Accelerated joint venture buy-outs have increased the real estate value of the Sunrise Senior Living (NYSE:SRZ) acquisition by Health Care REIT (NYSE:HCN) from about $1.9 billion to $3.2 billion, the investment trust announced on Tuesday.
“We are extremely pleased with our initial success in reaching agreements to purchase additional Sunrise joint venture partner interests,” said George L. Chapman, Chairman and CEO of Health Care REIT, Inc., in a statement. “The ability to transform what was initially announced as a $1.9 billion real estate opportunity into a $3.2 billion transaction upon closing accelerates our portfolio quality enhancement initiatives including increasing the private pay component of our portfolio and its concentration in east and west coast markets and top 31 MSAs.”
Since Aug. 22, 2012, when the deal was originally announced, HCN in collaboration with Sunrise has acquired or reached agreement to acquire majority interests in 38 of Sunrise’s 105 joint venture properties, increasing the expected real estate value of the transaction to approximately $3.2 billion upon closing.
Of those 38 properties, 16 were subject to buy/sell rights and 22 were in joint ventures with no purchase option or buy/sell right.
The REIT has already closed the acquisition of five of the 38 properties for $243 million as part of its third quarter pipeline. All five of the properties are located in the United Kingdom and are managed by Sunrise. They were purchased from a partnership between Sunrise and an institutional investor.
Sunrise will acquire majority interests in the other 33 properties using proceeds from a $467 million loan provided by Health Care REIT. The loan is expected to close in the fourth quarter of this year and will be converted to ownership by HCN upon completion of the original Sunrise acquisition.
Including the additional buyouts, HCN’s acquisition of Sunrise will now consist of 58 wholly owned properties and 67 joint venture properties. Out of the 67 joint venture holdings, 50 are subject to purchase options giving the REIT and Sunrise the right to buy the majority partners’ interests.
Following its second quarter earnings report, Health Care REIT announced it would have a $925 million acquisition pipeline in the third quarter. To date in the quarter, $375 million of those acquisitions have closed, with $263 million more expected to close in the third quarter of 2012. The REIT now expects $287 million worth of acquisitions will close in the fourth quarter of 2012. The aggregate acquisition amount includes approximately $134 million of debt the company expects to assume at an average interest rate of 5.6%.
Written by Alyssa Gerace