Strategic Acquisition Expands Ventas’s MOB Business to Over 20
Million Square Feet
Cogdell Under Contract to Sell Erdman Prior to Closing
CHICAGO & CHARLOTTE, N.C.--(BUSINESS WIRE)--Dec. 27, 2011--
Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) and Cogdell Spencer
Inc. (NYSE: CSA) (“Cogdell”) today announced that the Boards of
Directors of both companies have approved a definitive agreement under
which Ventas will acquire Cogdell and its 72 high quality medical office
buildings (“MOBs”) in an all-cash transaction. At closing, Ventas’s
investment, including its share of debt, is expected to approximate $760
million to $770 million, before anticipated transaction expenses.
Under the terms of the agreement, holders of shares of Cogdell common
stock and units of limited partnership interests in Cogdell’s operating
partnership, Cogdell Spencer LP (“Cogdell LP”), will receive
consideration of $4.25 per share (or unit), representing a premium of 8%
to Cogdell’s closing price on December 23, 2011 and 13% to the average
closing price of Cogdell common stock over the past 30 days. The
consideration plus anticipated transaction expenses values Cogdell’s
properties at a low- to mid- 7% net operating income (“NOI”) yield, or
slightly over $200 per square foot. Holders of Cogdell’s preferred stock
will receive consideration of $25 per share, plus accrued and unpaid
dividends through the closing. Cogdell will pay its currently declared
common stock dividend as scheduled on January 19, 2012, at which time
Cogdell LP will pay a similar distribution on its outstanding limited
partnership units. Cogdell and Cogdell LP will not pay further dividends
or distributions on their common stock or units pending consummation of
the transaction.
“We are delighted to announce this strategic and accretive acquisition
that further broadens our footprint in the attractive MOB sector,
continues to diversify our business and tenant relationships and keeps
our balance sheet strong,” Ventas Chairman and Chief Executive Officer
Debra A. Cafaro said. “Cogdell’s high-quality properties enhance our
medical office building market presence, especially in the southeast,
and provide an opportunity to scale our Lillibridge Healthcare Services
subsidiary platform. We look forward to successfully integrating the
Cogdell properties into the Ventas portfolio.”
Highlights of the acquired assets are:
-
Acquired MOBs: 68 stabilized (92% occupied), 2 leaseup and 2 in
development, 4.2 million square feet;
-
Management business acquired: 44 MOBs, 2 million square feet;
-
Ventas’s MOB portfolio will increase from 11% to 15% of total NOI;
-
Owned MOBs are located in 15 states;
-
Eighty-eight percent of the owned portfolio’s square footage (72 MOBs)
is located on hospital campuses or is hospital anchored; and
-
Twelve new business relationships with investment-grade rated
hospitals.
“When this acquisition is completed, Ventas will have the leading MOB
business in the U.S., with over 20 million square feet owned or managed,
and a coast-to-coast presence that is second to none in the healthcare
real estate industry,” Ventas Executive Vice President of Medical
Property Operations Todd W. Lillibridge said. “We continue to build on
our 25 years of experience exclusively in the medical office building
and outpatient arena for the benefit of our clients and stakeholders.”
“We are pleased to have reached this agreement with Ventas, which
provides immediate, full and fair value to our shareholders,” Cogdell
Spencer’s Chief Executive Officer and President Raymond Braun said. “Our
Board of Directors conducted a robust and thorough review of strategic
alternatives and determined that this transaction is advisable to, and
in the best interests of, our shareholders. In reaching this decision to
sell, the Board carefully considered our prospects to raise capital in
support of our growth strategy. The Board is unequivocal in its view
that the sale to Ventas will deliver the most value to shareholders. I
look forward to working with the Ventas team to facilitate a seamless
and successful integration.”
