Ventas announced one of its largest acquisitions in a while, a billion-dollar deal. Unfortunately, it is not in seniors housing. And we probably will not see a billion-dollar deal in seniors housing this year.
The Ventas Life Science and Healthcare Real Estate Fund bought a “trophy” life science portfolio in the South San Francisco life science cluster for $1.0 billion. The portfolio consists of a campus of three newly developed or renovated buildings totaling nearly 800,000 square feet that are 96% leased. For the quantitatively challenged, that comes to $1,250 per square foot, which is much more expensive than any seniors housing portfolio that has sold. The tenant base is diverse with half of the them public companies averaging over $10 billion in market cap. Not too shabby.
The purchase price represents a cap rate of 5% on “forward” cash NOI, which we assume to mean first year, with the average annual escalator exceeding 3%. Ventas could probably find a lot of sellers in the seniors housing space at a 5% forward cap rate, but the risk level would be higher than an investment such as this one.
While this portfolio was acquired mostly by the fund, Ventas has a 21% interest, and more than $400 million of property-level debt was used to finance the deal. Most of the 800,000 square feet is dedicated to lab space supporting biotechnology and other life sciences research. In the time of COVID, seems like a good bet to us.
