American Realty Capital Adds Total of 143 Properties, Along with a
Pipeline of More Than $250 Million in Potential Investments
Ventas Announces Separate Transaction to Acquire 29 Senior Living
Communities in Canada from Holiday Retirement for $900 Million
Transactions Expected to Be Immediately Accretive by at Least $0.10
Per Share to 2015 Normalized FFO
CHICAGO & NEW YORK--(BUSINESS WIRE)--Jun. 2, 2014--
Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) and American Realty
Capital Healthcare Trust, Inc. (NASDAQ: HCT) (“ARC Healthcare”) today
announced that the Boards of Directors of both companies have
unanimously approved a definitive agreement under which Ventas will
acquire all of the outstanding shares of ARC Healthcare in a stock and
cash transaction valued at $2.6 billion, or $11.33 per ARC Healthcare
share, solidifying Ventas’s position as the global leader in senior
living and medical office buildings.
In the transaction, ARC Healthcare shares will generally be converted
into a fixed number of Ventas shares, based upon a negotiated Ventas
stock price of $67.13. In the transaction, ARC Healthcare shareholders
will have the option to elect to receive either 0.1688 Ventas common
shares or $11.33 in cash for each share of ARC Healthcare common stock
they own. Based upon the agreed upon Ventas stock price of $67.13, the
per share value of the transaction represents a premium to ARC
Healthcare shareholders of approximately 14 percent over ARC
Healthcare’s closing stock price on May 30, 2014. The cash portion of
the consideration is subject to a cap of ten percent of ARC Healthcare’s
outstanding common stock.
Assuming a ten percent cash election, the stock component of the
consideration will consist of Ventas issuing to ARC Healthcare
shareholders approximately 26.9 million shares of Ventas common stock,
currently valued at $1.8 billion. Upon closing of the transaction, ARC
Healthcare shareholders are expected to own approximately eight percent
of Ventas’s 321 million shares of common stock then outstanding. The
transaction is expected to close in the fourth quarter of 2014, subject
to the approval of ARC Healthcare shareholders and satisfaction of
customary closing conditions.
Ventas also announced that it will acquire 29 independent living seniors
housing communities located in Canada from Holiday Retirement in a
separate transaction for CAD $980 million (approximately USD $900
million) in cash. The transaction is expected to close in the third
quarter of 2014. The Holiday portfolio is currently 90 percent occupied,
with margins of approximately 50 percent in markets with above average
income and senior population growth rates. Upon closing, the operations
for the acquired seniors housing communities will be transitioned to
Atria, which will manage a total of 173 communities for Ventas,
inclusive of two unrelated communities that Ventas acquired after the
first quarter.
The transactions are expected to be immediately accretive to Ventas’s
2015 normalized Funds from Operations (“FFO”) by at least $0.10 per
share and have an expected unlevered yield of approximately six percent.
“These acquisitions are consistent with our stated strategy to be the
leading owner of healthcare and senior living properties globally, and
position Ventas to continue to deliver growth and consistent superior
returns to our shareholders,” Ventas Chairman and Chief Executive
Officer Debra A. Cafaro said. “With the addition of ARC Healthcare and
the Canadian seniors housing communities, we are continuing our focus on
private pay assets, expanding our industry-leading MOB footprint and
international presence, and increasing our diversification while
maintaining a strong credit profile and balance sheet. With these two
accretive transactions, Ventas continues our excellent track record of
value creating acquisitions.”
“We are very excited to announce this transaction which delivers our
shareholders a compelling premium to the Company’s listing, tender offer
and five day volume weighted average price (“VWAP”) prior to today’s
announcement. In addition, it provides them the opportunity to
participate in the future growth of what will become the largest, and in
my view, best managed healthcare REIT and 6th largest overall
REIT in the country,” said Nicholas S. Schorsch, Executive Chairman of
ARC Healthcare. “Ventas is an ideal strategic partner given its
complementary and broadly diversified real estate portfolio, outstanding
history of value creation, and extraordinary record of dividend growth.
In keeping with our commitment and past practice of aligning management
and shareholder interests, the ARC Healthcare management team has
elected to take all consideration for this transaction in stock of the
combined company.”
“Our Board and management team continuously review options to drive
value for our shareholders and we believe this transaction with Ventas
provides compelling value,” said Thomas P. D'Arcy, Chief Executive
Officer of ARC Healthcare. “Since incorporating in 2010, fully deploying
capital by acquiring high-quality healthcare real estate assets between
2011 and 2013, and recently listing our shares on The NASDAQ Global
Select Market, we have come full circle within the public, non-traded
REIT continuum, generating significant total returns to ARC Healthcare
shareholders. We have successfully assembled our outstanding property
portfolio and now have entered into this value-enhancing transaction
with Ventas. As a result of this transaction, we believe our
shareowners, tenants and operators will benefit from becoming a part of
Ventas. Moreover, we are confident that by joining these highly
complementary portfolios, the combined company will continue to drive
shareholder value.”
