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Borrowing Arrangements

12 Months Ended

Dec. 31, 2018

NOTE 10—SENIOR NOTES PAYABLE AND OTHER DEBT

The following is a summary of our senior notes payable and other debt as of December 31, 2018 and 2017:



	2018			2017
	(In thousands)
Unsecured revolving credit facility ⁽¹⁾	$	765,919		$	535,832
Secured revolving construction credit facility due 2022	90,488			2,868
2.00% Senior Notes due 2018	—			700,000
4.00% Senior Notes due 2019	—			600,000
3.00% Senior Notes, Series A due 2019 ⁽²⁾	293,319			318,041
2.70% Senior Notes due 2020	500,000			500,000
Unsecured term loan due 2020	—			900,000
4.75% Senior Notes due 2021	—			700,000
4.25% Senior Notes due 2022	600,000			600,000
3.25% Senior Notes due 2022	500,000			500,000
3.30% Senior Notes, Series C due 2022 ⁽²⁾	183,325			198,776
Unsecured term loan due 2023	300,000			—
3.125% Senior Notes due 2023	400,000			400,000
3.10% Senior Notes due 2023	400,000			400,000
2.55% Senior Notes, Series D due 2023 ⁽²⁾	201,657			218,653
Unsecured term loan due 2024	600,000			—
3.75% Senior Notes due 2024	400,000			400,000
4.125% Senior Notes, Series B due 2024 ⁽²⁾	183,324			198,776
3.50% Senior Notes due 2025	600,000			600,000
4.125% Senior Notes due 2026	500,000			500,000
3.25% Senior Notes due 2026	450,000			450,000
3.85% Senior Notes due 2027	400,000			400,000
4.00% Senior Notes due 2028	650,000			—
4.40% Senior Notes due 2029	750,000			—
6.90% Senior Notes due 2037	52,400			52,400
6.59% Senior Notes due 2038	22,823			22,973
5.45% Senior Notes due 2043	258,750			258,750
5.70% Senior Notes due 2043	300,000			300,000
4.375% Senior Notes due 2045	300,000			300,000
Mortgage loans and other	1,127,697			1,308,564
Total	10,829,702			11,365,633
Deferred financing costs, net	(69,615		)	(73,093		)
Unamortized fair value adjustment	(1,163		)	12,139
Unamortized discounts	(25,225		)	(28,617		)
Senior notes payable and other debt	$	10,733,699		$	11,276,062


⁽¹⁾	As of December 31, 2018 and 2017, respectively, $23.1 million and $28.7 million of aggregate borrowings were denominated in Canadian dollars. Aggregate borrowings of $27.8 million and $31.1 million were denominated in British pounds as of December 31, 2018 and 2017, respectively.


⁽²⁾	These borrowings are in the form of Canadian dollars.

Credit Facilities and Unsecured Term Loans

In April 2017, we entered into an unsecured credit facility comprised of a $3.0 billion unsecured revolving credit facility, priced at London Inter-bank Offered Rate (“LIBOR”) plus 0.875%, that replaced our previous $2.0 billion unsecured revolving credit facility priced at LIBOR plus 1.0%. The new unsecured credit facility was also comprised of our $200.0 million term loan that was scheduled to mature in 2018 and our $278.6 million term loan that was scheduled to mature in 2019. The 2018 and 2019 term loans were priced at LIBOR plus 1.05%. In August 2017, we used most of the proceeds from the sale of 22 SNFs to repay the balances then outstanding on the 2018 and 2019 term loans, and recognized a loss on extinguishment of debt of $0.5 million.

The unsecured revolving credit facility matures in 2021, but may be extended at our option subject to the satisfaction of certain conditions for two additional periods of six months each. The unsecured revolving credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $3.75 billion.

Our unsecured credit facility imposes certain customary restrictions on us, including restrictions pertaining to: (i) liens; (ii) investments; (iii) the incurrence of additional indebtedness; (iv) mergers and dissolutions; (v) certain dividend, distribution and other payments; (vi) permitted businesses; (vii) transactions with affiliates; (viii) agreements limiting certain liens; and (ix) the maintenance of certain consolidated total leverage, secured debt leverage, unsecured debt leverage and fixed charge coverage ratios and minimum consolidated adjusted net worth, and contains customary events of default.

