shares of Restricted Stock granted on the second anniversary of the date of such grant provided the recipient of the grant is a director of the Board at such time. One-half of the Restricted Stock Units granted pursuant to this Section 5.1 shall vest on the first anniversary of the date of such grant provided the recipient of the grant is a director of the Board at such time and the remaining one-half of the Restricted Stock Units shall vest on the second anniversary of the date of such grant provided the recipient of the grant is a director of the Board at such time. Notwithstanding the provisions of this Section 5.1, upon a Change in Control or the death, Disability or retirement of the Director, all restrictions pertaining to the then outstanding Shares of Restricted Stock and Restricted Stock Units held by Directors shall lapse and such Shares of Restricted Stock shall thereafter be immediately free from any and all restrictions under the Plan and Restricted Stock Units shall be paid as set forth in the Restricted Award Agreement.
5.2 Discretionary Grants . Subject to the terms and provisions of the Plan, the Committee may grant shares of Restricted Stock or Restricted Stock Units, as elected by the Director, in addition to the Restricted Stock and Restricted Stock Units specified in Section 5.1 at any time and from time to time. The Committee shall generally determine the terms and conditions of Restricted Stock and Restricted Stock Units granted pursuant to this Section 5.2 but the Director shall determine the payment date for Restricted Stock Units.
5.3 Restricted Award Agreement . Each grant of Restricted Stock or Restricted Stock Units shall be evidenced by a Restricted Award Agreement which shall specify the Restriction
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Period, the number of shares of Restricted Stock or Restricted Stock Units granted, as elected by the Director, and such other provisions as the Committee may determine or which are required by the Plan.
5.4 Non-Transferability of Restricted Stock . Except as provided in this Article 5, shares of Restricted Stock and Restricted Stock Units may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until the end of the applicable Restriction Period or later as specified in the Restricted Award Agreement, or upon earlier satisfaction of any other conditions determined at the time of grant specified in the Restricted Award Agreement.
5.5 Other Restrictions . The Committee may impose such other restrictions on any shares of Restricted Stock or Restricted Stock Units as it may deem advisable, including, without limitation, legends on certificates representing shares of Restricted Stock and restrictions under applicable Federal or state securities laws. The Committee may provide that any share of Restricted Stock shall be held (together with a stock power executed in blank by the Director) in custody by the Company until any or all restrictions thereon shall have lapsed.
5.6 Reacquisition of Restricted Stock . Any forfeited shares of Restricted Stock held by a Director or former Director which are to be reacquired by the Company shall be immediately returned to the Company by the Director or former Director, and the Director or former Director shall only receive the amount, if any, paid by the Director or former Director for such Restricted Stock.
5.7 Voting Rights; Dividends and Other Distributions . Unless determined otherwise by the Committee, during the Restriction Period, directors of the Board holding shares of Restricted Stock may exercise full voting rights, and shall be entitled to receive all dividends and other distributions paid, with respect to such Restricted Stock. If any dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions as the shares of Restricted Stock with respect to which they were paid.
On each dividend or other distribution date with respect to Shares, a cash dollar amount equal to the amount of cash dividends or the fair market value of property other than Shares that would have been paid or distributed on a number of Shares equal to the number of Restricted Stock Units held by Directors as of the close of business on the record date for such dividend or distribution shall be paid in cash to such Directors. If any dividend or distribution with respect to Shares is payable in Shares, Directors shall be credited with an additional number of Restricted Stock Units equal to the product of the number of Restricted Stock Units held by such Directors on the record date for such dividend or distribution multiplied by the number of Shares (including fractions thereof) distributable as a dividend or distribution on a Share. Restricted Stock Units which are credited to Directors pursuant to the preceding sentence shall be subject to the same terms and conditions of the Plan, the Restricted Award Agreement and elections applicable with respect to such Restricted Stock Units with respect to which they relate.
5.8 Termination of Directorship . If the recipient of Restricted Stock ceases to be a director of the Board for any reason other than death, Disability, retirement or Change in Control prior to the expiration of the Restriction Period applicable to any shares of Restricted Stock then held by the Director, such Shares shall thereupon be immediately forfeited by and returned to the
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Company, and the former Director shall only receive the amount, if any, paid by the former Director for such Restricted Stock. If the recipient of Restricted Stock Units ceases to be a director of the Board for any reason other than death, Disability, retirement or Change in Control prior to the expiration of the Restriction Period applicable to any Restricted Stock Units then held by the Director, such Restricted Stock Units shall thereupon be immediately forfeited.
ARTICLE 6. OTHER STOCK-BASED AWARDS
The Board may grant to Directors such other Awards (including, without limitation, stock awards, stock appreciation rights, LTIP Units, and rights to dividends and dividend equivalents) that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares, including, without limitation, OP Units) as are deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, as an alternative to other Awards.
ARTICLE 7. ADMINISTRATION
7.1 The Committee . Portions of the Plan are designed to operate automatically and not require any significant administration. To the extent administration is required, the Plan shall be administered by a Committee appointed by the Board which shall include two or more directors of the Company or the entire Board. The Committee, in accordance with Section 409A of the Code, may permit a Director to defer receipt of payment or delivery of Shares that would otherwise be due to such Director. The Committee shall meet at such times and places as it determines and may meet through a telephone conference call. A majority of its members shall constitute a quorum, and the decision of the majority of those present at any meeting at which a quorum is present shall constitute the decision of the Committee. Any decision reduced to writing and signed by a majority of the members of the Committee shall be fully effective as if it had been made by a majority at a meeting duly held. All decisions, determinations and selections made by the Committee pursuant to the provisions of the Plan shall be final. To the extent permitted by law, the Committee may delegate its authority hereunder.
7.2 Section 16 and 409A Compliance . It is the intention of the Company that the Plan and the administration of the Plan comply in all respects with Section 16(b) of the Exchange Act and Section 409A of the Code and the rules and regulations promulgated thereunder to the extent deemed appropriate by the Committee. If any Plan provision, or any aspect of the administration of the Plan, is found not to be in compliance with Section 16(b) of the Exchange Act or 409A of the Code, the provision or administration shall be deemed null and void to the extent deemed appropriate by the Committee, and in all events the Plan shall be construed in favor of its meeting the requirements of Rule 16b-3 promulgated under the Exchange Act and Section 409A of the Code to the extent deemed appropriate by the Committee.
Notwithstanding anything contained in the Plan to the contrary, the Company intends that Awards payable under the Plan shall satisfy the requirements for exemption from, or compliance with, Section 409A of the Code and that all terms and provisions shall be interpreted, operated and administered to satisfy such requirements. To the extent Section 409A of the Code is applicable to any Award, it is intended that such 409A Award complies with the deferral, payout and other limitations and restrictions imposed under Section 409A of the Code.
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Regardless of what may be contained in any Award Agreement, to the extent that any 409A Award treated as payable upon a separation from service pursuant to Section 409A of the Code (as determined, and in accordance with the methodology selected by the Company, consistent with Section 409A of the Code) (Separation from Service), then, if payment is triggered by reason of the Separation from Service and on the date of the Participants Separation from Service, the Participant is a specified employee pursuant to Section 409A of the Code (as determined, and in accordance with the methodology selected by the Company, consistent with Section 409A of the Code), then to the extent required for the Participant not to incur additional taxes pursuant to Section 409A of the Code, no payment with respect to the 409A Award shall be made to the Participant earlier than the earlier of (i) six (6) months after the Participants Separation from Service; or (ii) the date of the Participants death. Should the limitation set forth in the preceding sentence result in payment later than otherwise provided in the Plan or 409A Award, on the first day any such payment may be made without incurring additional tax pursuant to Section 409A of the Code, such payment shall be made to the Participant in a lump sum. Notwithstanding anything contained in the Plan or Award to the contrary, the date on which a Participants Separation from Service occurs shall be treated as the Participants termination of employment or service date or comparable concept for purposes of determining the timing of payments under the Plan and Award to the extent necessary to have such payments under the Plan and Award be exempt from or comply with the requirements of Section 409A of the Code; provided, however, this sentence shall have no impact on whether or not an Award becomes vested. No 409A Award shall be subject to acceleration or to any change in the specified time or method of payment, except as permitted by Section 409A of the Code or as otherwise provided under the Plan or Award and consistent with Section 409A of the Code.
These last three paragraphs of this Section 7.2 are not intended to impose any restrictions on Awards other than those required for the Participant not to incur additional tax under Code Section 409A and shall be interpreted and operated accordingly. Notwithstanding any other provision in the Plan, the Committee makes no representations that Awards granted under the Plan shall be exempt from, or comply with, Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to Awards granted under the Plan. No provision of the Plan shall be interpreted or construed to transfer any liability for failure to comply with Section 409A from the Participant or any other individual to the Company.
ARTICLE 8. ADJUSTMENTS UPON CHANGE IN CAPITALIZATION
Notwithstanding the limitations set forth in Article 3, in the event of a merger, reorganization, consolidation, recapitalization, reclassification, split-up, spin-off, separation, liquidation, stock dividend, stock split, reverse stock split, property dividend, share repurchase, share combination, share exchange, issuance of warrants, rights or debentures or other change in corporate structure of the Company affecting the Shares or Op Units, the Committee shall make an appropriate and equitable adjustment in the maximum number of Shares or Op Units available under the Plan or to any one individual and in the number, kind and exercise price of Shares or Op Units subject to Awards granted under the Plan to prevent dilution or enlargement of the rights of Directors under the Plan and outstanding Awards. Any adjustments pursuant to this Article 8 to Awards that are considered Section 409A Awards are intended to be made only if permitted by Section 409A of the Code and only in a manner in compliance with the requirements of Section 409A of the Code and any adjustments made pursuant to this Article 8
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to Awards that are not considered 409A Awards are intended to be made only if and in such a manner that after such adjustment the Awards either continue not to be 409A Awards or comply with the requirements of Section 409A of the Code.
ARTICLE 9. AMENDMENTS AND DISCONTINUANCE
9.1 In General . Except as provided in Section 9.2, the Board may discontinue, amend, modify or terminate the Plan at any time.
9.2 Amendments . To the extent required to meet the requirements of any national securities exchange or system on which the Shares are then listed or reported or a regulatory body having jurisdiction with respect thereto, without the approval of the stockholders of the Company, no amendment or modification may make a material revision to the Plan. Without limitation on the preceding sentence, no amendment may increase the number of Shares or Op Units available under the Plan without the approval of the stockholders of the Company.
9.3 No Effect on Outstanding Awards . Any Award which is outstanding under the Plan at the time of the Plans amendment or termination shall remain in effect in accordance with its terms and conditions and those of the Plan as in effect when the Award was granted.
9.4 No Repricing. Except for the adjustments set forth in Article 8, there shall be no change in the exercise price of an Option without the approval of the stockholders of the Company.
ARTICLE 10. MERGER, CONSOLIDATION, ETC.
10.1 Conversion on Certain Mergers . In the event the Company merges or consolidates with another corporation, or all or substantially all of the Companys capital stock or assets are acquired by another corporation, and the surviving or acquiring corporation issues shares of its stock to the Companys stockholders in connection with the merger, consolidation or acquisition, the surviving or acquiring corporation shall adopt the Plan. Following such adoption, the Optionee shall, at no additional cost (other than the exercise price), be entitled to receive upon the exercise of an Option, in lieu of the number of Shares to which such Option is then exercisable, the number and class of stock or other securities to which the Optionee would have been entitled pursuant to the terms of the merger, consolidation or acquisition if immediately prior thereto the Optionee had been the holder of record of a number of Shares equal to the number of Shares as to which the Option shall then be exercisable.
10.2 No Conversion on Other Mergers . In the event that the Company merges or consolidates with another corporation, or all or substantially all of the Companys capital stock or assets are acquired by another corporation, and the surviving or acquiring corporation does not issue shares of its stock to the Companys stockholders in connection with the merger, consolidation or acquisition, then, notwithstanding any other provision of the Plan to the contrary, no Option may be exercised after the effective date of the merger, consolidation or acquisition.
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ARTICLE 11. EFFECTIVE DATE AND TERMINATION OF THE PLAN
11.1 Effective Date . The Plan shall become effective May 31, 2006. All Awards granted under the Plan shall be null and void unless within 12 months from the date of the adoption of the Plan by the Board it shall have been approved by the holders of a majority of the outstanding Shares present or represented and entitled to vote on the Plan at a stockholders meeting.
11.2 Termination Date . The Plan shall terminate on the earliest to occur of (i) the date when all of the Shares or Op Units available under the Plan shall have been acquired through the exercise of Options granted under the Plan or through the vesting of Awards; (ii) 10 years after the effective date of the Plan; or (iii) such earlier date as the Board may determine.
ARTICLE 12. NO RIGHT TO REELECTION
Neither the Plan, nor any action taken under the Plan, shall be construed as conferring upon a Director any right to continue as a director of the Company, to be renominated by the Board or reelected by the stockholders of the Company.
ARTICLE 13. INDEMNIFICATION
No member of the Board or the Committee, nor any officer or employee acting on behalf of the Board or the Committee, shall be personally liable for any action, determination or interpretation taken or made with respect to the Plan, and all members of the Board, the Committee and each officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination or interpretation.
ARTICLE 14. GOVERNING LAW
The provisions of the Plan shall be construed, administered and enforced according to the laws of the State of Delaware without regard to its conflict of laws rules.
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Exhibit 10.11.2
[DIRECTOR FORM]
VENTAS, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (Agreement) is made and entered into as of (the Effective Date), by and between VENTAS, INC. , a Delaware corporation (the Company), and , a non-employee director of the Company (Optionee) pursuant to the Ventas, Inc. 2006 Stock Plan for Directors (the Plan).
AGREEMENT :
The parties agree as follows:
1. Grant of Option; Option Price . Company hereby grants to Optionee, as a matter of separate inducement and agreement in connection with being a director of the Company (and not in lieu of any other compensation for Optionees services) the right and option to purchase (the Option) all or any part of an aggregate of ( ) shares of the Companys Common Stock (the Option Shares) on the terms and conditions set forth herein, subject to adjustment as provided in Section 7, at a purchase price of ($ ) per share (the Option Price). The Company and Optionee consider the Option Price to be not less than the Fair Market Value (as defined in the Plan) of the Common Stock on the Effective Date, which is the date on which the Option was granted to Optionee (the Option Date).
2. Term of Option . The Option shall commence on the date hereof and continue for a term ending ten years from the Option Date (the Termination Date), unless sooner terminated as provided in Sections 5 and 6.
3. Option Exercisable in Installments . Subject to the other terms and conditions stated herein, the right to exercise the Option shall vest [in installments as follows:
(a) First Installment . Commencing on the Option Date, Optionee may exercise the Option for up to 50 percent of the number of Option Shares.
(b) Second Installment . Commencing on the first anniversary of the Option Date, the Option may be fully exercised to the extent that it has not previously been exercised.]
[Alternative vesting schedule]
4. Conditions to Exercise of the Option .
(a) Exercise of Option . Subject to the provisions of Section 3, Optionee may exercise the Option by delivering to the Company written notice (Notice) of exercise stating the number of Option Shares for which the Option is being exercised accompanied by payment in the amount of the Option Price multiplied by the number of Option Shares for which the Option is being exercised (the Exercise Price) in the manner provided in Section 4(b).
(b) Payment of Exercise Price . The Company shall accept as payment for the Exercise Price (a) a check payable to the order of the Company, (b) the tender of Common Stock (by either actual delivery of Common Stock or by attestation), (c) cashless exercise through a third party in a transaction independent of the Company and properly structured to avoid any adverse accounting consequences to the Company, (d) a combination of the foregoing, or (e) by any other means which the Committee determines.
(c) Delivery of Shares on Exercise . As soon as practicable after receipt of the Notice and payment of the Exercise Price, the Company shall deliver to Optionee, without transfer or issuance tax or other incidental expense to Optionee, at the office of the Company, or at such other place as may be mutually acceptable, or, at the election of the Company, by certified mail addressed to Optionee at Optionees address shown in the records of the Company, a certificate or certificates for the number of shares of Common Stock set forth in the Notice and for which the Company has received payment in the manner prescribed herein. Company may postpone such delivery until it receives satisfactory proof that the issuance or transfer of such shares will not violate any of the provisions of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, any rules or regulations of the Securities and Exchange Commission promulgated thereunder, or the requirements of applicable state law relating to authorization, issuance or sale of securities, or until there has been compliance with the provisions of such acts or rules. If Optionee fails to accept delivery of all or any part of the number of shares of Common Stock specified in such notice upon tender of delivery thereof, Optionees right to exercise the Option for such undelivered shares may be terminated by the Company.
5. Restrictions on Transfer of Option .
(a) Except as provided in Section 5(b), the Option shall be exercisable during Optionees lifetime only by Optionee, and neither the Option nor any right hereunder shall be transferable except by bequest or the laws of descent and distribution. The Option may not be subject to execution or other similar process. If Optionee attempts to alienate, assign, pledge, hypothecate or otherwise dispose of the Option or any of Optionees rights hereunder, except as provided herein or in Section 5(b), or in the event of any levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the Option by notice to Optionee, and it shall thereupon become null and void.
(b) Optionee may transfer, subject to any restrictions under Section 16(b) of the Exchange Act, all rights under this Agreement to (i) Optionees spouse or lineal descendants (Immediate Family Members), (ii) a trust or trusts for the exclusive benefit of Optionee and/or Optionees Immediate Family Members, or (iii) a partnership or limited liability company in which Optionee and/or Optionees Immediate Family Members are the only partners or members, as applicable; provided that (a) any such transfer must be without any consideration to Optionee for such transfer, and (b) all subsequent transfers of any rights under this Agreement shall be prohibited other than by bequest or the laws of descent and distribution. Following any such transfer, this Agreement shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of this Agreement and the Plan (excluding Section 6 hereof and Section 4.2 of the Plan), the term Optionee shall be deemed to refer to the transferee. Any rights to exercise the Option transferred hereunder shall be exercisable by the transferee only to the extent, and for the periods, specified in this Agreement.
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6. Exercise of the Option Upon Ceasing to be a Director .
(a) If Optionee ceases to be a director of the Company prior to the Termination Date for any reason other than death, Disability, retirement or removal for Cause, the Option shall terminate six months after Optionee ceases to be a director of the Company (unless Optionee dies during such period) or on the Options expiration date, if earlier, and shall be exercisable during such period after Optionee ceases to be a director of the Company only with respect to the number of Shares which Optionee was entitled to purchase on the day preceding the day on which Optionee ceased to be a director.
(b) If the Optionee ceases to be a director of the Company because of removal for Cause, the Option shall terminate on the date of the Optionees removal.
(c) In the event of Optionees death, Disability or retirement while a director of the Company, or Optionees death within six months after Optionee ceases to be a director (other than by reason of removal for Cause), the Option shall terminate upon the earlier to occur of (i) 12 months after the date of Optionees death, Disability or retirement, or (ii) the Options expiration date. The Option shall be fully exercisable during such period.
7. Adjustment to Option Shares . The Option shall be subject to adjustment as provided in the Plan.
8. Change in Control . Notwithstanding the provisions of Section 3, upon a Change in Control, Optionee shall have the right to exercise the Option in full as to all Option Shares.
9. Miscellaneous .
(a) No Rights as Stockholder . Neither Optionee, nor any person entitled to exercise Optionees rights under this Agreement, shall have any of the rights of a stockholder regarding the shares of Common Stock subject to the Option, except after the exercise of the Option as provided herein.
(b) Incorporation of Plan . Except as specifically provided herein, this Agreement is and shall be in all respects subject to the terms and conditions of the Plan, a copy of which Optionee acknowledges receiving prior to the execution hereof and the terms of which are incorporated by reference.
(c) Captions . The captions and section headings used herein are for convenience only, shall not be deemed part of this Agreement and shall not in any way restrict or modify the context or substance of any section or paragraph of this Agreement.
(d) Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware without regard to its conflict of laws rules.
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(e) Defined Terms . All capitalized terms not defined herein shall have the meanings set forth in the Plan, unless a different meaning is plainly required by the context.
IN WITNESS WHEREOF , the parties have executed this Agreement on and as of the date first above written.
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Exhibit 10.11.3
[DIRECTOR FORM]
VENTAS, INC.
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT (Agreement) is made and entered into as of the day of , by and between VENTAS, INC. , a Delaware corporation (the Company), and , a non-employee director of the Company (Director), pursuant to the Ventas, Inc. 2006 Stock Plan for Directors (the Plan).
AGREEMENT :
The parties agree as follows:
1. Issuance of Common Stock . The Company shall cause to be issued to Director ( ) shares of Common Stock (the Shares). The certificates representing the Shares, together with a stock power duly endorsed in blank by Director, shall be deposited with the Company to be held by it until the restrictions imposed upon the Shares by this Agreement have expired.
2. Vesting of Shares . If Director has not forfeited any of the Shares, the restriction on the Transfer (as defined herein) of the Shares shall expire [with respect to one-half of the Shares on , and shall expire with respect to the balance of the Shares on ] [alternative vesting schedule]. Upon expiration of the restriction against Transfer of any of the Shares pursuant to this Section 2, the Shares shall vest. Notwithstanding the foregoing, in the event of (A) a Change in Control or (B) the death, Disability or retirement of Director, the Shares shall automatically vest and all restrictions on the Shares shall lapse.
3. Forfeiture of Shares . If Director ceases to be a director of the Company for any reason other than a Change in Control or the death, Disability or retirement of Director, all Shares which have not vested in accordance with Section 2 of this Agreement shall be forfeited and reconveyed to the Company by Director without additional consideration, and Director shall have no further rights with respect thereto.
4. Restriction on Transfer of Shares . Director shall not Transfer any of the Shares owned by Director until such restriction on the Transfer of the Shares is removed pursuant to this Agreement. For purposes of this Agreement, the term Transfer shall mean any sale, exchange, assignment, gift, encumbrance, lien, transfer by bankruptcy or judicial order, transfer by operation of law and all other types of transfers and dispositions, whether direct or indirect, voluntary or involuntary.
5. Rights as Stockholder . Unless the Shares are forfeited, Director shall be considered a stockholder of the Company with respect to all such Shares that have not been forfeited and shall have all rights appurtenant thereto, including the right to vote or consent to all matters that may be presented to the stockholders and to receive all dividends and other distributions paid on such Shares. If any dividends or distributions are paid in Common Stock, such Common Stock shall be subject to the same restrictions as the Shares with respect to which it was paid.
6. Restrictive Legend . Each certificate representing the Shares may bear the following legend:
The sale or other transfer of the shares represented by this Certificate, whether voluntary, involuntary or by operation of law, is subject to certain restrictions on transfer (including conditions of forfeiture) as set forth in the Ventas, Inc. 2006 Stock Plan for Directors and in the related Restricted Stock Agreement. A copy of the Restricted Stock Agreement may be obtained from the Secretary of Ventas, Inc.
When the Shares have become vested, Director shall have the right to have the preceding legend removed from the certificate representing such vested Shares.
7. Agreement Does Not Grant Service Continuation . The granting of Shares shall not be construed as granting to Director any right to continue as a director or any other relationship with the Company. The right of the Company to terminate Directors service at any time, for any reason, with or without cause, is specifically reserved.