Strategic and Financial Benefits of Transactions
-
Addition of High-Quality, Private Pay Assets with Significant
Growth Potential. The two portfolios have strong characteristics
in terms of quality, location, occupancy, and demographics,
representing strategic growth for Ventas. Private pay revenue sources
account for 82 percent of ARC Healthcare’s assets and 100 percent of
the Canadian assets. Taken together, 40 percent of the NOI is from
triple-net leased healthcare and MOB assets, 46 percent is from
seniors housing operating communities and 14 percent is from
multi-tenant MOBs. ARC Healthcare also has an attractive pipeline of
potential investments exceeding $250 million, which are expected to be
completed by the end of 2014.
-
Expansion of Industry-Leading MOB Footprint. The ARC Healthcare
acquisition expands Ventas’s industry-leading MOB footprint with the
addition of four million square feet of high-quality assets in
attractive markets. ARC Healthcare’s MOB portfolio, which represents
51 percent of the total NOI, enjoys an average occupancy rate of 97
percent, with over 50 percent of the portfolio built in the last ten
years. This portfolio lowers the average age and extends lease
maturities of Ventas’s existing portfolio and both expands Ventas’s
relationships with existing healthcare systems and creates new ones.
-
Strong Canadian Senior Living Properties and Markets. The 29
Canadian seniors housing communities are located in markets with above
average growth and household incomes and have an average occupancy of
90 percent, margins of approximately 50 percent and revenue per
occupied room (“REVPOR”) of C$3,200. The Canadian assets, which
contain 3,354 independent living units, are located in seven of ten
Canadian provinces, with the majority in Toronto and Alberta. The NOI
growth rate is expected to be four to five percent.
-
Increase in Diversification and International Presence. The ARC
Healthcare transaction increases Ventas’s tenant-operator
diversification with limited overlap of tenant-operators. The
transaction will add eight new seniors housing operators, one new
specialty hospital operator and five new skilled nursing operators. In
addition, the 29 Canadian seniors housing communities expands Ventas’s
international presence. Excluding ARC Healthcare’s investment
pipeline, the transactions would bring Ventas’s international NOI to
five percent.
-
Accretive Transactions. Taken together, these transactions are
expected to be immediately accretive to Ventas’s 2015 normalized FFO
by at least $0.10 per share. Ventas will maintain its strong credit
profile and balance sheet following the completion of both
transactions. Although Ventas expects the transactions to be accretive
to 2014 normalized FFO per share, the Company intends to update
guidance for 2014 near completion of both transactions, the completion
of ARC Healthcare’s pipeline, and when final capital structure is
determined.
Additional Highlights of ARC Healthcare Portfolio
ARC Healthcare’s portfolio is comprised primarily of MOBs and seniors
housing assets, comprising over 80 percent of NOI for the fiscal year
ended December 31, 2013. The properties are located in attractive
markets with home values and senior growth rates higher than the U.S.
average. Triple-net leased healthcare and MOB assets account for 55
percent of the ARC Healthcare portfolio NOI. The triple-net leased
portfolio has an average remaining lease term of 12 years, and only two
percent of the NOI in the triple-net leased portfolio has lease
maturities before 2018. The escalators are consistent with Ventas’s
existing triple-net leased portfolio.
ARC Healthcare’s seniors housing operating portfolio, which comprises 27
percent of the NOI, includes 29 communities managed by eight operators,
is 94 percent occupied, and has strong REVPOR of $4,300. The expected
NOI growth rate for the seniors housing operating communities is four to
five percent.
Approvals and Timing
Completion of the ARC Healthcare transaction is subject to the approval
of ARC Healthcare shareholders and satisfaction of customary closing
conditions. The transaction is expected to close in the fourth quarter
of 2014. Completion of the acquisition of 29 independent living
communities from Holiday Retirement is subject to the satisfaction of
customary closing conditions and is expected to occur in the third
quarter of 2014.
Supplemental information regarding the transactions can be found on the
Company’s website under the “Investor Relations” section.
Advisors
Centerview Partners LLC and UBS Investment Bank are acting as financial
advisors to Ventas, and Wachtell, Lipton, Rosen & Katz is acting as its
legal counsel. Citigroup Global Markets Inc., JP Morgan Securities LLC
and RCS Capital, the investment banking and capital markets division of
Realty Capital Securities, LLC, are acting as financial advisors to ARC
Healthcare, and Proskauer Rose LLP and Venable LLP are providing legal
counsel.
