Ventas Spinoff Gets a Name, Plans for Future

Ventas Inc. is moving quickly to get its post-acute/skilled nursing facility spinoff company off the ground.
Debra Cafaro, Ventas

Debra Cafaro, Ventas

Ventas Inc. is moving quickly to get its post-acute/skilled nursing facility spinoff company – Care Capital Properties, Inc. – off the ground, filing paperwork with the SEC and outlining the strengths and growth opportunities for the new independent, publicly traded REIT.

“We are very pleased with the progress we are making on the spin-off and remain on track to complete the transaction in the second half of the year. We are working hard to position Care Capital Properties to capitalize on the attractive investment opportunities in the skilled nursing market,” Ray Lewis, the current Ventas president who will become CEO of CCP, said in a news release about the filing with the U.S. Securities and Exchange Commission.

The Chicago-based healthcare property REIT announced its plans for the spinoff on April 6 at the same time it said it was paying $1.75 billion for Ardent Health Services, one of the largest for-profit hospital companies in the United States. Ventas stock jumped that day “reflecting investor enthusiasm surrounding its pure-play skilled nursing spin-off,” according to an investors report from Green Street Advisors.

Ventas chairman & CEO Debra Cafaro called the SEC filing “an important step towards successfully completing the strategic, value creating spin-off of our SNF portfolio.”

With the spinoff, “we will create two focused companies with distinct strategies,” Cafaro said in the release. “CCP will be positioned as an independent, pure-play SNF REIT with significant external growth opportunities. Ventas will improve its industry leading contribution from private-pay, net-operating income, its relationship with top 20 care providers, and its growth rate, while maintaining its diversification, scale, strong balance sheet and superior dividend and cash flow growth as a top global REIT.”

“Both of these transactions, the spin-off and the (Ardent) acquisition make a lot of sense (for Ventas),” Brad Thomas, editor of Forbes Real Estate Investors newsletter, told Commercial Property Executive. “It integrates within the existing portfolio. It’s very complementary.”

The Green Street Advisors report, written by Kevin Tyler, Michael Knott and Christina Zhang, said a “nugget of gold may be produced” for shareholders by the spin-off.

Ventas stockholders are expected to receive one share of CCP common stock for every four Ventas common shares they own. Following the distribution, Ventas’ stockholders will own shares in both Ventas and CCP.

The market also seems to be reacting favorably to the team, headed by Lewis that will lead CCP. Lori Wittman, who is now senior vice president, capital markets and investor relations, at Ventas, joins Lewis at CCP as executive vice president. Douglas Crocker, who has been a director at Ventas since 1998, will become the non-executive chairman of the board of CCP.

The Form 10 said the “well-seasoned team has extensive experience working together in the healthcare real estate industry, and the top four executives have an average tenure of approximately 10 years at Ventas.” The document stated the Crocker has “more than 40 years of experience as a real estate executive, has a comprehensive understanding of REIT operations and strategy, capital markets, and corporate governance.”

“Ray is very well thought of,” Thomas said. “This gives him a chance to run his own ship.”

CCP will launch with 353 assets that have more than 38,000 beds/units and are operated by 43 private regional and local care providers spread across 37 states. The leases have a weighted average remaining term of about 10 years. For the year ended Dec. 31, 2014, those properties generated total revenues and net operating income of $295.4 million, according to the Form 10.

“With a strong balance sheet, equity currency and independent access to capital markets, we aim to drive growth and create value through acquisitions and active asset management, including redevelopment,” Lewis said in a letter to Ventas shareholders.

In the SEC filing document, the spin-off company cites its strengths as competitive advantages, including a growing earnings stream; national, diversified portfolio with Ventas legacy; strong relationships with operators; and an experienced management team focused on growth.

The new spin-off plans to drive growth and create value by capitalizing on opportunities in the highly fragmented SNF industry and sourcing investments from its operator relationships. The spin-off, citing statistics that 77 percent of SNF operators own 25 or fewer properties, believes those owners are too small to attract the interest of large REITS like Ventas and other institutional investors, and would be ripe targets for acquisition at attractive prices.