8. Section 83(b) Election Under the Code and Tax Withholding . If Director timely elects, under Section 83(b) of the Code, to include the fair market value of the Shares on the date hereof in Directors gross income for the current taxable year, Director agrees to give prompt written notice of such election to the Company. To the extent the Company ever becomes obligated to withhold taxes for amounts includable in Directors income, Director hereby agrees to make whatever arrangements are necessary to enable the Company to withhold as required by law.
9. Miscellaneous .
a. Incorporation of Plan . Except as specifically provided herein, this Agreement is and shall be in all respects subject to the terms and conditions of the Plan, a copy of which Director acknowledges receiving prior to the execution hereof and the terms of which are incorporated by reference.
b. Captions . The captions and section headings used herein are for convenience only, shall not be deemed part of this Agreement and shall not in any way restrict or modify the context or substance of any section or paragraph of this Agreement.
c. Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware without regard to its conflict of laws rules.
d. Defined Terms . All capitalized terms not defined herein shall have the meanings set forth in the Plan, unless a different meaning is plainly required by the context.
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IN WITNESS WHEREOF, the parties have executed this Agreement on and as of the date first above written.
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Exhibit 10.11.4
[DIRECTOR FORM]
VENTAS, INC.
RESTRICTED STOCK UNIT AGREEMENT
THIS RESTRICTED STOCK UNIT AGREEMENT (Agreement) is made and entered into as of the day of , by and between VENTAS, INC. , a Delaware corporation (the Company), and , a non-employee director of the Company (Director), pursuant to the Ventas, Inc. 2006 Stock Plan for Directors (the Plan).
AGREEMENT :
The parties agree as follows:
1. Issuance of Units . The Company hereby grants to Director Restricted Stock Units (Units) under the Plan.
2. Vesting of Units . If Director has not forfeited any of the Units, [one-half of the Units shall vest on , and the balance of the Units shall vest on ] [alternative vesting schedule]. Notwithstanding the foregoing, in the event of (A) a Change in Control or (B) the death, Disability or retirement of Director, the Units shall automatically vest.
3. Forfeiture of Units . If Director ceases to be a director of the Company for any reason other than a Change in Control or the death, Disability or retirement of Director, all of the Units which have not vested in accordance with Section 2 of this Agreement shall be forfeited and Director shall have no further rights with respect thereto.
4. Conversion of Units into Shares . Except as otherwise provided by a deferral election pursuant to Section 5 of this Agreement, vested Units shall be converted into Shares and distributed to Director when unvested Units become vested Units.
If, however, Director elects to defer payment of Shares as provided in Section 5 of this Agreement, the Shares shall be issued as set forth in the Deferral Election Agreement entered into by Director and accepted by the Company.
5. Deferral Election . Director may elect to defer delivery of the Shares that would otherwise be due to be paid pursuant to Section 4. The Committee shall, in its sole discretion, establish the rules and procedures for such deferral elections and payment deferrals.
6. Dividends . Director shall be credited with dividend equivalents with respect to Units under this Agreement.
On each dividend or other distribution date with respect to Shares, an amount equal to the cash dividends or the fair market value of property other than Shares that would have been paid or distributed on a number of Shares equal to the number of Units held by Director as of the close of business on the record date for such dividend or distribution shall be paid in cash to Director. If any dividend or distribution with respect to Shares is payable in Shares, Director
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shall be credited with an additional number of Units equal to the product of the number of Units held by Director on the record date for such dividend or distribution multiplied by the number of Shares (including fractions thereof) distributable as a dividend or distribution on a Share. Units which are credited to Director pursuant to the preceding sentence shall be subject to the same terms and conditions of the Plan, this Agreement and elections applicable with respect to such Units with respect to which they relate.
7. No Rights as Stockholder . Except as set forth in Section 6, Director shall have no voting or other rights as a stockholder of the Company with respect to any Units. Upon conversion of the Units into Shares, Director shall have full voting and other rights as a stockholder of the Company.
8. Independent Tax Advice . Director acknowledges that determining the actual tax consequences to Director of receiving Units or Shares or deferring or disposing of Units or Shares may be complicated. These tax consequences will depend, in part, on Directors specific situation and may also depend on the resolution of currently uncertain tax law and other variables not within the control of the Company. Director is aware that Director should consult a competent and independent tax advisor for a full understanding of the specific tax consequences to Director of receiving, deferring or disposing of Units or Shares. Prior to executing this Agreement, Director either has consulted with a competent tax advisor independent of the Company to obtain tax advice concerning the Units and Shares in light of Directors specific situation or has had the opportunity to consult with such a tax advisor but chose not to do so.
9. Restriction on Transfer of Units . Director shall not Transfer any of the Units except to the extent permitted by the Committee. For the purposes of this Agreement, the term Transfer shall mean any sale, exchange, assignment, gift, encumbrance, lien, transfer by bankruptcy or judicial order, transfer by operation of law and all other types of transfers and dispositions, whether direct or indirect, voluntary or involuntary.
10. Agreement Does Not Grant Service Continuation . The granting of Units or their conversion into Shares shall not be construed as granting to Director any right to continue as a director or any other relationship with the Company. The right of the Company to terminate Directors service at any time, for any reason, with or without consent, is specifically reserved.
11. General Provisions .
a. Incorporation of Plan . Except as specifically provided herein, this Agreement is and shall be in all respects subject to the terms and conditions of the Plan, a copy of which Director acknowledges receiving prior to the execution hereof and the terms of which are incorporated by reference.
b. Captions . The captions and section headings used herein are for convenience only, shall not be deemed part of this Agreement and shall not in any way restrict or modify the context or substance of any section or paragraph of this Agreement.
c. Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware without regard to its conflict of laws rules.
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d. Defined Terms . All capitalized terms not defined herein shall have the same meanings set forth in the Plan, unless a different meaning is plainly required by the context.
e. Tax Code Section 409A Dealing with Deferred Compensation . To the extent that a deferral election is not made pursuant to Section 5, Units are intended to be exempt from Section 409A of the Code as short-term deferral or otherwise. To the extent Section 409A of the Code is applicable to any Units, it is intended that such Units comply with the deferral, payout and other limitations and restrictions imposed under Section 409A of the Code. Notwithstanding any other provision, the Company, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify this Agreement to help distributions qualify for exemption from or compliance with Section 409A of the Code; provided , however , that the Company makes no representation that Units under the Plan shall be exempt from or comply with Section 409A of the Code and makes no undertaking to comply with Section 409A of the Code or to preclude Section 409A of the Code from applying to any Units. Director understands that Section 409A of the Code is complex, that any additional taxes and other liabilities under Section 409A of the Code are Directors responsibility and that the Company encourages Director to consult a tax advisor regarding the potential impact of Section 409A of the Code.
IN WITNESS WHEREOF, the parties have executed this Agreement on and as of the date first above written.
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Exhibit 10.12.1
VENTAS
EXECUTIVE DEFERRED STOCK COMPENSATION PLAN
[As amended December 8, 2008]
ARTICLE 1
INTRODUCTION
1.1 Establishment . Ventas, Inc. (the Company) hereby establishes the Ventas Executive Deferred Stock Compensation Plan (the Plan) for certain executives of the Company. The Plan allows Executives to defer the receipt of compensation and to receive such deferred compensation in the form of Shares.
1.2 Purpose . The Plan is intended to advance the interests of the Company and its stockholders by providing a means to attract and retain qualified persons to serve as Executives and to promote ownership by Executives of a greater proprietary interest in the Company, thereby aligning such Executives interests more closely with the interests of stockholders of the Company.
1.3 Effective Date . The Plan shall become effective as of September 30, 2004 (the Effective Date).
ARTICLE 2
DEFINITIONS
Certain terms used in this Plan have the meanings set forth in the Appendix.
ARTICLE 3
SHARES AVAILABLE UNDER THE PLAN
Subject to adjustment as provided in Article 10, the maximum number of Shares that may be distributed in settlement of Stock Unit Accounts under the Plan shall be five hundred thousand (500,000). Such Shares may include authorized but unissued Shares, treasury Shares or Shares that have been reacquired by the Company.
ARTICLE 4
ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the Board or such other committee as may be designated by the Board. The Committee shall have the authority to make all determinations it deems necessary or advisable for administering the Plan, subject to the express provisions of the Plan.
ARTICLE 5
ELIGIBILITY
Each person who is an Executive on a Deferral Date shall be eligible to defer Compensation payable on such date in accordance with Article 6 of the Plan.
ARTICLE 6
DEFERRAL ELECTIONS IN LIEU OF CASH PAYMENTS
6.1 General Rule . Each Executive may, in lieu of receipt of Compensation, defer any or all of such Compensation in accordance with this Article 6, provided that such Executive is eligible under Article 5 of the Plan to defer such Compensation at the date any such Compensation is otherwise payable. An Executive may elect to defer a percentage of his or her Compensation or a specific dollar amount of his or her Compensation in accordance with administrative procedures established with respect to the Plan.
6.2 Timing of Election . Each Executive on the Effective Date may make a Deferral Election at any time prior to the Effective Date. Any person who is not then serving as an Executive may make a Deferral Election within thirty days after such person becomes an Executive with respect to Compensation for services to be performed subsequent to the Deferral Election. An Executive who does not make a Deferral Election when first eligible to do so may make a Deferral Election at such time before any subsequent calendar year or other time permitted by the Committee in accordance with administrative procedures established with respect to the Plan.
6.3 Effect and Duration of Election . A Deferral Election shall apply to Compensation payable after the date such election is made and shall be deemed to be continuing and applicable to all Compensation payable in subsequent calendar years or other periods determined by the Committee, unless the Participant revokes or modifies such election by filing a new election form at such time before the first day of any subsequent calendar year or other period determined by the Committee in accordance with administrative procedures established with respect to the Plan, effective for all Compensation payable on and after the first day of such calendar year or other period determined by the Committee.
6.4 Form of Election . A Deferral Election shall be made in a manner satisfactory to the Committee. Generally, a Deferral Election shall be made by completing and filing the specified election form with the Corporate Secretary or his or her designee within the period described in Section 6.2 or Section 6.3.
6.5 Establishment of Stock Unit Account . The Company shall establish a Stock Unit Account for each Participant. All Compensation deferred pursuant to this Article 6 shall be credited to the Participants Stock Unit Account as of the Deferral Date and converted to Stock Units. The number of Stock Units credited to a Participants Stock Unit Account as of a Deferral Date shall equal the amount of the deferred Compensation divided by the Fair Market Value of a Share on such Deferral Date, with fractional units calculated to three decimal places. Fractional
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Stock Units shall be credited cumulatively, but any fractional Stock Unit in a Participants Stock Unit Account at the time of a distribution under Article 7 shall be converted into cash equal to the Fair Market Value of a corresponding fractional Share on the date of distribution.
6.6 Crediting of Dividend Equivalents . As of each dividend payment date with respect to Shares, each Participant shall be paid outright or have credited to his or her Stock Unit Account, as elected in advance by the Participant in accordance with procedures established by the Committee, a dollar amount equal to the amount of cash dividends that would have been paid on the number of Shares equal to the number of Stock Units credited to the Participants Stock Unit Account as of the close of business on the record date for such dividend. Such dollar amount if credited to the Participants Stock Unit Account shall then be converted into a number of Stock Units equal to the number of whole and fractional Shares that could have been purchased with such dollar amount at Fair Market Value on the dividend payment date.
ARTICLE 7
SETTLEMENT OF STOCK UNITS
7.1 Timing of Payment . A Participant shall receive or begin receiving a distribution of his or her Stock Unit Account in the manner described in Section 7.2 either (i) on or as soon as administratively feasible after the Participant incurs a Termination of Employment, (ii) if the Participant has made an election to defer payment in accordance with this Section and as permitted by the Committee, on or as soon as administratively feasible after January 1 of the year immediately following the date on which the Participant incurs a Termination of Employment, or (iii) if the Participant has made an election to defer payment in accordance with this Section and as permitted by the Committee, on or as soon as administratively feasible after such other date or event specified by the Participant. A Participant must deliver an election to defer the distribution or commencement of distribution to the Corporate Secretary or his or her designee such period in advance and in such manner as determined by the Committee.
7.2 Payment Options . A Deferral Election filed under Article 6 shall specify whether the Participants Stock Unit Account is to be settled by delivering to the Participant the number of Shares equal to the number of whole Stock Units then credited to the Participants Stock Unit Account, in either (i) a lump sum, or (ii) substantially equal annual installments over a period not to exceed ten years, provided that such installment payments do not extend more than ten years after the Participants Termination of Employment. Any fractional Stock Unit credited to a Participants Stock Unit Account at the time of a distribution shall be paid in cash at the time of such distribution. A Participant may change the manner in which his or her Stock Unit Account is distributed in accordance with such procedures established by the Committee.
7.3 Payment Upon Death of a Participant . If a Participant dies before the entire balance of his or her Stock Unit Account has been distributed, the balance of the Participants Stock Unit Account shall be paid in Shares as soon as administratively feasible after the Participants death, to the beneficiary designated by the Participant under Article 9.
7.4 Continuation of Dividend Equivalents . If payment of Stock Units is deferred pursuant to Section 7.2, the Participants Stock Unit Account shall continue to be credited with dividend equivalents as provided in Section 6.6 until the entire balance of the Participants Stock Unit Account has been distributed.
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ARTICLE 8
UNFUNDED STATUS
8.1 General . The interest of each Participant in any Compensation deferred under the Plan (and any Stock Units or Stock Unit Account relating thereto) shall be that of a general creditor of the Company. Stock Unit Accounts, and Stock Units credited thereto, shall at all times be maintained by the Company as bookkeeping entries evidencing unfunded and unsecured general obligations of the Company. Except as provided in Section 8.2, no money or other assets shall be set aside for any Participant.
8.2 Trust . To the extent determined by the Board, the Company may transfer funds necessary to fund all or part of the payments under the Plan to a trust; provided, the assets held in such trust shall remain at all times subject to the claims of the general creditors of the Company. No participant or beneficiary shall have any interest in the assets held in such trust or in the general assets of the Company other than as a general, unsecured creditor. Accordingly, the Company shall not grant a security interest in the assets held by the trust in favor of any Participant, beneficiary or creditor.
ARTICLE 9
DESIGNATION OF BENEFICIARY
Each Participant may designate, on a form provided by the Committee, one or more beneficiaries to receive payment of the Participants Stock Unit Account in the event of such Participants death. The Company may rely upon the beneficiary designation list filed with the Committee, provided that such form was executed by the Participant or his or her legal representative and filed with the Committee prior to the Participants death. If a Participant has not designated a beneficiary, or if the designated beneficiary is not surviving when a payment is to be made to such person under the Plan, the beneficiary with respect to such payment shall be the Participants surviving spouse, or if there is no surviving spouse, the Participants estate.
ARTICLE 10
ADJUSTMENT PROVISIONS
In the event of a reorganization, recapitalization, stock split, stock dividend, spin-off, combination, corporate exchange, merger, consolidation or other change in the Common Stock or any distribution to stockholders of Common Stock other than cash dividends or any transaction determined in good faith by the Board or Committee to be similar to the foregoing, the Board or Committee shall make appropriate equitable changes in the number and type of Shares authorized by this Plan, and the number and type of Shares to be delivered upon settlement of Stock Unit Accounts under Article 7. Any adjustments pursuant to this Article 10
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to Stock Units that are considered 409A Stock Units are intended to be made only if permitted by Code Section 409A and only in a manner in compliance with the requirements of Code Section 409A and any adjustments made pursuant to this Article 10 to Stock Units that are not considered 409A Stock Units are intended to be made only if and in such a manner that after such adjustment the Stock Units either continue not to be 409A Stock Units or comply with the requirements of Code Section 409A.
ARTICLE 11
WITHHOLDING
A Participant shall have withheld by the Company or shall remit to the Company an amount sufficient to satisfy Federal, state and local taxes (including the Participants FICA and Medicare obligation) required by law to be withheld with respect to any deferrals or payment made under or as a result of the Plan. If the Company has a withholding obligation upon the issuance of Shares under the Plan, a Participant may, subject to the discretion of the Committee, elect to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares limited to the extent required for accounting purposes, to Shares having a Fair Market Value on the date the withholding tax is to be determined equal only to the minimum amount required to be withheld under applicable law.
ARTICLE 12
GENERAL PROVISIONS
12.1 No Stockholder Rights Conferred . Nothing contained in the Plan will confer upon any Participant or beneficiary any rights of a Stockholder of the Company, unless and until Shares are in fact issued or transferred to such Participant or beneficiary in accordance with Article 7.
12.2 Changes to The Plan . The Board may amend, alter, suspend, discontinue, extend, or terminate the Plan without the consent of Participants; provided, no action taken without the consent of an affected Participant may materially impair the rights of such Participant with respect to any Stock Units credited to his or her Stock Unit Account at the time of such change or termination except that the Board may without the consent of any Participant terminate the Plan and pay out Shares with respect to Stock Units then credited to Participants Stock Unit Account.
12.3 Compliance With Laws and Obligations . The Company will not be obligated to issue or deliver Shares in connection with the Plan in a transaction subject to the registration requirements of the Securities Act of 1933, as amended, or any other federal or state securities law, any requirement under any listing agreement between the Company and any national securities exchange or automated quotation system or any other laws, regulations, or contractual obligations of the Company, until the Company is satisfied that such laws, regulations and other obligations of the Company have been complied with in full. Certificates representing Shares delivered under the Plan will be subject to such restrictions as may be applicable under such laws, regulations and other obligations of the Company.
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12.4 Limitations on Transferability . Stock Units and other rights under the Plan may not be pledged, mortgaged, hypothecated or otherwise encumbered, and shall not be subject to the claims of creditors of any Participant.
12.5 Governing Law . The validity, construction and effect of the Plan and any agreement hereunder will be determined in accordance with the Delaware General Corporation Law.
12.6 Plan Termination . Unless earlier terminated by action of the Board, the Plan will remain in effect until such time as no Shares remain available for delivery under the Plan and the Company has no further rights or obligations under the Plan.
ARTICLE 13
COMPLIANCE WITH CODE SECTION 409A
13.1 409A Stock Units . The provisions of this Article 13 apply to any 409A Stock Units, notwithstanding any provisions to the contrary contained in the Plan or the Deferral Election. The Company intends that Stock Units payable under the Plan shall satisfy the requirements for exemption from, or compliance with, Code Section 409A and that all terms and provisions shall be interpreted, operated and administered to satisfy such requirements. It is intended that each 409A Stock Unit complies with the deferral, payout and other limitations and restrictions imposed under Code Section 409A. This Article 13 is not intended to impose any restrictions on Stock Units other than those required for the Participant not to incur additional tax under Code Section 409A and shall be interpreted and operated accordingly. Notwithstanding any other provision in the Plan, the Company makes no representation that Stock Units under the Plan shall be exempt from, or comply with, Code Section 409A and makes no undertaking to preclude Code Section 409A from applying to Stock Units granted under the Plan. No provision of the Plan shall be interpreted or construed to transfer any liability for failure to comply with Code Section 409A from the Participant or any other individual to the Company.
13.2 Deferral Elections . Except as otherwise permitted or required by Code Section 409A, the following requirements apply to any Deferral Election that may be permitted or required by the Committee pursuant to a 409A Stock Unit: (i) A Deferral Election must be in writing and specify the amount being deferred and the time and form of distribution as permitted by the Plan; and (ii) A Deferral Election shall become irrevocable as of the deadline specified by the Committee, which shall not be later than December 31 of the year preceding the year in which services are performed for such Compensation.
13.3 Subsequent Elections . Except as otherwise permitted or required by Code Section 409A, a 409A Stock Unit which permits a subsequent Deferral Election to further defer the distribution or change the form of distribution shall comply with the following requirements: (i) No subsequent Deferral Election may take effect until at least twelve months after the date on which the subsequent Deferral Election is made; (ii) Each subsequent Deferral Election related to
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a distribution upon Termination of Employment, a specified time or a 409A Change in Control must result in a delay of the distribution for a period of not less than 5 years from the date such distribution would otherwise have been made; and (iii) No subsequent Deferral Election related to a distribution to be made at a specified time or pursuant to a fixed schedule shall be made less than twelve months prior to the date the first scheduled payment would otherwise be made.
13.4 Distributions . Except as otherwise permitted or required by Code Section 409A, no distribution in settlement of a 409A Stock Unit may commence earlier than (i) Termination of Employment; (ii) a specified time (or pursuant to a fixed schedule) that is specified by the Participant in a Deferral Election complying with this Article 13 or (iii) a 409A Change in Control. Notwithstanding anything to the contrary, to the extent that distribution of a 409A Stock Unit is triggered by a Participants Termination of Employment, if the Participant is then a Specified Employee, no distribution shall be made before the earlier of (i) six (6) months after the Participants Termination of Employment; or (ii) the date of the Participants death. Should the limitation set forth in the preceding sentence result in payment later than otherwise provided in the Plan or 409A Stock Unit, on the first day any such payment may be made without incurring additional tax pursuant to Code Section 409A, such payment shall be made to the Participant in one transfer. Notwithstanding anything contained in the Plan or Stock Unit to the contrary, the date on which a Participants Termination of Employment occurs shall be treated as the Participants termination of employment or service date or comparable concept for purposes of determining the timing of distributions under the Plan and Stock Unit to the extent necessary to have such distributions under the Plan and Stock Unit be exempt from or comply with the requirements of Code Section 409A. If a 409A Stock Unit is to be paid in two or more installments, for purposes of Code Section 409A, each installment shall be treated as a separate payment. No 409A Stock Unit shall be subject to acceleration or to any change in the specified time or schedule of distribution, except as permitted by Code Section 409A or as otherwise provided under the Plan or Stock Unit and consistent with Code Section 409A.
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APPENDIX 1
409A Change in Control means to the extent necessary for the 409A Stock Units to comply with Code Section 409A, at a minimum a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of subsection (a)(2)(A)(v) of Code Section 409A.
409A Stock Unit means a Stock Unit that constitutes deferral of compensation subject to the requirements of Code Section 409A.
Board means the Board of Directors of the Company.
Code Section 409A means section 409A of the Internal Revenue Code of 1986, as amended.
Committee means the Compensation Committee of the Board or such other committee appointed to administer the Plan under Article 4.
Common Stock means the Companys class of capital stock designed as Common Stock, or, in the event that the outstanding shares of Common Stock are after the Effective Date recapitalized, converted into or exchanged for different stock or securities of the Company, such other stock or securities.
Company means Ventas, Inc. a Delaware corporation, or any successor thereto.
Compensation means all or part of any salary or bonus payable in cash to an Executive or to the extent determined appropriate by the Committee, such other compensation to the Executive. Compensation shall not include any expenses paid directly or through reimbursement.
Deferral Date means the date Compensation would otherwise have been paid to the Participant.
Deferral Election means a written election to defer Compensation under the Plan or an election as to the form of distribution (but not an election as to the medium of payment).
Executive means any individual who is a senior vice president, executive vice president, president, chief executive officer or other executive of the Company designated by the Committee.
