Ventas Enters Life Science Field with $1.5B Acquisition
- Jul 07, 2016
Chicago—Chicago-based healthcare property REIT Ventas Inc. is making its first move into the life science field with an agreement to acquire nearly all the real estate assets of Wexford Science & Technology LLC and its development pipeline for $1.5 billion from affiliates of The Blackstone Group.
Blackstone Real Estate Partners VIII LP had owned Wexford since January when it was part of the $8 billion acquisition of BioMed Realty Trust Inc., a San Diego-based life science REIT that had interests in 18.8 million square feet of office and lab space in several markets in the U.S. and U.K. BioMed had owned Wexford, headquartered in Baltimore, since 2013, when it purchased the firm for $640 million.
Ventas made a separate announcement that it was selling nine million shares of its common stock for total estimated gross proceeds of $649 million to use toward the purchase of the Wexford assets.
Wexford’s portfolio includes 23 operating properties with 4.1 million square feet of space that is 97 percent leased and gets 73 percent of its revenue from tenants including leading universities, academic medical centers and research companies. Notable tenants are Yale University, the University of Pennsylvania Health System, Washington University in St. Louis, Wake Forest University and Alexion Pharmaceuticals Inc. The pending deal also covers two development assets encompassing about 400,000 square feet that are nearly 60 percent pre-leased and affiliated with Duke University and Wake Forest University. Ventas will also acquire nine development sites, most of them contiguous to existing assets.
The deal is expected to close in the fourth quarter. As part of the acquisition, Ventas will enter into a long-term management and pipeline agreement with Wexford. In addition to the existing portfolio, Ventas will have exclusive rights to jointly develop future projects with Wexford, and Wexford will continue to manage the portfolio. Wexford—the leading real estate development company focused exclusively on partnering with universities, academic medical centers and research companies—will be independently owned and operated by its current management team.
“This acquisition and alliance with Wexford are a natural fit for Ventas, and reinforce our position as the premier provider of capital and the intersection of healthcare and real estate. We are excited to add these world-class institutions and advantaged real estate to our portfolio,” Ventas Chairman & CEO Debra Cafaro said in a prepared statement. “This transaction also provides Ventas a unique opportunity to capitalize on increasing healthcare-driven research and development spurred and supported by top tier research universities. We believe the growth opportunity is significant, and look forward to working with Wexford to help leading universities, academic medical centers and research companies fulfill their core missions.”
Ventas is the second-largest U.S. healthcare REIT by market value with 1,300 properties throughout the U.S., Canada and United Kingdom. Most of its assets are seniors housing communities, medical office buildings, skilled nursing facilities, specialty hospitals and general acute-care hospitals. Through its Lillibridge subsidiary, it provides management, leasing, marketing, facility development and advisory services to hospitals and health systems.
In April 2015, Ventas announced it was buying Ardent Health Services for $1.75 billion and spinning off most of its post-acute/skilled nursing portfolio into an independent publicly traded REIT. The spinoff, Care Capital Properties Inc., was started with 355 triple net-leased SNFs and other healthcare assets. Ardent is one of the 10 largest for-profit hospital companies in the U.S.
Although Ventas stock dipped slightly Wednesday, Mizuho Securities USA Inc. reacted well to the Wexford news. In an investors’ note Wednesday, Richard Anderson, managing director of Americas Research, wrote: “The company has recently made some forward-thinking strategic moves (and we add Wexford to that list) that we think are creating a sense of trust from a wider investor base.”
Those investors might be attracted to some of the strategic and financial benefits that Ventas outlined about the planned purchase, including that it is consistent with the REIT’s strategy of driving reliable income and growth through a diversified portfolio and that it marks the company’s “entry into the attractive university-affiliated life science real estate business.” Ventas also noted that the properties have highly-rated tenants and favorable triple-net lease structures with weighted average lease terms of 10 years and 2 percent annual rent increases. The REIT also pointed to the Wexford pipeline that will allow it to continue to benefit from “the increasing longevity of the aging U.S. population and biopharma drug development growth opportunities.”
J.P. Morgan Securities LLC is acting as financial advisor to Ventas and Kirkland & Ellis LLP is its legal counsel for the transaction. Eastdil Secured group of Wells Fargo Securities LLC is acting as financial advisor to Blackstone and Simpson Thacher & Bartlett is Blackstone’s legal counsel.