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
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 Ventas and 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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For Ventas:Lori B. Wittman, 877-4-VENTASorFor ARC
Healthcare:Andrew G. Backman, 917-475-2135orJoele Frank, Wilkinson
Brimmer KatcherMeaghan Repko / Jonathan Keehner, 212-355-4449
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