Fair Market Value of a share of Common Stock means, as of any applicable date, the closing sale price of the Shares on the New York Stock Exchange or any national or regional stock exchange in which the Shares are traded, or if no such reported sale of the Shares shall have occurred on such date, on the next preceding date on which there was such a reported sale. If there shall be any material alternation in the present system of reporting sale prices of the Shares, or if the Shares shall no longer be listed on the New York Stock Exchange or a national or regional stock exchange, the fair market value of the Shares as of a particular date shall be determined by such method as shall be determined by the Committee .
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Participant means an Executive who defers Compensation under Article 6 of the Plan.
Shares means shares of the Common Stock.
Stock Units means the credits to a Participants Stock Unit Account under Article 6 of the Plan, each of which represents the right to receive one Share upon settlement of the Stock Unit
Stock Unit Account means the bookkeeping account established by the Company pursuant to Section 6.5.
Termination of Employment means separation of service pursuant to Code Section 409A, as determined, and in accordance with the methodology selected, by the Company, consistent with Code Section 409A.
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Exhibit 10.12.2
VENTAS EXECUTIVE DEFERRED STOCK COMPENSATION PLAN
[YEAR] DEFERRAL ELECTION FORM
To the Corporate Secretary:
I. | DEFERRAL AMOUNT |
Pursuant to Article 6 of the Ventas Executive Deferred Stock Compensation Plan (the Plan), I hereby elect to have (select one):
¨ | percent ( %) | |||
¨ | $ dollars |
of my (select one or both):
¨ | base salary per pay period | |
¨ | bonus |
payable hereafter deferred and credited to a Stock Unit Account for me, net of any required FICA or other withholdings. I understand that I may revoke or modify this election only with respect to amounts payable on or after the first day of a subsequent calendar year and only by filing a new election form before the first day of such subsequent calendar year in accordance with Plan procedures.
II. | DIVIDEND CHOICE |
I elect to have dividend equivalents with respect to Stock Units in my Stock Unit Account (select one):
¨ | paid to me in cash as soon as practicable after dividends are paid on shares of Ventas, Inc. | |
¨ | converted to additional Stock Units and distributed at the time and in the manner selected for my Stock Unit Account. |
III. | PAYMENT OPTIONS |
I direct that distribution of my Stock Unit Account be made after my Termination of Employment as follows (select one):
¨ | a lump sum. | |
¨ | a series of annual payments over years (10 or less, not to extend more than 10 years after my Termination of Employment). |
I direct that distribution of my Stock Unit Account commence as soon as administratively feasible after (select one):
¨ | my Termination of Employment occurs. | |
¨ | January 1 of the calendar year immediately following my Termination of Employment. | |
¨ | seven months following my Termination of Employment. | |
¨ | . (select date) |
Change in Control Accelerated Payment (select if desired):
¨ | Notwithstanding my elections above, I direct that distribution of Stock Units in my Stock Unit Account be accelerated and occur in a lump sum upon a Change in Control (as defined in the 2000 Incentive Compensation Plan), provided such Change in Control also constitutes a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A(a)(2)(A)(v) of the Code. |
IV. | DESIGNATION OF BENEFICIARY |
Pursuant to Article 9 of the Plan, I designate my beneficiary (or beneficiaries) as follows:
Name |
Address |
Percentage |
||
|
||||
|
I reserve the right to make new designations as provided in the Plan.
V. | ACKNOWLEDGEMENT |
By signing this Deferral Election, I hereby acknowledge my understanding and acceptance of the following:
1. | Irrevocable Election. This election is irrevocable. I understand that I may not revoke or modify this election (except in such limited circumstances as the Compensation Committee may permit in accordance with law). I do not expect to be able to make any changes to the manner of timing of distributions set forth in this Deferral Election. |
2. | Company Right to Terminate Election and Early Transfer. The Company reserves the right to terminate this Deferral Election at any time. In such case, Stock Units which are subject to the Deferral Election may be converted into Shares and such Shares may be transferred to me immediately. Notwithstanding any election made herein and without limitation on the preceding provisions, the Company reserves the right to transfer to me all of the Shares associated with the Stock Units subject to this Deferral Election at any time following the termination of my employment with the Company or any affiliate or following the termination of the Plan. |
3. | Withholding. The Company and its affiliates shall have the right to deduct from all deferrals or payments hereunder, any federal, state, or local tax required by law to be withheld. |
4. | Tax Code Section 409A Dealing with Deferred Compensation . I understand that this election shall be construed in accordance with the terms and provisions set forth in this Deferral Election, as well as the Plan and the requirements of Section 409A of the Code. To the extent Section 409A of the Code is applicable to any Stock Unit, it is intended that such Stock Unit complies with the deferral, payout and other limitations and restrictions imposed under Section 409A of the Code. Notwithstanding any other provision in this Deferral Election, the Company, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify this election to help distributions qualify for exemption from or compliance with Section 409A of the Code; provided, however, that the Company makes no representation that Stock Units under the Plan shall be exempt from or comply with Section 409A of the Code and makes no undertaking to comply with Section 409A of the Code or to preclude Section 409A of the Code from applying to any Stock Units. I understand that Section 409A of the Code is complex, that any additional taxes and other liabilities under Section 409A of the Code are my responsibility and that the Company encourages me to consult a tax advisor regarding the potential impact of Section 409A of the Code. |
Capitalized terms used but not defined herein have the meanings specified in the Plan.
By signing this Deferral Election, I hereby acknowledge my understanding of and agreement with all the terms and provisions set forth in this Deferral Election, as well
Dated: December ,
|
||
Participants Signature | ||
|
||
Print Participants Name |
Copy received this day of December, .
|
||
Corporate Secretary |
Exhibit 10.13.1
VENTAS
NONEMPLOYEE DIRECTORS
DEFERRED STOCK COMPENSATION PLAN
[As amended December 8, 2008]
ARTICLE 1
INTRODUCTION
1.1 Establishment . Ventas, Inc. (the Company) hereby establishes the Ventas Nonemployee Directors Deferred Stock Compensation Plan (the Plan) for those directors of the Company who are not employees of the Company or any of its subsidiaries or affiliates. The Plan allows Nonemployee Directors to defer the receipt of cash compensation and to receive such deferred compensation in the form of Shares.
1.2 Purpose . The Plan is intended to advance the interests of the Company and its stockholders by providing a means to attract and retain qualified persons to serve as Nonemployee Directors and to promote ownership by Nonemployee Directors of a greater proprietary interest in the Company, thereby aligning such Directors interests more closely with the interests of stockholders of the Company.
1.3 Effective Date . The Plan shall become effective as of September 9, 2004 (the Effective Date).
ARTICLE 2
DEFINITIONS
Certain terms used in this Plan have the meanings set forth in the Appendix.
ARTICLE 3
SHARES AVAILABLE UNDER THE PLAN
Subject to adjustment as provided in Article 10, the maximum number of Shares that may be distributed in settlement of Stock Unit Accounts under the Plan shall be five hundred thousand (500,000). Such Shares may include authorized but unissued Shares, treasury Shares or Shares that have been reacquired by the Company.G
ARTICLE 4
ADMINISTRATION
The Plan shall be administered by the Nominating and Governance Committee of the Board or such other committee as may be designated by the Board. The Committee shall have the authority to make all determinations it deems necessary or advisable for administering the Plan, subject to the express provisions of the Plan. Notwithstanding the foregoing, no Director who is a Participant under the Plan shall participate in any determination relating solely or primarily to his or her own Shares, Stock Units or Stock Unit Account.
ARTICLE 5
ELIGIBILITY
Each person who is a Nonemployee Director on a Deferral Date shall be eligible to defer Fees payable on such date in accordance with Article 6 of the Plan. If any Nonemployee Director subsequently becomes an employee of the Company or any of its subsidiaries, but does not incur a Termination of Service, such Director shall continue as a Participant with respect to Fees previously deferred, but shall cease eligibility with respect to all future Fees, if any, earned while an employee.
ARTICLE 6
DEFERRAL ELECTIONS IN LIEU OF CASH PAYMENTS
6.1 General Rule . Each Nonemployee Director may, in lieu of receipt of Fees, defer any or all of such Fees in accordance with this Article 6, provided that such Nonemployee Director is eligible under Article 5 of the Plan to defer such Fees at the date any such Fees are otherwise payable. A Director may elect to defer a percentage of his or her Fees or a specific dollar amount of his or her Fees in accordance with administrative procedures established with respect to the Plan.
6.2 Timing of Election . Each Nonemployee Director who is serving on the Board on the Effective Date may make a Deferral Election at any time prior to the Effective Date. Any person who is not then serving as a Nonemployee Director may make a Deferral Election before the first date on which he or she is entitled to receive Fees. A Nonemployee Director who does not make a Deferral Election when first eligible to do so may make a Deferral Election at such time before any subsequent calendar year in accordance with administrative procedures established with respect to the Plan.
6.3 Effect and Duration of Election . A Deferral Election shall apply to Fees payable after the date such election is made and shall be deemed to be continuing and applicable to all Fees payable in subsequent calendar years, unless the participant revokes or modifies such election by filing a new election form at such time before the first day of any subsequent calendar year in accordance with administrative procedures established with respect to the Plan, effective for all Fees payable on and after the first day of such calendar year.
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6.4 Form of Election . A Deferral Election shall be made in a manner satisfactory to the Committee. Generally, a Deferral Election shall be made by completing and filing the specified election form with the Corporate Secretary or his or her designee within the period described in Section 6.2 or Section 6.3.
6.5 Establishment of Stock Unit Account . The Company shall establish a Stock Unit Account for each Participant. All Fees deferred pursuant to this Article 6 shall be credited to the Participants Stock Unit Account as of the Deferral Date and converted to Stock Units. The number of Stock Units credited to a Participants Stock Unit Account as of a Deferral Date shall equal the amount of the deferred Fees divided by the Fair Market Value of a Share on such Deferral Date, with fractional units calculated to three decimal places. Fractional Stock Units shall be credited cumulatively, but any fractional Stock Unit in a Participants Stock Unit Account at the time of a distribution under Article 7 shall be converted into cash equal to the Fair Market Value of a corresponding fractional Share on the date of distribution.
6.6 Crediting of Dividend Equivalents . As of each dividend payment date with respect to Shares, each Participant shall be paid outright or have credited to his or her Stock Unit Account, as elected in advance by the Participant in accordance with procedures established by the Committee, a dollar amount equal to the amount of cash dividends that would have been paid on the number of Shares equal to the number of Stock Units credited to the Participants Stock Unit Account as of the close of business on the record date for such dividend. Such dollar amount if credited to the Participants Stock Unit Account shall then be converted into a number of Stock Units equal to the number of whole and fractional Shares that could have been purchased with such dollar amount at Fair Market Value on the dividend payment date.
ARTICLE 7
SETTLEMENT OF STOCK UNITS
7.1 Timing of Payment . A Participant shall receive or begin receiving a distribution of his or her Stock Unit Account in the manner described in Section 7.2 either (i) on or as soon as administratively feasible after the Participant incurs a Termination of Service, (ii) if the Participant has made an election to defer payment in accordance with this Section, on or as soon as administratively feasible after January 1 of the year immediately following the date on which the Participant incurs a Termination of Service, or (iii) if the Participant has made an election to defer payment in accordance with this Section, on or as soon as administratively feasible after the date specified by the Participant. A Participant must deliver an election to defer the distribution or commencement of distribution to the Corporate Secretary or his or her designee such period in advance and in such manner as determined by the Committee.
7.2 Payment Options . A Deferral Election filed under Article 6 shall specify whether the Participants Stock Unit Account is to be settled by delivering to the Participant the number of Shares equal to the number of whole Stock Units then credited to the Participants Stock Unit Account, in either (i) a lump sum, or (ii) substantially equal annual installments over a period not to exceed ten years, provided that such installment payments do not extend more than ten years after the Participants Termination of Service as a Director. Any fractional Stock Unit credited to a Participants Stock Unit Account at the time of a distribution shall be paid in cash at the time of such distribution. A Participant may change the manner in which his or her Stock Unit Account is distributed in accordance with such procedures established by the Committee.
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7.3 Payment Upon Death of a Participant . If a Participant dies before the entire balance of his or her Stock Unit Account has been distributed, the balance of the Participants Stock Unit Account shall be paid in Shares as soon as administratively feasible after the Participants death, to the beneficiary designated by the Participant under Article 9.
7.4 Continuation of Dividend Equivalents . If payment of Stock Units is deferred pursuant to Section 7.2, the Participants Stock Unit Account shall continue to be credited with dividend equivalents as provided in Section 6.6 until the entire balance of the Participants Stock Unit Account has been distributed.
ARTICLE 8
UNFUNDED STATUS
8.1 General . The interest of each Participant in any Fees deferred under the Plan (and any Stock Units or Stock Unit Account relating thereto) shall be that of a general creditor of the Company. Stock Unit Accounts, and Stock Units credited thereto, shall at all times be maintained by the Company as bookkeeping entries evidencing unfunded and unsecured general obligations of the Company. Except as provided in Section 8.2, no money or other assets shall be set aside for any Participant.
8.2 Trust . To the extent determined by the Board, the Company may transfer funds necessary to fund all or part of the payments under the Plan to a trust; provided, the assets held in such trust shall remain at all times subject to the claims of the general creditors of the Company. No participant or beneficiary shall have any interest in the assets held in such trust or in the general assets of the Company other than as a general, unsecured creditor. Accordingly, the Company shall not grant a security interest in the assets held by the trust in favor of any Participant, beneficiary or creditor.
ARTICLE 9
DESIGNATION OF BENEFICIARY
Each Participant may designate, on a form provided by the Committee, one or more beneficiaries to receive payment of the Participants Stock Unit Account in the event of such Participants death. The Company may rely upon the beneficiary designation list filed with the Committee, provided that such form was executed by the Participant or his or her legal representative and filed with the Committee prior to the Participants death. If a Participant has not designated a beneficiary, or if the designated beneficiary is not surviving when a payment is to be made to such person under the Plan, the beneficiary with respect to such payment shall be the Participants surviving spouse, or if there is no surviving spouse, the Participants estate.
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ARTICLE 10
ADJUSTMENT PROVISIONS
In the event of a reorganization, recapitalization, stock split, stock dividend, spin-off, combination, corporate exchange, merger, consolidation or other change in the Common Stock or any distribution to stockholders of Common Stock other than cash dividends or any transaction determined in good faith by the Board or Committee to be similar to the foregoing, the Board or Committee shall make appropriate equitable changes in the number and type of Shares authorized by this Plan, and the number and type of Shares to be delivered upon settlement of Stock Unit Accounts under Article 7. Any adjustments pursuant to this Article 10 to Stock Units that are considered 409A Stock Units are intended to be made only if permitted by Code Section 409A and only in a manner in compliance with the requirements of Code Section 409A and any adjustments made pursuant to this Article 10 to Stock Units that are not considered 409A Stock Units are intended to be made only if and in such a manner that after such adjustment the Stock Units either continue not to be 409A Stock Units or comply with the requirements of Code Section 409A.
ARTICLE 11
GENERAL PROVISIONS
11.1 No Stockholder Rights Conferred . Nothing contained in the Plan will confer upon any Participant or beneficiary any rights of a Stockholder of the Company, unless and until Shares are in fact issued or transferred to such Participant or beneficiary in accordance with Article 7.
11.2 Changes to The Plan . The Board may amend, alter, suspend, discontinue, extend, or terminate the Plan without the consent of Participants; provided, no action taken without the consent of an affected Participant may materially impair the rights of such Participant with respect to any Stock Units credited to his or her Stock Unit Account at the time of such change or termination except that the Board may without the consent of any Participant terminate the Plan and pay out Shares with respect to Stock Units then credited to Participants Stock Unit Account.
11.3 Compliance With Laws and Obligations . The Company will not be obligated to issue or deliver Shares in connection with the Plan in a transaction subject to the registration requirements of the Securities Act of 1933, as amended, or any other federal or state securities law, any requirement under any listing agreement between the Company and any national securities exchange or automated quotation system or any other laws, regulations, or contractual obligations of the Company, until the Company is satisfied that such laws, regulations and other obligations of the Company have been complied with in full. Certificates representing Shares delivered under the Plan will be subject to such restrictions as may be applicable under such laws, regulations and other obligations of the Company.
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11.4 Limitations on Transferability . Stock Units and other rights under the Plan may not be pledged, mortgaged, hypothecated or otherwise encumbered, and shall not be subject to the claims of creditors of any Participant.
11.5 Governing Law . The validity, construction and effect of the Plan and any agreement hereunder will be determined in accordance with the Delaware General Corporation Law.
11.6 Plan Termination . Unless earlier terminated by action of the Board, the Plan will remain in effect until such time as no Shares remain available for delivery under the Plan and the Company has no further rights or obligations under the Plan.
ARTICLE 12
COMPLIANCE WITH CODE SECTION 409A
12.1 409A Stock Units . The provisions of this Article 12 apply to any 409A Stock Units, notwithstanding any provisions to the contrary contained in the Plan or the Deferral Election. The Company intends that Stock Units payable under the Plan shall satisfy the requirements for exemption from, or compliance with, Code Section 409A and that all terms and provisions shall be interpreted, operated and administered to satisfy such requirements. It is intended that each 409A Stock Unit complies with the deferral, payout and other limitations and restrictions imposed under Code Section 409A. This Article 12 is not intended to impose any restrictions on Stock Units other than those required for the Participant not to incur additional tax under Code Section 409A and shall be interpreted and operated accordingly. Notwithstanding any other provision in the Plan, the Company makes no representation that Stock Units under the Plan shall be exempt from, or comply with, Code Section 409A and makes no undertaking to preclude Code Section 409A from applying to Stock Units granted under the Plan. No provision of the Plan shall be interpreted or construed to transfer any liability for failure to comply with Code Section 409A from the Participant or any other individual to the Company.
12.2 Deferral Elections . Except as otherwise permitted or required by Code Section 409A, the following requirements apply to any Deferral Election that may be permitted or required by the Committee pursuant to a 409A Stock Unit: (i) A Deferral Election must be in writing and specify the amount being deferred and the time and form of distribution as permitted by the Plan; and (ii) A Deferral Election shall become irrevocable as of the deadline specified by the Committee, which shall not be later than December 31 of the year preceding the year in which services are performed for such Fees.
12.3 Subsequent Elections . Except as otherwise permitted or required by Code Section 409A, a 409A Stock Unit which permits a subsequent Deferral Election to further defer the distribution or change the form of distribution shall comply with the following requirements: (i) No subsequent Deferral Election may take effect until at least twelve months after the date on which the subsequent Deferral Election is made; (ii) Each subsequent Deferral Election related to a distribution upon Termination of Service, a specified time or a 409A Change in Control must result in a delay of the distribution for a period of not less than 5 years from the date such distribution would otherwise have been made; and (iii) No subsequent Deferral Election related to a distribution to be made at a specified time or pursuant to a fixed schedule shall be made less than twelve months prior to the date the first scheduled payment would otherwise be made.
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12.4 Distributions . Except as otherwise permitted or required by Code Section 409A, no distribution in settlement of a 409A Stock Unit may commence earlier than (i) Termination of Service; (ii) a specified time (or pursuant to a fixed schedule) that is specified by the Participant in a Deferral Election complying with this Article 12; or (iii) a 409A Change in Control. Notwithstanding anything to the contrary, to the extent that distribution of a 409A Stock Unit is triggered by a Participants Termination of Service, if the Participant is then a Specified Employee, no distribution shall be made before the earlier of (i) six (6) months after the Participants Termination of Service; or (ii) the date of the Participants death. Should the limitation set forth in the preceding sentence result in payment later than otherwise provided in the Plan or 409A Stock Unit, on the first day any such payment may be made without incurring additional tax pursuant to Code Section 409A, such payment shall be made to the Participant in one transfer. Notwithstanding anything contained in the Plan or Stock Unit to the contrary, the date on which a Participants Termination of Service occurs shall be treated as the Participants termination of employment or service date or comparable concept for purposes of determining the timing of distributions under the Plan and Stock Unit to the extent necessary to have such distributions under the Plan and Stock Unit be exempt from or comply with the requirements of Code Section 409A. If a 409A Stock Unit is to be paid in two or more installments, for purposes of Code Section 409A, each installment shall be treated as a separate payment. No 409A Stock Unit shall be subject to acceleration or to any change in the specified time or schedule of distribution, except as permitted by Code Section 409A or as otherwise provided under the Plan or Stock Unit and consistent with Code Section 409A.
12.5 2008 Elections . Notwithstanding the general timing requirements for Deferral Elections, the Committee may, to the extent permitted by Notice 2007-86, allow Participants to make by December 31, 2008 new Deferral Elections with respect to the timing of distributions of Stock Units. Any Deferral Election with respect to the timing of distributions of Stock Units made in accordance with the preceding sentence shall not be treated as a change in either the form or timing of payment for purposes of Code Section 409A or the Plan. No Deferral Election pursuant to this Section 12.5 shall be effective to the extent that it relates to Stock Units that would otherwise be distributed to the Participant in 2008 or would cause Stock Units to be distributed to the Participant in 2008.
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APPENDIX 1
409A Change in Control means to the extent necessary for the 409A Stock Units to comply with Code Section 409A, at a minimum a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of subsection (a)(2)(A)(v) of Code Section 409A.
409A Stock Unit means a Stock Unit that constitutes deferral of compensation subject to the requirements of Code Section 409A.
Board means the Board of Directors of the Company.
Code Section 409A means section 409A of the Internal Revenue Code of 1986, as amended.
Committee means the Nominating and Governance Committee of Board or such other committee appointed to administer the Plan under Article 4.
Common Stock means the Companys class of capital stock designed as Common Stock, or, in the event that the outstanding shares of Common Stock are after the Effective Date recapitalized, converted into or exchanged for different stock or securities of the Company, such other stock or securities.
Company means Ventas, Inc. a Delaware corporation, or any successor thereto.
Deferral Date means the date Fees would otherwise have been paid to the Participant.
Deferral Election means a written election to defer Fees under the Plan or an election as to the form of distribution (but not an election as to the medium of payment).
Director means any individual who is a member of the Board.
Fair Market Value of a share of Common Stock means, as of any applicable date, the closing sale price of the Shares on the New York Stock Exchange or any national or regional stock exchange in which the Shares are traded, or if no such reported sale of the Shares shall have occurred on such date, on the next preceding date on which there was such a reported sale. If there shall be any material alternation in the present system of reporting sale prices of the Shares, or if the Shares shall no longer be listed on the New York Stock Exchange or a national or regional stock exchange, the fair market value of the Shares as of a particular date shall be determined by such method as shall be determined by the Committee .
Fees means all or part of any retainer or meeting fees payable in cash to a Nonemployee Director in his or her capacity as a Director. Fees shall not include any expenses paid directly or through reimbursement.
Nonemployee Director means a Director who is not an employee of the Company or any of its subsidiaries or affiliates. For purposes of the Plan, an employee is an individual whose wages are subject to withholding of federal income tax under Section 3401 of the Internal Revenue Code of 1986, as amended.
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Participant means a Nonemployee Director who defers Fees under Article 6 of the Plan.
Shares means shares of the Common Stock.
