Health Care REIT, Inc. (NYSE:HCN) announced Monday that it has signed a definitive agreement to acquire substantially all of the real estate assets of privately-owned Genesis HealthCare (Genesis)for $2.4 billion. Genesis will continue to operate the facilities under a long-term triple-net master lease where the first year rent will provide for $198 million with an initial cash yield of 8.25%. The acquisition will include 147 post-acute, skilled nursing and assisted living facilities located in 11 states in the Northeast and Mid-Atlantic. Genesis’ largest markets include Massachusetts, Maryland, New Jersey, Pennsylvania and West Virginia.
As part of the agreement, HCN will have the right to own certain facilities that Genesis currently leases from third-party landlords, pursuant to fixed price purchase options, as well as any facilities that Genesis acquires or develops during the initial 15-year term of the lease at pre-determined lease yields. HCN will also receive the option to acquire a 9.9% ownership interest in Genesis for a fixed price equal to $47 million throughout the initial lease term
"We expect Health Care REIT’s acquisition and leaseback of Genesis HealthCare’s assets will be highly accretive to HCN’s earnings," says George L. Chapman, Health Care REIT’s Chairman, Chief Executive Officer and President. "The acquisition is consistent with our commitment to partner with best-in-class operators across the health care acuity spectrum. The investment provides embedded opportunities for both organic and external growth. Genesis is positioned to grow its quality payor mix and optimize occupancy as it continues to meet the needs of an increasing post-acute, short-stay patient population. In addition, Genesis has built a robust pipeline of potential acquisition and development opportunities as it expands its footprint along the eastern seaboard. This new partnership between Genesis and Health Care REIT is an exciting growth story."
The transaction, which is expected to close in the second quarter, is structured as an equity purchase of the Genesis real estate holdings subsidiary and is expected to be accretive to HCN’s funds from operations guidance issued earlier this month with a pro forma 12% growth over the midpoint of its 2011 guidance. HCN has obtained a commitment for a bridge loan in an amount up to $2.4 billion which will be available to finance the acquisition of Genesis, if necessary. Genesis is privately-owned by affiliates of Formation Capital and JER Partners.
George V. Hager, Jr., Chief Executive Officer of Genesis added, "We at Genesis are delighted to have the opportunity to partner with Health Care REIT. Together, we will continue our high level of investment in optimizing and expanding our facilities to meet the needs of our increasingly acute patient population. Genesis prides itself on providing patients and residents with outstanding clinical care, delivered by highly skilled practitioners in a warm and comfortable setting. We selected HCN as our partner because of this shared vision and its commitment to serve as a trusted, long-term partner in our growth."