Ventas will pay $2B to acquire an 85 per cent interest in Quebec seniors living company Le Groupe Maurice. (Courtesy LGM)

U.S.-based Ventas Inc. will spend about $2 billion to acquire an 85 per cent interest in the seniors housing assets and operations of Quebec’s Le Groupe Maurice (LGM).

LGM owns and operates a class-A portfolio of 31 purpose-built seniors housing communities in Quebec and has four other projects under development. The transaction values LGM’s portfolio at $2.4B (all figures Canadian).

The announcement comes as LGM ends a longstanding financial arrangement with Quebec-based private equity investor Ipso Facto, its partner for the past 15 years.

“Throughout this process, our priority was to ensure the continuity of our company while maintaining its distinctive brand attributes, the foundation of our success,” said Luc Maurice, the founder and president of Le Groupe Maurice, in a release announcing the deal. “For these reasons, I am convinced that Ventas is the ideal partner to help us continue to contribute to the quality in aging of thousands of seniors, better meeting their needs and aspirations.”

The transaction is expected to involve two phases. The first phase – expected to close early in the third quarter of 2019 – includes a $987-million bridge loan from Ventas to LGM to buy out Ipso Facto.

The second phase, full investment and partnership closing, is subject to the satisfaction of standard closing conditions and approvals. This is expected to occur later in the third quarter of 2019.

LGM management team remains

The transaction includes provision for Ventas to assume its share of the portfolio’s $1.3B in debt.

“We have built a leading seniors housing business over 20 years with very strong brand awareness and market share across Quebec through a commitment to quality and an energetic independent lifestyle for our residents,” Maurice said in the release. “Le Groupe Maurice’s team and employees are excited about this partnership with Ventas and we look forward to expanding the business and capitalizing on the significant opportunities we see in the growing and attractive Canadian senior housing market.”

LGM retains a 15 per cent interest in the partnership, and says the new arrangement will not lead to any changes in the company’s regular operations. The current management team will remain in place under Maurice, the company’s founder.

Ventas, the second-largest owner of seniors housing properties in the U.S., will receive exclusive rights to fund and own all additional developments under a pipeline agreement.

LGM has become a Quebec market leader in the design, development and management of apartment-like, independent living seniors housing communities. Founded in 1998, it has over 2,000 employees, a management team with deep industry knowledge and a track record of developing and operating success.

LGM has a leading nine per cent market share in Quebec.

Le Groupe Maurice portfolio

“We are delighted to announce this accretive investment with Le Groupe Maurice to obtain a strong portfolio with built-in growth potential from existing and new developments in high-quality, attractive urban markets,” said Ventas chair and chief executive officer Debra A. Cafaro in the release. “This transaction demonstrates the Ventas team’s commitment to our pivot to growth as we execute on accelerating external growth opportunities.

“The transaction enhances and diversifies our leading portfolio and underscores our successful strategy of partnering with best-in-class operators and developers.”

The LGM portfolio includes 28 stable, institutional-quality communities containing 7,885 units in high-density, core urban markets with occupancy of nearly 97 per cent. The residences are an average of eight years old, and the revenue per occupied unit exceeds C$2,600 per month.

The lease-up portfolio includes three assets opening in 2019 containing 1,032 units.

LGM’s 10 most recently completed and stabilized developments averaged 25 per cent occupancy in month one and leased to over 90 per cent occupancy, on average, in 12 months.

The 31 communities are forecast to deliver four per cent compound annual growth in NOI over the next five years.

Seniors housing in high demand

The transaction also includes four in-progress developments expected to contain about 1,400 units in the Montreal area, projected to open in late 2020 and 2021.

Quebec offers a large, thriving senior housing market with a penetration rate approximating 18 per cent (two times the Canadian average). This is expected to continue to rise as the Canadian 75-and-over seniors population is forecast to grow nearly 50 per cent between through 2028.

LGM says the agreement will allow it to accelerate its long-term development plan, given what it calls “the tremendous need for new senior housing complexes across Quebec.” The company plans to start two to three new residences per year.

Ventas’ Canadian portfolio increases from 41 properties to 76 properties and the NOI contribution from Canadian assets is expected to grow to seven per cent.

With the transaction, LGM would become a top-10 Ventas operator. NOI from the 31 communities in 2020 is expected to be as high as $129 million (at 100 per cent).

About Ventas

Ventas, an S&P 500 company, is a leading U.S. real estate investment trust. Its diverse portfolio of approximately 1,200 assets in the U.S., Canada and the United Kingdom consists of seniors housing communities, medical office buildings, university-based research and innovation centres, 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.

Ventas maintains its headquarters in Chicago.