Ventas Board Okays SNF Spin-off

CHICAGO—The board of Ventas Inc. has approved the spin-off of most of the healthcare REIT's post-acute/skilled nursing facility portfolio into a separate company. To be known as Care Capital Properties Inc., the spinoff REIT will trade on the New York Stock Exchange under the CCP symbol beginning next month, following a stock distribution to VTR shareholders that's expected to close on August 17.

“This transaction brings significant benefits to both Ventas and CCP,” says Debra A. Cafaro, chairman and CEO of VTR. Post spin-off, the the parent company will have “an outstanding portfolio and an enhanced growth profile with an increase in NOI contribution from top-tier operators and industry-leading private pay NOI composition. At the same time, we will maintain our diversification, scale, strong balance sheet and excellent dividend and cash flow growth.”

CCP, Cafaro continues, “will have a differentiated external growth strategy focused on attractive investment opportunities with regional and local operators. CCP will also benefit from an experienced management team, strong balance sheet and diversified portfolio with good coverage and growth through contractual escalations and redevelopment.”

VTR announced the spin in April, at the same time as it moved to further diversify its holdings with its $1.75-billion acquisition of Ardent Health Services. A month later, the spin-off REIT's registration statement spelled out the rationale for launching as a separate company and spinning off most of the parent company's SNF properties.

“There are 14 publicly traded healthcare REITs representing an aggregate market capitalization of approximately $92 billion,” according to the Form 10 that CCP filed in May. Most of these REITs have specialties other than SNFs. Most focus on healthcare sectors other than SNFs, “resulting in private regional and local operators being underserved.”

The pool of underserved SNF operators is considerable. “According to the American Health Care Association, the SNF industry is comprised of approximately 15,600 facilities and 1.7 million beds, and according to the National Investment Center for the Seniors Housing & Care Industry, there are more than 2,500 SNF operators,” according to the Form 10 filing. With only 14.3% of SNFs owned by publicly traded REITs, according to the AHCA, the large and highly fragmented market provides ample opportunities for consolidation.” CCP, according to the SEC filing, “will be poised to take advantage of those opportunities.”

Centerview Partners and Bank of America Merrill Lynch are serving as financial advisors to VTR. Wachtell, Lipton, Rosen & Katz is serving as the company's legal advisor in connection with the spin-off.