In order to recapitalize the Sunrise Senior Living management
Health Care REIT Inc.
) penned a definitive deal following which the company will own
24% interest in Sunrise Senior Living while Revera will hold the
rest. Currently, Health Care REIT has about 20% stake in Sunrise
The transaction, which involves the acquisition of interest
from the affiliates of
Kohlberg Kravis Roberts & Co.
), Beecken Petty O'Keefe & Company and Coastwood Senior
Housing Partners LLC., is slated to close in second-quarter 2014,
upon fulfillment of regulatory approvals. After the completion of
deal, Sunrise Senior Living and Revera will continue to operate
as separate companies
As a matter of fact, Health Care REIT has partnered with
Revera in the first half of 2013 and the joint venture owns 47
high-quality seniors housing communities that are positioned in
key metropolitan markets in Canada.
The interest acquisition deal is a strategic fit for
Healthcare REIT and promises decent upside potential amid the
highly-fragmented senior housing sector with limited new supply
and positive growth indicators. According to the U.S. Census
Bureau, the elderly population (aged 65 and older) is expected to
jump 36% from 2010 to 2020 to 54.8 million. Additionally, the
company's strengthening relationship with Sunrise and Revera
paves the way for further expansions on the private pay seniors
Healthcare REIT is scheduled to release its fourth-quarter
2013 results on Feb 19, before the opening bell. The Zacks
Consensus Estimate for 2013 funds from operations (FFO) per share
is currently pegged at 97 cents.
, which represents the difference between the Most Accurate
estimate and the Zacks Consensus Estimate, stands at -3.09%. This
along with the Zacks Rank #3 (Hold) makes us skeptical about an
However, better-ranked REITs include
Sabra Health Care REIT, Inc.
). Both stocks carry a Zacks Rank #2 (Buy).
FFO, a widely used metric to gauge the performance of REITs,
is obtained after adding depreciation and amortization and other
non-cash expenses to net income.
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