Ventas SNF spin-off could set trend, analysts say

Ventas Chairman and CEO Debra Cafaro
Ventas Chairman and CEO Debra Cafaro

Chicago-based Ventas' announcement that it will be spinning off its skilled nursing facilities could have a snowball effect among other long-term care healthcare investors, analysts believe.  

Ventas, a leading healthcare real estate investment trust (REIT), made the announcement Monday that it will acquire privately held Ardent Medical Services, which includes 14 hospitals, for $1.75 billion. This, just a month after the REIT spent $2.9 billion to acquire medical office buildings and senior housing assets. Ventas' shares reportedly rose 5% following Monday's announcement, their biggest jump in four years.

Jeung Hyun, of Adelante Capital Management, told Bloomberg News “investor enthusiasm” fueled by the Ventas deal could encourage other firms looking to capitalize on the enhanced value such spin-offs create. In Ventas' case, for example, the sum of all the parts created in the deal could add up as much as $80 a share, about 9% higher than where the stock was trading last week, Bloomberg News reported.

Among those healthcare REITS analysts are eyeing to possibly follow suit are HCP and Health Care REIT, according to Jeffrey Langbaum, an analyst at Bloomberg Intelligence.

Though typically viewed as relatively risky investments due to a reliance on government reimbursement, skilled nursing facilities are becoming attractive to investors because more patients could end up in them as an alternative to pricier acute care settings, the news service reported.