Ventas to Buy Lillibridge, Expanding MOB Portfolio to 8.4M SF

June 24, 2010

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Buying an entire company is a good way to expand a portfolio in one fell swoop and Ventas Inc. is about to do just that. The Chicago-headquartered healthcare REIT has signed a definitive agreement to acquire Lillibridge Healthcare Services Inc., also based in Chicago, in a transaction valued at $300 million to $400 million.

By: Barbra Murray, Contributing Editor

Buying an entire company is a good way to expand a portfolio in one fell swoop and Ventas Inc. is about to do just that. The Chicago-headquartered healthcare REIT has signed a definitive agreement to acquire Lillibridge Healthcare Services Inc., also based in Chicago, in a transaction valued at $300 million to $400 million. The purchase will expand Ventas’s portfolio of owned or managed medical office buildings from 34 properties to 154 properties encompassing 8.4 million square feet in 19 states and the District of Columbia.

Lillibridge–the largest fully-integrated private owner, manager and developer of MOBs–has a portfolio of 95 MOBs that consists of a 100 percent interest in 37 assets totaling 1.9 million square feet, a 20 percent joint venture stake in 24 properties totaling 1.5 million square feet, and a 5 percent joint venture interest in 34 properties accounting for 2.3 million square feet. The group of assets has an average occupancy level of 86 percent. Lillibridge also brings to the table its management business, which involves the company’s third-party management of 33 MOBs totaling 1 million square feet.

Ventas, whose portfolio beyond MOBs includes 187 skilled nursing facilities, 40 hospitals and 244 senior housing facilities, will operate the MOB business under the Lillibridge name, and will bring Lillibridge founder and CEO Todd Lillibridge onboard.

For forward-looking investors, the timing is just right for pursuing MOBs. The healthcare real estate sub-sector has weathered the recession better than the traditional office sector, and it is only going to get stronger. According to a report by Fitch Ratings, as healthcare reform is rolled out over the next several years, there will be a significant jump in demand for healthcare-related properties, and MOBs are no exception.

Ventas plans to finance the acquisition of Lillibridge with cash, borrowings under its revolving credit facilities and the assumption of secured mortgage debt.