Stock Units means the credits to a Participants Stock Unit Account under Article 6 of the Plan, each of which represents the right to receive one Share upon settlement of the Stock Unit
Stock Unit Account means the bookkeeping account established by the Company pursuant to Section 6.5.
Termination of Service means separation from service pursuant to Code Section 409A, as determined, and in accordance with the methodology selected, by the Company, consistent with Code Section 409A.
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Exhibit 10.13.2
VENTAS NONEMPLOYEE DIRECTORS DEFERRED STOCK COMPENSATION PLAN
[YEAR] DEFERRAL ELECTION FORM
To the Corporate Secretary:
I. | DEFERRAL AMOUNT |
Pursuant to Article 6 of the Ventas Nonemployee Directors Deferred Stock Compensation Plan (the Plan), I hereby elect to have (select one):
¨ | percent ( %) |
¨ | dollars ($ ) per calendar quarter |
of my Director Fees payable hereafter deferred and credited to a Stock Unit Account for me. I understand that I may revoke or modify this election only with respect to Director Fees payable on or after the first day of a subsequent calendar year and only by filing a new Election Form before the first day of such subsequent calendar year in accordance with Plan procedures.
II. | DIVIDEND CHOICE |
I elect to have dividend equivalents with respect to Stock Units in my Stock Unit Account (select one):
¨ | paid to me in cash as soon as practicable after dividends are paid on Shares of Ventas, Inc. | |
¨ | converted to additional Stock Units and distributed at the time and in the manner selected for my Stock Unit Account |
III. | PAYMENT OPTIONS |
I direct that distribution of my Stock Unit Account under the Plan be made after Termination of my Service as a Director as follows (select one):
¨ | in a lump sum | |
¨ | in a series of annual payments over years (10 or less, not to extend more than 10 years after Termination of my Service as a Director) |
I direct that distribution of my Stock Unit Account under the Plan commence as soon as administratively feasible after (select one):
¨ | Termination of my Service as a Director | |
¨ | January 1 of the calendar year immediately following Termination of my Service as a Director | |
¨ | Seven months following Termination of my Service as a Director | |
¨ | (specify date) |
Change in Control Accelerated Payment (select if desired)
¨ | Notwithstanding the above elections, I direct that distribution of my Stock Unit Account under the Plan be accelerated and occur in a lump sum upon a Change in Control (as defined in the 2006 Incentive Plan), provided such Change in Control also constitutes a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A(a)(2)(A)(v) of the Code. |
IV. | DESIGNATION OF BENEFICIARY |
Pursuant to Article 9 of the Plan, I designate my beneficiary (or beneficiaries) as follows:
Name |
Address |
Percentage |
||
|
I reserve the right to make new designations as provided in the plan.
V. | ACKNOWLEDGEMENT |
By signing this Election Form, I hereby acknowledge my understanding and acceptance of the following:
1. | Irrevocable Election . This election is irrevocable. I understand that I may not revoke or modify this election (except in such limited circumstances as the Committee may permit in accordance with law). I do not expect to be able to make any changes to the manner or timing of distributions set forth in this Election Form. |
2. | Company Right to Terminate Election and Early Transfer . The Company reserves the right to terminate this Election Form at any time. In such case, Stock Units which are subject to this Election Form may be converted into Shares and such Shares may be transferred to me immediately. Notwithstanding any election made herein and without limitation on the preceding provisions, the Company reserves the right to transfer to me all of the Shares associated with the Stock Units subject to this Election Form at any time following Termination of my Service as a Director or following termination of the Plan. |
3. | Tax Code Section 409A Dealing with Deferred Compensation . I understand that this election shall be construed in accordance with the terms and provisions set forth in this Election Form, as well as the Plan and the requirements of Section 409A of the Code. To the extent Section 409A of the Code is applicable to any Stock Unit, it is intended that such Stock Unit complies with the deferral, payout and other limitations and restrictions imposed under Section 409A of the Code. Notwithstanding any other provision in this Election Form, the Company, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify this election to help distributions qualify for exemption from or compliance with Section 409A of the Code; provided, however, that the Company makes no representation that Stock Units under the Plan shall be exempt from or comply with Section 409A of the Code and makes no undertaking to comply with Section 409A of the Code or to preclude Section 409A of the Code from applying to any Stock Units. I understand that Section 409A of the Code is complex, that any additional taxes and other liabilities under Section 409A of the Code are my responsibility and that the Company encourages me to consult a tax advisor regarding the potential impact of Section 409A of the Code. |
Capitalized terms used but not defined herein have the meanings specified in the Plan.
By signing this Election Form, I hereby acknowledge my understanding of and agreement with all the terms and provisions set forth in this Election Form, as well as the
Dated: December ,
|
Participants Signature |
|
Print Participants Name |
Copy received this day of December, .
|
Corporate Secretary |
Exhibit 10.14.2
AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amendment to the Amended and Restated Employment Agreement (Employment Agreement) dated as of December 28, 2006 between Ventas, Inc., a Delaware corporation (the Company) and Debra A. Cafaro (the Executive) is made as of December 31, 2008.
WITNESSETH:
WHEREAS, the Company and Executive entered into the Employment Agreement; and
WHEREAS, the Executive Compensation Committee of the Board of Directors of the Company has determined that it is in the best interests of the Company and Executive to make certain changes to the Employment Agreement.
NOW, THEREFORE, the Company and Executive agree as follows:
1. The following sentence is added at the end of Section 6(f) DATE OF TERMINATION of the Employment Agreement:
To the extent necessary to have payments and benefits under this Agreement be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (Code Section 409A) or comply with the requirements of Code Section 409A, the Company and Executive agree to cooperate in a reasonable manner (including with regard to any post-termination services by the Executive) such that the Date of Termination as defined in this Agreement shall constitute a separation from service pursuant to Code Section 409A (Separation from Service). Notwithstanding anything contained in this Agreement to the contrary, the date on which a Separation from Service occurs shall be the Date of Termination or termination of employment for purposes of determining the timing of payments under this Agreement to the extent necessary to have such payments and benefits under this Agreement be exempt from the requirements of Section 409A of the Code or comply with the requirements of Code Section 409A.
2. The second sentence of Section 7(a) DEATH OR DISABILITY of the Employment Agreement is amended and restated in its entirety as follows:
Such amount shall be paid within 30 days of the date when such amounts would otherwise have been payable to the Executive if Executives employment had not terminated but in no event later than the March 15th of the calendar year following the calendar year in which the Executives employment terminated.
3. In subsection (8) of Section 7(b) GOOD REASON; OTHER THAN FOR CAUSE , the words outplacement in the form of are added immediately preceding the words executive office space.
4. The attorney designation after the words With a copy to: in Section 19 NOTICES is amended and restated in its entirety as follows:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067-4276
Attention: Steven A. Marenberg
5. Section 22 COMPLIANCE WITH SECTION 409A OF THE INTERNAL REVENUE CODE of the Employment Agreement is amended and restated in its entirety as follows:
22. COMPLIANCE WITH SECTION 409A OF THE INTERNAL REVENUE CODE . All payments pursuant to this Agreement shall be subject to the provisions of this Section 22. Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and operated to the fullest extent possible so that the payments and benefits under this Agreement either shall be exempt from the requirements of Code Section 409A or shall comply with the requirements of such provision; provided, however, that notwithstanding anything to the contrary in this Agreement in no event shall the Company be liable to the Executive for or with respect to any taxes, penalties or interest which may be imposed upon the Executive pursuant to Code Section 409A. This Section 22 shall not limit any tax payments (other than Code Section 409A tax payments) provided in this Agreement.
(a) PAYMENTS TO SPECIFIED EMPLOYEES . To the extent that any payment or benefit pursuant to this Agreement constitutes a deferral of compensation subject to Code Section 409A (after taking into account to the maximum extent possible any applicable exemptions) (a 409A Payment) treated as payable upon Separation from Service, then, if on the date of the Executives Separation from Service, the Executive is a Specified Employee, then to the extent required for Executive not to incur additional taxes pursuant to Code Section 409A, no such 409A Payment shall be made to the Executive earlier than the earlier of (i) six (6) months after the Executives Separation from Service; or (ii) the date of her death. Should this Section 22 otherwise result in the delay of in-kind benefits (for example, health benefits), any such benefit shall be made available to the Executive by the Company during such delay period at Executives expense. Should this Section 22 result in payments or benefits to Executive at a later time than otherwise would have been made under this Agreement, on the first day any such payments or benefits may be made without incurring additional tax pursuant to Code Section 409A (the 409A Payment Date), the Company shall make such payments and provide such benefits as provided for in this Agreement, provided that any amounts that would have been payable earlier but for the application of this Section 22, as well as reimbursement of the amount Executive paid for benefits pursuant to the preceding sentence, shall be paid in lump-sum on the 409A Payment Date along with accrued interest at the rate of interest published in the Wall Street Journal as the prime rate (or equivalent) on the date that payments or benefits, as applicable, to Executive should have been made under this Agreement. For purposes of this Section 22, the term Specified Employee shall have the meaning set forth in Code Section 409A, as determined in
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accordance with the methodology established by the Company. For purposes of determining whether a Separation from Service has occurred for purposes of Code Section 409A, to the extent permissible under Code Section 409A, subsidiaries and affiliates of the Company are those included by using a twenty percent (20%) standard to define the controlled group under Code Section 1563(a) in lieu of the fifty percent (50%) default rule. In addition, for purposes of determining whether a Separation from Service has occurred for purposes of Code Section 409A, a Separation from Service is deemed to include a reasonably anticipated permanent reduction in the level of services performed by the Executive to less than fifty (50%) of the average level of services performed by the Executive during the immediately preceding 12-month period.
(b) REIMBURSEMENTS INCLUDING TAX GROSS-UPS . For purposes of complying with Code Section 409A and without extending the payment timing otherwise provided in this Agreement, taxable reimbursements under this Agreement, subject to the following sentence and to the extent required to comply with Code Section 409A, will be made no later than the end of the calendar year following the calendar year in which the expense was incurred. However, for purposes of complying with Code Section 409A and without extending the payment timing otherwise provided in this Agreement, any tax gross-up may be payable through the calendar year after the calendar year in which the Executive remits the taxes rather than be limited to the end of the calendar year following the calendar year in which the expense was incurred and reimbursement of expenses incurred due to a tax audit or litigation addressing the existence or amount of a tax liability may be payable through the end of the calendar year following the calendar year in which the taxes that are the subject of the audit or litigation are remitted to the taxing authority or, where as a result of such audit or litigation no taxes are remitted, the end of the calendar year following the calendar year in which the audit is completed or there is a final and nonappealable settlement or other resolution of the litigation. To the extent required to comply with Code Section 409A, any taxable reimbursements and any in-kind benefits under this Agreement will be subject to the following: (a) payment of such reimbursements or in-kind benefits during one calendar year will not affect the amount of such reimbursement or in-kind benefits provided during any other calendar year (other than for medical reimbursement arrangements as excepted under Treasury Regulations §1.409A-3(i)(1)(iv)(B) solely because the arrangement provides for a limit on the amount of expenses that may be reimbursed under such arrangement over some or all of the period the arrangement remains in effect); (b) such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another form of compensation to the Executive; and (c) the right to reimbursements under this Agreement will be in effect for the lesser of the time specified in this Agreement or ten years plus the lifetime of the Executive. Any taxable reimbursements or in-kind benefits shall be treated as not subject to Code Section 409A to the maximum extent provided by Treasury Regulations §1.409A-1(b)(9)(v) or otherwise under Code Section 409A.
(c) RELEASE . To the extent that Executive is required to execute and deliver a Release to receive a 409A Payment and this Agreement provides for such 409A Payment to be provided prior to the 55th day following the Executives Separation from Service, such 409A Payment will be provided upon the 55th day following Executives Separation from Service provided the Release in the form mutually agreed upon between Executive
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and the Company or in the form set forth in Exhibit B has been executed, delivered and effective prior to such time. To the extent a 409A Payment is made at a later time than otherwise would have been made under this Agreement because of the provisions of the preceding sentence of this Section 22(c), interest for the delay and the opportunity for Executive to pay for benefits in the interim with subsequent reimbursement from the Company shall be provided in a manner consistent with that set forth in Section 22(a). To the extent that Executive is required to execute and deliver a Release to receive a 409A Payment and this Agreement provides for such 409A Payment to be provided in accordance with Section 22(a), such 409A Payment will be provided as set forth in Section 22(a) provided the Release in the form mutually agreed upon between Executive and the Company or in the form set forth in Exhibit B has been executed, delivered and effective prior to such time. If a Release is required for a 409A Payment and such Release is not executed, delivered and effective by the date six months after the Executives Separation from Service if such 409A Payment is subject to the limitations set forth in Section 22(a) or the 55th day following Executives Separation from Service if such 409A Payment is not subject to the limitations set forth in Section 22(a), such 409A Payment shall not be provided to the Executive to the extent that providing such 409A Payment would cause such 409A Payment to fail to comply with Code Section 409A. To the extent that any payments or benefits under this Agreement are intended to be exempt from Code Section 409A as a short-term deferral pursuant to Treasury Regulations §1.409A-1(b)(4) or any successor thereto and require Executive to provide a Release to the Company to obtain such payments or benefits, any Release required for such payment or benefit must be provided in the form mutually agreed upon between Executive and the Company or in the form set forth in Exhibit B no later than March 7 th of the calendar year following the calendar year of the Executives Separation from Service.
(d) NO ACCELERATION; SEPARATE PAYMENTS . No 409A Payment payable under this Agreement shall be subject to acceleration or to any change in the specified time or method of payment, except as otherwise provided under this Agreement and consistent with Code Section 409A. If under this Agreement, a 409A Payment is to be paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payment.
(e) COOPERATION . If any compensation or benefits provided by this Agreement may result in the application of Code Section 409A, the Company shall, in consultation with the Executive, modify the Agreement in the least restrictive manner necessary in order to exclude such compensation from the definition of deferred of compensation within the meaning of such Code Section 409A or in order to comply with the provisions of Code Section 409A of the Code and without any diminution in the value of the payments or benefits to the Executive. This Section 22 is not intended to impose any restrictions on payments or benefits to Executive other than those otherwise set forth in this Agreement or required for Executive not to incur additional tax under Code Section 409A and shall be interpreted and operated accordingly. The Company to the extent reasonably requested by Executive shall modify this Agreement to effectuate the intention set forth in the preceding sentence.
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6. In all other respects, the Employment Agreement, as amended, shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.
VENTAS, INC. | ||
By: |
/s/ T. Richard Riney |
|
Title: |
Executive Vice President, Chief Administrative Officer and General Counsel |
|
EXECUTIVE: | ||
/s/ Debra A. Cafaro |
||
Debra A. Cafaro |
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Exhibit 10.15.4
AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amendment to the Amended and Restated Employment Agreement (Employment Agreement), dated as of July 31, 1998 and amended as of September 30, 1999 and March 19, 2007 between Ventas, Inc., a Delaware corporation (the Company), and T. Richard Riney (the Executive) is made as of December 31, 2008.
WITNESSETH:
WHEREAS, the Company and Executive entered into the Employment Agreement; and
WHEREAS, the Executive Compensation Committee of the Board of Directors of the Company has determined that it is in the best interests of the Company and Executive to make certain changes to the Employment Agreement.
NOW, THEREFORE, the Company and Executive agree as follows:
1. The following sentence is added at the end of Section 6(e) Date of Termination of the Employment Agreement:
To the extent necessary to have payments and benefits under this Agreement be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (Code Section 409A) or comply with the requirements of Code Section 409A, the Company and Executive agree to cooperate in a reasonable manner (including with regard to any post-termination services by the Executive) such that the Date of Termination as defined in this Agreement shall constitute a separation from service pursuant to Code Section 409A (Separation from Service). Notwithstanding anything contained in this Agreement to the contrary, the date on which a Separation from Service occurs shall be the Date of Termination or termination of employment for purposes of determining the timing of payments under this Agreement to the extent necessary to have such payments and benefits under this Agreement be exempt from the requirements of Section 409A of the Code or comply with the requirements of Code Section 409A.
2. The second sentence of Section 7(a) Death or Disability of the Employment Agreement is amended and restated in its entirety as follows:
Such amount shall be paid within 30 days of the date when such amounts would otherwise have been payable to the Executive if Executives employment had not terminated but in no event later than the March 15th of the calendar year following the calendar year in which the Executives employment terminated.
3. Section 19 COMPLIANCE WITH SECTION 409A OF THE INTERNAL REVENUE CODE of the Employment Agreement is amended and restated in its entirety as follows:
19. Compliance with Section 409A of the Internal Revenue Code. All payments pursuant to this Agreement shall be subject to the provisions of this Section 19. Notwithstanding anything herein to the contrary, this Agreement is intended to be
interpreted and operated to the fullest extent possible so that the payments and benefits under this Agreement either shall be exempt from the requirements of Code Section 409A or shall comply with the requirements of such provision; provided, however, that nothwithstanding anything to the contrary in this Agreement in no event shall the Company be liable to the Executive for or with respect to any taxes, penalties or interest which may be imposed upon the Executive pursuant to Code Section 409A.
(a) Payments to Specified Employees . To the extent that any payment or benefit pursuant to this Agreement constitutes a deferral of compensation subject to Code Section 409A (after taking into account to the maximum extent possible any applicable exemptions) (a 409A Payment) treated as payable upon Separation from Service, then, if on the date of the Executives Separation from Service, the Executive is a Specified Employee, then to the extent required for Executive not to incur additional taxes pursuant to Code Section 409A, no such 409A Payment shall be made to the Executive earlier than the earlier of (i) six (6) months after the Executives Separation from Service; or (ii) the date of his death. Should this Section 19 otherwise result in the delay of in-kind benefits (for example, health benefits), any such benefit shall be made available to the Executive by the Company during such delay period at Executives expense. Should this Section 19 result in payments or benefits to Executive at a later time than otherwise would have been made under this Agreement, on the first day any such payments or benefits may be made without incurring additional tax pursuant to Code Section 409A (the 409A Payment Date), the Company shall make such payments and provide such benefits as provided for in this Agreement, provided that any amounts that would have been payable earlier but for the application of this Section 19, as well as reimbursement of the amount Executive paid for benefits pursuant to the preceding sentence, shall be paid in lump-sum on the 409A Payment Date along with accrued interest at the rate of interest published in the Wall Street Journal as the prime rate (or equivalent) on the date that payments or benefits, as applicable, to Executive should have been made under this Agreement. For purposes of this Section 19, the term Specified Employee shall have the meaning set forth in Code Section 409A, as determined in accordance with the methodology established by the Company. For purposes of determining whether a Separation from Service has occurred for purposes of Code Section 409A, to the extent permissible under Code Section 409A, subsidiaries and affiliates of the Company are those included by using a twenty percent (20%) standard to define the controlled group under Code Section 1563(a) in lieu of the fifty percent (50%) default rule. In addition, for purposes of determining whether a Separation from Service has occurred for purposes of Code Section 409A, a Separation from Service is deemed to include a reasonably anticipated permanent reduction in the level of services performed by the Executive to less than fifty (50%) of the average level of services performed by the Executive during the immediately preceding 12-month period.
(b) Reimbursements Including Tax Gross-Ups . For purposes of complying with Code Section 409A and without extending the payment timing otherwise provided in this Agreement, taxable reimbursements under this Agreement, subject to the following sentence and to the extent required to comply with Code Section 409A, will be made no later than the end of the calendar year following the calendar year in which the expense was incurred. However, for purposes of complying with Code Section 409A and
2
without extending the payment timing otherwise provided in this Agreement, any tax gross-up may be payable through the calendar year after the calendar year in which the Executive remits the taxes rather than be limited to the end of the calendar year following the calendar year in which the expense was incurred and reimbursement of expenses incurred due to a tax audit or litigation addressing the existence or amount of a tax liability may be payable through the end of the calendar year following the calendar year in which the taxes that are the subject of the audit or litigation are remitted to the taxing authority or, where as a result of such audit or litigation no taxes are remitted, the end of the calendar year following the calendar year in which the audit is completed or there is a final and nonappealable settlement or other resolution of the litigation. To the extent required to comply with Code Section 409A, any taxable reimbursements and any in-kind benefits under this Agreement will be subject to the following: (a) payment of such reimbursements or in-kind benefits during one calendar year will not affect the amount of such reimbursement or in-kind benefits provided during any other calendar year (other than for medical reimbursement arrangements as excepted under Treasury Regulations §1.409A-3(i)(1)(iv)(B) solely because the arrangement provides for a limit on the amount of expenses that may be reimbursed under such arrangement over some or all of the period the arrangement remains in effect); (b) such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another form of compensation to the Executive; and (c) the right to reimbursements under this Agreement will be in effect for the lesser of the time specified in this Agreement or ten years plus the lifetime of the Executive. Any taxable reimbursements or in-kind benefits shall be treated as not subject to Code Section 409A to the maximum extent provided by Treasury Regulations §1.409A-1(b)(9)(v) or otherwise under Code Section 409A.
(c) Release . To the extent that Executive is required to execute and deliver a release to receive a 409A Payment and this Agreement provides for such 409A Payment to be provided prior to the 55th day following the Executives Separation from Service, such 409A Payment will be provided upon the 55th day following Executives Separation from Service provided the release in the form mutually agreed upon between Executive and the Company or in the form set forth in Appendix A has been executed, delivered and effective prior to such time. To the extent a 409A Payment is made at a later time than otherwise would have been made under this Agreement because of the provisions of the preceding sentence of this Section 19(c), interest for the delay and the opportunity for Executive to pay for benefits in the interim with subsequent reimbursement from the Company shall be provided in a manner consistent with that set forth in Section 19(a). To the extent that Executive is required to execute and deliver a release to receive a 409A Payment and this Agreement provides for such 409A Payment to be provided in accordance with Section 19(a), such 409A Payment will be provided as set forth in Section 19(a) provided the release in the form mutually agreed upon between Executive and the Company or in the form set forth in Appendix A has been executed, delivered and effective prior to such time. If a release is required for a 409A Payment and such release is not executed, delivered and effective by the date six months after the Executives Separation from Service if such 409A Payment is subject to the limitations set forth in Section 19(a) or the 55th day following Executives Separation from Service if such 409A Payment is not subject to the limitations set forth in Section 19(a), such 409A Payment shall not be provided to the Executive to the extent that providing such
3
409A Payment would cause such 409A Payment to fail to comply with Code Section 409A. To the extent that any payments or benefits under this Agreement are intended to be exempt from Code Section 409A as a short-term deferral pursuant to Treasury Regulations §1.409A-1(b)(4) or any successor thereto and require Executive to provide a release to the Company to obtain such payments or benefits, any release required for such payment or benefit must be provided in the form mutually agreed upon between Executive and the Company or in the form set forth in Appendix A no later than March 7 th of the calendar year following the calendar year of the Executives Separation from Service.
(d) No Acceleration; Separate Payments . No 409A Payment payable under this Agreement shall be subject to acceleration or to any change in the specified time or method of payment, except as otherwise provided under this Agreement and consistent with Code Section 409A. If under this Agreement, a 409A Payment is to be paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payment.
