UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

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

Commission file number: 1-10989

Ventas, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		61-1055020
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class of Common Stock:		Outstanding at July 26, 2010:
Common Stock, $0.25 par value		157,080,577

 

 

VENTAS, INC.
FORM 10-Q

INDEX

		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009			3
Consolidated Statements of Income for the Three and Six Months Ended June 30, 2010 and 2009			4
Consolidated Statements of Equity for the Six Months Ended June 30, 2010 and the Year Ended December 31, 2009			5
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures About Market Risk			45
Item 4. Controls and Procedures			48
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			49
Item 1A. Risk Factors			49
Item 6. Exhibits			52
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VENTAS, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)

		June 30,				December 31,
		2010				2009
		(Unaudited)				(Audited)
Assets
Real estate investments:
Land		$	556,469			$	557,276
Buildings and improvements			5,732,421				5,722,837
Construction in progress			3,788				12,508
			6,292,678				6,292,621
Accumulated depreciation			(1,274,088	)			(1,177,911	)
Net real estate property			5,018,590				5,114,710
Loans receivable, net			140,870				131,887
Net real estate investments			5,159,460				5,246,597
Cash and cash equivalents			27,794				107,397
Escrow deposits and restricted cash			43,484				39,832
Deferred financing costs, net			24,891				29,252
Other			206,488				193,167
Total assets		$	5,462,117			$	5,616,245
Liabilities and equity
Liabilities:
Senior notes payable and other debt		$	2,580,849			$	2,670,101
Accrued interest			16,682				17,974
Accounts payable and other liabilities			181,343				190,445
Deferred income taxes			251,829				253,665
Total liabilities			3,030,703				3,132,185
Commitments and contingencies
Equity:
Ventas stockholders’ equity:
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued			—				—
Common stock, $0.25 par value; 300,000 shares authorized; 156,872 and 156,627 shares issued at June 30, 2010 and December 31, 2009, respectively			39,343				39,160
Capital in excess of par value			2,583,412				2,573,039
Accumulated other comprehensive income			16,506				19,669
Retained earnings (deficit)			(222,853	)			(165,710	)
Treasury stock, 0 and 15 shares at June 30, 2010 and December 31, 2009, respectively			—				(647	)
Total Ventas stockholders’ equity			2,416,408				2,465,511
Noncontrolling interest			15,006				18,549
Total equity			2,431,414				2,484,060
Total liabilities and equity		$	5,462,117			$	5,616,245

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2010				2009				2010				2009
Revenues:
Rental income		$	130,284			$	124,612			$	259,463			$	247,010
Resident fees and services			109,867				103,399				218,353				206,338
Income from loans and investments			3,705				3,333				7,322				6,614
Interest and other income			122				108				385				394
Total revenues			243,978				231,452				485,523				460,356
Expenses:
Interest			44,045				43,994				88,345				89,924
Depreciation and amortization			50,185				48,643				102,661				98,141
Property-level operating expenses			75,183				72,564				154,062				148,032
General, administrative and professional fees (including non-cash stock-based compensation expense of $3,057 and $3,078 for the three months ended 2010 and 2009, respectively, and $6,089 and $6,137 for the six months ended 2010 and 2009, respectively)			9,858				10,355				20,541				20,953
Foreign currency loss (gain)			121				5				15				(1	)
Loss on extinguishment of debt			6,549				5,975				6,549				6,080
Merger-related expenses and deal costs			4,207				3,502				6,526				5,556
Total expenses			190,148				185,038				378,699				368,685
Income before income taxes, discontinued operations and noncontrolling interest			53,830				46,414				106,824				91,671
Income tax (expense) benefit			(409	)			395				(695	)			942
Income from continuing operations			53,421				46,809				106,129				92,613
Discontinued operations			5,544				42,374				6,004				71,539
Net income			58,965				89,183				112,133				164,152
Net income attributable to noncontrolling interest (net of tax of $559 and $541 for the three months ended 2010 and 2009, respectively, and $978 and $931 for the six months ended 2010 and 2009, respectively)			898				802				1,447				1,543
Net income attributable to common stockholders		$	58,067			$	88,381			$	110,686			$	162,609
Earnings per common share:
Basic:
Income from continuing operations attributable to common stockholders		$	0.33			$	0.30			$	0.67			$	0.61
Discontinued operations			0.04				0.27				0.04				0.48
Net income attributable to common stockholders		$	0.37			$	0.57			$	0.71			$	1.09
Diluted:
Income from continuing operations attributable to common stockholders		$	0.33			$	0.30			$	0.66			$	0.61
Discontinued operations			0.04				0.27				0.04				0.48
Net income attributable to common stockholders		$	0.37			$	0.57			$	0.70			$	1.09
Weighted average shares used in computing earnings per common share:
Basic			156,611				154,441				156,533				148,798
Diluted			157,441				154,510				157,206				148,859
Dividends declared per common share		$	0.535			$	0.5125			$	1.07			$	1.025

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF EQUITY
For the Six Months Ended June 30, 2010 and the Year Ended December 31, 2009
(In thousands, except per share amounts)

