Ventas Inc. (VTR), a leading health care real estate investment trust (“REIT”), has recently acquired full ownership of all the real estate assets of Atria Senior Living Group, the fourth largest operator of assisted living properties in the U.S., for $3.1 billion. The purchase price included the assumption of $1.6 billion in debt, $1.35 billion worth of common stock of Ventas, and $150 million in cash.
With the deal, Ventas will own 118 high-quality seniors housing assets in the premium markets of the New York metropolitan area, New England, Boston, and California. The portfolio includes approximately 13,500 units, with a median community age of 12 years and a current average occupancy rate of over 87%.
Ventas expects Atria properties to generate approximately $640 million of revenues in 2011, with net operating income (after management fees and operating expenses) in the range of $186 million to $196 million. The portfolio has excellent growth prospects, and the transaction is expected to break even for Ventas in 2011 and become accretive in 2012 and thereafter.
Atria is owned by private equity funds managed by Lazard Real Estate Partners. According to the terms of the deal, Atria will spin off its management company (“Atria Management Co.”) prior to the closing and will continue to operate the assets as an independent privately-owned company post acquisition.
Ventas is one of the top-performing healthcare REITs in the U.S., having one of the largest and most diversified portfolios in the healthcare sector exposed to nearly all types of facilities. The product diversity of the company allows it to capitalize on opportunities in different markets based on individual market dynamics, and provides a hard-to-replicate competitive advantage over its peers.
The acquisition further strengthens Ventas’ leading position in the market. The senior housing sector is a highly-fragmented market with limited new supply and positive growth indicators, with the over-85 demographic growing at three times the rate of the overall population. With the acquisition, Ventas will become the largest owner of senior housing in the U.S., with over 35,000 seniors housing units across 350 properties in its portfolio.
We maintain our Neutral rating on Ventas . The company currently has a Zacks #2 Rank, which translates into a short-term Buy recommendation and indicates that the stock is expected to outperform the overall U.S.equity market for the next 1–3 months.
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