The Big-3 REITs are back as buyers, with Ventas making the biggest splash of them all by acquiring 31 senior living communities in Quebec for approximately C$2.4 billion, or US$1.8 billion. Made in an 85/15% partnership with the in-place operator, Le Groupe Maurice, the acquisition is expected to generate compound annual NOI growth of 4% over the next five years.
The stabilized portfolio, consisting of 28 communities located in core urban markets, has 7,885 units, an occupancy of 97%, an average age of seven years and more than C$2,600 in monthly revenue per-occupied unit. It certainly helps that the penetration rate for seniors housing in Quebec is twice that of the rest of Canada at 18%. We don’t see figures like that south of the border. Three of the properties with 1,032 total units will open sometime in 2019. In addition, there are four developments expected to open in 2020 or 2021 with about 1,400 additional units around Montreal.
The acquisition included the assumption of C$1.3 billion of debt, with Ventas also securing exclusive rights to own and fund all LGM future developments under a pipeline agreement. The stable assets were valued around C$2.0 billion, or C$255,000 per unit, at a 5.5% yield, while the three assets opening in 2019 sold for C$300 million, or approximately C$290,000 per unit, at an estimated 5.5% stabilized yield. The four projects in development are projected to cost around C$400 million, or C$280,000 per unit, to build, with a 6.5% yield upon stabilization.
For Ventas, the REIT is clearly doubling down on the Canadian seniors housing market, nearly doubling its portfolio from 41 properties to 76, with the NOI of those properties expected to make up 21% of its entire SHOP NOI. Canada has been a good performer. The first phase of the transaction is expected to close early in the third quarter of 2019 and includes a C$987 million bridge loan from Ventas to LGM to enable it to buy out its current private equity partner. The final phase is expected to occur in the third quarter of 2019. TD Securities is serving as exclusive financial advisor to Ventas, and National Bank Financial Inc. is serving as exclusive financial advisor to Le Groupe Maurice.