										Accumulated
		Common				Capital in				Other				Retained								Total Ventas
		Stock Par				Excess of				Comprehensive				Earnings				Treasury				Stockholders’				Noncontrolling				Total
		Value				Par Value				Income (Loss)				(Deficit)				Stock				Equity				Interest				Equity
Balance at January 1, 2009		$	35,825			$	2,264,125			$	(21,089	)		$	(117,806	)		$	(457	)		$	2,160,598			$	19,137			$	2,179,735
Comprehensive Income:
Net income			—				—				—				266,495				—				266,495				2,865				269,360
Foreign currency translation			—				—				23,552				—				—				23,552				—				23,552
Unrealized gain on marketable debt securities			—				—				17,327				—				—				17,327				—				17,327
Other			—				—				(121	)			—				—				(121	)			—				(121	)
Comprehensive income			—				—				—				—				—				307,253				2,865				310,118
Net change in noncontrolling interest			—				334				—				—				—				334				(3,453	)			(3,119	)
Dividends to common stockholders — $2.05 per share			—				—				—				(314,399	)			—				(314,399	)			—				(314,399	)
Issuance of common stock			3,266				295,935				—				—				—				299,201				—				299,201
Issuance of common stock for stock plans			30				12,819				—				—				175				13,024				—				13,024
Grant of restricted stock, net of forfeitures			39				(174	)			—				—				(365	)			(500	)			—				(500	)
Balance at December 31, 2009			39,160				2,573,039				19,669				(165,710	)			(647	)			2,465,511				18,549				2,484,060
Comprehensive Income:
Net income			—				—				—				110,686				—				110,686				1,447				112,133
Foreign currency translation			—				—				(2,150	)			—				—				(2,150	)			—				(2,150	)
Unrealized loss on marketable debt securities			—				—				(869	)			—				—				(869	)			—				(869	)
Other			—				—				(144	)			—				—				(144	)			—				(144	)
Comprehensive income			—				—				—				—				—				107,523				1,447				108,970
Net change in noncontrolling interest			—				2,246				—				—				—				2,246				(4,990	)			(2,744	)
Dividends to common stockholders — $1.07 per share			—				—				—				(167,829	)			—				(167,829	)			—				(167,829	)
Issuance of common stock for stock plans			149				7,155				—				—				2,455				9,759				—				9,759
Grant of restricted stock, net of forfeitures			34				972				—				—				(1,808	)			(802	)			—				(802	)
Balance at June 30, 2010		$	39,343			$	2,583,412			$	16,506			$	(222,853	)		$	—			$	2,416,408			$	15,006			$	2,431,414

See accompanying notes.

VENTAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

		For the Six Months Ended June 30,
		2010				2009
Cash flows from operating activities:
Net income		$	112,133			$	164,152
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amounts in discontinued operations)			102,722				98,815
Amortization of deferred revenue and lease intangibles, net			(2,943	)			(3,587	)
Other amortization expenses			4,367				2,374
Stock-based compensation			6,089				6,137
Straight-lining of rental income			(4,975	)			(5,990	)
Loss on extinguishment of debt			6,549				6,080
Net gain on sale of real estate assets			(5,225	)			(66,891	)
Income tax expense (benefit)			695				(942	)
Other			(238	)			(12	)
Changes in operating assets and liabilities:
(Increase) decrease in other assets			(5,174	)			1,426
Decrease in accrued interest			(1,292	)			(4,979	)
Decrease in accounts payable and other liabilities			(4,991	)			(1,441	)
Net cash provided by operating activities			207,717				195,142
Cash flows from investing activities:
Net investment in real estate property			(22,915	)			(19,358	)
Investment in loans receivable			(15,796	)			(7,373	)
Proceeds from real estate disposals			23,029				56,614
Proceeds from loans receivable			1,323				7,701
Capital expenditures			(7,078	)			(4,028	)
Net cash (used in) provided by investing activities			(21,437	)			33,556
Cash flows from financing activities:
Net change in borrowings under revolving credit facilities			117,280				(289,928	)
Proceeds from debt			696				301,115
Repayment of debt			(215,171	)			(503,016	)
Payment of deferred financing costs			(1,840	)			(13,422	)
Issuance of common stock, net			—				299,201
Cash distribution to common stockholders			(167,829	)			(153,815	)
Contributions from noncontrolling interest			633				306
Distributions to noncontrolling interest			(4,277	)			(5,024	)
Other			4,673				5,457
Net cash used in financing activities			(265,835	)			(359,126	)
Net decrease in cash and cash equivalents			(79,555	)			(130,428	)
Effect of foreign currency translation on cash and cash equivalents			(48	)			139
Cash and cash equivalents at beginning of period			107,397				176,812
Cash and cash equivalents at end of period		$	27,794			$	46,523
Supplemental schedule of non-cash activities:
Assets and liabilities assumed from acquisitions:
Real estate investments		$	496			$	8,307
Utilization of escrow funds held for an Internal Revenue Code Section 1031 exchange			—				(9,295	)
Other assets acquired			(355	)			82
Other liabilities			141				(1,886	)
Noncontrolling interest			—				980
Debt transferred on the sale of assets			—				38,759

See accompanying notes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF BUSINESS

Ventas, Inc. (together with its subsidiaries, unless otherwise indicated or except where the context otherwise requires, “we,” “us” or “our”) is a real estate investment trust (“REIT”) with a geographically diverse portfolio of seniors housing and healthcare properties in the United States and Canada. As of June 30, 2010, this portfolio consisted of 503 assets: 242 seniors housing communities, 187 skilled nursing facilities, 40 hospitals and 34 medical office buildings (“MOBs”) and other properties in 43 states and two Canadian provinces. With the exception of our seniors housing communities that are managed by independent third parties, such as Sunrise Senior Living, Inc. (together with its subsidiaries, “Sunrise”), pursuant to long-term management agreements and the majority of our MOBs, we lease our properties to healthcare operating companies under “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses. We also had real estate loan investments relating to seniors housing and healthcare companies or properties as of June 30, 2010.

