Ventas Inc. (NYSE: VTR), a real estate investment trust that is one of the premier owners of senior housing properties nationwide, is continuing to diversify by acquiring a portfolio of life science and medical real estate assets for $1.5 billion in cash.
The portfolio includes nearly all the life science and medical real estate assets of Wexford Science & Technology LLC (Wexford), encompassing 25 class-A properties leased by universities, academic medical centers and research companies, including Yale University and the University of Pennsylvania, the Chicago-based REIT announced Monday. It is being acquired from affiliates of Blackstone Real Estate Partners VIII L.P.
“This transaction … provides Ventas a unique opportunity to capitalize on increasing healthcare-driven research and development spurred and supported by top tier research universities,” Ventas CEO and Chairman Debra A. Cafaro said in a prepared statement. “We believe the growth opportunity is significant, and look forward to working with Wexford to help leading universities, academic medical centers and research companies fulfill their core missions.”
The message is similar to the one Ventas sent last year when it entered the hospital space by acquiring Ardent Health Services Inc. for $1.75 billion. At the same time, Ventas spun off its skilled nursing assets into a separate publicly traded REIT dubbed Care Capital Properties (NYSE: CCP).
Ventas’ diversification should not be taken as a sign that is any less committed to senior housing, company leaders said at the time.
While such assurances were not overtly made in the official announcement of the Wexford portfolio, Ventas emphasized that this sizable transaction is in keeping with the strategy that it has previously laid out of driving income and growth from a diversified portfolio. Pro forma, the acquired Wexford assets are expected to generate about 5% of Ventas’ total net operating income (NOI).
The acquisition also creates a platform for growth in university-affiliated life science, a new sector for Ventas. The Ardent hospital deal also was described as a beachhead for growth, and this approach mimics what Ventas has done in the senior housing space by building off its Atria Senior Living platform.
Wexford is a leading development company focused exclusively on university-affiliated projects. Ventas is entering into a long-term management and pipeline agreement with Wexford in conjunction with this initial acquisition, under which Ventas has exclusive rights to develop future projects with Wexford, which will continue to manage the portfolio.
The transaction announced Monday includes 23 operating properties totaling 4.1 million square feet, which derive 73% of revenue from credit tenants including universities as well as investment-grade and public companies with equity market capitalization exceeding $1 billion, according to Ventas. The transaction also includes two development sites affiliated with Duke University and Wake Forest University, and nine development sites principally contiguous to existing assets.
The transaction is being financed in part using net proceeds from an offering of 9,000,000 shares of common stock, also announced Monday. The deal is expected to close in the fourth quarter of 2016.
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Written by Tim Mullaney