Ventas, Inc. - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐

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)						(I.R.S. Employer Identification No.)

353 N. Clark Street, Suite 3300

Chicago, Illinois

60654

(Address of Principal Executive Offices)

(877) 483-6827

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Exchange on Which Registered

Common Stock $0.25 par value

VTR

New York Stock Exchange

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 of 1934 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer ☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 3, 2021, there were 380,334,511 shares of the registrant’s common stock outstanding.

VENTAS, INC.

FORM 10-Q

INDEX

Page

PART I—FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements (Unaudited)

Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2021 and 2020

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2021 and 2020

Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2021 and 2020

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020

Notes to Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II—OTHER INFORMATION

Item 1A.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 5.

Other Information

Item 6.

Exhibits

PART I—FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

VENTAS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	As of June 30, 2021		As of December 31, 2020
	(In thousands, except per share amounts)


Assets
Real estate investments:
Land and improvements	$	2,231,836	$	2,261,415
Buildings and improvements	24,269,450		24,323,279
Construction in progress	288,910		265,748
Acquired lease intangibles	1,200,574		1,230,886
Operating lease assets	328,707		346,372
	28,319,477		28,427,700
Accumulated depreciation and amortization	(8,189,447)		(7,877,665)
Net real estate property	20,130,030		20,550,035
Secured loans receivable and investments, net	596,171		605,567
Investments in unconsolidated real estate entities	494,239		443,688
Net real estate investments	21,220,440		21,599,290
Cash and cash equivalents	233,837		413,327
Escrow deposits and restricted cash	40,931		38,313
Goodwill	1,051,832		1,051,650
Assets held for sale	90,002		9,608
Deferred income tax assets, net	11,486		9,987
Other assets	855,786		807,229
Total assets	$	23,504,314	$	23,929,404
Liabilities and equity
Liabilities:
Senior notes payable and other debt	$	11,761,545	$	11,895,412
Accrued interest	105,883		111,444
Operating lease liabilities	205,484		209,917
Accounts payable and other liabilities	1,122,171		1,133,066
Liabilities related to assets held for sale	4,568		3,246
Deferred income tax liabilities	68,097		62,638
Total liabilities	13,267,748		13,415,723
Redeemable OP unitholder and noncontrolling interests	252,662		235,490
Commitments and contingencies
Equity:
Ventas stockholders’ equity:
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued	—		—
Common stock, $0.25 par value; 600,000 shares authorized, 375,204 and 374,609 shares issued at June 30, 2021 and December 31, 2020, respectively	93,784		93,635
Capital in excess of par value	14,187,577		14,171,262
Accumulated other comprehensive loss	(58,290)		(54,354)
Retained earnings (deficit)	(4,340,052)		(4,030,376)
Treasury stock, 6 and 0 shares at June 30, 2021 and December 31, 2020, respectively	(320)		—
Total Ventas stockholders’ equity	9,882,699		10,180,167
Noncontrolling interests	101,205		98,024
Total equity	9,983,904		10,278,191
Total liabilities and equity	$	23,504,314	$	23,929,404

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
	(In thousands, except per share amounts)
Revenues
Rental income:
Triple-net leased	$	159,223	$	176,240	$	319,108	$	371,102
Office	200,388		192,925		397,843		401,320
	359,611		369,165		716,951		772,422
Resident fees and services	535,952		549,329		1,064,602		1,126,099
Office building and other services revenue	5,381		3,673		10,331		6,801
Income from loans and investments	17,665		19,491		36,675		43,537
Interest and other income	585		1,540		926		6,393
Total revenues	919,194		943,198		1,829,485		1,955,252
Expenses
Interest	110,051		123,132		220,818		239,828
Depreciation and amortization	250,700		349,594		564,848		598,431
Property-level operating expenses:
Senior living	424,813		432,578		842,642		842,709
Office	64,950		60,752		128,896		125,258
Triple-net leased	4,432		5,275		9,257		11,606
	494,195		498,605		980,795		979,573
Office building services costs	658		543		1,276		1,270
General, administrative and professional fees	30,588		28,080		70,897		68,540
(Gain) loss on extinguishment of debt, net	(74)		—		27,016		—

Merger-related expenses and deal costs	721		6,586		5,338		14,804
Allowance on loans receivable and investments	(59)		29,655		(8,961)		29,655
Other	(13,490)		5,286		(22,918)		11,069
Total expenses	873,290		1,041,481		1,839,109		1,943,170
Income (loss) before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests	45,904		(98,283)		(9,624)		12,082
Income (loss) from unconsolidated entities	4,767		(5,850)		4,517		(16,726)
Gain on real estate dispositions	41,258		1,254		43,791		227,479
Income tax (expense) benefit	(3,641)		(56,356)		(5,794)		92,660
Income (loss) from continuing operations	88,288		(159,235)		32,890		315,495
Net income (loss)	88,288		(159,235)		32,890		315,495
Net income (loss) attributable to noncontrolling interests	1,897		(2,065)		3,708		(452)
Net income (loss) attributable to common stockholders	$	86,391	$	(157,170)	$	29,182	$	315,947
Earnings per common share
Basic:
Income (loss) from continuing operations	$	0.24	$	(0.43)	$	0.09	$	0.85

Net income (loss) attributable to common stockholders	0.23		(0.42)		0.08		0.85
Diluted:
Income (loss) from continuing operations	$	0.23	$	(0.43)	$	0.09	$	0.84

Net income (loss) attributable to common stockholders	0.23		(0.42)		0.08		0.84

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
	(In thousands)
Net income (loss)	$	88,288	$	(159,235)	$	32,890	$	315,495
Other comprehensive (loss) income:
Foreign currency translation	(1,016)		(4,309)		(1,032)		(12,849)
Unrealized (loss) gain on available for sale securities	(2,663)		31,440		(7,280)		(20,259)
Derivative instruments	(595)		(2,788)		8,811		(21,375)
Total other comprehensive (loss) income	(4,274)		24,343		499		(54,483)
Comprehensive income (loss)	84,014		(134,892)		33,389		261,012
Comprehensive income (loss) attributable to noncontrolling interests	3,416		1,630		8,142		(6,739)
Comprehensive income (loss) attributable to common stockholders	$	80,598	$	(136,522)	$	25,247	$	267,751

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months Ended June 30, 2021 and 2020

(Unaudited)


2019	Common Stock Par Value		Capital in Excess of Par Value		Accumulated Other Comprehensive Loss		Retained Earnings (Deficit)		Treasury Stock		Total Ventas Stockholders’ Equity		Noncontrolling Interests		Total Equity
2019	(In thousands, except per share amounts)
Balance at April 1, 2021	$	93,750	$	14,186,692	$	(52,497)	$	(4,257,001)	$	(789)	$	9,970,155	$	101,465	$	10,071,620
Net income	—		—		—		86,391		—		86,391		1,897		88,288
Other comprehensive (loss) income	—		—		(5,793)		—		—		(5,793)		1,519		(4,274)
Net change in noncontrolling interests	—		2,804		—		—		—		2,804		(3,676)		(872)
Dividends to common stockholders—$0.45 per share	—		—		—		(169,442)		—		(169,442)		—		(169,442)



Issuance of common stock for stock plans, restricted stock grants and other	34		10,505		—		—		469		11,008		—		11,008
Adjust redeemable OP unitholder interests to current fair value	—		(12,421)		—		—		—		(12,421)		—		(12,421)

Redemption of OP Units	—		(3)		—		—		—		(3)		—		(3)
Balance at June 30, 2021	$	93,784	$	14,187,577	$	(58,290)	$	(4,340,052)	$	(320)	$	9,882,699	$	101,205	$	9,983,904

Balance at April 1, 2020	$	93,256	$	14,135,657	$	(103,408)	$	(3,491,696)	$	(867)	$	10,632,942	$	83,455	$	10,716,397
Net loss	—		—		—		(157,170)		—		(157,170)		(2,065)		(159,235)
Other comprehensive income	—		—		20,647		—		—		20,647		3,696		24,343
Net change in noncontrolling interests	—		252		—		—		—		252		3,612		3,864
Dividends to common stockholders—$0.45 per share	—		—		—		(168,126)		—		(168,126)		—		(168,126)

Issuance of common stock for stock plans, restricted stock grants and other	5		1,999		—		532		(80)		2,456		—		2,456

Adjust redeemable OP unitholder interests to current fair value	—		(19,789)		—		—		—		(19,789)		—		(19,789)



Balance at June 30, 2020	$	93,261	$	14,118,119	$	(82,761)	$	(3,816,460)	$	(947)	$	10,311,212	$	88,698	$	10,399,910

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

For the Six Months Ended June 30, 2021 and 2020

(Unaudited)


2019	Common Stock Par Value		Capital in Excess of Par Value		Accumulated Other Comprehensive Loss		Retained Earnings (Deficit)		Treasury Stock		Total Ventas Stockholders’ Equity		Noncontrolling Interests		Total Equity
2021	(In thousands, except per share amounts)
Balance at January 1, 2021	$	93,635	$	14,171,262	$	(54,354)	$	(4,030,376)	$	—	$	10,180,167	$	98,024	$	10,278,191
Net income	—		—		—		29,182		—		29,182		3,708		32,890
Other comprehensive (loss) income	—		—		(3,936)		—		—		(3,936)		4,435		499
Net change in noncontrolling interests	—		6,239		—		—		—		6,239		(4,962)		1,277
Dividends to common stockholders—$0.9000 per share	—		—		—		(338,858)		—		(338,858)		—		(338,858)

Issuance of common stock for stock plans, restricted stock grants and other	149		35,434		—		—		(320)		35,263		—		35,263

Adjust redeemable OP unitholder interests to current fair value	—		(25,339)		—		—		—		(25,339)		—		(25,339)
Redemption of OP Units	—		(19)		—		—		—		(19)		—		(19)

Balance at June 30, 2021	$	93,784	$	14,187,577	$	(58,290)	$	(4,340,052)	$	(320)	$	9,882,699	$	101,205	$	9,983,904

Balance at January 1, 2020	$	93,185	$	14,056,453	$	(34,564)	$	(3,669,050)	$	(132)	$	10,445,892	$	99,560	$	10,545,452
Net income (loss)	—		—		—		315,947		—		315,947		(452)		315,495
Other comprehensive loss	—		—		(48,197)		—		—		(48,197)		(6,286)		(54,483)
Net change in noncontrolling interests	—		1,013		—		—		—		1,013		(4,124)		(3,111)
Dividends to common stockholders—$1.2425 per share	—		—		—		(464,608)		—		(464,608)		—		(464,608)

Issuance of common stock for stock plans, restricted stock grants and other	76		12,893		—		1,251		(815)		13,405		—		13,405

Adjust redeemable OP unitholder interests to current fair value	—		48,022		—		—		—		48,022		—		48,022
Redemption of OP Units	—		(262)		—		—		—		(262)		—		(262)

Balance at June 30, 2020	$	93,261	$	14,118,119	$	(82,761)	$	(3,816,460)	$	(947)	$	10,311,212	$	88,698	$	10,399,910

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Six Months Ended June 30,
	2021		2020
	(In thousands)
Cash flows from operating activities:
Net income	$	32,890	$	315,495
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	564,848		598,431
Amortization of deferred revenue and lease intangibles, net	(31,551)		(6,334)
Other non-cash amortization	10,119		9,653
Allowance on loans receivable and investments	(8,961)		29,655
Stock-based compensation	21,465		11,557
Straight-lining of rental income	(7,167)		91,499
Loss on extinguishment of debt, net	27,016		—
Gain on real estate dispositions	(43,791)		(227,479)
Gain on real estate loan investments	(74)		(167)

Income tax expense (benefit)	2,510		(95,127)
(Income) loss from unconsolidated entities	(4,512)		16,734

Distributions from unconsolidated entities	6,480		1,600

Other	(34,841)		12,756
Changes in operating assets and liabilities:
Increase in other assets	(25,618)		(12,463)
(Decrease) increase in accrued interest	(5,732)		7,094
Increase (decrease) in accounts payable and other liabilities	25,775		(32,893)
Net cash provided by operating activities	528,856		720,011
Cash flows from investing activities:
Net investment in real estate property	(210)		(77,469)


Investment in loans receivable	(283)		(67,290)
Proceeds from real estate disposals	115,850		627,804
Proceeds from loans receivable	36,475		106,775




Development project expenditures	(130,894)		(180,398)
Capital expenditures	(74,122)		(53,519)

Investment in unconsolidated entities	(68,311)		(7,865)
Insurance proceeds for property damage claims	390		42
Net cash (used in) provided by investing activities	(121,105)		348,080
Cash flows from financing activities:
Net change in borrowings under revolving credit facilities	(104,131)		465,416
Net change in borrowings under commercial paper program	169,984		(565,524)
Proceeds from debt	268,286		640,533
Repayment of debt	(565,951)		(111,301)

Payment of deferred financing costs	(17,776)		(7,549)
Issuance of common stock, net	14,250		—
Cash distribution to common stockholders	(337,838)		(592,285)
Cash distribution to redeemable OP unitholders	(3,164)		(4,628)
Cash issued for redemption of OP Units	(62)		(570)
Contributions from noncontrolling interests	30		346
Distributions to noncontrolling interests	(8,588)		(6,293)
Proceeds from stock option exercises	4,821		3,518
Other	(5,934)		(4,891)
Net cash used in financing activities	(586,073)		(183,228)
Net (decrease) increase in cash, cash equivalents and restricted cash	(178,322)		884,863
Effect of foreign currency translation	1,450		(1,829)
Cash, cash equivalents and restricted cash at beginning of period	451,640		146,102
Cash, cash equivalents and restricted cash at end of period	$	274,768	$	1,029,136

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)


	For the Six Months Ended June 30,
	2021		2020
	(In thousands)
Supplemental schedule of non-cash activities:
Assets acquired and liabilities assumed from acquisitions and other:
Real estate investments	$	468	$	77,111

Other assets	—		614
Debt	—		55,368
Other liabilities	—		2,097

Noncontrolling interests	468		20,259

See accompanying notes.

VENTAS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—DESCRIPTION OF BUSINESS

Ventas, Inc. (together with its consolidated subsidiaries, unless otherwise indicated or except where the context otherwise requires, “we,” “us” or “our”), an S&P 500 company, is a real estate investment trust (“REIT”) operating at the intersection of healthcare and real estate. We hold a highly diversified portfolio of senior housing, life science, research and innovation and healthcare properties located throughout the United States, Canada and the United Kingdom. As of June 30, 2021, we owned or had investments in approximately 1,200 properties (including properties classified as held for sale), consisting of senior housing communities, medical office buildings (“MOBs”), life science, research and innovation centers, inpatient rehabilitation facilities (“IRFs”) and long-term acute care facilities (“LTACs”) and health systems, which we generally refer to as “healthcare real estate.” Our company was originally founded in 1983 and is headquartered in Chicago, Illinois with an additional corporate office in Louisville, Kentucky.

We primarily invest in a diversified portfolio of healthcare real estate assets through wholly owned subsidiaries and other co-investment entities. We operate through three reportable business segments: triple-net leased properties, senior living operations, which we also refer to as SHOP, and office operations. See “Note 2 – Accounting Policies” and “Note 15 – Segment Information.” Our senior housing properties are either subject to triple-net leases, in which case they are included in our triple-net leased properties reportable business segment, or operated by independent third-party managers, in which case they are included in our senior living operations reportable business segment.

As of June 30, 2021, we leased a total of 358 properties (excluding properties within our office operations reportable business segment) to various healthcare operating companies under triple-net or absolute-net leases that obligate the tenants to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures. Our three largest tenants, Brookdale Senior Living Inc. (together with its subsidiaries, “Brookdale Senior Living”), Ardent Health Partners, LLC (together with its subsidiaries, “Ardent”) and Kindred Healthcare, LLC (together with its subsidiaries, “Kindred”) leased from us 121 properties, 12 properties and 32 properties, respectively, as of June 30, 2021.

As of June 30, 2021, pursuant to long-term management agreements, we engaged independent managers, such as Atria Senior Living, Inc. (“Atria”) and Sunrise Senior Living, LLC (together with its subsidiaries, “Sunrise”), to manage 449 senior housing communities in our senior living operations segment for us.

Through our Lillibridge Healthcare Services, Inc. subsidiary and our ownership interest in PMB Real Estate Services LLC, we also provide MOB management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. In addition, from time to time, we make secured and non-mortgage loans and other investments relating to senior housing and healthcare operators or properties.

We have not identified the COVID-19 pandemic, on its own, as a “triggering event” for purposes of evaluating impairment of real estate assets, goodwill and other intangibles, investments in unconsolidated entities and financial instruments. However, as of June 30, 2021, we considered the effect of the pandemic on certain of our assets (described below) and our ability to recover the respective carrying values of these assets. We applied our considerations to existing critical accounting policies that require us to make estimates and assumptions regarding future events that affect the reported amounts of assets and liabilities. We based our estimates on our experience and on assumptions we believe to be reasonable under the circumstances. For the six months ended June 30, 2021 we recognized no COVID-19 related charges in our Consolidated Statements of Income.

The trajectory and future impact of the COVID-19 pandemic remain highly uncertain, although emerging positive SHOP trends in the United States, if sustained, would improve performance over time. The extent of the pandemic’s continuing and ultimate effect on our operational and financial performance will depend on a variety of factors, including the speed at which vaccines and other clinical treatments are successfully developed and deployed; the rate of acceptance of available vaccines, particularly among the residents and staff in our senior housing communities; the impact of new variants of the virus and the effectiveness of vaccines and other clinical treatments against those variants; ongoing clinical experience, which may differ considerably across regions and fluctuate over time; and on other future developments, including the ultimate duration, spread and intensity of the outbreak, the availability of ongoing government financial support to our business, tenants and operators and the slope and pace of recovery of our senior housing business and the U.S. economy more generally. Due to these

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

uncertainties, we are not able at this time to estimate the continuing impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows.

Pending Merger with New Senior Investment Group

On June 28, 2021, we entered into an Agreement and Plan of Merger (as amended or otherwise modified from time to time, the “Merger Agreement”) with Cadence Merger Sub LLC, our wholly owned subsidiary (“Merger Sub”), and New Senior Investment Group Inc. (“New Senior Investment Group”), pursuant to which, subject to the satisfaction or waiver of certain conditions, Merger Sub will merge with and into New Senior Investment Group, with New Senior Investment Group surviving the merger as our subsidiary (the “New Senior Investment Group Acquisition”). Under the Merger Agreement, the consideration to be paid by us in the New Senior Investment Group Acquisition will consist of 0.1561 newly issued shares of common stock, par value $0.25 per share, of Ventas, Inc. for each share of common stock, par value $0.01 per share, of New Senior Investment Group issued and outstanding immediately prior to the effective time of the New Senior Investment Group Acquisition. New Senior Investment Group has a diversified portfolio of 103 private pay senior living communities, including 102 independent living communities. The New Senior Investment Group Acquisition is expected to close during the second half of 2021, subject to customary closing conditions, including adoption of the Merger Agreement by the common stockholders of New Senior Investment Group. We cannot assure you that the New Senior Investment Group acquisition will be completed on the terms or timeline anticipated or at all.

