KKR, Beecken Petty O’Keefe, Coastwood Senior Housing to Invest $130M in Sunrise Senior Living

KKR and two other companies in a JV will invest $130 million in Sunrise Senior Living. The transaction is expected to close in the first half of 2013.

Ralph Rosenberg, global head of Real Estate at KKR

Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, “KKR”), Beecken Petty O’Keefe & Company and Coastwood Senior Housing Partners L.L.C. have agreed to team up on the purchase of Sunrise Senior Living’s management company component for approximately $130 million.

“This partnership will provide for meaningful new capital investment for both 1) the infrastructure and IT required to improve care delivery to seniors in existing Sunrise facilities and 2) new ground-up development of cutting-edge senior living properties,” Ralph Rosenberg, KKR’s Global Head of Real Estate, told Commercial Property Executive. “In the U.S., the supply of quality seniors housing is likely to be outpaced by the demands of the aging population. This a much-needed investment to help address that growing demand.”

Additionally, Health Care REIT will invest about $26 million for a 20 percent interest in Sunrise, a McLean, Va.-based company known as a leading provider of senior living services and housing.

The partnership is expected to bring about many new advantages to Sunrise communities, its team, and its residents.

“We intend to focus on the company’s long-term growth plan and we offer a combination of financial resources, business success and a determination to take Sunrise and its time-tested mission to a whole new level,” Rosenberg said. “Examples of our improvement initiatives will include further investment in technology resources on the one hand and also an expanded focus on resident satisfaction metrics and best-practice sharing across the communities.”

Last month, 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. That purchase elevated Health Care REIT to one of the largest owners of seniors housing in the world, with more than 58,000 units in the United States, Canada and the United Kingdom.

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

The management company being acquired will consist of Sunrise’s existing management contracts covering 282 communities, including those communities to be acquired by HCN; leasehold interests in 15 communities; and 12 development parcels.

“This partnership with KKR, BPOC and Coastwood is a major step forward for our transaction with Health Care REIT,” said Mark Ordan, Sunrise’s chief executive officer. “All of us at Sunrise are excited by the opportunity to move forward with this next chapter in our story, and to continue Sunrise’s proud traditions of care and service to our residents.”

The deal also calls for a subsidiary of the management company to employ all employees of Sunrise and operate under the “Sunrise” name and brand.

“Sunrise personnel are trained to encourage the independence, preserve the dignity, enable freedom of choice and protect the privacy of residents,” Rosenberg added. “This culture of care was initially established by founders Paul and Terry Klaassen over 30 years ago and has been carefully incubated since. It has resulted in the strength of Sunrise’s brand and reputation and is critical to the company’s continued success and growth.”

The transaction, which is subject to customary closing conditions and regulatory approvals, is expected to close in the first half of 2013.

Simpson Thacher Bartlett L.L.P. served as legal adviser to KKR and Paul Hastings L.L.P. served as legal adviser to BPOC. Epstein Becker Green, P.C. and Munsch Hardt Kopf & Harr, P.C advised both KKR and BPOC.