As of December 31, 2018, we had $765.9 million of borrowings outstanding, $23.1 million of letters of credit outstanding and $2.2 billion of unused borrowing capacity available under our unsecured revolving credit facility.

In July 2018, we entered into a new $900.0 million unsecured term loan facility priced at LIBOR plus 0.90%. The new term loan facility is comprised of a $300.0 million term loan that matures in 2023 and a $600.0 million term loan that matures in 2024. The new term loan facility also includes an accordion feature that permits us to increase our aggregate borrowings thereunder to up to $1.5 billion. This unsecured term loan facility replaced and repaid in full our $900.0 million unsecured term loan due 2020 priced at LIBOR plus 0.975%.

As of December 31, 2018, we also had a $400.0 million secured revolving construction credit facility with $90.5 million of borrowings outstanding and $309.5 million of unused borrowing capacity. The secured revolving construction credit facility matures in 2022 and is primarily used to finance research and innovation center and other construction projects.

Commercial Paper Program

In January 2019, our subsidiary, Ventas Realty, Limited Partnership (“Ventas Realty”), established an unsecured commercial paper note program initially rated A2/P2/F2. Under the terms of the program, we may issue from time to time unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $1 billion. The notes will be sold under customary terms in the United States commercial paper note market and will rank pari passu with all of Ventas Realty’s other unsecured senior indebtedness. The notes will be fully and unconditionally guaranteed by Ventas.

Senior Notes

As of December 31, 2018, we had outstanding $7.0 billion aggregate principal amount of senior notes issued by Ventas Realty ($1.9 billion of which was co-issued by Ventas Realty’s wholly owned subsidiary, Ventas Capital Corporation), approximately $75.2 million aggregate principal amount of senior notes issued by Nationwide Health Properties, Inc. (“NHP”) and assumed by our subsidiary, Nationwide Health Properties, LLC (“NHP LLC”), as successor to NHP, in connection with our acquisition of NHP, and C$1.2 billion aggregate principal amount of senior notes issued by our subsidiary, Ventas Canada Finance Limited (“Ventas Canada”). All of the senior notes issued by Ventas Realty and Ventas Canada are unconditionally guaranteed by Ventas, Inc.

In March 2017, Ventas Realty issued and sold $400.0 million aggregate principal amount of 3.10% senior notes due 2023 at a public offering price equal to 99.28% of par, for total proceeds of $397.1 million before the underwriting discount and expenses, and $400.0 million aggregate principal amount of 3.85% senior notes due 2027 at a public offering price equal to 99.20% of par, for total proceeds of $396.8 million before the underwriting discount and expenses.

In April 2017, we repaid in full, at par, $300.0 million aggregate principal amount then outstanding of our 1.25% senior notes due 2017 upon maturity.

In June 2017, Ventas Canada issued and sold C$275.0 million aggregate principal amount of 2.55% senior notes, Series D due 2023 at a price equal to 99.95% of par, for total proceeds of C$274.9 million before the agent fees and expenses. The notes were offered on a private placement basis in Canada. We used part of the proceeds to repay C$124.4 million on our unsecured term loan due 2019.

In February 2018, we repaid in full, at par, $700.0 million aggregate principal amount then outstanding of our 2.00% senior notes due February 2018 upon maturity.

In February 2018, Ventas Realty issued and sold $650.0 million aggregate principal amount of 4.00% senior notes due 2028 at a public offering price equal to 99.23% of par, for total proceeds of $645.0 million before the underwriting discount and expenses.

In February 2018, we redeemed $502.1 million aggregate principal amount then outstanding of our 4.00% senior notes due April 2019 at a public offering price of 101.83% of par, plus accrued and unpaid interest to the redemption date, and recognized a loss on extinguishment of debt of $11.0 million. The redemption was funded using cash on hand and borrowings under our unsecured revolving credit facility. In April 2018, we repaid the remaining balance then outstanding of our 4.00% senior notes due April 2019 of $97.9 million and recognized a loss on extinguishment of debt of $1.8 million.

In August 2018, Ventas Realty issued and sold $750.0 million aggregate principal amount of 4.40% senior notes due 2029 at a public offering price equal to 99.95% of par, for total proceeds of $749.7 million before the underwriting discount and expenses.

