CHICAGO — Ventas (NYSE: VTR), a Chicago-based healthcare REIT, has agreed to acquire a 100 percent interest in 16 private pay seniors housing communities for $362 million. Ventas is purchasing the properties from a joint venture between Sunrise Senior Living (NYSE: SRZ) and an institutional investor partner.
The transaction will be funded through Ventas’ revolving credit facility, and all the properties will be acquired unencumbered.
“With the acquisition of these exceedingly high-quality seniors living communities, we continue our enterprise growth while also expanding our private pay revenue source,” said Ventas chairman and CEO Debra Cafaro in a prepared statement.
Sunrise will receive approximately $28 million for its 20 percent ownership interest in the portfolio. Sunrise will remain the manager of the communities under the pre-existing terms relating to management fees and contract length, which now range from 18 to 27 years.
The acquired assets were developed by Sunrise, have a median age of 4 years and contain 1,274 units. The 16 properties span 12 states coast to coast, according to Lori Wittman, vice president of capital markets with Ventas.
The senior living space has been a lucrative venture for Ventas and other REITs because it generates healthy returns. According to the National Council of Real Estate Investment Fiduciaries, the total annual return for the 77 seniors housing assets contained in its research database was 12.8 percent in 2011. The return is the highest it has been since the second quarter of 2008.
The seniors housing market is expected to be a strong performer for years to come because of the demographic shift in America. According to the U.S. Administration on Aging, the number of Americans age 65 and older will increase from 40 million in 2010 to 55 million in 2020, a 36 percent jump. The number of Americans age 85 and older is expected to rise from 5.5 million to 6.6 million over the same period, a 19 percent increase.
Sunrise views the disposition of its 20 percent ownership in the private pay communities for $28 million as a sound strategic move for the company.
“This is another positive event for Sunrise as it demonstrates the value of our purpose-built assets, provides us with additional capital, and reaffirms our positive and growing relationship with Ventas,” said Sunrise CEO Mark Ordan in prepared remarks.
“We are especially pleased to expand our relationship with Sunrise, the global leader in seniors living,” continued Cafaro.
The transaction is expected to close in the second quarter of 2012.
Sunrise Senior Living’s stock price closed on Tuesday at $6.51 per share, down from $8.94 per share a year ago. Meanwhile, the stock price for Ventas closed on Tuesday at $57.03 per share, up from $55.07 per share a year ago. Ventas is a Standard & Poor’s 500 company.
— John Nelson