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Ventas (VTR) Closes Wexford Life Science Real Estate Buyout
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Ventas Inc. (VTR - Free Report) completed the acquisition of significantly all of the life science and medical real estate assets of Wexford Science & Technology, LLC. from Blackstone Group LP (BX - Free Report) for $1.5 billion in cash. The transaction is expected to be accretive to the company’s normalized funds from operations (“FFO”) per share immediately.
This buyout marks the company’s foray into the thriving university-affiliated life science real estate business. It offers a solid diversification to the company.
Further, this deal aids Ventas in establishing a strategic relationship with the university-focused developer Wexford. As part of the acquisition, this company has entered into a long-term management and pipeline agreement with Wexford, which would grant exclusive rights to Ventas in developing future projects jointly with Wexford.
Notably, Wexford had been part of BioMed Realty Trust Inc. – a company Blackstone purchased in January this year.
The Portfolio Acquired
The acquired portfolio comprises 23 operating properties with 4.1 million square feet, which are 97% leased. Ventas also purchased two development assets which are pre-leased to Duke University and Wake Forest University. These assets are estimated to generate a stabilized unlevered yield of around 7.5%. In addition, nine development sites, mainly adjacent to existing assets, were acquired by Ventas – two of which offer scope for near-term development. Wexford will carry on managing the portfolio.
The Benefit
This acquisition is a strategic fit for Ventas as it provides opportunity to capitalize on the growing health-care-driven research and development, supported by top-tier research universities. Increasing longevity of the aging U.S. population along with biopharma drug development growth opportunities have also promoted the institutional life science and medical-market fundamentals.
Further, long lease terms and top rated, institutional quality tenants assure steady growth in cash flows for Ventas. Moreover, addition of 100% private pay assets would raise Ventas’s net operating income (NOI) contribution from private pay assets to 84%, which is encouraging.
The company has already included the impact of this acquisition in its 2016 normalized FFO per share guidance range of $4.05–$4.13, which it declared in its Jul 29, 2016 press release.
Ventas’ large and diversified healthcare portfolio will benefit it from an increasing healthcare spending, aging population and a rise in insured individuals. Further, the above-mentioned acquisition deal is consistent with the company’s strategy of adding high-quality properties, generating improving cash flows. Yet, stiff competition and rate hike issues keep us concerned.
Ventas currently has a Zacks Rank #3 (Hold). Investors interested in the REIT industry can also consider better-ranked stocks like CareTrust REIT, Inc. (CTRE - Free Report) and Senior Housing Properties Trust . Both the stocks carry a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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Ventas (VTR) Closes Wexford Life Science Real Estate Buyout
Ventas Inc. (VTR - Free Report) completed the acquisition of significantly all of the life science and medical real estate assets of Wexford Science & Technology, LLC. from Blackstone Group LP (BX - Free Report) for $1.5 billion in cash. The transaction is expected to be accretive to the company’s normalized funds from operations (“FFO”) per share immediately.
This buyout marks the company’s foray into the thriving university-affiliated life science real estate business. It offers a solid diversification to the company.
Further, this deal aids Ventas in establishing a strategic relationship with the university-focused developer Wexford. As part of the acquisition, this company has entered into a long-term management and pipeline agreement with Wexford, which would grant exclusive rights to Ventas in developing future projects jointly with Wexford.
Notably, Wexford had been part of BioMed Realty Trust Inc. – a company Blackstone purchased in January this year.
The Portfolio Acquired
The acquired portfolio comprises 23 operating properties with 4.1 million square feet, which are 97% leased. Ventas also purchased two development assets which are pre-leased to Duke University and Wake Forest University. These assets are estimated to generate a stabilized unlevered yield of around 7.5%. In addition, nine development sites, mainly adjacent to existing assets, were acquired by Ventas – two of which offer scope for near-term development. Wexford will carry on managing the portfolio.
The Benefit
This acquisition is a strategic fit for Ventas as it provides opportunity to capitalize on the growing health-care-driven research and development, supported by top-tier research universities. Increasing longevity of the aging U.S. population along with biopharma drug development growth opportunities have also promoted the institutional life science and medical-market fundamentals.
Further, long lease terms and top rated, institutional quality tenants assure steady growth in cash flows for Ventas. Moreover, addition of 100% private pay assets would raise Ventas’s net operating income (NOI) contribution from private pay assets to 84%, which is encouraging.
The company has already included the impact of this acquisition in its 2016 normalized FFO per share guidance range of $4.05–$4.13, which it declared in its Jul 29, 2016 press release.
VENTAS INC Price
VENTAS INC Price | VENTAS INC Quote
In Conclusion
Ventas’ large and diversified healthcare portfolio will benefit it from an increasing healthcare spending, aging population and a rise in insured individuals. Further, the above-mentioned acquisition deal is consistent with the company’s strategy of adding high-quality properties, generating improving cash flows. Yet, stiff competition and rate hike issues keep us concerned.
Ventas currently has a Zacks Rank #3 (Hold). Investors interested in the REIT industry can also consider better-ranked stocks like CareTrust REIT, Inc. (CTRE - Free Report) and Senior Housing Properties Trust . Both the stocks carry a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>