Ryan Shannon - IR Debra Cafaro - Chairman and CEO Robert Probst - EVP and CFO Pete Bulgarelli - EVP of Office.

Smedes Rose - Citi Juan Sanabria - Bank of America Michael Carroll - RBC Capital Markets Steve Sakwa - Evercore ISI Rich Anderson - Mizuho Securities Jordan Sadler - KeyBanc Capital Markets John Kim - BMO Capital Markets Chad Vanacore - Stifel Tayo Okusanya - Jefferies Lukas Hartwich - Green Street Advisors Karin Ford - MUFG Securities Todd Stender - Wells Fargo Daniel Bornstein - Capital One Michael Bilerman - Citi.

Good day, ladies and gentlemen, and welcome to the Third Quarter 2018 Ventas Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference Ryan Shannon, Investor Relations. Sir, please begin..

Thanks Irma. Good morning and welcome to the Ventas conference call to review the Company’s announcement today regarding its results for the third quarter ended September 30, 2018.

As we start, let me express that all 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 laws.

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, 2017 and the Company’s other SEC filings.

Please note that quantitative reconciliations between each non-GAAP financial measure referenced on this conference call and its most directly comparable GAAP measure, as well as the Company’s supplemental disclosure schedule are available in the Investor Relations section of our website at www.ventasreit.com.

I will now turn the call over to Debra Cafaro, Chairman and CEO of the Company..

Thank you, Ryan, and good morning to all of our shareholders and others participants, it's great to be with you on today's Ventas third quarter earnings call.

I’m also delighted to be joined by members of our Ventas team to report on another solid quarter and to highlight our financial strength, our investment and growth, expanded pipeline and partnerships, and commitments and recognition to ESG. After Bob provides detailed insights into our financial results, we will be happy to answer your questions.

Let me start with our results and full-year 2018 expectation. We're pleased to report normalized funds from operations of $0.99 per share this quarter to improve our full-year normalized FFO expectation and to confirm our same-store cash NOI expectations for the year.

Turning now to our enterprise and capital allocation strategy, we continue to enhance the long-term durability of Ventas by following our differentiated and deliberate approach of investing in our future growth with top tier customers and extending and expanding our key partnership.

First, this quarter and immediately following, we invested approximately a 100 million in attractive medical office building and outpatient facility with two key partners, Ardent and Pacific Medical.

We also announce our pending acquisition of a premier independent senior living community, located in the appealing Battery Park neighborhood of downtown Manhattan, firmly establishing our leadership in the high-end senior living Manhattan market. Second, we extended our exclusive partnership with Pacific Medical or PMB for a further 10-year term.

With almost 50 years of experience and outpacing facility development with key U.S. health systems, PMB's knowledge and expertise and development is extraordinary. The attractive MOB investments we made this quarter are an example of the benefits of our partnership with PMB.

As is our trophy MOB development attached to Sutter, new flagship hospitals in downtown San Francisco, which is on track to open in early 2019. We're also happy to report on the great performance lease-up and delivery of our university based research and innovation centers. Our forward pipeline of excellent projects is robust and growing.

In light of strong university demand, our leading market position and the positive risk reward investment profile of this project, we intend to ramp-up our investment activity in this space. The attractiveness of our university base development model was recently brought to light at a summit hosted by Ventas and our partner Wexford.

The buzz among attendees was palpable as we brought together leaders from universities and academic medical centers to share ideas and discuss innovative approaches to achieving their strategic goals.

Our partner Wexford is a trusted advisor, catering to university needs and enjoys an incredible track record and reputation for conceiving building leasing and delivering powerful knowledge communities on university campuses that supercharge research and innovation.

We are proud to partner with these leading universities and Wexford and to fund and own these knowledge communities for the long-term. In this business, I would like to note that one of our newest research and innovation buildings at Penn just opened.

This project which is on the precipice of already being 90% leased further builds out our footprint in the attractive U City submarket. The success of this project follows on the heels of another recently owned project at WashU's Cortex Innovation District, which we expect to be a 100% leased very shortly.

Finally, Atria Senior Living also continues to distinguish itself. In addition to Atria's consistent operational excellence in our portfolio, it just linked to a 3 billion agreement with a Related Companies to develop high-end urban senior living projects in major markets.

We are effectively a general partner in these potential projects through our one-third ownership interest in Atria. With Atria's expertise and Related's world-class development capabilities, we are excited about the potential for this deal.

I would like to turn to another area where we are making significant investments specifically environmental, social and governance or ESG matters. We believe that our commitment to ESG principals underpins our long-term success. This year, we have been recognized repeatedly by leading organizations for our positive impact.

Today, we are pleased to launch our inaugural corporate sustainability report showing our leadership and commitment to ESG policies and practices. I would like to give a special shout out to our whole ESG team who work long and hard at improving our ESG profiles showcase in this excellent report.

