$3.1B Purchase Makes Ventas Largest Seniors Housing Owner

If size matters, Ventas Inc. has just catapulted to the very top.

May 13, 2011
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user chefranden

If size matters, Ventas Inc. has just catapulted to the very top of the list in the seniors housing industry. With the completion of the healthcare REIT’s purchase of 118 seniors housing communities and all outstanding stock from Atria Senior Living Group Inc. in a $3.1 billion transaction, Ventas now holds the distinction of being the largest owner of seniors housing properties in the entire country.

The group of assets involved in the deal consists of 110 existing private-pay facilities and eight redevelopment properties with locations in affluent coastal markets in California and metropolitan New York, as well as metropolitan Boston and other New England cities.

Atria, owned by private equity funds managed by Lazard Real Estate Partners, will continue to oversee the communities through the newly spun-off Atria Senor Living Inc. management company under a long-term management agreement.

Debra Cafaro, chairman & CEO of Ventas, said the transaction partners the REIT, “with a company that boasts an outstanding operations infrastructure, an experienced management team and employees who are committed to providing excellent care to the residents they serve.” The change will have no negative impact on residents, an Atria spokesperson told CPE following the announcement of the multi-billion deal in October 2010.

The big price tag attached to the big deal involved a relatively small amount of cash, only $150 million. Ventas financed the remaining sum by handing over $1.35 billion in Ventas shares for Atria’s outstanding stock and assuming existing net debt totaling $1.6 billon. National law firm Ballard Spahr L.L.P. represented a group of three lenders in Ventas’ assumption of $837 million in mortgage debt.

The lenders, Red Mortgage Capital, Berkadia Commercial Mortgage and PNC Bank, had originated over 120 commercial mortgage loans to Atria. The loans were later sold to Fannie Mae and Freddie Mac, with the three financial entities retianing the loan servicing. Ballard Spahr provided Red Mortgage, Berkadia and PNC with guidance on a long list of issues including, but not limited to, structuring the transaction, orchestrating the operating leases and management agreement and, of course, negotiating the debt assumption documents.

“What this debt assumption transaction says is that the existing financing continues to be attractive,” Thomas Hauser, co-partner in charge of Ballard Spahr’s Real Estate Finance Group, told CPE. They did an analysis and concluded that the existing debt and existing interest rates are far more attractive than paying pre-payment premiums and getting new debt.” With the Atria del, Ballard Spahr has now closed four loan assumption transactions involving seniors housing assets within the last six months.

Financing in the seniors housing sector and, indeed, the entire multi-family sector, Hauser adds, is changing. “We did a lot of portfolio acquisitions over the last few years and they ware all with Fannie Mae and Freddie Mac, but it’s getting more competitive. Life insurance companies are more interested in multi-family and they’re competing with the GSEs.”