Health Care REIT Completes Acquisition of Sunrise Senior Living, Sale of Management Company

Toledo, OH-based Health Care REIT, Inc. (NYSE:HCN) has completed the acquisition of the Sunrise Senior Living, Inc. property portfolio, the sale of the Sunrise management company, and the acceleration of all planned joint venture partner buy-outs.

The company’s investment in Sunrise properties as of today is $3.4 billion, and that investment is expected to increase to $4.3 billion by July 2013 upon exercise of the company’s rights to acquire additional joint venture partner interests at fixed purchase prices.

The $4.3 billion investment is expected to include 120 wholly owned properties and five joint venture properties. Approximately 90% of the properties are Sunrise’s mansion prototype, and the average age of these properties is eight years.

The properties generate average monthly rental rates that are nearly 100 percent higher than the national average and are concentrated in London, Southern California, Chicago, Philadelphia, Boston, Washington D.C., and Montreal. Health Care REIT expects the $4.3 billion acquisition to generate a 6.5% unlevered initial yield, or 6.1% after capital expenditures.

The aggregate $4.3 billion acquisition amount includes the anticipated assumption of $494.0 million of debt with a blended rate of 5.1%. The assumed debt is net of approximately $2.1 billion of secured debt with a blended rate of 6.0% that was repaid prior to closing or is expected to be repaid through mid-2013. The approximate $3.1 billion in cash required to date to close the loans, the acquisitions and repay secured debt was funded through the company’s 2012 capital raising activity and availability under the company’s new unsecured credit facility.

Immediately prior to the acquisition of the Sunrise property portfolio, an entity led by affiliates of Kohlberg Kravis Roberts & Co. L.P. and affiliates of Beecken Petty O’Keefe & Company acquired the Sunrise management company for approximately $130 million, with Health Care REIT investing approximately $26 million for a 20% ownership interest. The Sunrise management company will employ the employees of Sunrise Senior Living and operate under the “Sunrise” name and brand.

BofA Merrill Lynch acted as exclusive financial advisor to Health Care REIT on the transaction. Arnold & Porter, LLP, Goodmans, LLP, Nabarro, LLP, Shumaker, Loop & Kendrick, LLP, and Sidley Austin LLP, acted as Health Care REIT's legal advisors.

Since the announcement of the proposed acquisition on August 22, 2012, the company accelerated the buy-out of joint venture partner interests in 100 of the 105 joint venture properties. Health Care REIT acquired five of the joint venture properties located in the United Kingdom in the third quarter of 2012 for $243.5 million. During the fourth quarter of 2012, Sunrise used $580.8 million of loan proceeds from Health Care REIT and its own funds to acquire joint venture partners’ interest in 37 of the 105 joint venture properties and to repay certain secured indebtedness.

The loans were converted to owned real estate by the company as of today’s closing.

Also during the fourth quarter of 2012, Health Care REIT acquired majority interest in and repaid debt related to five properties located in the United Kingdom for $238.7 million and reached agreement with additional joint venture partners to acquire their interest in 53 of the 105 joint venture properties. The company expects to complete the buyout on these 53 properties on or before July 2013.

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