To my mind, sustainability starts with financial strength and resilient cash flows from a high quality diverse portfolio. At Ventas, we are focused on both.

This quarter, we continued our proactive and successful efforts to build financial strength and reduce risk through debt refinancing and maturity expansions, and our portfolio produce growing same-store cash NOI per of 1.3% as a result of its quality and diversification and product type in operating model.

Looking at macro senior housing trends, we are very encouraged with the recently reported continued improvement in senior living starts, which are at a five-year low. Importantly, in primary markets, net absorption in assisted living in the third quarter of 2018 was the strongest third quarter for net demand on record.

However, it has been widely documented, we expect to experience another year of elevated deliveries in 2019, as the industry works its way through the opening of new communities that were started in anticipation of the demographic demand that will accelerate in the coming years.

If current trends continue, the current supply demand equation will surely reverse in our favor and that's why our senior housing assets continue to be so highly valued.

Finally, we are always mindful that seniors live in our communities, patients are receiving healthcare in our facility, and tens of thousands of employees are serving in our properties. Thus we were heartened when all seniors, patients, physicians and employees were reported safe despite the devastation of recent hurricanes Florence and Michael.

We are thankful for the preparation and execution by our care providers especially Ardent whose team exercised extraordinary efforts in the phase of the storm. We sincerely thank our operating partners for their preparedness and care. In sum, our cohesive team is confident in our enterprise and our continued success.

This confidence is founded on the resiliency of our portfolio, our financial strength, our focused in increasing investment in our future growth, the quality of our partnerships and relationship and accelerating demographic demand. I'm now happy to turn the call over to our CFO, Bob Probst..

Thank you, Debby, and congratulations on once again being named, as one of the top 100 best-performing CEOs in the world by Harvard Business Review. I'll begin with a review of our segment level performance which on a combined basis delivered portfolio same-store cash NOI growth of 1.3% in the third quarter.

Let me start this segment discussion with SHOP and the key leading indicator for future SHOP performance, namely the new construction starts. We are very excited that the trend line of the lower and new construction starts in our trade areas continued in the third quarter.

In fact, new store starts for our portfolio are at the lowest level observed in nearly five years. Annualized new starts for the first 3 quarters of 2018 represents just 1.7% of inventory in our trade areas, well below the roughly 2% near-term demand growth rate for our senior target market.

In terms of current performance, third quarter SHOP NOI performed in line with our expectations with same-store cash NOI lower versus prior year by 2.7%. Occupancy was ahead of our expectations while rate growth moderated together delivering 1.2% revenue growth in the quarter.

Occupancy in the third quarter reached 88%, a sequential improvement of 80 basis points, which is better than our normal seasonal trends and better than the industry overall as reported by NIC. On a year-over-year basis, the GAAP in SHOP occupancy also improved in the third quarter to 60 basis points below Q3 of 2017.

Third quarter RevPAR growth moderated to 1.8% as new competition drove wider releasing spreads. Operating expenses grew 3.1% in the third quarter. Wage cost per hour continued to run at roughly 4%, partially offset by more efficient staffing levels and reduced indirect costs.

At a market level, we're seeing strong NOI growth in Los Angeles and San Francisco meanwhile NOI is lower in markets expected by new competition such as Atlanta and Chicago. Our SHOP 2018 full-year same-store NOI guidance range remains unchanged at minus to 1% to minus 3%.

Though we will give formal guidance in February with the benefit of observing our year-end finish and early start to next year, we do expect elevated levels of new deliveries to continue in 2019. As a result, same-store shop NOI may evidence a similar year-over-year percentage decline in 2019 as in 2018.

That said, with the positive trend of lower new starts together with accelerating demand, we do expect supply demand fundamentals to offer powerful senior housing upside overtime. Our valuable office reporting segment which comprises 26% of our portfolio, increased same-store cash NOI by a robust 3.5% in the third quarter.

The office segment was led by a terrific result from our university-based life science portfolio, which grew same-store cash NOI by 12.4% in the third quarter as a result of strong lease up activity. The total life science portfolio grew NOI by nearly 23% in the third quarter, fueled by exciting new projects that at Wash U, Duke and Penn.

For the full year life science same-store pool in 2018, we continue to expect very robust same-store NOI growth in the range of 3% to 4%. Our reliable and valuable medical office business grew same-store NOI by 1.1% in the third quarter as a result of increased in place escalators approximately 3%, and best-in-class tenant retention of nearly 87%.

Q3 operating expenses were 3% higher versus prior year due in part to timing of expenses. We continue to forecast a 1.5% to 2.5% full year NOI increase from our same-store medical office portfolio.

Our combined office portfolio of life science and MOB assets, same-store cash NOI guidance range is also unchanged at 1.75% to 2.75% growth for the full year 2018.

A quick note on the recent hurricanes is appropriate here, as their principal impact was on two Ventas-owned MOBs and one Ardent-owned hospital in Panama City, Florida, which were significantly damaged. It is too early to determine the financial impacts of the hurricanes and therefore they are not included in our guidance.

