Health Care REIT Inc. entered into a definitive agreement to acquire all of the outstanding common stock of Sunrise Senior Living Inc. for $14.50 per share in an all cash transaction, or $845 million. The acquisition gives Health Care REIT more than 58,000 units located in the U.S., Canada, and the United Kingdom. The purchase price is more than a 60 percent premium over Sunrise’s closing price the day before the deal was announced.
As part of the transaction, Health Care REIT will acquire Sunrise’s 20 wholly owned seniors housing communities and Sunrise’s interest in joint ventures that own 105 seniors housing communities. The 20 wholly owned communities are located in the U.S. (17) and Canada (three), while the joint venture communities are located in the U.S. (78) and the United Kingdom (27). The purchase price reflects a real estate value of approximately $1.9 billion, of which approximately $950 million will be paid in cash and the balance through the assumption of debt at an average interest rate of approximately 4.9 percent.
“This acquisition powerfully advances our strategic vision: own the highest quality, private pay seniors housing communities in strong, growing, affluent markets and align with experienced, dynamic management teams,” Health Care REIT Chairman and CEO George L. Chapman said in a statement. “Sunrise has been a leader in the transformation of seniors housing. This transaction positions us to build on our collaborative, relationship based investment philosophy and benefit from the ongoing transformation of the sector. There are few opportunities to acquire assets of this quality in a transaction of this scale.”
The communities have a median age of eight years, and 90 percent of the communities are Sunrise’s “mansion” prototype. The portfolio is concentrated in New York, Los Angeles, San Francisco, Washington, D.C., Philadelphia, Boston, Chicago, and London. Approximately 50 percent of the properties are located in top five MSAs and approximately 85 percent of the properties are located in top 20 MSAs within their respective countries.
The acquisition includes a real estate pipeline of more than $2 billion that 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 percent 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 percent ownership interest.
Health Care REIT intends to structure ownership and operation of the wholly owned communities and any joint venture communities, if and when acquired, under RIDEA. Health Care REIT expects property-level net operating income to increase 4 percent to 5 percent per year on average over the long term, assuming economic conditions consistent with the current market.
The closing of the transaction is subject to approval by the shareholders of Sunrise. The transaction is expected to close in the first half of 2013.
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.
HCP Closes $205M Mezzanine Loan Facility
HCP closed a mezzanine loan facility to lend up to $205 million to Tandem Health Care, an affiliate of Formation Capital, as part of the recapitalization of a post-acute/skilled nursing portfolio. HCP funded $100 million at closing and expects to fund an additional $105 million between March 2013 and August 2013.
The second tranche will be used to repay debt senior to HCP’s loan. The loan is subordinate to $400 million in senior mortgage debt and $137 million in senior mezzanine debt. The loan bears interest at a fixed rate of 12 percent and 14 percent per annum for the first and second tranche, respectively. Including fees received at closing, the loan has a blended yield to maturity of approximately 13 percent. The facility will have a total term of up to 63 months from the initial closing.
The Tandem portfolio is comprised of 68 post-acute/skilled nursing facilities primarily located in Florida, Ohio, Pennsylvania and Virginia. The facilities are located in either Certificate of Need states or states that have placed restrictions on new post-acute/skilled nursing construction. The portfolio has an occupancy rate of 93 percent, a quality mix of 52 percent, a net operating income margin of 17 percent and in-place rent coverage of 1.3x. The portfolio is master leased to LaVie Care Centers, an operator of 208 post-acute/skilled nursing facilities in the United States.
Oak Grove Capital Finances $88.4M Facility for Newcastle Investment Corp.
Oak Grove Capital originated an $88.4 million Fannie Mae DUS credit facility to finance the acquisition of eight seniors housing communities located in California, Oregon, Utah, Arizona and Idaho.
The properties were purchased by subsidiaries of Newcastle Investment Corp. from BPM Senior Living of Portland, Ore. The eight communities will be managed by an affiliate of Newcastle.
The purchase price totaled $143 million plus related expenses, funded by the $88.4 million Fannie Mae credit facility and a $55 million equity investment from the borrowers. The credit facility, which consists of a fixed-rate loan and a variable-rate loan, matures in seven years.
