Ventas, Inc. (NYSE: VTR) announced on Monday it’s acquiring American Realty Capital Healthcare REIT for $2.6 billion in stock and cash—making it the 6th largest real estate investment trust in the country.
As part of the transaction, ARC Healthcare shares will be generally covered into a fixed number of Ventas shares, based upon a negotiated Ventas stock price of $67.13. Once the deal is closed, ARC Healthcare shareholders are expected to own approximately eight percent of Ventas’s 321 million shares of common stock then outstanding.
In total, Ventas will add 143 properties from ARC Healthcare. The property-type breakdown consists of 78 medical office buildings (MOBs), 29 senior housing operating communities, 13 senior housing triple-net properties, 14 skilled nursing facilities, seven hospitals and two land parcels.
The 29 senior housing assets are managed by eight operators, are 94% occupied and have a revenue per occupied room of $4,300, with an expected NOI growth rate of 4%-5%.
Under the acquisition agreement, Ventas eyes “significant” growth potential in absorbing ARC Healthcare’s pipeline of potential investments exceeding $250 million, which are expected to be completed by the end of the year.
“These acquisitions are consistent with our stated strategy to be the leading owner of healthcare and senior living properties globally, and position Ventas to continue to deliver growth and consistent superior returns to our shareholders,” stated Ventas Chairman and Chief Executive Officer Debra A. Cafaro.
Ventas also announced Monday it will acquire 29 independent living seniors housing communities located in Canada from Holiday Retirement in a separate transaction for approximately USD $900 million in cash.
The communities total 3,354 independent living units, have an average occupancy of 90%, margins of approximately 50% and revenue per occupied room of approximately USD$2,937. The properties are located in seven of 10 Canadian provinces with the majority in Toronto and Alberta, and with a NOI growth rate expected to be 4%-5%.
Upon closing, the operations for the acquired senior housing communities will be transitioned to Atria Senior Living, which will manage a total of 173 communities for Ventas.
The deal with Holiday is the second between the two companies.
Last year, Ventas acquired a 26 property portfolio of independent living communities from Holiday roughly $790 million.
“With the addition of ARC Healthcare and the Canadian seniors housing communities, we are continuing our focus on private pay assets, expanding our industry-leading MOB footprint and international presence, and increased our diversification while maintaining a strong credit profile and balance sheet,” Cafaro stated.
This “industry-leading” MOB footprint will add four million square feet to Ventas’s existing portfolio.
ARC Healthcare’s MOB portfolio represents 51% of the total NOI and contains an average occupancy of 97%, with over 50% of the portfolio built in the last decade, the company stated in a release.
During an interview with the Wall Street Journal, Nicholas Schorsch, who runs ARC, said the deal brings two competitors together.
“We were on the playing field playing against each other, and now we’re on the same side, working for the same shareholders,” Mr. Schorsch said.
Ventas expects the transactions announced Monday to be immediately accretive to the company’s 2015 normalized Funds From Operations by at least $0.10 per share and have an expected unlevered yield of approximately 6%.
The transaction is expected to close in the fourth quarter of 2014, subject to the approval of ARC Healthcare shareholders and satisfaction of customary closing conditions.
As a result of the deal, Ventas stands to be the 6th largest overall REIT in the country.
Written by John Yedinak
Editors Note: We will be updating the post as we get more information, stay tuned.