NOTE 2—ACCOUNTING POLICIES

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The accompanying Consolidated Financial Statements and related notes should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report”). Certain prior period amounts have been reclassified to conform to the current period presentation.

Principles of Consolidation

The accompanying Consolidated Financial Statements include our accounts and the accounts of our wholly owned subsidiaries and the joint venture entities over which we exercise control. All intercompany transactions and balances have been eliminated in consolidation, and our net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.

GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; and (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. We consolidate our investment in a VIE when we determine that we are its primary beneficiary. We may change our original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affects the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary.

We identify the primary beneficiary of a VIE as the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. We perform this analysis on an ongoing basis.

As it relates to investments in joint ventures, GAAP may preclude consolidation by the sole general partner in certain circumstances based on the type of rights held by the limited partner or partners. We assess limited partners’ rights and their

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

impact on our consolidation conclusions, and we reassess if there is a change to the terms or in the exercisability of the rights of the limited partners, the sole general partner increases or decreases its ownership of limited partnership (“LP”) interests or there is an increase or decrease in the number of outstanding LP interests. We also apply this guidance to managing member interests in limited liability companies (“LLCs”).

We consolidate several VIEs that share the following common characteristics:

•the VIE is in the legal form of an LP or LLC;

•the VIE was designed to own and manage its underlying real estate investments;

•we are the general partner or managing member of the VIE;

•we own a majority of the voting interests in the VIE;

•a minority of voting interests in the VIE are owned by external third parties, unrelated to us;

•the minority owners do not have substantive kick-out or participating rights in the VIE; and

•we are the primary beneficiary of the VIE.

We have separately identified certain special purpose entities that were established to allow investments in life science, research and innovation projects by tax credit investors (“TCIs”). We have determined that these special purpose entities are VIEs, we are a holder of variable interests and we are the primary beneficiary of the VIEs, and therefore we consolidate these special purpose entities. Our primary beneficiary determination is based upon several factors, including but not limited to the rights we have in directing the activities which most significantly impact the VIEs’ economic performance as well as certain guarantees which protect the TCIs from losses should a tax credit recapture event occur.

In general, the assets of consolidated VIEs are available only for the settlement of the obligations of the respective entities. Unless otherwise required by the LP or LLC agreement, any mortgage loans of the consolidated VIEs are non-recourse to us. The table below summarizes the total assets and liabilities of our consolidated VIEs as reported on our Consolidated Balance Sheets.


	June 30, 2021				December 31, 2020
	Total Assets		Total Liabilities		Total Assets		Total Liabilities
	(In thousands)
NHP/PMB L.P.	$	681,080	$	241,609	$	649,128	$	238,168
Other identified VIEs	4,261,785		1,822,827		4,095,102		1,653,036
Tax credit VIEs	465,606		108,338		614,490		204,746

Investments in Unconsolidated Entities

We report investments in unconsolidated entities over whose operating and financial policies we have the ability to exercise significant influence under the equity method of accounting. We adjust our investment in unconsolidated entities for additional contributions made, distributions received as well as our share of the investee’s earnings or losses which is included in our Consolidated Statements of Income.

We base the initial carrying value of investments in unconsolidated entities on the fair value of the assets at the time we acquired the joint venture interest. We estimate fair values for our equity method investments based on discounted cash flow models that include all estimated cash inflows and outflows over a specified holding period and, where applicable, any estimated debt premiums or discounts. The capitalization rates, discount rates and credit spreads we use in these models are based upon assumptions that we believe to be within a reasonable range of current market rates for the respective investments.

We generally amortize any difference between our cost basis and the basis reflected at the joint venture level, if any, over the lives of the related assets and liabilities and include that amortization in our share of income or loss from unconsolidated entities. For earnings of equity method investments with pro rata distribution allocations, net income or loss is allocated between the partners in the joint venture based on their respective stated ownership percentages. In other instances, net income or loss may be allocated between the partners in the joint venture based on the hypothetical liquidation at book value method (the “HLBV method”). Under the HLBV method, net income or loss is allocated between the partners based on the difference between each partner’s claim on the net assets of the joint venture at the end and beginning of the period, after taking into account contributions and distributions. Each partner’s share of the net assets of the joint venture is calculated as the amount that the partner would receive if the joint venture were to liquidate all of its assets at net book value and distribute the resulting cash to creditors and partners in accordance with their respective priorities. Under the HLBV method, in any given

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

period, we could record more or less income than the joint venture has generated, than actual cash distributions we receive or than the amount we may receive in the event of an actual liquidation.

Redeemable OP Unitholder and Noncontrolling Interests

We own a majority interest in NHP/PMB L.P. (“NHP/PMB”), a limited partnership formed in 2008 to acquire properties from entities affiliated with Pacific Medical Buildings LLC (“PMB”). Given our wholly owned subsidiary is the general partner and the primary beneficiary of NHP/PMB, we consolidate it as a VIE. As of June 30, 2021, third party investors owned 3.3 million Class A limited partnership units in NHP/PMB (“OP Units”), which represented 31% of the total units then outstanding, and we owned 7.3 million Class B limited partnership units in NHP/PMB, representing the remaining 69%. The OP Units may be redeemed at any time at the election of the holder for cash or, at our option, 0.9051 shares of our common stock per OP Unit, subject to further adjustment in certain circumstances. We are party by assumption to a registration rights agreement with the holders of the OP Units that requires us, subject to the terms and conditions and certain exceptions set forth therein, to file and maintain a registration statement relating to the issuance of shares of our common stock upon redemption of OP Units.

As redemption rights are outside of our control, the redeemable OP Units are classified outside of permanent equity on our Consolidated Balance Sheets. We reflect the redeemable OP Units at the greater of cost or redemption value. As of June 30, 2021 and December 31, 2020, the fair value of the redeemable OP Units was $168.6 million and $146.0 million, respectively. We recognize changes in fair value through capital in excess of par value, net of cash distributions paid and purchases by us of any OP Units. Our diluted earnings per share includes the effect of any potential shares outstanding from redemption of the OP Units.

Certain noncontrolling interests of other consolidated joint ventures were also classified as redeemable at June 30, 2021 and December 31, 2020. Accordingly, we record the carrying amount of these noncontrolling interests at the greater of their initial carrying amount (increased or decreased for the noncontrolling interests’ share of net income or loss and distributions) or the redemption value, which is primarily based on the fair value of the underlying real estate asset. Our joint venture partners have certain redemption rights with respect to their noncontrolling interests in these joint ventures that are outside of our control, and the redeemable noncontrolling interests are classified outside of permanent equity on our Consolidated Balance Sheets. We recognize changes in the carrying value of redeemable noncontrolling interests through capital in excess of par value.

Noncontrolling Interests

Excluding the redeemable noncontrolling interests described above, we present the portion of any equity that we do not own in entities that we control (and thus consolidate) as noncontrolling interests and classify those interests as a component of consolidated equity, separate from total Ventas stockholders’ equity, on our Consolidated Balance Sheets. For consolidated joint ventures with pro rata distribution allocations, net income or loss, and comprehensive income, is allocated between the joint venture partners based on their respective stated ownership percentages. In other cases, net income or loss is allocated between the joint venture partners based on the HLBV method. We account for purchases or sales of equity interests that do not result in a change of control as equity transactions, through capital in excess of par value. We include net income attributable to the noncontrolling interests in net income in our Consolidated Statements of Income and we include the noncontrolling interests share of comprehensive income in our Consolidated Statements of Comprehensive Income.

Accounting for Historic and New Markets Tax Credits

For certain of our life science, research and innovation centers, we are party to contractual arrangements with TCIs that were established to enable the TCIs to receive benefits of historic tax credits (“HTCs”), new markets tax credits (“NMTCs”) or both. As of June 30, 2021, we owned six properties that had syndicated HTCs or NMTCs, or both, to TCIs.

In general, TCIs invest cash into special purpose entities that invest in entities that own the subject property and generate the tax credits. The TCIs receive substantially all of the tax credits and hold only a nominal interest in the economic risk and benefits of the special purpose entities.

HTCs are delivered to the TCIs upon substantial completion of the project. NMTCs are allowed for up to 39% of a qualified investment and are delivered to the TCIs after the investment has been funded and spent on a qualified business. HTCs are subject to 20% recapture per year beginning one year after the completion of the historic rehabilitation of the subject property. NMTCs are subject to 100% recapture until the end of the seventh year following the qualifying investment. We have provided the TCIs with certain guarantees which protect the TCIs from losses should a tax credit recapture event occur.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

The contractual arrangements with the TCIs include a put/call provision whereby we may be obligated or entitled to repurchase the interest of the TCIs in the special purpose entities at the end of the tax credit recapture period. We anticipate that either the TCIs will exercise their put rights or we will exercise our call rights prior to the applicable tax credit recapture periods.

The portion of the TCI’s investment that is attributed to the put is recorded at fair value at inception in accounts payable and other liabilities on our Consolidated Balance Sheets, and is accreted to the expected put price as interest expense in our Consolidated Statements of Income over the recapture period. The remaining balance of the TCI’s investment is initially recorded in accounts payable and other liabilities on our Consolidated Balance Sheets and will be relieved upon delivery of the tax credit to the TCI, as a reduction in the carrying value of the subject property, net of allocated expenses. Direct and incremental costs incurred in structuring the transaction are deferred and will be recognized as an increase in the cost basis of the subject property upon the recognition of the related tax credit as discussed above.

Fair Values of Financial Instruments

Fair value is a market-based measurement, not an entity-specific measurement, and we determine fair value based on the assumptions that we expect market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, GAAP 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 entity’s own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).

Level one inputs utilize unadjusted quoted prices for identical assets or liabilities in active markets that we have the ability to access. Level two inputs are inputs other than quoted prices included in level one that are directly or indirectly observable for the asset or liability. Level two inputs may include quoted prices for similar assets and liabilities in active markets and other inputs for the asset or liability that are observable at commonly quoted intervals, such as interest rates, foreign exchange rates and yield curves. Level three inputs are unobservable inputs for the asset or liability, which typically are based on our own assumptions, because there is little, if any, related market activity. If the determination of the fair value measurement is based on inputs from different levels of the hierarchy, the level within which the entire fair value measurement falls is the lowest level input that is significant to the fair value measurement in its entirety. If the volume and level of market activity for an asset or liability has decreased significantly relative to the normal market activity for such asset or liability (or similar assets or liabilities), then transactions or quoted prices may not accurately reflect fair value. In addition, if there is evidence that a transaction for an asset or liability is not orderly, little, if any, weight is placed on that transaction price as an indicator of fair value. 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 use the following methods and assumptions in estimating the fair value of our financial instruments whose fair value is determined on a recurring basis.

•Cash and cash equivalents - The carrying amount of unrestricted cash and cash equivalents reported on our Consolidated Balance Sheets approximates fair value due to the short maturity of these instruments.

•Escrow deposits and restricted cash - The carrying amount of escrow deposits and restricted cash reported on our Consolidated Balance Sheets approximates fair value due to the short maturity of these instruments.

•Loans receivable - We estimate the fair value of loans receivable using level two and level three inputs, including underlying asset performance and credit quality. We discount future cash flows using current interest rates at which similar loans with the same terms and length to maturity would be made to borrowers with similar credit ratings.

•Available for sale securities - We estimate the fair value of marketable debt securities using level two inputs. We observe quoted prices for similar assets or liabilities in active markets that we have the ability to access. We estimate the fair value of certain government-sponsored pooled loan investments using level three inputs. We consider credit spreads, underlying asset performance and credit quality, and default rates.

•Derivative instruments - With the assistance of a third party, we estimate the fair value of derivative instruments, including interest rate caps, interest rate swaps, and foreign currency forward contracts, using level two inputs.

◦Interest rate caps - We observe forward yield curves and other relevant information.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

◦Interest rate swaps - We observe alternative financing rates derived from market-based financing rates, forward yield curves and discount rates.

◦Foreign currency forward contracts - We estimate the future values of the two currency tranches using forward exchange rates that are based on traded forward points and calculate a present value of the net amount using a discount factor based on observable traded interest rates.

•Stock warrants - We estimate the fair value of stock warrants using level two inputs that are obtained from public sources. Inputs include equity spot price, dividend yield, volatility and risk-free rate.

•Senior notes payable and other debt - We estimate the fair value of senior notes payable and other debt using level two inputs. We discount the future cash flows using current interest rates at which we could obtain similar borrowings. For mortgage debt, we may estimate fair value using level three inputs, similar to those used in determining fair value of loans receivable (above).

•Redeemable OP unitholder interests - We estimate the fair value of our redeemable OP unitholder interests using level one inputs. We base fair value on the closing price of our common stock, as OP Units may be redeemed at the election of the holder for cash or, at our option, shares of our common stock, subject to adjustment in certain circumstances.

Impairment of Long-Lived and Intangible Assets

We periodically evaluate our long-lived assets, primarily consisting of investments in real estate, for impairment indicators. 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. In performing this evaluation, we consider market conditions and our current intentions with respect to holding or disposing of the asset. 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. We recognize an impairment loss at the time we make any such determination.

If impairment indicators arise with respect to intangible assets with finite useful lives, we evaluate impairment by comparing the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset. If estimated future undiscounted net cash flows are less than the carrying amount of the asset, then we estimate the fair value of the asset and compare the estimated fair value to the intangible asset’s carrying value. We recognize any shortfall from carrying value as an impairment loss in the current period.

We evaluate our investments in unconsolidated entities for impairment at least annually, and whenever events or changes in circumstances indicate that the carrying value of our investment may exceed its fair value. If we determine that a decline in the fair value of our investment in an unconsolidated entity is other-than-temporary, and if such reduced fair value is below the carrying value, we record an impairment.

We test goodwill for impairment at least annually, and more frequently if indicators arise. We first assess qualitative factors, such as current macroeconomic conditions, state of the equity and capital markets and our overall financial and operating performance, to determine the likelihood that the fair value of a reporting unit is less than its carrying amount. If we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we proceed with estimating the fair value of the reporting unit. A goodwill impairment, if any, will be recognized in the period it is determined and is measured as the amount by which a reporting unit’s carrying value exceeds its fair value.

Estimates of fair value used in our evaluation of goodwill (if necessary based on our qualitative assessment), investments in real estate, investments in unconsolidated entities and intangible assets are based upon discounted future cash flow projections or other acceptable valuation techniques that are based, in turn, upon all available evidence including level three inputs, such as revenue and expense growth rates, estimates of future cash flows, capitalization rates, discount rates, general economic conditions and trends, or other available market data such as replacement cost or comparable sales. Our ability to accurately predict future operating results and cash flows and to estimate and determine fair values impacts the timing and recognition of impairments. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Revenue Recognition

Triple-Net Leased Properties and Office Operations

Certain of our triple-net leases and most of our MOB and life science, research and innovation centers (collectively, “office operations”) leases provide for periodic and determinable increases in base rent. We recognize base rental revenues under these leases on a straight-line basis over the applicable lease term when collectability of substantially all rents is probable. Recognizing rental income on a straight-line basis generally results in recognized revenues during the first half of a lease term exceeding the cash amounts contractually due from our tenants, creating a straight-line rent receivable that is included in other assets on our Consolidated Balance Sheets. At June 30, 2021 and December 31, 2020, this cumulative excess totaled $173.1 million and $169.7 million, respectively (excluding properties classified as held for sale).

Certain of our leases provide for periodic increases in base rent only if certain revenue parameters or other substantive contingencies are met. We recognize the increased rental revenue under these leases as the related parameters or contingencies are met, rather than on a straight-line basis over the applicable lease term.

We assess the probability of collecting substantially all rents under our leases based on several factors, including, among other things, payment history, the financial strength of the tenant and any guarantors, the historical operations and operating trends of the property, the historical payment pattern of the tenant, the type of property, the value of the underlying collateral, if any, expected future performance of the property and current economic conditions. If our evaluation of these factors indicates it is not probable that we will be able to collect substantially all rents under the lease, we record a charge to rental income. If we change our conclusions regarding the probability of collecting rent payments required by a lease, we may recognize adjustments to rental income in the period we make such change in our conclusions.

Senior Living Operations

Our resident agreements are accounted for as leases and we recognize resident fees and services, other than move-in fees, monthly as services are provided. We recognize move-in fees on a straight-line basis over the average resident stay.

Other

We recognize interest income from loans and investments, including discounts and premiums, using the effective interest method when collectability is reasonably assured. We apply the effective interest method on a loan-by-loan basis and recognize discounts and premiums as yield adjustments over the related loan term. We evaluate collectability of accrued interest receivables separate from the amortized cost basis of our loans. As such, we recognize interest income on an impaired loan to the extent we believe accrued contractual interest payments are collectable. Otherwise interest income is recognized on a cash basis.

We evaluate a current estimate of all expected credit losses over the life of a financial instrument, which may result in recognition of credit losses on loans and other financial instruments before an actual event of default. We will establish reserves for any estimated credit losses with a corresponding charge to allowance on loans receivable and investments in our Consolidated Statements of Income. Subsequent changes in our estimate of credit losses may result in a corresponding increase or decrease to allowance on loans receivable and investments in our Consolidated Statements of Income.

Accounting for Leased Property

We lease real property, primarily land and corporate office space, and equipment, primarily vehicles at our senior housing communities. At lease inception, we establish an operating lease asset and operating lease liability calculated as the present value of future minimum lease payments. As our leases do not provide an implicit rate, we use a discount rate that approximates our incremental borrowing rate available at lease commencement to determine the present value. Our lease expense primarily consists of ground and corporate office leases. Ground lease expense is included in interest expense and corporate office lease expense is included in general, administrative and professional fees in the Company's Consolidated Statements of Income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

NOTE 3—CONCENTRATION OF CREDIT RISK

As of June 30, 2021, Atria, Sunrise, Brookdale Senior Living, Ardent and Kindred managed or operated approximately 21.1%, 10.6%, 8.3%, 5.0% and 1.1%, respectively, of our consolidated real estate investments based on gross book value (excluding properties classified as held for sale as of June 30, 2021). Because Atria and Sunrise manage our properties in exchange for the receipt of a management fee from us, we are not directly exposed to the credit risk of our managers in the same manner or to the same extent as our triple-net tenants.

Based on gross book value, approximately 15.3% and 49.6% of our consolidated real estate investments were senior housing communities included in the triple-net leased properties and senior living operations reportable business segments, respectively (excluding properties classified as held for sale as of June 30, 2021). MOBs, life science, research and innovation centers, IRFs and LTACs, health systems, skilled nursing facilities (“SNFs”) and secured loans receivable and investments collectively comprised the remaining 35.1%. Our consolidated properties were located in 45 states, the District of Columbia, seven Canadian provinces and the United Kingdom as of June 30, 2021, with properties in one state (California) accounting for more than 10% of our total consolidated revenues and net operating income (“ NOI,” which is defined as total revenues, excluding interest and other income, less property-level operating expenses and office building services costs) for the three months then ended.

