Debra Cafaro headshot
Debra Cafaro

Real estate investment trusts Ventas and New Senior Investment Group will merge in an all-stock transaction valued at $2.3 billion, including $1.5 billion of New Senior debt, the companies announced Monday morning.

Chicago-based Ventas will acquire New York City-based New Senior’s portfolio of 103 private-pay senior living communities, which includes 102 independent living communities and one continuing care retirement community. The properties, located across 36 states, have a combined total of 12,404 units.

“The transaction provides Ventas shareholders with an attractive valuation and accretion and further positions us to win the recovery,” Ventas Chairman and CEO Debra Cafaro said in a statement. “It continues Ventas’s longstanding track record of capital allocation excellence, builds on our deep experience with the independent living product and leading operators Atria and Holiday, and is a testament to the continued dedication and expertise of our outstanding team.”

The deal is expected to close in the second half of the year, Ventas said in a presentation posted on its website. The companies did not reveal what the fate of New Senior executives will be at that time.

Under the terms of the agreement, New Senior shareholders will receive 0.1561 shares of newly issued Ventas stock per share of New Senior common stock. Based on the closing price of Ventas common stock on June 25, this amount represents approximately $9.10 per New Senior share, a 31% equity premium based on New Senior’s 30-day trading average, and a 10% premium on New Senior’s total enterprise value, the companies said.

A good fit

J. Justin Hutchens, Ventas’ executive vice president of senior housing said that the portfolio’s independent living communities fit well with REIT’s existing portfolio.

“New Senior’s independent living communities are located in advantaged markets, enjoy positive supply demand fundamentals, appeal to a large and growing middle market senior demographic, have demonstrated superior financial performance and are rapidly growing occupancy and leads,” he said.

Susan L. Givens, president and CEO of New Senior, said the REIT’s board and management team decided 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.” Both REIT boards approved the merger unanimously.

The REITs said the New Senior portfolio is of “superior quality” and is “high performing” and “well-located in advantaged markets” where median home values exceed $300,000, median incomes exceed $70,000, premier retail is nearby and  limited deliveries of new supply are expected in the next few years.

In the early stages of the post-pandemic recovery, the portfolio has seen positive trends, with leads and move-ins in the second quarter accelerating through June and expected to exceed the comparable pre-pandemic period in 2019, they said.

More independent living

The transaction expands the concentration of independent living properties in Ventas’ portfolio at a time when the aging population is growing — the oldest baby boomers are turning 75 and many are looking for senior housing, or will be soon. Independent living frequently is a starting point. Ventas said it expects the New Senior properties to cater to a large and growing middle market —  expected to expand by 82% to 14 million people by 2029, at which time the segment is expected to represent 43% of all older adults — and to complement its existing high-end, major-market senior housing portfolio.

The acquisition also builds on Ventas’ existing operator relationships with Atria Senior Living and Holiday Retirement. The Ventas portfolio currently includes 170 Atria communities and 26 Holiday communities.

Ventas holds a 34% ownership stake in Atria, which last week announced plans to acquire the management services division of Holiday as Welltower acquires 86 Holiday owned and leased senior living communities — 80 independent living communities and six combination independent living/assisted living properties — for $1.58 billion. Altogether, Holiday manages 240 communities, and Atria has 206.

New Senior itself completed the transition of 21 communities from Holiday to Atria on April 1.

The agreement between Ventas and New Senior also adds new operators to Ventas’ portfolio, including Grace Management, Merrill Gardens Senior Living, Hawthorn Senior Living and Watermark Retirement Communities (the CCRC).

Ventas’ total senior housing portfolio concentration will increase from 44% to 48% of first-quarter 2021 annualized adjusted net operating income, or NOI. The REIT’s seniors housing operating portfolio, or SHOP, mix will increase from 26% to 31%. Ventas’s SHOP portfolio independent living unit mix will increase from 48% to 58%. Its SHOP portfolio NOI generated in the United States will increase from 61% to 69%.

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