Moving onto our triple-net lease segment, which grew overall same-store cash NOI by 3% in the third quarter, in place, lease escalations were the primary driver of this increase.

In terms of rent coverage, trailing 12-month EBITDAR on coverage in our triple-net same-store seniors housing portfolio held steady at 1.2 times through Q2, our latest available reporting period. Notably, the asset sales announced as part of the Brookdale transaction are progressing. We expect the first tranche of these sales to occur in 2019.

And our triple-net post-acute portfolio, cash flow coverage held steady at 1.4 times. We continue to expect our LTAC to generate improving results in the second half of 2018 with operational strategies mitigating LTAC criteria. In health systems, Ardent coverage remains strong and steady at 2.9 times on the back with solid second quarter.

Momentum at Ardent continues and the business is performing exceptionally well. We are holding our 2018 same-store NOI guidance range for the triple-net portfolio overall to grow between 2.5% and 3%. Finally, our book of loans extended by Ventas now stands at 4% of NOI, down from 7% at the star of 2018 due to repayments of profitable loans.

We expect further reductions to our loan investment book with maturities on existing loans of roughly $300 million in the second half of 2019, with proceeds earmarked to fund our exciting life science development pipeline. Let's turn to our overall company third quarter financial results. Normalized FFO per share was $0.99 in the third quarter.

This result was principally driven by two factors. First, the expected receipt of a $0.03 per share fee from Kindred successful go private transaction in July. And second, the dilutive net impact of $1.3 billion in dispositions and loan repayment proceeds received in the first half of the year and used to reduce debt.

Stepping back since 2005, we have completed nearly $8 billion in value creating capital recycling activity. Over that same time period, we've also been highly proactive in refinancing our debt maturities to extend duration and limit interest rate exposure. In 2018 alone, we have retired or refinanced $3.2 billion in debt.

As a result, we have a strategic asset in our sector leading financial strength and flexibility, some evidence from the third quarter, fixed charge coverage was 4.6 times at quarter end, our net-debt-to-EBITDA ratio stood at 5.4 times less than 12% of our total debt matures in the next three years, and we enjoyed liquidity of nearly $3 billion.

Our aggressive efforts to reduce debt, extend and stagger our maturity profile and significantly reduce medium-term refinancing risk has already paid-off as we completed these efforts prior to the recent strong move upwards in rates. Let's close up the prepared remarks with our 2018 guidance for the Company.

For 2018, for the third time this year, we are improving our full-year outlook for normalized FFO per fully diluted share, which we now forecast to range between $4.03 and $4.07. We have also confirmed our total and segment level same-store cash NOI guidance for the full year 2018.

The assumptions within this guidance range are substantially the same as our previous guidance in July, including the previously described 1.3 billion in capital recycling and related debt retirement. To closeout, the Ventas team is cohesive, determined and sharply focused on delivering against our financial commitments as we closeout 2018.

With that, I'll hand it back to the operator to open the line for questions..

[Operator Instructions] Our first question comes from Smedes Rose of Citi. Your line is open..

I wanted to ask you just on your SHOP guidance for next year. [indiscernible] So you pointed out, this is about 7% as in place inventory under construction primary market.

Do you have a sense of what percentage will open over the course of 2019, which you think it would like kind of similar to what in the 12 months trailing that you just mentioned? And just on that front, what are your operators telling you about wage increases going forward into next year their expectations around that?.

This is Bob here. First of all just to clarify, in early indication for SHOP of 2019, I would say as opposed formal guidance we'll give that in February. But there are things, we now know standing here today which include deliveries having seen three quarters of the year, we have a pretty good view into delivery levels next year.

And our view today is that they are roughly in line with where we are going to see 2018 pan out, so effectively equivalent on the deliveries line. And there in light to the comment to say, we expect performance in '19 to look quite similar to '18 in terms of year-over-year.

And within that of course the same things, I would highlight whether it would be price occupancy wages and the same thing will likely play out in '19 as we saw in '18. But again, we want to see the year-end, we want to see the rate letters and so on before you give formal guidance..

And then just with your relationship with Atria, will you be investing more capital into that relationship now given their announcement with Related or does that remain unchanged?.

This is Debbie, Smedes. The deal with Related is a really exciting one and has potential to be 3 billion of high-end urban senior living overtime. And we will have the opportunity of course to invest capital in effectively general partner position in those projects.

And then, if there are other opportunities to invest capital on the projects that we see as attractive, those opportunities could manifest for us as well..

Our next question comes from Juan Sanabria of Bank of America. Your line is open..

On holiday, I just wanted to ask about that some of your peers have been talking about having been [indiscernible] scared about converting some of the leases in triple-net through idea.

Can you confirm if you've been and how you are thinking about your exposure? And also as part of those broader discussions, are you interested in acquiring any incremental holiday asset at this point in the cycle given maybe some available for sale?.

