Ventas slashes rents 45% on senior housing operator

Brookdale Senior Living gets discount on 121 properties hit hard by Covid, but deal doesn’t come cheap

Brookdale Senior Living president and CEO Lucinda M. Baier and Ventus CEO Debra Cafaro (iStock)
Brookdale Senior Living president and CEO Lucinda M. Baier and Ventus CEO Debra Cafaro (iStock)

Senior housing and medical office REIT Ventas has renegotiated leases for a firm that operates 121 of its senior living facilities across the country. Ventas CEO Debra Cafaro said the agreement with Brookdale Senior Living addresses the financial toll the coronavirus pandemic has taken on those communities.

Under the agreement, Brookdale’s annual combined rent dropped to $100 million from $182 million a year, according to company filings. But the deal does not come cheap for Brookdale, which agreed to pay Ventas $235 million in cash and hand over 16.3 million shares of its common stock. It also must pay the real estate investment trust a $45 million note that’s due in 2025, the filing shows.

As part of the agreement, Brookdale also transferred ownership of five senior living facilities representing 471 units to Ventas. In the first quarter of 2020 — and before Covid-19’s full impact was felt financially — those five facilities generated $5 million annually. That worked out to about $10,600 per unit before interest and taxes, according to a financial statement.

Cafaro said the renegotiated lease deal provides “Ventas shareholders with certainty, flexibility and the opportunity for upside.” It also enhances “Brookdale’s stability and liquidity,” she said, allowing it to operate Ventas’ properties “safely and productively.”

The coronavirus has had a devastating human impact on several Brookdale facilities. A New York Times analysis of senior healthcare facilities that have had more than 50 coronavirus cases found that in three Brookdale facilities in New Jersey, 238 cases resulted in 46 deaths. It is not clear if those facilities — in Paramus, West Orange and Emerson — are part of the Ventas-Brookdale portfolio.

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In 2018, Ventas purchased the ground lease for Brookdale’s Battery Park City facility in New York, amid pressure from an Australian investment firm to monetize the senior housing operator’s real estate.

Ventas has 1,188 facilities in the U.S., Britain and Canada.

Despite seniors’ disproportionate vulnerability to the coronavirus, most senior living facility operators that run assisted living, independent living and skilled nursing properties have managed to maintain their rent payments.

Several senior housing facilities have in recent months sold at steep discounts, however. But investor interest in senior housing has increased in recent years, due to the sector’s track record of steady, increasing rents, even during an economic downturn.