Ventas, Inc. Q1 FY2020 Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Q1 2020 Ventas Earnings Conference Call. At this time, all participant lines are in a listen-only mode. Operator Instructions. I would now like to turn the conference over to your speaker today, Mr. Juan Sanabrial.

Thanks, Cindy. Good morning and welcome to the Ventas conference call to review the Company's announcement today regarding its results for the first quarter ended March 31, 2020. As we start, let me express that our projections and predictions and certain other statements to be made during this conference call may be considered Forward-Looking Statements within the meaning of the Federal Securities Law. The Company cautions that these forward-looking statements are subject to many risks, uncertainties and contingencies and stockholders and others should recognize that actual results may differ materially from the Company's expectations, whether expressed or implied. Ventas expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any changes in expectations. Additional information about the factors that may affect the Company's operations and results is included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and the Company's other SEC filings. Please note the quantitative reconciliations between each non-GAAP financial measure referenced on this conference call and its most directly comparable GAAP measure as well the Company's supplemental disclosure schedule are available in the Investor Relations section of our website, www.ventasreit.com. Before I hand the call off to Debra Cafaro, Chairman and CEO of the Company. I would like to note that, we posted an investor presentation this morning on our website, which includes a COVID-19 business update to this helpful information that the team will reference in our prepared remarks. With those formalities out of the way, I will hand it over to Debbie.

Thank you, Juan, and good morning to all of our shareholders and other participants and welcome to the Ventas' first quarter 2020 earnings call. I sincerely hope that you and yours are safe and healthy. Today, the Ventas team is working remotely, but we are together in spirit as we outline our outstanding first quarter results, describe the challenging conditions in the markets, the economy and our Company brought on by the terrible COVID-19 pandemic, discuss near-term business trends and evaluate the macro outlook. At this time, we face unprecedented conditions nationally and globally created by the pandemic. Those of us in real estate who have been around a long time have managed through many severe crises over the decades, including the 9/11 terrorist attacks and the great financial crisis, and the deep recession that followed both. Yet today's complex mix of public health, remote working, economic, operational and market conditions make this pandemic a uniquely challenging adversary. Let me begin today by setting the stage and then outlining the swift and decisive actions we have taken to ensure that Ventas remains strong and stable. As we rolled into March, we were excited to see how our previously announced initiatives were gaining traction and making an impact and how well our overall enterprise and each of our business lines were performing. You can see the power of our diversified business model in the strong normalized FFO per share results we reported today at $0.97 per share, inclusive of the financial impact of COVID-19 toward the end of the quarter. In short, we were hitting on all cylinders with terrific momentum. As soon as we realized the potential scope and impact of the novel Coronavirus in February and early in March, we identified as our key priority the health and safety of Ventas’ employees and their families and the employees, patients and senior living residents in our 1,200 healthcare sites. Although this particular crisis reflects a unique combination of forces, our experience, deep analysis based on early real time inputs and core principles have given us a solid framework for action. Here are some of the strong measures we have taken to preserve and protect the Company and the many stakeholders who depend upon us. We have devoted significant efforts to support our tenants and operators across our portfolio during the COVID-19 pandemic. We have established financial support programs for those who are experiencing financial hardship. We have assisted operators who may be eligible for complex and various government programs, and we have leveraged our national scale to help operators source supplies, including scarce Personal Protective Equipment or PPE. And today, we have announced a powerful new initiative for Ventas senior living operators. Ventas will be providing access to COVID-19 testing kits and analysis from Mayo Clinic Laboratories without charge to certain of our senior housing operators to further enhance safety at Ventas communities by accelerating employee testing. Ventas and Atria, working through Atria's ongoing relationship, have secured access to testing capacity in excess of 30,000. Atria is already nearly done testing all of its 14,000 U.S. on-site and regional staff with approximately 9,000 results in; less than 1% of Atria's employee tests have been returned positive. Combined with digital tracking and tracing and appropriate use of PPE, Atria is building a new normal model to run its senior housing business safely and thoughtfully. In a positive sign, Atria has moved in 300 residents since early March all under full quarantine and PPE protocol. Ventas plans to make available to certain of its other operators at least 10,000 COVID-19 test kits and analysis from Mayo Clinic Labs. ESL will be the next Ventas operator to use this testing for its Ventas communities, and it is already getting ready to test all its staff in May. We look forward to finding more ways to work with Mayo Clinic Labs and our operators to further enhance safety in our communities for residents and caregivers. We will continue to evaluate additional action as appropriate. Second, on our action hit list, we moved early to review and implement our pre-existing business continuity plan so we could maintain a high level of productivity and manage a seamless transition to remote working arrangements. With an interdisciplinary team of Ventas leaders coordinating our efforts, strong IT support and capabilities, full buy-in by our employees and enhanced communication, the company experienced no downtime and we have been highly effective during these challenging times. I'm so proud of how Ventas employees have reacted and rallied and I want to thank them for their extraordinary efforts. Third, we are pleased that we have reached a positive consensual resolution of our Holiday lease. After receiving full rents from Holiday since lease inception in 2013 through the end of the first quarter 2020, we have now received an additional $100 million in cash and secured notes. We have entered into a new management agreement with Holiday for 26 independent living assets and we have terminated the Holiday lease all effective April 1. This management structure retains our upside in our 26 communities and provides us with operational flexibility. We appreciate Holiday management's engagement and cooperation to complete this transaction. Fourth, we were excited to augment our leadership team with Justin Hutchens and Carey Roberts when they joined Ventas on March 4. Justin and Carey have added new energy and insight to our tight-knit group at this crucial time. They've already made many meaningful contributions to Ventas as we have collaborated to analyze and attack the business challenges presented by the pandemic. Our experience has instilled in us the importance of liquidity in a crisis. As a result, we shared the courage of our convictions in mid-March by drawing on our revolver and then issuing senior notes generating $3.3 billion in liquidity. This financial flexibility will serve us well as we manage through to the other side of the COVID-19 pandemic. In addition, we further enhanced our financial flexibility by acting immediately to reduce 2020 capital expenditures by $300 million, mainly by pausing certain of our previously announced ground-up developments that were not yet substantially underway. We are also carefully reviewing other areas of our Company for cost savings, including general and administrative expenses. At the same time, we promptly withdrew our financial guidance on March 17, nearly two months ago, when our early analysis informed by real-time data led us to conclude that our financial performance could be materially affected by the pandemic. Our foresight proved correct and we fulfilled our commitment to transparency to our stakeholders by the actions we took in a timely way. Finally, Ventas has served and continues to work tirelessly as a proactive and evidence-based advocate for seniors to federal policymakers. Working with industry groups and in alliance with senior living CEOs, we are demonstrating the crucial role senior living care providers play in protecting our senior population that is particularly vulnerable to this novel Coronavirus. While we have taken plenty of actions, policymakers have done exponentially more. The Fed, the administration and Congress have implemented a comprehensive array of bold policy actions to partially mitigate the virus' severe implications for public health, capital markets and the economy. Many businesses and households, including many of our tenants and operators, have already benefited from this arsenal of federal programs. With this powerful support and more financial relief likely to follow, it is our responsibility now to take action to safely and responsibly move our Company toward a new normal. As we do so, our visibility is limited and uncertainty remains very high. Indeed, we face the COVID-19 paradox: on the one side, reputable models and even certain government projections show an expected increase in COVID-19 confirmed cases and mortality numbers in many jurisdictions. These expectations, if they materialize, could derail even the best-laid plans for economic recovery. And this morning we saw historic levels of unemployment claims in the U.S. On the other hand, there is palpable optimism in the air as most states plan staged re-openings of their economies and businesses, many companies including ours are preparing for a gradual return to office work, patients and physicians are scheduling appointments and elective procedures, families are making deposits for senior housing move-ins, universities are planning to welcome students in the fall, and most importantly, our best scientific and medical minds are racing to find treatments, cures and vaccines for the Coronavirus. We are proud to say that many of our key research and innovation university relationships and tenants, including Duke, Wake Forest, Penn, Yale, and Integral Molecular are at the forefront of this research. All these promising developments provide hope for a speedier and sustained bounce back. We don't have to know how these opposing trends will play out. Our job is to preserve and protect our Company and our stakeholders, and be ready for a variety of scenarios and opportunities. Before closing, I want to address our dividends in the context of this COVID-19 uncertainty. As you know, we declared and paid our last quarterly dividend in April. Because we normally pay our next dividend in July, our board will consider the dividend in mid to late June. As it always does, our responsible and experienced board will make a decision using its good faith business judgment, taking into account all of the information available to it at that time. In a situation like the fast-moving, rapidly changing global pandemic, we have the advantage of aggregating and analyzing the best and most current information available in order to make the optimal decision. The company and its team are well prepared to manage through current conditions and to take further action as necessary. Guided by our experience, analysis and ethics, we will safeguard our employees, our senior housing residents and caregivers, our capital and our reputation, so that Ventas will remain a leading healthcare property owner in the businesses and geographies where we invest, a desirable employer and an attractive investment vehicle. And now for the first time, I'm pleased to ask Justin Hutchens to address you about Ventas’ senior housing business.