Cogdell has reached an agreement under which Cogdell’s design-build and
development business (“Erdman”) will be sold to an affiliate of Lubar &
Co., a well regarded private equity firm affiliated with David Lubar,
prior to completion of the Ventas transaction. Mr. Lubar previously held
an equity stake in Erdman before it was sold to Cogdell in 2008. The
transaction will include all assets and liabilities of the Erdman
business, including approximately $11 million in projected net working
capital on the Erdman balance sheet. In addition, Cogdell will
contribute approximately $12 million to its equity capitalization, with
a roughly equal amount to be contributed by an affiliate of Lubar & Co,
in order to capitalize Erdman. The agreement currently contemplates the
sale of Erdman for nominal consideration but allows Cogdell to solicit
superior proposals for the Erdman business over a 45-day period. Cogdell
shareholders would receive any additional proceeds resulting from a sale
of the Erdman business to an alternative party, less incremental costs
associated with such sale.
Ventas’s acquisition of Cogdell is expected to be financed through the
assumption of existing Cogdell mortgage debt and other Ventas borrowings.
The transaction is expected to be immediately accretive to Ventas’s
normalized funds from operations (FFO), approximately $0.03 to $0.05 per
share on a full year basis excluding merger-related, transition and
integration costs and expenses. In addition, Ventas anticipates that
Cogdell’s debt balances are expected to increase, and its cash balance
expected to decrease, between now and the closing principally due to
Cogdell’s ongoing development projects and its contribution to Erdman.
Ventas expects its net debt to EBITDA to approximate 5x including the
acquisition.
Approvals and Timing
Completion of Ventas’s acquisition of Cogdell, which is expected to
occur in the second quarter of 2012, is subject to the approval of
Cogdell shareholders, satisfaction of customary closing conditions and
the successful completion of the sale of Erdman.
Advisors
Centerview Partners LLC and Morgan Stanley & Co. LLC are acting as
financial advisors to Ventas, and Willkie Farr & Gallagher LLP is acting
as legal counsel.
Citi is acting as exclusive financial advisor to Cogdell and provided a
fairness opinion, and Alston & Bird LLP is acting as legal counsel.
Presentation
An investor presentation discussing the transaction is available on
Ventas’s website at www.ventasreit.com.
About Ventas, Inc.
Ventas, Inc., an S&P 500 company, is a leading healthcare real estate
investment trust. Its diverse portfolio of more than 1,300 assets in 47
states (including the District of Columbia) and two Canadian provinces
consists of seniors housing communities, skilled nursing facilities,
hospitals, medical office buildings and other properties. Through its
Lillibridge subsidiary, Ventas provides management, leasing, marketing,
facility development and advisory services to highly rated hospitals and
health systems throughout the United States. More information about
Ventas and Lillibridge can be found at http://www.ventasreit.com
and http://www.lillibridge.com.
About Cogdell Spencer Inc.
Charlotte-based Cogdell Spencer Inc. (NYSE:CSA), healthcare's preferred
real estate partner, is a real estate investment trust ("REIT") focused
on planning, owning, developing, constructing, and managing medical
facilities. Through strategically managed, customized facilities, we
help our clients deliver superior healthcare. Learn more about Cogdell
Spencer Inc. and its subsidiaries at www.cogdell.com.
Caution About Forward-Looking Statements
This press release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements regarding the Company’s or Cogdell’s or their respective
tenants’, operators’, managers’ or borrowers’ expected future financial
position, results of operations, cash flows, funds from operations,
dividends and dividend plans, financing plans, business strategy,
budgets, projected costs, operating metrics, capital expenditures,
competitive positions, acquisitions, investment opportunities,
dispositions, merger integration, growth opportunities, expected lease
income, continued qualification as a real estate investment trust
(“REIT”), plans and objectives of management for future operations and
statements that include words such as “anticipate,” “if,” “believe,”
“plan,” “estimate,” “expect,” “intend,” “may,” “could,” “should,”
“will,” “seek” and other similar expressions are forward-looking
statements. Such forward-looking statements are inherently uncertain,
and security holders must recognize that actual results may differ from
the Company’s or Cogdell’s expectations. Although the Company and
Cogdell presently believe that the plans, expectations and results
expressed in or suggested by the forward-looking statements are
reasonable, all forward-looking statements are inherently subjective,
uncertain and subject to change, as they involve substantial risks and
uncertainties beyond management’s control. New factors emerge from time
to time, and it is not possible to predict the nature, or assess the
potential impact, of each new factor on the Company’s or Cogdell’s
business. Given these uncertainties, you should not place undue reliance
on these forward-looking statements. Neither the Company nor Cogdell
undertakes a duty to update such forward-looking statements, which speak
only as of the date on which they are made.