(e) Cooperation . If any compensation or benefits provided by this Agreement may result in the application of Code Section 409A, the Company shall, in consultation with the Executive, modify the Agreement in the least restrictive manner necessary in order to exclude such compensation from the definition of deferred of compensation within the meaning of such Code Section 409A or in order to comply with the provisions of Code Section 409A of the Code and without any diminution in the value of the payments or benefits to the Executive. This Section 19 is not intended to impose any restrictions on payments or benefits to Executive other than those otherwise set forth in this Agreement or required for Executive not to incur additional tax under Code Section 409A and shall be interpreted and operated accordingly. The Company to the extent reasonably requested by Executive shall modify this Agreement to effectuate the intention set forth in the preceding sentence.
4. The attached document is added as Appendix A to the Employment Agreement.
5. In all other respects, the Employment Agreement, as amended, shall continue in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.
VENTAS, INC. | ||
By: |
/s/ Richard A. Schweinhart |
|
Title: |
Executive Vice President and Chief Financial Officer |
|
EXECUTIVE | ||
/s/ T. Richard Riney |
||
T. Richard Riney |
5
Exhibit 10.15.8
AMENDMENT TO CHANGE-IN-CONTROL SEVERANCE AGREEMENT
This Amendment to the Change-in-Control Severance Agreement (the Severance Agreement), dated as of May 1, 1998 and amended as of September 30, 1999 and March 19, 2007 between Ventas, Inc., a Delaware corporation (the Company), and T. Richard Riney (the Employee) is made as of December 31, 2008.
WITNESSETH:
WHEREAS, the Company and Employee entered into the Severance Agreement; and
WHEREAS, the Executive Compensation Committee of the Board of Directors of the Company has determined that it is in the best interests of the Company and Employee to make certain changes to the Severance Agreement.
NOW, THEREFORE, the Company and Employee agree as follows:
1. The following sentence is added at the end of Section 1.h Termination of Employment of the Severance Agreement:
To the extent necessary to have payments and benefits under this Agreement be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (Code Section 409A) or comply with the requirements of Code Section 409A, the Company and Employee agree to cooperate in a reasonable manner (including with regard to any post-termination services by the Employee) such that the Termination of Employment as defined in this Agreement shall constitute a separation from service pursuant to Code Section 409A (Separation from Service). Notwithstanding anything contained in this Agreement to the contrary, the date on which a Separation from Service occurs shall be the Termination of Employment or variation of termination of employment for purposes of determining the timing of payments under this Agreement to the extent necessary to have such payments and benefits under this Agreement be exempt from the requirements of Section 409A of the Code or comply with the requirements of Code Section 409A.
2. The second sentence of Section 7(a) Death or Disability of the Severance Agreement is amended and restated in its entirety as follows:
Such amount shall be paid within 30 days of the date when such amounts would otherwise have been payable to the Employee if Employees employment had not terminated but in no event later than the March 15th of the calendar year following the calendar year in which the Employees employment terminated.
3. Section 21 COMPLIANCE WITH SECTION 409A OF THE INTERNAL REVENUE CODE of the Severance Agreement is amended and restated in its entirety as follows:
21. Compliance with Section 409A of the Internal Revenue Code. All payments pursuant to this Agreement shall be subject to the provisions of this Section 21.
Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and operated to the fullest extent possible so that the payments and benefits under this Agreement either shall be exempt from the requirements of Code Section 409A or shall comply with the requirements of such provision; provided, however, that notwithstanding anything to the contrary in this Agreement in no event shall the Company be liable to the Employee for or with respect to any taxes, penalties or interest which may be imposed upon the Employee pursuant to Code Section 409A. This Section 21 shall not limit any tax payments (other than Code Section 409A tax payments) provided in this Agreement.
(a) Payments to Specified Employees . To the extent that any payment or benefit pursuant to this Agreement constitutes a deferral of compensation subject to Code Section 409A (after taking into account to the maximum extent possible any applicable exemptions) (a 409A Payment) treated as payable upon Separation from Service, then, if on the date of the Employees Separation from Service, the Employee is a Specified Employee, then to the extent required for Employee not to incur additional taxes pursuant to Code Section 409A, no such 409A Payment shall be made to the Employee earlier than the earlier of (i) six (6) months after the Employees Separation from Service; or (ii) the date of his death. Should this Section 21 otherwise result in the delay of in-kind benefits (for example, health benefits), any such benefit shall be made available to the Employee by the Company during such delay period at Employees expense. Should this Section 21 result in payments or benefits to Employee at a later time than otherwise would have been made under this Agreement, on the first day any such payments or benefits may be made without incurring additional tax pursuant to Code Section 409A (the 409A Payment Date), the Company shall make such payments and provide such benefits as provided for in this Agreement, provided that any amounts that would have been payable earlier but for the application of this Section 21, as well as reimbursement of the amount Employee paid for benefits pursuant to the preceding sentence, shall be paid in lump-sum on the 409A Payment Date along with accrued interest at the rate of interest published in the Wall Street Journal as the prime rate (or equivalent) on the date that payments or benefits, as applicable, to Employee should have been made under this Agreement. For purposes of this Section 21, the term Specified Employee shall have the meaning set forth in Code Section 409A, as determined in accordance with the methodology established by the Company. For purposes of determining whether a Separation from Service has occurred for purposes of Code Section 409A, to the extent permissible under Code Section 409A, subsidiaries and affiliates of the Company are those included by using a twenty percent (20%) standard to define the controlled group under Code Section 1563(a) in lieu of the fifty percent (50%) default rule. In addition, for purposes of determining whether a Separation from Service has occurred for purposes of Code Section 409A, a Separation from Service is deemed to include a reasonably anticipated permanent reduction in the level of services performed by the Employee to less than fifty (50%) of the average level of services performed by the Employee during the immediately preceding 12-month period.
(b) Reimbursements Including Tax Gross-Ups . For purposes of complying with Code Section 409A and without extending the payment timing otherwise provided in this Agreement, taxable reimbursements under this Agreement, subject to the
2
following sentence and to the extent required to comply with Code Section 409A, will be made no later than the end of the calendar year following the calendar year in which the expense was incurred. However, for purposes of complying with Code Section 409A and without extending the payment timing otherwise provided in this Agreement, any tax gross-up may be payable through the calendar year after the calendar year in which the Employee remits the taxes rather than be limited to the end of the calendar year following the calendar year in which the expense was incurred and reimbursement of expenses incurred due to a tax audit or litigation addressing the existence or amount of a tax liability may be payable through the end of the calendar year following the calendar year in which the taxes that are the subject of the audit or litigation are remitted to the taxing authority or, where as a result of such audit or litigation no taxes are remitted, the end of the calendar year following the calendar year in which the audit is completed or there is a final and nonappealable settlement or other resolution of the litigation. To the extent required to comply with Code Section 409A, any taxable reimbursements and any in-kind benefits under this Agreement will be subject to the following: (a) payment of such reimbursements or in-kind benefits during one calendar year will not affect the amount of such reimbursement or in-kind benefits provided during any other calendar year (other than for medical reimbursement arrangements as excepted under Treasury Regulations §1.409A-3(i)(1)(iv)(B) solely because the arrangement provides for a limit on the amount of expenses that may be reimbursed under such arrangement over some or all of the period the arrangement remains in effect); (b) such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another form of compensation to the Employee; and (c) the right to reimbursements under this Agreement will be in effect for the lesser of the time specified in this Agreement or ten years plus the lifetime of the Employee. Any taxable reimbursements or in-kind benefits shall be treated as not subject to Code Section 409A to the maximum extent provided by Treasury Regulations §1.409A-1(b)(9)(v) or otherwise under Code Section 409A.
(c) Release . To the extent that Employee is required to execute and deliver a release to receive a 409A Payment and this Agreement provides for such 409A Payment to be provided prior to the 55th day following the Employees Separation from Service, such 409A Payment will be provided upon the 55th day following Employees Separation from Service provided the release in the form mutually agreed upon between Employee and the Company or in the form set forth in Appendix A has been executed, delivered and effective prior to such time. To the extent a 409A Payment is made at a later time than otherwise would have been made under this Agreement because of the provisions of the preceding sentence of this Section 21(c), interest for the delay and the opportunity for Employee to pay for benefits in the interim with subsequent reimbursement from the Company shall be provided in a manner consistent with that set forth in Section 21(a). To the extent that Employee is required to execute and deliver a release to receive a 409A Payment and this Agreement provides for such 409A Payment to be provided in accordance with Section 21(a), such 409A Payment will be provided as set forth in Section 21(a) provided the release in the form mutually agreed upon between Employee and the Company or in the form set forth in Appendix A has been executed, delivered and effective prior to such time. If a release is required for a 409A Payment and such release is not executed, delivered and effective by the date six months after the Employees Separation from Service if such 409A Payment is subject to the limitations
3
set forth in Section 21(a) or the 55th day following Employees Separation from Service if such 409A Payment is not subject to the limitations set forth in Section 21(a), such 409A Payment shall not be provided to the Employee to the extent that providing such 409A Payment would cause such 409A Payment to fail to comply with Code Section 409A. To the extent that any payments or benefits under this Agreement are intended to be exempt from Code Section 409A as a short-term deferral pursuant to Treasury Regulations §1.409A-1(b)(4) or any successor thereto and require Employee to provide a release to the Company to obtain such payments or benefits, any release required for such payment or benefit must be provided in the form mutually agreed upon between Employee and the Company or in the form set forth in Appendix A no later than March 7 th of the calendar year following the calendar year of the Employees Separation from Service.
(d) No Acceleration; Separate Payments . No 409A Payment payable under this Agreement shall be subject to acceleration or to any change in the specified time or method of payment, except as otherwise provided under this Agreement and consistent with Code Section 409A. If under this Agreement, a 409A Payment is to be paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payment.
(e) Cooperation . If any compensation or benefits provided by this Agreement may result in the application of Code Section 409A, the Company shall, in consultation with the Employee, modify the Agreement in the least restrictive manner necessary in order to exclude such compensation from the definition of deferred of compensation within the meaning of such Code Section 409A or in order to comply with the provisions of Code Section 409A of the Code and without any diminution in the value of the payments or benefits to the Employee. This Section 21 is not intended to impose any restrictions on payments or benefits to Employee other than those otherwise set forth in this Agreement or required for Employee not to incur additional tax under Code Section 409A and shall be interpreted and operated accordingly. The Company to the extent reasonably requested by Employee shall modify this Agreement to effectuate the intention set forth in the preceding sentence.
4. The attached document is added as Appendix A to the Severance Agreement.
5. In all other respects, the Severance Agreement, as amended, shall continue in full force and effect.
4
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.
VENTAS, INC. | ||
By: |
/s/ Richard A. Schweinhart |
|
Title: | Executive Vice President and Chief Financial Officer | |
EMPLOYEE | ||
/s/ T. Richard Riney |
||
T. Richard Riney |
5
Exhibit 10.16.3
AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amendment to the Amended and Restated Employment Agreement (Employment Agreement), dated as of December 31, 2004 and amended as of March 19, 2007 between Ventas, Inc., a Delaware corporation (the Company), and Richard A. Schweinhart (the Executive) is made as of December 31, 2008.
WITNESSETH:
WHEREAS, the Company and Executive entered into the Employment Agreement; and
WHEREAS, the Executive Compensation Committee of the Board of Directors of the Company has determined that it is in the best interests of the Company and Executive to make certain changes to the Employment Agreement.
NOW, THEREFORE, the Company and Executive agree as follows:
1. The following sentence is added at the end of Section 6(e) Date of Termination of the Employment Agreement:
To the extent necessary to have payments and benefits under this Agreement be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (Code Section 409A) or comply with the requirements of Code Section 409A, the Company and Executive agree to cooperate in a reasonable manner (including with regard to any post-termination services by the Executive) such that the Date of Termination as defined in this Agreement shall constitute a separation from service pursuant to Code Section 409A (Separation from Service). Notwithstanding anything contained in this Agreement to the contrary, the date on which a Separation from Service occurs shall be the Date of Termination or termination of employment for purposes of determining the timing of payments under this Agreement to the extent necessary to have such payments and benefits under this Agreement be exempt from the requirements of Section 409A of the Code or comply with the requirements of Code Section 409A.
2. The second sentence of Section 7(a) Death or Disability of the Employment Agreement is amended and restated in its entirety as follows:
Such amount shall be paid within 30 days of the date when such amounts would otherwise have been payable to the Executive if Executives employment had not terminated but in no event later than the March 15th of the calendar year following the calendar year in which the Executives employment terminated.
3. The third sentence of Section 13 Certain Additional Payments by the Company of the Employment Agreement is amended and restated in its entirety as follows:
Such reduction, if applicable, shall be made generally by first reducing the payments under Section 8(a)(i) of this Agreement and in any event shall be made in such a manner as to maximize the value of all Payments actually made to Executive.
4. Section 22 COMPLIANCE WITH SECTION 409A OF THE INTERNAL REVENUE CODE of the Employment Agreement is amended and restated in its entirety as follows:
22. Compliance with Section 409A of the Internal Revenue Code . All payments pursuant to this Agreement shall be subject to the provisions of this Section 22. Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and operated to the fullest extent possible so that the payments and benefits under this Agreement either shall be exempt from the requirements of Code Section 409A or shall comply with the requirements of such provision; provided, however, that notwithstanding anything to the contrary in this Agreement in no event shall the Company be liable to the Executive for or with respect to any taxes, penalties or interest which may be imposed upon the Executive pursuant to Code Section 409A. This Section 22 shall not limit any tax payments (other than Code Section 409A tax payments) provided in this Agreement.
(a) Payments to Specified Employees . To the extent that any payment or benefit pursuant to this Agreement constitutes a deferral of compensation subject to Code Section 409A (after taking into account to the maximum extent possible any applicable exemptions) (a 409A Payment) treated as payable upon Separation from Service, then, if on the date of the Executives Separation from Service, the Executive is a Specified Employee, then to the extent required for Executive not to incur additional taxes pursuant to Code Section 409A, no such 409A Payment shall be made to the Executive earlier than the earlier of (i) six (6) months after the Executives Separation from Service; or (ii) the date of his death. Should this Section 22 otherwise result in the delay of in-kind benefits (for example, health benefits), any such benefit shall be made available to the Executive by the Company during such delay period at Executives expense. Should this Section 22 result in of payments or benefits to Executive at a later time than otherwise would have been made under this Agreement, on the first day any such payments or benefits may be made without incurring additional tax pursuant to Code Section 409A (the 409A Payment Date), the Company shall make such payments and provide such benefits as provided for in this Agreement, provided that any amounts that would have been payable earlier but for the application of this Section 22, as well as reimbursement of the amount Executive paid for benefits pursuant to the preceding sentence, shall be paid in lump-sum on the 409A Payment Date along with accrued interest at the rate of interest published in the Wall Street Journal as the prime rate (or equivalent) on the date that payments or benefits, as applicable, to Executive should have been made under this Agreement. For purposes of this Section 22, the term Specified Employee shall have the meaning set forth in Code Section 409A, as determined in accordance with the methodology established by the Company. For purposes of determining whether a Separation from Service has occurred for purposes of Code Section 409A, to the extent permissible under Code Section 409A, subsidiaries and affiliates of the Company are those included by using a twenty percent (20%) standard to define the controlled group under Code Section 1563(a) in lieu of the fifty percent (50%) default rule. In addition, for purposes of determining whether a Separation from Service has occurred for purposes of Code Section 409A, a Separation from Service is deemed to include a reasonably anticipated permanent reduction in the level of services performed by the Executive to less than fifty (50%) of the average level of services performed by the Executive during the immediately preceding 12-month period.
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(b) Reimbursements Including Tax Gross-Ups . For purposes of complying with Code Section 409A and without extending the payment timing otherwise provided in this Agreement, taxable reimbursements under this Agreement, subject to the following sentence and to the extent required to comply with Code Section 409A, will be made no later than the end of the calendar year following the calendar year in which the expense was incurred. However, for purposes of complying with Code Section 409A and without extending the payment timing otherwise provided in this Agreement, any tax gross-up may be payable through the calendar year after the calendar year in which the Executive remits the taxes rather than be limited to the end of the calendar year following the calendar year in which the expense was incurred and reimbursement of expenses incurred due to a tax audit or litigation addressing the existence or amount of a tax liability may be payable through the end of the calendar year following the calendar year in which the taxes that are the subject of the audit or litigation are remitted to the taxing authority or, where as a result of such audit or litigation no taxes are remitted, the end of the calendar year following the calendar year in which the audit is completed or there is a final and nonappealable settlement or other resolution of the litigation. To the extent required to comply with Code Section 409A, any taxable reimbursements and any in-kind benefits under this Agreement will be subject to the following: (a) payment of such reimbursements or in-kind benefits during one calendar year will not affect the amount of such reimbursement or in-kind benefits provided during any other calendar year (other than for medical reimbursement arrangements as excepted under Treasury Regulations §1.409A-3(i)(1)(iv)(B) solely because the arrangement provides for a limit on the amount of expenses that may be reimbursed under such arrangement over some or all of the period the arrangement remains in effect); (b) such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another form of compensation to the Executive; and (c) the right to reimbursements under this Agreement will be in effect for the lesser of the time specified in this Agreement or ten years plus the lifetime of the Executive. Any taxable reimbursements or in-kind benefits shall be treated as not subject to Code Section 409A to the maximum extent provided by Treasury Regulations §1.409A-1(b)(9)(v) or otherwise under Code Section 409A.
(c) Release . To the extent that Executive is required to execute and deliver a Release to receive a 409A Payment and this Agreement provides for such 409A Payment to be provided prior to the 55th day following the Executives Separation from Service, such 409A Payment will be provided upon the 55th day following Executives Separation from Service provided the Release in the form mutually agreed upon between Executive and the Company or in the form set forth in Attachment A has been executed, delivered and effective prior to such time. To the extent a 409A Payment is made at a later time than otherwise would have been made under this Agreement because of the provisions of the preceding sentence of this Section 22(c), interest for the delay and the opportunity for Executive to pay for benefits in the interim with subsequent reimbursement from the Company shall be provided in a manner consistent with that set forth in Section 22(a). To the extent that Executive is required to execute and deliver a Release to receive a 409A Payment and this Agreement provides for such 409A Payment to be provided in
3
accordance with Section 22(a), such 409A Payment will be provided as set forth in Section 22(a) provided the Release in the form mutually agreed upon between Executive and the Company or in the form set forth in Attachment A has been executed, delivered and effective prior to such time. If a Release is required for a 409A Payment and such Release is not executed, delivered and effective by the date six months after the Executives Separation from Service if such 409A Payment is subject to the limitations set forth in Section 22(a) or the 55th day following Executives Separation from Service if such 409A Payment is not subject to the limitations set forth in Section 22(a), such 409A Payment shall not be provided to the Executive to the extent that providing such 409A Payment would cause such 409A Payment to fail to comply with Code Section 409A. To the extent that any payments or benefits under this Agreement are intended to be exempt from Code Section 409A as a short-term deferral pursuant to Treasury Regulations §1.409A-1(b)(4) or any successor thereto and require Executive to provide a Release to the Company to obtain such payments or benefits, any Release required for such payment or benefit must be provided in the form mutually agreed upon between Executive and the Company or in the form set forth in Attachment A no later than March 7 th of the calendar year following the calendar year of the Executives Separation from Service.
(d) No Acceleration; Separate Payments . No 409A Payment payable under this Agreement shall be subject to acceleration or to any change in the specified time or method of payment, except as otherwise provided under this Agreement and consistent with Code Section 409A. If under this Agreement, a 409A Payment is to be paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payment.
(e) Cooperation . If any compensation or benefits provided by this Agreement may result in the application of Code Section 409A, the Company shall, in consultation with the Executive, modify the Agreement in the least restrictive manner necessary in order to exclude such compensation from the definition of deferred of compensation within the meaning of such Code Section 409A or in order to comply with the provisions of Code Section 409A of the Code and without any diminution in the value of the payments or benefits to the Executive. This Section 22 is not intended to impose any restrictions on payments or benefits to Executive other than those otherwise set forth in this Agreement or required for Executive not to incur additional tax under Code Section 409A and shall be interpreted and operated accordingly. The Company to the extent reasonably requested by Executive shall modify this Agreement to effectuate the intention set forth in the preceding sentence.
5. In all other respects, the Employment Agreement, as amended, shall continue in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.
VENTAS, INC. | ||
By: |
/s/ T. Richard Riney |
|
Title: |
Executive Vice President, Chief Administrative Officer and General Counsel |
|
EXECUTIVE | ||
/s/ Richard A. Schweinhart |
||
Richard A. Schweinhart |
5
Exhibit 10.17.3
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to the Employment Agreement (Employment Agreement), dated as of September 18, 2002, and amended as of March 19, 2007, between Ventas, Inc., a Delaware corporation (the Company), and Raymond J. Lewis (the Executive) is made as of December 31, 2008.
WITNESSETH:
WHEREAS, the Company and Executive entered into the Employment Agreement; and
WHEREAS, the Executive Compensation Committee of the Board of Directors of the Company has determined that it is in the best interests of the Company and Executive to make certain changes to the Employment Agreement.
NOW, THEREFORE, the Company and Executive agree as follows:
1. The following sentence is added at the end of Section 6(e) Date of Termination of the Employment Agreement:
To the extent necessary to have payments and benefits under this Agreement be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (Code Section 409A) or comply with the requirements of Code Section 409A, the Company and Executive agree to cooperate in a reasonable manner (including with regard to any post-termination services by the Executive) such that the Date of Termination as defined in this Agreement shall constitute a separation from service pursuant to Code Section 409A (Separation from Service). Notwithstanding anything contained in this Agreement to the contrary, the date on which a Separation from Service occurs shall be the Date of Termination or termination of employment for purposes of determining the timing of payments under this Agreement to the extent necessary to have such payments and benefits under this Agreement be exempt from the requirements of Section 409A of the Code or comply with the requirements of Code Section 409A.
2. The second sentence of Section 7(a) Death or Disability of the Employment Agreement is amended and restated in its entirety as follows:
Such amount shall be paid within 30 days of the date when such amounts would otherwise have been payable to the Executive if Executives employment had not terminated but in no event later than the March 15th of the calendar year following the calendar year in which the Executives employment terminated.
3. The third sentence of Section 13 Certain Additional Payments by the Company of the Employment Agreement is amended and restated in its entirety as follows:
Such reduction, if applicable, shall be made generally by first reducing the payments under Section 8(a)(i) of this Agreement and in any event shall be made in such a manner as to maximize the value of all Payments actually made to Executive.
4. Section 22 COMPLIANCE WITH SECTION 409A OF THE INTERNAL REVENUE CODE of the Employment Agreement is amended and restated in its entirety as follows:
22. Compliance with Section 409A of the Internal Revenue Code . All payments pursuant to this Agreement shall be subject to the provisions of this Section 22. Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and operated to the fullest extent possible so that the payments and benefits under this Agreement either shall be exempt from the requirements of Code Section 409A or shall comply with the requirements of such provision; provided, however, that notwithstanding anything to the contrary in this Agreement in no event shall the Company be liable to the Executive for or with respect to any taxes, penalties or interest which may be imposed upon the Executive pursuant to Code Section 409A. This Section 22 shall not limit any tax payments (other than Code Section 409A tax payments) provided in this Agreement.