Thanks, Debbie. Let me just start off by saying I'm extremely excited to be working with the Ventas team. Given the circumstances, I have certainly had the opportunity to jump right in and immediately put my operating experience to work. I'm also happy to be working again with long standing colleagues and industry leaders like Atria, Brookdale, ESL, Holiday, and Sunrise. COVID notwithstanding, I see great opportunities ahead for Ventas in its senior housing business. In my first Ventas earnings call, I would like to discuss the momentum the SHOP same-store portfolio showed in the first quarter, outline how Ventas has worked with integrity to support our tenants and operators during a very challenging time, describe the operational and clinical environment in SHOP and triple-net, delve into April and May trends and provide our outlook for safe and staged reopening in senior housing. Our SHOP portfolio started the year ahead of our expectations and with good momentum. Sequentially, NOI in our same-store SHOP portfolio grew 2.3% in the first quarter with COVID costs embedded. Without COVID impacts, NOI grew 6% versus the fourth quarter, with credit due to solid sequential performance from Atria through strong rate growth and expense control, and some welcome stabilization from ESL. As expected, the year-over-year same-store SHOP comparisons were negatively affected by $6 million in COVID costs incurred in the quarter, the reduction in occupancy as a result of COVID in the back half of March, as well as the previously discussed lower starting point heading into 2020. Excluding COVID costs, the year-over-year same-store NOI would have declined 6.9%, better than our expectations given the difficult prior year comparison. While we are mostly focused on the impact of COVID-19 to our operating performance, it is worth noting new construction starts in senior housing continue to decelerate with the first quarter of 2020 having the lowest number of new starts in several years in Ventas markets. Moving to our support for senior housing tenants and operators, I have been proud that Ventas has been out front and willing to work with integrity in support of our senior housing tenants who are on the front lines of caring for seniors. This support has taken many forms. I will just focus on some creative programs we have offered to our triple-net tenants. The company offered support to its triple-net senior housing tenants affected by the COVID-19 pandemic by implementing a 25% rent deferral program in April to enable them to care for seniors, purchase needed supplies and pay employees. This program ultimately reduced April cash rent receipts by approximately $3 million. Adjusting for this tenant support program, tenants paid substantially all triple-net senior housing rents in April. For the month of May, the company offered qualified senior housing tenants the opportunity to pay up to 25% of their rent with cash as escrows and security deposits and based on participating tenants, we expect about $2 million of our rent to be paid this way. We are encouraged to see that some of our tenants have availed themselves of government relief programs for which they are eligible. We will continue to engage in constructive ongoing dialogue with our triple-net tenants regarding their COVID-19 challenges on a case-by-case basis. We have many tools available to us to work through near-term conditions including our backstop of corporate and personal guarantees and over $100 million of security deposits that stand behind these lease obligations. Turning to the clinical and operational environment, these trying times underline the importance of partnering with true industry leaders. We have been inspired by the tireless work of our operating partners to keep seniors safe. Senior housing operators across the industry continue to aggressively implement protocols to protect against COVID-19. The result of these protocols is that almost all operators are only offering virtual tours and at the present time about 29% of our 400 SHOP communities have suspended their move-ins. In terms of the clinical impact on our SHOP portfolio as of April 30, it is a tale of two cities. Having a large New York and New Jersey footprint is a strategic advantage for Ventas, but those states were the epicenter for the COVID-19 infection and mortality rate. On a full portfolio basis, about a quarter of our SHOP communities experienced at least one positive COVID-19 resident diagnosis since the beginning of the pandemic, registering cumulative resident cases at slightly over 2% of the resident population. Excluding New York and New Jersey, these figures improved dramatically with only 1% of our residents cumulatively affected since day one. In our triple-net senior housing portfolio benefiting from geographic diversification, the percentage of resident cases is 1%. As is best practice, the care providers go to great lengths to isolate or transfer to a higher acuity setting the limited number of residents who receive a positive diagnosis. Brookdale in particular has been compassionate, but also fairly disciplined and rigorous in its preparation for and management of COVID conditions for the benefit of residents and their families. In SHOPs, as a result of restricted access to communities nationally, April move-ins approximated 25% of typical levels while overall move-outs were largely in-line with historic patterns. April average occupancy was approximately 82.4%. As of May 1, spot occupancy was estimated at 80.7% representing a 330 basis point decline since the beginning of April based on interim information provided by Ventas operators. When excluding New York and New Jersey, occupancy would have declined 280 basis points. Operating expenses are trending around 10% higher, particularly for labor and supplies including PPE. These revenue and expense trends we are seeing for April are expected to continue in May. Financial and operational trends are expected to be directionally similar for our triple-net portfolio in the second quarter. For senior housing overall, as we look beyond the second quarter, there are three critical considerations we are monitoring that will materially affect the outlook for senior housing: one, timing of reopening of communities to physical tours and move-ins; two, cost and access to labor; three, local demand characteristics including evolving protocols required to protect against the virus. The timing of openings will be driven by state-specific guidelines, CDC guidelines and local community considerations. Ventas along with our operating partners is closely tracking state-specific guidelines and COVID infection curves in each of our markets. I'm encouraged to report that we have roughly 300 deposits for move-ins, which is a good sign of ongoing demand for our senior housing communities. Senior housing operators will find success in many ways, including and most importantly building trust with prospective residents and their families by demonstrating a concerted effort to keep communities free of infection. To do so, we anticipate elevated levels of costs over the course of the next several months. Trust and confidence in senior housing in the near-term will be supported with best-in-class infection control practices, availability of PPE and testing residents and employees. As Debbie described, Ventas has played an important role alongside our operators and tenants to combat the pandemic and helping operators prepare to open successfully. Through this challenging stretch, we continue to resolutely believe in the long-term value that senior living offers residents and their families and are sharply focused on positioning Ventas’ senior housing business for long-term success. With that, I will hand the floor to Pete to discuss our office business.

Thanks Justin. We are certainly glad to have you and Carey on board. I will quickly touch on the first quarter results for our office segment, which represents 27% of Ventas NOI and then focus on the latest trends in our latest second quarter COVID framework. For the first quarter of 2020, office same-store cash NOI increased by 5.8% year-on-year. This outstanding result was fueled by our R&I portfolio, which grew 22% driven by strong lease up and complemented by strong performance from the MOB portfolio. In R&I, first quarter average rent per square foot was up 9.4% and occupancy was robust at just under 97%. Strong performance at our university based developments affiliated with University of Pennsylvania in Philadelphia and Washington University in St. Louis fueled our growth. Complementing the fast growing R&I business is our MOB business. MOB same-store cash NOI for the first quarter of 2020 increased 1.9% year-on-year, also above our expectations. Now let's shift to the latest COVID trends we are seeing in our office portfolio. I will start with medical office. Our top priority has been to partner with our tenants and the associated health systems to ensure the safety of health professionals, patients and our employees. We have sourced substantial amounts of PPE, coordinated visitor screening, licensed short-term spaces, set up drive-through testing centers in our parking lots, provided supplemental cleaning and otherwise supported our tenants during this challenging time. We are happy to report that all of our buildings are open and none of our site-based employees have tested positive for COVID-19. We sincerely thank all of our on-site employees and partners who fight the fight every day. We are very proud of them. I will also say regarding our MOB business, that parking receipts have slowed and while safety concerns have caused an increase in cleaning costs. Given the current uncertainty, the pace of new leasing has slowed. However, we still leased 573,000 square feet during the first quarter and 381,000 square feet during April, with an additional 200,000 square feet of leases at the letter of intent stage. Also, tenant retention has increased. I'm proud to say that MOB reported record retention of 83% for the trailing 12 months, 90% retention for the first quarter, 94% retention for March and an outstanding 98% in April. Turning to our R&I portfolio. Our R&I buildings are 100% open and are supporting critical research focused on the detection, prevention, and cure of COVID-19. We are proud to be partnered with leading research institutions such as Yale, Penn Gene Therapy Center, Wake Forest Health Sciences, Virginia Commonwealth University, Integral Molecular, Alexion and others in fighting this virus. And we look forward to expanding our portfolio with other leading research institutions such as Arizona State and University of Pittsburgh in new under-construction, world-class research buildings. As previously mentioned, our R&I portfolio is 97% leased with an active leasing pipeline. Last phase continues to be in high demand. Net-net as of April 30th, we had 91.5% occupancy in our office business, representing a 150 basis point year-on-year increase from April 2019. From March 31st through April 30th, we experienced a 10 basis point increase in occupancy for MOB and a 10 basis point increase for R&I. So, let's talk rent payments. During the first quarter, our tenants paid essentially 100% of the office rent. Our historical bad debt expense has only been 20 basis points. We have high quality tenants that pay their rent. In April, our tenants paid 96% of office rents. We expect a significant proportion of the unpaid rent to be ultimately collected. And I’m encouraged that so far in May, our office tenants have paid nearly 80% of the rents due; to date we are seeing a faster payment rate than what we experienced in April. I will say the tenants experiencing the most pressure are the smaller third-party physician groups in MOB, the smaller private companies in R&I and retail. Taken together, these customer segments represent a relatively small portion of our office portfolio. We are supporting these tenants by raising awareness and assisting them with securing federal relief. On a selective basis, we are also offering to defer May rent for these small tenants to be repaid no later than the fourth quarter. To date only a small number of tenants have utilized the rent deferral opportunity. Supporting the durability of our office portfolio are a couple of additional facts. First, our MOB portfolio is largely on campus at 71%. We also have a high level of acuity in our buildings, with 88% of our physician tenants being specialists. Our buildings and our tenants are essential to the delivery of care during this difficult time. Less than 10% of our tenant suites closed during the pandemic. Second, as of May 7th, over 80% of the MOB NOI is in states that have either reopened for elective procedures or have announced the resumption of elective procedures. In locations that have reopened, we are seeing material increases in activity, although still below pre-COVID levels. As a reminder that our nation is resilient and that normalcy returns following catastrophes. I'm happy to report that Ventas is delivering a project that was devastated by Hurricane Michael in 2018. With that happy news, I will pass the turn to Bob to finish up our prepared remarks.

