Health Care REIT to pay $2B for Sunrise Senior Living
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TOLEDO, OH-Locally based Health Care REIT Inc. entered into a definitive agreement to acquire Sunrise Senior Living Inc.'s outstanding common stock at $14.50 per share. Once the $1.9 billion acquisition closes in the first half of 2013, Health Care REIT will have control of more than 58,000 units in the US, Canada and the United Kingdom, placing it among one of the largest owners of senior housing worldwide.
As part of the acquisition, Health Care REIT will acquire the McLean, VA-based Sunrise's 20 wholly owned seniors housing communities (located in the US and Canada) and Sunrise’s interest in joint ventures that own 105 seniors housing communities, located in the US and UK. Approximately $950 million will be paid in cash, with the balance through debt assumption at an average interest rate of 4.9%.
The acquisition will provide Health Care REIT with:
- Institutional-quality properties in high barrier to entry markets. The properties have a median age of eight years. The portfolio is concentrated in New York, Los Angeles, San Francisco, Washington, DC, Philadelphia, Boston, Chicago and London. Approximately 50% of the properties are located in top five MSAs.
- Investment pipeline in excess of $2 billion. This pipeline could be realized over time by purchasing additional interests from existing Sunrise joint venture partners. At the time of acquisition, Health Care REIT expects to own on average an approximately 28% interest in the 105 joint venture communities. Of the 105 joint venture communities, 37 have purchase options that are exercisable in 2013; 13 have purchase options that are exercisable in 2014 and 21 are subject to open buy/sell rights that could result in Health Care REIT acquiring a 100% ownership interest.
- Strong NOI growth. Health Care REIT expects property-level net operating income to increase 4% to 5% per year on average over the long term, assuming economic conditions consistent with the current market.
- Enhanced diversification and private pay component. The transaction is expected to increase Health Care REIT’s private pay percentage from 74% to 77%. Sunrise will become Health Care REIT’s second largest operator at approximately 11% of the portfolio based on investment balance.
BofA Merrill Lynch acted as exclusive financial advisor to Health Care REIT on the transaction. Arnold & Porter LLP; Shumaker, Loop & Kendrick LLP and Sidley Austin LLP acted as Health Care REIT’s legal advisors.
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