We conduct substantially all of our business through our wholly owned subsidiaries, Ventas Realty, Limited Partnership (“Ventas Realty”), PSLT OP, L.P. and Ventas SSL, Inc. Our primary business consists of acquiring, financing and owning seniors housing and healthcare properties and leasing those properties to third parties or operating those properties through independent third party managers.

NOTE 2 — ACCOUNTING POLICIES

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. Operating results for the three and six months ended June 30, 2010 are not necessarily an indication of the results that may be expected for the year ending December 31, 2010. The accompanying Consolidated Financial Statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Current Report on Form 8-K filed with the SEC on May 3, 2010. Certain prior period amounts have been reclassified to conform to the current period presentation.

Revenue Recognition

Certain of our leases, including the majority of our leases with Brookdale Senior Living Inc. (together with its subsidiaries, “Brookdale Senior Living”), provide for periodic and determinable increases in base rent. Base rental revenues under these leases are recognized on a straight-line basis over the terms of the applicable lease. Income on our straight-line revenue is recognized when collectibility is reasonably assured, and in the event we determine that collectibility of straight-line revenue is not reasonably assured, we establish an allowance for estimated losses. Recognizing rental income on a straight-line basis results in recognized revenue exceeding cash amounts contractually due from our tenants during the first half of the term for leases that have straight-line treatment. The cumulative excess is included in other assets, net of allowances, on our Consolidated Balance Sheets and totaled $82.4 million and $78.4 million at June 30, 2010 and December 31, 2009, respectively.

Our master lease agreements with Kindred Healthcare, Inc. (together with its subsidiaries, “Kindred”) (the “Kindred Master Leases”) and certain of our other leases provide for an annual increase in rental payments only if certain revenue parameters or other substantive contingencies are met. We recognize the increased rental revenue under these leases only if the revenue parameters or other substantive contingencies are met, rather than on a straight-line basis over the term of the applicable lease.

We recognize income from rent, lease termination fees and all other income when all of the following criteria are met in accordance with SEC Staff Accounting Bulletin 104: (i) the agreement has been fully executed and delivered; (ii) services have been rendered; (iii) the amount is fixed or determinable; and (iv) collectibility is reasonably assured.

We recognize resident fees and services, other than move-in fees, monthly as services are provided. Move-in fees, a component of resident fees and services, are recognized on a straight-line basis over the term of the applicable lease agreement. Lease agreements with residents generally have a term of one year and are cancelable by the resident with 30 days’ notice.

Fair Values of Financial Instruments

The following methods and assumptions were used in estimating fair value disclosures for financial instruments.

•

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

•

Loans receivable: The fair value of loans receivable is estimated by discounting the future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

•

Marketable debt securities: The fair value of marketable debt securities is estimated using quoted prices in active markets for identical assets or liabilities that we have the ability to access.

•

Senior notes payable and other debt: The fair values of borrowings are estimated by discounting the future cash flows using current interest rates at which similar borrowings could be made by us.

Recently Issued or Adopted Accounting Standards

On January 1, 2010, we adopted Accounting Standards Update (“ASU”) No. 2009-17, Consolidation (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. ASU No. 2009-17 requires an enterprise to analyze whether its variable interest gives it a controlling financial interest in a variable interest entity (“VIE”). This analysis identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity. ASU No. 2009-17 requires an enterprise to perform this analysis on an ongoing basis and requires additional disclosures about an enterprise’s involvement in VIEs. The adoption of ASU No. 2009-17 did not impact our Consolidated Financial Statements.

On January 1, 2010, we adopted ASU No. 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary—a Scope Clarification. ASU No. 2010-02 provides additional clarification regarding decrease-in-ownership provisions and expands the disclosures required upon deconsolidation of a subsidiary. The adoption of ASU 2010-02 did not impact our Consolidated Financial Statements.

On January 1, 2010, we adopted ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. ASU No. 2010-06 adds new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances and settlements relating to Level 3 measurements. ASU No. 2010-06 is partially effective for periods beginning after December 15, 2009; requirements related to additional Level 3 disclosures will be effective for fiscal years beginning after December 15, 2010. The adoption of ASU No. 2010-06 did not impact our Consolidated Financial Statements.

In February 2010, the FASB issued ASU No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. ASU No. 2010-09 includes, among other things, an exemption for SEC filers from the requirement to disclose the date through which subsequent events have been evaluated. We adopted ASU No. 2010-09 during the first quarter of 2010 and will no longer include the date through which subsequent events have been evaluated in our notes to Consolidated Financial Statements.

NOTE 3 — CONCENTRATION OF CREDIT RISK

As of June 30, 2010, approximately 38.9%, 21.5% and 14.1% of our properties, based on the gross book value of real estate investments (including assets held for sale), were managed or operated by Sunrise, Brookdale Senior Living (whose subsidiaries include Brookdale Living Communities, Inc. (“Brookdale”) and Alterra Healthcare Corporation (“Alterra”)) and Kindred, respectively. Seniors housing communities and skilled nursing facilities constituted approximately 73.9% and 12.6%, respectively, of our portfolio, based on the gross book value of real estate investments (including assets held for sale), as of June 30, 2010, with the remaining properties consisting of hospitals, MOBs and other healthcare assets. As of June 30, 2010, our properties were located in 43 states and two Canadian provinces, with properties in two states each accounting for 10% or more of total revenues during the six months then ended.