Thank you Pete. I will start with our triple-net lease portfolio overall before I close with some enterprise level commentary. The triple-net portfolio grew same-store cash NOI by 3.9% year-over-year in the first quarter. Growth was driven by in-place lease escalations, and a $3 million cash fee received in the quarter from Capital Senior Living. Trailing 12-month coverage as of the fourth quarter of 2019 for the overall triple-net portfolio and for triple-net senior housing remains stable at 1.5 times and 1.1 times respectively. Post-acute coverage declined sequentially by 10 basis points to 1.3 times due to a decline in volumes at Kindred, driven by managed care and purposeful reduction of non-compliant patients. Adjusting for the 25% rent deferral program in senior housing, we collected close to 100% of our overall expected triple-net portfolio rents in April. We have already received almost 100% of triple-net healthcare rent for May and we are on-track with triple-net senior housing May collections. We expect the impact of COVID on our triple-net healthcare rents from acute care providers to be muted in the second quarter. Acute care hospitals have been impacted by the reduction of elective procedures, but have had significant access to government funding and support. Additionally for Ardent, as of May 1st, all 10 of the Ventas-owned hospitals have reopened or will reopen in May for elective procedures. For the post-acute providers in our triple-net healthcare portfolio, volume trends have varied. Deltek Ventas has been higher than budgeted, the costs have increased. We expect that the concern over respiratory disease will enhance Kindred and Deltek business going forward. Urban census initially declined due to lower surgeries and acute care volumes, but census has improved since mid-April. Skilled nursing providers are experiencing notably higher mortality rates with census down dramatically and the most profitable rehab patients also down. Positive post-acute trends include access to government funding, relief from site neutral pricing, waiver of length of stay requirements and the 2% sequestration delay. I will close with some comments regarding the overall enterprise and our financial position. I want to underscore how pleased we are with our first quarter results including property performance ahead of our expectations, record quarterly revenues, strong FFO delivery of $0.97 per share and enhanced balance sheet: 5.7 times net debt to EBITDA and excellent liquidity. And we took decisive action in the face of the pandemic to bolster our financial flexibility. In March, we drew $2.75 billion under our $3 billion revolver and followed it up in early April with a $500 million senior note issuance. As a result, as of May 6th, Ventas has approximately $3.2 billion in cash and cash equivalents on hand with no commercial paper outstanding. We also have very limited debt maturing in 2020 or 2021 and we have the ability to extend our revolver for up to one year. We plan to bolster financial flexibility by reducing 2020 total capital expenditures by nearly $300 million to a total of $500 million with the decline led by pausing ground-up developments not yet substantially underway, notably one in Philadelphia and 42/10 in St. Louis. Our ongoing development projects are on average 81% pre-leased to high quality credit tenants in the R&I business. I note that Ventas has a $400 million committed construction line of credit to fund development with $250 million of available capacity as of the end of March. Ventas' expected unfunded investment in all ground-up developments in 2020 net of committed financing is approximately $100 million. In addition to conserving CapEx, the company is reviewing its cost structures across the enterprise, including its SG&A and organizational costs. As Debbie says, we are on it. Given our early understanding of the potential impacts of the pandemic, Ventas withdrew previously issued financial guidance on March 17. We believe the adverse impact on our operating results and financial condition will be driven by many factors, most of which are outside of the Company's control and ability to forecast. Wherever possible to provide investors with incremental observations and transparency, we included today the investor deck outlining our COVID response and latest business trends, as well as expanded disclosure as summarized on Page 44 of the supplemental. To close, we are pleased with our start to the year and with the actions taken thus far, and are committed to continuing to take the actions necessary to manage through these unprecedented times. That concludes our prepared remarks. Before we start with Q&A, we are limiting each caller to two questions given a busy calendar. We request from a few analysts to be respectful of everyone on the line. Also, given the fact that we are all remote, we will have Debra quarterback the Q&A and to pass questions to the Ventas team if needed. With that, I will turn the call back to the operator.

Operator Instructions. Your first question comes from Nick Joseph from Citi.

Thank you, I appreciate all the color and specifically on April and May rent collections for net lease. You addressed Holiday this morning, but do you expect additional net lease restructurings over the next few months?

Good morning Nick, it's Debra. I'm going to ask Justin to comment on that.

Thank you Debra. First of all, I think it is important to know our biggest priority is that our operators are looking out for the health and safety of our residents in our communities. That is priority number one in the near-term. I will also point out, as I mentioned in our prepared remarks, that we have already started to take action; we mentioned the rent deferral in April, we mentioned the opportunity for tenants to pay some of their rent with their cash escrows in May and the Holiday restructuring. What we are committed to do is to take action that is going to give us the best opportunity to create value in a portfolio and work with our operators to determine the best outcome. It is still early, some uncertainty lies ahead of us, but we will certainly be watching everything closely.

Debra, it is Michael Bilerman. I think Bob mentioned in his comments about sort of looking at all forms of cost within the enterprise. Can you sort of address corporate management pay levels and whether that is on the docket and how investors should think about that from a governance perspective, whether there would be any changes from the Chairman and CEO role which you continue to maintain?

Sure, and I'm happy to talk about that and turn it over to Bob for a little bit more detail. But most of our executive compensation is very aligned with shareholders and the vast majority is in the form of performance-based equity compensation. When you think about the overall enterprise, I'm going to turn it over to Bob to talk about some of the insights he has about making sure that the company is efficient and cognizant of the environment that we are in.

Sure. This is an analysis Michael that again pre-COVID that is the analysis of our SG&A. We are well underway in that analysis. Everything I would say is on the table as we think about that. I would expect to have some more news this quarter as we are well underway on that analysis and we do see opportunity. But at the end of the day, we have a 20-year record of being efficient and effective and that continues to be our goal and we have a duty to make sure we are doing that.

And Debra is there anything on splitting the Chairman and CEO role?

I think that, consistent with the idea that one of the cost efficiencies, our expectation is that I would continue to hold those roles, obviously serving at the pleasure of our shareholders and our Board of Directors.

Your next question comes from Rich Anderson from SMBC.

Hey, thanks. Good morning everyone and hello to you, Justin. So, just on the Holiday and maybe an extrapolation from that. So EBITDA below rent, so it is obviously a dilutive transaction. Understanding kind of the thought process on taking Sabra’s roadmap on Holiday. And so, I'm curious in the aftermath of all this, do you feel like net lease is becoming an increasingly dying breed for Ventas and you want more control that goes through Brookdale and others or is this a one-off type of thing and you still think that there is a role for triple-net to play in senior housing in the aftermath of all this?

Good to talk with you, Rich. Let me take that. A couple of things. One is we are pleased with the Holiday transaction. We think it really does a lot of good things and we are happy to take a page out of our friends' book, and we preserved upside in the assets and a lot of operational flexibility. So, we feel good about that and look forward to optimizing that portfolio. In terms of the triple-net lease, what I would say is triple-net leases are a little bit like mortgages in one sense, which is that they magnify ups and downs for the operators and in any challenging environment they are going to be disfavored. And of course that is the situation we find ourselves in now. In other environments, they could be very attractive to both landowners as well as the operators. So, I think there are many tools in the toolkit, and the triple-net lease I think will continue to be one. And there are many ways that you can customize leases also to create alignment. So, we think the triple-net lease will survive and we think we will continue to be creative and collaborative in how we work with our operators, be they tenants or managers, in optimizing our portfolio and being good partners.

Okay. I prefer arrows in the quiver, but that is just me.

That is a good one too. Absolutely.

Your next question comes from Nick Yulico from Scotiabank.

Good morning everyone. So, in terms of the Holiday restructuring just to make sure I understand how this is going to work. In terms of the money that you are receiving from them — the cash and then the notes — are you going to be actually booking any income from those two items in the second quarter and in terms of the notes, the 9% rate, is there any component that is cash interest that you are receiving?

