Senior Housing: Ventas Becomes Largest HC REIT with $3.1B Buy

By Robert Carr

CHICAGO-Ventas Inc. has signed an agreement that will make the company the largest US owner of seniors housing communities. The locally-based health care REIT will buy the real estate assets of Louisville, KY-based Atria Senior Living Group, about 118 properties, for $3.1 billion.

The trust is paying for the acquisition with $1.35 billion of its common stock (almost 25 million shares), $150 million in cash and the assumption or repayment of $1.6 billion of net debt. Lazard Real Estate Partners, the manager of the private equity funds that own Atria, is contributing CEO Matthew Lustig to the Ventas Board of Directors as part of the transaction. Also, Atria will spin off its property management division, with Ventas keeping the company on in exchange for a minority stake in Atria Management Co. and a potential performance-based payment by Ventas in 2015 o 2016.

Ventas has been on acquisition tear this year, acquiring the minority interest in 58 senior living communities from McLean, VA-based Sunrise Senior Living Inc. in September and locally-based REIT Lillibridge Healthcare Services Inc., with more than 500 properties, in June. Ventas has made six major acquisitions in the past six years, said CEO Debra Cafaro in a statement.

Upon closing, expected in the first half of 2011, Ventas will become the largest owner of seniors housing nationally, with more than 35,000 units across 350 properties. The trust will own a total of 700 assets, including medical office buildings and other health care properties, in 44 states and Canada.

Almost 70% of the new acquisition properties are from high-income, densely populated coastal markets, Cafaro said. This includes 29% of properties from New York, 21% from New England and 18% from Northern and Southern California. The trust expects the new portfolio to generate about $640 million in revenues next year, with a 2011 unleveraged NOI yield of about 6.5%, implying a purchase cost of $230,000 per unit.

“The addition of 118 exceptional seniors housing assets in highly desirable locations will increase the portion of our net operating income received from private pay assets to over two-thirds of our total NOI, Cafaro said in the statement. “Moreover, given the inherent growth in the portfolio, we expect that this transaction will improve Ventas’s growth rate.”

Ventas’s lead financial advisors are Jefferies & Co. Inc. and Centerview Partners LLC. BofA Merrill Lynch is also acting as a financial advisor to Ventas. Ventas’s legal advisors are Wachtell, Lipton, Rosen & Katz and Barack Ferrazzano Kirschbaum & Nagelberg. Lazard’s financial advisor is Lazard Frères & Co. LLC, and its legal advisors are Sullivan & Cromwell LLP and Roberts and Holland LLP.


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