Holiday Lease Terminated and Ventas Receives $100 Million in Payments and Notes
Ventas, Inc. (NYSE: VTR) (the “Company”) announced today that is has completed a consensual transaction with affiliates of Holiday Retirement (collectively, “Holiday”) including entry into a new management agreement with Holiday Management Company, and a termination of the Holiday Lease. The agreements are with respect to Ventas’s 26 independent living assets (the “Holiday Communities”) that were previously leased by the Company to Holiday tenants under a master lease (the “Holiday Lease”).
“We are pleased to realign our relationship with Holiday by entering into a new management agreement for our 26 independent living communities and terminating our Holiday Lease,” said Debra A. Cafaro, Ventas Chairman and CEO. “This mutually beneficial transaction enables us to retain upside in our 26 communities over time, receive significant value from the Holiday Lease guarantor and preserve our operational flexibility. We appreciate the Holiday management team’s engagement and cooperation.”
Terms of the transaction, which was effective as of April 1, 2020, include:
- Ventas has received a total of $100 million consisting of $34 million in cash (the “Cash Payment”) and $66 million aggregate principal amount of secured Notes from the prior guarantor of the Holiday Lease (the “Guarantor”) and certain Holiday affiliates. The Notes mature in five years and bear interest at a blended rate of nine percent per annum. The Guarantor owns seven communities, one of which is unencumbered and six of which are encumbered by a $174 million mortgage loan.
- Under the new management agreement for the 26 Holiday Communities, Ventas will pay Holiday a management fee equal to five percent of gross revenues. The management agreement is terminable by Ventas without penalty upon thirty days’ notice.
The terminated Holiday Lease covered the Company’s 26 Holiday Communities, which contain 3,184 units. Holiday fully paid all rent due under the Holiday Lease from inception in 2013 through March 2020, with first quarter 2020 cash rent totaling $15 million. The Holiday Lease, which was set to expire in 2028, was previously guaranteed by the Guarantor for the sole benefit of Ventas. The property level EBITDARM to cash rent coverage of the Company’s 26 Holiday Communities was 0.9x for the trailing twelve months ended March 31, 2020, based on information provided by Holiday. The COVID-19 pandemic is expected to have an impact on the financial and operational performance of the Holiday communities, the extent of which is highly uncertain, and is dependent upon the length, depth and geographical scope of the pandemic, among other factors.
In the second quarter of 2020, Ventas expects to recognize income reflecting receipt of the Cash Payment and the Notes, partially offset by a non-cash expense of $50 million from the write-off of the non-cash accrued straight-line receivable under the Holiday Lease. These amounts will all be excluded from the Company’s reported Normalized FFO.
Lazard is serving as financial advisor to Ventas and Kirkland & Ellis LLP and Barack Ferrazzano Kirschbaum & Nagelberg LLP are serving as legal counsel to the Company.
Ventas, Inc. (together with its subsidiaries, unless otherwise expressly noted, “Ventas” or the “Company”), an S&P 500 company, is a real estate investment trust with a highly diversified portfolio of senior housing, research and innovation, and healthcare properties located throughout the United States, Canada and the United Kingdom. As of March 31, 2020, Ventas owned or managed through unconsolidated joint ventures approximately 1,200 properties (including properties classified as held for sale), consisting of senior housing communities, medical office buildings, research and innovation centers, inpatient rehabilitation and long-term acute care facilities, and health systems. Through its Lillibridge subsidiary, Ventas provides management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. More information about Ventas and Lillibridge can be found at www.ventasreit.com and www.lillibridge.com.
View source version on: https://www.businesswire.com/news/home/20200508005225/en