Emeritus Corporation (NYSE: ESC), a national provider of assisted living and Alzheimer’s care services to seniors, announced that it has entered into a joint venture ("Joint Venture") agreement with Blackstone Real Estate Advisors VI, L.P. ("BREA") and Columbia Pacific Advisors, ("Columbia Pacific"), an affiliate of the Chairman and Co-CEO of Emeritus, in connection with the acquisition by the Joint Venture of approximately 134 communities currently operated by an affiliate of Sunwest Management ("Sunwest"), a Salem, Oregon-based operator of senior living communities.
BREA will have up to an 80% equity interest in the Joint Venture and Emeritus and Columbia Pacific each will have up to a 10% equity interest in the Joint Venture. The Joint Venture has entered into a purchase and sale agreement to acquire the 134 communities from Sunwest for approximately $1.15 billion. The Joint Venture will post a $50 million purchase deposit in conjunction with the signing. The purchase includes cash, the assumption of secured debt, and the potential equity rollover of up to $25 million by the existing Sunwest investors.
In conjunction with the proposed acquisition, Emeritus entered into an agreement with the Joint Venture to manage the portfolio of communities for a fee equal to 5% of gross revenues. In addition, the Joint Venture agreement contains provisions to allow Emeritus a right of first opportunity to purchase the communities or the Joint Venture interests at fair value, and includes a profit sharing provision for Emeritus if the Joint Venture’s internal rate of return exceeds established thresholds.
Mr. Dan Baty, Chairman and Co-CEO of Emeritus, said, "This represents an opportunity to layer in our core product, within our geographic footprint in a structure with Blackstone that has been successful for us in the past. We have spent significant time and resources to understand the operational and physical requirements of these communities so that we can efficiently integrate them into our nationwide operating structure."
The purchase and sale agreement is subject to bankruptcy court approvals and finalization of loan modifications with the secured creditors. The bankruptcy court process also includes an open bidding period and process that will allow other qualified parties to bid on the portfolio.