Triple-Net Leased Properties

The properties we lease to Brookdale Senior Living, Ardent and Kindred account for a significant portion of our triple-net leased properties segment revenues and NOI and the following table reflects the concentration risk related to our triple-net leased properties for the periods presented:


	For the Three Months Ended June 30,
	2021		2020
Revenues(1):
Brookdale Senior Living	4.1	%	4.9	%
Ardent	3.4		3.2
Kindred	3.6		3.5
NOI:
Brookdale Senior Living	8.8	%	10.4	%
Ardent	7.4		6.8
Kindred	7.9		7.4

(1)Total revenues include office building and other services revenue, income from loans and investments and interest and other income.

Each of our leases with Brookdale Senior Living, Ardent and Kindred is a triple-net lease that obligates the tenant to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and to comply with the terms of the mortgage financing documents, if any, affecting the properties. In addition, each of our Brookdale Senior Living, Ardent and Kindred leases has a corporate guaranty.

Senior Living Operations

As of June 30, 2021, Atria and Sunrise, collectively, provided comprehensive property management and accounting services with respect to 258 of our 439 consolidated senior housing communities, for which we pay annual management fees pursuant to long-term management agreements.

We rely on our managers’ personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our senior living operations efficiently and effectively. We also rely on our managers to set appropriate resident fees, provide accurate property-level financial results in a timely manner and otherwise operate our senior housing communities in compliance with the terms of our management agreements and all applicable laws and regulations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

NOTE 4—DISPOSITIONS AND IMPAIRMENTS

2021 Activity

During the six months ended June 30, 2021, we sold five MOBs and one triple-net leased property for aggregate consideration of $115.9 million and recognized a gain on the sale of these assets of $43.8 million.

Assets Held for Sale

The table below summarizes our real estate assets classified as held for sale, including the amounts reported on our Consolidated Balance Sheets, which may include anticipated post-closing settlements of working capital for disposed properties.


	As of June 30, 2021					As of December 31, 2020
	Number of Properties Held for Sale	Assets Held for Sale		Liabilities Related to Assets Held for Sale		Number of Properties Held for Sale	Assets Held for Sale		Liabilities Related to Assets Held for Sale
	(Dollars in thousands)
Triple-Net Leased Properties	3	$	15,232	$	189	1	$	4,960	$	2,690
Office Operations(1)	16	70,300		3,831		—	15		101
Senior Living Operations	1	4,470		548		1	4,633		455
Total	20	$	90,002	$	4,568	2	$	9,608	$	3,246

(1)2020 balances relate to anticipated post-closing settlements of working capital.

Real Estate Impairment

We recognized impairments of $97.1 million and $121.5 million, respectively, for the six months ended June 30, 2021 and 2020, which are primarily recorded in depreciation and amortization in our Consolidated Statements of Income. The impairments recorded during 2021 were primarily the result of a change in our intent to hold the impaired assets. In most cases, we recognize an impairment in the periods in which our change in intent is made.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

NOTE 5—LOANS RECEIVABLE AND INVESTMENTS

As of June 30, 2021 and December 31, 2020, we had $868.4 million and $900.2 million, respectively, of net loans receivable and investments relating to senior housing and healthcare operators or properties. The following is a summary of our loans receivable and investments, net, including amortized cost, fair value and unrealized gains or losses on available for sale investments:


	Amortized Cost		Allowance		Unrealized Gain		Carrying Amount		Fair Value
	(In thousands)
As of June 30, 2021:
Secured/mortgage loans and other, net (1)	$	555,083	$	—	$	—	$	555,083	$	538,417
Government-sponsored pooled loan investments, net (2)	37,548		—		3,540		41,088		41,088
Total investments reported as secured loans receivable and investments, net	592,631		—		3,540		596,171		579,505
Non-mortgage loans receivable, net	63,049		(5,689)		—		57,360		57,638
Marketable debt securities (3)	198,056		—		16,818		214,874		214,874
Total loans receivable and investments, net	$	853,736	$	(5,689)	$	20,358	$	868,405	$	852,017

As of December 31, 2020:
Secured/mortgage loans and other, net	$	555,840	$	—	$	—	$	555,840	$	508,707
Government-sponsored pooled loan investments, net	55,154		(8,846)		3,419		49,727		49,727
Total investments reported as secured loans receivable and investments, net	610,994		(8,846)		3,419		605,567		558,434
Non-mortgage loans receivable, net	74,700		(17,623)		—		57,077		57,009
Marketable debt securities	213,334		—		24,219		237,553		237,553
Total loans receivable and investments, net	$	899,028	$	(26,469)	$	27,638	$	900,197	$	852,996

(1)In July 2021, we received proceeds of $66 million in full repayment of secured notes at par from Holiday Retirement.

(2)Investment in government-sponsored pool loans has a contractual maturity date in 2023.

(3)Investment in marketable debt securities has a contractual maturity date in 2026. These securities were redeemed by the issuer in July 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

2021 Activity

In July 2021, we received $66 million from Holiday Retirement as repayment in full at par of the secured notes outstanding which Holiday Retirement had previously issued to us as part of the April 2020 lease termination transaction.

In June 2021, we received a notice of full redemption for Ardent’s outstanding 9.75% Senior Notes due 2026 at a price equal to 107.313% of the principal amount of the notes, plus accrued and unpaid interest. We received aggregate proceeds of $224 million from the redemption of these marketable debt securities in July 2021. We expect to recognize a gain of $16.6 million during the third quarter of 2021.

In April 2021, we received $19.2 million in full repayment of certain government-sponsored pooled loan investments. In the first quarter of 2021, prior to such repayment, we reversed an $8.8 million allowance we had previously recorded in 2020 on this investment with a corresponding adjustment to allowance on loans receivable and investments in our Consolidated Statements of Income. There was no impact to our second quarter 2021 Consolidated Statements of Income from the loan repayment.

During the six months ended June 30, 2021, we received aggregate proceeds of $16.5 million for the redemption and sale of marketable debt securities, resulting in total gains of $1.0 million. As of December 31, 2020, $1.2 million of unrealized gain was presented within accumulated other comprehensive income related to these securities. These securities had a weighted average interest rate of 8.3% and were due to mature between 2024 and 2026.

In March 2021, $11.9 million of previously reserved non-mortgage loans were forgiven. We derecognized both the amortized cost bases and allowances for these loans during the quarter ended March 31, 2021.

NOTE 6—INVESTMENTS IN UNCONSOLIDATED ENTITIES

We report investments in unconsolidated entities over whose operating and financial policies we have the ability to exercise significant influence under the equity method of accounting. We are not required to consolidate these entities because our joint venture partners have significant participating rights, nor are these entities considered VIEs, as they are controlled by equity holders with sufficient capital. We invest in both real estate entities and operating entities which are described further below.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Investments in Unconsolidated Real Estate Entities

Through our Ventas Investment Management Platform, which consolidates our extensive third-party capital ventures under a single brand and umbrella, we partner with third-party institutional investors to invest with us in healthcare real estate through various joint ventures and other co-investment vehicles where we are the sponsor or general partner. Below is a summary of our investments in unconsolidated real estate entities as of June 30, 2021 and December 31, 2020, respectively:


	Ownership As of (1)		Carrying Amount As of
	June 30, 2021	December 31, 2020	June 30, 2021		December 31, 2020
			(In thousands)
Investment in unconsolidated real estate entities:
Ventas Life Science & Healthcare Real Estate Fund	21.1%	22.9%	$	274,908	$	279,983
Pension Fund Joint Venture	22.9%	22.8%	31,583		34,690
Research & Innovation Development Joint Venture	50.8%	50.3%	182,760		123,445
Ventas Investment Management Platform			489,251		438,118
All other(2)	34.0%-50.0%	34.0%-50.0%	4,988		5,570
Total investments in unconsolidated real estate entities			$	494,239	$	443,688

(1) The entities in which we have an ownership interest may have less than a 100% interest in the underlying real estate. The ownership percentages in the table reflect our interest in the underlying real estate. Joint venture members, including us in some instances, have equity participation rights based on the underlying performance of the investments which could result in non pro rata distributions.
(2) Includes investments in land parcels, parking structures and other de minimis investments in unconsolidated real estate entities.

In March 2021, the Ventas Life Science and Healthcare Real Estate Fund, L.P. (the “Ventas Fund”) acquired two Class-A life science properties in the Baltimore-DC life science cluster for $272 million, which increased assets under management of the Ventas Fund to $2.1 billion.

We provide various services to our unconsolidated real estate entities in exchange for fees and reimbursements. Total management fees earned in connection with these services were $3.0 million and $1.5 million for the three months ended June 30, 2021 and 2020, respectively, and $5.7 million and $2.4 million for the six months ended June 30, 2021 and 2020, respectively. Such amounts are included in office building and other services revenue in our Consolidated Statements of Income.

Investments in Unconsolidated Operating Entities

We own investments in unconsolidated operating entities such as Ardent, Atria and Eclipse Senior Living, Inc. (“ESL”), which are included within other assets on our Consolidated Balance Sheets. Our 34% ownership interest in Atria entitles us to customary minority rights and protections, including the right to appoint two of six members to the Atria Board of Directors. Our 34% ownership interest in ESL entitles us to customary minority rights and protections, including the right to appoint two of six members to the ESL Board of Directors. ESL management owns the 66% controlling interest. Our 9.8% ownership interest in Ardent entitles us to customary minority rights and protections, as well as the right to appoint one of 11 members on the Ardent Board of Directors.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

NOTE 7—INTANGIBLES

The following is a summary of our intangibles:


	As of June 30, 2021			As of December 31, 2020
	Balance		Remaining Weighted Average Amortization Period in Years	Balance		Remaining Weighted Average Amortization Period in Years
	(Dollars in thousands)
Intangible assets:
Above market lease intangibles	$	137,612	6.2	$	140,096	6.4
In-place and other lease intangibles	1,062,962		11.0	1,090,790		10.7
Goodwill	1,051,832		N/A	1,051,650		N/A
Other intangibles	35,915		9.6	35,870		10.0
Accumulated amortization	(945,716)		N/A	(941,462)		N/A
Net intangible assets	$	1,342,605	10.5	$	1,376,944	10.3
Intangible liabilities:
Below market lease intangibles	$	336,502	14.1	$	339,265	14.3
Other lease intangibles	13,498		N/A	13,498		N/A
Accumulated amortization	(217,368)		N/A	(212,655)		N/A
Purchase option intangibles	3,568		N/A	3,568		N/A
Net intangible liabilities	$	136,200	14.1	$	143,676	14.3

N/A—Not Applicable.

Above market lease intangibles and in-place and other lease intangibles are included in acquired lease intangibles within real estate investments on our Consolidated Balance Sheets. Other intangibles (including non-compete agreements, trade names and trademarks) are included in other assets on our Consolidated Balance Sheets. Below market lease intangibles, other lease intangibles and purchase option intangibles are included in accounts payable and other liabilities on our Consolidated Balance Sheets.

NOTE 8—OTHER ASSETS

The following is a summary of our other assets:


	As of June 30, 2021		As of December 31, 2020
	(In thousands)
Straight-line rent receivables	$	173,095	$	169,711
Non-mortgage loans receivable, net	57,360		57,077
Stock warrants	94,328		50,098
Marketable debt securities	214,874		237,553
Other intangibles, net	4,430		4,659
Investment in unconsolidated operating entities	73,065		63,768
Other	238,634		224,363
Total other assets	$	855,786	$	807,229

Stock warrants represent warrants exercisable at any time prior to December 31, 2025, in whole or in part, for 16.3 million shares of Brookdale Senior Living common stock at an exercise price of $3.00 per share. These warrants are measured at fair value with changes in fair value being recognized within other expense in our Consolidated Statements of Income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

NOTE 9—SENIOR NOTES PAYABLE AND OTHER DEBT

The following is a summary of our senior notes payable and other debt:


	As of June 30, 2021		As of December 31, 2020
	(In thousands)
Unsecured revolving credit facility (1)	$	46,324	$	39,395
Commercial paper notes	170,000		—
Secured revolving construction credit facility due 2022	43,908		154,098
Floating Rate Senior Notes, Series F due 2021 (2)	242,053		235,664
3.25% Senior Notes due 2022 (3)	263,687		263,687
3.30% Senior Notes, Series C due 2022 (2)	201,711		196,386
Unsecured term loan due 2023	200,000		200,000
3.125% Senior Notes due 2023 (4)	400,000		400,000
3.10% Senior Notes due 2023	—		400,000
2.55% Senior Notes, Series D due 2023 (2)	221,882		216,025
3.50% Senior Notes due 2024	400,000		400,000
3.75% Senior Notes due 2024	400,000		400,000
4.125% Senior Notes, Series B due 2024 (2)	201,711		196,386
2.80% Senior Notes, Series E due 2024 (2)	484,105		471,328
Unsecured term loan due 2025 (2)	403,421		392,773
3.50% Senior Notes due 2025	600,000		600,000
2.65% Senior Notes due 2025	450,000		450,000
4.125% Senior Notes due 2026	500,000		500,000
3.25% Senior Notes due 2026	450,000		450,000
3.85% Senior Notes due 2027	400,000		400,000
4.00% Senior Notes due 2028	650,000		650,000
4.40% Senior Notes due 2029	750,000		750,000
3.00% Senior Notes due 2030	650,000		650,000
4.75% Senior Notes due 2030	500,000		500,000
6.90% Senior Notes due 2037 (5)	52,400		52,400
6.59% Senior Notes due 2038 (5)	22,823		22,823
5.70% Senior Notes due 2043	300,000		300,000
4.375% Senior Notes due 2045	300,000		300,000
4.875% Senior Notes due 2049	300,000		300,000
Mortgage loans and other	2,246,531		2,092,106
Total	11,850,556		11,983,071
Deferred financing costs, net	(71,259)		(68,343)
Unamortized fair value adjustment	10,985		12,618
Unamortized discounts	(28,737)		(31,934)
Senior notes payable and other debt	$	11,761,545	$	11,895,412

(1)As of June 30, 2021 and December 31, 2020, respectively, $19.8 million and $12.2 million of aggregate borrowings were denominated in Canadian dollars. Aggregate borrowings of $26.6 million and $27.2 million were denominated in British pounds as of June 30, 2021 and December 31, 2020, respectively.

(2)Canadian Dollar debt obligations shown in US Dollars.

(3)In July 2021, Ventas Realty and Ventas Capital Corporation issued a make whole notice of redemption for the entirety of the $263.7 million aggregate principal amount of 3.25% senior notes due 2022.

(4)In August 2021, Ventas Realty issued a make whole notice of redemption for the entirety of the $400.0 million aggregate principal amount of 3.125% senior notes due 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

(5)Our 6.90% senior notes due 2037 are subject to repurchase at the option of the holders, at par, on October 1, 2027, and our 6.59% senior notes due 2038 are subject to repurchase at the option of the holders, at par, on July 7 in each of 2023 and 2028.

Credit Facilities, Commercial Paper and Unsecured Term Loans

In January 2021, we entered into an amended and restated unsecured credit facility (the “New Credit Facility”) comprised of a $2.75 billion unsecured revolving credit facility initially priced at LIBOR plus 0.825% based on the Company’s debt rating. The New Credit Facility replaced our previous $3.0 billion unsecured revolving credit facility priced at 0.875%. The New Credit Facility matures in January 2025, but may be extended at our option, subject to the satisfaction of certain conditions, for two additional periods of six months each. The New Credit Facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $3.75 billion, subject to the satisfaction of certain conditions.

As of June 30, 2021, we had $2.7 billion of undrawn capacity on our New Credit Facility with $46.3 million borrowings outstanding and an additional $24.9 million restricted to support outstanding letters of credit. We limit our use of the New Credit Facility, to the extent necessary, to support our commercial paper program when commercial paper notes are outstanding. As of June 30, 2021, we had $170.0 million of commercial paper outstanding.

Our wholly owned subsidiary, Ventas Realty, Limited Partnership (“Ventas Realty”), may issue from time to time unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $1.0 billion. The notes are sold under customary terms in the U.S. commercial paper note market and are ranked pari passu with all of Ventas Realty’s other unsecured senior indebtedness. The notes are fully and unconditionally guaranteed by Ventas, Inc. As of June 30, 2021, we had $170.0 million in borrowings outstanding under our commercial paper program.

As of June 30, 2021, we had a $200.0 million unsecured term loan priced at LIBOR plus 0.90% that matures in 2023. The term loan also includes an accordion feature that effectively permits us to increase our aggregate borrowings thereunder to up to $800.0 million.

As of June 30, 2021, we had a C$500 million unsecured term loan facility priced at Canadian Dollar Offered Rate (“CDOR”) plus 0.90% that matures in 2025.

As of June 30, 2021, we had a $400.0 million secured revolving construction credit facility with $43.9 million of borrowings outstanding. The secured revolving construction credit facility matures in 2022 and is primarily used to finance the development of life science, research and innovation centers and other construction projects.

Senior Notes

In August 2021, Ventas Realty issued a make whole notice of redemption for the entirety of the $400.0 million aggregate principal amount of 3.125% senior notes due 2023. The redemption is expected to settle in September 2021, principally using cash on hand. We expect to recognize a loss on extinguishment of debt of approximately $21 million during the third quarter of 2021.

In July 2021, Ventas Realty and Ventas Capital Corporation issued a make whole notice of redemption for the entirety of the $263.7 million aggregate principal amount of 3.25% senior notes due 2022. The redemption is expected to settle in August 2021, principally using cash on hand. We expect to recognize a loss on extinguishment of debt of approximately $8 million during the third quarter of 2021.

In February 2021, Ventas Realty issued a make whole notice of redemption for the entirety of the $400.0 million aggregate principal amount of 3.10% senior notes due January 2023, resulting in a loss on extinguishment of debt of $27.3 million for the three months ended March 31, 2021. The redemption settled principally using cash on hand.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

As of June 30, 2021, our indebtedness had the following maturities:


	Principal Amount Due at Maturity		Unsecured Revolving Credit Facility and Commercial Paper Notes (1)		Scheduled Periodic Amortization		Total Maturities
	(In thousands)
2021	$	422,380	$	170,000	$	24,626	$	617,006
2022	978,030		—		41,953		1,019,983
2023	1,219,370		—		27,971		1,247,341
2024	1,644,318		—		21,724		1,666,042
2025	1,632,255		46,324		18,038		1,696,617
Thereafter	5,486,317		—		117,250		5,603,567
Total maturities	$	11,382,670	$	216,324	$	251,562	$	11,850,556

(1)At June 30, 2021, we had unrestricted cash and cash equivalents of $233.8 million, which exceeds the borrowings outstanding under our unsecured revolving credit facility and commercial paper program.

