Senior housing portfolio closes for $602.4M

Once touted the world's richest family, the Reichmann's family company, Olympia & York Developments, collapsed under a $20B debt. They're back in the news, only now it's about cash inflow.


LOUISVILLE, Ky., Ventas, Inc. (VTR) has completed its acquisition of a portfolio of healthcare and senior housing properties in a transaction with Canada’s Reichmann family.

The purchase price for 64 assets is $602.4 million. Finalization of two properties, part of the Elmcroft Assisted Living portfolio valued at $18.5 million, are pending approval by the U. S. Department of Housing and Urban Development (HUD) of the loan assumptions by Ventas relating to $9 million of mortgage debt encumbering those assets. One $28 million asset that was originally included in the transaction has been excluded due to changes in local real estate taxes.

“The Senior Care acquisition represents our commitment to sustained growth and diversification,” Ventas Chairman, President and CEO Debra A. Cafaro said. “With this transaction, we add an important new tenant relationship to our growing group of tenant-operators, increase our private pay revenues, achieve strong projected internal growth from rental escalations and expand our diversified asset base, all of which enhance shareholder value.

“The properties are being, or will be, leased to affiliates of Senior Care, Inc. on a 15-year triple-net basis, with two five-year extensions. Initial annual cash base rent for the 64 assets acquired is $46.8 million, and initial annual cash base rent for the two Elmcroft assets, when acquired, will total $1.3 million. Aggregate annual cash base rent for all 66 assets will equal $48.1 million, which represents a 7.75 percent going in cash yield.

Ventas funded the acquisition with the issuance to the Reichmann of approximately 1.7 million shares of Ventas common equity, assumption of $114.8 million of mortgage debt, draws on Ventas’s $500 million unsecured revolving credit facility and cash on hand. Simultaneously with the closing, Reichmann also repaid two bridge loans from Ventas, in the aggregate principal amount $191.1 million, which repayment proceeds were used in part to fund the acquisition. The outstanding balance on Ventas’s revolving credit facility following the transaction is approximately $300 million.

The 66 facilities are located in 15 states, and the portfolio consists of four separate asset groups and contains 5,758 beds/units:Health Care Group Five high end multi-level retirement communities (CCRCs) and two dementia care communities located in infill markets in southern California;United Rehab 19 healthcare assets (17 skilled nursing facilities and two rehabilitation hospitals) located primarily in Kentucky; Elmcroft Assisted Living Eight newer assisted living communities located in the southeastern United States; and Outlook Pointe 32 newer assisted living communities located primarily in the mid-Atlantic region.

The Reichmann family
Over time, through successful projects in Toronto and New York, the Reichmann family business, Olympia & York became the largest property development and management firm in the world and the Reichmanns, its richest family.

In the early 1990s, the company’s Canary Wharf project greatly overextended O&Y and in 1992, despite the sale of some of its assets, Canary Wharf declared bankruptcy and the Reichmann brothers largely lost control of the company that they had created. O&Y’s collapse was of such a magnitude that it caused consternation in the business community worldwide.

Some believe it was son, Paul’s charm and chutzpa that convinced bankers to keep lending O&Y cash, even as its debt ballooned to over $20 billion. Yet, the family continues to be involved in real estate deals around the world.

O&Y started operation in the U.S. in 1976 and is the largest private real estate company in the world with holdings in 30 North American cities.

Louisville-based Ventas is the second largest publicly traded healthcare REIT based on the value of its assets and its rental revenues. Its geographically diverse portfolio consists of 388 facilities located in 42 states. With the industry’s strongest leases, which are structured as pooled, multi-facility, Master Leases, Ventas has the highest internal growth of any healthcare REIT.