Ventas To Buy Atria Assets For $3.1 Billion

October 22, 2010

October 22, 2010. The wait is over.  Early this morning, Ventas announced that it has agreed to purchase Atria Senior Living's 118 senior living properties with approximately 13,500 units for a total price of $3.1 billion, or $230,000 per unit. 

The purchase price will consist of about $1.35 billion in Ventas common stock, $1.6 billion of assumed debt (some of which will be refinanced) and $150 million of cash.  Atria management will continue to operate the facilities under a management contract with Ventas, and Ventas will own a minority interest in the to-be-spun-off management entity.  While we do not know how much cash has been dispersed to the equity funds that own Atria, and that are managed by Lazard Real Estate Partners, the $1.5 billion in cash and stock they will receive has to be a pleasant surprise, especially in this economic environment when other real estate funds have not performed very well.  

The deal equates to a 6.0% to 6.3% "cap rate" based on estimated 2011 EBITDA, but an unlevered yield closer to 6.5% based on the 110 stabilized properties.  Because Ventas expects EBITDA to grow annually by, we have surmised, somewhere between 7% and 9%, the ultimate yield will be much higher, especially when the stabilized properties are filled and when others in great locations are repositioned. The Atria assets are primarily in wealthy areas in the Northeast and California, have a median age of 12 years and an average occupancy above 87%.  The acquisition is expected to close in the first half of 2011 and will not start to be accretive to Ventas until 2012.  We will have more details and a little "history" in the November issue of The SeniorCare Investor. 

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