Great question. Yes, the cash and notes are effectively income and I think we mentioned this in the release and so those will be included in net income and yes we actually would expect as part of our ongoing notes we would expect to book and receive some amount of interest income as we go forward.

Is any of that cash income from those notes?

We would expect it to be cash, yes.

Okay, thanks. And then I was just hoping to get a feel for — I know you gave us a coverage on Holiday as a trailing number. Is it possible to get the quarterly first quarter EBITDARM for those assets so we can understand exactly from an NOI standpoint as you now have this operating NOI what the delta is going to be between the old $60 million of cash NOI you got on the lease versus on a real time basis, realizing things are going to move around still, but at least on the first quarter number record what that looks like from an operating EBITDARM basis?

Right, I mean we have had Holiday in the heat map obviously and it had been below a 1.0 EBITDARM basis, so as we reported the last time and really what I would say is that just like everything else in the portfolio, it is really going to depend on how the pandemic really plays out and so I think we will just defer that as we get more real time information about the portfolio. I'm happy to talk to you about it as things progress.

Right, I guess, but I mean you guys do have an actual number I'm assuming that for the first quarter and so I was trying to see if we can at least get that number so we can use that as a base to then build off some assumptions.

Yes, I mean, I think you should look at about a 0.9 EBITDARM coverage, something like that in the first quarter, rough numbers.

Your next question comes from Vikram Malhotra from Morgan Stanley.

Sorry, I had myself on mute. I just hope everyone on the team is okay and doing well. Debbie, you referenced the dividend in your prepared remarks and I just want to clarify one thing. I'm assuming the dividend is all cash today and just as we think about the dividend going into the second quarter, what are sort of the metrics? What are you looking at? Maybe give us a sense of where AFFO versus the dividend could trend even just percentage-wise. What are some of your puts and takes if you think about the dividend?

Thank you. Yes, I mean, I think really want to just touch on the fact that while we are in this period of uncertainty, we generally want to match our decision making speed with what is required. And our Board is going to look at all relevant information when it addresses the dividend, as I mentioned in mid to late June.

Okay. And the dividend is all cash currency?

It has been, yes Vikram.

Okay. And then just second, as you and Bob outlined the expectations for occupancy in the next few months and it was about 100 basis points per month in the RIDEA portfolio. Can you give a broader sense of the ins and outs in terms of assumptions for move-ins versus move-outs and as an aside, if we could request more monthly or weekly updates, that would be great.

Sure. I will give you some building blocks Vikram using April as our case study here. We saw move-ins approximately 25% of our historic levels or down 75%, to put it the other way. The move-outs have trended pretty consistently with historical patterns and the net of that is approximately a 70 basis point impact on occupancy on a weekly basis. One way to think about revenue impact is that, and this is on Page 7 of the investor deck if you haven't seen it, a 100 basis points of occupancy generally sequentially on average equates to about $2 million to $3 million of revenue per month. So you can do the math there. And we expect that trend as we see it right now to carry on into May. On the expense side, we mentioned about 10% OpEx increase, driven by labor and supplies including PPE. We had about $125 million of monthly OpEx in our SHOP portfolio, so it gives you some more facts if you like to do the math.

I guess I was just trying to understand the move from the 330 basis points loss in the month of April down to a 100 per month. And I was just trying to understand more specifically like what are you assuming changes from April to May through June?

Let me clarify, just to make sure we are on the same page. The 330 basis points was the spot-to-spot effectively beginning to end of April occupancy moves. And my 100 basis points was simply a rule of thumb to help you. That is an important clarification. Beyond what we are seeing in April and early May, I'm not able to project what I think is going to be for the second quarter, for example. But those will give you some building blocks to make your own assumptions.

This is Justin. I'm going to add a little color that might be helpful and I will just preface this that I'm going to give you April average occupancy numbers that are presented by our operators and these are fully vetted — we only report these numbers. But I'm going to compare March first. So March average occupancy was 85%, April average is at 82.4%. So there is a 260 basis point difference. If you take New York and New Jersey out, as I did in my prepared remarks when I was using spot occupancy, March average is 85.1, April at 82.9. So, the 220 basis point change.

And that shows the difference between really the quote-unquote spot beginning of month to end of month versus the average occupancies for the month.

Your next question comes from Michael Carroll from RBC Capital Markets.

Debbie, I just wonder if you could add some color on the testing capabilities that you are providing your operators. I don't know if you said this or if I missed it, but are you able to provide enough tests for all the residents or staff at the facilities or what in depth are you able to offer right now in that relationship?

Great. We are very excited about this initiative and we are taking the first step with Atria and it is really to accelerate employee testing at Ventas buildings with select operators to make our communities safer, and facilitate thoughtful reopening and confidence and trust as Justin talked about. We have this first complement of 10,000 testing kits with Mayo Clinic Labs’ analysis, which is very important — they have a very high accuracy rate at Mayo, as you would imagine — and we really think this is a great first step that we can make available. Atria has already done it, ESL will be next and we will make it available to select operators, principally for their employee testing program. Once we see how that goes — again, we are in early days, there is still a lot of uncertainty, new testing tools come out all the time — we will determine if we want to ramp up or if we want to take a different step moving forward, but we think this is a great opportunity to do the right thing and really have a differentiated partnership with our operators and really build that trust and confidence with residents and their families that is so sorely needed.

And then what is the turnaround time? How long does it take to get test results and I guess if you have confidence that at least your employees are not affected by COVID, is there discussion that you could reopen those communities or is it still too early to tell?

The turnaround is a day or two and it will indeed build confidence as a component of the thoughtful reopening and admissions plan.

All of our operators are considering the move-in protocols at this point, and about 70% of our operators are operating in states that are starting to loosen their stay-at-home policies. So this is a very active conversation. The advantage that testing gives you is it provides much more certainty around the potential for spread of infection. But the other advantage is it is recognized in the CDC guidelines. If testing occurs, then it can accelerate the time that someone can move in, where the regular quarantine is around 14 days and the testing allows for something closer to two or three days.

Your next question comes from Jordan Sadler from KeyBanc Capital Markets.

Thank you, and I hope everybody is doing well. My first question is maybe for Bob. Regarding the revolver draw down and some subsequent repayments post the senior note issuance in April, you did mention in your conversation that Ventas is past the peak for mortality in your SHOP assets and in triple-net. I'm curious — I know you are waiting till the last minute to make a decision on a dividend — but what do you want to see with the virus before in order to sort of pay down those borrowings and sort of what is that sort of draw down? Is that reflecting concerns around the ability to potentially borrow?

Well, I will turn it over to Bob, but one thing we know for sure is having gone through many decades of this that having assured liquidity is the number one, two and three attributes that you want to have to manage successfully through any kind of uncertainty. And so we have that and that is kind of a golden rule and it served us very, very well. In terms of the pass of the peak, again there are numerous models and there is a lot of uncertainty, but at a point in time a lot of our NOI in our senior housing and triple-net is in states where according to certain models the peak of mortality is behind us. Now that could change again and that of course would affect our outlook.

That is helpful. I guess I'm trying to understand the difference between that assured liquidity as it relates to that revolver borrowing versus the dividend that you actually pay. So there is some uncertainty surrounding the potential to be able to draw or have access to cash, but it seems like you are not yet willing to sort of cut the dividend down to zero in order to sort of stay off or protect yourself from any uncertainty — maybe I'm misreading that.

Yes. I mean, I think what we have said clearly about the dividends is that the board will make that decision at the right time, which historically is our July dividend and so that would basically defer that decision to be made by our board until mid to late June. Do you have a question for Bob about the revolver draw Jordan?

I think you answered it. But maybe Justin — I wanted to welcome you back to REIT land. Unfortunately under these circumstances. A couple years ago you spun off the skilled nursing portfolio at a time when there was no real distress in that sector. Any thoughts surrounding management and or the potential spin of the senior housing portfolio or is that way too soon?

Yes, I think that when we spun off skilled nursing we really did that at the absolute peak time in valuations and we continue to believe that was a very sound strategic decision, particularly as we look at infection mortality rates in skilled nursing now. Given all the uncertainty right now we are focused on health and safety as Justin said and really just a strong effort to keep Ventas strong and stable and get ready for any scenario and the opportunities in the future. So we will defer that discussion if you don't mind.

Your next question comes from Joshua Dennerlein from Bank of America.

I'm just curious on the Holiday switch to the management contract. Was that something you were in discussion with before the pandemic or was the pandemic the driver that got you going on that discussion?

We have talked about Holiday for a while and have been pretty clear about what the performance was over the past couple of years. I think we were in a good spot because Holiday remained current and paying full rent all the way through the first quarter and they have been great about that and we were the sole beneficiary of the guarantors. So we felt like we were in a good spot. But we did feel mutually that it was the right time to take a different approach and we did so in a way that we think was beneficial for both and preserved upside and operational flexibility. So we are happy that we have done it, and we are going to optimize that portfolio especially now that Justin is here.

