TEXT-Fitch rates Ventas senior unsecured notes 'BBB+'
Dec 10 - Fitch Ratings has assigned 'BBB+' ratings to the $700 million aggregate principal amount 2.00% coupon senior unsecured notes due 2018 and $225 million aggregate principal amount 3.25% coupon senior unsecured notes due 2022 issued by the operating partnership of Ventas, Inc. (NYSE: VTR), Ventas Realty, Limited Partnership (Ventas Realty), and a wholly owned subsidiary, Ventas Capital Corporation (collectively, Ventas). The notes are guaranteed by Ventas, Inc. on a senior unsecured basis. The 2018 notes were priced at 99.739% of par to yield 2.053% to maturity, or 145 basis points over the benchmark treasury rate. The 2022 notes were priced at 98.509% of par to yield 3.432% to maturity, or 185 basis points over the benchmark treasury rate. The company expects to use the net proceeds from the offerings to repay indebtedness outstanding under its unsecured revolving credit facility and for working capital and other general corporate purposes, including to fund future acquisitions and investments, if any. Fitch currently rates Ventas, Inc. and its subsidiaries (collectively, Ventas) as follows: Ventas, Inc. Ventas Realty, Limited Partnership Ventas Capital Corporation --Issuer Default Rating (IDR) 'BBB+'; --$2 billion unsecured revolving credit facility 'BBB+'; --$686.5 million senior unsecured term loans 'BBB+'; --$3.5 billion senior unsecured notes 'BBB+'. Nationwide Health Properties, LLC (NHP) --IDR 'BBB+'; --$579.6 million senior unsecured notes 'BBB+'. The Rating Outlook is Stable. The ratings reflect: --The company's diversified healthcare property portfolio that is benefiting from favorable demographics; --Strong access to capital and liquidity; --Appropriate leverage for the rating; and --A solid management team. The rating is balanced by: --Uncertainties regarding the replacement of rent on the 54 remaining Kindred Healthcare, Inc. skilled nursing facilities; --The incurrence of increased capital expenditures related to Ventas's May 2011 acquisition of substantially all of the real estate assets and working capital of Atria Senior Living Group, Inc.(ASLG); however, this is mitigated by the fact that since the ASLG acquisition as well as the purchases of NHP in July 2011 and Cogdell Spencer in April 2012, fixed charge coverage has remained and is expected to remain solid for the 'BBB+' rating. The portfolio benefits from demand by a growing elderly population for various segments of healthcare real estate. As of Sept. 30, 2012, operating seniors housing represented 26% of NOI, followed by triple-net seniors housing (25%), skilled nursing (23%), medical office (17%) and hospitals (7%). Ventas has limited exposure to specific geographical regions. The company's largest states by NOI within the owned portfolio in the third quarter of 2012 (3Q'12) were California at 12%, Texas at 7%, New York at 7%, and Massachusetts at 6%, with no other state exceeding 5%, thereby reducing risks related to single-state healthcare regulatory changes. The company's payor sources are 70% private pay by NOI, limiting government reimbursement risk. Further, same-store cash flow coverage ratios of all of the company's triple-net tenants are solid at 1.7x on average for 2Q'12 (latest data available), which insulates the company against potential tenant cash flow deterioration stemming from possible sequestration rate reductions. Ventas's tenant/operator concentration is limited and includes Kindred at 17% of 3Q'12 NOI, Atria Senior Living, Inc. owned by private equity funds managed by Lazard Real Estate Partners LLC at 14%, Sunrise Senior Living, Inc. (NYSE: SRZ) at 12%, and Brookdale Senior Living Inc. (NYSE: BKD) at 10%, with no other tenant/operator exceeding 5% of NOI. Access to multiple sources of capital provides further support for the 'BBB+' rating. In addition to the unsecured bond offerings, the company also has proven access to the unsecured term loan market, and has proactively raised follow-on common equity, most recently selling $344 million of common equity (including the overallotment option) in June 2012.Corporate Rating MethodologyParent and Subsidiary Rating LinkageCriteria for Rating U.S. Equity REITs and REOCs
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