Approximately 25.2% and 26.8% of our total revenues and 37.0% and 38.8% of our total net operating income (“NOI,” which is defined as total revenues, less interest and other income and property-level operating expenses) (including amounts in discontinued operations) for the six months ended June 30, 2010 and 2009, respectively, were derived from our four Kindred Master Leases. Approximately 12.5% and 13.0% of our total revenues and 18.3% and 19.2% of our total NOI (including amounts in discontinued operations) for the six months ended June 30, 2010 and 2009, respectively, were derived from our lease agreements with Brookdale Senior Living. Each of the Kindred Master Leases and our leases with Brookdale Senior Living is a triple-net lease pursuant to which the tenant is required to pay all insurance, taxes, utilities and maintenance and repairs related to the properties. In addition, the tenants are required to comply with the terms of the mortgage financing documents, if any, affecting the properties.

In view of the fact that Kindred and Brookdale Senior Living lease a substantial portion of our triple-net leased properties and are each a significant source of our revenues and operating income, their financial condition and ability and willingness to satisfy their obligations under their respective leases and other agreements with us, as well as their willingness to renew those leases upon expiration of the terms thereof, have a considerable impact on our results of operations and our ability to service our indebtedness and to make distributions to our stockholders. We cannot assure you that Kindred or Brookdale Senior Living will have sufficient assets, income and access to financing to enable it to satisfy its obligations under its respective leases and other agreements with us, and any inability or unwillingness on its part to do so would have a material adverse effect on our business, financial condition, results of operations and liquidity, our ability to service our indebtedness and our ability to make distributions to our stockholders, as required for us to continue to qualify as a REIT (a “Material Adverse Effect”). We also cannot assure you that Kindred or Brookdale Senior Living will elect to renew its respective leases with us upon expiration of the initial base terms or any renewal terms thereof.

We are party to long-term management agreements with Sunrise pursuant to which Sunrise currently provides comprehensive accounting and property management services with respect to 79 of our seniors housing communities. Each management agreement has a term of 30 years from its effective date, the earliest of which began in 2004. Approximately 44.7% and 44.2% of our total revenues and 22.1% and 20.3% of our total earnings before interest, taxes, depreciation and amortization (including non-cash stock-based compensation), excluding merger-related expenses and deal costs and gains and losses on real estate disposals (“Adjusted EBITDA”) (including amounts in discontinued operations) for the six months ended June 30, 2010 and 2009, respectively, were attributable to senior living operations managed by Sunrise.

Unlike Kindred and Brookdale Senior Living, Sunrise does not lease properties from us, but rather acts as a property manager for all of our senior living operations. Therefore, while we are not directly exposed to credit risk with Sunrise, Sunrise’s inability to efficiently and effectively manage our properties and to provide timely and accurate accounting information with respect thereto could have a Material Adverse Effect on us. Although we have various rights as owner under the Sunrise management agreements, we rely on Sunrise’s personnel, good faith, expertise, historical performance, technical resources and information systems, proprietary information and judgment to manage our seniors housing communities efficiently and effectively. We also rely on Sunrise to set resident fees and otherwise operate those properties pursuant to our management agreements. Any adverse developments in Sunrise’s business and affairs or financial condition, including without limitation, the acceleration of its indebtedness, the inability to renew or extend its revolving credit facility, the enforcement of default remedies by its counterparties, or the commencement of insolvency proceedings under the U.S. Bankruptcy Code by or against Sunrise could have a Material Adverse Effect on us.

Each of Kindred, Brookdale Senior Living and Sunrise is subject to the reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Kindred, Brookdale Senior Living and Sunrise contained or referred to in this Quarterly Report on Form 10-Q is derived from filings made by Kindred, Brookdale Senior Living or Sunrise, as the case may be, with the SEC or other publicly available information, or has been provided to us by Kindred, Brookdale Senior Living or Sunrise. We have not verified this information either through an independent investigation or by reviewing Kindred’s, Brookdale Senior Living’s or Sunrise’s public filings. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you that all of this information is accurate. Kindred’s, Brookdale Senior Living’s and Sunrise’s filings with the SEC can be found at the SEC’s website at www.sec.gov. We are providing this data for informational purposes only, and you are encouraged to obtain Kindred’s, Brookdale Senior Living’s and Sunrise’s publicly available filings from the SEC.

NOTE 4 — DISPOSITIONS

We present separately, as discontinued operations, in all periods presented the results of operations for all long-lived assets disposed of or held for sale.

2010 Dispositions and Assets Held for Sale

In June 2010, we sold four seniors housing communities for approximately $22.5 million, including a lease termination fee of $0.2 million. We recognized a gain from the sale of these assets of $4.9 million during the second quarter of 2010. The operations for these assets have been reported as discontinued operations for the three and six months ended June 30, 2010 and 2009.

During the first quarter of 2010, we classified the operations of one seniors housing community as held for sale. The net book value of this asset, $2.5 million, is reflected as held for sale as of June 30, 2010 and is included in other assets on our Consolidated Balance Sheets. The operations for this asset have been reported as discontinued operations for the three and six months ended June 30, 2010 and 2009. We expect to complete the sale of this asset and record a gain from the sale of approximately $0.1 million during the third quarter of 2010.

In February 2010, we sold one seniors housing community for approximately $2.5 million. We recognized a gain from the sale of this asset of $0.1 million during the first quarter of 2010. The operations for this asset have been reported as discontinued operations for all periods presented.

