Brookdale, HCP to Acquire Senior Housing Portfolio for $849M

IRVINE, VA—Nashville-based Brookdale Senior Living and local REIT HCP have entered into a definitive agreement to acquire 35 private pay senior housing communities from Chartwell Retirement Residences for $849 million. The 35 assets will trade via a RIDEA joint venture structure in which HCP and Brookdale will own 90% and 10%, respectively, of the portfolio.

The 4,792-unit portfolio is located in eight states concentrately mainly in Florida, Texas and Colorado and is compromised mainly of assisted living and independent living facilities, with some memory care and skilled nursing operations.

The deal also includes leasehold interests in two communities that are wholly-owned by HCP.

Brookdale has operated these communities since 2011 after its acquisition of Horizon Bay, and will continue to manage the communities after the closing.

The two companies have made strategic acquisitions jointly before, most notably a $1.2-billion strategic joint venture portfolio deal last year in which 14 entry fee Continuing Care Retirement Communities were acquired and amendments made to the triple-net leases on 202 HCP-owned senior housing communities.

For this latest transaction, the gross sale price represents a cap rate of approximately 6.6%. The portfolio is encumbered by $439 million of mortgage debt with an average annual interest rate of 5.85%. The sale is expected to close in the third quarter of 2015.

The deal also checks off all of HCP's acquisition boxes. It "is consistent with Brookdale's strategy of acquiring managed communities when possible given the company's elevated understanding of the operations, minimal transition costs and time, the ability to leverage in-place overhead, and the opportunity to exchange a vulnerable third party management arrangement with a stable RIDEA joint venture structure," says Andy Smith, Brookdale's CEO.

As for Chartwell, the sale allows the Canadian based company to exit the US market at a point where its senior housing investments will garner maximum proceeds, it says. The company plans to pay off debt and build up its balance sheet to fund its development pipeline, Brent Binions, Chartwell's president and CEO, says in a prepared statement. Calls to the principals were not immediately returned in time for publication.