About Ventas
Ventas, Inc., an S&P 500 company, is a leading real estate investment
trust. Its diverse portfolio of nearly 1,500 assets in 47 states
(including the District of Columbia), two Canadian provinces and the
United Kingdom consists of seniors housing communities, medical office
buildings, skilled nursing facilities, hospitals 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 www.ventasreit.com
and www.lillibridge.com.
About ARC Healthcare
ARC Healthcare is a publicly traded Maryland corporation listed on The
NASDAQ Global Select Market, focused on acquiring and owning a balanced
and diversified portfolio of medical office buildings, seniors housing
and select hospital and post-acute care properties. Additional
information about ARC Healthcare can be found on its website at www.archealthcaretrust.com.
ARC Healthcare may disseminate important information regarding it and
its operations, including financial information, through social media
platforms such as Twitter, Facebook and LinkedIn.
Additional Information about the Proposed Transaction and Where to
Find It
In connection with the proposed transaction, Ventas expects to prepare
and file with the Securities and Exchange Commission (the “SEC”) a
registration statement on Form S-4, which will contain a proxy statement
of ARC Healthcare and a prospectus of Ventas, and each party will file
other documents with respect to Ventas’s proposed acquisition of ARC
Healthcare. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH
RESPECT TO THE PROPOSED TRANSACTION, INVESTORS ARE URGED TO READ THE
REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS
(INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT
DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors may obtain free copies of the registration statement, the
proxy statement/prospectus and other relevant documents filed by Ventasand ARC Healthcare with the SEC (when they become available) through the
website maintained by the SEC at www.sec.gov.
Copies of the documents filed by Ventas with the SEC are also available
free of charge on Ventas’s website at http://www.ventasreit.com/,
and copies of the documents filed by ARC Healthcare with the SEC are
available free of charge on ARC Healthcare’s website at http://www.archealthcaretrust.com/.
Participants in Solicitation Relating to the Transaction
Ventas and ARC Healthcare and their respective directors and executive
officers may be deemed to be participants in the solicitation of proxies
from ARC Healthcare’s stockholders in respect of the proposed
transaction. Information regarding Ventas’s directors and executive
officers can be found in Ventas’s definitive proxy statement for
Ventas’s 2014 annual meeting of stockholders, filed with the SEC on
April 4, 2014. Information regarding ARC Healthcare’s directors and
executive officers can be found in ARC Healthcare’s definitive proxy
statement for ARC Healthcare’s 2014 annual meeting of stockholders,
filed with the SEC on April 28, 2014. Additional information regarding
the interests of such potential participants will be included in the
registration statement and the proxy statement/prospectus and other
relevant documents filed with the SEC in connection with the proposed
transaction when they become available. These documents are available
free of charge on the SEC’s website and from Ventas or ARC Healthcare’s,
as applicable, using the sources indicated above.
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, ARC Healthcare’s or their tenants’,
operators’, borrowers’ or managers’ expected future financial condition,
results of operations, cash flows, funds from operations, dividends and
dividend plans, financing opportunities and plans, capital markets
transactions, 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” and other similar expressions are
forward-looking statements. These forward-looking statements are
inherently uncertain, and actual results may differ from the Company’s
or ARC Healthcare’s expectations. The Company and ARC Healthcare
do not undertake a duty to update these forward-looking statements,
which speak only as of the date on which they are made.
The Company’s or ARC Healthcare’s actual future results and trends
may differ materially from expectations depending on a variety of
factors discussed in the Company’s and ARC Healthcare’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; (b) the inability to complete the merger due to the failure
to obtain ARC Healthcare stockholder approval of the merger or the
failure to satisfy other conditions to completion of the merger,
including that a governmental authority may prohibit, delay or refuse to
grant approval for the consummation of the merger; (c) the inability to
obtain regulatory approvals for the merger; (d) risks related to
disruption of management’s attention from the ongoing business
operations due to the proposed merger; (e) the effect of the
announcement of the proposed merger on Ventas’s or ARC Healthcare’s
relationships with their respective customers, tenants, lenders,
operating results and businesses generally; (f) the outcome of any legal
proceedings relating to the merger or the merger agreement; (g) risks to
the consummation of the merger, including the risk that the merger will
not be consummated within the expected time period or at all; (h) the
ability and willingness of the Company’s or ARC Healthcare’s tenants,
operators, borrowers, managers and other third parties to satisfy their
obligations under their respective contractual arrangements with the
Company or ARC Healthcare, including, in some cases, their obligations
to indemnify, defend and hold harmless the Company or ARC Healthcare
from and against various claims, litigation and liabilities; (i) the
ability of the Company’s or ARC Healthcare’s 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 and