In August 2018, we redeemed $549.5 million aggregate principal amount then outstanding of our 4.75% senior notes due 2021 at a public offering price of 104.56% of par, plus accrued and unpaid interest to the redemption date, and recognized a loss on extinguishment of debt of $28.3 million. The redemption was funded using proceeds from our August 2018 senior note issuance, cash on hand and borrowings under our unsecured revolving credit facility. In September 2018, we repaid the remaining balance then outstanding of our 4.75% senior notes due 2021 of $150.5 million and recognized a loss on extinguishment of debt of $7.6 million.

In January 2019, we redeemed $258.8 million aggregate principal amount then outstanding of our 5.45% senior notes due 2043 at a public offering price at par, plus accrued and unpaid interest to the redemption date. Notice of the redemption was given in November 2018 and, as a result, we recognized a non-cash charge to loss on extinguishment of debt of $7.1 million during the year ended December 31, 2018.

Ventas Realty’s senior notes are part of our and Ventas Realty’s general unsecured obligations, ranking equal in right of payment with all of our and Ventas Realty’s existing and future senior obligations and ranking senior in right of payment to all of our and Ventas Realty’s existing and future subordinated indebtedness. However, Ventas Realty’s senior notes are effectively subordinated to our and Ventas Realty’s secured indebtedness, if any, to the extent of the value of the assets securing that indebtedness. Ventas Realty’s senior notes are also structurally subordinated to the preferred equity and indebtedness, whether secured or unsecured, of our subsidiaries (other than Ventas Realty and, with respect to those senior notes co-issued by Ventas Capital Corporation, Ventas Capital Corporation).

Ventas Canada’s senior notes are part of our and Ventas Canada’s general unsecured obligations, ranking equal in right of payment with all of Ventas Canada’s existing and future subordinated indebtedness. However, Ventas Canada’s senior notes are effectively subordinated to our and Ventas Canada’s secured indebtedness, if any, to the extent of the value of the assets securing that indebtedness. Ventas Canada’s senior notes are also structurally subordinated to the preferred equity and indebtedness, whether secured or unsecured, of our subsidiaries (other than Ventas Canada).

NHP LLC’s senior notes are part of NHP LLC’s general unsecured obligations, ranking equal in right of payment with all of NHP LLC’s existing and future senior obligations and ranking senior to all of NHP LLC’s existing and future subordinated indebtedness. However, NHP LLC’s senior notes are effectively subordinated to NHP LLC’s secured indebtedness, if any, to the extent of the value of the assets securing that indebtedness. NHP LLC’s senior notes are also structurally subordinated to the preferred equity and indebtedness, whether secured or unsecured, of its subsidiaries.

Ventas Realty and Ventas Canada may redeem each series of their respective senior notes in whole at any time or in part from time to time, prior to maturity at the redemption prices set forth in the applicable indenture (which include, in many instances, a make-whole premium), plus, in each case, accrued and unpaid interest thereon to the redemption date.

NHP LLC’s 6.90% senior notes due 2037 are subject to repurchase at the option of the holders, at par, on October 1, 2027, and its 6.59% senior notes due 2038 are subject to repurchase at the option of the holders, at par, on July 7 in each of 2023 and 2028.

Mortgages

At December 31, 2018, we had 56 mortgage loans outstanding in the aggregate principal amount of $1.1 billion and secured by 60 of our properties. Of these loans, 45 loans in the aggregate principal amount of $698.1 million bear interest at fixed rates ranging from 3.0% to 8.6% per annum, and 11 loans in the aggregate principal amount of $429.6 million bear interest at variable rates ranging from 1.4% to 5.4% per annum as of December 31, 2018. At December 31, 2018, the weighted average annual rate on our fixed rate mortgage loans was 4.4%, and the weighted average annual rate on our variable rate mortgage loans was 3.4%. Our mortgage loans had a weighted average maturity of 5.8 years as of December 31, 2018.

During the years ended December 31, 2018, 2017 and 2016, we repaid in full mortgage loans in the aggregate principal amount of $485.7 million, $411.4 million and $337.8 million, respectively.

