There has certainly been plenty of media coverage of Ventas Inc.‘s pending acquisition of another publicly traded, healthcare-focused real estate investment trust (REIT), ARC Healthcare Trust.
However, much of the coverage of the deal, which is expected to close in the fourth quarter (Q4) and total about $2.6 billion, has not looked closely at the portfolio that Ventas will receive in the transaction.
Healthcare Real Estate Insights talked to several healthcare real estate professionals and took a close look at the buildings involved in the pending deal.
While Ventas’ 1,500-property portfolio – prior to the closing of the ARC deal – is heavily concentrated on seniors facilities, with seniors housing and skilled nursing composing 73 percent, it is also the country’s largest owner of MOBs, with about 327 MOBs owned at the close of Q1 2014.
By acquiring ARC Healthcare and its entire 143-property portfolio, Ventas will add 78 MOBs with about four million square feet, bringing the REIT’s total to more than 400 such facilities. The remainder of the ARC portfolio is composed of 29 seniors housing operating communities, 13 seniors housing triple-net properties, 14 skilled nursing facilities (SNFs), seven hospitals and two land parcels for future development.
Buying whole companies such as ARC is certainly considered by many to be the best way for Ventas, the country’s largest healthcare REIT and the sixth largest REIT of any kind, to significantly add to its MOB holdings and maintain the diversity of facility types that the company desires. The company has said it would like to have MOBs remain at least 15 percent of its holdings. At the same time that Ventas announced its pending deal with ARC, it also announced that it was acquiring 29 senior housing communities in Canada from Holiday Retirement in a deal worth about $900 million.
“The HCT acquisition that we’ve announced is strategic for Ventas,” Vincent M. Cozzi, senior VP of Ventas, tells HREI. “It is a diversified healthcare portfolio that is similar in composition to our own. When you look at the MOBs specifically, we think they are a great addition – 97 percent leased, newer on average, longer-term leases and affiliated with high-quality health systems.”
Ventas’ acquisition of ARC Healthcare Trust and its large portfolio should not have much of an impact on the MOB sales sector, according to several sources in the industry. Currently, there are not enough facilities being put on the trading block to satisfy the demands of investors, and having Ventas acquire ARC and its 78 MOBs and 65 other properties is akin to putting them in a bank vault, because, as one industry veteran says, “REITs like Ventas rarely sell properties.”
However, the strong prices that Ventas paid for the ARC properties could be a positive for other owners considering selling, as they might be able to garner historic, or near-historic, prices for their properties.
Scott D. Peters, CEO of Scottsdale, AZ-based Healthcare Trust of America Inc., said the Ventas-ARC deal is a positive one for the HRE space.
“Four or five years ago who would’ve thought that a non-traded REIT could put together a diversified healthcare portfolio and see such a strong demand and pricing for it. It makes us feel more valuable, frankly,” Peters said.
John B. Mugford is the Editor of Healthcare Real Estate Insights™, the nation’s first and only publication totally dedicated to covering news and trends in healthcare real estate development, financing and investment. For more information, please visit www.HREInsights.com.