Health Care REIT fulfills acquisition for $3.4B as Sunrise Senior Living sells property assets

1/10/2013

Toledo-based Health Care REIT Inc. said Wednesday that it had completed its $3.4 billion deal to acquire nearly all of the property assets of Sunrise Senior Living Inc., a senior living firm with 125 high quality properties in key large metro areas of the United States, Canada, and the United Kingdom.

Besides its Sunrise acquisition, Health Care REIT said it also completed a related deal to sell Sunrise’s management company business for $130 million to an investment group led by equity firm Kohlberg Kravis Roberts & Co., and it has expedited the buyout of multiple joint ventures that control 53 of Sunrise’s properties, with completion of those buyouts expected to be finished by July.

The buyouts add another $826 million of value to the deal, which was first announced in August. In July, when the entire acquisition and buyouts are tallied, Health Care REIT’s total price tag to acquire Sunrise will be $4.3 billion. When the acquisition was first announced, it was reported as an $845 million deal, but that only included Health Care REIT's purchase of Sunrise stock.

“Rapid and efficient execution of a complex acquisition, accelerated joint venture buyouts at accretive prices, and the favorable sale of the management company has positioned us with the premier seniors housing portfolio in the market place at a price that generates very attractive risk adjusted returns for our shareholders,” George Chapman, Health Care REIT’s chairman and chief executive, said Wednesday in announcing the completion of the deal.

The company’s shares dropped 19 cents to $61.49 a share Wednesday in trading on the New York Stock Exchange.

About 90 percent of Sunrise’s properties are newer mansion-style structures that, on average, are only eight years old. They generate average monthly rental rates that are nearly double the national average because they are located in markets with high concentrations of age and income-qualified seniors and affluence, according to the Toledo real estate investment trust.

The median housing value in the markets where Sunrise properties are located is 100 percent higher than the national median. Its properties are concentrated in London, southern California, Chicago, Philadelphia, Boston, Washington, D.C., and Montreal.

Health Care REIT said the deal will cost it $3 billion in cash and another $397.8 million in assumed debt. It will spend another $730 million for the buyouts of the 53 joint venture properties, plus another $96 million in assumed debt by July when the buyouts are completed, for a total value of $4.3 billion.

Overall, Sunrise had 125 properties with 20 of them wholly owned and 105 owned under joint ventures between Sunrise and third parties. As of Wednesday, Health Care REIT had purchased 47 of the properties, and in July the total will become 120. The five remaining properties will continue to be owned by joint ventures.