Ventas Forms Life Sciences, Health-Care Fund

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Ventas Inc. has just revealed that it is sponsoring a new perpetual-life fund, Ventas Life Science and Healthcare Real Estate Fund LP. Scheduled for launch during the first quarter of 2020, the new investment vehicle will target core and core plus life sciences, medical office and senior housing real estate across North America. Ventas will introduce the fund with approximately $700 million in assets under management and $650 million in third-party equity commitments.

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Ventas, which will maintain a 20 percent ownership interest in the Fund in its capacity as sponsor and general partner, expects the new vehicle to serve as a permanent growth platform for the company. Additionally, the fund will expand Ventas’ strategic reach, and position it to gain an advantageous market position in private capital formation among public REITs in the targeted sectors. The investment vehicle will launch with a 1.2 million-square-foot portfolio of five premier, stabilized life sciences and MOB properties, courtesy of Ventas, which will also pocket asset management fees.

“Basically, we’ve seeded the fund, and then anything that grows the fund, assets under management, will be new investments, typically at sporty cap rates,” Debra Cafaro, chair & CEO of  Ventas Inc., said during the REITs fourth quarter 2019 earnings conference call on February 20. “And the fund will provide another arrow in our quiver in terms of access to capital and will enable us to acquire things that, in some cases, would be inefficient for us to acquire on balance sheet.”

The Fund will increase gross assets under management over time. Ventas will eventually invest in the vehicle, but in the meantime, the company will continue to rely on its unlimited capacity to invest on balance sheet; it’s a proven template for success. “If you look at Prologis, for example, as an example, then you would see that it’s helped the overall enterprise grow. And that’s what we’re aiming for,” Cafaro said.

Fine time

The life sciences and health-care real estate markets continue to thrive and while the impact of anticipated disruptors is unknown, both markets appear to be headed for more growth. As noted in PwC’s Real Estate 2020 report, the increasing global population and large aging community will bolster health-care real estate. “While office, industrial, retail and residential will remain the main sectors, affordable housing, agriculture, health care and retirement will become significant subsectors in their own right,” according to the PwC report. Of the respondents to a survey for KPMG’s 2020 Healthcare and Life Sciences Investment Outlook report, 51 percent believe the health-care market has strong or moderate fundamentals, and 42 percent view the life sciences market as having strong or moderate fundamentals.