Sean Ryan is associate editor of Real Estate New Jersey

Its 6,819 units are overwhelmingly funded from private-pay sources. Its properties are in 15-year leases to two tenants, Brookdale Living Communities and Alterra Healthcare Corp. Brookdale leases 21 properties with 4,474 units, and Alterra leases 47 properties with 2,345 units. Provident's expected cash rental receipts are an estimated $85.7 million in 2006.

"This transaction expands our strategic goals of increasing our private-pay revenue sources and increasing our tenant diversification by adding 68 high-quality, private-pay independent and assisted living assets to our portfolio," said Ventas chairman, president and CEO Debra A. Cafaro in a conference call.

"We had a very spirited negotiation of this transaction," added Provident chairman, president and CEO Darryl W. Copeland Jr. "The good news is--now that we're going to become [Ventas] shareholders--that Debbie is on our side now."

"Provident's assets are superior quality private-pay senior housing facilities located in high-end barrier to entry markets and with weighted average occupancies exceeding 90%," Cafaro said. The purchase price implies approximately $176,000 per unit.

"We believe this transaction creates one of the largest and most attractive REITs," noted Copeland, "with ownership of a very high-quality portfolio leased to experienced operators with strong property operating performance and generating industry-leading cash rental growth."

Ventas is a REIT that owns healthcare and senior housing assets in 39 states. That number will be 40 when Provident's properties are added in. With this acquisition, Ventas has more than $4 billion in enterprises. Ventas expects that, after the acquisition, one third of its revenues will come from private-pay independent and assisted living facilities.

The $1.2 billion breaks down to $380 million in Ventas equity, $460 in assumed Provident mortgage debt, $231 million in cash to Provident shareholders, and $150 million to pay off Provident's debt and transaction costs. Venta officials report the transaction will add about five cents to its 2006 normalized FFO. Provident shareholders will receive 0.4951 Ventas common shares and $7.81 in cash for each Provident common share. At the transaction's close, Ventas will have 100 million fully diluted shares outstanding.

The acquisition is expected to close in the second quarter. Merrill Lynch is Ventas's financial advisor, while Friedman, Billings, Ramsey & Co. Inc. serves the same role for Provident. The Boards of Directors for both companies have unanimously approved the transaction and the senior management team at Provident has agreed to a transitional services agreement with Ventas through the end of the year. No one from Provident will be joining the Ventas board of directors.

Instant Insights /

Ventas Acquires Provident for $1B

Related Stories

Recommended For You