Ventas, a Chicago-based healthcare real estate investment trust, reported moderate revenue growth in the third quarter, but higher expenses weighed on the firm's profits.
The publicly traded company reported $827.6 million in revenue for the three months ended Sept. 30, up from $704.9 million in revenue that was reported during the same period last year.
Rental income, the company's second-largest revenue source next to resident fees and services, was up 20% at $343.8 million. Ventas reported $454.8 million in revenue from fees and services, up 15%.
Ventas' reported earnings were skewed because the company completed the spinoff of 35 properties into Care Capital Properties in September. The spinoff accounted for about $22.4 million in discontinued operations from the quarter.
The REIT also reported a 31% jump in depreciation expenses and a 13.5% increase in property-level operating expenses at its senior living and medical office buildings. Profits were also dampened by $62.1 million in costs related to the spinoff and Ventas' recent acquisition of Ardent, which was nearly three times higher than merger- and deal-related costs during the third quarter of 2014.
Including the loss from the discontinued operations, Ventas reported $22.9 million in profit, which is 80% less than the company earned in last year's third quarter.
Calculated as if the spinoff were completed in January 2014, Ventas reported $330.1 million in funds from operations, a term used by REITs to define cash flow from operations.
Same-store net operating income for the company's portfolio of 1,024 properties was $356.3 million, up 4.3% when adjusted for changes in currency rates.
Ventas reported nine-month revenue of $2.4 billion this year, up 20% from the same period last year. Ventas reported $293.1 million in profits so far this year, down 20% from $367.6 million during the same period last year, including the spun-off operations.
Ventas expects its reported funds from operations per diluted share to be between $4.43 and $4.46 for the full year, up from its previous guidance of $4.39 to $4.45 per diluted share. The company said it expects same-store operating income to grow 3.5% to 4% in 2015, an improvement from its previous guidance of 2.5% to 3.5%.
Healthcare REITs continue to offer strong returns as compared to other industry real estate trusts. At 5.3%, healthcare REITS led all other real estate property sectors in dividend yield listed on the FTSE NAREIT U.S. Real Estate Index, as of Thursday.