On the senior housing triple-net rents, you mentioned offering in May to allow up to 25% of the rent to be paid from escrows, you expect about $2 million to be paid that way. Do you have a sense of what percent of tenants are taking advantage of that and later on would you require the tenants to backfill those deposits?

It is actually a very low percentage. If you think about around $30 million of rent per month and only around $2 million or up to $2 million we think will be paid with cash escrows or security deposits, so not a lot. I will mention two other things on the triple-net: one is that our May collections are looking right on track, so looking good in May. Also some April tenants that took advantage of that deferral have already paid back. So that was a good encouraging sign as well, and in those cases there were smaller operators that had advantage of government assistance. But the tap was to allow some liquidity for operators during a very tough and uncertain time, and we are happy that some of the operators have taken advantage of that.

Your next question comes from John Kim from BMO Capital Markets.

Hey good morning everyone and welcome Justin. I had a question on your deposits that were mentioned — are there any differences regionally, for New York and New Jersey to have more deposits than other markets not impacted by the virus?

We don’t normally track deposits because senior housing, particularly assisted living and memory care, are needs-driven, so tracking deposits is usually a very short-term indicator of move-in. But given the environment we started to track recently and a lot of those deposits are in Sunrise and Sunrise has a northeast footprint with us. So there is certainly some New York and Massachusetts for our Sunrise footprint — a lot of those deposits are with them. Another stat I will mention is lead volume which is something we track regularly and leads have stabilized over the past few weeks at about half of our lead volume, which is encouraging in a sense because it shows that there is still ongoing demand even though we are not doing physical tours and are doing virtual tours in lieu of those there is still ongoing demand. But I am not ready to really point out specific geographies except to say that Sunrise is a big part of those deposits.

Pete mentioned in his prepared remarks the high retention rate you guys had in the medical office business. Can you provide some terms on that — are these short-term, month-to-month extensions and also what the cash leasing spreads were?

So, John, of our retention rates — yes, 90% for the quarter and 94% for March and for April is at 98% — which is a phenomenal set of numbers. I would say it is a mix. In some cases they are short-term where tenants are uncertain about their future so they want just to take a one-year extension. In other cases we use the opportunity to take advantage of maybe some rent relief in exchange for a couple years of additional term. We have been fairly entrepreneurial in doing that. There are also practical reasons — an OB/GYN who was 70-something years old was going to retire, but then he sat back and he thought maybe he will extend for one more year because of the uncertainty. So it has been a mixture of things.

Your next question comes from Lukas Hartwich from Green Street Advisors.

Whenever we do come out the other side of the COVID pandemic, I'm just curious what you think the recovery in SHOP looks like. Do you expect pent-up demand or something more gradual?

I think our focus right now is really getting through the biggest part of the pandemic, Lukas, and then there remains really a lot of uncertainty about the depths and then the time period where it will be most active and then what the slope and pace to recovery will look like and those could very significantly affect what the recovery in senior housing looks like. So we are really happy for the day when we can discuss that with more specificity in terms of timing, pace and slope. But right now, we are focused on maximizing during the course of the toughest period of the pandemic.

Can you provide a little more color on the performance trends of the Sunrise SHOP portfolio?

So, I mentioned in my prepared remarks the year-over-year stats that were down and the reasons for that given the fact we are starting off at a lower starting point. I also mentioned the strong sequential performance. That performance was driven by Atria and ESL. Sunrise was not as big a contributor to that. There was less good performance from the Sunrise portfolio during that time, so it was actually contributing on a sequential basis closer to down around 9%.

Your next question comes from Omotayo Okusanya from Mizuho.

Good morning everyone. Justin, good to have you back. A couple of questions. The first one is on the office side. The 96% of April rent collected — is there a way you could help us break it down between MOB versus life sciences or other differences there?

Hey Tayo. The 96% we are very pleased with, and one of the items I did want to point out is that those are cash receipts. Deferrals are not included in that number, and as a matter of fact for April there were almost zero deferrals — we are talking like $150,000 worth of deferrals in April and those were for retail tenants. So this is true cash receipts and collected in a very positive way. The MOB portfolio had a slightly higher collection rate for April and the R&I had a slightly lower number, but really nothing material. It is interesting that many of the universities just hand write checks and it is a slower process in a normal month and it is a slower process in a turbulent month. So that is my assessment.

On the life sciences side, very strong same-store NOI this quarter. I guess I was a little surprised when I looked at the development pipeline that some projects were halted — some Wexford projects and another life sciences project where the completion date was deferred or pushed back. So curious thinking about that business which is such a big positive for you — why halt or delay some of these development projects?

You are absolutely right. We are happy that we have grown our office portfolio particularly this exciting life sciences university-based portfolio over the past years and you are seeing the benefit now. Both in the fact that is where all the action is on the virus and the search for a cure as well as the diversification benefits we are getting from that portfolio within the broader Ventas enterprise. It is a significant capital allocation priority. We do have a number of ongoing projects with Arizona State and University of Pittsburgh to name a few. Basically what we did, as a matter of discipline, is when we really understood quickly the potential from this Coronavirus, we paused the two developments that really were not yet significantly underway. The ones that are ongoing are going to be delivered and we will have them 80% pre-leased and the ones on the drawing board have been paused to take a look at capital conservation. As I mentioned, we will make decisions on those at the appropriate time as to moving forward and timing. We are happy to have this portfolio and it will continue to be an important part of Ventas’ story.

One more: when Justin was announced as joining the team and you announced plans around senior housing the stock outperformed that day. Today, you announced the Holiday plan and the stock outperformed. So clearly the market is looking for you to rectify issues people see in the portfolio. Given that, why not be more aggressive in trying to address some of these issues whether it is some of the triple-net portfolio that still has weak rent coverage? It just feels like the market is basically saying 'do it' but it doesn't seem to be happening as quickly as some of us anticipated.

We have a long track record of taking action that we think is beneficial for shareholders and we have taken many actions to evidence that whether they have been with Kindred or with Holiday and we will continue to do that. We have made a ton of progress and we are proud of what we have done on the leadership front along with the portfolio front and we will continue to do that with urgency and purpose. Hopefully we will continue to get rewarded for doing the right things at the right time.

We have one more caller. Your final question comes from Michael Carroll from RBC Capital Markets.

I just wanted to follow up and clarify the testing initiative. Is the testing primarily for employees or will it also be available for residents? And is the testing free to the operators?

The initial rollout is principally for employee testing to accelerate employee testing at select operators and to be provided without charge to certain senior housing operators. Once we see how the initial program goes we will evaluate whether to expand and under what terms, including whether to test new residents in certain cases. The tests we are initially providing will include Mayo Clinic Labs analysis and the initial 10,000-test complement is being made available to select operators. I think we have one more operator. Anything further? If we don't have any further questions, I want to sincerely thank you for your time, your attention, your interest in Ventas. We have a great team here that is really committed to protecting and preserving the Company and really delivering for all the stakeholders who depend upon us. So, we look forward to seeing you on the other side of this terrible pandemic and until then, stay safe and strong. We will see you soon. Bye-bye.

Ladies and gentlemen, this does conclude today's conference. Thank you for participating. You may now disconnect. Ladies and gentlemen, thank you for standing by and welcome to the Q1 2020 Ventas Earnings Conference Call. At this time, all participant lines are in a listen-only mode. Operator Instructions. I would now like to turn the conference over to your speaker today, Mr. Juan Sanabrial.

Thanks, Cindy. Good morning and welcome to the Ventas conference call to review the Company's announcement today regarding its results for the first quarter ended March 31, 2020. As we start, let me express that our projections and predictions and certain other statements to be made during this conference call may be considered Forward-Looking Statements within the meaning of the Federal Securities Law. The Company cautions that these forward-looking statements are subject to many risks, uncertainties and contingencies and stockholders and others should recognize that actual results may differ materially from the Company's expectations, whether expressed or implied. Ventas expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any changes in expectations. Additional information about the factors that may affect the Company's operations and results is included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and the Company's other SEC filings. Please note the quantitative reconciliations between each non-GAAP financial measure referenced on this conference call and its most directly comparable GAAP measure as well the Company's supplemental disclosure schedule are available in the Investor Relations section of our website, www.ventasreit.com. Before I hand the call off to Debra Cafaro, Chairman and CEO of the Company. I would like to note that, we posted an investor presentation this morning on our website, which includes a COVID-19 business update to this helpful information that the team will reference in our prepared remarks. With those formalities out of the way, I will hand it over to Debbie.

