Ventas Buys Lillibridge in $300M-$400M Deal

CHICAGO-Public REIT Ventas Inc. announced this morning that it will acquire private REIT Lillibridge Healthcare Services Inc., with ownership interest in about 95 medical office buildings, for between $300 million and $400 million. Both trusts are based here.

Ventas is one of the largest health care trusts, with more than 500 properties in 43 states and two Canadian provinces. The trust’s business model trends more toward senior housing and skilled nursing facilities, with medical offices being only 5% of the sites owned. This purchase adds much-needed property diversification to Ventas, resulting in the trust managing or owning 154 medical offices with 8.4 million square feet in 20 states and Washington, DC. Lillibridge also is gaining in the deal, says CEO Todd Lillibridge.

“This provides us access to Ventas’ enormous balance sheet. It’s all about growth in this business, and to do that you need capital,” Lillibridge tells GlobeSt.com. “Going public is a great capital structure for us. This deal also gives us a breadth of property types to work from, we can bring those solutions to our clients.”

The Lillibridge firm will continue to operate as a subsidiary of Ventas, with Todd Lillibridge staying on as CEO and executive vice president in charge of Ventas’ Medical Properties group. Joseph Kurzydym will remain CFO and EVP of Lillibridge, and will be SVP of Ventas’ Medical Properties group. Both firms will remain in their offices for now, Ventas at 111 S. Wacker Dr. and Lillibridge at 200 W. Madison St.

Debra Cafaro, chairman, president and CEO of Ventas, said her firm’s goal is to be a national leader in the growing area of medical office buildings and ambulatory facilities. “The market is estimated at $173 billion and expected to grow more than 30% in the coming years,” she said in a statement.

Ventas will acquire and manage all properties owned by Lillibridge, as well as the interests in various joint ventures. Lillibridge owns 37 medical offices of about 1.9 million square feet, has 20% JV interest in 24 more offices of about 1.5 million square feet, and 5% JV interest in 34 additional properties of about 2.3 million square feet. Ventas will have right of first offer on the remaining JV interests. The Lillibridge portfolio is currently 86% leased.

The purchase benefit for Ventas will be increased operating income from the medical offices, expected to be 8% versus 5% of the trust’s current annualized run-rate NOI, according to a statement by the REIT. The transaction is expected to be modestly accretive to Ventas’ 2010 normalized funds from operations per share after costs and expenses of the transaction, and transition and integration expenses, according to the statement.

Ventas said it will fund the acquisition with a combination of cash on hand, borrowings under its revolving credit facilities and assumed secured mortgage financing. The Lillibridge assets are primarily financed with pre-payable secured debt,  which is expected to be repaid at or following the closing in the third quarter 2010, according to the Ventas statement. Goldman Sachs & Co. is acting as Ventas’ lead financial advisor, with assistance from Barclays Capital Inc.