Ventas Inc. VTR has announced a definitive deal to acquire a portfolio of 31 purpose-built seniors housing communities and four in-progress developments in the growing Quebec market. This would be done by investing through an 85%/15% equity partnership with Le Groupe Maurice (“LGM”).
The acquisition of this portfolio, which is valued at C$2.4 billion (USD $1.8 billion) including construction in progress, will help Ventas diversify its assets, business model and operator base. The health care REIT will also have exclusive rights to fund and own all additional developments under a pipeline agreement with LGM. Notably, new incremental developments are expected to average two to three new starts per year.
The move is a strategic fit as amid limited new supply of properties, the aging population is likely to offer decent opportunities for growth in the region. In fact, between 2018 and 2028, the Canadian 75 and over senior population will likely be up nearly 50%, and Quebec offers a large, thriving senior housing market.
Moreover, the well-occupied, stable portfolio and lease-up assets are expected to deliver 4% compound annual growth rate in net operating income (NOI) over the next five years. The transaction is expected to be neutral to 2019 normalized Funds from Operations (FFO) per share and accretive to 2020 normalized FFO by around 3 cents per share. The deal is estimated to close in phases, with the first one likely to close early in this year’s third quarter and the second one later during the same period.
In a separate press release, Ventas announced the pricing of public offering of 11 million shares of common stock at $62.75 per share with the underwriters having a 30-day option to purchase up to an additional 1.65 million shares from the company at the public offering price. With these proceeds, the company plans to fund part of this above-mentioned acquisition.
Additionally, Ventas, which has healthcare REIT peers like Welltower Inc. WELL, HCP Inc. HCP and Senior Housing Properties Trust SNH, is capitalizing on the robust demand for university-based research and innovation developments, and making efforts to enhance its office portfolio.
In fact, it is redeploying proceeds from asset sales into university-based research and innovation assets and to retire debt. These efforts will enhance its balance-sheet strength and enhance the company’s portfolio. However, elevated supply of senior-housing assets in some of the domestic markets will likely put pressure on rent and occupancy growth in the near term.
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