Atria Plans $1 Billion in Real Estate Ventures After Capital Raise

Fresh off of a major capital raise, the nation’s seventh-largest senior housing provider is now planning to invest $1 billion in real estate ventures in high-barrier-to-entry markets.

Senior executives at Louisville, Kentucky-based Atria Senior Living recently sold 50% of their ownership interest in the company’s management business to Fremont Realty Capital, Atria announced Wednesday. Atria currently manages more than 200 senior housing communities in 28 states and seven Canadian provinces.

As a result, senior executives at Atria will now own 33% of the company’s management services business, as opposed to 66%. Chicago-based real estate investment trust (REIT) Ventas, Inc. (NYSE: VTR) will continue to own 34% of Atria’s management services business, while the real estate private equity business unit of the Fremont Group will own 33%.

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The exact amount raised by Atria in the transaction was not disclosed. However, Atria did reveal that the proceeds, along with an additional investment by Ventas, will be invested in a new venture that will act as general partner in $1 billion worth of real estate ventures, with a specific concentration on senior housing development and redevelopment projects in high-barrier-to-entry markets.

“What we’re most excited about is being able to build a bigger and better company,” Regan Atkinson, Atria’s senior vice president of marketing and communications, told Senior Housing News.

The aforementioned general partner also plans to raise $300 million to $400 million worth of limited partner capital to fund the dedicated development and redevelopment strategy.

On Wednesday, Ventas issued a press release in support of Atria’s capital raise. The REIT acquired substantially all of Atria’s real estate in 2011. At the time, the 118-property Atria portfolio acquired by Ventas was valued at more than $3.1 billion.

Since then, Ventas has invested almost $3 billion of incremental capital in senior housing communities operated by Atria. Currently, the REIT owns 172 senior housing communities managed by Atria.

“As Atria now takes the next step to enhance its scale and financial flexibility, the business will be well positioned for growth as a consolidator within a highly fragmented market,” Ventas Chairman and CEO Debra Cafaro said in the press release.

Atria also plans to use the funds raised to further invest in technology, Atkinson said. Atria Chairman and CEO John A. Moore echoed that sentiment in a press release.

“With this additional capital we can continue to build scale and accelerate our investments in infrastructure and systems to better position us for both the current environment and our maturing industry as it prepares for the demographic wave that is around the corner,” Moore said.

Scaling up has been a tricky proposition in senior living, but the track record of Atria and Ventas suggest these organizations could have what it takes to succeed, according to Michael Knott, an analyst with Green Street Advisors.

“This is too small to be a financial needle-mover for Ventas, but the Atria transaction does reinforce the value proposition of the REIT’s largest operator and its ability to attract new capital sources that believe in the company’s impressive platform,” he told SHN. “When you think of an Atria, or a Sunrise, you think of very valuable operating scale and expertise in a growing senior housing business. As we’ve clearly seen elsewhere in senior housing, bigger is not always better, but in this case, and some others, it seems to be.”

Written by Mary Kate Nelson

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