LTC Announces Acquisition of Two Skilled Nursing Facilities
LTC Properties Inc. acquired two skilled nursing facilities with a total of 288 licensed beds for $54.0 million.
One property located in Cincinnati, Ohio was built in 2009 and the other property, located in Dayton, Ohio, was built in 2010. The acquisition was funded from the company’s unsecured revolving line of credit and cash on hand. Simultaneous with the purchase, the company entered into to a master lease with affiliates of Carespring Health Care Management LLC at an initial cash yield of 8.5 percent and an estimated GAAP yield of 10.1 percent.
The initial term of the lease is 15 years with two 5-year renewal options and annual rent escalations of the lesser of i) 2.25 percent for the first seven years and 2.50 percent for the remainder of the term or ii) a calculation based on the consumer price index.
NHI Announces $25.2M Senior Living Campus Acquisition
National Health Investors Inc. (NHI) acquired a senior living campus in Silverdale, Wash., for $25.2 million, funded from borrowings on NHI’s revolving credit facility.
The 138-unit community offers independent living, assisted living and rehabilitation care. The transaction is anticipated to close this week upon final licensing approval.
Sante’ Partners of Salem, Ore., entered into a 15-year lease agreement including two 10-year renewal options at a 7.8 percent lease rate plus annual fixed escalators. Furthermore, NHI extended an additional $3.5 million at a 8.3 percent lease rate to expand and renovate the community.
JV Acquires Arbors at Michigan City
Ryan Saul of Senior Living Investment Brokerage Inc. represented Trilogy Health Systems in the sale of The Arbors at Michigan City, a skilled nursing facility in Michigan City, Ind.
The purchaser, a joint venture between YAM Management and a private REIT, acquired the 180-bed facility through a confidential sales process. Senior Living Investment Brokerage was able to procure multiple offers and the final sale price of $12.85 million, a price per bed of $71,389.
The Arbors at Michigan City has a 38 percent quality mix and 80 percent overall occupancy. Trilogy Health Systems strategically divested The Arbors at Michigan City because it didn’t fit their prototype of skilled nursing combined with assisted living. Additionally, the sale freed up debt and equity to deploy to other projects that are more closely aligned with the company’s model and vision.
The Purchaser, YAM Management, will add The Arbors at Michigan City to their existing Illinois portfolio of 16 facilities.
LaSalle Group Building Memory Care Community in Illinois
The LaSalle Group is planning to build a 26,000-sq.-ft. $10.2 million memory care assisted living community in Bolinbrook, Ill.
The Autumn Leaves of Bolingbrook community will serve residents living with Alzheimer’s and dementia. The project is the result of a partnership with The LaSalle Group, RT Partners and local lender, HMO Harris Bank
“Even during the more challenging financial markets, the financial institutions understand the need for the care we offer,” LaSalle Group CEO Brenda Brantley said in a statement. “With the help of local banks, we have been able to expand in the Chicagoland area, and serve more families struggling with caring for a loved one with Alzheimer’s or dementia. The local community needs our high level of services, and we are excited to bring it our family approach to memory care.”
Tryko Buys Pine Bluff Village
Pine Bluff Village in Salisbury, Md. has become the newest addition to Tryko Partners LLC’s affordable housing portfolio. The private equity real estate group purchased the 151-unit, age-restricted rental property from Aimco for $7.2 million.
Pine Bluff Village, which opened in 1979, is designated as an independent-living community for adults 62 years of age or older. The property includes one-bedroom apartments with kitchens. Residents benefit from a commercial kitchen serving lunch and dinner, an onsite beauty/barber shop, laundry facilities, an exercise room and landscaped grounds with a picnic and patio area.
The acquisition included a land lease. Still, the transaction moved quickly, closing a full two months prior to the contract’s deadline.
Bank of Hampton Roads, an affiliate of Salisbury-based Shore Bank, provided financing for the acquisition.
The Pine Bluff Village acquisition follows Tryko’s late 2011 purchase of Pemberton Manor in Salisbury. The firm is in the midst of a major renovation at that 209-unit property, which includes both market-rate and HUD affordable housing residences.