NOTE 10—FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying amounts and fair values of our financial instruments were as follows:


	As of June 30, 2021				As of December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In thousands)
Assets:
Cash and cash equivalents	$	233,837	$	233,837	$	413,327	$	413,327
Escrow deposits and restricted cash	40,931		40,931		38,313		38,313
Stock warrants	94,328		94,328		50,098		50,098
Secured mortgage loans and other, net	555,083		538,417		555,840		508,707
Non-mortgage loans receivable, net	57,360		57,638		57,077		57,009
Marketable debt securities	214,874		214,874		237,553		237,553
Government-sponsored pooled loan investments, net	41,088		41,088		49,727		49,727
Derivative instruments	176		176		2		2
Liabilities:
Senior notes payable and other debt, gross	11,850,556		12,746,646		11,983,071		13,075,337
Derivative instruments	20,059		20,059		28,338		28,338
Redeemable OP Units	168,639		168,639		145,983		145,983

For a discussion of the assumptions considered, refer to “Note 2 – Accounting Policies.” 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

NOTE 11—LITIGATION

From time to time, we are party to various lawsuits, investigations, claims and other legal and regulatory proceedings arising in connection with our business. These legal and regulatory matters may include, among other things, professional liability and general liability claims, commercial liability claims, unfair business practice claims and employment claims, as well as regulatory proceedings, including proceedings related to our senior living operations, where we are typically the holder of the applicable healthcare license. In certain circumstances, regardless of whether we are a named party in a lawsuit, investigation, claim or other legal or regulatory proceeding, we may be contractually obligated to indemnify, defend and hold harmless our tenants, operators, managers or other third parties against, or may otherwise be responsible for, such actions, proceedings or claims. In other circumstances, certain of our tenants, operators, managers or other third parties may be obligated to indemnify, defend and hold us harmless in whole or in part with respect to certain actions, legal or regulatory proceedings. We cannot assure you that these third parties will be able to satisfy their defense and indemnification obligations to us. Legal and regulatory matters to which we are subject or for which we are otherwise responsible may not be fully insured and some may allege large damage amounts.

It is the opinion of management, that the disposition of any such lawsuits, investigations, claims and other legal and regulatory proceedings that are currently pending will not, individually or in the aggregate, have a material adverse effect on us. However, regardless of the merits of a particular legal or regulatory matter, we may be forced to expend significant financial resources to defend and resolve these matters. We are unable to predict the ultimate outcome of these lawsuits, investigations, claims and other legal and regulatory proceedings, and if management’s assessment of our liability with respect thereto is incorrect, such legal or regulatory matters could have a material adverse effect on us.

NOTE 12—INCOME TAXES

We have elected to be taxed as a REIT under the applicable provisions of the Internal Revenue Code of 1986, as amended, for every year beginning with the year ended December 31, 1999. We have also elected for certain of our subsidiaries to be treated as taxable REIT subsidiaries (“TRS” or “TRS entities”), which are subject to federal, state and foreign income taxes. All entities other than the TRS entities are collectively referred to as the “REIT” within this note. Certain REIT entities are subject to foreign income tax.

Although the TRS entities and certain other foreign entities have paid minimal federal, state and foreign income taxes for the six months ended June 30, 2021, their income tax liabilities may increase in future periods as we exhaust net operating loss (“NOL”) carryforwards and as our senior living and other operations grow. Such increases could be significant.

Our consolidated provision for income taxes for the three months ended June 30, 2021 and 2020 was an expense of $3.6 million and of $56.4 million, respectively. Our consolidated provision for income taxes for the six months ended June 30, 2021 and 2020 was an expense of $5.8 million and a benefit of $92.7 million, respectively. The income tax expense for the three and six months ended June 30, 2021 was primarily due to a $2.8 million net deferred tax expense related to an internal restructuring of certain US taxable REIT subsidiaries, and a $3.4 million deferred tax expense related to the revaluation of certain deferred tax liabilities as a result of enacted tax rate changes in the UK.

Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. Deferred tax liabilities with respect to our TRS entities totaled $68.1 million and $62.6 million as of June 30, 2021 and December 31, 2020, respectively, and related primarily to differences between the financial reporting and tax bases of fixed and intangible assets, net of loss carryforwards. Deferred tax assets with respect to our TRS entities totaled $11.6 million and $10.0 million as of June 30, 2021 and December 31, 2020, respectively, and related primarily to loss carryforwards.

Generally, we are subject to audit under the statute of limitations by the Internal Revenue Service for the year ended December 31, 2017 and subsequent years and are subject to audit by state taxing authorities for the year ended December 31, 2016 and subsequent years. We are subject to audit generally under the statutes of limitation by the Canada Revenue Agency and provincial authorities with respect to the Canadian entities for the year ended December 31, 2016 and subsequent years. We are subject to audit in the United Kingdom generally for periods ended in and subsequent to 2019.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

NOTE 13—STOCKHOLDERS' EQUITY

Capital Stock

From time to time, we may sell our common stock under an “at-the-market” equity offering program (“ATM program”). As of June 30, 2021, we had $740.7 million remaining under our existing ATM program. During the six months ended June 30, 2021, we sold 0.3 million shares of our common stock under our ATM program for gross proceeds of $56.73 per share.

In July 2021, we sold 5.1 million shares of our common stock under our ATM program for gross proceeds of $58.60 per share. As of July 31, 2021, we have $440.6 million remaining under our existing ATM program.

Accumulated Other Comprehensive Loss

The following is a summary of our accumulated other comprehensive loss:


	As of June 30, 2021		As of December 31, 2020
	(In thousands)
Foreign currency translation	$	(56,180)	$	(51,947)
Available for sale securities	18,432		25,712
Derivative instruments	(20,542)		(28,119)
Total accumulated other comprehensive loss	$	(58,290)	$	(54,354)

NOTE 14—EARNINGS PER SHARE

The following table shows the amounts used in computing our basic and diluted earnings per share:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
	(In thousands, except per share amounts)
Numerator for basic and diluted earnings per share:
Income (loss) from continuing operations	$	88,288	$	(159,235)	$	32,890	$	315,495
Net income (loss)	88,288		(159,235)		32,890		315,495
Net income (loss) attributable to noncontrolling interests	1,897		(2,065)		3,708		(452)
Net income (loss) attributable to common stockholders	$	86,391	$	(157,170)	$	29,182	$	315,947
Denominator:
Denominator for basic earnings per share—weighted average shares	375,067		372,982		374,869		372,905
Effect of dilutive securities:
Stock options	58		—		34		—
Restricted stock awards	328		87		304		140
OP unitholder interests	2,954		2,955		2,954		2,975
Denominator for diluted earnings per share—adjusted weighted average shares	378,408		376,024		378,161		376,020
Basic earnings per share:
Income (loss) from continuing operations	$	0.24	$	(0.43)	$	0.09	$	0.85
Net income (loss) attributable to common stockholders	0.23		(0.42)		0.08		0.85
Diluted earnings per share:(1)
Income (loss) from continuing operations	$	0.23	$	(0.43)	$	0.09	$	0.84
Net income (loss) attributable to common stockholders	0.23		(0.42)		0.08		0.84

(1) Potential common shares are not included in the computation of diluted earnings per share when a loss from continuing operations exists as the effect would be an antidilutive per share amount.

NOTE 15—SEGMENT INFORMATION

As of June 30, 2021, we operated through three reportable business segments: triple-net leased properties, senior living operations and office operations. In our triple-net leased properties segment, we invest in and own senior housing and healthcare properties throughout the United States and the United Kingdom and lease those properties to healthcare operating companies under “triple-net” or “absolute-net” leases that obligate the tenants to pay all property-related expenses. In our senior living operations segment, we invest in senior housing communities throughout the United States and Canada and engage independent operators, such as Atria and Sunrise, to manage those communities. In our office operations segment, we primarily acquire, own, develop, lease and manage MOBs and life science, research and innovation centers throughout the United States. Information provided for “all other” includes income from loans and investments and other miscellaneous income and various corporate-level expenses not directly attributable to any of our three reportable business segments. Assets included in “all other” consist primarily of corporate assets, including cash, restricted cash, loans receivable and investments, and miscellaneous accounts receivable.

Our chief operating decision makers evaluate performance of the combined properties in each reportable business segment and determine how to allocate resources to those segments, in significant part, based on segment NOI and related measures. We define segment NOI as total revenues, less interest and other income, property-level operating expenses and office building services costs. We consider segment NOI useful because it allows investors, analysts and our management to measure unlevered property-level operating results and to compare our operating results to the operating results of other real estate companies between periods on a consistent basis. In order to facilitate a clear understanding of our historical consolidated operating results, segment NOI should be examined in conjunction with net income attributable to common stockholders as presented in our Consolidated Financial Statements and other financial data included elsewhere in this Quarterly Report on Form 10-Q.

Interest expense, depreciation and amortization, general, administrative and professional fees, income tax expense and other non-property specific revenues and expenses are not allocated to individual reportable business segments for purposes of assessing segment performance. There are no intersegment sales or transfers.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Summary information by reportable business segment is as follows:



	For the Three Months Ended June 30, 2021
	Triple-Net Leased Properties		Senior Living Operations		Office Operations		All Other		Total
	(In thousands)
Revenues:
Rental income	$	159,223	$	—	$	200,388	$	—	$	359,611
Resident fees and services	—		535,952		—		—		535,952
Office building and other services revenue	—		—		2,540		2,841		5,381
Income from loans and investments	—		—		—		17,665		17,665
Interest and other income	—		—		—		585		585
Total revenues	$	159,223	$	535,952	$	202,928	$	21,091	$	919,194

Total revenues	$	159,223	$	535,952	$	202,928	$	21,091	$	919,194
Less:
Interest and other income	—		—		—		585		585
Property-level operating expenses	4,432		424,813		64,950		—		494,195
Office building services costs	—		—		658		—		658
Segment NOI	$	154,791	$	111,139	$	137,320	$	20,506	423,756
Interest and other income									585
Interest expense									(110,051)
Depreciation and amortization									(250,700)
General, administrative and professional fees									(30,588)
Gain on extinguishment of debt, net									74
Merger-related expenses and deal costs									(721)
Allowance on loans receivable and investments									59
Other									13,490
Income from unconsolidated entities									4,767
Gain on real estate dispositions									41,258
Income tax expense									(3,641)
Income from continuing operations									88,288
Net income									88,288
Net income attributable to noncontrolling interests									1,897
Net income attributable to common stockholders									$	86,391

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)


	For the Three Months Ended June 30, 2020
	Triple-Net Leased Properties		Senior Living Operations		Office Operations		All Other		Total
	(In thousands)
Revenues:
Rental income	$	176,240	$	—	$	192,925	$	—	$	369,165
Resident fees and services	—		549,329		—		—		549,329
Office building and other services revenue	—		—		2,257		1,416		3,673
Income from loans and investments	—		—		—		19,491		19,491
Interest and other income	—		—		—		1,540		1,540
Total revenues	$	176,240	$	549,329	$	195,182	$	22,447	$	943,198

Total revenues	$	176,240	$	549,329	$	195,182	$	22,447	$	943,198
Less:
Interest and other income	—		—		—		1,540		1,540
Property-level operating expenses	5,275		432,578		60,752		—		498,605
Office building services costs	—		—		543		—		543
Segment NOI	$	170,965	$	116,751	$	133,887	$	20,907	442,510
Interest and other income									1,540
Interest expense									(123,132)
Depreciation and amortization									(349,594)
General, administrative and professional fees									(28,080)

Merger-related expenses and deal costs									(6,586)
Allowance on loans receivable and investments									(29,655)
Other									(5,286)
Loss from unconsolidated entities									(5,850)
Gain on real estate dispositions									1,254
Income tax expense									(56,356)
Loss from continuing operations									(159,235)
Net loss									(159,235)
Net loss attributable to noncontrolling interests									(2,065)
Net loss attributable to common stockholders									$	(157,170)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)


	For the Six Months Ended June 30, 2021
	Triple-Net Leased Properties		Senior Living Operations		Office Operations		All Other		Total
	(In thousands)
Revenues:
Rental income	$	319,108	$	—	$	397,843	$	—	$	716,951
Resident fees and services	—		1,064,602		—		—		1,064,602
Office building and other services revenue	—		—		4,884		5,447		10,331
Income from loans and investments	—		—		—		36,675		36,675
Interest and other income	—		—		—		926		926
Total revenues	$	319,108	$	1,064,602	$	402,727	$	43,048	$	1,829,485

Total revenues	$	319,108	$	1,064,602	$	402,727	$	43,048	$	1,829,485
Less:
Interest and other income	—		—		—		926		926
Property-level operating expenses	9,257		842,642		128,896		—		980,795
Office building services costs	—		—		1,276		—		1,276
Segment NOI	$	309,851	$	221,960	$	272,555	$	42,122	846,488
Interest and other income									926
Interest expense									(220,818)
Depreciation and amortization									(564,848)
General, administrative and professional fees									(70,897)
Loss on extinguishment of debt, net									(27,016)
Merger-related expenses and deal costs									(5,338)
Allowance on loans receivable and investments									8,961
Other									22,918
Income from unconsolidated entities									4,517
Gain on real estate dispositions									43,791
Income tax expense									(5,794)
Income from continuing operations									32,890
Net income									32,890
Net income attributable to noncontrolling interests									3,708
Income from continuing operations									$	29,182

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)


	For the Six Months Ended June 30, 2020
	Triple-Net Leased Properties		Senior Living Operations		Office Operations		All Other		Total
	(In thousands)
Revenues:
Rental income	$	371,102	$	—	$	401,320	$	—	$	772,422
Resident fees and services	—		1,126,099		—		—		1,126,099
Office building and other services revenue	—		—		4,432		2,369		6,801
Income from loans and investments	—		—		—		43,537		43,537
Interest and other income	—		—		—		6,393		6,393
Total revenues	$	371,102	$	1,126,099	$	405,752	$	52,299	$	1,955,252

Total revenues	$	371,102	$	1,126,099	$	405,752	$	52,299	$	1,955,252
Less:
Interest and other income	—		—		—		6,393		6,393
Property-level operating expenses	11,606		842,709		125,258		—		979,573
Office building services costs	—		—		1,270		—		1,270
Segment NOI	$	359,496	$	283,390	$	279,224	$	45,906	968,016
Interest and other income									6,393
Interest expense									(239,828)
Depreciation and amortization									(598,431)
General, administrative and professional fees									(68,540)

Merger-related expenses and deal costs									(14,804)
Allowance on loans receivable and investments									(29,655)
Other									(11,069)
Loss from unconsolidated entities									(16,726)
Gain on real estate dispositions									227,479
Income tax benefit									92,660
Income from continuing operations									315,495
Net income									315,495
Net loss attributable to noncontrolling interests									(452)
Net income attributable to common stockholders									$	315,947

Capital expenditures, including investments in real estate property and development project expenditures, by reportable business segment are as follows:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
	(In thousands)
Capital expenditures:
Triple-net leased properties	$	8,921	$	13,483	$	17,139	$	21,168
Senior living operating properties	51,156		30,932		99,873		82,816
Office properties	56,667		66,415		88,213		207,402
Total capital expenditures	$	116,744	$	110,830	$	205,225	$	311,386

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Our portfolio of properties and mortgage loan and other investments are located in the United States, Canada and the United Kingdom. Revenues are attributed to an individual country based on the location of each property. Geographic information regarding our operations is as follows:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
	(In thousands)
Revenues:
United States	$	803,242	$	843,324	$	1,601,010	$	1,751,518
Canada	108,342		93,190		213,375		190,160
United Kingdom	7,610		6,684		15,100		13,574
Total revenues	$	919,194	$	943,198	$	1,829,485	$	1,955,252


	As of June 30, 2021		As of December 31, 2020
	(In thousands)
Net real estate property:
United States	$	16,800,959	$	17,303,816
Canada	3,070,191		2,983,924
United Kingdom	258,880		262,295
Total net real estate property	$	20,130,030	$	20,550,035

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise indicated or except where the context otherwise requires, the terms “we,” “us” and “our” and other similar terms in Item 2 of this Quarterly Report on Form 10-Q refer to Ventas, Inc. and its consolidated subsidiaries.

Cautionary Statements

Forward-Looking Statements

This Quarterly Report on Form 10-Q 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”). These forward-looking statements include, among others, statements of expectations, beliefs, future plans and strategies, anticipated results from operations and developments and other matters that are not historical facts. Forward-looking statements include, among other things, statements regarding our and our officers’ intent, belief or expectation as identified by the use of words such as “may,” “will,” “project,” “expect,” “believe,” “intend,” “anticipate,” “seek,” “target,” “forecast,” “plan,” “potential,” “estimate,” “could,” “would,” “should” and other comparable and derivative terms or the negatives thereof. The forward-looking statements are based on management’s beliefs as well as on a number of assumptions concerning future events. You should not put undue reliance on these forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors that could cause actual events or results to differ materially from those expressed or implied by the forward-looking statements. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made. You are urged to carefully review the disclosures we make concerning risks and uncertainties that may affect our business and future financial performance, including those made below and in “Item 1A, “Risk Factors”, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report”).

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

Many of these factors are beyond our control and the control of our management.

Note Regarding Third-Party Information

This Quarterly Report includes information that has been derived from SEC filings made by our publicly listed tenants or other publicly available information or was provided to us by our tenants and managers. We believe that such information is accurate and that the sources from which it has been obtained are reliable; however, we cannot guarantee the accuracy of such information and have not independently verified the assumptions on which such information is based.

Company Overview

Ventas, Inc., an S&P 500 company, is a real estate investment trust operating at the intersection of healthcare and real estate. We hold a highly diversified portfolio of senior housing, life science, research and innovation, and healthcare properties located throughout the United States, Canada and the United Kingdom. As of June 30, 2021, we owned or had investments in approximately 1,200 properties (including properties classified as held for sale), consisting of senior housing communities, medical office buildings (“MOBs”), life science, research and innovation centers, inpatient rehabilitation facilities (“IRFs”) and long-term acute care facilities (“LTACs”), and health systems, which we generally refer to as “healthcare real estate.” Our company was originally founded in 1983 and is headquartered in Chicago, Illinois with an additional corporate office in Louisville, Kentucky.

We primarily invest in a diversified portfolio of healthcare real estate assets through wholly owned subsidiaries and other co-investment entities. We operate through three reportable business segments: triple-net leased properties, senior living operations, which we also refer to as SHOP, and office operations. See our Consolidated Financial Statements and the related notes, including “Note 2 – Accounting Policies” and “Note 15 – Segment Information,” included in Item 1 of this Quarterly Report on Form 10-Q. Our senior housing properties are either subject to triple-net leases, in which case they are included in our triple-net leased properties reportable business segment, or operated by independent third-party managers, in which case they are included in our senior living operations reportable business segment.

As of June 30, 2021, pursuant to long-term management agreements, we engaged independent operators, such as Atria Senior Living, Inc. (“Atria”) and Sunrise Senior Living, LLC (together with its subsidiaries, “Sunrise”), to manage 449 senior housing communities in our senior living operations segment for us.

Through our Lillibridge Healthcare Services, Inc. (“Lillibridge”) subsidiary and our ownership interest in PMB Real Estate Services LLC (“PMBRES”), we also provide MOB management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. In addition, from time to time, we make secured and non-mortgage loans and other investments relating to senior housing and healthcare operators or properties.