Thank you, Juan, and good morning to all of our shareholders and other participants and welcome to the Ventas' first quarter 2020 earnings call. I sincerely hope that you and yours are safe and healthy. Today, the Ventas team is working remotely, but we are together in spirit as we outline our outstanding first quarter results, describe the challenging conditions in the markets, the economy and our Company brought on by the terrible COVID-19 pandemic, discuss near-term business trends and evaluate the macro outlook. At this time, we face unprecedented conditions nationally and globally created by the pandemic. Those of us in real estate who have been around a long time have managed through many severe crises over the decades, including the 9/11 terrorist attacks and the great financial crisis, and the deep recession that followed both. Yet today's complex mix of public health, remote working, economic, operational and market conditions make this pandemic a uniquely challenging adversary. Let me begin today by setting the stage and then outlining the swift and decisive actions we have taken to ensure that Ventas remains strong and stable. As we rolled into March, we were excited to see how our previously announced initiatives were gaining traction and making an impact and how well our overall enterprise and each of our business lines were performing. You can see the power of our diversified business model in the strong normalized FFO per share results we reported today at $0.97 per share, inclusive of the financial impact of COVID-19 toward the end of the quarter. In short, we were hitting on all cylinders with terrific momentum. As soon as we realized the potential scope and impact of the novel Coronavirus in February and early in March, we identified as our key priority the health and safety of Ventas’ employees and their families and the employees, patients and senior living residents in our 1,200 healthcare sites. Although this particular crisis reflects a unique combination of forces, our experience, deep analysis based on early real time inputs and core principles have given us a solid framework for action. Here are some of the strong measures we have taken to preserve and protect the Company and the many stakeholders who depend upon us. We have devoted significant efforts to support our tenants and operators across our portfolio during the COVID-19 pandemic. We have established financial support programs for those who are experiencing financial hardship. We have assisted operators who may be eligible for complex and various government programs, and we have leveraged our national scale to help operators source supplies, including scarce Personal Protective Equipment or PPE. And today, we have announced a powerful new initiative for Ventas senior living operators. Ventas will be providing access to COVID-19 testing kits and analysis from Mayo Clinic Laboratories without charge to certain of our senior housing operators to further enhance safety at Ventas communities by accelerating employee testing. Ventas and Atria, working through Atria's ongoing relationship, have secured access to testing capacity in excess of 30,000. Atria is already nearly done testing all of its 14,000 U.S. on-site and regional staff with approximately 9,000 results in; less than 1% of Atria's employee tests have been returned positive. Combined with digital tracking and tracing and appropriate use of PPE, Atria is building a new normal model to run its senior housing business safely and thoughtfully. In a positive sign, Atria has moved in 300 residents since early March all under full quarantine and PPE protocol. Ventas plans to make available to certain of its other operators at least 10,000 COVID-19 test kits and analysis from Mayo Clinic Labs. ESL will be the next Ventas operator to use this testing for its Ventas communities, and it is already getting ready to test all its staff in May. We look forward to finding more ways to work with Mayo Clinic Labs and our operators to further enhance safety in our communities for residents and caregivers. We will continue to evaluate additional action as appropriate. Second, on our action hit list, we moved early to review and implement our pre-existing business continuity plan so we could maintain a high level of productivity and manage a seamless transition to remote working arrangements. With an interdisciplinary team of Ventas leaders coordinating our efforts, strong IT support and capabilities, full buy-in by our employees and enhanced communication, the company experienced no downtime and we have been highly effective during these challenging times. I'm so proud of how Ventas employees have reacted and rallied and I want to thank them for their extraordinary efforts. Third, we are pleased that we have reached a positive consensual resolution of our Holiday lease. After receiving full rents from Holiday since lease inception in 2013 through the end of the first quarter 2020, we have now received an additional $100 million in cash and secured notes. We have entered into a new management agreement with Holiday for 26 independent living assets and we have terminated the Holiday lease all effective April 1. This management structure retains our upside in our 26 communities and provides us with operational flexibility. We appreciate Holiday management's engagement and cooperation to complete this transaction. Fourth, we were excited to augment our leadership team with Justin Hutchens and Carey Roberts when they joined Ventas on March 4. Justin and Carey have added new energy and insight to our tight-knit group at this crucial time. They've already made many meaningful contributions to Ventas as we have collaborated to analyze and attack the business challenges presented by the pandemic. Our experience has instilled in us the importance of liquidity in a crisis. As a result, we shared the courage of our convictions in mid-March by drawing on our revolver and then issuing senior notes generating $3.3 billion in liquidity. This financial flexibility will serve us well as we manage through to the other side of the COVID-19 pandemic. In addition, we further enhanced our financial flexibility by acting immediately to reduce 2020 capital expenditures by $300 million, mainly by pausing certain of our previously announced ground-up developments that were not yet substantially underway. We are also carefully reviewing other areas of our Company for cost savings, including general and administrative expenses. At the same time, we promptly withdrew our financial guidance on March 17, nearly two months ago, when our early analysis informed by real-time data led us to conclude that our financial performance could be materially affected by the pandemic. Our foresight proved correct and we fulfilled our commitment to transparency to our stakeholders by the actions we took in a timely way. Finally, Ventas has served and continues to work tirelessly as a proactive and evidence-based advocate for seniors to federal policymakers. Working with industry groups and in alliance with senior living CEOs, we are demonstrating the crucial role senior living care providers play in protecting our senior population that is particularly vulnerable to this novel Coronavirus. While we have taken plenty of actions, policymakers have done exponentially more. The Fed, the administration and Congress have implemented a comprehensive array of bold policy actions to partially mitigate the virus' severe implications for public health, capital markets and the economy. Many businesses and households, including many of our tenants and operators, have already benefited from this arsenal of federal programs. With this powerful support and more financial relief likely to follow, it is our responsibility now to take action to safely and responsibly move our Company toward a new normal. As we do so, our visibility is limited and uncertainty remains very high. Indeed, we face the COVID-19 paradox: on the one side, reputable models and even certain government projections show an expected increase in COVID-19 confirmed cases and mortality numbers in many jurisdictions. These expectations, if they materialize, could derail even the best-laid plans for economic recovery. And this morning we saw historic levels of unemployment claims in the U.S. On the other hand, there is palpable optimism in the air as most states plan staged re-openings of their economies and businesses, many companies including ours are preparing for a gradual return to office work, patients and physicians are scheduling appointments and elective procedures, families are making deposits for senior housing move-ins, universities are planning to welcome students in the fall, and most importantly our best scientific and medical minds are racing to find treatments, cures and vaccines for the Coronavirus. We are proud to say that many of our key research and innovation university relationships and tenants, including Duke, Wake Forest, Penn, Yale and Integral Molecular are at the forefront of this research. All these promising developments provide hope for a speedier and sustained bounce back. We don't have to know how these opposing trends will play out. Our job is to preserve and protect our Company and our stakeholders, and be ready for a variety of scenarios and opportunities. Before closing, I want to address our dividends in the context of this COVID-19 uncertainty. As you know, we declared and paid our last quarterly dividend in April. Because we normally pay our next dividend in July, our board will consider the dividend in mid to late June. As it always does, our responsible and experienced board will make a decision using its good faith business judgment taking into account all of the information available to it at that time. In a situation like the fast-moving, rapidly changing global pandemic, we have the advantage of aggregating and analyzing the best and most current information available in order to make the optimal decision. The company and its team are well prepared to manage through current conditions and to take further action as necessary. Guided by our experience, analysis and ethics, we will safeguard our employees, our senior housing residents and caregivers, our capital and our reputation, so that Ventas will remain a leading healthcare property owner in the businesses and geographies where we invest, a desirable employer and an attractive investment vehicle. And now for the first time, I'm pleased to ask Justin Hutchens to address you about Ventas’ senior housing business.

