Ventas to Buy Interests in 58 Sunrise Seniors Housing Assets in $186M Deal

In addition to leaving Ventas as full owner of the 58 assets, the deal calls for a revision of the management agreement for the 21 properties that Sunrise presently manages on behalf of Ventas, in addition to the 38 communities it will manage upon the transaction's completion.

October 5, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user pedrosimoes7

Ventas Inc. is about to expand its holdings. The healthcare REIT signed on to acquire Sunrise Senior Living Inc.’s interests in 58 senior living properties in a cash and debt transaction valued at $186 million.

“In this case, there is a situation where the operator is having an issue, both operational and financial, and Ventas can help them by taking debt off their hands and providing capital,” John M. Roberts, director of research with financial services firm J.B. Hilliard, W.L. Lyons L.L.C., told CPE.

Sunrise’s ownership stake in the private pay senior living communities, located in affluent neighborhoods in the U.S. and Canada, ranges from 15 percent to 25 percent. Presently the occupancy level at the properties is 89 percent. In addition to leaving Ventas as full owner of the 58 assets, the deal calls for a revision of the management agreement for the 21 properties that Sunrise presently manages on behalf of Ventas, in addition to the 38 communities it will manage upon the transaction’s completion. As per the altered contract, Ventas will refrain from exercising performance-based termination rights during 2010 and 2011, and Sunrise will accept a respective 3.5 percent and 3.75 percent decrease in its annual management fee for the aforementioned years.

Ventas plans to finance the acquisition by making an approximately $41 million capital infusion into Sunrise and assuming $145 million in mortgage debt on the portfolio. “Ventas is a consolidator in the industry, and it has very good access to inexpensive financing–both debt and equity,” Roberts said. “They’re in a position to consolidate the industry and when opportunities like this come along, they’re going to jump on them.”

The Sunrise transaction is on target to close in the fourth quarter.