Ventas, Inc., is near the top of the REIT world right now after languishing at the bottom, largely thanks to the tireless efforts of chairman and CEO Debra Cafaro, reports Real Estate Journal. But it hasn’t been an easy journey, and it’s left them drained, Cafaro told a crowd at a ULI forum.
“We are exhausted,” Cafaro was quoted as saying at the Union Club in Chicago. “We’ve pushed the organization beyond what it was built for, but we believe that with our plan, we will continue to be a terrific company.”
The businesswoman took Ventas from being $1 billion in debt one decade ago, to more than doubling its assets in the space of one year, RE Journal reported, after the company acquired $11 billion in assets within the last year for a total of more than $20 billion.
Cafaro started out as a lawyer with expertise in doing tax exempt bond deals, and this distinction gave her credibility with REITs that used this method to finance deals. This ultimately led to offers to join the “business side of the table,” says the article, and in the 1990s she became president of Ambassador Apartments, Inc., a multi-family REIT which she guided to sale in less than two years.
Some time later, colleague David Neithercut, president and CEO of Equity Residential, persuaded Cafaro to take over a troubled health care REIT located in Louisville, Ky., where he was on the board of advisors. With limited healthcare knowledge, Cafaro was hesitant.
“I told them that I didn’t know anything about healthcare, but David said they wanted someone who knew about REITs,” she said. “I took the position and it turned out that I did need to know about healthcare.”
It was 1998, and that REIT was Ventas, but it was nowhere near the Ventas of today. With less than 10 employees and a debt of $1 billion coming due, its only tenant was post-acute-care-provider Vencore, Inc., and it was facing a dozen Medicare fraud suits filed by government whistleblowers. In short, the firm was less than promising, especially after Vencore officials stated their intention to file bankruptcy.
With Cafaro at the helm, things began to change for the better. Her lawyer background helped Vencore to restructure and reemerge with a sustainable capital structure, RE Journal reports. And although Cafaro originally planned on selling Ventas to a larger firm, she found that investors weren’t looking favorably upon healthcare REITs.
“When I realized that we weren’t going to be able to sell I decided that we had to grow the company,” she said. “I kept telling people that this is a great business.”
Armed with $100 million in equity, Cafaro set about positioning the firm for growth. She realized that in order to be recognized by investors, healthcare REITs would need to be listed on major indices like Morgan Stanley, and set about campaigning for this, RE Journal reports. She won this bid in 2009, when healthcare REITs became accepted on most major indices, and Ventas joined the S&P 500.
After the recession, Ventas started making big moves, acquiring Lillibridge Healthcare Services Inc. and its 96 medical office buildings for $381 million. Next, it acquired 118 Atria senior housing assets for $3.1 billion, and shortly after picked up Nationwide Health Properties, Inc. and its more than 600 healthcare properties for $7.6 billion.
The acquisitions put Ventas on the map from coast to coast, and looking forward, Cafaro says they want to reduce revenue independence from government programs by going after a private pay audience. Ventas’ strategy includes targeting the aging baby boomer population as they begin moving into upscale senior housing facilities, and also acquiring medical office buildings, which are less costly than hospitals, she says.
The REIT recently acquired a $2 billion revolving credit line, hinting at further acquisition activity in the future.
Read the Real Estate Journal article here.
Written by Alyssa Gerace