The sale was to include Arcapita's 90% stake in the properties in 12 states, mostly in the suburbs of Los Angeles, New York City and Chicago. The buildings have a total of 2,082 units, and are about 94% occupied. The deal was canceled after a due-diligence period.

"We determined that the transaction would not be in the best interest of our stockholders under the original terms," said George Chapman, chairman and CEO of the REIT, in a statement. He said the firm will continue to pursue new investment opportunities, and that it is "committed to prudently allocating capital throughout all economic cycles."

Sunrise Senior Living Inc., the developer of the properties and current manager, has more to lose with the broken deal. The company, which would have kept its 10% interest in the sites, would have earned up to $60 million as a partner in the transaction, though it still will serve as manager of the properties until 2025. The McLean, VA-based firm's stock dropped to its lowest point ever after the deal cancellation announcement Friday, to $2.62 per share, but rebounded by almost $1 per share by the end of trading Monday. The company started the year at near $30 per share.

Analysts reportedly say that Sunrise could have to turn to drastic measures to meet credit-line covenants. Company officials said in a statement that the firm is working closely with banks and other sources of capital to gain cash. "Although there can be no assurance as to these or other prospective matters in the current turbulent environment (including whether our bank lenders will exercise the rights previously described in our SEC filings if, as we expect to happen by the end of the fourth quarter of 2008, we fall out of compliance with our covenants under our bank credit facility, and whether we are able to secure alternative financing, if needed), as we will detail in our upcoming earnings call, we believe we have a strong collateral base and that Sunrise will continue to be the leading brand in the growing senior living sector," the officials said in a statement.

Sunrise has about 445 communities in the US, Canada, Germany and the UK, and another 36 communities under construction. Health Care REIT's portfolio consists of 641 properties inn 39 states. A spokeswoman with Arcapita, an international investment bank, did not respond for comment.

Instant Insights /

REIT's Stock Steady After Dropping $643M Deal

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