Ventas, Inc. (VTR) a leading health care real estate investment trust (REIT), has recently accomplished a deal by which the company along with the management team of Atria Senior Living, Inc. gained complete ownership over Atria.
Ventas executed the deal through the acquisition of 100% of several private investment funds formerly managed by Lazard Frères Real Estate Investors LLC (‘LFREI’) or its affiliates. Funds acquired now possess a 34% interest in Atria and 3.7 million shares of Ventas common stock. The amount required for this purchase of interests was around $242 million. Notably, executives and employees of Atria have a 66% stake in Atria.
Atria will carry on managing a portfolio of 118 private pay senior living communities comprising around 13,600 units for Ventas, which are situated in major metropolitan markets.
The Back Story
In May 2011, Ventas substantially acquired all of the real estate assets and working capital of privately-owned Atria Senior Living Group Inc. (ASLG). However, at that time, private equity funds managed by LFREI or its affiliates owned ASLG.
Before the closing of the deal, ASLG spun off its management operations to a newly formed entity named Atria Senior Living Inc., which continued to be substantially owned and controlled by LFREI or its affiliates. Post-acquisition, Atria continues to manage these properties.
Ventas, primarily engaged in the business of financing, owning and leasing healthcare related and senior housing facilities, boasts one of the largest and most diversified portfolios in the healthcare sector with exposure to all types of facilities.
The product diversity of the company allows it to capitalize on opportunities in different markets based on individual market dynamics, and provides a hard-to-replicate competitive advantage over its peers. This recent transaction further creates additional growth prospects.
Ventas received specific rights and minority protections concerning material transactions impacting Atria and is permitted two seats on Atria’s board. Further, Ventas put an end to its commitment related to the “Earnout,” a contingent performance-based payment that resulted from Ventas’s 2011 acquisition of 117 Atria-managed senior living communities, for an additional $44 million. However, this transaction is likely to be minimally accretive to Ventas’s 2013 normalized funds from operations (FFO) per share.
Ventas currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. One of its competitors, HCP, Inc (HCP) currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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