The Company’s and Cogdell’s actual future results, performance or
achievements and trends may differ materially depending on a variety of
factors discussed in the Company’s and Cogdell’s filings with the
Securities and Exchange Commission. These factors include without
limitation: (a) the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement or the stock purchase agreement relating to Erdman; (b) the
inability to obtain Cogdell’s stockholder approval for the merger or the
failure to satisfy other conditions to complete the merger or sale of
Erdman; (c) the outcome of any legal proceedings instituted against
Cogdell related to the merger agreement or the stock purchase agreement;
(d) the failure to obtain the necessary financing arrangements set forth
in the equity commitment letter delivered pursuant to the stock purchase
agreement; (e) risks that the proposed transaction disrupts current
plans and operations of either the Company or Cogdell; (f) the ability
to recognize the benefits of the merger; (g) the amount of costs, fees,
expenses and charges incurred by the Company or Cogdell related to the
merger;(h) the ability and willingness of the Company’s and Cogdell’s
tenants, operators, borrowers, managers and other third parties to meet
and/or perform their obligations under their respective contractual
arrangements with the Company and Cogdell, including, in some cases,
their obligations to indemnify, defend and hold harmless the Company or
Cogdell, as applicable, from and against various claims, litigation and
liabilities; (i) the ability of the Company’s and Cogdell’s respective
tenants, operators, borrowers and managers to maintain the financial
strength and liquidity necessary to satisfy their respective obligations
and liabilities to third parties, including without limitation
obligations under their existing credit facilities and other
indebtedness; (j) the Company’s success in implementing its business
strategy and the Company’s ability to identify, underwrite, finance,
consummate and integrate diversifying acquisitions or investments,
including the Nationwide Health Properties, Inc. transaction and those
in different asset types and outside the United States; (k)
macroeconomic conditions such as a disruption of or lack of access to
the capital markets, changes in the debt rating on U.S. government
securities, default and/or delay in payment by the United States of its
obligations, and changes in the federal budget resulting in the
reduction or nonpayment of Medicare or Medicaid reimbursement rates; (l)
the nature and extent of future competition; (m) the extent of future or
pending healthcare reform and regulation, including cost containment
measures and changes in reimbursement policies, procedures and rates;
(n) increases in the Company’s cost of borrowing as a result of changes
in interest rates and other factors; (o) the ability of the Company’s
operators and managers, as applicable, to deliver high quality services,
to attract and retain qualified personnel and to attract residents and
patients; (p) changes in general economic conditions and/or economic
conditions in the markets in which the Company and Cogdell may, from
time to time, compete, and the effect of those changes on the Company’s
and Cogdell’s revenues and the Company’s ability to access the capital
markets or other sources of funds; (q) the Company’s ability to pay
down, refinance, restructure and/or extend its indebtedness as it
becomes due; (r) the Company’s ability and willingness to maintain its
qualification as a REIT due to economic, market, legal, tax or other
considerations; (s) final determination of the Company’s taxable net
income for the year ending December 31, 2011; (t) the ability and
willingness of the Company’s and Cogdell’s tenants to renew their leases
with the Company or Cogdell, as applicable, upon expiration of the
leases and the Company’s and Cogdell’s ability to reposition their
respective properties on the same or better terms in the event such
leases expire and are not renewed by the Company’s or Cogdell’s tenants
or in the event the Company or Cogdell exercises its right to replace an
existing tenant upon default; (u) risks associated with the Company’s
senior living operating portfolio, such as factors causing volatility in
the Company’s operating income and earnings generated by its properties,
including without limitation national and regional economic conditions,
costs of materials, energy, labor and services, employee benefit costs,
