Ventas to Acquire Brookdale Property in New York City for $194 Million

Ventas (NYSE: VTR) has struck a deal to buy some prime real estate from the nation’s largest senior living provider.

The Chicago-based real estate investment trust (REIT) on Monday revealed it plans to buy from Brookdale Senior Living (NYSE: BKD) a senior housing community located in New York City’s Battery Park neighborhood for approximately $194 million. The acquisition price represents a cap rate of roughly 5%.

“Battery Park adds an irreplaceable, well-established community to our high-quality seniors housing portfolio and is uniquely positioned to benefit from New York City’s strong demographics,” stated Ventas Chairman and CEO Debra Cafaro in a press release announcing the deal. “We are pleased to reach another mutually beneficial transaction for Ventas and Brookdale and we look forward to growing and improving this high-quality residence for seniors.”

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This isn’t the REIT’s first foray into Manhattan real estate. Ventas also owns Atria West 86, an Atria Senior Living community on the city’s Upper West Side. That community offers waterfront views and a rooftop terrace, along with a host of other resort-style amenities.

Ventas chose Brookdale to manage the community under a separate management agreement due to begin when the acquisition closes. The Nashville, Tennessee-based company expects to earn approximately $140 million in proceeds from the sale, which includes associated debt and transaction costs.

HFF represented Brookdale as broker in the sale of this community. The deal is expected to close by the end of the year.

This is the latest agreement between the REIT and its major senior living tenant. Earlier this year, Ventas and Brookdale agreed to restructure a portfolio of 128 senior living communities. The agreements combined substantially all of Ventas’ wholly owned Brookdale communities into one master lease and security agreement.

Brookdale represents roughly 9% of Ventas’ total portfolio, based on net operating income (NOI).

The sale to Ventas fits into Brookdale’s overall strategy of selling off some of its high-valued assets. The operator announced earlier this year it planned to shed 28 of its owned communities in order to generate proceeds in excess of $250 million.

“I am pleased with this continued progress in delivering on our real estate strategy, which we introduced earlier this year,” said Brookdale President and CEO Cindy Baier in a press release. “I am thrilled that we will continue to operate Battery Park after closing, as we have since the community opened in 2000, and thank Debra Cafaro and the Ventas team for their continued partnership and another mutually beneficial transaction.”

Despite the stated intention to sell off more real estate, an activist shareholder is pushing Brookdale to unload its owned properties even more aggressively. The shareholder, Land & Buildings, recently urged the operator to “aggressively sell assets” in light of the company’s lease restructurings and turnaround efforts.

The 14-story independent living community has 217 units and upscale amenities such as a wellness clinic, exercise room, game room, indoor pool, raised garden beds, a whirlpool spa and views of the Hudson River. Located in downtown Manhattan, the community also lies near some of the Big Apple’s shopping, dining and entertainment venues.

Brookdale first opened the community in 2001, shortly before the attacks of September 11. The property—which is located just two blocks from the World Trade Center—was evacuated in the tragic aftermath that paralyzed New York City, and used as a temporary police headquarters, according to former Brookdale President John Rijos. Still, Brookdale Battery Park was able to bounce back and achieve relatively high occupancy in just a year’s time.

“We had this $60 million investment and I remember thinking: ‘This is going to be worth zero,’” Rijos told Senior Housing News in 2016. “As it turned out, Battery Park came back so fast and so strong that a year later we were 100% occupied with a waiting list, and it’s pretty much been that way ever since.”

Relatively few private-pay senior living options exist in New York City, but that appears to be changing over time. Some other REITs and senior living-focused companies have targeted the city for acquisitions or new development, including Welltower (NYSE:WELL) and and Sunrise Senior Living; Maplewood Senior Living and Omega Healthcare Investors (NYSE: OHI); and Kayne Anderson Real Estate Advisors (KAREA) and Watermark Retirement Communities.

Written by Tim Regan

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