Research: Rating Action: Moody’s confirms Baa1 ratings for Ventas; outlook revised to stable

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New York, August 01, 2022 — Moody’s Investors Service (“Moody’s”) has affirmed the ratings of Ventas Inc. subsidiaries, including senior unsecured Baa1 ratings of Ventas Realty, Limited Partnership, Ventas Canada Finance Limited and Nationwide Health Properties , Inc. Moody’s has also assigned a Preferred Share Conservation Rating (P)Baa2 to Ventas, Inc. The ratings outlook has been revised from negative to stable. The ratings affirmation reflects Ventas’ market positioning as one of the largest healthcare REITs, as well as its diversification across property types, business models and operators within the real estate market. health care. Ventas also benefits from modest secured debt levels, a large, high-quality unencumbered asset pool and good liquidity.

The stable outlook reflects the REIT’s improved cash flow as its senior housing operating portfolio (37% of 1Q22 revenue) continues to recoup revenue lost in the first year of the pandemic. Demand for senior housing remains strong and we expect rising cash flow to drive further debt reductions at Ventas. The pace of recovery will largely depend on the direction of labor costs, but we expect Ventas’ net debt/EBITDA to be back within its target range by year-end 2023.

The following ratings have been confirmed:

Ventas Realty, Limited Partnership — Senior unsecured debt secured at Baa1; Unsecured senior shelf leaning against (P)Baa1; P-2 backed commercial paper program

Ventas Canada Finance Limited — Senior unsecured debt backed by Baa1

Nationwide Health Properties, Inc. — Senior unsecured debt secured at Baa1; senior unsecured debt at Baa1

The following score was awarded:

Ventas, Inc. – Preferred Stock Shelf Backed by (P)Baa2; Shelf of non-cumulative preferred shares backed by (P)Baa2

Outlook Actions:

Issuers: Ventas Realty, Limited Partnership; Ventas Canada Finance Limited; Nationwide Health Properties, Inc.

Outlook changed from negative to stable

Issuer: Ventas, Inc.

Assigned stable outlook

RATINGS RATIONALE

Ventas’ Baa1 senior unsecured rating reflects its large size and diversification by ownership type and business model with a mix of senior housing operating assets (37% of NOI), triple net leases for residential seniors (14%), medical office properties (21%), life sciences/research and innovation properties (9%), long-term acute care facilities/inpatient rehabilitation (8%) and acute care hospitals (7%). Additional credit strengths include Ventas’ modest book leverage, low secured debt levels, strong fixed charge coverage and a large pool of high-quality unencumbered assets that enhance financial flexibility.

Key credit challenges include Ventas’ high leverage with Moody’s net debt to EBITDA ratio at 7.1x for 1Q22 (latest quarter annualized). Leverage increased due to the sharp decline in cash flow experienced in the REIT’s senior housing operating portfolio during the pandemic, which impacted occupancy and operating expenses . Ventas’ diversification has mitigated the decline in senior housing as its other asset classes have been a source of stability and growth.

On the positive side, senior housing is showing strong demand, with occupancy improving steadily since 1Q21. The REIT has also been able to pass on historically high rental rate increases to existing residents, which we believe will lead to continued improvement in revenue and margins. Strong rental rate increases are helping to offset the impact of still high labor costs, which remain a challenge to temper the pace of recovery. Low levels of new supply and positive demographic trends will support industry growth over the next few years.

Ventas maintains good liquidity. The REIT had $2.2 billion in cash in 1Q22, including $2.1 billion in revolver availability and $100 million in cash. The line of credit matures in January 2025 before extension options. Upcoming maturities are manageable with $382 million coming in 2022 and $740 million in 2023. Capital requirements are increasing with $1.7 billion in debt maturing in 2024, but Ventas has still maintained access strong to multiple sources of public and private capital. Ventas’ large pool of high-quality unencumbered assets further supports financial flexibility.

The stable outlook reflects continued improvement in Ventas’ senior housing business and our expectation that increased cash flow will lead to further debt reductions in the coming year.

FACTORS THAT MAY LEAD TO IMPROVEMENT OR DEGRADATION OF RATINGS

Ventas’ ratings could be downgraded if the Net Debt/EBITDA ratio is expected to remain permanently above 6.5x. Continued operational weakness in the SHOP portfolio and concerns over the REIT’s growth prospects could also lead to a downgrade. A fixed load coverage of less than 3.5x would also lead to pressure on the ratings.

A ratings upgrade is unlikely in the medium term, but would require a net debt to EBITDA ratio below 5.0x and effective leverage closer to 30% on a gross asset basis. Secured debt remaining below 10% of gross assets, fixed charge coverage above 4.5x and reduced concentration of operators/managers (the first two at less than 20% of the combined NOI) would also support a bet. at rating level.

The primary methodology used in these ratings was the Methodology for REITs and Other Commercial Real Estate Companies published in July 2021 and available at https://ratings.moodys.com/api/rmc-documents/74168. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

Ventas, Inc. [NYSE: VTR] is a healthcare REIT with a diversified portfolio of more than 1,200 assets in the United States, Canada and the United Kingdom, consisting of retirement homes, medical office buildings, research centers and innovation in academics, inpatient rehabilitation facilities and acute long-term care facilities, healthcare systems and skilled nursing facilities.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to the jurisdiction: Ancillary services, Disclosures to the rated entity, Disclosures to be provided by the rated entity.

The ratings have been communicated to the rated entity or its designated agent(s) and issued without modification resulting from such communication.

These notes are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement was issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Lori Brands
VP – Senior Credit Officer
Corporate Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Philippe Kibel
Associate General Manager
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Release Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

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