2009 Dispositions

In June 2009, we sold six skilled nursing facilities to Kindred for total consideration of $58.0 million, consisting of a $55.7 million aggregate sale price and a $2.3 million lease termination fee. The proceeds from the sale were held in an Internal Revenue Code Section 1031 exchange escrow account with a qualified intermediary and used for our acquisition of three MOBs in December 2009. Cash rent for these assets for the May 1, 2008 to April 30, 2009 lease year was approximately $5.6 million. We recognized a net gain from the sale of these assets of $38.9 million in the second quarter of 2009.

During 2009, we also sold five seniors housing communities, one hospital, one MOB and one other property to the existing tenants for an aggregate sale price of $96.2 million and transferred related debt of $38.8 million. We recognized a net gain from the sales of these assets of $27.5 million in 2009.

Set forth below is a summary of the results of operations for the three- and six-month periods ended June 30, 2010 and 2009 with respect to the properties sold or held for sale during the six months ended June 30, 2010 and the year ended December 31, 2009:

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2010				2009				2010				2009
						(In thousands)
Revenues:
Rental income		$	405			$	1,972			$	901			$	4,432
Interest and other income			225				2,300				225				2,423
			630				4,272				1,126				6,855
Expenses:
Interest			127				652				286				1,531
Depreciation and amortization			—				266				61				676
			127				918				347				2,207
Income before gain on sale of real estate assets			503				3,354				779				4,648
Gain on sale of real estate assets			5,041				39,020				5,225				66,891
Discontinued operations		$	5,544			$	42,374			$	6,004			$	71,539

NOTE 5 — INTANGIBLES

The following is a summary of our intangibles as of June 30, 2010 and December 31, 2009:

		June 30,				December 31,
		2010				2009
		(Dollars in thousands)
Intangible Assets:
Above market resident leases		$	9,370			$	10,525
In-place resident leases			96,097				96,274
Other intangibles			3,326				2,522
Accumulated amortization			(93,582	)			(92,636	)
Net Intangible Assets		$	15,211			$	16,685
Remaining weighted average amortization period of lease-related intangibles in years			7.5				8.0
Intangible Liabilities:
Below market resident leases		$	15,166			$	15,143
Accumulated amortization			(11,134	)			(10,760	)
Net Intangible Liabilities		$	4,032			$	4,383
Remaining weighted average amortization period of lease-related intangibles in years			8.1				8.3

NOTE 6 — SENIOR NOTES PAYABLE AND OTHER DEBT

The following is a summary of our senior notes payable and other debt as of June 30, 2010 and December 31, 2009:

		June 30,				December 31,
		2010				2009
		(In thousands)
Unsecured revolving credit facilities		$	126,269			$	8,466
63/4% Senior Notes due 2010			—				1,375
37/8% Convertible Senior Notes due 2011			230,000				230,000
9% Senior Notes due 2012			82,433				82,433
65/8% Senior Notes due 2014			71,654				71,654
71/8% Senior Notes due 2015			—				142,669
61/2% Senior Notes due 2016			400,000				400,000
63/4% Senior Notes due 2017			225,000				225,000
Mortgage loans and other			1,474,287				1,540,064
Total			2,609,643				2,701,661
Unamortized fair value adjustment			10,214				11,642
Unamortized commission fees and discounts			(39,008	)			(43,202	)
Senior notes payable and other debt		$	2,580,849			$	2,670,101

As of June 30, 2010, our indebtedness had the following maturities:

						Unsecured
		Principal Amount				Revolving Credit				Scheduled Periodic
		Due at Maturity				Facilities (1)				Amortization				Total Maturities
						(In thousands)
2010		$	122,246			$	—			$	13,749			$	135,995
2011			301,823				—				26,354				328,177
2012			388,937				126,269				22,798				538,004
2013			150,962				—				17,265				168,227
2014			109,137				—				15,054				124,191
Thereafter			1,255,599				—				59,450				1,315,049
Total maturities		$	2,328,704			$	126,269			$	154,670			$	2,609,643

As of June 30, 2010, our joint venture partners’ share of total debt was $147.7 million with respect to 56 of our properties owned through joint ventures.

Unsecured Revolving Credit Facilities

As of June 30, 2010, our aggregate borrowing capacity under the unsecured revolving credit facilities was $1.0 billion, all of which matures on April 26, 2012. Borrowings under our unsecured revolving credit facilities bear interest at a fluctuating rate per annum (based on U.S. or Canadian LIBOR, the Canadian Bankers’ Acceptance rate, or the U.S. or Canadian Prime rate), plus an applicable percentage based on our consolidated leverage. At June 30, 2010, the applicable percentage was 2.80%. Our unsecured revolving credit facilities have a 20 basis point facility fee. At June 30, 2010, we had $126.3 million outstanding under our unsecured revolving credit facilities and approximately $872.7 million of availability.

Senior Notes

On June 1, 2010, we repaid in full, at par, $1.4 million principal amount outstanding of our senior notes due 2010 upon maturity. In June 2010, we also exercised our option to redeem all $142.7 million principal amount outstanding of our 7¹/8% senior notes due 2015, at a redemption price equal to 103.56% of par, plus accrued and unpaid interest to the redemption date, pursuant to the call option contained in the indenture governing the notes. As a result, we paid a total of $147.8 million, plus accrued and unpaid interest, and recognized a net loss on extinguishment of debt of $6.4 million during the second quarter.

