Health Care REIT, Benchmark Close $890M JV

The group of assets involved--including independent living, assisted living, memory impaired and respite stay communities--are sited in highly coveted markets in six New England states.

March 30, 2011
By Barbra Murray, Contributing Editor

It’s a done deal. Health Care REIT Inc. and Benchmark Senior Living have completed the formation of their partnership, an $890 million endeavor involving 34 premier private-pay senior housing communities. The properties have an $890 million investment balance.

The group of assets involved–including independent living, assisted living, memory impaired and respite stay communities–are sited in highly coveted markets in six New England states. The bulk of the Benchmark portfolio, which has an average age of 12 years, is located in Connecticut and Massachusetts, where there are 14 and 13 properties, respectively. Three of the communities are in Rhode Island and two are located in New Hampshire, and Vermont and Maine are home to one property each.

Seniors housing fared better than most other commercial real estate sectors during the economic downturn; however, it did not go unscathed. “The independent living market is starting to see improvement,” Jeff Miller, executive vice president with Health Care REIT, told CPE. “Assisted living has been strong and remains strong, and it’s the same case with skilled nursing. There is some repositioning in skilled nursing. The sector is increasing as we move into a new healthcare paradigm. There’s been a shift among operators into post-acute, shorter-term care. They’re trying to move patients into the most cost-efficient setting, and a hospital would not be that for many.”

As per terms of the joint venture agreement, Health Care REIT owns a 95 percent ownership in the partnership, leaving Benchmark with the remaining 5 percent interest, as well as a management contract to continue operating the properties. Together, the partners plan to expand Benchmark’s presence beyond New England and pursue other new initiatives.

Health Care REIT has formed a bevy of partnerships this year, including a $600 million deal with Brandywine Senior Living, and a $360 million arrangement with Senior Star Living and a $298 million venture with Silverado Senior Living. Other seniors housing companies are beginning to see the value in establishing such partnerships. “There are certainly a number of different owners and operators who are examining their options,” Miller said.

“During the downturn there was a limited amount of debt, now we’re seeing a bit of freeing up of capital,” he continued. “REITs have been active; we have to take advantage of those opportunities and that has prompted some owners and operators to consider partnerships.

“The question is how do you access capital that gives you the best opportunity to grow and right now, REITs are the best source. For Health Care REIT, people know us and understand that we are committed to growth. People want to join forces with someone to grow, make acquisitions, refurbish existing properties and take advantage of new opportunities. For those looking for long-term capital partners, Health Care REIT is well positioned because we have lots of strong relationships in the industry and have been good partners to our operators. None of these transactions spring up over night. These partnerships are a reflection of the fact that REITs have a long-term perspective and realize that a long-term perspective is best for business.”