(a) Payments to Specified Employees . To the extent that any payment or benefit pursuant to this Agreement constitutes a deferral of compensation subject to Code Section 409A (after taking into account to the maximum extent possible any applicable exemptions) (a 409A Payment) treated as payable upon Separation from Service, then, if on the date of the Executives Separation from Service, the Executive is a Specified Employee, then to the extent required for Executive not to incur additional taxes pursuant to Code Section 409A, no such 409A Payment shall be made to the Executive earlier than the earlier of (i) six (6) months after the Executives Separation from Service; or (ii) the date of his death. Should this Section 22 otherwise result in the delay of in-kind benefits (for example, health benefits), any such benefit shall be made available to the Executive by the Company during such delay period at Executives expense. Should this Section 22 result in payments or benefits to Executive at a later time than otherwise would have been made under this Agreement, on the first day any such payments or benefits may be made without incurring additional tax pursuant to Code Section 409A (the 409A Payment Date), the Company shall make such payments and provide such benefits as provided for in this Agreement, provided that any amounts that would have been payable earlier but for the application of this Section 22, as well as reimbursement of the amount Executive paid for benefits pursuant to the preceding sentence, shall be paid in lump-sum on the 409A Payment Date along with accrued interest at the rate of interest published in the Wall Street Journal as the prime rate (or equivalent) on the date that payments or benefits, as applicable, to Executive should have been made under this Agreement. For purposes of this Section 22, the term Specified Employee shall have the meaning set forth in Code Section 409A, as determined in accordance with the methodology established by the Company. For purposes of determining whether a Separation from Service has occurred for purposes of Code Section 409A, to the extent permissible under Code Section 409A, subsidiaries and affiliates of the Company are those included by using a twenty percent (20%) standard to define the controlled group under Code Section 1563(a) in lieu of the fifty percent (50%) default rule. In addition, for purposes of determining whether a Separation from Service has occurred for purposes of Code Section 409A, a Separation from Service is deemed to include a reasonably anticipated permanent reduction in the level of services performed by the Executive to less than fifty (50%) of the average level of services performed by the Executive during the immediately preceding 12-month period.
(b) Reimbursements Including Tax Gross-Ups . For purposes of complying with Code Section 409A and without extending the payment timing otherwise provided in this Agreement, taxable reimbursements under this Agreement, subject to the following sentence and to the extent required to comply with Code Section 409A, will be made no later than the end of the calendar year following the calendar year in which the expense was incurred. However, for purposes of complying with Code Section 409A and without extending the payment timing otherwise provided in this Agreement, any tax gross-up may be payable through the calendar year after the calendar year in which the Executive remits the taxes rather than be limited to the end of the calendar year following the calendar year in which the expense was incurred and reimbursement of expenses incurred due to a tax audit or litigation addressing the existence or amount of a tax liability may be payable through the end of the calendar year following the calendar year in which the taxes that are the subject of the audit or litigation are remitted to the taxing authority or, where as a result of such audit or litigation no taxes are remitted, the end of the calendar year following the calendar year in which the audit is completed or there is a final and nonappealable settlement or other resolution of the litigation. To the extent required to comply with Code Section 409A, any taxable reimbursements and any in-kind benefits under this Agreement will be subject to the following: (a) payment of such reimbursements or in-kind benefits during one calendar year will not affect the amount of such reimbursement or in-kind benefits provided during any other calendar year (other than for medical reimbursement arrangements as excepted under Treasury Regulations §1.409A-3(i)(1)(iv)(B) solely because the arrangement provides for a limit on the amount of expenses that may be reimbursed under such arrangement over some or all of the period the arrangement remains in effect); (b) such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another form of compensation to the Executive; and (c) the right to reimbursements under this Agreement will be in effect for the lesser of the time specified in this Agreement or ten years plus the lifetime of the Executive. Any taxable reimbursements or in-kind benefits shall be treated as not subject to Code Section 409A to the maximum extent provided by Treasury Regulations §1.409A-1(b)(9)(v) or otherwise under Code Section 409A.
(c) Release . To the extent that Executive is required to execute and deliver a Release to receive a 409A Payment and this Agreement provides for such 409A Payment to be provided prior to the 55th day following the Executives Separation from Service, such 409A Payment will be provided upon the 55th day following Executives Separation from Service provided the Release in the form mutually agreed upon between Executive and the Company or in the form set forth in Attachment A has been executed, delivered and effective prior to such time. To the extent a 409A Payment is made at a later time than otherwise would have been made under this Agreement because of the provisions of the preceding sentence of this Section 22(c), interest for the delay and the opportunity for Executive to pay for benefits in the interim with subsequent reimbursement from the Company shall be provided in a manner consistent with that set forth in Section 22(a). To the extent that Executive is required to execute and deliver a Release to receive a 409A Payment and this Agreement provides for such 409A Payment to be provided in
accordance with Section 22(a), such 409A Payment will be provided as set forth in Section 22(a) provided the Release in the form mutually agreed upon between Executive and the Company or in the form set forth in Attachment A has been executed, delivered and effective prior to such time. If a Release is required for a 409A Payment and such Release is not executed, delivered and effective by the date six months after the Executives Separation from Service if such 409A Payment is subject to the limitations set forth in Section 22(a) or the 55th day following Executives Separation from Service if such 409A Payment is not subject to the limitations set forth in Section 19(a), such 409A Payment shall not be provided to the Executive to the extent that providing such 409A Payment would cause such 409A Payment to fail to comply with Code Section 409A. To the extent that any payments or benefits under this Agreement are intended to be exempt from Code Section 409A as a short-term deferral pursuant to Treasury Regulations §1.409A-1(b)(4) or any successor thereto and require Executive to provide a Release to the Company to obtain such payments or benefits, any Release required for such payment or benefit must be provided in the form mutually agreed upon between Executive and the Company or in the form set forth in Attachment A no later than March 7th of the calendar year following the calendar year of the Executives Separation from Service.
(d) No Acceleration; Separate Payments . No 409A Payment payable under this Agreement shall be subject to acceleration or to any change in the specified time or method of payment, except as otherwise provided under this Agreement and consistent with Code Section 409A. If under this Agreement, a 409A Payment is to be paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payment.
(e) Cooperation . If any compensation or benefits provided by this Agreement may result in the application of Code Section 409A, the Company shall, in consultation with the Executive, modify the Agreement in the least restrictive manner necessary in order to exclude such compensation from the definition of deferred of compensation within the meaning of such Code Section 409A or in order to comply with the provisions of Code Section 409A of the Code and without any diminution in the value of the payments or benefits to the Executive. This Section 22 is not intended to impose any restrictions on payments or benefits to Executive other than those otherwise set forth in this Agreement or required for Executive not to incur additional tax under Code Section 409A and shall be interpreted and operated accordingly. The Company to the extent reasonably requested by Executive shall modify this Agreement to effectuate the intention set forth in the preceding sentence.
5. In all other respects, the Employment Agreement, as amended, shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.
VENTAS, INC. | ||
By: |
/s/ T. Richard Riney |
|
Title: |
Executive Vice President, Chief Administrative Officer and General Counsel |
|
EXECUTIVE | ||
/s/ Raymond J. Lewis |
||
Raymond J. Lewis |
Exhibit 10.18
VENTAS
EMPLOYEE AND DIRECTOR STOCK PURCHASE PLAN
[As amended December 8, 2008]
The Ventas Employee and Director Stock Purchase Plan is comprised of two subplans as set forth below: the Ventas Qualified Employee Stock Purchase Plan and the Ventas Taxable Employee and Director Stock Purchase Plan.
A total of two million five hundred thousand (2,500,000) shares of Common Stock of Ventas, Inc. are reserved for sale and authorized for issuance pursuant to the Ventas Employee and Director Stock Purchase Plan comprised of the Ventas Qualified Employee Stock Purchase Plan and the Ventas Taxable Employee and Director Stock Purchase Plan. Such number of shares is subject to adjustment as set forth in Article 9 of each subplan. Shares of Common Stock to be issued under the Plan may be either authorized and unissued shares, treasury shares or a combination thereof.
VENTAS
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
ARTICLE 1. PURPOSE
The purpose of this Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company. It is the intention of the Company to have the Plan qualify as an employee stock purchase plan under section 423 of the Code. The provisions of this Plan, accordingly, shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code.
ARTICLE 2. DEFINITIONS
Certain terms used in this Plan have the meanings set forth in Appendix A.
ARTICLE 3. ELIGIBILITY REQUIREMENTS
3.1. Initial Eligibility . Except as provided in Section 3.2, each Employee shall become eligible to participate in the Plan in accordance with Article 4 on the first Enrollment Date on or following the later of (a) the date such individual becomes an Employee or (b) the Effective Date. Participation in the Plan is entirely voluntary.
3.2. Limitations on Eligibility . The Committee may determine that the following Employees are not eligible to participate in the Plan:
(a) | Employees who have been employed less than one (1) year or such shorter period established by the Committee; |
(b) | Employees whose customary employment is twenty (20) hours or less per week or any lesser number of hours established by the Committee; and |
(c) | Employees who, immediately upon purchasing Shares under the Plan, would own directly or indirectly, an aggregate of five percent (5%) or more of the total combined voting power or value of all outstanding shares of all classes of stock of the Company or any Subsidiary (and for purposes of this paragraph, the rules of Section 424(d) of the Code shall apply, and stock which the Employee may purchase under outstanding options shall be treated as stock owned by the Employee). |
ARTICLE 4. ENROLLMENT
Any Eligible Employee may enroll in the Plan for any Offering Period by completing and signing an enrollment election form or by such other means as the Committee shall prescribe and submitting such enrollment election to the Company in accordance with procedures established by the Committee on or before the Cut-Off Date with respect to such Offering Period. Unless otherwise determined by the Committee, the enrollment election and the designated rate of payroll deduction shall continue for future Offering Periods unless the Participant changes or cancels the enrollment election or designated rate of payroll deduction prior to the Cut-Off Date.
ARTICLE 5. GRANT OF OPTIONS ON ENROLLMENT
5.1. Option Grant . Enrollment by an Eligible Employee in the Plan as of an Enrollment Date will constitute the grant by the Company to such Participant of an option on such Enrollment Date to purchase Shares from the Company pursuant to the Plan.
5.2. Option Expiration . An option granted to a Participant pursuant to this Plan shall expire, if not terminated for any reason first, on the earliest to occur of (a) the end of the Offering Period in which such option was granted; (b) the completion of the purchase of Shares under the option under Article 7; or (c) the date on which participation of such Participant in the Plan terminates for any reason.
5.3. Purchase of Shares . An option granted to a Participant under the Plan shall give the Participant a right to purchase on a Purchase Date the largest number of whole Shares, as determined by the Committee, which the funds accumulated in the Participants Account as of such Purchase Date will purchase at the applicable Purchase Price; provided, however, that the Committee may, in its discretion, limit the number of Shares purchased by each Participant in any Purchase Period.
Notwithstanding anything to the contrary herein, to the extent required by Section 423 of the Code, no Employee shall be granted an option under the Plan (or any other plan of the Company or a Subsidiary intended to qualify under Section 423 of the Code) which would permit the Employee to purchase Shares under the Plan (and such other plan) in any calendar year with a Fair Market Value (determined at the time such option is granted) in excess of $25,000 and any payments made by a Participant in excess of this limitation shall be returned to the Participant in accordance with procedures established by the Committee.
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ARTICLE 6. PAYMENT
The Committee may designate the time and manner for payment of Shares to be purchased during the Purchase Period, including, but not limited to, through payroll deductions from Compensation, the terms and conditions of which are designated by the Committee. Payment amounts shall be credited on a bookkeeping basis to a Participants Account under this Plan. All payment amounts may be used by the Company for any purpose and the Company shall have no obligation to segregate such funds. No interest accrues on payments by Participants.
ARTICLE 7. PURCHASE OF SHARES
7.1. Option Exercise . Any option held by the Participant which was granted under this Plan and which remains outstanding as of a Purchase Date shall be deemed to have been exercised on such Purchase Date for the number of whole Shares, as determined by the Committee, which the funds accumulated in the Participants Account as of the Purchase Date will purchase at the applicable Purchase Price (but not in excess of the number of Shares for which options have been granted to the Participant pursuant to Section 5.3). Options for other Shares for which options have been granted which are not purchased on the last Purchase Date during the Offering Period shall terminate. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such Shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed. As a condition to the exercise of an option, the Committee may require the person exercising such option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares.
7.2. Refund of Excess Amount . If, after a Participants exercise of an option under Section 7.1, an amount remains credited to the Participants Account as of a Purchase Date, then the remaining amount shall be (a) if no further Purchase Periods are immediately contemplated by the Committee, distributed to the Participant as soon as administratively feasible, or (b) if another Purchase Period is contemplated by the Committee, carried forward in the Account for application to the purchase of Shares on the next following Purchase Date.
7.3. Employees of Designated Categories . In the case of Participants employed by a Designated Subsidiary, the Committee may provide for Shares to be sold through the Subsidiary to such Participants, to the extent consistent with Section 423 of the Code.
7.4. Pro Rata Allocations . If the total number of Shares for which options are or could be exercised on any Purchase Date in accordance with this Article 7, when aggregated with all Shares for which options have been previously exercised under this Plan, exceeds the maximum number of Shares reserved in Article 12, the Company may, in accordance with Article 12, allocate the Shares available for delivery and distribution in the ratio that the balance in each Participants Account bears to the aggregate balances of all Participants Accounts, and the remaining balance of the amount credited to the Account of each Participant under the Plan shall be returned to him or her as promptly as possible.
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7.5. Notice of Disposition . If a Participant or former Participant sells, transfers, or otherwise makes a disposition of Shares purchased pursuant to an option granted under the Plan and within two (2) years after the date such option is granted or within one (1) year after the date such Shares were transferred to the Participant, if such Participant or former Participant is subject to United States federal income tax, then such Participant or former Participant shall notify the Company or a member of the Employer in writing of such sale, transfer or other disposition within ten (10) days of the consummation of such sale, transfer, or other disposition. Without limitation on the Participant or former Participants ability to sell, transfer or otherwise make a disposition of Shares and without limitation on Section 11.2, Participants and former Participants must maintain any Shares purchased pursuant to an option granted under the Plan within two (2) years after the date such option is granted or within one (1) year after the date such Shares were transferred to the Participant at the broker designated by the Committee, unless the Committee determines otherwise.
ARTICLE 8. WITHDRAWAL FROM THE PLAN,
TERMINATION OF EMPLOYMENT, AND LEAVE OF ABSENCE
8.1. Withdrawal from the Plan . A Participant may withdraw all funds accumulated in the Participants Account from the Plan during any Purchase Period by delivering a notice of withdrawal to the Company or a member of the Employer (in a manner prescribed by the Committee) at any time up to but not including the thirty (30) days prior to the Purchase Date next following the date such notice of withdrawal is delivered, or at such shorter time in advance of such Purchase Date as the Committee may permit. If notice of complete withdrawal as described in the preceding sentence is timely received, all funds then accumulated in the Participants Account shall not be used to purchase Shares, but shall instead be distributed to the Participant as soon as administratively feasible and the Company or member of the Employer will cease the Participants payroll withholding for the Plan in accordance with timing and other procedures established by the Committee. An Employee who has withdrawn during a Purchase Period may not return funds to the Company or a member of the Employer during the same Purchase Period and require the Company or member of the Employer to apply those funds to the purchase of Shares. Any Eligible Employee who has withdrawn from the Plan may, however, re-enroll in the Plan on the next subsequent Enrollment Date, if any.
8.2. Termination of Participation . Participation in the Plan terminates immediately following the end of the Purchase Period during which a Participant ceases to be employed by the Company or a member of the Employer for any reason whatsoever or otherwise ceases to be an Eligible Employee. Notwithstanding the preceding sentence, such Participant may elect to withdraw from the Plan in accordance with Section 8.1 and the procedures prescribed by the Committee.
8.3. Leave of Absence . If a Participant takes a leave of absence, such Participant shall have the right, in accordance with procedures prescribed by the Committee, to elect to withdraw from the Plan in accordance with Section 8.1. To the extent determined by the Committee or required by Section 423 of the Code, certain leaves of absence may be treated as cessations of employment for purposes of the Plan.
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ARTICLE 9. ADJUSTMENTS UPON CHANGES IN
CAPITALIZATION, DISSOLUTION, LIQUIDATION, MERGER OR ASSET SALE
9.1. Adjustments Upon Changes in Capitalization . Subject to any required action by the shareholders of the Company, the right to purchase Shares of Common Stock covered by a current Offering Period and the number of Shares which have been authorized for issuance under the Plan for any future Offering Period, the maximum number of Shares each Participant may purchase each Offering Period (pursuant to Section 5.3 hereof), as well as the price per Share and the number of Shares covered by each right under the Plan which have not yet been purchased shall be proportionately adjusted in the sole discretion of the Committee for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, extraordinary cash dividend, combination or reclassification of the Common Stock, or recapitalization, reorganization, consolidation, split-up, spin-off, or any other increase or decrease in the number of Shares effected without receipt of consideration by the Company. Except as expressly provided otherwise by the Committee, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares.
9.2. Committee Adjustment . Without limitation on the preceding provisions, in the event of any corporate transaction, the Committee may make such adjustment it deems appropriate to prevent dilution or enlargement of rights in the number and class of Shares which may be delivered under Article 12, in the number, class of or price of Shares available for purchase under the Plan and in the number of Shares which an Employee is entitled to purchase and any other adjustments it deems appropriate. Without limiting the Committees authority under this Plan, in the event of any transaction, the Committee may elect to have the options hereunder assumed or such options substituted by a successor entity, to terminate all outstanding options either prior to their expiration or upon completion of the purchase of Shares on the next Purchase Date, to shorten the Offering Period by setting a new Purchase Date or to take such other action deemed appropriate by the Committee.
ARTICLE 10. DESIGNATION OF BENEFICIARY
Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom the amount in his or her Account is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Committee during the Participants lifetime. In the absence of any such designation, any Account balance remaining unpaid at the Participants death shall be paid to the Participants estate.
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ARTICLE 11. ADMINISTRATION.
11.1. Administration by Committee . The Plan shall be administered by the Committee. The Committee shall have the authority to delegate duties to officers, directors or employees of the Company.
11.2. Authority of Committee . The Committee shall have the full and exclusive discretionary authority to construe and interpret the Plan and options granted under it; to establish, amend, and revoke rules and regulations for administration of the Plan (including, without limitation, the determination and change of Offering Periods, Purchase Periods and payment procedures, the requirement that Shares be held by a specified broker, and the establishment of the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars); to determine all questions of eligibility, disputed claims and policy that may arise in the administration of the Plan; to make any changes to the Plan or its operations to reduce or eliminate any unfavorable legal, accounting or other consequences to the extent deemed appropriate by the Committee; and, generally, to exercise such powers and perform such acts as the Committee deems necessary or expedient to promote the best interests of the Company, including, but not limited to, designating from time to time which Subsidiaries of the Company shall be part of the Employer. The Committees determinations as to the interpretation and operation of this Plan shall be final and conclusive and each action of the Committee shall be binding on all persons.
In exercising the powers described in the foregoing paragraph, the Committee may adopt special or different rules for the operation of the Plan including, but not limited to, rules which allow employees of any foreign Subsidiary to participate in, and enjoy the tax benefits offered by, the Plan; provided that such rules shall not result in any grantees of options having different rights and/or privileges under the Plan in violation of Section 423 of the Code nor otherwise cause the Plan to fail to satisfy the requirements of Section 423 of the Code and the regulations thereunder.
11.3. Administrative Modification . The Plan provisions relating to the administration of the Plan may be amended by the Committee from time to time as may be desirable to satisfy any requirements of or under the federal securities and/or other applicable laws of the United States, to obtain any exemption under such laws, or to reduce or eliminate any unfavorable legal, accounting or other consequences or for any other purpose deemed appropriate by the Committee.
ARTICLE 12. NUMBER OF SHARES
Subject to adjustment as set forth in Article 9, two million five hundred thousand (2,500,000) Shares are reserved for sale and authorized for issuance pursuant to the Ventas Employee and Director Stock Purchase Plan, and therefore, the number of Shares authorized for issuance pursuant to the Plan is two million five hundred thousand (2,500,000) Shares less the number of Shares issued pursuant to the Ventas Taxable Employee and Director Stock Purchase Plan. If any option granted under the Plan shall for any reason terminate without having been exercised, the Shares not purchased under such option shall again become available for the
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Ventas Employee and Director Stock Purchase Plan. If on a given Purchase Date, the number of Shares with respect to which options are to be exercised exceeds the number of Shares then available under the Plan, the Committee shall make a pro rata allocation of the Shares remaining available for purchase in as uniform a manner as shall be practical and as it shall determine to be equitable.
ARTICLE 13. MISCELLANEOUS
13.1. Restrictions on Transfer . Options granted under the Plan to a Participant may not be exercised during the Participants lifetime other than by the Participant. Neither amounts credited to a Participants Account nor any rights with respect to the exercise of an option or to receive stock under the Plan may be assigned, transferred, pledged, or otherwise disposed of in any way by the Participant other than by will or the laws of descent and distribution. Any such attempted assignment, transfer, pledge, or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw from the Plan in accordance with Section 8.1.
13.2. Administrative Assistance . If the Committee in its discretion so elects, it may retain a brokerage firm, bank, or other financial institution to assist in the purchase of Shares, delivery of reports, or other administrative aspects of the Plan. If the Committee so elects, each Participant shall (unless prohibited by applicable law) be deemed upon enrollment in the Plan to have authorized the establishment of an account on his or her behalf at such institution. Shares purchased by a Participant under the Plan shall be held in the Account in the Participants name, or if the Participant so indicates in the enrollment form, in the Participants name together with the name of his or her spouse in joint tenancy with right of survivorship or spousal community property, or in certain forms of trust approved by the Committee.
13.3. Treatment of Non-U.S. Participants . Participants who are employed by non-U.S. Designated Subsidiaries, who are paid in foreign currency, and who contribute foreign currency to the Plan through contributions or payroll deductions will have such contributions converted to U.S. dollars. The exchange rate and method for such conversion will be determined as prescribed by the Committee. In no event will any procedure implemented for dealing with exchange rate fluctuations that may occur during an Offering Period result in a purchase price below the Purchase Date Price permitted under the Plan. Each Participant shall bear the risk of any currency exchange fluctuations (if applicable) between the date on which any Participant contributions are converted to U.S. dollars and the following Purchase Date.
13.4. Withholding . The Company or any member of the Employer shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company or any member of the Employer, an amount sufficient to satisfy Federal, state and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.
13.5. Equal Rights and Privileges . All Eligible Employees shall have equal rights and privileges with respect to the Plan so that the Plan qualifies as an employee stock purchase plan within the meaning of Section 423 or any successor provision of the Code and the related
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regulations. Notwithstanding the express terms of the Plan, any provision of the Plan which is inconsistent with Section 423 or any successor provision of the Code shall without further act or amendment by the Company or the Committee be reformed to comply with the requirements of Section 423 of the Code. This Section 13.5 shall take precedence over all other provisions in the Plan.
