CHICAGO AND NEW YORK CITY — Ventas Inc. (NYSE: VTR) has entered into a definitive merger agreement to acquire New Senior Investment Group (NYSE: SNR), a New York City-based owner of independent living communities across the country. The deal between these two seniors housing real estate investment trusts (REITs) is valued at $2.3 billion, including $1.5 billion of debt.
The transaction will bolster the number of independent living communities for Ventas, which as of March 31 owned (fully or partially) 1,200 properties. As of first-quarter 2021, 48 percent of Ventas’ portfolio was classified as independent living. Post acquisition, Ventas expects independent living will comprise 58 percent of its portfolio.
New Senior currently owns 103 properties across 36 states, with a large concentration clustered in California, North Carolina, Florida and Oregon. The portfolio was a little more than 80 percent occupied as of May 31, and the average age of residents was 81. The only New Senior property that isn’t independent living is Watermark at Logan Square, a continuing care retirement community located in Philadelphia.
Shown is a map of New Senior Investment Group’s portfolio. Click on image to view larger version
The acquisition will deepen Ventas’ relationship with seniors housing operators such as Atria Senior Living and Holiday Retirement, which announced last week their plans to merge and operate under the Atria banner. Together Atria and Holiday operate 76 communities within New Senior’s portfolio. Other operators in New Senior’s network include Hawthorn Senior Living, Grace MGMT Inc. and Merrill Gardens.
Debra Cafaro, chairman and CEO of Ventas, says that the New Senior acquisition comes at a time when the seniors housing industry is on the upswing during its recovery from the COVID-19 pandemic. She adds that the acquisition positions the Chicago-based firm to “win the recovery.”
“Building on the strong momentum we are experiencing in our business, we are delighted to announce this strategic and accretive acquisition with New Senior that expands Ventas’ position in seniors housing at an important inflection point in the cycle as the senior housing industry rebounds,” says Cafaro.
Justin Hutchens, executive vice president of senior housing at Ventas, says that the New Senior properties are complementary to his firm’s higher end communities and are well-positioned to tap into the middle-income seniors population, which are residents who are classified as having too many financial assets to qualify for Medicaid but not enough to fully cover housing and support needs.
According to Ventas’ investor presentation for the New Senior transaction, the middle-income seniors population is expected to comprise 43 percent of all senior citizens by 2029, an 82 percent growth rate over 10 years.
For New Senior, the transaction gives immediate and full value to its stockholders, who will receive 0.1561 shares of newly issued Ventas stock per share of New Senior common stock once the deal closes. Based on the closing price of Ventas common stock on Friday, June 25, this represents a 31 percent premium based on New Senior’s 30-day trading average.
“Our board and management team have concluded that combining with Ventas will provide all of our stakeholders the opportunity to benefit from the upside potential of a combined company that has enhanced size, scale, relationships and financial strength,” says Susan Givens, New Senior’s president and CEO.
The boards of directors of both companies have unanimously approved the transaction, which is expected to close before the end of the year.
Centerview Partners LLC is serving as financial advisor to Ventas, and Wachtell, Lipton, Rosen & Katz is acting as the firm’s legal advisor. Morgan Stanley & Co. LLC is serving as financial advisor to New Senior, and Cravath, Swaine & Moore LLP is acting as legal advisor.
The stock price for Ventas closed on Friday, June 25 at $58.31 per share, up from $36.70 a year ago. Ventas is the No. 2 seniors housing REIT in terms of market cap, only trailing Toledo, Ohio-based Welltower Inc.
The stock price for New Senior closed on Friday at $6.91 per share, up from $3.47 a year ago.
— John Nelson