Breaking News: Health Care REIT Enters into Final Agreement to Buy Sunrise Senior Living

Health Care REIT became one of the world's largest owners of seniors housing after entering into a definitive agreement to buy the outstanding common stock of Sunrise Senior Living.

Health Care REIT entered into a definitive agreement to buy all of the outstanding common stock of Sunrise Senior Living Inc. for $14.50 per share in an all-cash transaction. The move makes Health Care REIT among the largest owners of seniors housing in the world, with more than 58,000 units in the United States, Canada and the United Kingdom. The acquisition price equates to a real estate value of approximately $1.9 billion, of which half will be paid in cash and the balance through the assumption of debt at an average interest rate of approximately 4.9 percent.

As part of the business deal, Health Care REIT will buy Sunrise’s 20 wholly owned seniors housing communities and Sunrise’s interest in joint ventures that own 105 other seniors housing communities (located in the United States and Canada).

The transaction will give HealthCare REIT the following:

  • Institutional Quality Properties in High Barrier to Entry Markets — The senior communities have a median age of eight years, and most of them are modeled after Sunrise’s “mansion” prototype. The portfolio is located 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 different nations.
  • Embedded Investment Pipeline In Excess of $2 Billion  — The deal also 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 purchase, Health Care REIT expects to own about a 28 percent interest in the 105 joint venture communities. Of those communities, 37 have purchase options that could be used in 2013, 13 have purchase options that cols be used in 2014, and 21 are subject to open buy/sell rights that could result in Health Care REIT acquiring a 100 percent ownership interest.
  • Acquisition Structured to Capture Strong NOI Growth — Health Care REIT plans 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 to 5 percent per year on average over the long term, assuming economic conditions consistent with the current market.
  • Future Value Creation — Health Care REIT expects to create additional value for shareholders when joint venture interests are acquired, existing debt is re-financed, and operational and structural efficiencies are achieved.
  • Enhanced Diversification and Private Pay Component — The transaction is expected to increase Health Care REIT’s private pay percentage from 74 to 77 percent. Sunrise will become Health Care REIT’s second largest operator at approximately 11 percent of the portfolio based on investment balance.

“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,” said George L. Chapman, Health Care REIT’s Chairman and CEO, in a statement.

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