Three lenders have helped Ventas (NYSE: VTR), the health care real estatetrust (REIT) assume $837 million in existing mortgage debt to support its acquisition of Atria Senior Living Group.
Red Mortgage Capital, Berkadia Commercial Mortgage and PNC Bank played a key role in the complex, according to the Philadelphia-based legal and financial firm Ballard Spahr.
The lenders originated more than 120 commercial mortgage loans made to subsidiaries of Atria, the fourth-largest operator of assisted living properties in the nation, says Thomas Hauser, partner at Ballard Spahr, who led the legal team that advised the lenders in the transactions. Hauser is based in the firm’s Baltimore office.
The Ventas-Atria merger shows the continued consolidation in the seniors housing industry, and creates the largest owner of senior housing properties in the country, notes Hauser. Another Ventas deal, the merger with Nationwide Health Properties, is a further sign of that consolidation, he says.
Ventas acquired Atria’s outstanding stock for $1.35 billion in Ventas shares, plus $150 million in cash, and $1.6 billion in net debt. The merger, announced in the fourth quarter of 2010, took more than six months to consummate, says Hauser.
An important shift is occurring in the seniors housing industry, he adds. “We are seeing a movement away from the model where seniors housing properties are both owned and operated by the same sponsor. The operating companies are moving away from ownership and focusing more on the management-operation aspects, and the real estate companies, including REITS, are focusing on real estate ownership aspects,” says Hauser.
The sheer size of the Atria merger is a positive sign that major deals are re-emerging in the real estate market, says Hauser. And the availability of financing for the large mortgage debt reflects the activity within the REIT sector. REITs have been successful in raising capital over the past several years, the attorney says, and now need to use the capital through investments and acquisitions.
Hauser and his team advised the lenders on structuring the transaction, negotiating the assumption documents, the proposed operating leases and management agreements, and the restructuring of existing loan documents, among other aspects.
“This is the fourth loan assumption transaction that we have closed in the past six months involving a REIT acquisition in the seniors housing space,” says Hauser. “We have seen a general uptick in commercial real estate activity, especially in the multifamily area. We recently closed substantial real estate deals in the Midwest and Mid-Atlantic regions and continue to work with clients on other acquisitions and financings throughout the country.”