ARC Healthcare’s success in implementing their business strategies and
the Company’s and ARC Healthcare’s ability to identify, underwrite,
finance, consummate and integrate diversifying acquisitions and
investments, including investments 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 or delay in payment by the United
States of its obligations, and changes in the federal or state budgets
resulting in the reduction or nonpayment of Medicare or Medicaid
reimbursement rates; (l) the nature and extent of future competition,
including new construction in the markets in which the Company’s or ARC
Healthcare’s seniors housing communities and MOBs are located; (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 or ARC Healthcare’s
borrowing costs as a result of changes in interest rates and other
factors; (o) the ability of the Company’s or ARC Healthcare’s operators
and managers, as applicable, to comply with laws, rules and regulations
in the operation of the Company’s or ARC Healthcare’s properties, to
deliver high-quality services, to attract and retain qualified personnel
and to attract residents and patients; (p) changes in general economic
conditions or economic conditions in the markets in which the Company or
ARC Healthcare may, from time to time, compete, and the effect of those
changes on the Company’s or ARC Healthcare’s revenues, earnings and
funding sources; (q) the Company’s and ARC Healthcare’s ability to pay
down, refinance, restructure or extend their indebtedness as it becomes
due; (r) the Company’s and ARC Healthcare’s ability and willingness to
maintain their qualification as a REIT in light of economic, market,
legal, tax and other considerations; (s) final determination of the
Company’s and ARC Healthcare’s taxable net income for the year ended
December 31, 2013 and for the year ending December 31, 2014; (t) the
ability and willingness of the Company’s and ARC Healthcare’s tenants to
renew their leases with the Company or ARC Healthcare upon expiration of
the leases, the Company’s and ARC Healthcare’s ability to reposition
their properties on the same or better terms in the event of nonrenewal
or in the event the Company or ARC Healthcare exercises their right to
replace an existing tenant or manager, and obligations, including
indemnification obligations, the Company or ARC Healthcare may incur in
connection with the replacement of an existing tenant or manager; (u)
risks associated with the Company’s or ARC Healthcare’s senior living
operating portfolio, such as factors that can cause volatility in the
Company’s or ARC Healthcare’s operating income and earnings generated by
those properties, including without limitation national and regional
economic conditions, costs of food, 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) changes in
exchange rates for any foreign currency in which the Company or ARC
Healthcare may, from time to time, conduct business; (w) year-over-year
changes in the Consumer Price Index or retail price index and the effect
of those changes on the rent escalators contained in the Company’s or
ARC Healthcare leases, and on the Company’s earnings; (x) the Company’s
and ARC Healthcare’s ability and the ability of their tenants,
operators, borrowers and managers to obtain and maintain adequate
property, liability and other insurance from reputable, financially
stable providers; (y) the impact of increased operating costs and
uninsured professional liability claims on the Company’s or ARC
Healthcare’s liquidity, financial condition and results of operations or
that of the Company’s or ARC Healthcare’s tenants, operators, borrowers
and managers, and the ability of the Company or ARC Healthcare and the
Company’s or ARC Healthcare’s tenants, operators, borrowers and managers
to accurately estimate the magnitude of those claims; (z) risks
associated with the Company’s or ARC Healthcare’s MOB portfolio and
operations, including the Company’s and ARC Healthcare’s ability to
successfully design, develop and manage MOBs, to accurately estimate
their 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 or ARC Healthcare’s MOBs are located and their affiliated
health systems to remain competitive and financially viable and to
attract physicians and physician groups; (ab) the Company’s and ARC
Healthcare’s ability to build, maintain and expand their relationships
with existing and prospective hospital and health system clients; (ac)
risks associated with the Company’s or ARC Healthcare’s investments in
joint ventures and unconsolidated entities, including their lack of sole
decision-making authority and its reliance on its joint venture
partners’ financial condition; (ad) the impact of market or issuer
events on the liquidity or value of the Company’s or ARC Healthcare’s
investments in marketable securities; (ae) merger and acquisition
activity in the healthcare and seniors housing industries resulting in a
change of control of, or a competitor’s investment in, one or more of
the Company’s or ARC Healthcare’s tenants, operators, borrowers or
managers or significant changes in the senior management of the
Company’s or ARC Healthcare’s tenants, operators, borrowers or managers;
and (af) the impact of litigation or any financial, accounting, legal or
regulatory issues that may affect the Company, ARC Healthcare or their
tenants, operators, borrowers or managers. Many of these factors
are beyond the control of the Company, ARC Healthcare and their
management.
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Source: Ventas, Inc. and American Realty Capital Healthcare Trust, Inc.
For Ventas:
Lori B. Wittman, 877-4-VENTAS
or
For ARC
Healthcare:
Andrew G. Backman, 917-475-2135
or
Joele
Frank, Wilkinson Brimmer Katcher
Meaghan Repko / Jonathan Keehner,
212-355-4449