So, I would like to put holiday into context for Ventas. It's about 3% of our NOI and as you know they did a deal with new senior that is public that has a conversion of assets from a lease to management fee, management structure with the payment of large fee connected therewith.

I think just like every other customer that we have, we would typically engage in conversation just like we did with Brookdale, just like we have done with Kindred over the years. And we will be thoughtful I think and have a lot of ways of coming up with optimal changes should we believe they are appropriate..

And then just on the seniors housing on the regular side going back to that, can you comment on how newer renewals spreads are trending? And if there has been any expansion between those two, just looking at the sequential same-store numbers, it looked like RevPAR did come down despite occupancy ticking up.

I'm not sure, if you could comment on what drove that specifically, I don’t know if that was equipped to Related or not?.

Sure, I think you're referring to RevPAR which was 2.1% year-over-year in the second quarter, 1.8% in the third quarter, and that is driven by what I call releasing spreads or new leasing spreads, if you want to refer to that way.

In other words, former resident to new resident, what does that look like that I quoted last quarter was about mid single digits down and that has widened a bit. Again, that's one of the artifacts of new competition.

So that's really what's driving that drift sequentially?.

Our next question comes from Michael Carroll of RBC Capital Markets. Your line is open..

Bob, the quarterly run rate, as the run rate has bounced around this year and the guidance is currently implying that there's going to be another drop in the fourth quarter even if you exclude the Kindred fee this quarter.

Can you kind of provide some color? And what is the correct run rate of FFO? And what's driving the drop between 4Q and 3Q?.

We've been asked to repeat the questions. I understand there maybe some static on the operators line, so which we apologize. So, I think in sum, the question is really to discuss the fourth quarter normalized FFO rate implied in our 2018 guidance..

Right and I'd just frame that again, the third quarter FFO was $0.99 that included a $0.03 Kindred fee, which we were very explicit about last quarter. In fact, we see as of this call last quarter, that's in the third quarter when you adjust for that, that's $0.96.

As you say, the implied midpoint when we look at the fourth quarter is approximately $0.94.

What's going on there? The key as we think about and this is the first half and second half conversation, but most no evidence in the fourth quarter is the cumulative impact of the dispositions that we've seen over the last year, including the LHP repayment, including the Kindred dispositions of last year, effectively using those pre-proceeds to retire debt.

And so, that now really is complete, it was complete as of the end of the second quarter, and therefore we're seeing that run rate impacts really manifest in the fourth quarter..

And then last question for me. Debbie, I think in your prepared remarks that you highlighted that you expect the ramp-up investment within the Wexford platform. Can you quantify what that ramp-up means? It seems like the investments and churning between 300 million to 500 million.

Will 2019 exceed that pace?.

Well, as I mentioned, we're seeing a lot of good projects, the timing, they are large and they are high quality projects with a lead institution either existing customers or new universities. And the timing is harder to predict with certainty, but I could see that substantially increasing..

And our next question comes from Steve Sakwa of Evercore ISI. Your line is open..

I guess I just want to follow up on that last line of questioning. Bob, you've made the comment that most of the dispositions were sort of done by the end of the second quarter. So, I would've thought that the negative impact would have been felt fully in the third quarter and therefore there wouldn’t be a further drop down in Q3 to Q4.

So can you just or maybe help me understand where all of those really not done by the second quarter? Or is there something else that's kind of dragging down Q4?.

Sure, Steve. The question is, why there is 96 go to 94 third quarter to fourth quarter sequentially when adjusted for the Kindred fee. And I would point the seasonality particularly in SHOP for that difference, that’s the key item the fourth quarter on dollars basis is seasonally lowest at that stage, and that's really the biggest driver, Steve..

And that really has to do with seniors' behavior moving in and around the holidays and things like that. So, that’s a typical pattern..

Our next question comes from Rich Anderson of Mizuho Securities. Your line is open..

So, if I could get back to the run rate question, I think Mike asked earlier. So, if you take 94 multiplied by for your 376, consensus for next year $4. I know you are not giving guidance, but let me maybe frame the question this way.

I know, you also said that you're ready to do some more on the life science side, but is this the time to be a buyer in senior housing as well before this inevitable turn starts to happen.

I think everybody on this call is waiting for the next big thing from Ventas and I'm wondering, how you feel about that in context with what The Street is currently thinking about you guys for 2019?.

Okay, so, I'll try to repeat the question. I think it started with woo hoo, but the question is really around a buying senior housing, if I could summarize, Rich..

The noise just went down a little bit. So when you annualized your 94 run rate, you get to a lower number for '19 versus what The Street is currently expecting.

And I'm wondering, if perhaps the missing variable is something going on, is this the time that Ventas to be buying senior housing before the recovery actually starts to take shape?.

Well, good question. So I would say that we are for example buying the trophy Battery Park asset because we do see strength there. The good news as I said is our assets are very highly valued, so there continues to be a very strong bid in senior housing for the inevitable upturn.

