UPDATE 3-Ventas vaults to top in senior housing on $1.5 bln buy

* To pay $1.35 bln in Ventas stock and $150 mln in cash

* To also assume $1.6 bln of Atria’s debt

* Atria owned by funds managed by Lazard Real Estate

* Ventas says expects deal to add $640 mln in 2011 rev

* Sees deal closing in H1 of 2011
(Adds conference call details, analyst comment, stock
movement)

By Esha Dey

BANGALORE, Oct 22 (BestGrowthStock) – Ventas Inc (VTR.N: ) will pay
about $1.5 billion to buy the real-estate assets of Atria
Senior Living Group, making it the largest U.S. player in the
seniors’ housing space, at a time when the country’s population
is aging rapidly.

The deal is Ventas’ second this month and follows a spate
of acquisitions in the seniors’ housing and assisted living
space as companies rush to deploy the cash pile they were
sitting on during the downturn.

Nearly 40 million people, or 12.9 percent of the U.S.
population, were older than 65 years in 2009 — a number
expected to grow to 19 percent by 2030, according to the
Department of Health & Human Services.

The assets under the Atria deal are mostly located in
wealthy metropolitan enclaves and coastal communities around
New York, New England and California, and would cost Ventas
about $230,000 per unit.

“We anticipate additional facility net operating income
growth through redevelopment opportunities in certain assets
located in affluent infill locations primarily in Los Angeles,
San Francisco and the New York metropolitan area,” Ventas Chief
Executive Debra Cafaro said on a conference call.

Analysts said that while Ventas paid “full price” for the
assets, which had most probably seen a price war, the deal
would prove to be a long-term, above-average growth driver.

“While it can be argued that this is an expensive
transaction, Ventas will be a winner over the long-term with
this deal,” BMO Capital Markets analyst Richard Anderson said.

Publicly listed competitors of Ventas include HCP Inc
(HCP.N: ), Nationwide Health Properties Inc (NHP.N: ) and Health
Care REIT Inc (HCN.N: ) might also be eyeing deals in the senior
living space.

That can explain the surge in the stock price of pure-play
senior living service provider Brookdale Senior Living Inc
(BKD.N: ) on Friday, Anderson said. Brookdale shares jumped as
much as 20 percent.

As a diversified healthcare REIT, Ventas is also present in
the hospital and medical office space, but the biggest chunk of
its business consists of assisted, independent and senior
living facilities.
The assisted and senior living space is on a growth
trajectory, especially after a bad run in recent times, and
companies like Ventas are trying to grab a share of that
growth, BMO’s Anderson said.

“The fundamentals of the senior and assisted living space
are improving… the very old who use this space are growing at
a much faster rate than the overall population,” he added.

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StarMine Valuations: http://r.reuters.com/ves79p

Factbox on deals in senior-living space: [ID:nSGE69L0K5]

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Ventas, which the market valued at about $8.6 billion at
Thursday’s close, will also assume $1.6 billion of Atria’s net
debt.

“We plan to repay a significant portion of Atria’s mortgage
debt with unsecured borrowings,” Ventas CEO Cafaro said.

The company expects the unsecured debt rate to be lower
than that of its secured debt, which it plans to replace,
Cafaro said. It currently has a debt rate of 6 percent on its
portfolio.

Upon completion of the transaction, Ventas will own over
35,000 senior housing units across 350 properties, the company
said.

Ventas expects the deal to generate revenue of about $640
million in 2011 and to add to its 2012 normalized funds from
operations per share. The deal will also boost its net
operating income by high-single-digits percent annually.

Louisville, Kentucky-based Atria, the fourth largest
operator of assisted living properties in the United States, is
owned by private-equity funds managed by Lazard Real Estate
Partners. Atria’s owners will become Ventas’ largest
shareholder after the deal.

Current Atria management will continue to manage the assets
after deal close, which is expected in the first half of 2011.

Ventas was advised by Jefferies & Co, Centerview Partners
LLC and BofA Merrill Lynch on the deal.

Ventas’ shares, which have gained about 6 percent since it
agreed to buy 58 senior-living communities from a unit of
Sunrise Senior Living (SRZ.N: ) about two weeks ago, were down
about 4 percent at $52.69 in afternoon trade on the New York
Stock Exchange.

Shares of Ventas have risen 24 percent this year,
outperforming the S&P 500 specialized REITS (sub-industry)
index (.GSPRESP: ) that has risen 21 percent.
(Reporting by Krishnakali Sengupta and Esha Dey in Bangalore;
Editing by Aradhana Aravindan, Roshni Menon)

UPDATE 3-Ventas vaults to top in senior housing on $1.5 bln buy