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Blackstone to sell Wexford’s life science and medical real estate assets for $1.5 bln

Ventas has agreed to acquire most of Wexford Science & Technology‘s life science and medical real estate assets for $1.5 billion in cash. The seller is Blackstone. The deal is expected to be completed in the fourth quarter of this year. J.P. Morgan Securities is serving as financial adviser to Ventas while Wells Fargo is acting as financial advisor to Blackstone. Wexford is a real estate company focused on partnering with universities, academic medical centers and research companies.

PRESS RELEASE

CHICAGO–(BUSINESS WIRE)–Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) today announced that it has signed a definitive agreement to acquire substantially all of the life science and medical real estate assets of Wexford Science & Technology, LLC (“Wexford”) from affiliates of Blackstone Real Estate Partners VIII L.P. for $1.5 billion in cash. The acquisition will add a related business line to Ventas’s diverse portfolio with 25 class-A assets that are leased by leading universities, academic medical centers and research companies, including Yale University, the University of Pennsylvania Health System, Washington University in St. Louis, Wake Forest University and Alexion Pharmaceuticals, Inc. The transaction is subject to the satisfaction of customary closing conditions and expected to close in the fourth quarter of 2016.

“This acquisition and alliance with Wexford are a natural fit for Ventas, and reinforce our position as the premier provider of capital at the intersection of healthcare and real estate. We are excited to add these world class institutions and advantaged real estate to our portfolio,” said Ventas Chairman and Chief Executive Officer Debra A. Cafaro. “This transaction also provides Ventas a unique opportunity to capitalize on increasing healthcare-driven research and development spurred and supported by top tier research universities. We believe the growth opportunity is significant, and look forward to working with Wexford to help leading universities, academic medical centers and research companies fulfill their core missions.”

The portfolio includes 23 operating properties that contain 4.1 million square feet, are 97 percent leased and derive 73 percent of revenue from excellent credit tenants, including 11 universities with an average credit rating of Aa2, investment grade companies and public companies with an equity market capitalization exceeding $1 billion. It also includes two development assets encompassing approximately 400,000 square feet, that are nearly 60 percent pre-leased and affiliated with Duke University and Wake Forest University. The Company is also acquiring nine development sites principally contiguous to existing assets.

The total consideration for the transaction is $1.5 billion plus the assumption of $33 million of liabilities. The total consideration for the 23 operating properties is $1.4 billion (representing a 2017 cash yield of 6.8 percent); $88 million for the two development properties (representing an unlevered projected stabilized yield of approximately 7.5 percent inclusive of post-closing capital funding to complete and lease up the assets to stabilization); and $50 million for the development sites.

Wexford is the leading real estate development company focused exclusively on partnering with universities, academic medical centers and research companies. As part of the acquisition, Ventas will enter into a long-term management and pipeline agreement with Wexford, whereby Ventas will own the existing real estate portfolio, Ventas will have exclusive rights to jointly develop future projects with Wexford, and Wexford will continue to manage the portfolio. Wexford will be independently owned and operated by its experienced, existing management team.

“Through the acquisition of Wexford’s assets, we are adding new high-quality properties with long lease terms and highly rated, institutional quality tenants, driving reliable, growing cash flows for Ventas,” said Ventas Executive Vice President, Chief Investment Officer John Cobb. “We are pleased to partner with the outstanding Wexford team. With several projects in the near term pipeline, we look forward to pursuing additional growth opportunities together.”

“Universities are reliable, consistent drivers of economic activity, resulting in high, sustainable portfolio occupancies,” said Jim Berens, President of Wexford. “We are delighted to have Ventas, the leader in healthcare real estate, as our strategic capital partner to continue growing a portfolio where there is cutting-edge, institutional-quality life science research to meet the needs of a growing and aging population.”

Strategic and Financial Benefits
Consistent with Ventas’s Strategy of Driving Reliable Income and Growth from a Diversified Portfolio. The transaction marks Ventas’s entry into the attractive university-affiliated life science real estate business. These 100 percent private pay assets will provide Ventas with additional diversification, reliable income and growth. Wexford’s assets are affiliated with 11 leading universities that collectively account for 10 percent of U.S. university research and development spending. Pro forma for the Wexford transaction, the acquired assets will generate approximately five percent of Ventas’s total net operating income (“NOI”). Upon closing of the transaction, the Wexford portfolio will increase Ventas’s NOI contribution from private pay assets to 84 percent.

Adds High-quality Properties Generating Growing Cash Flows. The acquired portfolio of 25 properties includes highly rated tenants and favorable triple-net lease structures with a weighted average lease term of 10 years and two percent annual rent escalators. The two development properties are expected to open in 2017, leading to additional near term growth. 2017 cash NOI is expected to approximate $94.6 million.

Establishes New Platform for Growth. Similar to what Ventas has successfully achieved with Lillibridge Healthcare Services and Atria Senior Living, this transaction adds the leading real estate development company focused exclusively on partnering with universities, academic medical centers and research companies as a strategic partner for growth. Ventas will have an exclusive pipeline agreement with Wexford that will provide Ventas with the opportunity to capture real estate demand for the institutional life science and medical market, which is benefitting from the increasing longevity of the aging U.S. population and biopharma drug development growth opportunities. Wexford currently has a significant pipeline of near term, attractive investment opportunities.
Accretive Transaction on a Leverage Neutral Basis. The transaction is expected to be accretive to Ventas’s normalized funds from operations (“FFO”) in 2017 by $0.07 to $0.09 per share on a leverage-neutral basis.

Enhanced Sustainability Profile with 15 LEED Properties. 13 of the operating properties are LEED certified and both of the development properties are expected to be LEED certified, enhancing Ventas’s sustainability profile.
Advisors

J.P. Morgan Securities LLC is acting as financial advisor to Ventas, and Kirkland & Ellis LLP is acting as its legal counsel in connection with the transaction. Eastdil Secured group of Wells Fargo Securities LLC is acting as financial advisor to Blackstone, and Simpson Thacher & Bartlett LLP is acting as its legal counsel.

Additional Materials
A presentation regarding the acquisition of Wexford’s university affiliated life science and medical real estate assets and a link to a video property tour can be found on the Company’s website under the “Investor Relations” section.

About Ventas
Ventas, Inc., an S&P 500 company, is a leading real estate investment trust. Its diverse portfolio of approximately 1,300 assets in the United States, Canada and the United Kingdom consists of seniors housing communities, medical office buildings, skilled nursing facilities, specialty hospitals and general acute care hospitals. 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.

About Wexford
Wexford Science & Technology, LLC is a real estate company exclusively focused on partnering with universities, academic medical centers and research companies. Wexford targets strategic opportunities with top-tier research universities that are directly on or contiguous to dense, urban campuses.
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