We aim to enhance shareholder value by delivering consistent, superior total returns through a strategy of (1) generating reliable and growing cash flows, (2) maintaining a balanced, diversified portfolio of high-quality assets and (3) preserving our financial strength, flexibility and liquidity.

Our ability to access capital in a timely and cost-effective manner is critical to the success of our business strategy because it affects our ability to satisfy existing obligations, including the repayment of maturing indebtedness, and to make future investments. Factors such as general market conditions, interest rates, credit ratings on our securities, expectations of our potential future earnings and cash distributions, and the trading price of our common stock impact our access to and cost of external capital. For that reason, we generally attempt to match the long-term duration of our investments in real property with long-term financing through the issuance of shares of our common stock or the incurrence of long-term fixed rate debt.

During fiscal 2020 and continuing into fiscal 2021, our business has been and continues to be impacted by both the COVID-19 pandemic itself, including actions taken to prevent the spread of the virus and its variants, and the consequences and effects of the pandemic on our business, including our senior housing business, which are ongoing. The trajectory and future impact of the COVID-19 pandemic remain highly uncertain, although emerging positive SHOP trends in the United States, if sustained, would improve performance over time. The extent of the pandemic’s continuing and ultimate effect on our operational and financial performance will depend on a variety of factors, including the speed at which vaccines and other clinical treatments are successfully developed and deployed; the rate of acceptance of available vaccines, particularly among the residents and staff in our senior housing communities; the impact of new variants of the virus and the effectiveness of vaccines and other clinical treatments against those variants; ongoing clinical experience, which may differ considerably across regions and fluctuate over time; and on other future developments, including the ultimate duration, spread and intensity of the outbreak, the availability of ongoing government financial support to our business, tenants and operators and the slope and pace of recovery of our senior housing business and the U.S. economy more generally. Due to these uncertainties, we are not able at this time to estimate the continuing impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows.

2021 Highlights

Investments and Dispositions

•In July 2021, we received $66 million from Holiday Retirement as repayment in full at par of the secured notes outstanding which Holiday Retirement had previously issued to us as part of the April 2020 lease termination transaction.

•In June 2021, we received a notice of full redemption for Ardent’s outstanding 9.75% Senior Notes due 2026 at a price equal to 107.313% of the principal amount of the notes, plus accrued and unpaid interest. We received aggregate proceeds of $224 million from the redemption of these marketable debt securities in July 2021.

•In April 2021, we received $19.2 million in full repayment of certain government-sponsored pooled loan investments. In the first quarter of 2021, prior to such repayment, we reversed an $8.8 million allowance we had previously recorded in 2020 on this investment. There was no impact to our second quarter 2021 Consolidated Statements of Income from the loan repayment.

•During the six months ended June 30, 2021, we received aggregate proceeds of $16.5 million for the redemption or sale of marketable debt securities, resulting in total gains of $1.0 million. These securities had a weighted average interest rate of 8.3% and were due to mature between 2024 and 2026.

•During the six months ended June 30, 2021, we sold six properties for aggregate consideration of $115.9 million and we recognized gains on the sale of these assets of $43.8 million.

Liquidity and Capital

•In August 2021, Ventas Realty Limited Partnership (“Ventas Realty”) issued a make whole notice of redemption for the entirety of the $400.0 million aggregate principal amount of 3.125% senior notes due 2023. The redemption is expected to settle in September 2021, principally using cash on hand.

•In July 2021, Ventas Realty and Ventas Capital Corporation issued a make whole notice of redemption for the entirety of the $263.7 million aggregate principal amount of 3.25% senior notes due 2022. The redemption is expected to settle in August 2021, principally using cash on hand.

•In February 2021, Ventas Realty issued a make whole notice of redemption for the entirety of the $400.0 million aggregate principal amount of 3.10% senior notes due January 2023, resulting in a loss on extinguishment of debt of $27.3 million for the three months ended March 31, 2021. The redemption settled in March, principally using cash on hand.

•In January 2021, we entered into an unsecured credit facility comprised of a $2.75 billion unsecured revolving credit facility priced at LIBOR plus 0.825%, which replaced our previous $3.0 billion unsecured revolving credit facility priced at 0.875%. The new unsecured revolving credit facility matures in January 2025, but may be extended at our option, subject to the satisfaction of certain conditions, for an additional year. The unsecured revolving credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $3.75 billion, subject to the satisfaction of certain conditions.

•For the six months ended June 30, 2021, we sold an aggregate of 0.3 million shares of common stock under our “at-the-market” equity offering program (“ATM program”) for gross proceeds of $56.73 per share. In July 2021, we sold 5.1 million shares of common stock under our ATM program for gross proceeds of $58.60 per share.

Other Items

•On June 28, 2021, we entered into an Agreement and Plan of Merger (as amended or otherwise modified from time to time, the “Merger Agreement”) with Cadence Merger Sub LLC, our subsidiary (“Merger Sub”), and New Senior Investment Group Inc. (“New Senior Investment Group”), pursuant to which, subject to the satisfaction or waiver of certain conditions, Merger Sub will merge with and into New Senior Investment Group, with New Senior Investment Group surviving the merger as our wholly owned subsidiary (the “New Senior Investment Group Acquisition”). Under the Merger Agreement, the consideration to be paid by us in the New Senior Investment Group Acquisition will consist of 0.1561 newly issued shares of common stock, par value $0.25 per share, of Ventas, Inc. for each share of common stock, par value $0.01 per share, of New Senior Investment Group issued and outstanding immediately prior to the effective time of the New Senior Investment Group Acquisition. New Senior Investment Group has a diversified portfolio of 103 private pay senior living communities, including 102 independent living communities. The New Senior Investment Group Acquisition is expected to close during the second half of 2021, subject to customary closing conditions, including adoption of the Merger Agreement by the common stockholders of New Senior Investment Group. We cannot assure you that the New Senior Investment Group acquisition will be completed on the terms or timeline anticipated or at all.

•In March 2021, the Ventas Life Science and Healthcare Real Estate Fund, L.P. (the “Ventas Fund”) acquired two Class-A life science properties in the Baltimore-DC life science cluster for $272 million, which increased the Ventas Fund’s assets under management to $2.1 billion.

•In the first quarter of 2021, we received $13.6 million in grants in connection with our Phase 3 applications to the Provider Relief Fund administered by the U.S. Department of Health & Human Services (“HHS”) on behalf of the assisted living communities in our senior living operations segment to partially mitigate losses attributable to COVID-19.

•During the six months ended June 30, 2021, we recognized $8.3 million of expenses relating to winter storms.

Concentration Risk

We use concentration ratios to identify, understand and evaluate the potential impact of economic downturns and other adverse events that may affect our asset types, geographic locations, business models, and tenants, operators and managers. We evaluate concentration risk in terms of investment mix and operations mix. Investment mix measures the percentage of our investments that is concentrated in a specific asset type or that is operated or managed by a particular tenant, operator or manager. Operations mix measures the percentage of our operating results that is attributed to a particular tenant, operator or manager, geographic location or business model. The following tables reflect our concentration risk as of the dates and for the periods presented:


	As of June 30, 2021		As of December 31, 2020
Investment mix by asset type(1):
Senior housing communities	64.9	%	63.5	%
MOBs	18.2		19.7
Life science, research and innovation centers	7.1		7.1
Health systems	5.3		5.2
IRFs and LTACs	1.7		1.7
Skilled nursing facilities (“SNFs”)	0.7		0.7
Secured loans receivable and investments, net	2.1		2.1
Investment mix by tenant, operator and manager(1):
Atria	21.1	%	20.8	%
Sunrise	10.6		10.4
Brookdale Senior Living	8.3		8.2
Ardent	5.0		4.9
Kindred	1.1		1.1
All other	53.9		54.6

(1)Ratios are based on the gross book value of consolidated real estate investments (excluding properties classified as held for sale) as of each reporting date.


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
Operations mix by tenant and operator and business model:
Revenues(1):
Senior living operations	58.5	%	58.4	%	58.4	%	57.7	%
Brookdale Senior Living(2)	4.1		4.9		4.1		4.7
Ardent	3.4		3.2		3.4		3.1
Kindred	3.6		3.5		3.6		3.3
All others	30.4		30.0		30.5		31.2
Adjusted EBITDA:
Senior living operations	27.2	%	27.5	%	27.5	%	30.5	%
Brookdale Senior Living(2)	9.1		10.8		9.1		10.0
Ardent	7.7		7.1		7.8		6.6
Kindred	8.2		7.7		8.2		7.1
All others	47.8		46.9		47.4		45.8
Net operating income (“NOI”):
Senior living operations	26.6	%	26.7	%	26.6	%	29.4	%
Brookdale Senior Living(2)	8.8		10.4		8.8		9.5
Ardent	7.4		6.8		7.4		6.2
Kindred	7.9		7.4		7.9		6.7
All others	49.3		48.7		49.3		48.2
Operations mix by geographic location(3):
California	15.2	%	16.2	%	15.3	%	15.7	%
New York	7.7		8.1		7.7		8.3
Texas	6.0		6.7		6.0		6.2
Pennsylvania	4.6		4.7		4.6		4.7
Illinois	3.9		4.2		3.9		4.1
All others	62.5		60.1		62.4		61.0

(1)Total revenues include office building and other services revenue, revenue from loans and investments and interest and other income (including amounts related to assets classified as held for sale).

(2)Results exclude eight senior housing communities which are included in the senior living operations reportable business segment.

(3)Ratios are based on total revenues (including amounts related to assets classified as held for sale) for each period presented.

See “Non-GAAP Financial Measures” included elsewhere in this Quarterly Report on Form 10-Q for additional disclosure and reconciliations of net income attributable to common stockholders, as computed in accordance with GAAP, to Adjusted EBITDA and NOI, respectively.

Triple-Net Lease Performance and Expirations

Although our lease expirations are staggered, the non-renewal of some or all of our triple-net leases that expire in any given year could have a material adverse effect on us. During the six months ended June 30, 2021, we had no triple-net lease renewals or expirations without renewal that, in the aggregate, had a material impact on our financial condition or results of operations for that period.

Critical Accounting Policies and Estimates

Our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the SEC instructions to Form 10-Q and Article 10 of Regulation S-X. GAAP requires us to make estimates and assumptions regarding future events 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 revenues and expenses during the reporting periods. We base these estimates on our experience and assumptions we believe to be reasonable under the circumstances. However, if our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, we may have applied a different accounting treatment, resulting in a different presentation of our financial statements. We periodically reevaluate our estimates and assumptions, and in the event they prove to be different from actual results, we make adjustments in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain.

Our 2020 Annual Report contains additional information regarding the critical accounting policies that affect our more significant estimates and judgments used in the preparation of our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. There have been no material changes to these policies in 2021. Please refer to “Note 2 – Accounting Policies” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding recently adopted accounting standards.

Results of Operations

Our chief operating decision makers evaluate performance of the combined properties in each reportable business segment and determine how to allocate resources to those segments, in significant part, based on segment NOI and related measures. For further information regarding our reportable business segments and a discussion of our definition of segment NOI, see “Note 15 – Segment Information” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. See “Non-GAAP Financial Measures” included elsewhere in this Quarterly Report on Form 10-Q for additional disclosure and reconciliations of net income attributable to common stockholders, as computed in accordance with GAAP, to NOI.

Three Months Ended June 30, 2021 and 2020

The table below shows our results of operations for the three months ended June 30, 2021 and 2020 and the effect of changes in those results from period to period on our net income attributable to common stockholders.


	For the Three Months Ended June 30,				(Decrease) Increase to Net Income
	2021		2020		$		%
	(Dollars in thousands)
Segment NOI:
Triple-net leased properties	$	154,791	$	170,965	$	(16,174)	(9.5)	%
Senior living operations	111,139		116,751		(5,612)		(4.8)
Office operations	137,320		133,887		3,433		2.6
All other	20,506		20,907		(401)		(1.9)
Total segment NOI	423,756		442,510		(18,754)		(4.2)
Interest and other income	585		1,540		(955)		(62.0)
Interest expense	(110,051)		(123,132)		13,081		10.6
Depreciation and amortization	(250,700)		(349,594)		98,894		28.3
General, administrative and professional fees	(30,588)		(28,080)		(2,508)		(8.9)
Gain on extinguishment of debt, net	74		—		74		nm
Merger-related expenses and deal costs	(721)		(6,586)		5,865		89.1
Allowance on loans receivable and investments	59		(29,655)		29,714		nm
Other	13,490		(5,286)		18,776		nm
Income (loss) before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests	45,904		(98,283)		144,187		nm
Income (loss) from unconsolidated entities	4,767		(5,850)		10,617		nm
Gain on real estate dispositions	41,258		1,254		40,004		nm
Income tax expense	(3,641)		(56,356)		52,715		93.5
Income (loss) from continuing operations	88,288		(159,235)		247,523		nm
Net income (loss)	88,288		(159,235)		247,523		nm
Net income (loss) attributable to noncontrolling interests	1,897		(2,065)		(3,962)		nm
Net income (loss) attributable to common stockholders	$	86,391	$	(157,170)	243,561		nm

nm - not meaningful

Segment NOI—Triple-Net Leased Properties

The following table summarizes results of operations in our triple-net leased properties reportable business segment, including assets sold or classified as held for sale as of June 30, 2021.


	For the Three Months Ended June 30,				(Decrease) Increase to Segment NOI
	2021		2020		$		%
	(Dollars in thousands)
Segment NOI—Triple-Net Leased Properties:
Rental income	$	159,223	$	176,240	$	(17,017)	(9.7)	%
Less: Property-level operating expenses	(4,432)		(5,275)		843		16.0
Segment NOI	$	154,791	$	170,965	(16,174)		(9.5)

In our triple-net leased properties reportable business segment, our revenues generally consist of fixed rental amounts (subject to annual contractual escalations) received from our tenants in accordance with the applicable lease terms. We report revenues and property-level operating expenses within our triple-net leased properties reportable business segment for real estate tax and insurance expenses that are paid from escrows collected from our tenants.

The segment NOI decrease in our triple-net leased portfolio was primarily driven by (i) a $53.4 million reduction (including $3.0 million of contractual rent) attributable to the net impact of the transition of 26 independent living assets operated by Holiday Retirement, from our triple-net portfolio to our senior housing operating portfolio in the beginning of the second quarter of 2020, (ii) a $8.9 million reduction in rental income under our lease with Brookdale Senior Living following the modification of the lease in the third quarter of 2020 and (iii) a $8.7 million reduction attributable to rental income from communities that were sold or transitioned to our senior housing operating portfolio prior to the second quarter of 2021. These decreases were partially offset by a $53.3 million COVID-19 related write-off of previously accrued straight-line rental income in the second quarter of 2020.

Occupancy rates may affect the profitability of our tenants’ operations. For senior housing communities and post-acute properties in our triple-net leased properties reportable business segment, occupancy generally reflects average operator-reported unit and bed occupancy, respectively, for the reporting period. Because triple-net financials are delivered to us following the reporting period, occupancy is reported in arrears. The following table sets forth average continuing occupancy rates related to the triple-net leased properties we owned at June 30, 2021 and 2020 for the first quarter of 2021 and 2020, respectively. The table excludes non-stabilized properties, properties owned through investments in unconsolidated real estate entities, certain properties for which we do not receive occupancy information and properties acquired or properties that transitioned operators for which we do not have a full quarter of occupancy results.


	Number of Properties Owned at June 30, 2021	Average Occupancy for the Three Months Ended March 31, 2021	Number of Properties Owned at June 30, 2020	Average Occupancy for the Three Months Ended March 31, 2020
Senior housing communities	281	76.0%	302	84.8%
SNFs	16	75.8	16	88.7
IRFs and LTACs	35	59.0	36	54.7

The following table compares results of operations for our 352 same-store triple-net leased properties. See “Non-GAAP Financial Measures—NOI” included elsewhere in this Quarterly Report on Form 10-Q for additional disclosure regarding same-store NOI for each of our reportable business segments.


	For the Three Months Ended June 30,				Increase to Segment NOI
	2021		2020		$		%
	(Dollars in thousands)
Same-Store Segment NOI—Triple-Net Leased Properties:
Rental income	$	157,728	$	113,471	$	44,257	39.0	%
Less: Property-level operating expenses	(4,432)		(4,442)		10		0.2
Segment NOI	$	153,296	$	109,029	44,267		40.6

The segment NOI increase in our same-store triple net leased portfolio was primarily driven by a $53.3 million COVID-19 related write-off of previously accrued straight-line rental income in the second quarter of 2020, partially offset by $8.9 million in lower rental income under our lease with Brookdale Senior Living following modification of the lease in the third quarter of 2020.

Segment NOI—Senior Living Operations

The following table summarizes results of operations in our senior living operations reportable business segment, including assets sold or classified as held for sale as of June 30, 2021. For senior housing communities in our senior living operations reportable business segment, occupancy generally reflects average operator-reported unit occupancy for the reporting period.


	For the Three Months Ended June 30,				(Decrease) Increase to Segment NOI
	2021		2020		$		%
	(Dollars in thousands)
Segment NOI—Senior Living Operations:
Resident fees and services	$	535,952	$	549,329	$	(13,377)	(2.4)	%
Less: Property-level operating expenses	(424,813)		(432,578)		7,765		1.8
Segment NOI	$	111,139	$	116,751	(5,612)		(4.8)


	Number of Properties at June 30,		Average Unit Occupancy for the Three Months Ended June 30,				Average Monthly Revenue Per Occupied Room For the Three Months Ended June 30,
	2021	2020	2021		2020		2021		2020
Total communities	440	428	77.4	%	82.2	%	$	4,635	$	4,674

Resident fees and services include all amounts earned from residents at our senior housing communities, such as rental fees related to resident leases, extended health care fees and other ancillary service income. Average monthly revenue per occupied room reflects average resident fees and services per operator-reported occupied unit for the reporting period. Property-level operating expenses related to our senior living operations segment include labor, food, utilities, marketing, management and other costs of operating the properties.

The period over period segment NOI decrease in our senior living operating portfolio was primarily driven by lower occupancy and move-in incentives provided to new residents, partially offset by lower COVID-19 costs in 2021, the transition of assets from our triple-net portfolio to our senior living operating portfolio and development properties placed in service.

The following table compares results of operations for our 393 same-store senior living operating communities.


	For the Three Months Ended June 30,				(Decrease) Increase to Segment NOI
	2021		2020		$		%
	(Dollars in thousands)
Same-Store Segment NOI—Senior Living Operations:
Resident fees and services	$	491,387	$	533,595	$	(42,208)	(7.9)	%
Less: Property-level operating expenses	(392,632)		(421,330)		28,698		6.8
Segment NOI	$	98,755	$	112,265	(13,510)		(12.0)


	Number of Properties at June 30,		Average Unit Occupancy for the Three Months Ended June 30,				Average Monthly Revenue Per Occupied Room For the Three Months Ended June 30,
	2021	2020	2021		2020		2021		2020
Same-store communities	393	393	78.0	%	82.4	%	$	4,812	$	4,947

The period over period segment NOI decrease in our same-store senior living operating portfolio was primarily driven by lower occupancy and move-in incentives provided to new residents, partially offset by lower COVID-19 costs in 2021.