And we are continuing to look at investment opportunities that we think are -- will do something for Ventas strategically, accretively, so very open to value creating transactions. And so, as always, we will be opportunistic, and if there is a next big thing, you will be the first to know..

And then, if I could just get a reconciliation and explanation. Bob, you reiterated the same-store guidance of 75 basis points to 1.5%, but it's on the back of the supplemental. The range in the more detailed breakout is lower 0.6% to 1.3%.

What is the difference?.

Rich, can you refer us again to the page, we didn’t hear you?.

It's the last sort of guidance breakout page of the supplemental.

And if you look at it the total same store growth is 0.6% to 1.3%, and I'm just curious what the difference is between new published same-store outlook?.

Yes, our total company outlook which has been reaffirmed is the 0.75 to 1.5..

The difference, Rich, you'll see a line item there which is called fees that's the Brookdale cash fee we received in the year. And if you adjust for that item, it's included in the guidance, but we want to show it with and without that item and that's the difference..

Our next question comes from Jordan Sadler of KeyBanc Capital Markets. Your line is open..

It looks like there maybe a little bit of an increase appetite for traditional MOBs.

Any insight you could offer there? And maybe a little of the compare contrast on what is sold versus purchased since the end of last quarter?.

So the question was really about our investments in outpatient in MOBs. We have built a great business here which is at 19% and 20% of our portfolio. We like this business. It's been a very steady grower, very reliable.

And then, I'm going to turn to people who really are new leader of the business and talk about what we like about the investments that we make..

Sure. Thanks Debbie. As Debbie said in here opening remarks, we've been very opportunistic and careful of our investments, but these five assets that we've bought and the one additional we felt our operating pieces very well. They are in great locations, primarily in California, Arizona and Texas.

They are associated with great hospitals Baylor, Dignity and Tenants. They are essentially fully leased, and very importantly, they are associated with key partners of ours. One of them is associated with Ardent, and we have an existing MOB in the same campus, and five others are with PMB, our key development partner.

And the last piece is that all these transactions were off market, and so they were very attractively priced..

Pete, can you just expand on maybe the asset that was sold. I know it was -- I think you had a 40% stake in that one, but the cap rate there was a bit higher relative to the going new cap rates on the acquisition.

Can you talk about the quality or the caliber of that asset?.

Yes, this is Debbie. Real quickly, Jordan, the question was about a sold asset, not with pursuant to a purchase option..

Lastly, one more quick one for, Bob. Bob, can you just clarify that releasing spreads scout that you quoted.

Does that include concessions or is that just straight face value to face value?.

That's face rent face, value to face value, but it's actuals, so it's not like a street price against which are a significant discount, it's actuals. So, I think it's a pretty clean number..

Our next question comes from John Kim of BMO Capital Markets. Your line is open..

On your early indication for SHOP, next year, can you provide some color on some of the key components of this? In other words may occupancy be higher offset by lower rate growth and high expenses?.

I'll summarize the question.

Could we have some more insight into your '19 early indications, as we look to the P&L, and I would say the themes again very similar, and if you just look at the third quarter P&L, I think it's a nice guide as we think about next year in the sense of year-over-year occupancy has been improving albeit, still a gap to prior a year.

Some moderating pricing, I expect we will still have nice way -- nice price increases on the in place annual rent letters that we get in the beginning of the year, but I do expect we will have some of the continued pressure through releasing spreads in the balance of the year.

And then on the operating expense line, certainly, the tight labor market wage pressure will carry on as we think about next year. The operators have done a wonderful job this year as I have said, repeatedly, and the staffing models and how they have managed that cost.

I do expect there's some run way to continue there as we think about next year but again yes, we get that relative to the occupancy line also, so very thematically similar to the P&L, as we look at the third quarter..

Bob, for this year's guidance, your CapEx I think the FAD is 145 million as a midpoint, but year-to-date, your FAD CapEx was 79 million.

Are these two comparable figures?.

A great question. So, we typically, the question is the ramp on FAD CapEx for the fourth quarter and is it achievable would be my interpretation of the question because it is a significant ramp. We typically do you have seasonally in the fourth quarter a significant increase. That hill decline this year is a bit steeper.

So all its equal perhaps, we have little bit of core opportunity there. But seasonally, we do expect a significant increase in the fourth..

And finally, on the feedbacks in the NIC conference seems to be there is an abundant amount of capital looking at the healthcare space.

I'm wondering if you agree with this characterization that it's increased and also what verticals that may impact the both?.

So the question is really is about the capital that's interested in our business lines.

And the answer is, yes, they are over the 20 years when I couldn’t get anyone to talk me about healthcare at the beginning to now where it has been a highly institutionally attractive business for all the qualities we discussed, whether it's MOBs and the core like returns that you get there, the demographic to me and in the asset classes that we have, the private pay nature of senior housing and multifamily shared characteristics.