13.6. Eligible Employees in Other Countries . Without amending the Plan, the Committee may grant options or establish other procedures to provide benefits to Eligible Employees of Designated Subsidiaries with non-U.S. employees on such terms and conditions different from those specified in this Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan and shall have the authority to adopt such modifications, procedures, subplans and the like as may be necessary or desirable (a) to comply with provisions of the laws or regulations or conform to the requirements to operate the Plan in a qualified or tax or accounting advantageous manner in other countries or jurisdictions in which the Company or any Designated Subsidiary may operate or have employees, (b) to ensure the viability of the benefits from the Plan to Eligible Employees employed in such countries or jurisdictions and (c) to meet the objectives of the Plan. Notwithstanding anything to the contrary herein, any such actions taken by the Committee with respect to Eligible Employees of any Designated Subsidiary may be treated as a subplan outside of an employee stock purchase plan under Section 423 of the United States Code and not subject to the requirements of Section 423 set forth in the United States Code and this Plan.
13.7. Applicable Law . The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the State of Delaware.
13.8. Amendment and Termination . The Board may amend, alter, or terminate the Plan at any time; provided, however, that (1) the Plan may not be amended in a way which will cause rights issued under the Plan to fail to meet the requirements of Section 423 of the Code; and (2) no amendment which would amend or modify the Plan in a manner requiring stockholder approval under Section 423 of the Code or the requirements of any securities exchange on which the Shares are traded shall be effective unless such stockholder approval is obtained. In addition, the Committee may amend the Plan as provided in Section 11.3, subject to the conditions set forth in this Section 13.8.
If the Plan is terminated, the Committee may elect to terminate all outstanding options either prior to their expiration or upon completion of the purchase of Shares on the next Purchase Date, or may elect to permit options to expire in accordance with their terms (and participation to continue through such expiration dates). If the options are terminated prior to expiration, all funds accumulated in Participants Accounts as of the date the options are terminated shall be returned to the Participants as soon as administratively feasible.
13.9. No Right of Employment . Neither the grant nor the exercise of any rights to purchase Shares under this Plan nor anything in this Plan shall impose upon the Company or a member of the Employer any obligation to employ or continue to employ any Employee. The right of the Company or a member of the Employer to terminate any Employee shall not be diminished or affected because any rights to purchase Shares have been granted to such Employee.
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13.10. Rights as Shareholder . No Participant shall have any rights as shareholder unless and until Shares have been issued to him or her.
13.11. Governmental Regulation . The Companys obligation to sell and deliver Shares under this Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance, or sale of such Shares.
13.12. Gender . When used herein, masculine terms shall be deemed to include the feminine, except when the context indicates to the contrary.
13.13. Condition for Participation . As a condition to participation in the Plan, Eligible Employees agree to be bound by the terms of the Plan (including, without limitation, the notification and holding requirements of Section 7.5) and the determinations of the Committee.
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APPENDIX A
DEFINITIONS
Account means a recordkeeping account maintained for a Participant to which Participant contributions and payroll deductions, if applicable, shall be credited.
Board means the Board of Directors of the Company.
Code means the Internal Revenue Code of 1986, as amended.
Committee means any person or committee appointed by the Board.
Common Stock means the Common Stock of the Company.
Company means Ventas, Inc., a Delaware corporation.
Compensation means gross earnings from the Employer, including such amounts of gross earnings as are deferred by an Eligible Employees (a) under a qualified cash or deferred arrangement described in Section 401(k) of the Code or (b) under a plan qualified under Section 125 of the Code. Compensation does not include severance pay, equity compensation or gain from stock option exercises.
Cut-Off Date means the date established by the Committee from time to time by which enrollment forms must be received prior to an Enrollment Date.
Designated Subsidiary means any Subsidiary which has been designated by the Committee from time to time in its sole discretion as eligible to participate in the Plan and which has adopted the Plan with the approval of the Committee in its sole and absolute discretion.
Effective Date means the effective date as determined by the Committee.
Eligible
Employee means any individual who is an employee of the Employer for tax purposes.
Employer means the Company or any Designated Subsidiary of the Company by which an Employee is employed.
Enrollment Date means the first Trading Day of an Offering Period.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Fair Market Value of the Shares shall mean, as of any applicable date, the closing sale price of the Shares on the New York Stock Exchange or any national or regional stock exchange on
A-1
which the Shares are traded, or if no such reported sale of the Shares shall have occurred on such date, on the next preceding date on which there was such a reported sale. If there shall be any material alteration in the present system of reporting sale prices of the Shares, or if the Shares shall no longer be listed on the New York Stock Exchange or a national or regional stock exchange, the fair market value of the Shares as of a particular date shall be determined by such method as shall be determined by the Committee.
Grant Date means a date on which an Eligible Employee is granted an option under the Plan pursuant to Article 5.
Offering Period means each period, if any, designated by the Committee; provided, that each period shall in no event end later than twenty-seven (27) months from the Grant Date. The Offering Period may but need not be the same as the Purchase Period, as determined by the Committee.
Participant means an Eligible Employee who has enrolled in the Plan pursuant to Section 4.
Plan means this Ventas Qualified Employee Stock Purchase Plan.
Purchase Date with respect to a Purchase Period means the last Trading Day in such Purchase Period.
Purchase Date Price means the Fair Market Value of a Share on the applicable Purchase Date.
Purchase Period means the period beginning on the Effective Date and ending on the date designated by the Committee and each period, if any, thereafter designated by the Committee; provided, that each period shall, in no event end later than twenty-seven (27) months from the Grant Date.
Purchase Price means the price designated by the Committee, at which each Share may be purchased under any option, but in no event less than ninety percent (90%) of the Purchase Date Price.
Shares means shares of the Companys Common Stock.
Subsidiary means a corporation, domestic or foreign, of which not less than 50% of the combined voting power is held by the Company or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary.
Trading Day means a day on which the New York Stock Exchange, Nasdaq stock market or other alternative exchange or service on which the Common Stock is traded, listed or quoted is open for trading.
A-2
VENTAS
TAXABLE EMPLOYEE AND DIRECTOR STOCK PURCHASE PLAN
ARTICLE 1. PURPOSE
The purpose of this Plan is to provide employees and directors of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company.
ARTICLE 2. DEFINITIONS
Certain terms used in this Plan have the meanings set forth in Appendix B.
ARTICLE 3. ELIGIBILITY REQUIREMENTS
3.1. Initial Eligibility . Except as provided in Section 3.2, each Employee and Director shall become eligible to participate in the Plan in accordance with Article 4 on the first Enrollment Date on or following the later of (a) the date such individual becomes an Employee or Director; or (b) the Effective Date. Participation in the Plan is entirely voluntary.
3.2. Limitation on Eligibility . The Committee may determine that the following Employees are not eligible to participate in the Plan:
(a) | Employees who have been employed less than one (1) year or such shorter period established by the Committee; and |
(b) | Unless otherwise determined appropriate by the Committee, Employees whose customary employment is twenty (20) hours or less per week or any lesser number of hours established by the Committee. |
ARTICLE 4. ENROLLMENT
Any Eligible Person may enroll in the Plan for any Offering Period by completing and signing an enrollment election form or by such other means as the Committee shall prescribe and submitting such enrollment election to the Company in accordance with procedures established by the Committee on or before the Cut-Off Date with respect to such Offering Period. Unless otherwise determined by the Committee, the enrollment election and the designated rate of payroll deduction shall continue for future Offering Periods unless the Participant changes or cancels the enrollment election or designated rate of payroll deduction prior to the Cut-Off Date.
ARTICLE 5. GRANT OF OPTIONS ON ENROLLMENT
5.1. Option Grant . Enrollment by an Eligible Person in the Plan as of an Enrollment Date will constitute the grant by the Company to such Participant of an option on such Enrollment Date to purchase Shares from the Company pursuant to the Plan.
5.2. Option Expiration . An option granted to a Participant pursuant to this Plan shall expire, if not terminated for any reason first, on the earliest to occur of (a) the end of the Offering Period in which such option was granted; (b) the completion of the purchase of Shares under the option under Article 7; or (c) the date on which participation of such Participant in the Plan terminates for any reason.
5.3. Purchase of Shares . An option granted to a Participant under the Plan shall give the Participant a right to purchase on a Purchase Date the largest number of whole Shares, as determined by the Committee, which the funds accumulated in the Participants Account as of such Purchase Date will purchase at the applicable Purchase Price; provided, however, that the Committee may, in its discretion, limit the number of Shares purchased by each Participant in any Purchase Period.
ARTICLE 6. PAYMENT
The Committee may designate the time and manner for payment of Shares to be purchased during the Purchase Period, including, but not limited to, through payroll deductions from Compensation, the terms and conditions of which are designated by the Committee. Payment amounts shall be credited on a bookkeeping basis to a Participants Account under this Plan. All payment amounts may be used by the Company for any purpose and the Company shall have no obligation to segregate such funds. No interest accrues on payments by Participants.
ARTICLE 7. PURCHASE OF SHARES
7.1. Option Exercise . Any option held by the Participant which was granted under this Plan and which remains outstanding as of a Purchase Date shall be deemed to have been exercised on such Purchase Date for the number of whole Shares, as determined by the Committee, which the funds accumulated in the Participants Account as of the Purchase Date will purchase at the applicable Purchase Price (but not in excess of the number of Shares for which options have been granted to the Participant pursuant to Section 5.3). Options for other Shares for which options have been granted which are not purchased on the last Purchase Date during the Offering Period shall terminate. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such Shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed. As a condition to the exercise of an option, the Committee may require the person exercising such option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares.
7.2. Refund of Excess Amount , If, after a Participants exercise of an option under Section 7.1, an amount remains credited to the Participants Account as of a Purchase Date, then the remaining amount shall be (a) if no further Purchase Periods are immediately contemplated
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by the Committee, distributed to the Participant as soon as administratively feasible, or (b) if another Purchase Period is contemplated by the Committee, carried forward in the Account for application to the purchase of Shares on the next following Purchase Date.
7.3. Employees of Designated Categories . In the case of Participants employed by a Designated Subsidiary, the Committee may provide for Shares to be sold through the Subsidiary to such Participants.
7.4. Pro Rata Allocation . If the total number of Shares for which options are or could be exercised on any Purchase Date in accordance with this Article 7, when aggregated with all Shares for which options have been previously exercised under this Plan, exceeds the maximum number of Shares reserved in Section 12, the Company may, in accordance with Article 12, allocate the Shares available for delivery and distribution in the ratio that the balance in each Participants Account bears to the aggregate balances of all Participants Accounts, and the remaining balance of the amount credited to the Account of each Participant under the Plan shall be returned to him or her as promptly as possible.
ARTICLE 8. WITHDRAWAL FROM THE PLAN,
TERMINATION OF EMPLOYMENT, AND LEAVE OF ABSENCE
8.1. Withdrawal from the Plan . A Participant may withdraw all funds accumulated in the Participants Account from the Plan during any Purchase Period by delivering a notice of withdrawal to the Company or a member of the Employer (in a manner prescribed by the Committee) at any time up to but not including the thirty (30) days prior to the Purchase Date next following the date such notice of withdrawal is delivered, or at such shorter time in advance of such Purchase Date as the Committee may permit. If notice of complete withdrawal as described in the preceding sentence is timely received, all funds then accumulated in the Participants Account shall not be used to purchase Shares, but shall instead be distributed to the Participant as soon as administratively feasible and the Company or member of the Employer will cease the Participants payroll withholding for the Plan in accordance with timing and other procedures established by the Committee. An Eligible Person who has withdrawn during a Purchase Period may not return funds to the Company or a member of the Employer during the same Purchase Period and require the Company or member of the Employer to apply those funds to the purchase of Shares. Any Eligible Person who has withdrawn from the Plan may, however, re-enroll in the Plan on the next subsequent Enrollment Date, if any.
8.2. Termination of Participation . Participation in the Plan terminates immediately following the end of the Purchase Period during which a Participant ceases to be employed by the Company or a member of the Employer for any reason whatsoever or otherwise ceases to be an Eligible Person. Notwithstanding the preceding sentence, such Participant may elect to withdraw from the Plan in accordance with Section 8.1 and the procedures prescribed by the Committee.
8.3. Leave of Absence . If a Participant takes a leave of absence, such Participant shall have the right, in accordance with procedures prescribed by the Committee, to elect to
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withdraw from the Plan in accordance with Section 8.1. To the extent determined by the Committee, certain leaves of absence may be treated as cessations of employment for purposes of the Plan.
ARTICLE 9. ADJUSTMENTS UPON CHANGES IN
CAPITALIZATION, DISSOLUTION, LIQUIDATION, MERGER OR ASSET SALE
9.1. Adjustments Upon Changes in Capitalization . Subject to any required action by the shareholders of the Company, the right to purchase Shares of Common Stock covered by a current Offering Period and the number of Shares which have been authorized for issuance under the Plan for any future Offering Period, the maximum number of Shares each Participant may purchase each Offering Period (pursuant to Section 5.3 hereof), as well as the price per Share and the number of Shares covered by each right under the Plan which have not yet been purchased shall be proportionately adjusted in the sole discretion of the Committee for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, extraordinary cash dividend, combination or reclassification of the Common Stock, or recapitalization, reorganization, consolidation, split-up, spin-off, or any other increase or decrease in the number of Shares effected without receipt of consideration by the Company. Except as expressly provided otherwise by the Committee, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares.
9.2. Committee Adjustment . Without limitation on the preceding provisions, in the event of any corporate transaction, the Committee may make such adjustment it deems appropriate to prevent dilution or enlargement of rights in the number and class of Shares which may be delivered under Article 12, in the number, class of or price of Shares available for purchase under the Plan and in the number of Shares which an Eligible Person is entitled to purchase and any other adjustments it deems appropriate. Without limiting the Committees authority under this Plan, in the event of any transaction, the Committee may elect to have the options hereunder assumed or such options substituted by a successor entity, to terminate all outstanding options either prior to their expiration or upon completion of the purchase of Shares on the next Purchase Date, to shorten the Offering Period by setting a new Purchase Date or to take such other action deemed appropriate by the Committee.
ARTICLE 10. DESIGNATION OF BENEFICIARY
Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom the amount in his or her Account is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Committee during the Participants lifetime. In the absence of any such designation, any Account balance remaining unpaid at the Participants death shall be paid to the Participants estate.
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ARTICLE 11. ADMINISTRATION
11.1. Administration by Committee . The Plan shall be administered by the Committee. The Committee shall have the authority to delegate duties to officers, directors or employees of the Company.
11.2. Authority of Committee . The Committee shall have the full and exclusive discretionary authority to construe and interpret the Plan and options granted under it; to establish, amend, and revoke rules and regulations for administration of the Plan (including, without limitation, the determination and change of Offering Periods, Purchase Periods and payment procedures, the requirement that Shares be held by a specified broker, and the establishment of the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars); to determine all questions of eligibility, disputed claims and policy that may arise in the administration of the Plan; to make any changes to the Plan or its operations to reduce or eliminate any unfavorable legal, accounting or other consequences to the extent deemed appropriate by the Committee; and, generally, to exercise such powers and perform such acts as the Committee deems necessary or expedient to promote the best interests of the Company, including, but not limited to, designating from time to time which Subsidiaries of the Company shall be part of the Employer. The Committees determinations as to the interpretation and operation of this Plan shall be final and conclusive and each action of the Committee shall be binding on all persons. The Committee may adopt special or different rules for the operation of the Plan for different Participants, including, but not limited to, rules designed to accommodate the practices of the applicable jurisdiction.
11.3. Administrative Modification . The Plan provisions relating to the administration of the Plan may be amended by the Committee from time to time as may be desirable to satisfy any requirements of or under the securities or other applicable laws of the United States or other jurisdiction, to obtain any exemption under such laws, or to reduce or eliminate any unfavorable legal, accounting or other consequences or for any other purpose deemed appropriate by the Committee.
11.4. Section 409A of the Code . Grants of options under this Plan are intended to be exempt from the requirements of Section 409A of the Code pursuant to the short-term deferral exception or otherwise. This Plan is intended to be interpreted and operated to the fullest extent possible so that options under this Plan shall be exempt from the requirements of Section 409A of the Code. Notwithstanding the foregoing provisions of this Section, neither the Company nor the Committee shall be liable to any Participant for or with respect to any taxes, penalties or interest which may be imposed upon the Participant pursuant to Section 409A of the Code
ARTICLE 12. NUMBER OF SHARES
Subject to adjustment as set forth in Article 9, two million five hundred thousand (2,500,000) Shares are reserved for sale and authorized for issuance pursuant to the Ventas Employee and Director Stock Purchase Plan, and therefore, the number of Shares authorized for issuance pursuant to the Plan is two million five hundred thousand (2,500,000) Shares less the
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number of Shares issued pursuant to the Ventas Qualified Employee Stock Purchase Plan. If any option granted under the Plan shall for any reason terminate without having been exercised, the Shares not purchased under such option shall again become available for the Ventas Employee and Director Stock Purchase Plan. If on a given Purchase Date, the number of Shares with respect to which options are to be exercised exceeds the number of Shares then available under the Plan, the Committee shall make a pro rata allocation of the Shares remaining available for purchase in as uniform a manner as shall be practical and as it shall determine to be equitable.
ARTICLE 13. MISCELLANEOUS
13.1. Restrictions on Transfer . Options granted under the Plan to a Participant may not be exercised during the Participants lifetime other than by the Participant. Neither amounts credited to a Participants Account nor any rights with respect to the exercise of an option or to receive stock under the Plan may be assigned, transferred, pledged, or otherwise disposed of in any way by the Participant other than by will or the laws of descent and distribution. Any such attempted assignment, transfer, pledge, or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw from the Plan in accordance with Section 8.1.
13.2. Administrative Assistance . If the Committee in its discretion so elects, it may retain a brokerage firm, bank, or other financial institution to assist in the purchase of Shares, delivery of reports, or other administrative aspects of the Plan. If the Committee so elects, each Participant shall (unless prohibited by applicable law) be deemed upon enrollment in the Plan to have authorized the establishment of an account on his or her behalf at such institution. Shares purchased by a Participant under the Plan shall be held in the Account in the Participants name, or if the Participant so indicates in the enrollment form, in the Participants name together with the name of his or her spouse in joint tenancy with right of survivorship or spousal community property, or in certain forms of trust approved by the Committee.
13.3. Treatment of Non-U.S. Participants . Participants who are employed by non-U.S. Designated Subsidiaries, who are paid in foreign currency, and who contribute foreign currency to the Plan through contributions or payroll deductions will have such contributions converted to U.S. dollars. The exchange rate and method for such conversion will be determined as prescribed by the Committee. Each Participant shall bear the risk of any currency exchange fluctuations (if applicable) between the date on which any Participant contributions are converted to U.S. dollars and the following Purchase Date.
13.4. Withholding . The Company or any member of the Employer shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company or any member of the Employer, an amount sufficient to satisfy taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.
13.5. Eligible Employees in Other Countries . Without amending the Plan, the Committee may grant options or establish other procedures to provide benefits to Eligible
- 6 -
Persons of Designated Subsidiaries with non-U.S. employees on such terms and conditions different from those specified in this Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan and shall have the authority to adopt such modifications, procedures, subplans and the like as may be necessary or desirable (a) to comply with provisions of the laws or regulations or conform to the requirements to operate the Plan in a qualified or tax or accounting advantageous manner in other countries or jurisdictions in which the Company or any Designated Subsidiary may operate or have employees, (b) to ensure the viability of the benefits from the Plan to Eligible Persons employed in such countries or jurisdictions and (c) to meet the objectives of the Plan.
13.6. Applicable Law . The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the State of Delaware.
13.7. Amendment and Termination . The Board may amend, alter, or terminate the Plan at any time; provided, however, that no amendment which would amend or modify the Plan in a manner requiring stockholder approval under the requirements of any securities exchange on which the Shares are traded shall be effective unless such stockholder approval is obtained. In addition, the Committee may amend the Plan as provided in Section 11.3, subject to the conditions set forth in this Section 13.7.
If the Plan is terminated, the Committee may elect to terminate all outstanding options either prior to their expiration or upon completion of the purchase of Shares on the next Purchase Date, or may elect to permit options to expire in accordance with their terms (and participation to continue through such expiration dates). If the options are terminated prior to expiration, all funds accumulated in Participants Accounts as of the date the options are terminated shall be returned to the Participants as soon as administratively feasible.
13.8. No Right of Employment . Neither the grant nor the exercise of any rights to purchase Shares under this Plan nor anything in this Plan shall impose upon the Company or a member of the Employer any obligation to employ or continue to employ any Employee. The right of the Company or a member of the Employer to terminate any Employee shall not be diminished or affected because any rights to purchase Shares have been granted to such Employee.
13.9. Rights as Shareholder . No Participant shall have any rights as shareholder unless and until Shares have been issued to him or her.
13.10. Governmental Regulation . The Companys obligation to sell and deliver Shares under this Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance, or sale of such Shares.
13.11. Gender . When used herein, masculine terms shall be deemed to include the feminine, except when the context indicates to the contrary.
13.12. Condition for Participation . As a condition to participation in the Plan, Eligible Persons agree to be bound by the terms of the Plan and the determinations of the Committee.
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APPENDIX B
DEFINITIONS
Account means a recordkeeping account maintained for a Participant to which Participant contributions and payroll deductions, if applicable, shall be credited.
Board means the Board of Directors of the Company.
Code means the Internal Revenue Code of 1986, as amended.
Committee means any person or committee appointed by the Board.
Common Stock means the Common Stock of the Company.
Company means Ventas, Inc., a Delaware corporation.
Compensation means gross earnings from the Employer, including such amounts of gross earnings as are deferred by an Eligible Persons (a) under a qualified cash or deferred arrangement described in Section 401(k) of the Code or (b) under a plan qualified under Section 125 of the Code. Compensation does not include severance pay, equity compensation or gain from stock option exercises.
Cut-Off Date means the date established by the Committee from time to time by which enrollment forms must be received prior to an Enrollment Date.
Designated Subsidiary means any Subsidiary which has been designated by the Committee from time to time in its sole discretion as eligible to participate in the Plan and which has adopted the Plan with the approval of the Committee in its sole and absolute discretion.
Director means a director of the Company.
Effective Date means the effective date as determined by the Committee.
Eligible Person means an Employee or director of the Company eligible to participate in the Plan in accordance with Article 3.
Employee means any individual who is an employee of the Employer for purposes of the Plan as determined by the Committee.
Employer means the Company and any Designated Subsidiary of the Company.
Enrollment Date means the first Trading Day of an Offering Period.
Exchange Act means the Securities Exchange Act of 1934, as amended.
B-1
Fair Market Value of the Shares shall mean, as of any applicable date, the closing sale price of the Shares on the New York Stock Exchange or any national or regional stock exchange on which the Shares are traded, or if no such reported sale of the Shares shall have occurred on such date, on the next preceding date on which there was such a reported sale. If there shall be any material alteration in the present system of reporting sale prices of the Shares, or if the Shares shall no longer be listed on the New York Stock Exchange or a national or regional stock exchange, the fair market value of the Shares as of a particular date shall be determined by such method as shall be determined by the Committee.