Thanks, Debbie. Let me just start off by saying I'm extremely excited to be working with the Ventas team. Given the circumstances, I have certainly had the opportunity to jump right in and immediately put my operating experience to work. I'm also happy to be working again with long standing colleagues and industry leaders like Atria, Brookdale, ESL, Holiday, and Sunrise. COVID notwithstanding, I see great opportunities ahead for Ventas in its senior housing business. In my first Ventas earnings call, I would like to discuss the momentum the SHOP same-store portfolio showed in the first quarter, outline how Ventas has worked with integrity to support our tenants and operators during a very challenging time, describe the operational and clinical environment in SHOP and triple-net, delve into April and May trends and provide our outlook for safe and staged reopening in senior housing. Our SHOP portfolio started the year ahead of our expectations and with good momentum. Sequentially, NOI in our same-store SHOP portfolio grew 2.3% in the first quarter with COVID costs embedded. Without COVID impacts, NOI grew 6% versus the fourth quarter, with credit due to solid sequential performance from Atria through strong rate growth and expense control, and some welcome stabilization from ESL. As expected, the year-over-year same-store SHOP comparisons were negatively affected by $6 million in COVID costs incurred in the quarter, the reduction in occupancy as a result of COVID in the back half of March, as well as the previously discussed lower starting point heading into 2020. Excluding COVID costs, the year-over-year same-store NOI would have declined 6.9%, better than our expectations given the difficult prior year comparison. While we are mostly focused on the impact of COVID-19 to our operating performance, it is worth noting new construction starts in senior housing continue to decelerate with the first quarter of 2020 having the lowest number of new starts in several years in Ventas markets. Moving to our support for senior housing tenants and operators, I have been proud that Ventas has been out front and willing to work with integrity in support of our senior housing tenants who are on the front lines of caring for seniors. This support has taken many forms. I will just focus on some creative programs we have offered to our triple-net tenants. The company offered support to its triple-net senior housing tenants affected by the COVID-19 pandemic by implementing a 25% rent deferral program in April to enable them to care for seniors, purchase needed supplies and pay employees. This program ultimately reduced April cash rent receipts by approximately $3 million. Adjusting for this tenant support program, tenants paid substantially all triple-net senior housing rents in April. For the month of May, the company offered qualified senior housing tenants the opportunity to pay up to 25% of their rent with cash as escrows and security deposits and based on participating tenants, we expect about $2 million of our rent to be paid this way. We are encouraged to see that some of our tenants have availed themselves of government relief programs for which they are eligible. We will continue to engage in constructive ongoing dialogue with our triple-net tenants regarding their COVID-19 challenges on a case-by-case basis. We have many tools available to us to work through near-term conditions including our backstop of corporate and personal guarantees and over $100 million of security deposits that stand behind these lease obligations. Turning to the clinical and operational environment, these trying times underline the importance of partnering with true industry leaders. We have been inspired by the tireless work of our operating partners to keep seniors safe. Senior housing operators across the industry continue to aggressively implement protocols to protect against COVID-19. The result of these protocols is that almost all operators are only offering virtual tours and at the present time about 29% of our 400 SHOP communities have suspended their move-ins. In terms of the clinical impact on our SHOP portfolio as of April 30, it is a tale of two cities. Having a large New York and New Jersey footprint is a strategic advantage for Ventas, but those states were the epicenter for the COVID-19 infection and mortality rate. On a full portfolio basis, about a quarter of our SHOP communities experienced at least one positive COVID-19 resident diagnosis since the beginning of the pandemic, registering cumulative resident cases at slightly over 2% of the resident population. Excluding New York and New Jersey, these figures improved dramatically with only 1% of our residents cumulatively affected since day one. In our triple-net senior housing portfolio benefiting from geographic diversification, the percentage of resident cases is 1%. As is best practice, the care providers go to great lengths to isolate or transfer to a higher acuity setting the limited number of residents who receive a positive diagnosis. Brookdale in particular has been compassionate, but also fairly disciplined and rigorous in its preparation for and management of COVID conditions for the benefit of residents and their families. In SHOPs, as a result of restricted access to communities nationally, April move-ins approximated 25% of typical levels while overall move-outs were largely in-line with historic patterns. April average occupancy was approximately 82.4%. As of May 1, spot occupancy was estimated at 80.7% representing a 330 basis point decline since the beginning of April based on interim information provided by Ventas operators. When excluding New York and New Jersey, occupancy would have declined 280 basis points. Operating expenses are trending around 10% higher, particularly for labor and supplies including PPE. These revenue and expense trends we are seeing for April are expected to continue in May. Financial and operational trends are expected to be directionally similar for our triple-net portfolio in the second quarter. For senior housing overall, as we look beyond the second quarter, there are three critical considerations we are monitoring that will materially affect the outlook for senior housing: one, timing of reopening of communities to physical tours and move-ins; two, cost and access to labor; three, local demand characteristics including evolving protocols required to protect against the virus. The timing of openings will be driven by state-specific guidelines, CDC guidelines and local community considerations. Ventas along with our operating partners is closely tracking state-specific guidelines and COVID infection curves in each of our markets. I'm encouraged to report that we have roughly 300 deposits for move-ins, which is a good sign of ongoing demand for our senior housing communities. Senior housing operators will find success in many ways, including and most importantly building trust with prospective residents and their families by demonstrating a concerted effort to keep communities free of infection. To do so, we anticipate elevated levels of costs over the course of the next several months. Trust and confidence in senior housing in the near-term will be supported with best-in-class infection control practices, availability of PPE and testing residents and employees. As Debbie described, Ventas has played an important role alongside our operators and tenants to combat the pandemic and helping operators prepare to open successfully. Through this challenging stretch, we continue to resolutely believe in the long-term value that senior living offers residents and their families and are sharply focused on positioning Ventas’ senior housing business for long-term success. With that, I will hand the floor to Pete to discuss our office business.

Thanks Justin. We are certainly glad to have you and Carey on board. I will quickly touch on the first quarter results for our office segment, which represents 27% of Ventas NOI and then focus on the latest trends in our latest second quarter COVID framework. For the first quarter of 2020, office same-store cash NOI increased by 5.8% year-on-year. This outstanding result was fueled by our R&I portfolio, which grew 22% driven by strong lease up and complemented by strong performance from the MOB portfolio. In R&I, first quarter average rent per square foot was up 9.4% and occupancy was robust at just under 97%. Strong performance at our university based developments affiliated with University of Pennsylvania in Philadelphia and Washington University in St. Louis fueled our growth. Complementing the fast growing R&I business is our MOB business. MOB same-store cash NOI for the first quarter of 2020 increased 1.9% year-on-year, also above our expectations. Now let's shift to the latest COVID trends we are seeing in our office portfolio. I will start with medical office. Our top priority has been to partner with our tenants and the associated health systems to ensure the safety of health professionals, patients and our employees. We have sourced substantial amounts of PPE, coordinated visitor screening, licensed short-term spaces, set up drive-through testing centers in our parking lots, provided supplemental cleaning and otherwise supported our tenants during this challenging time. We are happy to report that all of our buildings are open and none of our site-based employees have tested positive for COVID-19. We sincerely thank all of our on-site employees and partners who fight the fight every day. We are very proud of them. I will also say regarding our MOB business, that parking receipts have slowed and while safety concerns have caused an increase in cleaning costs. Given the current uncertainty, the pace of new leasing has slowed. However, we still leased 573,000 square feet during the first quarter and 381,000 square feet during April, with an additional 200,000 square feet of leases at the letter of intent stage. Also, tenant retention has increased. I'm proud to say that MOB reported record retention of 83% for the trailing 12 months, 90% retention for the first quarter, 94% retention for March and an outstanding 98% in April. Turning to our R&I portfolio. Our R&I buildings are 100% open and are supporting critical research focused on the detection, prevention, and cure of COVID-19. We are proud to be partnered with leading research institutions such as Yale, Penn Gene Therapy Center, Wake Forest Health Sciences, Virginia Commonwealth University, Integral Molecular, Alexion and others in fighting this virus. And we look forward to expanding our portfolio with other leading research institutions such as Arizona State and University of Pittsburgh in new under-construction, world-class research buildings. As previously mentioned, our R&I portfolio is 97% leased with an active leasing pipeline. Last phase continues to be in high demand. Net-net as of April 30th, we had 91.5% occupancy in our office business, representing a 150 basis point year-on-year increase from April 2019. From March 31st through April 30th, we experienced a 10 basis point increase in occupancy for MOB and a 10 basis point increase for R&I. So, let's talk rent payments. During the first quarter, our tenants paid essentially 100% of the office rent. Our historical bad debt expense has only been 20 basis points. We have high quality tenants that pay their rent. In April, our tenants paid 96% of office rents. We expect a significant proportion of the unpaid rent to be ultimately collected. And I’m encouraged that so far in May, our office tenants have paid nearly 80% of the rents due; to date we are seeing a faster payment rate than what we experienced in April. I will say the tenants experiencing the most pressure are the smaller third-party physician groups in MOB, the smaller private companies in R&I and retail. Taken together, these customer segments represent a relatively small portion of our office portfolio. We are supporting these tenants by raising awareness and assisting them with securing federal relief. On a selective basis, we are also offering to defer May rent for these small tenants to be repaid no later than the fourth quarter. To date only a small number of tenants have utilized the rent deferral opportunity. Supporting the durability of our office portfolio are a couple of additional facts. First, our MOB portfolio is largely on campus at 71%. We also have a high level of acuity in our buildings, with 88% of our physician tenants being specialists. Our buildings and our tenants are essential to the delivery of care during this difficult time. Less than 10% of our tenant suites closed during the pandemic. Second, as of May 7th, over 80% of the MOB NOI is in states that have either reopened for elective procedures or have announced the resumption of elective procedures. In locations that have reopened, we are seeing material increases in activity, although still below pre-COVID levels. As a reminder that our nation is resilient and that normalcy returns following catastrophes. I'm happy to report that Ventas is delivering a project that was devastated by Hurricane Michael in 2018. With that happy news, I will pass the turn to Bob to finish up our prepared remarks.