Mortgages

In June 2010, we repaid $49.8 million of mortgage loans on two of our Sunrise-managed properties in which we had 80% ownership interests. In connection with our payment of Sunrise’s share ($9.9 million) of those mortgage loans, we acquired Sunrise’s 20% noncontrolling interests in the properties.

NOTE 7 — FAIR VALUES OF FINANCIAL INSTRUMENTS

As of June 30, 2010 and December 31, 2009, the carrying amounts and fair values of our financial instruments were as follows:

		June 30, 2010								December 31, 2009
		Carrying								Carrying
		Amount				Fair Value				Amount				Fair Value
		(In thousands)
Cash and cash equivalents		$	27,794			$	27,794			$	107,397			$	107,397
Loans receivable, net			140,870				142,025				131,887				129,512
Marketable debt securities			64,800				64,800				65,038				65,038
Senior notes payable and other debt, gross			(2,609,643	)			(2,591,820	)			(2,701,661	)			(2,780,405	)

Fair value estimates are subjective in nature and depend on a number of important assumptions, including estimates of future cash flows, risks, discount rates and relevant comparable market information associated with each financial instrument. The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented above are not necessarily indicative of the amounts we would realize in a current market exchange.

At June 30, 2010, we held marketable debt securities, classified as available-for-sale, with an aggregate amortized cost basis and fair value of $61.2 million and $64.8 million, respectively. At December 31, 2009, these securities had an aggregate amortized cost basis and fair value of $60.6 million and $65.0 million, respectively. The contractual maturities of our marketable debt securities range from October 1, 2012 to April 15, 2016. We do not intend to sell these securities and it is more likely than not that we will not be required to sell these securities prior to maturity.

NOTE 8 — LITIGATION

Legal Proceedings Defended and Indemnified by Third Parties

Kindred, Brookdale Senior Living, Sunrise and our other tenants, operators and managers are parties to certain legal actions and regulatory investigations arising in the normal course of their business. In certain cases, the tenant, operator or manager, as applicable, has agreed to indemnify, defend and hold us harmless against these actions and investigations. However, the resolution of any litigation or investigations, either individually or in the aggregate, could have a material adverse effect on Kindred’s, Brookdale Senior Living’s, Sunrise’s or such other tenants’, operators’ and managers’ liquidity, financial condition or results of operations, which, in turn, could have a Material Adverse Effect on us.

Litigation Related to the Sunrise REIT Acquisition

On May 3, 2007, we filed a lawsuit against HCP, Inc. (“HCP”) in the United States District Court for the Western District of Kentucky, entitled Ventas, Inc. v. HCP, Inc., Case No. 07-cv-238-JGH. We asserted claims of tortious interference with contract and tortious interference with prospective business advantage. Our complaint alleged that HCP interfered with our purchase agreement to acquire the assets and liabilities of Sunrise Senior Living Real Estate Investment Trust (“Sunrise REIT”) and with the process for unitholder consideration of the purchase agreement. The complaint alleged, among other things, that HCP made certain improper and misleading public statements and/or offers to acquire Sunrise REIT and that HCP’s actions caused us to suffer substantial damages, including, among other things, the payment of materially greater consideration to acquire Sunrise REIT resulting from the substantial increase in the purchase price above the original contract price necessary to obtain unitholder approval and increased costs associated with the delay in closing the acquisition, including increased costs to finance the transaction as a result of the delay.

HCP brought counterclaims against us alleging misrepresentation and negligent misrepresentation by Sunrise REIT related to its sale process, claiming that we were responsible for those actions as successor. HCP sought compensatory and punitive damages. On March 25, 2009, the District Court granted us judgment on the pleadings against all counterclaims brought by HCP and dismissed HCP’s counterclaims with prejudice. Thereafter, the District Court confirmed the dismissal of HCP’s counterclaims.

On July 16, 2009, the District Court denied HCP’s summary judgment motion as to our claim for tortious interference with business advantage, permitting us to present that claim against HCP at trial. The District Court granted HCP’s motion for summary judgment as to our claim for tortious interference with contract and dismissed that claim. The District Court also ruled that we could not seek to recover a portion of our alleged damages.

On September 4, 2009, the jury unanimously held that HCP tortiously interfered with our business expectation to acquire Sunrise REIT at the agreed price by employing significantly wrongful means such as fraudulent misrepresentation, deceit and coercion. The jury awarded us $101.6 million in compensatory damages, which is the full amount of damages the District Court permitted us to seek at trial. The District Court entered judgment on the jury’s verdict on September 8, 2009.

On November 16, 2009, the District Court affirmed the jury’s verdict and denied all of HCP’s post-trial motions, including a motion requesting that the District Court overturn the jury’s verdict and enter judgment for HCP or, in the alternative, award HCP a new trial. The District Court also denied our motion for pre-judgment interest and/or to modify the jury award to increase it to reflect the currency rates in effect on September 8, 2009, the date of entry of the judgment.

On November 17, 2009, HCP appealed the District Court’s judgment to the United States Court of Appeals for the Sixth Circuit (the “Sixth Circuit”). HCP argues that the judgment against it should be vacated and the case remanded for a new trial and/or that judgment should be entered in its favor as a matter of law. We are vigorously contesting HCP’s appeal and seek confirmation by the Sixth Circuit of both the jury’s verdict and the various rulings in our favor in the District Court.

