Ventas Rumored to Be in Buyout Talks With Brookdale

Rumors of a potential sale of senior housing giant Brookdale Senior Living (NYSE: BKD) took another turn Thursday, as real estate investment trust (REIT) Ventas (NYSE: VTR) was said to be in talks to buy the company in whole or in part. The Wall Street Journal first reported the rumor, citing unnamed sources with knowledge of the negotiations.

Following less-than-stellar earnings results released earlier this week, some believed that Brookdale would feel even more pressure to strike a deal with private equity firm Blackstone Group. Earlier this month, the WSJ reported a rumor that these two companies were in the process of negotiating a potential buyout deal, which could involve Blackstone buying the entire Brookdale enterprise or just its significant real estate holdings.

But now Blackstone’s interest has cooled, according to Thursday’s WSJ report.

Advertisement

Both Blackstone and Brookdale declined to comment for this article. SHN reached out for comment from Ventas, but the company did not respond as of press time.

Steaks vs. The Cow

This is not the first speculation of a BKD takeover by Chicago-based Ventas, which already owns 140 Brookdale properties, representing 5% of the REIT’s revenue.

In April 2015, there was chatter of Brookdale striking a deal with Ventas and another major REIT, Irvine, California-based HCP Inc. (NYSE: HCP), but no deal materialized. Since that time, Brookdale has continued to struggle, seeing further erosion in its share price, which began to slide during a troubled integration process following the mega-acquisition of rival Emeritus Corp. in 2014.

Ventas and HCP are not the only major REITs with a significant stake in Brookdale, which at more than 1,000 communities is the largest senior housing provider in the nation by a long shot. Toledo, Ohio-based Welltower (NYSE: HCN) also is a landlord.

Any potential buyout of BKD or its real estate would need to gain the consent of all these big REITs—and this is a high bar to clear, several analysts have noted.

“It was not hard to imagine a private equity firm being able to skillfully balance all the many elements that would be required to privatize Brookdale,” Green Street analyst Michael Knott told Senior Housing News. “It was and remains hard to imagine a REIT being able to pull it off given the consent rights held by the other REITs and the different level of competition among them as compared to a PE firm.”

The REITs would “presumably” have less power to block a transaction that involves simply Brookdale’s real estate rather than the whole company—and the real estate would logically be what a REIT buyer is after.

Yet, purchasing the entirety of Brookdale’s sizable real estate portfolio, which includes a mix of high-performing and struggling communities, might raise some eyebrows.

“While Ventas could try to buy the whole cow to get a few steaks–and it likely would not be the first time trying–it still seems more likely that they would just be trying to buy some steaks in the first place,” Knott said.

Whichever way you spin it, Brookdale is thinking about doing something, but keeping very quiet on the details.

“We are exploring all options that are on the table to increase shareholder value, and I think that we have to leave it at that,” Brookdale CEO Andy Smith said during the earnings call this week.

Written by Alana Stramowski

Companies featured in this article:

, ,