Ventas to acquire New Senior REIT in $2.3B deal

Ventas, the Chicago-based healthcare REIT, is buying New Senior Investment Group in a deal valued at $2.3 billion as it expands its senior housing portfolio by 20 percent to take advantage of resurging demand.

Ventas said Monday the deal, which includes $1.5 billion in New Senior’s debt, will allow it “to capture powerful senior housing upside at a cyclical inflection point,” repeating a stance it took earlier this month in an earnings call.

New York-based New Senior REIT’s 103 properties across 36 states adds to Ventas’ 1,200-strong portfolio of owned and invested real estate. Ventas’s senior housing operating portfolio, what the industry calls SHOP, includes 377 facilities in the U.S. and Canada.

“With resilient demand from a rapidly growing population of seniors, new construction at cyclical lows, and the trough of the COVID-19 pandemic behind us, senior housing is poised for exciting growth,” Ventas said in a presentation to shareholders about the transaction.

The deal is expected to close by the end of the year, catapulting Ventas’s position in what is widely expected to be a resilient senior housing sector for the next decade and beyond. The demographics tell the story, according to Ventas: Americans reaching 80 years old and above are expected to jump by more than 2 million people through 2025, reaching nearly 20 million five years later, a near-54 percent surge.

At the same time, construction of new properties is at the lowest level since 2011, and Chief Executive Officer Debra Cafaro said she’s confident that demand for independent- and assisted-living facilities will explode.

“Building on the strong momentum we are experiencing in our business, we are delighted to announce this strategic and accretive acquisition with New Senior that expands Ventas’s position in senior housing … as the senior housing industry rebounds,” she said in a statement.

Cafaro’s positive outlook follows a challenging 2020, when the coronavirus pandemic infected and killed seniors living in independent- and assisted-living facilities at alarming rates.

More than 1.2 million confirmed cases of COVID-19 among residents and staff at senior centers were reported to the Centers for Disease Control and Prevention, though it’s unclear if all cases were actually reported. Deaths tied to those cases number about 135,000, peaking at the end of last year and leveling off as vaccinations rose.

Ventas reported a 42.5 percent drop in net operating income from the SHOP portfolio at the end of last year even after cutting about a quarter of its corporate positions and slashing executive pay.

But Cafaro called a bottom on the company’s first-quarter earnings call last month after occupancy levels rose in March and April. Move-ins exceeded both pre-pandemic levels and move-outs since the beginnings of the virus’ spread.

“Occupancy gains were at or above those reported by other market participants,” she added.

How well that holds up is yet to be seen. Ventas still has a way to go to reach pre-pandemic SHOP net operating income.