Health Care REIT, Benchmark Form $890M JV

The agreement involves 34 of Benchmark's seniors housing properties encompassing 3,007 units in New England.

February 17, 2011
By Barbra Murray, Contributing Editor

In an agreement valued at $890 million, Health Care REIT Inc. will create a partnership with Benchmark Senior Living involving 34 of Benchmark’s seniors housing properties encompassing 3,007 units in New England.

Fourteen of the seniors communities involved in the partnership are located in Connecticut and 13 are in Massachusetts. Three are in Rhode Island, two are sited in New Hampshire, and Vermont and Maine are home to one property each. Most of the assets are continuing care retirement communities that offer single-site accommodations starting with independent living units and continuing through the spectrum of seniors housing types, including assisted living, specialized services, memory care facilities and respite stay programs.

Health Care REIT’s partnership contribution, structured as a REIT Investment Diversification and Empowerment Act investment, will be financed through borrowings under the company’s revolving credit facility and a $400 million bridge loan. The REIT’s investment will result in a 95 percent ownership stake, leaving Benchmark with a 5 percent interest and a management contract to continue operating the 34 properties, which comprise 75 percent of Benchmark’s total portfolio. The partnership will take on responsibility for $509 million in secured debt that carries an average interest rate of 5.3 percent.

Benchmark chairman & CEO Thomas Grape said the move positions the firm with a strong capital partner and a stable foundation for growth. He added that the company will now be able to add properties and pursue new initiatives such as geographic expansion beyond New England.

With the aging of the baby boomer set, the increase in population and lengthening life span of the average American, demand for seniors housing is destined to increase, but at present, the market has yet to fully recover from the impact of the economic crisis. The average occupancy level for seniors housing was 87.6 percent in the fourth quarter of 2010, marking a minuscule change from the fourth quarter of 2009, according to data culled by the National Investment Center for the Seniors Housing & Care Industry.

Benchmark, however, has a successful track record of thriving in the face of adversity. “Benchmark is providing attractive returns for investors,” George L. Chapman, chairman, president and CEO of Health Care REIT, said. “The Benchmark management team has produced exceptional net operating income growth despite a challenging economic climate.”

For Health Care REIT’s part, the deal with Benchmark marks the company’s third such RIDEA-structured joint venture arrangement in less than three months. In December, it created a $360 million partnership with Senior Star Living, and in January, Health Care REIT and Silverado Senior Living joined forces to form a $298 million partnership.