On November 24, 2009, we filed a cross-appeal to the Sixth Circuit, which will be heard and decided in conjunction with HCP’s appeal. In addition to maintaining the full benefit of our favorable jury verdict, in our cross-appeal, we have asserted that we are entitled to substantial monetary relief in addition to the jury verdict, including punitive damages, additional compensatory damages and pre-judgment interest. We are vigorously pursuing our cross-appeal and seek additional proceedings in the District Court in which a jury may supplement the current judgment.

On December 11, 2009, HCP posted a $102.8 million letter of credit in our favor to serve as security to stay execution of the jury verdict pending the appellate proceedings.

The briefing process for HCP’s appeal and our cross-appeal is complete, and a final decision by the Sixth Circuit could be issued by June 2011. There can be no assurance as to the outcome of HCP’s appeal or our cross-appeal or the timing of a decision by the Sixth Circuit.

Other Litigation

We are party to various other lawsuits, investigations and claims (some of which may not be insured) arising in the normal course of our business, including without limitation in connection with the operations of our seniors housing communities managed by Sunrise. It is the opinion of management that, except as set forth in this Note 8, the disposition of these actions, investigations and claims will not, individually or in the aggregate, have a Material Adverse Effect on us. However, we are unable to predict the ultimate outcome of pending litigation, investigations and claims, and if management’s assessment of our liability with respect to these actions, investigations and claims is incorrect, such actions, investigations and claims could have a Material Adverse Effect on us.

NOTE 9 — INCOME TAXES

We have elected for certain of our subsidiaries to be treated as taxable REIT subsidiaries (“TRS” or “TRS entities”), which are subject to federal and state income taxes. Although the TRS entities were not liable for any cash federal income taxes for the three or six months ended June 30, 2010, federal income tax liabilities for these TRS entities may increase in future periods as we exhaust net operating loss carryforwards and as our senior living operations segment grows. Such increases could be significant.

The consolidated provision for income taxes for the three months ended June 30, 2010 and 2009 was an expense of $0.4 million and a benefit of $0.4 million, respectively. These amounts were adjusted by income tax expense of $0.6 million and $0.5 million, respectively, related to the noncontrolling interest share of net income. The consolidated provision for income taxes for the six months ended June 30, 2010 and 2009 was an expense of $0.7 million and a benefit of $0.9 million, respectively. These amounts were adjusted by income tax expense of $1.0 million and $0.9 million, respectively, related to the noncontrolling interest share of net income. Realization of a deferred tax benefit is dependent in part upon generating sufficient taxable income in future periods. Our net operating loss carryforwards begin to expire in 2024 with respect to the TRS entities and 2020 with respect to our other entities.

Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. Net deferred tax liabilities related to TRS entities totaled $251.8 million and $253.7 million at June 30, 2010 and December 31, 2009, respectively, and related primarily to book and tax basis differences for fixed and intangible assets and to net operating losses.

Generally, we are subject to audit under the statute of limitations by the Internal Revenue Service for the year ended December 31, 2006 and subsequent years and are subject to audit by state taxing authorities for the year ended December 31, 2005 and subsequent years. We are also subject to audit by the Canada Revenue Agency for periods subsequent to 2003 related to entities acquired or formed in connection with our Sunrise REIT acquisition.

NOTE 10 — STOCKHOLDERS’ EQUITY

In March 2010, in connection with our outstanding 3⁷/8% convertible senior notes due 2011, issued in 2006, we filed a registration statement on Form S-3 with the SEC relating to the resale, from time to time, by the selling stockholders of shares of our common stock, if any, that may become issuable upon conversion of the convertible notes. The registration statement replaced our previous resale shelf registration statement, which expired pursuant to the SEC’s rules.

Accumulated Other Comprehensive Income

		June 30,				December 31,
		2010				2009
		(In thousands)
Foreign currency translation		$	13,909			$	16,059
Unrealized gain on marketable debt securities			3,571				4,440
Other			(974	)			(830	)
Total accumulated other comprehensive income		$	16,506			$	19,669

NOTE 11 — EARNINGS PER COMMON SHARE

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

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2010				2009				2010				2009
		(In thousands, except per share amounts)
Numerator for basic and diluted earnings per share:
Income from continuing operations attributable to common stockholders		$	52,523			$	46,007			$	104,682			$	91,070
Discontinued operations			5,544				42,374				6,004				71,539
Net income attributable to common stockholders		$	58,067			$	88,381			$	110,686			$	162,609
Denominator:
Denominator for basic earnings per share — weighted average shares			156,611				154,441				156,533				148,798
Effect of dilutive securities:
Stock options			357				63				337				55
Restricted stock awards			48				6				45				6
Convertible notes			425				—				291				—
Denominator for diluted earnings per share — adjusted weighted average shares			157,441				154,510				157,206				148,859
Basic earnings per share:
Income from continuing operations attributable to common stockholders		$	0.33			$	0.30			$	0.67			$	0.61
Discontinued operations			0.04				0.27				0.04				0.48
Net income attributable to common stockholders		$	0.37			$	0.57			$	0.71			$	1.09
Diluted earnings per share:
Income from continuing operations attributable to common stockholders		$	0.33			$	0.30			$	0.66			$	0.61
Discontinued operations			0.04				0.27				0.04				0.48
Net income attributable to common stockholders		$	0.37			$	0.57			$	0.70			$	1.09

NOTE 12 — SEGMENT INFORMATION

As of June 30, 2010, we operated through two reportable business segments: triple-net leased properties and senior living operations. Our triple-net leased properties segment consists of acquiring and owning seniors housing and healthcare properties in the United States and leasing those properties to healthcare operating companies under “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses. Our senior living operations segment primarily consists of investments in seniors housing communities located in the United States and Canada for which we engage independent third parties, such as Sunrise, to manage the operations.

