Strategic Acquisition Expands Ventas's MOB Business to Over 20
Million Square Feet Cogdell Under Contract to Sell Erdman Prior to Closing
Ventas, Inc. (NYSE: VTR) ("Ventas" or the "Company") and Cogdell Spencer
Inc. (NYSE: CSA) ("Cogdell") today announced that the Boards of
Directors of both companies have approved a definitive agreement under
which Ventas will acquire Cogdell and its 72 high quality medical office
buildings ("MOBs") in an all-cash transaction. At closing, Ventas's
investment, including its share of debt, is expected to approximate $760
million to $770 million, before anticipated transaction expenses.
Under the terms of the agreement, holders of shares of Cogdell common
stock and units of limited partnership interests in Cogdell's operating
partnership, Cogdell Spencer LP ("Cogdell LP"), will receive
consideration of $4.25 per share (or unit), representing a premium of 8%
to Cogdell's closing price on December 23, 2011 and 13% to the average
closing price of Cogdell common stock over the past 30 days. The
consideration plus anticipated transaction expenses values Cogdell's
properties at a low- to mid- 7% net operating income ("NOI") yield, or
slightly over $200 per square foot. Holders of Cogdell's preferred stock
will receive consideration of $25 per share, plus accrued and unpaid
dividends through the closing. Cogdell will pay its currently declared
common stock dividend as scheduled on January 19, 2012, at which time
Cogdell LP will pay a similar distribution on its outstanding limited
partnership units. Cogdell and Cogdell LP will not pay further dividends
or distributions on their common stock or units pending consummation of
the transaction.
"We are delighted to announce this strategic and accretive acquisition
that further broadens our footprint in the attractive MOB sector,
continues to diversify our business and tenant relationships and keeps
our balance sheet strong," Ventas Chairman and Chief Executive Officer
Debra A. Cafaro said. "Cogdell's high-quality properties enhance our
medical office building market presence, especially in the southeast,
and provide an opportunity to scale our Lillibridge Healthcare Services
subsidiary platform. We look forward to successfully integrating the
Cogdell properties into the Ventas portfolio."
Highlights of the acquired assets are:
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Acquired MOBs: 68 stabilized (92% occupied), 2 leaseup and 2 in
development, 4.2 million square feet;
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Management business acquired: 44 MOBs, 2 million square feet;
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Ventas's MOB portfolio will increase from 11% to 15% of total NOI;
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Owned MOBs are located in 15 states;
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Eighty-eight percent of the owned portfolio's square footage (72 MOBs)
is located on hospital campuses or is hospital anchored; and
-
Twelve new business relationships with investment-grade rated
hospitals.
"When this acquisition is completed, Ventas will have the leading MOB
business in the U.S., with over 20 million square feet owned or managed,
and a coast-to-coast presence that is second to none in the healthcare
real estate industry," Ventas Executive Vice President of Medical
Property Operations Todd W. Lillibridge said. "We continue to build on
our 25 years of experience exclusively in the medical office building
and outpatient arena for the benefit of our clients and stakeholders."
"We are pleased to have reached this agreement with Ventas, which
provides immediate, full and fair value to our shareholders," Cogdell
Spencer's Chief Executive Officer and President Raymond Braun said. "Our
Board of Directors conducted a robust and thorough review of strategic
alternatives and determined that this transaction is advisable to, and
in the best interests of, our shareholders. In reaching this decision to
sell, the Board carefully considered our prospects to raise capital in
support of our growth strategy. The Board is unequivocal in its view
that the sale to Ventas will deliver the most value to shareholders. I
look forward to working with the Ventas team to facilitate a seamless
and successful integration."
Cogdell has reached an agreement under which Cogdell's design-build and
development business ("Erdman") will be sold to an affiliate of Lubar &
Co., a well regarded private equity firm affiliated with David Lubar,
prior to completion of the Ventas transaction. Mr. Lubar previously held
an equity stake in Erdman before it was sold to Cogdell in 2008. The
transaction will include all assets and liabilities of the Erdman
business, including approximately $11 million in projected net working
capital on the Erdman balance sheet. In addition, Cogdell will
contribute approximately $12 million to its equity capitalization, with
a roughly equal amount to be contributed by an affiliate of Lubar & Co,
in order to capitalize Erdman. The agreement currently contemplates the
sale of Erdman for nominal consideration but allows Cogdell to solicit
superior proposals for the Erdman business over a 45-day period. Cogdell
shareholders would receive any additional proceeds resulting from a sale
of the Erdman business to an alternative party, less incremental costs
associated with such sale.
Ventas's acquisition of Cogdell is expected to be financed through the
assumption of existing Cogdell mortgage debt and other Ventas borrowings.
The transaction is expected to be immediately accretive to Ventas's
normalized funds from operations (FFO), approximately $0.03 to $0.05 per
share on a full year basis excluding merger-related, transition and
integration costs and expenses. In addition, Ventas anticipates that
Cogdell's debt balances are expected to increase, and its cash balance
expected to decrease, between now and the closing principally due to
Cogdell's ongoing development projects and its contribution to Erdman.