Scheduled Maturities of Borrowing Arrangements and Other Provisions

The following summarizes the maturities of our senior notes payable and other debt as of December 31, 2018:



	Principal Amount Due at Maturity		Unsecured Revolving Credit Facility ⁽¹⁾		Scheduled Periodic Amortization		Total Maturities
	(In thousands)
2019	$	390,779	$	—	$	15,850	$	406,629
2020	592,384		—		15,322		607,706
2021	64,342		765,919		14,232		844,493
2022	1,491,561		—		12,743		1,504,304
2023	1,542,294		—		9,104		1,551,398
Thereafter ⁽²⁾	5,835,010		—		80,162		5,915,172
Total maturities	$	9,916,370	$	765,919	$	147,413	$	10,829,702


⁽¹⁾	At December 31, 2018, we had $72.3 million of unrestricted cash and cash equivalents, for $693.6 million of net borrowings outstanding under our unsecured revolving credit facility.


⁽²⁾	Includes $52.4 million aggregate principal amount of 6.90% senior notes due 2037 that is subject to repurchase, at the option of the holders, on October 1, 2027, and $22.8 million aggregate principal amount of 6.59% senior notes due 2038 that is subject to repurchase, at the option of the holders, on July 7 in each of 2023 and 2028.

The instruments governing our outstanding indebtedness contain covenants that limit our ability and the ability of certain of our subsidiaries to, among other things: (i) incur debt; (ii) make certain dividends, distributions and investments; (iii) enter into certain transactions; and/or (iv) merge, consolidate or sell certain assets. Ventas Realty’s and Ventas Canada’s senior notes also require us and our subsidiaries to maintain total unencumbered assets of at least 150% of our unsecured debt. Our credit facilities also require us to maintain certain financial covenants pertaining to, among other things, our consolidated total leverage, secured debt, unsecured debt, fixed charge coverage and net worth.

As of December 31, 2018, we were in compliance with all of these covenants.

Derivatives and Hedging

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

We do not use derivative instruments for trading or speculative purposes, and we have a policy of entering into contracts only with major financial institutions based upon their credit ratings and other factors. When considered together

with the underlying exposure that the derivative is designed to hedge, we do not expect that the use of derivatives in this manner would have any material adverse effect on our future financial condition or results of operations.

As of December 31, 2018, our variable rate debt obligations of $1.8 billion reflect, in part, the effect of $148.8 million notional amount of interest rate swaps with maturities ranging from March 2022 to May 2022 that effectively convert fixed rate debt to variable rate debt. As of December 31, 2018, our fixed rate debt obligations of $9.0 billion reflect, in part, the effect of $516.2 million notional amount of interest rate swaps with maturities ranging from April 2019 to September 2027, in each case that effectively convert variable rate debt to fixed rate debt.

In January and February 2017, we entered into a total of $275 million of notional forward starting swaps with an effective date of April 3, 2017 that reduced our exposure to fluctuations in interest rates related to changes in rates between the trade dates of the swaps and the forecasted issuance of long-term debt. The rate on the notional amounts was locked at a weighted average rate of 2.33%. In March 2017, these swaps were terminated in conjunction with the issuance of the 3.85% senior notes due 2027, which resulted in a $0.8 million gain that is being recognized over the life of the notes using the effective interest method.

In March 2017, we entered into interest rate swaps totaling a notional amount of $400 million with a maturity of January 15, 2023, effectively converting fixed rate debt to three month LIBOR-based floating rate debt. As a result, we would pay a floating rate equal to three month LIBOR plus a weighted average swap spread of 0.98%. In August 2018, $200 million notional amount of these swaps were terminated, which resulted in a $6.6 million loss that is being recognized over the life of the notes using the effective interest method. In December 2018, the remaining $200 million notional amount of these swaps were terminated, which resulted in a $5.1 million loss that is being recognized over the life of the notes using the effective interest method.

During June and December 2017, we entered into a total of $200 million notional forward starting swaps that reduced our exposure to fluctuations in interest rates prior to the February 2018 issuance of 4.00% senior notes due 2028. On the issuance date, we realized a gain of $10.0 million from these swaps that is being recognized over the life of the notes using the effective interest method.

In August 2018, we entered into interest rate swaps totaling a notional amount of $200 million with a maturity of January 31, 2023 that effectively converts LIBOR-based floating rate debt to fixed rate debt.

During the twelve months ended December 31, 2018, we entered into $300 million notional value forward starting swaps that reduced our exposure to fluctuations in interest rates prior to our August 2018 issuance of 4.40% senior notes due 2029, which resulted in a $4.4 million gain that is being recognized over the life of the notes using the effective interest method.