CHICAGO and NASHVILLE, Tenn. — Ventas (NYSE: VTR), a Chicago-based REIT and one of the largest owners of seniors housing in the country, has restructured its master lease with Brookdale (NYSE: BKD), the largest seniors housing operator in the country, in response to the challenges presented by the COVID-19 pandemic.
Ventas owns 120 Brookdale-managed communities totaling 10,174 units. As part of the restructuring, Brookdale sold five communities that it both owned and operated to Ventas, but will continue to operate those properties.
“These agreements represent a significant step forward toward improving our long-term financial position,” says Lucinda Baier, Brookdale’s president and CEO. “The lease amendment transaction provides a permanent rent reduction, which will help mitigate the business impact of COVID-19, significantly improves our cash flow and lease coverage over the remaining lease period, and eliminates financial covenants.”
Terms of the agreement include a reduction in rents totaling $500 million over the remaining lease term, which ends on Dec. 31, 2025. Brookdale surrendered its $47 million security deposit and agrees to pay $115 million in cash to Ventas. In addition, Brookdale issued a $45 million unsecured, interest-only, pre-payable note to Ventas, with an initial interest rate of 9.0 percent per annum and maturing at the same time as the lease expiration.
Lastly, Brookdale issued 16.3 million shares of its stock to Ventas at a value of $3 per share. The transaction represents approximately 8 percent of all Brookdale shares.
“The arrangements that we are announcing today benefit both companies, by providing Ventas shareholders with certainty, flexibility and the opportunity for upside, enhancing Brookdale’s stability and liquidity, and creating the most conducive environment for Brookdale to operate our communities safely and productively,” says Debra Cafaro, Ventas chairman and CEO.
Centerview Partners served as financial advisor to Ventas. Wachtell, Lipton, Rosen & Katz and Barack Ferrazzano Kirschbaum & Nagelberg LLP are serving as legal counsel to the company.