Ventas Inc. (VTR) is in a stock-and-cash deal worth $2.9 billion to acquire its competitor, American Realty Capital Healthcare Trust Inc. Further, last month, the company announced completing the acquisition of 29 Canadian senior living communities from Holiday Retirement. Positioned across seven Canadian provinces, predominantly in Ontario and Alberta, these private-pay properties enjoy 90% occupancy.
But can this healthcare real estate investment trust (REIT) ride on the growth trajectory with such acquisitions?
As a matter of fact, demand for healthcare facilities and senior housing have been on the rise with an increase in the elderly population, and consequently proliferating healthcare expenses. Amid this, Ventas seems poised to well capitalize on this trend. We expect such acquisitions and the resultant cash flows to add momentum to the company’s growth going forward.
Particularly, the above-mentioned deals, in sync with the company’s strategy of focusing on the private-pay properties, are expected to strengthen its medical-office buildings footprint as well as international existence.
Moreover, Ventas’ second-quarter 2014 normalized FFO per share came 11% above the year-ago quarter figure, thanks to strategic investments, same-store growth in its portfolio, fees receipt and other income. The company has also increased its full-year 2014 outlook.
Yet, an expected rise in the interest rate in the long run and the company’s substantial exposure to long-term leased assets, remain our concerns. At the same time, cut-throat competition adds to our woes.
Echoing similar sentiments, over the last 7 days, the Zacks Consensus Estimate for 2014 and 2015 remained unchanged at $4.44 and $4.62 per share, respectively. Ventas currently carries a Zacks Rank #3 (Hold).
To gain a deeper insight into Ventas, you can refer to our updated research report issued on Sep 26, 2014.
Other Stocks to Consider
Investors interested in the REIT industry may consider better-ranked stocks like HCP, Inc. (HCP), Mack-Cali Realty Corp. (CLI) and Omega Healthcare Investors Inc. (OHI). All these stocks hold a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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