Grant Date means a date on which an Eligible Person is granted an option under the Plan pursuant to Section 5.
Offering Period means the period, if any, designated by the Committee; provided, that each period shall in no event end later than twenty-seven (27) months from the Grant Date. The Offering Period may but need not be the same as the Purchase Period, as determined by the Committee.
Participant means an Eligible Person who has enrolled in the Plan pursuant to Section 4.
Plan means this Ventas Taxable Employee and Director Stock Purchase Plan.
Purchase Date with respect to a Purchase Period means the last Trading Day in such Purchase Period.
Purchase Date Price means the Fair Market Value of a Share on the applicable Purchase Date.
Purchase Period means the period beginning on the Effective Date and ending on the date designated by the Committee and each period, if any, thereafter designated by the Committee; provided, that each period shall, in no event end later than twenty-seven (27) months from the Grant Date.
Purchase Price means the price designated by the Committee, at which each Share may be purchased under any option, but in no event less than ninety-five percent (95%) of the Purchase Date Price.
Shares means shares of the Companys Common Stock.
Subsidiary means a corporation or other entity or person, domestic or foreign, of which a majority of its voting power, equity securities, or equity interest is owned directly or indirectly by the Company or a Subsidiary, whether or not such corporation or other entity or person now exists or is hereafter organized or acquired by the Company or a Subsidiary.
Trading Day means a day on which the New York Stock Exchange, Nasdaq stock market or other alternative exchange or service on which the Common Stock is traded, listed or quoted is open for trading.
B-2
Exhibit 12
STATEMENT REGARDING COMPUTATION OF RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
For the year ended December 31, | |||||||||||||||
(dollars in thousands) | 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||
Income before net loss on real estate disposals, reversal of contingent liability, income taxes, minority interest, discontinued operations and preferred stock dividends and issuance costs |
$ | 145,285 | $ | 116,365 | $ | 120,303 | $ | 116,532 | $ | 90,811 | |||||
Interest expense |
|||||||||||||||
Senior notes payable and other debt |
203,184 | 195,731 | 128,953 | 93,676 | 57,122 | ||||||||||
Earnings |
$ | 348,469 | $ | 312,096 | $ | 249,256 | $ | 210,208 | $ | 147,933 | |||||
Interest |
|||||||||||||||
Senior notes payable and other debt expense |
$ | 203,184 | $ | 195,731 | $ | 128,953 | $ | 93,676 | $ | 57,122 | |||||
Interest capitalized |
114 | | | | | ||||||||||
Preferred stock dividends |
| 3,449 | | | | ||||||||||
Fixed charges |
$ | 203,298 | $ | 199,180 | $ | 128,953 | $ | 93,676 | $ | 57,122 | |||||
Ratio of Earnings to Fixed Charges |
1.71 | 1.57 | 1.93 | 2.24 | 2.59 | ||||||||||
Exhibit 21
SUBSIDIARIES OF VENTAS, INC.
AS OF FEBRUARY 27, 2009
Name |
Jurisdiction of Organization or Formation |
|
AL (AP) Holding, LLC | Delaware | |
AL (HCN) Holding, LLC | Delaware | |
AL (MT) Holding, LLC | Delaware | |
AL III Investments, L.L.C. | Virginia | |
AL One Investments, LLC | Delaware | |
AL One PA Investments, LLC | Delaware | |
AL Subfunding II, LLC | Delaware | |
AL Subfunding LLC | Delaware | |
ALI/East Brunswick Senior Housing, LLC | Delaware | |
ALI/Glen Ellyn Senior Housing, LLC | Delaware | |
ALI/La Costa Senior Housing, LLC | Delaware | |
ALI/Naperville Senior Housing, LLC | Delaware | |
ALI/North Lynbrook Senior Housing, LLC | Delaware | |
ALI/Pinehurst Senior Housing, LLC | Delaware | |
ALI/Providence Senior Housing, Inc. | Delaware | |
ALI/Richmond Senior Housing, LLC | Delaware | |
ALI/Stamford Senior Housing Living, LLC | Delaware | |
ALI/Woodcliff Lake Senior Housing, LLC | Delaware | |
Allison Park Nominee, LLC | Delaware | |
Allison Park Nominee, LP | Delaware | |
BCC Altoona Realty GP, LLC | Delaware | |
BCC Altoona Realty, LLC | Delaware | |
BCC Altoona Realty, LP | Delaware | |
BCC Berwick Realty GP, LLC | Delaware | |
BCC Berwick Realty, LLC | Delaware | |
BCC Berwick Realty, LP | Delaware | |
BCC Lewistown Realty GP, LLC | Delaware | |
BCC Lewistown Realty, LLC | Delaware | |
BCC Lewistown Realty, LP | Delaware | |
BCC Martinsburg Realty, LLC | Delaware | |
BCC Medina Realty, LLC | Delaware | |
BCC Ontario Realty, LLC | Delaware | |
BCC Reading Realty GP, LLC | Delaware | |
BCC Reading Realty, LLC | Delaware | |
BCC Reading Realty, LP | Delaware | |
BCC Shippensburg Realty, LLC | Delaware | |
BCC South Beaver Realty, LLC | Delaware | |
BCC State College Realty GP, LLC | Delaware | |
BCC State College Realty, LLC | Delaware | |
BCC State College Realty, LP | Delaware | |
BCC Washington Township Realty, LLC | Delaware | |
BLC Issuer II, LLC | Delaware | |
BLC of California-San Marcos, L.P. | Delaware | |
Bloomsburg Nominee, LLC | Delaware | |
Bloomsburg Nominee, LP | Delaware | |
Brookdale Holdings, LLC | Delaware | |
Brookdale Living Communities of Arizona-EM, LLC | Delaware | |
Brookdale Living Communities of California, LLC | Delaware |
Name |
Jurisdiction of Organization or Formation |
|
Brookdale Living Communities of California-RC, LLC | Delaware | |
Brookdale Living Communities of California-San Marcos, LLC | Delaware | |
Brookdale Living Communities of Connecticut, LLC | Delaware | |
Brookdale Living Communities of Florida-CL, LLC | Delaware | |
Brookdale Living Communities of Illinois-2960, LLC | Delaware | |
Brookdale Living Communities of Illinois-Hoffman Estates, LLC | Delaware | |
Brookdale Living Communities of Illinois-HV, LLC | Delaware | |
Brookdale Living Communities of Illinois-II, LLC | Delaware | |
Brookdale Living Communities of Massachusetts-RB, LLC | Delaware | |
Brookdale Living Communities of Minnesota, LLC | Delaware | |
Brookdale Living Communities of New Jersey, LLC | Delaware | |
Brookdale Living Communities of New York-GB, LLC | Delaware | |
Brookdale Living Communities of Washington-PP, LLC | Delaware | |
Casper Wyoming Hospital, LLC | Delaware | |
Chippewa Nominee, LLC | Delaware | |
Chippewa Nominee, LP | Delaware | |
DBF Issuer I, LLC | Ohio | |
Dillsburg Nominee, LLC | Delaware | |
Dillsburg Nominee, LP | Delaware | |
DV Greenville MOB, LLC | Delaware | |
DV Parker II MOB LLC | Delaware | |
EC Halcyon Realty, LLC | Delaware | |
EC Hamilton Place Realty, LLC | Delaware | |
EC Lebanon Realty, LLC | Delaware | |
EC Martinez Realty, LLC | Delaware | |
EC Muncie Realty, LLC | Delaware | |
EC Timberlin Parc Realty, LLC | Delaware | |
ElderTrust | Maryland | |
ElderTrust Operating Limited Partnership | Delaware | |
ET Belvedere Finance, Inc. | Delaware | |
ET Belvedere Finance, L.L.C. | Delaware | |
ET Berkshire, LLC | Delaware | |
ET Capital Corp. | Delaware | |
ET DCMH Finance, Inc. | Delaware | |
ET DCMH Finance, L.L.C. | Delaware | |
ET GENPAR, L.L.C. | Delaware | |
ET Heritage Andover Finance, Inc. | Delaware | |
ET Lehigh, LLC | Delaware | |
ET Pennsburg Finance, L.L.C. | Delaware | |
ET POBI Finance, L.L.C. | Delaware | |
ET POBI Finance, Inc. | Delaware | |
ET Sanatoga, LLC | Delaware | |
ET Sub-Belvedere Limited Partnership, L.L.P. | Virginia | |
ET Sub-Berkshire Limited Partnership | Delaware | |
ET Sub-DCMH Limited Partnership, L.L.P. | Virginia | |
ET Sub-Heritage Woods, L.L.C. | Delaware | |
ET Sub-Highgate, L.P. | Pennsylvania | |
ET Sub-Lacey I, L.L.C. | Delaware | |
ET Sub-Lehigh Limited Partnership | Delaware | |
ET Sub-Lopatcong, L.L.C. | Delaware | |
ET Sub-Pennsburg Manor Limited Partnership, L.L.P. | Virginia | |
ET Sub-Phillipsburg I, L.L.C. | Delaware | |
ET Sub-Pleasant View, L.L.C. | Delaware | |
ET Sub-POBI Limited Partnership, L.L.P. | Virginia |
Name |
Jurisdiction of Organization or Formation |
|
ET Sub-Rittenhouse Limited Partnership, L.L.P. | Virginia | |
ET Sub-Riverview Ridge Limited Partnership, L.L.P. | Virginia | |
ET Sub-Sanatoga Limited Partnership | Delaware | |
ET Sub-SMOB, L.L.C. | Delaware | |
ET Sub-Wayne I, Limited Partnership, L.L.P. | Virginia | |
ET Sub-Willowbrook Limited Partnership, L.L.P. | Virginia | |
ET Sub-Woodbridge, L.P. | Pennsylvania | |
ET Wayne Finance, Inc. | Delaware | |
ET Wayne Finance, L.L.C. | Delaware | |
Fair Oak Assisted Living, LLC | Delaware | |
Greenville MOB Owners LLC | Delaware | |
Hendersonville Nominee, LLC | Delaware | |
Hendersonville Nominee, LP | Delaware | |
IPC (AP) Holding, LLC | Delaware | |
IPC (HCN) Holding, LLC | Delaware | |
IPC (MT) Holding, LLC | Delaware | |
Karrington of Park Ridge, L.L.C. | Ohio | |
Kingsport Nominee, LLC | Delaware | |
Kingsport Nominee, LP | Delaware | |
Knoxville Nominee, LLC | Delaware | |
Knoxville Nominee, LP | Delaware | |
Lebanon Nominee, LLC | Delaware | |
Lebanon Nominee, LP | Delaware | |
Lewisburg Nominee, LLC | Delaware | |
Lewisburg Nominee, LP | Delaware | |
Lima Nominee, LLC | Delaware | |
Lima Nominee, LP | Delaware | |
Loyalsock Nominee, LLC | Delaware | |
Loyalsock Nominee, LP | Delaware | |
MAB Parent, LLC | Delaware | |
NV Briargate MOB LLC | Delaware | |
NV Broadway MOB, LLC | Delaware | |
NV Potomac MOB LLC | Delaware | |
NV Printers Park MOB LLC | Delaware | |
Parker II MOB Owners, LLC | Delaware | |
PSLT-ALS Properties Holdings, LLC | Delaware | |
PSLT-ALS Properties I, LLC | Delaware | |
PSLT-ALS Properties II, LLC | Delaware | |
PSLT-BLC Properties Holdings, LLC | Delaware | |
PSLT GP, LLC | Delaware | |
PSLT OP, L.P. | Delaware | |
River Oaks Partners | Illinois | |
Sagamore Hills Nominee, LLC | Delaware | |
Sagamore Hills Nominee, LP | Delaware | |
Saxonburg Nominee, LLC | Delaware | |
Saxonburg Nominee, LP | Delaware | |
Shippensburg Realty Holdings, LLC | Delaware | |
South Beaver Realty Holdings, LLC | Delaware | |
Sunrise Abington Assisted Living, L.L.C. | Pennsylvania | |
Sunrise Arlington, MA Assisted Living, L.L.C. | Virginia | |
Sunrise Assisted Living Limited Partnership III | Pennsylvania | |
Sunrise Bloomfield Senior Living, LLC | Delaware | |
Sunrise Bloomingdale Assisted Living, L.L.C. | Illinois | |
Sunrise Buffalo Grove Assisted Living, L.L.C. | Illinois |
Name |
Jurisdiction of Organization or Formation |
|
Sunrise Cherry Creek Senior Living, LLC | Delaware | |
Sunrise Cuyahoga Falls Senior Living, LLC | Delaware | |
Sunrise East Cobb Assisted Living LP | Georgia | |
Sunrise Edina Assisted Living, L.L.C. | Minnesota | |
Sunrise Fleetwood A.L., L.L.C. | New York | |
Sunrise First Assisted Living Holdings, LLC | Delaware | |
Sunrise Granite Run Assisted Living, L.L.C. | Pennsylvania | |
Sunrise Haverford Assisted Living, L.L.C. | Pennsylvania | |
Sunrise Hillcrest Senior Living, LLC | Delaware | |
Sunrise Huntcliff Assisted Living LP | Georgia | |
Sunrise Ivey Ridge Assisted Living LP | Georgia | |
Sunrise Mission Viejo Assisted Living, L.L.C. | Virginia | |
Sunrise Morris Plains Assisted Living, L.L.C. | New Jersey | |
Sunrise New City Senior Living, L.L.C. | Delaware | |
Sunrise North Ann Arbor Senior Living, LLC | Delaware | |
Sunrise Northville Assisted Living, L.L.C. | Michigan | |
Sunrise of Alexandria Assisted Living, L.P. | Virginia | |
Sunrise of Aurora GP Inc. | Ontario, Canada | |
Sunrise of Aurora LP | Ontario, Canada | |
Sunrise of Erin Mills GP Inc. | Ontario, Canada | |
Sunrise of Erin Mills LP | Ontario, Canada | |
Sunrise of North York GP Inc. | Ontario, Canada | |
Sunrise of North York LP | Ontario, Canada | |
Sunrise Old Tappan Assisted Living, L.L.C. | New Jersey | |
Sunrise Orchard AL, L.L.C. | Colorado | |
Sunrise Pacific Palisades Assisted Living, L.P. | California | |
Sunrise Parma Assisted Living, L.L.C. | Virginia | |
Sunrise Riverside Assisted Living, LP | California | |
Sunrise Rochester Assisted Living, L.L.C. | Delaware | |
Sunrise Rocklin Senior Living, LLC | Delaware | |
Sunrise Sandy Senior Living, LLC | Delaware | |
Sunrise Scottsdale Senior Living, LLC | Delaware | |
Sunrise Second Assisted Living Holdings, LLC | Delaware | |
Sunrise Second Baton Rouge Assisted Living, L.L.C. | Louisiana | |
Sunrise Second Westminster Assisted Living, L.L.C. | Colorado | |
Sunrise Smithtown A.L., L.L.C. | New York | |
Sunrise Springfield Assisted Living, L.L.C. | Virginia | |
Sunrise Staten Island Senior Living, LLC | New York | |
Sunrise Sterling Canyon Assisted Living, LP | California | |
Sunrise TFE Acquisitions, L.L.C. | Virginia | |
Sunrise Troy Assisted Living, L.L.C. | Michigan | |
Sunrise US UPREIT, LLC | Delaware | |
Sunrise Wall Assisted Living L.L.C. | New Jersey | |
Sunrise Wayne Assisted Living, L.L.C. | New Jersey | |
Sunrise Westfield Assisted Living, L.L.C. | New Jersey | |
SZR Acquisitions, LLC | Delaware | |
SZR Aurora Inc. | Ontario, Canada | |
SZR Burlington Inc. | Ontario, Canada | |
SZR Columbia, LLC | Delaware | |
SZR Erin Mills Inc. | Ontario, Canada | |
SZR Lincoln Park, LLC | Delaware | |
SZR Markham Inc. | Ontario, Canada | |
SZR Mississauga Inc. | Ontario, Canada | |
SZR North Hills, LLC | Delaware |
Name |
Jurisdiction of Organization or Formation |
|
SZR North York Inc. | Ontario, Canada | |
SZR Norwood, LLC | Delaware | |
SZR Oakville Inc. | Ontario, Canada | |
SZR Richmond Hill Inc. | Ontario, Canada | |
SZR Rockville, LLC | Delaware | |
SZR San Mateo, LLC | Delaware | |
SZR US Investments, Inc. | Delaware | |
SZR US UPREIT THREE, LLC | Delaware | |
SZR Westlake Village LLC | Delaware | |
SZR Windsor Inc. | Ontario, Canada | |
SZR Willowbrook, LLC | Delaware | |
SZR Yorba Linda, LLC | Delaware | |
The Ponds of Pembroke Limited Partnership | Illinois | |
United Rehab Realty Holding, LLC | Delaware | |
Ventas Amberleigh, LLC | Delaware | |
Ventas Bayshore Medical, LLC | Delaware | |
Ventas Brighton, LLC | Delaware | |
Ventas Broadway MOB, LLC | Delaware | |
Ventas Cal Sun LLC | Delaware | |
Ventas Capital Corporation | Delaware | |
Ventas Carroll MOB, LLC | Delaware | |
Ventas Casper Holdings, LLC | Delaware | |
Ventas Center MOB, LLC | Delaware | |
Ventas Cooperatief U.A. | The Netherlands | |
Ventas Crown Pointe, LLC | Delaware | |
Ventas DASCO MOB, LLC | Delaware | |
Ventas Fairwood, LLC | Delaware | |
Ventas Farmington Hills, LLC | Delaware | |
Ventas Framingham, LLC | Delaware | |
Ventas Georgetowne, LLC | Delaware | |
Ventas Grantor Trust #1 | Delaware | |
Ventas Grantor Trust #2 | Delaware | |
Ventas Harrison, LLC | Delaware | |
Ventas Healthcare Properties, Inc. | Delaware | |
Ventas Kansas City I, LLC | Delaware | |
Ventas Littleton, LLC | Delaware | |
Ventas LP Realty, L.L.C. | Delaware | |
Ventas Management, LLC | Delaware | |
Ventas MO Holdings, LLC | Delaware | |
Ventas MOB Holdings, LLC | Delaware | |
Ventas Nexcore Holdings, LLC | Delaware | |
Ventas of Vancouver Limited | Jersey | |
Ventas Plaza MOB, LLC | Delaware | |
Ventas Provident, LLC | Delaware | |
Ventas Realty, Limited Partnership | Delaware | |
Ventas Regency Medical Park I, LLC | Delaware | |
Ventas REIT US Holdings, Inc. | Delaware | |
Ventas Rose Arbor, LLC | Delaware | |
Ventas Santa Barbara, LLC | Delaware | |
Ventas SSL Beacon Hill, Inc. | Ontario, Canada | |
Ventas SSL Lynn Valley, Inc. | Ontario, Canada | |
Ventas SSL Holdings, Inc. | Delaware | |
Ventas SSL Holdings, LLC | Delaware | |
Ventas SSL, Inc. | Delaware |
Name |
Jurisdiction of Organization or Formation |
|
Ventas SSL Ontario II, Inc. | Ontario, Canada | |
Ventas SSL Ontario III, Inc. | Ontario, Canada | |
Ventas SSL Nova Scotia I Corp. | Nova Scotia | |
Ventas SSL Vancouver, Inc. | Ontario, Canada | |
Ventas Sun LLC | Delaware | |
Ventas TRS, LLC | Delaware | |
Ventas University MOB, LLC | Delaware | |
Ventas West Shores, LLC | Delaware | |
Ventas Whitehall Estates, LLC | Delaware | |
VG Aventura MOB, LLC | Delaware | |
VSCRE Holdings, LLC | Delaware | |
VTCC Carroll MOB, LLC | Delaware | |
VTRLTH MAB I, LLC | Delaware | |
VTRLTH MAB II, LLC | Delaware | |
Xenia Nominee, LLC | Delaware | |
Xenia Nominee, LP | Delaware |
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-02717) pertaining to the Vencor, Inc. 1987 Incentive Compensation Program; the Registration Statement (Form S-8 No. 333-34191) pertaining to the Vencor, Inc. 1987 Stock Plan for Non-Employee Directors; the Registration Statement (Form S-8 No. 333-25519) pertaining to the TheraTx, Incorporated 1996 Stock Option/Stock Issuance Plan; the Registration Statement (Form S-8 No. 333-61552) pertaining to the Ventas, Inc. Common Stock Purchase Plan for Directors; the Registration Statement (Form S-3 No. 333-65642) pertaining to the Ventas, Inc. Distribution Reinvestment and Stock Purchase Plan; the Registration Statement (Form S-8 No. 333-97251) pertaining to the Ventas, Inc. 2000 Incentive Compensation Plan; the Registration Statement (Form S-8 No. 333-107951) pertaining to the Ventas, Inc. 2000 Stock Option Plan for Directors; the Registration Statement (Form S-8 No. 333-118944) pertaining to the Ventas Executive Deferred Stock Compensation Plan and Ventas Nonemployee Director Deferred Stock Compensation Plan; the Registration Statement (Form S-8 No. 333-126639) pertaining to the Ventas Employee and Director Stock Purchase Plan; the Registration Statement (Form S-3 No. 333-133115) pertaining to securities of Ventas, Inc. and subsidiaries; the Registration Statement (Form S-8 No. 333-136175) pertaining to the Ventas, Inc. 2006 Incentive Plan and Ventas, Inc. 2006 Stock Plan for Directors; the Registration Statement (Form S-3 No. 333-141605) pertaining to the common stock of Ventas, Inc.; and the Registration Statement (Form S-3 No. 333-155770) pertaining to the Ventas, Inc. Distribution Reinvestment and Stock Purchase Plan, of our reports dated February 26, 2009 with respect to the consolidated financial statements and schedule of Ventas, Inc. and the effectiveness of internal control over financial reporting of Ventas, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2008.
/s/ Ernst & Young LLP |
Chicago, Illinois |
26 February 2009 |
Exhibit 31.1
I, Debra A. Cafaro, Chairman, President and Chief Executive Officer of Ventas, Inc., certify that:
1. | I have reviewed this Annual Report on Form 10-K of Ventas, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report, any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: February 27, 2009
/s/ Debra A. Cafaro |
Debra A. Cafaro |
Chairman, President and Chief Executive Officer |
Exhibit 31.2
I, Richard A. Schweinhart, Executive Vice President and Chief Financial Officer of Ventas, Inc., certify that:
1. | I have reviewed this Annual Report on Form 10-K of Ventas, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report, any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: February 27, 2009
/s/ Richard A. Schweinhart |
Richard A. Schweinhart |
Executive Vice President and Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Ventas, Inc. (the Company) for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Debra A. Cafaro, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 27, 2009
/s/ Debra A. Cafaro |
Debra A. Cafaro |
Chairman, President and Chief Executive Officer |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Ventas, Inc. (the Company) for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Richard A. Schweinhart, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 27, 2009
/s/ Richard A. Schweinhart |
Richard A. Schweinhart |
Executive Vice President and Chief Financial Officer |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.