Thank you Pete. I will start with our triple-net lease portfolio overall before I close with some enterprise level commentary. The triple-net portfolio grew same-store cash NOI by 3.9% year-over-year in the first quarter. Growth was driven by in-place lease escalations, and a $3 million cash fee received in the quarter from Capital Senior Living. Trailing 12-month coverage as of the fourth quarter of 2019 for the overall triple-net portfolio and for triple-net senior housing remains stable at 1.5 times and 1.1 times respectively. Post-acute coverage declined sequentially by 10 basis points to 1.3 times due to a decline in volumes at Kindred, driven by managed care and purposeful reduction of non-compliant patients. Adjusting for the 25% rent deferral program in senior housing, we collected close to 100% of our overall expected triple-net portfolio rents in April. We have already received almost 100% of triple-net healthcare rent for May and we are on-track with triple-net senior housing May collections. We expect the impact of COVID on our triple-net healthcare rents from acute care providers to be muted in the second quarter. Acute care hospitals have been impacted by the reduction of elective procedures, but have had significant access to government funding and support. Additionally for Ardent, as of May 1st, all 10 of the Ventas-owned hospitals have reopened or will reopen in May for elective procedures. For the post-acute providers in our triple-net healthcare portfolio, volume trends have varied. Deltek Ventas has been higher than budgeted, the costs have increased. We expect that the concern over respiratory disease will enhance Kindred and Deltek business going forward. Urban census initially declined due to lower surgeries and acute care volumes, but census has improved since mid-April. Skilled nursing providers are experiencing notably higher mortality rates with census down dramatically and the most profitable rehab patients also down. Positive post-acute trends include access to government funding, relief from site neutral pricing, waiver of length of stay requirements and the 2% sequestration delay. I will close with some comments regarding the overall enterprise and our financial position. I want to underscore how pleased we are with our first quarter results including property performance ahead of our expectations, record quarterly revenues, strong FFO delivery of $0.97 per share and enhanced balance sheet: 5.7 times net debt to EBITDA and excellent liquidity. And we took decisive action in the face of the pandemic to bolster our financial flexibility. In March, we drew $2.75 billion under our $3 billion revolver and followed it up in early April with a $500 million senior note issuance. As a result, as of May 6th, Ventas has approximately $3.2 billion in cash and cash equivalents on hand with no commercial paper outstanding. We also have very limited debt maturing in 2020 or 2021 and we have the ability to extend our revolver for up to one year. We plan to bolster financial flexibility by reducing 2020 total capital expenditures by nearly $300 million to a total of $500 million with the decline led by pausing ground-up developments not yet substantially underway, notably one in Philadelphia and 42/10 in St. Louis. Our ongoing development projects are on average 81% pre-leased to high quality credit tenants in the R&I business. I note that Ventas has a $400 million committed construction line of credit to fund development with $250 million of available capacity as of the end of March. Ventas' expected unfunded investment in all ground-up developments in 2020 net of committed financing is approximately $100 million. In addition to conserving CapEx, the company is reviewing its cost structures across the enterprise, including its SG&A and organizational costs. As Debbie says, we are on it. Given our early understanding of the potential impacts of the pandemic, Ventas withdrew previously issued financial guidance on March 17. We believe the adverse impact on our operating results and financial condition will be driven by many factors, most of which are outside of the Company's control and ability to forecast. Wherever possible to provide investors with incremental observations and transparency, we included today the investor deck outlining our COVID response and latest business trends, as well as expanded disclosure as summarized on Page 44 of the supplemental. To close, we are pleased with our start to the year and with the actions taken thus far, and are committed to continuing to take the actions necessary to manage through these unprecedented times. That concludes our prepared remarks. Before we start with Q&A, we are limiting each caller to two questions given a busy calendar. We request from a few analysts to be respectful of everyone on the line. Also, given the fact that we are all remote, we will have Debra quarterback the Q&A and to pass questions to the Ventas team if needed. With that, I will turn the call back to the operator.

Operator Instructions. Your first question comes from Nick Joseph from Citi.

Thank you, I appreciate all the color and specifically on April and May rent collections for net lease. You addressed Holiday this morning, but do you expect additional net lease restructurings over the next few months?

Good morning Nick, it's Debra. I'm going to ask Justin to comment on that.

Thank you Debra. First of all, I think it is important to know our biggest priority is that our operators are looking out for the health and safety of our residents in our communities. That is priority number one in the near-term. I will also point out, as I mentioned in our prepared remarks, that we have already started to take action; we mentioned the rent deferral in April, we mentioned the opportunity for tenants to pay some of their rent with their cash escrows in May and the Holiday restructuring. What we are committed to do is to take action that is going to give us the best opportunity to create value in a portfolio and work with our operators to determine the best outcome. It is still early, some uncertainty lies ahead of us, but we will certainly be watching everything closely.

Debra, it is Michael Bilerman. I think Bob mentioned in his comments about sort of looking at all forms of cost within the enterprise. Can you sort of address corporate management pay levels and whether that is on the docket and how investors should think about that from a governance perspective, whether there would be any changes from the Chairman and CEO role which you continue to maintain?

Sure, and I'm happy to talk about that and turn it over to Bob for a little bit more detail. But most of our executive compensation is very aligned with shareholders and the vast majority is in the form of performance-based equity compensation. When you think about the overall enterprise, I'm going to turn it over to Bob to talk about some of the insights he has about making sure that the company is efficient and cognizant of the environment that we are in.

Sure. This is an analysis Michael that again pre-COVID that is the analysis of our SG&A. We are well underway in that analysis. Everything I would say is on the table as we think about that. I would expect to have some more news this quarter as we are well underway on that analysis and we do see opportunity. But at the end of the day, we have a 20-year record of being efficient and effective and that continues to be our goal and we have a duty to make sure we are doing that.

And Debra is there anything on splitting the Chairman and CEO role?

I think that, consistent with the idea that one of the cost efficiencies, our expectation is that I would continue to hold those roles, obviously serving at the pleasure of our shareholders and our Board of Directors.

Your next question comes from Rich Anderson from SMBC.

Hey, thanks. Good morning everyone and hello to you, Justin. So, just on the Holiday and maybe an extrapolation from that. So EBITDA below rent, so it is obviously a dilutive transaction. Understanding kind of the thought process on taking Sabra’s roadmap on Holiday. And so, I'm curious in the aftermath of all this, do you feel like net lease is becoming an increasingly dying breed for Ventas and you want more control that goes through Brookdale and others or is this a one-off type of thing and you still think that there is a role for triple-net to play in senior housing in the aftermath of all this?

Good to talk with you, Rich. Let me take that. A couple of things. One is we are pleased with the Holiday transaction. We think it really does a lot of good things and we are happy to take a page out of our friends' book, and we preserved upside in the assets and a lot of operational flexibility. So, we feel good about that and look forward to optimizing that portfolio. In terms of the triple-net lease, what I would say is triple-net leases are a little bit like mortgages in one sense, which is that they magnify ups and downs for the operators and in any challenging environment they are going to be disfavored. And of course that is the situation we find ourselves in now. In other environments, they could be very attractive to both landowners as well as the operators. So, I think there are many tools in the toolkit, and the triple-net lease I think will continue to be one. And there are many ways that you can customize leases also to create alignment. So, we think the triple-net lease will survive and we think we will continue to be creative and collaborative in how we work with our operators, be they tenants or managers, in optimizing our portfolio and being good partners.

Your next question comes from Nick Yulico from Scotiabank.

Good morning everyone. So, in terms of the Holiday restructuring just to make sure I understand how this is going to work. In terms of the money that you are receiving from them — the cash and then the notes — are you going to be actually booking any income from those two items in the second quarter and in terms of the notes, the 9% rate, is there any component that is cash interest that you are receiving?

Great question. Yes, the cash and notes are effectively income and I think we mentioned this in the release and so those will be included in net income and yes we actually would expect as part of our ongoing notes we would expect to book and receive some amount of interest income as we go forward.

Your next question comes from Vikram Malhotra from Morgan Stanley.

Sorry, I had myself on mute. I just hope everyone on the team is okay and doing well. Debbie, you referenced the dividend in your prepared remarks and I just want to clarify one thing. I'm assuming the dividend is all cash today and just as we think about the dividend going into the second quarter, what are sort of the metrics? What are you looking at? Maybe give us a sense of where AFFO versus the dividend could trend even just percentage-wise. What are some of your puts and takes if you think about the dividend?

Thank you. Yes, I mean, I think really want to just touch on the fact that while we are in this period of uncertainty, we generally want to match our decision making speed with what is required. And our Board is going to look at all relevant information when it addresses the dividend, as I mentioned in mid to late June.

Your next question comes from Michael Carroll from RBC Capital Markets.

Debbie, I just wonder if you could add some color on the testing capabilities that you are providing your operators. I don't know if you said this or if I missed it, but are you able to provide enough tests for all the residents or staff at the facilities or what in depth are you able to offer right now in that relationship?

Great. We are very excited about this initiative and we are taking the first step with Atria and it is really to accelerate employee testing at Ventas buildings with select operators to make our communities safer, and facilitate thoughtful reopening and confidence and trust as Justin talked about. We have this first complement of 10,000 testing kits with Mayo Clinic Labs’ analysis, which is very important — they have a very high accuracy rate at Mayo, as you would imagine — and we really think this is a great first step that we can make available. Atria has already done it, ESL will be next and we will make it available to select operators, principally for their employee testing program. Once we see how that goes — again, we are in early days, there is still a lot of uncertainty, new testing tools come out all the time — we will determine if we want to ramp up or if we want to take a different step moving forward, but we think this is a great opportunity to do the right thing and really have a differentiated partnership with our operators and really build that trust and confidence with residents and their families that is so sorely needed.

That concludes today's conference. Thank you for participating. You may now disconnect.