As of June 30, 2010, our MOB segment consists of leasing space primarily to physicians and other healthcare businesses and engaging third parties to manage those operations. Due to our limited operation of and allocation of capital to the MOBs, the MOB segment is not individually reported and is included in “All Other” because it did not meet necessary quantitative and qualitative thresholds at June 30, 2010.

We evaluate performance of the combined properties in each segment based on NOI. There are no intersegment sales or transfers.

All other revenues consist primarily of rental income related to the MOBs, income from loans and investments and other miscellaneous income.

Summary information by business segment is as follows:

For the three months ended June 30, 2010:

		Triple-Net				Senior
		Leased				Living				All
		Properties				Operations				Other				Total
		(In thousands)
Revenues:
Rental income		$	118,044			$	—			$	12,240			$	130,284
Resident fees and services			—				109,867				—				109,867
Income from loans and investments			—				—				3,705				3,705
Interest and other income			93				7				22				122
Total revenues		$	118,137			$	109,874			$	15,967			$	243,978
Segment net operating income		$	118,044			$	38,808			$	11,821			$	168,673
Interest and other income			93				7				22				122
Interest expense			(21,441	)			(21,422	)			(1,182	)			(44,045	)
Depreciation and amortization			(27,335	)			(18,122	)			(4,728	)			(50,185	)
General, administrative and professional fees			—				—				(9,858	)			(9,858	)
Foreign currency loss			—				(121	)			—				(121	)
Loss on extinguishment of debt			(6,447	)			(102	)			—				(6,549	)
Merger-related expenses and deal costs			—				(535	)			(3,672	)			(4,207	)
Income (loss) before income taxes, discontinued operations and noncontrolling interest		$	62,914			$	(1,487	)		$	(7,597	)		$	53,830

For the three months ended June 30, 2009:

		Triple-Net				Senior
		Leased				Living				All
		Properties				Operations				Other				Total
		(In thousands)
Revenues:
Rental income		$	116,269			$	—			$	8,343			$	124,612
Resident fees and services			—				103,399				—				103,399
Income from loans and investments			—				—				3,333				3,333
Interest and other income			43				1				64				108
Total revenues		$	116,312			$	103,400			$	11,740			$	231,452
Segment net operating income		$	116,269			$	33,857			$	8,654			$	158,780
Interest and other income			43				1				64				108
Interest expense			(20,521	)			(22,579	)			(894	)			(43,994	)
Depreciation and amortization			(29,854	)			(15,813	)			(2,976	)			(48,643	)
General, administrative and professional fees			—				—				(10,355	)			(10,355	)
Foreign currency loss			—				(5	)			—				(5	)
Loss on extinguishment of debt			(5,975	)			—				—				(5,975	)
Merger-related expenses and deal costs			—				(3,498	)			(4	)			(3,502	)
Income (loss) before income taxes, discontinued operations and noncontrolling interest		$	59,962			$	(8,037	)		$	(5,511	)		$	46,414

For the six months ended June 30, 2010:

		Triple-Net				Senior
		Leased				Living				All
		Properties				Operations				Other				Total
		(In thousands)
Revenues:
Rental income		$	235,034			$	—			$	24,429			$	259,463
Resident fees and services			—				218,353				—				218,353
Income from loans and investments			—				—				7,322				7,322
Interest and other income			298				20				67				385
Total revenues		$	235,332			$	218,373			$	31,818			$	485,523
Segment net operating income		$	235,034			$	72,617			$	23,425			$	331,076
Interest and other income			298				20				67				385
Interest expense			(43,271	)			(42,688	)			(2,386	)			(88,345	)
Depreciation and amortization			(56,902	)			(36,084	)			(9,675	)			(102,661	)
General, administrative and professional fees			—				—				(20,541	)			(20,541	)
Foreign currency loss			—				(15	)			—				(15	)
Loss on extinguishment of debt			(6,447	)			(102	)			—				(6,549	)
Merger-related expenses and deal costs			(38	)			(1,246	)			(5,242	)			(6,526	)
Income (loss) before income taxes, discontinued operations and noncontrolling interest		$	128,674			$	(7,498	)		$	(14,352	)		$	106,824

For the six months ended June 30, 2009:

		Triple-Net				Senior
		Leased				Living				All
		Properties				Operations				Other				Total
		(In thousands)
Revenues:
Rental income		$	230,319			$	—			$	16,691			$	247,010
Resident fees and services			—				206,338				—				206,338
Income from loans and investments			—				—				6,614				6,614
Interest and other income			158				10				226				394
Total revenues		$	230,477			$	206,348			$	23,531			$	460,356
Segment net operating income		$	230,319			$	64,342			$	17,269			$	311,930
Interest and other income			158				10				226				394
Interest expense			(42,623	)			(45,352	)			(1,949	)			(89,924	)
Depreciation and amortization			(59,653	)			(32,938	)			(5,550	)			(98,141	)
General, administrative and professional fees			—				—				(20,953	)			(20,953	)
Foreign currency gain			—				1				—				1
Loss on extinguishment of debt			(6,012	)			—				(68	)			(6,080	)
Merger-related expenses and deal costs			(174	)			(5,355	)			(27	)			(5,556	)
Income (loss) before income taxes, discontinued operations and noncontrolling interest		$	122,015			$	(19,292	)		$	(11,052	)		$	91,671