We are very attractive and therefore capital is coming our way and that continues to enhance and improve the value of our assets, as people look to the coming years when, not too long from now 20% of the population will be in the senior category. So, you are 100% right with the interest in our verticals..

But is that broad based or is it specific factors that may benefit more than others?.

And it is fairly broad based at the moment. I do think that the highest interest from institutional capital is in senior living and MOB outpatients, but we also see significant interest in the hospital space.

For example, as we look to the performance of the public and rate increases, that have started in the fourth quarter, so it's fairly broad based..

Our next question comes from Chad Vanacore of Stifel. Your line is open..

Just a couple of quick ones here. One point of clarification, your supplement shows, we're going to have dispositions year-to-date, but guidance only assumes 1.3 billion.

Since it doesn’t seem to refer a net observation, what’s the difference there?.

The question is on the SHOP, we show 1.5 billion of growth, dispositions, our guidance is 1.3. The difference is our share, Chad, of data that. So, it's now a 100% owned, so that's a net difference..

And then just looking at your segment guidance, your overall NOI guidance changed, but SHOP looks a little bit lower and then the non-segment is higher.

So what’s pushing that non-segment guidance higher?.

The question is about our segment guidance which again we've reconfirmed from the July 27th guidance, and Bob can speak specifically, if there's anything further you'd like to add..

What's pushing the non-segment guidance higher?.

Yes, some small amount of acquisitions. The net impact to small amount of acquisitions that we've built in and is in non-same-store, so that's the difference..

And what assets are in there?.

Those that we have been reported in the supplemental, that's….

Let’s move on.

So just any update on your selling of Brookdale leased assets you're early in the year the degree to market up to 30 million of rents?.

Yes, we, as you recall, did a deal with Brookdale that extended the leases and had some other components in it, including asset sales of about 16% of the portfolio to prune the portfolio and improve the quality, and that does represent probably about 30 million in rents. And so, as Bob mentioned in his remarks, those are starting to get underway..

Just early in that marketing stage is right now?.

I would say just emerging, yes, it's premarketing I would say at this point. So, we expect those to happen. Those sales to happen overtime and as you recall they would basically be effectively at a 6 in the quarter to Ventas..

Our next question comes from Tayo Okusanya of Jefferies. Your line is open..

I might ask one additional question, if you don’t mind. But the first one again is, I think the [indiscernible] kind of alluded to this earlier on. When people just trying to take the look at the run rate, it's almost kind of implies on something did have to happen next in order for Ventas to get closer towards consensus numbers.

And you talked a little bit about university MOBs been an area you want to put more money to work in.

Just curious one, is that somewhere you can actually group really quickly like they were expert type transaction available in that group? And if it’s not a university MOB type deal, would you possibly consider hospitals where again the deals there pretty attractive relative to your cost of capital?.

So the question really is about the fourth quarter run rate and how that may relate to analyst consensus numbers. I mean I would just say that when we provide guidance, we typically do so with limited to know acquisitions in them, and we will obviously do so consistent with our practice in February.

And other than that, I think I would just repeat what Bob said about the fourth quarter 2018 run rate..

Okay, that's helpful. But again that's made me think of the acquisition outlook again on the MOB side.

Is that something big that would happen outside of the traditional space more in this university -- I'm sorry the university life science's side allow expert? Or is it a hospital type transaction that could make up a difference, if you will be actively looking at that space?.

As you know, our acquisitions and investments are always difficult to predict which is -- and they are lumpy. We have done more than our share over the years. We had these great relationships that we are able to leverage to find good strategic accretive acquisitions. And they could be across the board of our asset classes.

I do want to remind you that our number one capital allocation priority is really in the development of these university based knowledge communities.

And so, when we talk about investing in future growth, those are assets that we will deploy capital into we will ramp that capital, and that generally takes multiple years in order to produce cash flow EBITDA. But we are thereby creating a very high quality company, very high quality portfolio and investing in future growth.

So I think that’s an important other aspect as you think about our investment priorities going forward. We will continue to be opportunistic. We will continue to look across the board as we have in the past. But those tend to be again unpredictable and therefore we generally don’t attempt to predict them well you guys sometimes try to..

Another quick one for Bob. Again, I'm sure it's nothing I am just missing, but the big jump in the triple-net leased rental income from 2Q to 3Q.

So I'm just trying to understand what that was?.

Tayo, we are having some back, feedback too.

So could you repeat the question please?.

Yes. It's one for Bob. The triple-net lease rental income sort of a big jump in 3Q versus 2Q grew by $23 million.

I'm just trying to understand what that was? Did you get that?.

We had a write-off about 22 million as a result of based to closure of JV that we have that had Brookdale, [Multiple Speakers]. The Brookdale lease extension pardon me, was approximately 21 million that we wrote off in the second quarter last year or last second quarter..

Just last quarter and [Multiple Speakers].

But we don't have that sequentially, so that’s FAD item..

