Ventas to buy Nationwide Health Properties in major senior-housing deal

A looming boom in the number of older Americans in need of senior apartments, assisted living, healthcare services and access to skilled nursing has prompted another major real estate purchase, as a Chicago company that owns hundreds of senior housing facilities has agreed to buy a Newport Beach competitor in a $5.8-billion stock deal.

Ventas Inc.’s purchase of Nationwide Health Properties Inc. is one of the bolder moves in a recent flurry of acquisition deals. Also Monday, Health Care REIT Inc. of Toledo, Ohio, bought nearly 150 properties from rehabilitation facility and nursing home operator Genesis HealthCare Corp. for $2.4 billion.

In October, Ventas snapped up the real estate assets of Atria Senior Living Group for $1.5 billion in stock. And in December, HCP Inc., a real estate investment trust in Long Beach, said it would pay $6.1 billion for the 338 properties owned by nursing home behemoth HCR ManorCare Inc.

A fragmented market for healthcare property is rapidly consolidating as baby boomers reach retirement age and real estate values begin to recover, experts say. Proposed healthcare reforms could also lead to higher demand for services and better access.

The Ventas-Nationwide marriage would turn the company into the largest U.S. owner of homes for the elderly by far, the company said Monday.

Both companies are real estate investment trusts, or REITs, that own properties and lease them to healthcare providers. Together they would create a giant with an overall stock market value of $17 billion, becoming the leading healthcare REIT in the country and one of the largest public REITs overall.

Ventas, which already owns more than 600 sites, would see its portfolio double across the U.S. and Canada to more than 1,300 senior living facilities, medical office buildings, skilled nursing sites, specialty hospitals and continuing-care retirement facilities.

The acquisition is expected to close in the third quarter, said Ventas, which will keep its headquarters in Chicago. With the assumption of debt, the overall deal is valued at $7.4 billion.

“Healthcare real estate is one of the most attractive and dynamic sectors within the real estate industry,” said Ventas Chief Executive Debra A. Cafaro in a conference call with investors. “As a result, we see continued opportunities for expansion and growth.”

Nationwide, founded in 1985, makes for an appealing package, analysts said. It has an extensive roster of well-regarded buildings, including several Southern California medical offices developed by Pacific Medical Buildings, and has tenants such as Brookdale Senior Living Inc. and Sunrise Assisted Living Inc.

The deal would also help ingratiate Ventas with creditors, resulting in lower borrowing rates, analysts said.

“And that leads to the ability to make more acquisitions, which could then become more profitable,” said Robert M. Mains, an analyst with Morgan Keegan & Co. “Nationwide has a nice portfolio, but there are benefits from a financial perspective as well.”

Ventas isn’t the only one trying to capitalize on a growing elderly population in the U.S., which is projected to include 54.8 million people above age 65 by 2020, a 36% increase from last year. The number of people age 85 and older — the key nursing home population — is expected to soar 15% in the same period to 6.6 million, according to the Census Bureau.

At least 46 nursing home companies have been bought out in the last five years, in $20 billion worth of deals, according to research firm Dealogic. Healthcare spending is expected to grow to 20% of the U.S. gross domestic product by 2019 from 17.6%, according to Ventas.

As a whole, the healthcare real estate market is worth more than $700 billion, of which REITs own less than 10%, Cafaro said. Most properties belong to hospitals and other healthcare companies.

But nowadays, sellers increasingly look to public REITS for their access to cheap capital and superior liquidity compared with private investors.

The Southland is home to several other healthcare REITs, including LTC Properties of Westlake Village and Sabra Health Care REIT Inc. of Irvine, that analysts pegged as possible acquisition targets.

“There’s an awful lot of healthcare real estate that could potentially be sold,” said Jerry L. Doctrow, a research analyst with Stifel, Nicolaus & Co. “These properties tend to be slow and steady performers that held up better and are more attractive in a recession than commercial real estate.”

As part of Monday’s deal, Ventas shareholders would own 65% of the new company and Nationwide shareholders would own 35%.

Nationwide shareholders would receive 0.7866 Ventas shares for each Nationwide share, now worth $44.99 a share, a premium of 15.5% over Friday’s $38.96 price. Both companies’ stock climbed steadily in the last year.

On Monday, Ventas closed down 3% at $55.42 while Nationwide jumped nearly 10% to $42.74.

“As the population ages, there’s going to be more demand for these types of facilities,” said Jeff Theiler, a research analyst with Green Street Advisors. “These healthcare REIT stocks were able to maintain their earnings much better during the downturn. There’s investor demand for that relative safety.”

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Times staff writer Duke Helfand contributed to this report.