Segment NOI—Office Operations

The following table summarizes results of operations in our office operations reportable business segment, including assets sold or classified as held for sale as of June 30, 2021. For properties in our office operations reportable business segment, occupancy generally reflects occupied square footage divided by net rentable square footage as of the end of the reporting period.


	For the Three Months Ended June 30,				Increase (Decrease) to Segment NOI
	2021		2020		$		%
	(Dollars in thousands)
Segment NOI—Office Operations:
Rental income	$	200,388	$	192,925	$	7,463	3.9	%
Office building services revenues	2,540		2,257		283		12.5
Total revenues	202,928		195,182		7,746		4.0
Less:
Property-level operating expenses	(64,950)		(60,752)		(4,198)		(6.9)
Office building services costs	(658)		(543)		(115)		(21.2)
Segment NOI	$	137,320	$	133,887	3,433		2.6


	Number of Properties at June 30,		Occupancy at June 30,				Annualized Average Rent Per Occupied Square Foot for the Three Months Ended June 30,
	2021	2020	2021		2020		2021		2020
Total office buildings	370	377	89.5	%	90.4	%	$	34	$	33

The increase in office segment NOI is primarily due to a recovery in patient activity and parking revenues and contractual rent increases, partially offset by dispositions of non-core assets during the three months ended June 30, 2021.

The following table compares results of operations for our 345 same-store office buildings.


	For the Three Months Ended June 30,				Increase (Decrease) to Segment NOI
	2021		2020		$		%
	(Dollars in thousands)
Same-Store Segment NOI—Office Operations:
Rental income	$	187,352	$	178,073	$	9,279	5.2	%
Less: Property-level operating expenses	(59,604)		(55,189)		(4,415)		(8.0)
Segment NOI	$	127,748	$	122,884	4,864		4.0


	Number of Properties at June 30,		Occupancy at June 30,				Annualized Average Rent Per Occupied Square Foot for the Three Months Ended June 30,
	2021	2020	2021		2020		2021		2020
Same-store office buildings	345	345	91.6	%	92.0	%	$	35	$	33

Same-store office operations increased due to contractual escalators, increased tenant activity and improved parking income.

Segment NOI —All Other

Information provided for all other segment NOI includes income from loans and investments and other miscellaneous income not directly attributable to any of our three reportable business segments. The $0.4 million decrease in all other segment NOI for the three months ended June 30, 2021 over the same period in 2020 was primarily due to reduced interest income from our loans receivable investments, partially offset by increased management fee revenues from investments in unconsolidated real estate entities.

Company Results

Interest and Other Income

The $1.0 million decrease in interest and other income was primarily due to lower interest income on short-term investments.

Interest Expense

The $13.1 million decrease in total interest expense for the three months ended June 30, 2021 compared to the same period in 2020 was primarily due to lower debt balances, partially offset by a higher effective interest rate. Our weighted average effective interest rate was 3.6% and 3.3% for the three months ended June 30, 2021 and 2020, respectively. Capitalized interest for both the three months ended June 30, 2021 and 2020 was $2.7 million.

Depreciation and Amortization

Depreciation and amortization expense decreased $98.9 million primarily due to COVID-19 related impairments of $108.8 million recognized in the second quarter of 2020 as compared to $17.0 million of impairments recognized in the second quarter of 2021 related to properties classified as held for sale.

General, Administrative and Professional Fees

The $2.5 million increase in general, administrative and professional fees was primarily due to increased compensation and benefits, partially offset by lower professional fees.

Merger-Related Expenses and Deal Costs

The $5.9 million decrease in merger-related expenses and deal costs was primarily attributable to severance related charges incurred in 2020.

Allowance on Loans Receivable and Investments

The $29.7 million decrease in allowance on loans receivable and investments for the three months ended June 30, 2020 was due to the recognition of COVID-19 related credit losses.

Other

The $18.8 million change in other was primarily due to a $23.2 million increase in the fair value of stock warrants received in connection with the Brookdale Senior Living lease modification in the third quarter of 2020, partially offset by additional expenses relating to 2021 winter storms.

Income (Loss) from Unconsolidated Entities

The $10.6 million change in income (loss) from unconsolidated entities was primarily due to a $10.7 million impairment of our investment in an unconsolidated operating entity in the second quarter of 2020.

Gain on Real Estate Dispositions

The $40.0 million increase in gain on real estate dispositions was primarily due to the second quarter 2021 sale of one MOB that resulted in a gain of $41.3 million.

Income Tax Expense

The $52.7 million decrease in income tax expense was primarily due to a $56.4 million valuation allowance against deferred tax assets of certain of our TRS entities that was recognized in the second quarter of 2020.

Six Months Ended June 30, 2021 and 2020

The table below shows our results of operations for the six months ended June 30, 2021 and 2020 and the effect of changes in those results from period to period on our net income attributable to common stockholders.


	For the Six Months Ended June 30,				(Decrease) Increase to Net Income
	2021		2020		$		%
	(Dollars in thousands)
Segment NOI:
Triple-net leased properties	$	309,851	$	359,496	$	(49,645)	(13.8)	%
Senior living operations	221,960		283,390		(61,430)		(21.7)
Office operations	272,555		279,224		(6,669)		(2.4)
All other	42,122		45,906		(3,784)		(8.2)
Total segment NOI	846,488		968,016		(121,528)		(12.6)
Interest and other income	926		6,393		(5,467)		(85.5)
Interest expense	(220,818)		(239,828)		19,010		7.9
Depreciation and amortization	(564,848)		(598,431)		33,583		5.6
General, administrative and professional fees	(70,897)		(68,540)		(2,357)		(3.4)
Loss on extinguishment of debt, net	(27,016)		—		(27,016)		nm
Merger-related expenses and deal costs	(5,338)		(14,804)		9,466		63.9
Allowance on loans receivable and investments	8,961		(29,655)		38,616		nm
Other	22,918		(11,069)		33,987		nm
(Loss) income before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests	(9,624)		12,082		(21,706)		nm
Income (loss) from unconsolidated entities	4,517		(16,726)		21,243		nm
Gain on real estate dispositions	43,791		227,479		(183,688)		(80.7)
Income tax (expense) benefit	(5,794)		92,660		(98,454)		nm
Income from continuing operations	32,890		315,495		(282,605)		(89.6)
Net income	32,890		315,495		(282,605)		(89.6)
Net income (loss) attributable to noncontrolling interests	3,708		(452)		(4,160)		nm
Net income attributable to common stockholders	$	29,182	$	315,947	(286,765)		(90.8)

nm - not meaningful

Segment NOI—Triple-Net Leased Properties

The following table summarizes results of operations in our triple-net leased properties reportable business segment, including assets sold or classified as held for sale as of June 30, 2021.


	For the Six Months Ended June 30,				(Decrease) Increase to Segment NOI
	2021		2020		$		%
	(Dollars in thousands)
Segment NOI—Triple-Net Leased Properties:
Rental income	$	319,108	$	371,102	$	(51,994)	(14.0)	%

Less: Property-level operating expenses	(9,257)		(11,606)		2,349		20.2
Segment NOI	$	309,851	$	359,496	(49,645)		(13.8)

nm - not meaningful

The decrease in our triple-net leased properties segment NOI for the six months ended June 30, 2021 compared to the same period in 2020 was primarily driven by (i) a $69.0 million reduction (including $18.2 million of contractual rent) attributable to the net impact of the transition of 26 independent living assets operated by Holiday Retirement, from our triple-net portfolio to our senior housing operating portfolio in the beginning of the second quarter of 2020, (ii) a $17.8 million reduction in rental income under our lease with Brookdale Senior Living following modification of the lease in the third quarter of 2020, and (iii) a $17.9 million reduction attributable to rental income from communities that were sold or transitioned to our senior housing operating portfolio prior to the second quarter of 2021. These decreases were partially offset by a $53.3 million COVID-19 related write-off of previously accrued straight-line rental income during the second quarter of 2020.

The following table compares results of operations for our 352 same-store triple-net leased properties.


	For the Six Months Ended June 30,				Increase (Decrease) to Segment NOI
	2021		2020		$		%
	(Dollars in thousands)
Same-Store Segment NOI—Triple-Net Leased Properties:
Rental income	$	315,997	$	281,039	$	34,958	12.4	%
Less: Property-level operating expenses	(9,231)		(8,534)		(697)		(8.2)
Segment NOI	$	306,766	$	272,505	34,261		12.6

nm - not meaningful

The increase in our same-store triple-net leased properties rental income for the six months ended June 30, 2021 over the same period in 2020 was attributable primarily to a $53.3 million COVID-19 related write-off of previously accrued straight-line rental income during the second quarter of 2020, partially offset by $17.8 million in lower rental income recognized under our lease with Brookdale Senior Living following modification of the lease in the third quarter of 2020.

Segment NOI—Senior Living Operations

The following table summarizes results of operations in our senior living operations reportable business segment, including assets sold or classified as held for sale as of June 30, 2021.


	For the Six Months Ended June 30,				(Decrease) Increase to Segment NOI
	2021		2020		$		%
	(Dollars in thousands)
Segment NOI—Senior Living Operations:
Resident fees and services	$	1,064,602	$	1,126,099	$	(61,497)	(5.5)	%
Less: Property-level operating expenses	(842,642)		(842,709)		67		0.0
Segment NOI	$	221,960	$	283,390	(61,430)		(21.7)


	Number of Properties at June 30,		Average Unit Occupancy For the Six Months Ended June 30,				Average Monthly Revenue Per Occupied Room For the Six Months Ended June 30,
	2021	2020	2021		2020		2021		2020
Total communities	440	428	76.8	%	84.3	%	$	4,642	$	4,862

The period over period decrease in our senior living operations segment NOI was primarily driven by lower occupancy and move-in incentives provided to new residents, partially offset by lower COVID-19 costs in 2021, the transition of assets from our triple-net portfolio to our senior living operating portfolio and development properties placed in service.

The following table compares results of operations for our 389 same-store senior living operating communities.


	For the Six Months Ended June 30,				(Decrease) Increase to Segment NOI
	2021		2020		$		%
	(Dollars in thousands)
Same-Store Segment NOI—Senior Living Operations:
Resident fees and services	$	962,452	$	1,096,185	$	(133,733)	(12.2)	%
Less: Property-level operating expenses	(770,216)		(818,632)		48,416		5.9
Segment NOI	$	192,236	$	277,553	(85,317)		(30.7)


	Number of Properties at June 30,		Average Unit Occupancy For the Six Months Ended June 30,				Average Monthly Revenue Per Occupied Room For the Six Months Ended June 30,
	2021	2020	2021		2020		2021		2020
Same-store communities	389	389	77.1	%	84.6	%	$	4,912	$	5,100

The period over period decrease in our same-store senior living operations segment NOI was primarily attributable to lower occupancy and move-in incentives provided to new residents, partially offset by lower COVID-19 costs during 2021. Lower operating expenses in 2021 reflect the receipt of $13.2 million of HHS grants in the first quarter of 2021, which partially mitigated COVID-19 losses incurred by our SHOP communities.

Segment NOI—Office Operations

The following table summarizes results of operations in our office operations reportable business segment, including assets sold or classified as held for sale as of June 30, 2021.


	For the Six Months Ended June 30,				(Decrease) Increase to Segment NOI
	2021		2020		$		%
	(Dollars in thousands)
Segment NOI—Office Operations:
Rental income	$	397,843	$	401,320	$	(3,477)	(0.9)	%
Office building services revenue	4,884		4,432		452		10.2
Total revenues	402,727		405,752		(3,025)		(0.7)
Less:
Property-level operating expenses	(128,896)		(125,258)		(3,638)		(2.9)
Office building services costs	(1,276)		(1,270)		(6)		(0.5)
Segment NOI	$	272,555	$	279,224	(6,669)		(2.4)


	Number of Properties at June 30,		Occupancy at June 30,				Annualized Average Rent Per Occupied Square Foot For the Six Months Ended June 30,
	2021	2020	2021		2020		2021		2020
Total office buildings	370	377	89.5	%	90.4	%	$	34	$	33

The decrease in our office operations segment NOI for the six months ended June 30, 2021 over the same period in 2020 was attributable primarily to assets sold to the Ventas Fund in the first quarter of 2020 and business interruption proceeds received in 2020, partially offset by recovery in patient activity and parking revenues and contractual rent increases.

The following table compares results of operations for our 341 same-store office buildings.


	For the Six Months Ended June 30,				Increase (Decrease) to Segment NOI
	2021		2020		$		%
	(Dollars in thousands)
Same-Store Segment NOI—Office Operations:
Rental income	$	367,223	$	356,956	$	10,267	2.9	%
Less: Property-level operating expenses	(116,882)		(111,079)		(5,803)		(5.2)
Segment NOI	$	250,341	$	245,877	4,464		1.8


	Number of Properties at June 30,		Occupancy at June 30,				Annualized Average Rent Per Occupied Square Foot For the Six Months Ended June 30,
	2021	2020	2021		2020		2021		2020
Same-store office buildings	341	341	91.6	%	92.0	%	$	34	$	33

The increase in our same-store office operations segment NOI for the six months ended June 30, 2021 over the same period in 2020 was primarily due to contractual escalators, increased tenant activity and improved parking income.

Segment NOI —All Other

The $3.8 million decrease in all other segment NOI for the six months ended June 30, 2021 over the same period in 2020 was primarily due to reduced interest income from our loans receivable investments, partially offset by increased management fee revenues from investments in unconsolidated real estate entities.

Company Results

Interest and Other Income

The $5.5 million decrease in interest and other income for the six months ended June 30, 2021 over the same period in 2020 was primarily due to a 2020 reduction of a liability related to an acquisition and lower interest income on short term investments.

Interest Expense

The $19.0 million decrease in total interest expense for the six months ended June 30, 2021 over the same period in 2020 was primarily due to lower debt balances, partially offset by a higher effective interest rate. Our weighted average effective interest rate was 3.7% and 3.5% for the six months ended June 30, 2021 and 2020, respectively. Capitalized interest for the six months ended June 30, 2021 and 2020 was $5.8 million and $5.6 million, respectively.

Depreciation and Amortization

The $33.6 million decrease in depreciation and amortization expense was primarily due to the $108.8 million COVID-19 related impairments recognized in the second quarter of 2020, partially offset by $94.2 million of impairments recognized during 2021 relating to assets that were sold or classified as held for sale.

General, Administrative and Professional Fees

The $2.4 million increase in general, administrative and professional fees was primarily due to increased stock-based compensation, partially offset by reduced salaries and benefits and lower professional fees.

Loss on Extinguishment of Debt, Net

Loss on extinguishment of debt, net for the six months ended June 30, 2021 was due to the make whole redemption for the entirety of the $400.0 million aggregate principal amount of 3.10% senior notes due January 2023 during the first quarter of 2021.

Merger-Related Expenses and Deal Costs

The $9.5 million decrease in merger-related expenses and deal costs was primarily attributable to severance related charges and captive insurance organization costs incurred in 2020.

Allowance on Loans Receivable and Investments

The $38.6 million change in allowance on loans receivable and investments was due to the recognition of COVID-19 related credit losses in the second quarter of 2020, which were partially reversed in the first quarter of 2021 due to a change in our estimate of credit losses.

Other

The $34.0 million change in other was primarily due to the change in fair value of stock warrants received in connection with the Brookdale Senior Living lease modification in the third quarter of 2020, partially offset by additional expenses relating to 2021 winter storms.

Income (Loss) from Unconsolidated Entities

The $4.5 million of income from unconsolidated entities for the six months ended June 30, 2021 versus the $16.7 million of loss from unconsolidated entities for the same period in 2020 was due to an impairment of our investment in an unconsolidated operating entity in the second quarter of 2020 and our share of operating results from our unconsolidated entities.

Gain on Real Estate Dispositions

The $183.7 million decrease in gain on real estate dispositions was primarily due to our contribution of six properties to the Ventas Fund in the first quarter of 2020, partially offset by the second quarter 2021 sale of one MOB that resulted in a gain of $41.3 million.

Income Tax (Expense) Benefit

The $5.8 million of income tax expense for the six months ended June 30, 2021 as compared to the $92.7 million income tax benefit for the same period in 2020 was primarily due to a $152.9 million deferred tax benefit related to the internal restructuring of certain U.S. taxable REIT subsidiaries completed within the first quarter of 2020, partially offset by changes in the valuation allowance against deferred tax assets of certain of our TRS entities. The benefit resulted from the transfer of assets subject to certain deferred tax liabilities from taxable REIT subsidiaries to the entities other than the TRS entities in this tax-free transaction.

Non-GAAP Financial Measures

We consider certain non-GAAP financial measures to be useful supplemental measures of our operating performance. A non-GAAP financial measure is a measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are not so excluded from or included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP. Described below are the non-GAAP financial measures used by management to evaluate our operating performance and that we consider most useful to investors, together with reconciliations of these measures to the most directly comparable GAAP measures.

The non-GAAP financial measures we present in this Quarterly Report on Form 10-Q may not be comparable to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. You should not consider these measures as alternatives to net income attributable to common stockholders (determined in accordance with

GAAP) as indicators of our financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of our liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine these measures in conjunction with net income attributable to common stockholders as presented in our Consolidated Financial Statements and other financial data included elsewhere in this Quarterly Report on Form 10-Q.

Funds From Operations and Normalized Funds From Operations Attributable to Common Stockholders

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. However, since real estate values historically have risen or fallen with market conditions, many industry investors deem presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For that reason, we consider Funds From Operations attributable to common stockholders (“FFO”) and Normalized FFO to be appropriate supplemental measures of operating performance of an equity REIT. We believe that the presentation of FFO, combined with the presentation of required GAAP financial measures, has improved the understanding of operating results of REITs among the investing public and has helped make comparisons of REIT operating results more meaningful. Management generally considers FFO to be a useful measure for understanding and comparing our operating results because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment losses on depreciable real estate and real estate asset depreciation and amortization (which can differ across owners of similar assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a company’s real estate across reporting periods and to the operating performance of other companies. We believe that Normalized FFO is useful because it allows investors, analysts and our management to compare our operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences caused by non-recurring items and other non-operational events such as transactions and litigation. In some cases, we provide information about identified non-cash components of FFO and Normalized FFO because it allows investors, analysts and our management to assess the impact of those items on our financial results.

