Sunrise Begins Buying Out JV Interests in Senior Living Portfolios with HCN Financing

And so it begins: Backed with financing from Health Care REIT (NYSE:HCN), Sunrise Senior Living (NYSE:SRZ) is starting to buy out its joint venture partners’  interests in some senior living portfolios, according to an 8-K that was filed today.

Two of the national chain’s entities have entered into purchase and sale agreements, one with HVP Sun Investor LLC (HVP), an affiliate of an institutional investor, and the other with a Morgan Stanley Real Estate Fund venture, to acquire both parties’ interests in two senior living portfolios that are already partially owned by Sunrise.

One portfolio consists of 12 senior living communities that are indirectly owned by a joint venture between Metropolitan Senior Housing LC, Sunrise Lafayette Hills Assisted Living, L.P. and Sunrise Paoli Assisted Living, L.P. The joint venture 75% owned by HVP and 25% owned by Sunrise and Sunrise Senior Living Investments, Inc. (SSLII), a wholly-owned Sunrise subsidiary.


Under the terms of the Aug. 21 agreement, SSLII will purchase HVP’s interest along with certain operating company subsidiaries wholly-owned by HVP for a purchase price of approximately $120 million, assuming an overall enterprise valuation of $340 million. Upon closing, SSLII and Sunrise will own 100% of the joint venture.

The Sunrise subsidiary has posted a non-refundable deposit of $5 million; the closing is subject to customary closing conditions and is expected to occur on or around October 5, 2012.

On Aug. 22, Sunrise Senior Living International Limited Partnership (SSLI LP) entered a purchase and sale agreement with five entities collectively known as Morgan Stanley Real Estate Fund (MSREF) for a 17-property senior living portfolios located in the United Kingdom.


Dawn Holdco Limited owns 15 of these communities, while Dawn Holdco II Limited owns the other two. Dawn Limited Partnership owns both of these entities.

Through this agreement, SSLI LP will acquire MSREF’s 90% interest in Dawn for a purchase price of approximately $44 million. The subsidiary has posted an $8 million non-refundable deposit.

The closing for this agreement is currently scheduled to occur within 60 days after the date of the MSREF agreement with the ability to extend the closing date for up to 90 additional days.

On Aug. 21, Sunrise entered into a binding term sheet with HCN where the REIT committed to providing approximately $467 million in term financing for Sunrise to complete the above transactions as well as an additional proposed transaction to acquire a partner’s interest in another joint venture.

The term loans will bear interest at one-month LIBOR plus 5.00% and will mature on Dec. 31, 2013.

HCN’s announcement regarding its acquisition of Sunrise included plans to begin buying out ownership interest in the senior living operator’s 105 joint ventures.

View the 8-K.

Written by Alyssa Gerace

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