Ventas (NYSE: VTR) has agreed to acquire a Canadian senior housing portfolio of 31 existing properties and four in development through an 85%/15% equity partnership with Le Groupe Maurice (LGM). The total portfolio, including the in-progress developments, is valued at $1.8 billion.
Ventas’ investment will equal 85% of the total portfolio valuation, as well as a pro-rata share of partnership returns.
LGM will continue to operate the portfolio, and Ventas will have exclusive rights to fund and own all additional developments, according to a news release issued Monday. The future pipeline is expected to be two to three new communities per year.
Chicago-based Ventas, a real estate investment trust (REIT), is one of the largest U.S.-based owners of senior housing. This transaction will increase its Canadian portfolio from 41 to 76 properties.
“We are delighted to announce this accretive investment with Le Groupe Maurice to obtain a strong portfolio with built-in growth potential from existing and new developments in high-quality, attractive urban markets,” said Ventas Chairman and CEO, Debra A. Cafaro, in Monday’s release. “This transaction demonstrates the Ventas team’s commitment to our pivot to growth as we execute on accelerating external growth opportunities.
The acquisition will be funded in part by net proceeds from a stock offering also announced Monday. The company plans to offer 11 million shares of common stock, with the underwriters granted a 30-day option to purchase an additional 1.65 million shares.
LGM has grown from one property in 2000 to its current 35-property portfolio entirely through ground-up development, and has a 9% market share in Quebec.
The portfolio includes 28 stabilized properties encompassing 7,885 units in high-density urban markets, with occupancy of around 97%, according to the news release. A lease-up portfolio of three assets will open in 2019, and the 31 communities together are projected to add 4% compound annual growth in net operating income (NOI) for Ventas over the next five years.
The four developments in progress are located in Montreal and are anticipated to open in 2020 and 2021.
“We have built a leading seniors housing business over 20 years with very strong brand awareness and market share across Quebec through a commitment to quality and an energetic independent lifestyle for our residents,” President and Founder of Le Groupe Maurice, Luc Maurice, said in the announcement. “Le Groupe Maurice’s team and employees are excited about this partnership with Ventas and we look forward to expanding the business and capitalizing on the significant opportunities we see in the growing and attractive Canadian senior housing market.”
The first phase of the transaction is expected to close early in the third quarter of 2019, and will involve a Ventas bridge loan of about $734 million, to enable LGM to buy out its current equity partner. The second and final phase of closing is anticipated to occur later in the third quarter.