Ventas (NYSE: VTR) plans to shed Skilled Nursing Facilities worth about $63 million that are part of its Santerre Health Investors acquisitions.
The Chicago-based real estate investment trust (REIT) announced plans to sell the SNF assets in the midst of efforts to raise capital and pay down debt, the details of which Ventas shared in its second quarter earnings call last week.
“[We] are also selectively starting to dispose of certain of the assets and expect to sell about $60 million in SNFs later this year at a mid-8% cash cap rate,” Debra A. Cafaro, Chairman and CEO said. “So while we have more work to do, we have had good success so far and our cross-functional teams are intensely focused on maximizing the value and the [net operating income] of the portfolio.”
At the end of March, Ventas announced that it was taking ownership of the collateral that supports its approximately $486 million cash-pay mezzanine loan to Santerre. The loan was secured by equity interests in entities that collectively own a pool of medical office buildings, senior housing operating portfolio communities, triple-net leased skilled nursing facilities and hospital assets in the United States, including 48 skilled nursing facilities and hospital assets, representing nearly 40% of NOI of the Santerre portfolio.
Cafaro said that some of the operating trends for the nursing home sector were “getting a little bit better,” and the SNF assets fetched about $135,000 per bed.
Ventas is “off to a strong start” with a portfolio of 153 properties related to Santerre it took ownership of on May 1 by converting the Santerre mezzanine loan to equity, company executives further said.
Bob Probst, CFO and executive VP of Ventas, cited higher interest rates as among the challenges facing the sector, and noted the proactive steps taken by Ventas this year to raise capital at “attractive rates” to manage the balance sheet.
For the overall efforts to raise capital, Probst said that in selling these assets, the REIT tapped into multiple capital markets and geographies, including the U.S. and Canada, and raised secured, unsecured bank debt and convertible debt across multiple maturities as well as raising equity.
The company increased its expectations for NOI for the portfolio to $104 million from about $93 million, with some of the anticipated gains being related to the adjustments made to the portfolio.
“The NOI expectations have been increased and … that’s really from this intense kind of focus on asset management and integration and making sure we are taking all the steps we can to maximize cash flow and value,” Cafaro said, who also cited positive operating trends and strong early returns. “We believe the timing for taking ownership is advantageous and that our experience will help us maximize cash flow from this portfolio over time,” Cafaro said.
The REIT specializes in the ownership and management of health care facilities in the United States, Canada and the United Kingdom.