We use the National Association of Real Estate Investment Trusts (“Nareit”) definition of FFO. Nareit defines FFO as net income attributable to common stockholders (computed in accordance with GAAP), excluding gains or losses from sales of real estate property, including gains or losses on re-measurement of equity method investments, and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and entities. Adjustments for unconsolidated partnerships and entities will be calculated to reflect FFO on the same basis. We define Normalized FFO as FFO excluding the following income and expense items (which may be recurring in nature): (a) merger-related costs and expenses, including amortization of intangibles, transition and integration expenses, and deal costs and expenses, including expenses and recoveries relating to acquisition lawsuits; (b) the impact of any expenses related to asset impairment and valuation allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of our debt; (c) the non-cash effect of income tax benefits or expenses, the non-cash impact of changes to our executive equity compensation plan, derivative transactions that have non-cash mark-to-market impacts on our Consolidated Statements of Income and non-cash charges related to leases; (d) the financial impact of contingent consideration, severance-related costs and charitable donations made to the Ventas Charitable Foundation; (e) gains and losses for non-operational foreign currency hedge agreements and changes in the fair value of financial instruments; (f) gains and losses on non-real estate dispositions and other unusual items related to unconsolidated entities; (g) expenses related to the re-audit and re-review in 2014 of our historical financial statements and related matters; (h) net expenses or recoveries related to natural disasters; and (i) any other incremental items set forth in the Normalized FFO reconciliation included herein.

The following table summarizes our FFO and Normalized FFO for the three and six months ended June 30, 2021 and 2020. The decrease in Normalized FFO for the six months ended June 30, 2021 over the same period in 2020 is principally due to the impact of COVID-19 on our senior housing business, lower rental income from our triple-net lease with Brookdale Senior Living, and the impact of our contribution of six properties to the Ventas Fund in the first quarter of 2020, partially offset by a decrease in interest expense.


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
	(In thousands)
Net income (loss) attributable to common stockholders	$	86,391	$	(157,170)	$	29,182	$	315,947
Adjustments:
Real estate depreciation and amortization	249,527		348,110		562,397		595,440
Real estate depreciation related to noncontrolling interests	(4,678)		(4,068)		(9,296)		(7,911)
Real estate depreciation related to unconsolidated entities	4,615		1,307		8,633		1,868



Loss on real estate dispositions related to noncontrolling interests	(7)		(3)		(7)		(9)
Gain on real estate dispositions	(41,258)		(1,254)		(43,791)		(227,479)



FFO attributable to common stockholders	294,590		186,922		547,118		677,856
Adjustments:
Change in fair value of financial instruments	(23,211)		(13)		(44,219)		(23)
Non-cash income tax expense (benefit)	1,166		55,505		2,510		(85,391)
(Gain) loss on extinguishment of debt, net	(74)		—		27,016		—
(Gain) loss on non-real estate dispositions related to unconsolidated entities	(10)		—		(31)		239
Merger-related expenses, deal costs and re-audit costs	1,769		6,605		7,128		15,378
Amortization of other intangibles	116		118		233		236
Other items related to unconsolidated entities	43		(263)		143		(1,138)
Non-cash impact of changes to equity plan	(2,298)		(3,337)		6,443		3,558

Natural disaster expenses, net	3,128		252		8,255		1,193
Impact of Holiday lease termination	—		(50,184)		—		(50,184)
Write-off of straight-line rental income, net of noncontrolling interests	—		52,368		—		52,368
Allowance on loan investments and impairment of unconsolidated entities, net of noncontrolling interests	(57)		40,320		(8,955)		40,320
Normalized FFO attributable to common stockholders	$	275,162	$	288,293	$	545,641	$	654,412

Adjusted EBITDA

We consider Adjusted EBITDA an important supplemental measure because it provides another manner in which to evaluate our operating performance and serves as another indicator of our credit strength and our ability to service our debt obligations. We define Adjusted EBITDA as consolidated earnings before interest, taxes, depreciation and amortization (including non-cash stock-based compensation expense, asset impairment and valuation allowances), excluding gains or losses on extinguishment of debt, our partners’ share of EBITDA of consolidated entities, merger-related expenses and deal costs, expenses related to the re-audit and re-review in 2014 of our historical financial statements, net gains or losses on real estate activity, gains or losses on remeasurement of equity interest upon acquisition, changes in the fair value of financial instruments, unrealized foreign currency gains or losses, net expenses or recoveries related to natural disasters and non-cash charges related to leases, and including Ventas’ share of EBITDA from unconsolidated entities and adjustments for other immaterial or identified items. The following table sets forth a reconciliation of net income attributable to common stockholders to Adjusted EBITDA:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
	(In thousands)
Net income (loss) attributable to common stockholders	$	86,391	$	(157,170)	$	29,182	$	315,947
Adjustments:
Interest	110,051		123,132		220,818		239,828
(Gain) loss on extinguishment of debt, net	(74)		—		27,016		—
Taxes (including tax amounts in general, administrative and professional fees)	5,015		57,500		8,451		(90,207)
Depreciation and amortization	250,700		349,594		564,848		598,431
Non-cash stock-based compensation expense	5,393		1,043		21,465		11,557
Merger-related expenses, deal costs and re-audit costs	721		6,586		5,338		14,804
Net income attributable to noncontrolling interests, adjusted for partners’ share of consolidated entity EBITDA	(6,637)		(5,639)		(13,413)		(11,737)
Loss from unconsolidated entities, adjusted for Ventas share of EBITDA from unconsolidated entities	18,873		10,439		35,579		28,173
Gain on real estate dispositions	(41,258)		(1,254)		(43,791)		(227,478)
Unrealized foreign currency loss (gain)	55		(37)		124		(6)
Change in fair value of financial instruments	(23,217)		(13)		(44,222)		(22)

Natural disaster expenses, net	3,120		198		8,294		981
Write-off of straight-line rental income from Holiday lease termination	—		(50,184)		—		(50,184)
Write-off of straight-line rental income, net of noncontrolling interests	—		52,368		—		52,368
Allowance on loan investments and impairment of unconsolidated entities, net of noncontrolling interests	(57)		40,320		(8,955)		40,320
Adjusted EBITDA	$	409,076	$	426,883	$	810,734	$	922,775

NOI

We also consider NOI an important supplemental measure because it allows investors, analysts and our management to assess our unlevered property-level operating results and to compare our operating results with those of other real estate companies and between periods on a consistent basis. We define NOI as total revenues, less interest and other income, property-level operating expenses and office building services costs. Cash receipts may differ due to straight-line recognition of certain rental income and the application of other GAAP policies. The following table sets forth a reconciliation of net income attributable to common stockholders to NOI:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
	(In thousands)
Net income (loss) attributable to common stockholders	$	86,391	$	(157,170)	$	29,182	$	315,947
Adjustments:
Interest and other income	(585)		(1,540)		(926)		(6,393)
Interest expense	110,051		123,132		220,818		239,828
Depreciation and amortization	250,700		349,594		564,848		598,431
General, administrative and professional fees	30,588		28,080		70,897		68,540
(Gain) loss on extinguishment of debt, net	(74)		—		27,016		—
Merger-related expenses, deal costs and re-audit costs	721		6,586		5,338		14,804
Allowance on loans receivable and investments	(59)		29,655		(8,961)		29,655
Other	(13,490)		5,286		(22,918)		11,069
Net income (loss) attributable to noncontrolling interests	1,897		(2,065)		3,708		(452)
(Income) loss from unconsolidated entities	(4,767)		5,850		(4,517)		16,726
Income tax expense (benefit)	3,641		56,356		5,794		(92,660)
Gain on real estate dispositions	(41,258)		(1,254)		(43,791)		(227,479)
NOI	$	423,756	$	442,510	$	846,488	$	968,016

See “Results of Operations” for discussions regarding both segment NOI and same-store segment NOI. We define same-store as properties owned, consolidated and operational for the full period in both comparison periods and are not otherwise excluded; provided, however, that we may include selected properties that otherwise meet the same-store criteria if they are included in substantially all of, but not a full, period for one or both of the comparison periods, and in our judgment such inclusion provides a more meaningful presentation of our portfolio performance.

Newly acquired development properties and recently developed or redeveloped properties in our senior living operations segment will be included in same-store once they are stabilized for the full period in both periods presented. These properties are considered stabilized upon the earlier of (a) the achievement of 80% sustained occupancy or (b) 24 months from the date of acquisition or substantial completion of work. Recently developed or redeveloped properties in our office operations and triple-net leased properties segments will be included in same-store once substantial completion of work has occurred for the full period in both periods presented. Our senior living operations and triple-net leased properties that have undergone operator or business model transitions will be included in same-store once operating under consistent operating structures for the full period in both periods presented.

Properties are excluded from same-store if they are: (i) sold, classified as held for sale or properties whose operations were classified as discontinued operations in accordance with GAAP; (ii) impacted by materially disruptive events such as flood or fire; (iii) for SHOP, those properties that are currently undergoing a materially disruptive redevelopment; (iv) for our office operations and triple-net lease properties, those properties for which management has an intention to institute, or has instituted, a redevelopment plan because the properties may require major property-level expenditures to maximize value, increase NOI, or maintain a market-competitive position and/or achieve property stabilization, most commonly as the result of an expected or actual material change in occupancy or NOI; or (v) for the senior living operations and triple-net leased segments, those properties that are scheduled to undergo operator or business model transitions, or have transitioned operators or business models after the start of the prior comparison period.

To eliminate the impact of exchange rate movements, all portfolio performance-based disclosures assume constant exchange rates across comparable periods, using the following methodology: the current period’s results are shown in actual

reported USD, while prior comparison period’s results are adjusted and converted to USD based on the average exchange rate for the current period.

Liquidity and Capital Resources

During the six months ended June 30, 2021, our principal sources of liquidity were cash flows from operations, proceeds from the issuance of debt and equity securities, borrowings under our unsecured revolving credit facility, and proceeds from asset sales.

For the next 12 months, our principal liquidity needs are to: (i) fund operating expenses; (ii) meet our debt service requirements; (iii) repay maturing mortgage and other debt; (iv) fund acquisitions, investments and commitments and any development and redevelopment activities; (v) fund capital expenditures; and (vi) make distributions to our stockholders and unitholders, as required for us to continue to qualify as a REIT. Depending upon the availability of external capital, we believe our liquidity is sufficient to fund these uses of cash. We expect that these liquidity needs generally will be satisfied by a combination of the following: cash flows from operations, cash on hand, debt assumptions and financings (including secured financings), issuances of debt and equity securities, dispositions of assets (in whole or in part through joint venture arrangements with third parties) and borrowings under our revolving credit facilities and commercial paper program. However, an inability to access liquidity through multiple capital sources concurrently could have a material adverse effect on us.

While continuing decreased revenue and net operating income as a result of the COVID-19 pandemic could lead to downgrades of our long-term credit rating and therefore adversely impact our cost of borrowing, we currently believe we will continue to have access to one or more debt markets during the duration of the pandemic and could seek to enter into secured debt financings or issue debt and equity securities to satisfy our liquidity needs, although no assurances can be made in this regard.

See “Note 9 – Senior Notes Payable And Other Debt” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information regarding our significant financing activities.

Loans Receivable and Investments

Credit Facilities, Commercial Paper and Unsecured Term Loans

As of June 30, 2021, we had $2.5 billion of undrawn capacity on our New Credit Facility with $46.3 million borrowings outstanding and an additional $24.9 million restricted to support outstanding letters of credit. We limit our use of the New Credit Facility, to the extent necessary, to support our commercial paper program when commercial paper notes are outstanding. As of June 30, 2021, we had $170.0 million of commercial paper outstanding.

Our wholly owned subsidiary, Ventas Realty, may issue from time to time unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $1.0 billion. The notes are sold under customary terms in the United States commercial paper note market and are ranked pari passu with all of Ventas Realty’s other unsecured senior indebtedness. The notes are fully and unconditionally guaranteed by Ventas, Inc. As of June 30, 2021, we had $170.0 million of borrowings outstanding under our commercial paper program.

As of June 30, 2021, we had a C$500 million unsecured term loan facility priced at Canadian Dollar Offered Rate (“CDOR”) plus 0.90% that matures in 2025.

Senior Notes

We may, from time to time, seek to retire or purchase our outstanding senior notes for cash 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 capital and other factors. The amounts involved may be material.

Equity Offerings

From time to time, we may sell our common stock under an “at-the-market” equity offering program (“ATM program”). As of June 30, 2021, we had $740.7 million remaining under our existing ATM program. During the six months ended June 30, 2021, we sold 0.3 million shares of common stock under our ATM program for gross proceeds of $56.73 per share.

Derivatives and Hedging

In the normal course of our business, interest rate fluctuations affect future cash flows under our variable rate debt obligations, loans receivable and marketable debt securities, and foreign currency exchange rate fluctuations affect our operating results. We follow established risk management policies and procedures, including the use of derivative instruments, to mitigate the impact of these risks.

Dividends

During the six months ended June 30, 2021, we declared a dividend of $0.45 per share of our common stock in each of the first and second quarter, respectively. In order to continue to qualify as a REIT, we must make annual distributions to our stockholders of at least 90% of our REIT taxable income (excluding net capital gain). In addition, we will be subject to income tax at the regular corporate rate to the extent we distribute less than 100% of our REIT taxable income, including any net capital gains. We intend to pay dividends greater than 100% of our taxable income, after the use of any net operating loss carryforwards, for 2021.

We expect that our cash flows will exceed our REIT taxable income due to depreciation and other non-cash deductions in computing REIT taxable income and that we will be able to satisfy the 90% distribution requirement. However, from time to time, we may not have sufficient cash on hand or other liquid assets to meet this 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 on hand or other 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.

Cash Flows

The following table sets forth our sources and uses of cash flows:


	For the Six Months Ended June 30,				Increase (Decrease) to Cash
	2021		2020		$		%
	(Dollars in thousands)
Cash, cash equivalents and restricted cash at beginning of period	$	451,640	$	146,102	$	305,538	nm
Net cash provided by operating activities	528,856		720,011		(191,155)		(26.5)	%
Net cash (used in) provided by investing activities	(121,105)		348,080		(469,185)		nm
Net cash used in financing activities	(586,073)		(183,228)		(402,845)		nm
Effect of foreign currency translation	1,450		(1,829)		3,279		nm
Cash, cash equivalents and restricted cash at end of period	$	274,768	$	1,029,136	(754,368)		(73.3)

nm - not meaningful

Cash Flows from Operating Activities

Cash flows from operating activities decreased $191.2 million during the six months ended June 30, 2021 compared to the same period in 2020 primarily due to the COVID-19 impact on our triple-net leased and senior housing business and lower rental income from our triple-net lease with Brookdale Senior Living, partially offset by a decrease in interest expense.

Cash Flows from Investing Activities

Cash flows from investing activities decreased $469.2 million during the six months ended June 30, 2021 over the same period in 2020 primarily due to fewer proceeds from real estate dispositions.

Cash Flows from Financing Activities

Cash flows from financing activities decreased $402.8 million during the six months ended June 30, 2021 over the same period in 2020 primarily due to the April 2020 issuance of $500 million senior notes due 2030 and March 2021 redemption of $400.0 million senior notes due 2023, partially offset by lower dividends to common stockholders.

Capital Expenditures

The terms of our triple-net leases generally obligate our tenants to pay all capital expenditures necessary to maintain and improve our triple-net leased properties. However, from time to time, we may fund the capital expenditures for our triple-net leased properties through loans or advances to the tenants, which may increase the amount of rent payable with respect to the properties in certain cases. We may also fund capital expenditures for which we may become responsible upon expiration of our triple-net leases or in the event that our tenants are unable or unwilling to meet their obligations under those leases. We also expect to fund capital expenditures related to our senior living operations and office operations reportable business segments with the cash flows from the properties or through additional borrowings. We expect that these liquidity needs generally will be satisfied by a combination of the following: cash flows from operations, cash on hand, debt assumptions and financings (including secured financings), issuances of debt and equity securities, dispositions of assets (in whole or in part through joint venture arrangements with third parties) and borrowings under our revolving credit facilities.

To the extent that unanticipated capital expenditure needs arise or significant borrowings are required, our liquidity may be affected adversely. Our ability to borrow additional funds may be restricted in certain circumstances by the terms of the instruments governing our outstanding indebtedness.

We are party to certain agreements that obligate us to develop senior housing or healthcare properties funded through capital that we and, in certain circumstances, our joint venture partners provide. As of June 30, 2021, we had 12 properties under development pursuant to these agreements, including three properties that are owned by an unconsolidated real estate entity. In addition, from time to time, we engage in redevelopment projects with respect to our existing senior housing communities to maximize the value, increase NOI, maintain a market-competitive position, achieve property stabilization or change the primary use of the property.

Contractual Obligations

During the three months ended June 30, 2021, there were no significant changes to our contractual obligations from those disclosed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Annual Report.

Off-Balance Sheet Arrangements

We own interests in certain unconsolidated entities as described in Note 6 – Investments In Unconsolidated Entities. Except in limited circumstances, our risk of loss is limited to our investment in the joint venture and any outstanding loans receivable. In addition, we have certain properties which serve as collateral for debt that is owed by a previous owner of certain of our facilities, as described under Note 9 – Senior Notes Payable And Other Debt to the Consolidated Financial Statements. Our risk of loss for these certain properties is limited to the outstanding debt balance plus penalties, if any. Further, we use financial derivative instruments to hedge interest rate and foreign currency exchange rate exposure. Finally, at June 30, 2021, we had $24.9 million outstanding letter of credit obligations. We have no other material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources except those described above under “Contractual Obligations.”

Guarantor and Issuer Financial Information

Ventas, Inc. has fully and unconditionally guaranteed the obligation to pay principal and interest with respect to the outstanding senior notes issued by our 100% owned subsidiary, Ventas Realty, including the senior notes that were jointly issued with Ventas Capital Corporation. Ventas Capital Corporation is a direct 100% owned subsidiary of Ventas Realty that has no assets or operations, but was formed in 2002 solely to facilitate offerings of senior notes by a limited partnership. None of our other subsidiaries (excluding Ventas Realty and Ventas Capital Corporation) is obligated with respect to Ventas Realty’s outstanding senior notes.

Ventas, Inc. has also fully and unconditionally guaranteed the obligation to pay principal and interest with respect to the outstanding senior notes issued by our 100% owned subsidiary, Ventas Canada Finance Limited (“Ventas Canada”). None of our other subsidiaries is obligated with respect to Ventas Canada’s outstanding senior notes, all of which were issued on a private placement basis in Canada.

Under certain circumstances, contractual and legal restrictions, including those contained in the instruments governing our subsidiaries’ outstanding mortgage indebtedness, may restrict our ability to obtain cash from our subsidiaries for the purpose of meeting our debt service obligations, including our payment guarantees with respect to Ventas Realty’s and Ventas Canada’s senior notes.

The following summarizes our guarantor and issuer balance sheet and statement of income information as of June 30, 2021 and December 31, 2020 and for the six months ended June 30, 2021 and the year ended December 31, 2020.

