Close on the heels of the acquisition of
Sunrise Senior Living Inc.
) - one of the largest providers of senior living services in the
Health Care REIT Inc.
), a leading health care real estate investment trust (REIT) that
operates senior housing and health care real estate, has decided to
offload its management company business.
To materialize the decision, Health Care REIT has penned an
agreement with the affiliates of investment firms
Kohlberg Kravis Roberts & Co.
), Beecken Petty O'Keefe & Company, and Coastwood Senior
Housing Partners LLC, to form a new entity that would acquire the
divested business. Health Care REIT would invest about $26 million
for a 20% ownership stake in the joint venture.
The divested business would include the existing management
contracts of Sunrise Senior Living along with the 125 communities
set to be acquired by Health Care REIT. The newly-formed joint
venture entity would subsequently induct all the employees of the
erstwhile Sunrise Senior Living and operate under the 'Sunrise'
The current deal is effective within the framework of the
previously announced merger of Health Care REIT and Sunrise Senior
Living, under which the former would acquire all the outstanding
shares of the latter for $14.50 per share in an all-cash
transaction. The company expects to partially fund the acquisition
from the proceeds of the divestment of the management business.
With a median age of eight years, the acquisition will enable
Health Care REIT to own high-quality private pay senior housing
communities in high-barrier-to-entry affluent markets. In addition,
the company is likely to gain operational synergies as an
experienced and dynamic management team from Sunrise Senior Living,
with over 30 years of experience, comes on board.
Besides improving the economies of scale, the acquisition would
further enable Health Care REIT to gain access to higher yielding
embedded investment opportunities, as more ownership stakes in
joint venture properties come up for grabs. The senior housing
sector is a highly-fragmented market with limited new supply and
positive growth indicators, with the over-85 demographic growing at
three times the rate of the overall population.
Health Care REIT invests across the full spectrum of senior housing
and healthcare real estate properties. Headquartered in Toledo,
Ohio, the company also provides an extensive array of property
management and development services.
Founded in 1970, the company was the first REIT to invest
exclusively in healthcare facilities. Health Care REIT provides
senior housing operators and healthcare systems with a single
source for facility planning, design and turn-key development,
property management, and monetization or expansion of existing real
We maintain our Neutral recommendation on Health Care REIT, which
currently has a Zacks #3 Rank that indicates a short-term Hold
HEALTH CR REIT (HCN): Free Stock Analysis
KKR & CO LP (KKR): Free Stock Analysis
SUNRISE SENIOR (SRZ): Free Stock Analysis
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