So, it's a SHOP one item. [Multiple Speakers].

Yes, remember that and then just to repeat, that’s a noncash item..

Our next question comes from Lukas Hartwich of Green Street Advisors. Your line is open..

Given the tight coverage on triple-net senior housing, I'm just curious, how comfortable you guys that those properties are receiving the necessary CapEx to not only maintain but also compete effectively with all the new supply growth?.

So, let me repeat the question, I think it was about the triple-net senior housing portfolio and CapEx expenditures. So most of our leases have minimum CapEx required expenditures most it's not all, and so, we monitor that and that's the way we ensure that the assets continue to be in good market position.

I would also add that the Brookdale which off course is 40 plus percent of that portfolio that does have minimum expenditure requirements. And we also agreed with Brookdale that for other CapEx that we think would keep the assets in excellent market positioning.

And so on and so forth that we would consider funding additional CapEx for and market returns. And so, there are two different way really that I could give as examples of the way we can ensure that those triple-net assets continue to maintain market positioning..

Can you provide some color on the strong print for life science NOI growth?.

Sure. The question was the strong quarter, we had in life science so 12% growth and that was really first and foremost lease up particularly in one of our newer communities that we have with Brown in Rhode Island, which is now a 100% occupied performing incredibly well, and that is really the driver for the quarterly pool.

On the full-year pool basis, we continue to do incredibly well as also over 4% growth on the full-year pool, so strong which way you look at it..

Our next question comes from Karin Ford of MUFG Securities. Your line is open..

I wanted to ask about the Battery Park acquisition.

What sort of accretion opportunity do you see there? How do you expect the 5% cap rates to trend? And would you like additional scale in New York City?.

So, the question is really about the pending Battery Park asset acquisition that is a deal that we're excited about. We've been in the Manhattan senior living market really since 2011, and we think that the pricing on this asset is well below replacement cost.

So, we could foresee with the attractive demographics in New York and the unique positioning of this asset, that we would have obviously just stabilize NOI growth going forward, and there are potential redevelopment and licensing opportunities overtime that could provide additional opportunities for really great returns.

So, we have multiple path to success is what I would conclude..

And the next question is just follow-up on John's question from earlier.

Are you seeing any change in the cap rates in any of your segments? And have you changed your return expectations with the move up in base rates or with your increasing excitement about the university rates finance investments?.

So, the question is really on cap rates and sitting across from John Cobb, our Chief Investment Officer, and I would say that. This amount of capital that is attracted to our states for all the reasons previously mentioned is continuing to keep valuation high and cap rate relatively in the same range that they have been for several years now.

And in terms of the way we underwrite assets we obviously are always looking at our cost to capital we are looking at the growth rate of the asset the reliability of the expected cash flows.

And as we look at the university base like science, as we said at the beginning, there is a range of stabilized yields that we would expect that are in the frankly 6% to 8% or 8.5% range, depending on the profile of the asset.

And as we have discussed before I'll give you an example, if you have a 100% preleased building with AA credit that is in a great location, that’s going to be on the lower end of that. If you have a 20% preleased building that obviously would have a different expected to stabilize cap rate.

So that’s how we are looking at these opportunities, but the big takeaway is that the end of the day, as we grow this part of our portfolio, it is increasing and improving the overall age, quality and reliability of our portfolio with these highly rated really elite institutions. So hope that's responsive Karen..

Our next question comes from Todd Stender of Wells Fargo. Your line is open..

Back to the MOB transactions, the cap rates shown on the four you acquired was 5.6.

Does that include any fees you paid PMB or maybe you could talk about some of the economics around your relationship with PMB? And just how did you get that what I would consider above market growth [indiscernible]?.

As Pet said, the question is about the yields on the acquired MOBs, and as Pete said because these were assets that we acquired through existing relationships. We do think the pricing is very attractive. In terms of the NOI to the extent that there is a management fee for the assets, that’s embedded in the cap rate already..

And how about same store expectations for these four, I think Pete may have said they are California exposure or maybe Texas, I forget the other states, but there is a range of NOI expectations?.

Again, what we like about the MOBs is the core likely churns and the steady returns, and so we would expect that type of normal MOB year-over-year in growth rate..

Our next question comes from Daniel Bornstein of Capital One. Your line is open..

I'll sort of switch it up just a little bit and just ask about, how ESL is doing and whether that was the outlook for '19? I know its preliminary outlook includes ESL performance in that..

Yes, so ESL now, I guess 8 months older itself and maybe 10, continuing to roll out operational initiatives, I'd say Cai and team are deep into that right now, things like the staffing model and the operating model, and really bringing best practice there. So they are on it.

Certainly, we've seen some transition impact in terms of NOI that's always expected. But again, I think we've stabilized on that and were looking forward to the impact of those initiatives as it is rolling amount..

Are they performing better or worse than the general Ventas previous SHOP portfolio? I'm just trying to -- do they have positive NOIs or the negative NOI that we're seeing in….