Balance Sheet Information


	As of June 30, 2021
	Guarantor		Issuer
	(In thousands)
Assets



Investment in and advances to affiliates	$	16,559,608	$	2,728,041




Total assets	16,732,309		2,841,726
Liabilities and equity


Intercompany loans	10,816,488		(4,070,443)





Total liabilities	11,022,622		3,688,242
Redeemable OP unitholder and noncontrolling interests	84,209		—
Total equity (deficit)	5,625,478		(846,516)
Total liabilities and equity	16,732,309		2,841,726

Balance Sheet Information


	As of December 31, 2020
	Guarantor		Issuer
	(In thousands)
Assets



Investment in and advances to affiliates	$	16,576,278	$	2,727,931




Total assets	16,937,149		2,844,339
Liabilities and equity


Intercompany loans	10,691,626		(4,532,350)





Total liabilities	10,918,320		3,577,009
Redeemable OP unitholder and noncontrolling interests	89,669		—
Total equity (deficit)	5,929,161		(732,670)
Total liabilities and equity	16,937,149		2,844,339

Statement of Income Information


	For the Six Months Ended June 30, 2021
	Guarantor		Issuer
	(In thousands)





Equity earnings in affiliates	$	12,785	$	—

Total revenues	14,829		72,154










Income (loss) before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests	30,239		(117,389)





Net income (loss)	29,182		(117,389)

Net income (loss) attributable to common stockholders	29,182		(117,389)

Statement of Income Information


	For the Year Ended December 31, 2020
	Guarantor		Issuer
	(In thousands)





Equity earnings in affiliates	$	469,311	$	—

Total revenues	474,392		143,259










Income (loss) before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests	440,210		(215,406)





Net income (loss)	439,149		(202,845)

Net income (loss) attributable to common stockholders	439,149		(202,845)

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion of our exposure to various market risks contains forward-looking statements that involve risks and uncertainties. These projected results have been prepared utilizing certain assumptions considered reasonable in light of information currently available to us. Nevertheless, because of the inherent unpredictability of interest rates and other factors, actual results could differ materially from those projected in such forward-looking information.

We are exposed to market risk related to changes in interest rates with respect to borrowings under our unsecured revolving credit facility and our unsecured term loans, certain of our mortgage loans that are floating rate obligations, mortgage loans receivable that bear interest at floating rates and available for sale securities. These market risks result primarily from changes in LIBOR rates or prime rates. To manage these risks, we continuously monitor our level of floating rate debt with respect to total debt and other factors, including our assessment of current and future economic conditions.

As of June 30, 2021 and December 31, 2020, the fair value of our secured and non-mortgage loans receivable, based on our estimates of currently prevailing rates for comparable loans, was $596.1 million and $565.7 million, respectively.

The fair value of our fixed rate debt is based on current market interest rates at which we could obtain similar borrowings. Increases in market interest rates typically result in a decrease in the fair value of fixed rate debt while decreases in market interest rates typically result in an increase in the fair value of fixed rate date. While changes in market interest rates affect the fair value of our fixed rate debt, these changes do not affect the interest expense associated with our fixed rate debt. Therefore, interest rate risk does not have a significant impact on our fixed rate debt obligations until their maturity or earlier prepayment and refinancing. If interest rates have risen at the time we seek to refinance our fixed rate debt, whether at maturity or otherwise, our future earnings and cash flows could be adversely affected by additional borrowing costs. Conversely, lower interest rates at the time of refinancing may reduce our overall borrowing costs.

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 in interest rates:


	As of June 30, 2021		As of December 31, 2020
	(In thousands)
Gross book value	$	10,259,851	$	10,458,262
Fair value	11,181,232		11,550,236
Fair value reflecting change in interest rates:
-100 basis points	11,805,452		12,204,507
+100 basis points	10,622,518		10,951,483

The decrease in our fixed rate debt from December 31, 2020 to June 30, 2021 was due primarily to the make whole redemption of $400.0 million of senior notes due in 2023, partially offset by an increase in mortgage loans outstanding.

The table below sets forth certain information with respect to our debt, excluding premiums and discounts.


	As of June 30, 2021			As of December 31, 2020			As of June 30, 2020
	(Dollars in thousands)
Balance:
Fixed rate:
Senior notes	$	8,498,317		$	8,869,036		$	9,038,264
Unsecured term loans	200,000			200,000			200,000
Secured revolving construction credit facility	—			—			157,156
Mortgage loans and other	1,561,534			1,389,227			1,443,131
Variable rate:
Senior notes	242,053			235,664			221,027
Unsecured revolving credit facility	46,324			39,395			587,206
Unsecured term loans	403,421			392,773			368,378
Commercial paper notes	170,000			—			—
Secured revolving construction credit facility	43,908			154,098			—
Mortgage loans and other	684,997			702,878			613,155
Total	$	11,850,554		$	11,983,071		$	12,628,317
Percentage of total debt:
Fixed rate:
Senior notes	71.7		%	73.9		%	71.6		%
Unsecured term loans	1.7			1.7			1.6
Secured revolving construction credit facility	—			—			1.2
Mortgage loans and other	13.2			11.6			11.4
Variable rate:
Senior notes	2.0			2.0			1.8
Unsecured revolving credit facility	0.4			0.3			4.6
Unsecured term loans	3.4			3.3			2.9
Commercial paper notes	1.4			—			—
Secured revolving construction credit facility	0.4			1.3			—
Mortgage loans and other	5.8			5.9			4.9
Total	100.0		%	100.0		%	100.0		%
Weighted average interest rate at end of period:
Fixed rate:
Senior notes	3.8		%	3.7		%	3.7		%
Unsecured term loans	3.6			3.6			2.0
Secured revolving construction credit facility	—			—			4.5
Mortgage loans and other	3.5			3.5			3.7
Variable rate:
Senior notes	1.0			1.0			1.2
Unsecured revolving credit facility	1.0			1.0			1.0
Unsecured term loans	1.3			1.4			1.4
Commercial paper notes	0.2			—			—
Secured revolving construction credit facility	1.8			1.9			—
Mortgage loans and other	1.9			1.9			2.0
Total	3.4			3.4			3.4

The variable rate debt in the table above reflects, in part, the effect of $146.2 million notional amount of interest rate swaps with maturities ranging from March 2022 to May 2022, in each case that effectively convert fixed rate debt to variable rate debt. In addition, the fixed rate debt in the table above reflects, in part, the effect of $304.5 million and C$199.0 million notional amount of interest rate swaps with maturities ranging from January 2023 to April 2031 in each case that effectively convert variable rate debt to fixed rate debt.

The increase in our outstanding variable rate debt at June 30, 2021 compared to December 31, 2020 is primarily attributable to borrowings under our commercial paper program, partially offset by reduced borrowings under our secured revolving construction credit facility.

Assuming a 100 basis point increase in the weighted average interest rate related to our variable rate debt and assuming no change in our variable rate debt outstanding as of June 30, 2021, interest expense on an annualized basis would increase by approximately $15.5 million, or $0.04 per diluted common share.

As of June 30, 2021 and December 31, 2020, our joint venture partners’ aggregate share of total debt was $288.2 million and $271.6 million, respectively, with respect to certain properties we owned through consolidated joint ventures. Total debt does not include our portion of debt related to investments in unconsolidated real estate entities, which was $266.8 million and $213.0 million as of June 30, 2021 and December 31, 2020, respectively.

As a result of our Canadian and United Kingdom operations, we are subject to fluctuations in certain foreign currency exchange rates that may, from time to time, affect our financial condition and operating performance. Based solely on our results for the six months ended June 30, 2021 (including the impact of existing hedging arrangements), if the value of the U.S. dollar relative to the British pound and Canadian dollar were to increase or decrease by one standard deviation compared to the average exchange rate during the year, our Normalized FFO per share for the three and six months ended June 30, 2021 would decrease or increase, as applicable, by less than $0.01 per share or 1%. We will continue to mitigate these risks through a layered approach to hedging looking out for the next year and continual assessment of our foreign operational capital structure. Nevertheless, we cannot assure you that any such fluctuations will not have an effect on our earnings.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (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 June 30, 2021. 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 June 30, 2021, at the reasonable assurance level.

Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting during the second quarter of 2021 (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.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information contained in “Note 11 – Litigation” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated by reference into this Item 1. Except as set forth therein, there have been no new material legal proceedings and no material developments in the legal proceedings reported in our 2020 Annual Report.

ITEM 1A. RISK FACTORS

This section supplements and updates certain of the information found under Part I, Item 1A. “Risk Factors” of our 2020 Annual Report based on information currently known to us and recent developments since the date of the 2020 Annual Report. The matters discussed below should be read in conjunction with the risk factors set forth in the 2020 Annual Report. However, the risks and uncertainties that we face are not limited to those described below and those set forth in the 2020 Annual Report. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business, results of operations and financial condition.

Risks Related to the New Senior Investment Group Acquisition

We expect to incur substantial expenses related to the New Senior Investment Group Acquisition.

We expect to incur substantial expenses in completing the New Senior Investment Group Acquisition and integrating the business, operations, practices, policies and procedures of New Senior Investment Group. While we and New Senior Investment Group have assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond our and New Senior’s control that could affect the total amount or the timing of their integration expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. The expenses in connection with the New Senior Investment Group Acquisition are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.

We may not realize the anticipated benefits and synergies from the pending New Senior Investment Group Acquisition.

The New Senior Investment Group Acquisition involves the combination of two companies which currently operate as independent public companies. While we and New Senior Investment Group will continue to operate independently until the completion of the New Senior Investment Group Acquisition, the success of the New Senior Investment Group Acquisition will depend, in part, on our ability to realize the anticipated benefits from successfully combining our and New Senior Investment Group’s businesses. We plan on devoting substantial management attention and resources to integrating our and New Senior Investment Group’s business practices and operations so that we can fully realize the anticipated benefits of the New Senior Investment Group Acquisition. Nonetheless, the business and assets acquired may not be successful or continue to grow at the same rate as when operated independently or may require greater resources and investments than originally anticipated. The New Senior Investment Group Acquisition could also result in the assumption of unknown or contingent liabilities. Potential difficulties we may encounter in the integration process include the following:

•the inability to successfully combine our and New Senior Investment Group’s businesses in a manner that permits us to achieve the cost savings anticipated to result from the New Senior Investment Group Acquisition, which would result in some anticipated benefits of the New Senior Investment Group Acquisition not being realized in the time frame currently anticipated, or at all;

•the failure to integrate operations and internal systems, programs and controls;

•the inability to successfully realize the anticipated value from some of New Senior Investment Group’s assets;

•lost sales, loss of tenants and other commercial relationships;

•the complexities associated with managing the combined company;

•the additional complexities of combining two companies with different histories, cultures, markets, strategies and customer bases;

•the failure to retain key employees of either of the two companies that may be difficult to replace;

•the disruption of each company’s ongoing businesses or inconsistencies in services, standards, controls, procedures and policies;

•potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the New Senior Investment Group Acquisition; and

•performance shortfalls at one or both of the two companies as a result of the diversion of management’s attention caused by completing the New Senior Investment Group Acquisition and integrating our and New Senior Investment Group’s operations.

Any of these risks could adversely affect our ability to maintain relationships with tenants, managers, vendors, employees and other commercial relationships. As a result, the anticipated benefits of the New Senior Investment Group Acquisition may not be realized fully within the expected timeframe or at all or may take longer to realize or cost more than expected, which could adversely affect our business, financial condition, results of operations and growth prospects. In addition, changes in laws and regulations could adversely impact our business, financial condition, results of operations and growth prospects after the New Senior Investment Group Acquisition.

The pending New Senior Investment Group Acquisition may not be completed on the currently contemplated timeline or terms, or at all.

Consummation of the New Senior Investment Group Acquisition is conditioned on, among other things, adoption of the Merger Agreement by the stockholders of New Senior Investment Group. Neither we nor New Senior Investment Group can provide assurance that the conditions to completing the New Senior Investment Group Acquisition will be satisfied or waived, and accordingly, that the New Senior Investment Group Acquisition will be completed on the terms or timeline that the parties anticipate or at all. If any condition to the New Senior Investment Group Acquisition is not satisfied, it could delay or prevent the New Senior Investment Group Acquisition from occurring, which could negatively impact our business, financial condition, results of operations and growth prospects.

Failure to complete the pending New Senior Investment Group Acquisition could have an adverse effect on us.

Either we or New Senior Investment Group may terminate the Merger Agreement in specified circumstances. If the New Senior Investment Group Acquisition is not completed, our business, financial condition, results of operations and growth prospects may be adversely affected and, without realizing any of the benefits of having completed the New Senior Investment Group Acquisition, we will be subject to a number of risks, including the following:

•the market price of our common shares could decline;

•we will be required to pay our costs relating to the New Senior Investment Group Acquisition, such as legal, accounting, financial advisor, filing, printing and mailing fees and integration costs that have already been incurred or will continue to be incurred until the closing of the New Senior Investment Group Acquisition, whether or not the New Senior Investment Group Acquisition is completed;

•if the Merger Agreement is terminated and our board of directors seeks another acquisition, our stockholders cannot be certain that we will be able to find another party willing to enter into a transaction as attractive to us as the New Senior Investment Group Acquisition;

•we could be subject to litigation related to any failure to complete the New Senior Investment Group Acquisition or related to any enforcement proceeding commenced against us to perform our obligations under the Merger Agreement;

•we will not realize the benefit of the time and resources, financial and otherwise, committed by our management to matters relating to the New Senior Investment Group Acquisition that could have been devoted to pursuing other beneficial opportunities; and

•we may experience reputational harm due to the adverse perception of any failure to successfully complete the New Senior Investment Group Acquisition or negative reactions from the financial markets or from our tenants, managers, vendors, employees and other commercial relationships.

Any of these risks could adversely affect our business, financial condition, results of operations and growth prospects. Similarly, delays in the completion of the New Senior Investment Group Acquisition could, among other things, result in additional transaction costs, loss of revenue or other negative effects associated with delay and uncertainty about completion of the New Senior Investment Group Acquisition and could adversely affect our business, financial condition, results of operations and growth prospects.

The pendency of the New Senior Investment Group Acquisition could adversely affect our and/or New Senior Investment Group’s businesses and operations.

In connection with the pending New Senior Investment Group Acquisition, some tenants, managers, vendors or other parties with commercial relationships with each of us and New Senior Investment Group may delay or defer decisions, which could adversely affect the revenues, earnings, funds from operations, cash flows and expenses of us and New Senior Investment Group, regardless of whether the New Senior Investment Group Acquisition is completed. Similarly, current and prospective employees of us and New Senior Investment Group may experience uncertainty about their future roles with the combined company following the New Senior Investment Group Acquisition, which may adversely affect the ability of each of us and New Senior Investment Group to attract and retain key personnel during the pendency of the New Senior Investment Group Acquisition. In addition, due to operating covenants in the Merger Agreement, New Senior Investment Group may be unable (without our prior written consent), during the pendency of the New Senior Investment Group Acquisition, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial. We are subject to a more limited set of operating covenants that may limit or restrict our ability to act in certain circumstances.

Following the New Senior Investment Group Acquisition, we will have a substantial amount of indebtedness and may need to incur more in the future.

As of June 30, 2021, we had approximately $11.8 billion of outstanding indebtedness. This amount excludes the outstanding indebtedness of New Senior Investment Group, which as of June 30, 2021 was $1.5 billion, which may be repaid or remain outstanding (or a combination thereof) in connection with the New Senior Investment Group Acquisition. The instruments governing our existing indebtedness permit us to incur substantial additional debt, including secured debt, and we may satisfy our capital and liquidity needs through additional 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 make distributions to stockholders. A high level of indebtedness on an absolute basis or as a ratio to our cash flow could also have the following consequences:

•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 or healthcare industries;

•potential impairment of our ability to obtain additional financing to execute on 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, limiting our access to capital and increasing our cost of borrowing.

In addition, from time to time, we mortgage certain of 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 resulting loss of income and asset value.

Following the acquisition of New Senior, our asset concentration in senior housing real estate and reliance on a limited number of operators will increase.

New Senior’s investments are concentrated solely in the senior housing sector, with the majority of its assets managed by Harvest Management Sub LLC (doing business as Holiday Retirement Corp.) (which we refer to as “Holiday Retirement”). On July 30, 2021, Atria acquired the management services division of Holiday Retirement (which we refer to as the “Holiday Acquisition”). Currently, approximately 45% of our assets are concentrated in senior housing real estate (based on our second quarter annualized adjusted net operating income) and following the consummation of our acquisition of New Senior, approximately 48% of our assets will be concentrated in senior housing real estate. As a result, any factors that affect senior housing real estate will have a more pronounced effect on our portfolio following consummation of the acquisition of New Senior.

Additionally, as a result of the Holiday Acquisition and following the consummation of our acquisition of New Senior, our concentration of property management in Atria will also increase and we will have increased reliance on Atria’s personnel, expertise, technical resources and information systems, compliance procedures and programs, proprietary information, good faith and judgment to manage its senior housing operations efficiently and effectively. As a result, any failure or inability or unwillingness on the part of Atria to satisfy its obligations under its management agreements, or adverse developments in Atria’s business and affairs or financial condition that impacts or impairs its ability to manage our properties efficiently and effectively and in compliance with applicable laws, could adversely affect our business, financial condition, results of operations and growth prospects.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

We do not have a publicly announced repurchase plan or program in effect. The table below summarizes other repurchases of our common stock made during the quarter ended June 30, 2021.


	Number of Shares Repurchased (1)	Average Price Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs
April 1 through April 30	1,736	$	54.77	—	—
May 1 through May 31	1,810	55.45		—	—
June 1 through June 30	—	—		—	—
Total	3,546	55.12		—	—

(1)Repurchases represent shares withheld to pay taxes on the vesting of restricted stock granted to employees under our 2006 Incentive Plan or 2012 Incentive Plan or restricted stock units granted to employees under the Nationwide Health Properties, Inc. (“NHP”) 2005 Performance Incentive Plan and assumed by us in connection with our acquisition of NHP. The value of the shares withheld is the closing price of our common stock on the date the vesting or exercise occurred (or, if not a trading day, the immediately preceding trading day) or the fair market value of our common stock at the time of exercise, as the case may be.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

The exhibits required by Item 601 of Regulation S-K which are filed with this report are listed below.



Exhibit Number						Description of Document

2.1						Agreement and Plan of Merger, dated as of June 28, 2021, by and among Ventas, Inc., Cadence Merger Sub LLC and New Senior Investment Group (incorporated by reference to Exhibit 2.1 to Ventas, Inc.’s Current Report on Form 8-K filed on June 28, 2021).
22						List of Guarantors and Issuers of Guaranteed Securities.
31.1						Certification of Debra A. Cafaro, Chairman and Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.2						Certification of Robert F. Probst, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
32.1						Certification of Debra A. Cafaro, Chairman and Chief Executive Officer, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350.
32.2						Certification of Robert F. Probst, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350.
101						The following materials from the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2021, formatted in XBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Equity, (v) the Consolidated Statements of Cash Flows and (vi) Notes to the Consolidated Financial Statements.
104						Cover Page Interactive Data File (formatted as inline XBRL).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 6, 2021


			VENTAS, INC.

			By:			/s/ DEBRA A. CAFARO
						Debra A. Cafaro Chairman and Chief Executive Officer

			By:			/s/ ROBERT F. PROBST
						Robert F. Probst Executive Vice President and Chief Financial Officer