Real estate investment trust Ventas Inc. (VTR) has agreed to acquire smaller peer Cogdell Spencer Inc. (CSA) for $4.25 per share in cash, the two companies said Tuesday. Ventas noted that the deal will enable it to expand its presence in the medical office buildings or MOB business to over 20 million square feet.
Under the terms of the deal, holders of shares of Cogdell common stock and units of limited partnership interest in Cogdell's operating partnership, Cogdell Spencer LP, will receive consideration of $4.25 per share or unit. The offer price represents an 8 percent premium to Cogdell's closing stock price of $3.92 on Friday, December 23.
Holders of Cogdell's preferred stock will receive consideration of $25 per share, plus accrued and unpaid dividends through the closing. Cogdell will pay its currently declared common stock dividend as scheduled on January 19, 2012, while Cogdell LP will pay a similar distribution on its outstanding limited partnership units. Cogdell and Cogdell LP will not pay further dividends or distributions on their common stock or units pending consummation of the transaction.
Chicago, Illinois-based Ventas said that at closing, its investment, including its share of debt, is expected to be about $760 million to $770 million before anticipated transaction expenses.
Charlotte, North Carolina-based Cogdell has agreed to sell its design-build and development business, Erdman, to an affiliate of Lubar & Co., a private equity firm affiliated with David Lubar, prior to completion of the Ventas transaction.
The consideration plus anticipated transaction expenses values Cogdell's properties at a low- to mid- 7 percent net operating income yield or slightly over $200 per square foot.
The closing of the transaction, which is expected to occur in the second quarter of 2012, is subject to the approval of Cogdell shareholders, customary closing conditions and the successful completion of the sale of Erdman.
Debra Cafaro, Chairman and Chief Executive Officer of Ventas said, "Cogdell's high-quality properties enhance our medical office building market presence, especially in the southeast, and provide an opportunity to scale our Lillibridge Healthcare Services subsidiary platform. We look forward to successfully integrating the Cogdell properties into the Ventas portfolio."
Ventas noted that the assets to be acquired include 72 medical office buildings, comprising 68 stabilized MOBs that are 92 percent occupied, in addition to 2 leaseup and 2 in development.
The owned MOBs are located in 15 states and 88 percent of the owned portfolio's square footage is located on hospital campuses or is hospital anchored. Ventas noted that its MOB portfolio will increase to 15 percent of total NOI from 11 percent.
Ventas expects to finance the acquisition through the assumption of existing Cogdell mortgage debt and other Ventas borrowings.
Further, the company expects the transaction to immediately add to its normalized funds from operations or FFO about $0.03 to $0.05 per share on a full year basis, excluding merger-related, transition as well as integration costs and expenses.
VTR closed Friday's trading at $54.94, up $0.43 on 867,100 shares.
CSA closed trading at $3.92, down $0.02 on a volume of 201,800 shares. In Monday's pre-market, the stock is adding $0.32 or 8.16 percent to $4.24.
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