Yes, I think again. This is Debbie. When you have a transition, you basically are getting to stabilization point which as Bob said were at a stabilization point and then overtime, you would expect it to perform basically in line with the industry but offset to the positive potentially as operating initiatives take hold.

So directionally you would expect from here to be the same, but again with some upside as we've discussed before from operating and occupancy improvements overtime..

And one last quick one here on life science, we've always talked about hospitals and universities monetizing MOBs.

Is there any opportunity to buy life science assets rather than just develop any discussion with universities to monetize or existing life science assets?.

So, the question is about acquisitions of university based kind of research and innovation life science assets and the answer is, that was and has been a trend in medical office for several decades, and we are seeing that as well in the university in the life science space..

[Operator Instructions] Our next question comes from Smedes Rose with Citi. Your line is open..

It's Michael Bilerman here with Smedes. I had a couple of questions. The first is just on senior housing supply. And you talked in your comments about how you are pleasantly surprised by the reduction in the growth rate, but at the same time you talked about and you see both Related and Atria launching $3 billion at the high end senior housing.

I guess what gives you confidence that the supply is not going to stop anytime soon especially with that demographic range that will come out in the future?.

Mike, you snuck in here. We thought this was Smedes. So, we'll open and close with the call with Citi I guess. So the question is really about senior housing supply, and I think the key data points are around new starts which are very encouraging in the sense that they are at a five year low.

And as we were able to predict years ago that supply would be coming at this moment, I think based on the data that we now see one could expect we can predict a big upside as we look at the data sitting here today in the coming years.

So it is true that there continues to be interest in the assets and interest in developing as we talked about with the Related high-end urban developments, and that continues. But if these trends continue that we are seeing now with start then we feel very optimistic and upbeat about the supply demand fundamentals being very much in our favor..

Just a couple of others. Bob just on the loan portfolio running at about 800 million.

Is there any maturities that we should be aware or prepayments that you are aware of as we think about 2019?.

Yes, Michael, we have 300 million approximately of loans maturing in 2019 into the back half of 2019. That is all that matures next year. So that today we have 4% of NOI implication obviously is that we would have a lower percentage now of our loan book in our -- as a percent of NOI next year..

As we think about when you do provide guidance your assumption around that would be that that gets repaid and not replenished in that capital just goes to repay debt or you would make an assumption that you will find other loans to invest in?.

Yes, right now where you are marking that Michael for reinvestment to the life science development pipeline..

And then actually on the pipelines for a redevelopment and development standpoint, your gross pipeline right now stands at about $1,730,000,000 your share, and you recently completed about $200 million of development and redevelopment.

How should we think about the tailwinds that those investments give you as we go through '19? Certainly not all the assets are going to stabilized by then, but a number of them a lot of them are going to start producing income in '19.

How should we think about the yield on that 1 billion of in process and completed development at your share?.

So, you are right on, Michael, we will start to see, starting in '19, but really accelerate from there. The income benefit of these developments in particular in life science, some of which have recently opened, but we mentioned for example, WashU, Penn to name a few. Those we really start to pick up steam in the back half of '19 and into '20.

So, certainly a tailwind as we come out in February with the puts and takes that’s certainly on the good side work. We are excited about that, but it really takes off in '20..

And then on the redevelopment, it would be helpful, seems like you have the dates for the development on Page 20 in your supplemental. Just so on the redevelopment side, when -- because that’s obviously a big chunk almost 0.5 billion.

When those start to become income producing from the date perspective the same way you have it on Page 21 for the active development pipeline?.

Michael good, so if I could just repeat that for everyone benefit, the idea of including some work completion information for investors and the analysts on the redevelopment page in terms of deliveries, I think we can look at that as good suggestion as we provide guidance going forward.

I would add you do have to distinguish between senior housing developments and office developments because in senior housing while you are going through the post opening lease up period, you actually have some negatives EBITDA, as you have operating expenses, and so you get to lease up and breakeven.

So it's important, if we provide that information that we also make sure people understand what the different impacts are of the different asset class developments and redevelopments, as they start to come online. But this is very good input and we appreciate it..

Theirs is a lot of moving parts as we transition clearly the fourth quarter has the seasonality that Bob talked about on the senior housing side, as you roll into '19, you have the same-store pulling back modestly like it did this year. You have the investments that you're making which will start to earn income.

There is a still lot of pieces to 2019 that we need to be taking into consideration..

Yes, Michael is observing, so as best of if you can hear that there are lot of moving pieces to '19, which we've noticed recently actually and will look forward to enunciating those in February.

And with that, I really want to certainly reaffirm how confident the team is and how aligned we are about going to get these opportunities, and we want to thank everyone for your support and attention, and we look forward to talking with you further at NAREIT. Thank you..

Ladies and gentlemen, thank you for your participation in today's conference. You may all disconnect. Have a wonderful day..