Health Care REIT makes $845M deal

Toledo-based real estate investment trust purchases Sunrise Senior Living

8/23/2012

Health Care REIT Inc., the Toledo-based owner of se­nior hous­ing and health-care prop­er­ties, an­nounced Wed­nes­day that it had agreed to ac­quire Sun­rise Se­nior Liv­ing Inc. in a cash deal val­ued at $845 mil­lion.

The real es­tate in­vest­ment trust said it had set a pur­chase price for Sun­rise of $14.50 a share, a 62 per­cent pre­mium over Sun­rise’s clos­ing share price of $8.93 Tues­day.

Sun­rise has about 58.3 mil­lion shares out­stand­ing, im­ply­ing a value of $845 mil­lion. The ac­qui­si­tion re­flects a real es­tate value of about $1.9 bil­lion, Health Care REIT said in a state­ment.

The deal must be ap­proved by Sun­rise share­hold­ers and is sched­uled to be com­pleted in the first half of 2013.

Health Care REIT’s stock fell nearly 2.7 per­cent Wed­nes­day to fin­ish at $58.14 on the New York Stock Ex­change. Sun­rise shares jumped nearly 60 per­cent, gain­ing $5.33 to close at $14.26.

The Toledo real es­tate in­vest­ment trust said it will ac­quire Sun­rise’s 20 wholly-owned se­nior hous­ing com­mu­ni­ties in the United States and Canada as well as the McLean, Va.-based com­pany’s in­ter­est in joint ven­tures that own 105 com­mu­ni­ties, in­clud­ing 27 in the United King­dom.

De­mand for as­sisted-liv­ing and se­nior hous­ing is ex­pected to rise as the U.S. pop­u­la­tion ages. The num­ber of res­i­dents aged 65 and over will in­crease 79 per­cent through 2030, Health Care REIT said in a quar­terly reg­u­la­tory fil­ing, cit­ing Cen­sus Bureau data.

“This ac­qui­si­tion pow­er­fully ad­vances our strate­gic vi­sion: own the high­est-qual­ity, pri­vate-pay se­nior hous­ing com­mu­ni­ties in strong, grow­ing, af­flu­ent mar­kets,” said Ge­orge L. Chap­man, Health Care REIT’s chair­man and chief ex­ec­u­tive of­fi­cer.

After the trans­ac­tion, HealthCare REIT, which is the third-largest health care real es­tate in­vest­ment trust by mar­ket value, will own more than 58,000 units of se­nior hous­ing, ac­cord­ing to the state­ment.

The deal in­creases the share of the real es­tate in­vest­ment trust’s busi­ness that isn’t de­pen­dent on gov­ern­ment re­im­burse­ments and low­ers the av­er­age age of its prop­er­ties to 12 years from 13 years, ac­cord­ing to a pre­sen­ta­tion on the com­pany’s Web site.

The de­cline in av­er­age age, along with a high rev­enue per oc­cu­pied room, sug­gests Health Care REIT is get­ting “new prop­er­ties with the right ameni­ties in good, strong lo­ca­tions,” said John Shee­han, an an­a­lyst with Ed­ward Jones in St. Louis.

U.S. health-care REITs have an­nounced deals to­tal­ing $3.44 bil­lion in the last 12 months at an av­er­age pre­mium of about 13 per­cent, ac­cord­ing to data com­piled by Bloomberg.

Health Care REIT com­pleted $1.1 bil­lion of ac­qui­si­tions in the sec­ond quar­ter, in­clud­ing a $509.5 mil­lion deal with Chartwell Se­niors Hous­ing for prop­er­ties in Canada.

The Sun­rise deal is far from Health Care REIT’s largest ac­qui­si­tion.

In its largest deal to date, the real es­tate in­vest­ment trust spent $2.4 bil­lion in March, 2011, to ac­quire the real es­tate as­sets of pri­vately-held Ge­n­e­sis HealthCare, an op­er­a­tor of re­ha­bil­i­ta­tion fa­cil­i­ties, nurs­ing homes, and as­sisted-liv­ing com­plexes in the North­east and Mid-At­lantic states.

In Au­gust, 2010, Health Care REIT com­pleted an $817 mil­lion part­ner­ship with Seat­tle-based Mer­rill Gar­dens LLC. The lo­cal firm took an 80 per­cent stake in Mer­rill Gar­dens, which op­er­ated 38 re­tire­ment com­mu­ni­ties, pri­mar­ily in Cal­i­for­nia and Wash­ing­ton state.