insurance costs and professional and general liability claims, and the
timely delivery of accurate property-level financial results for those
properties; (v) the movement of U.S. and Canadian exchange rates; (w)
year-over-year changes in the Consumer Price Index and the effect of
those changes on the rent escalators, including the rent escalator for
Master Lease 2 with Kindred, and the Company’s earnings; (x) the
Company’s and Cogdell’s ability and the ability of their respective
tenants, operators, borrowers and managers to obtain and maintain
adequate liability and other insurance from reputable and financially
stable providers; (y) the impact of increased operating costs and
uninsured professional liability claims on the liquidity, financial
condition and results of operations of the Company’s and Cogdell’s
respective tenants, operators, borrowers and managers, and the ability
of the Company’s and Cogdell’s respective tenants, operators, borrowers
and managers to accurately estimate the magnitude of those claims; (z)
risks associated with the Company’s and Cogdell’s MOB portfolio and
operations, including its ability to successfully design, develop and
manage MOBs, to accurately estimate its costs in fixed fee-for-service
projects and to retain key personnel; (aa) the ability of the hospitals
on or near whose campuses the Company’s and Cogdell’s MOBs are located
and their affiliated health systems to remain competitive and
financially viable and to attract physicians and physician groups; (bb)
the Company’s ability to maintain or expand its relationships with its
existing and future hospital and health system clients; (cc) risks
associated with the Company’s and Cogdell’s respective investments in
joint ventures and unconsolidated entities, including the lack of sole
decision-making authority and reliance on their joint venture partners’
financial condition; (dd) the impact of market or issuer events on the
liquidity or value of the Company’s investments in marketable
securities; and (ee) the impact of any financial, accounting, legal or
regulatory issues or litigation that may affect the Company, Cogdell or
their respective major tenants, operators or managers. Many of
these factors are beyond the control of the Company, Cogdell and their
respective management teams.
Additional Information and Where to Find It
In connection with the proposed merger, Cogdell Spencer Inc.
(“Cogdell”) will prepare a proxy statement to be filed with the SEC.
When completed, a definitive proxy statement and a form of proxy will be
mailed to the holders of Cogdell common stock. HOLDERS OF COGDELL COMMON
STOCK ARE URGED TO READ THAT PROXY STATEMENT WHEN IT BECOMES AVAILABLE
BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION. Holders of Cogdell common stock will be able to obtain,
without charge, a copy of the proxy statement (when available) and other
relevant documents filed with the SEC from the SEC’s website at http://www.sec.gov.
The holders of Cogdell common stock will also be able to obtain, without
charge, a copy of the proxy statement and other relevant documents (when
available) by directing a request by mail or telephone to Cogdell, 4401
Barclay Downs Drive, Suite 300, Charlotte, North Carolina 28209, attn:
Corporate Secretary, or from Cogdell’s website, http://www.cogdell.com.
Ventas, Cogdell and their respective directors and officers may be
deemed to be participants in the solicitation of proxies from the
holders of Cogdell common stock with respect to the meeting of
stockholders that will be held to consider the proposed merger.
Information about the Company’s directors and executive officers can be
found the Company’s definitive proxy statement filed with the SEC on
March 28, 2011. Information about Cogdell’s directors and
executive officers can be found in Cogdell’s definitive proxy statement
filed with the SEC on March 25, 2011. Stockholders may obtain additional
information regarding the interests of such potential participants in
Cogdell’s proxy statement and other relevant documents filed with the
SEC in connection with the proposed transaction if and when they become
available. These documents are available free of charge on the
SEC’s website and from the Company or Cogdell, as applicable, using the
sources indicated above.
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Source: Ventas, Inc. and Cogdell Spencer, Inc.
For Ventas:
David Smith, (877) 4-VENTAS
or
For Cogdell
Spencer:
Jaime Buell, (704) 940-2929