Health Care REIT Investing in Revera’s $1.35 Billion Portfolio

Health Care REIT, Inc. (NYSE:HCN) announced on Wednesday it will be partnering with Revera Inc. to own 47 high-quality senior housing communities with approximately 5,000 units located in major Canadian metropolitan markets.

Once the transaction closes, HCN will own a 75% interest in the approximately $1.35 billion portfolio, with Revera owning the remaining 25%. Revera currently owns 100% of the portfolio, which consists primarily of independent living communities, many of which offer a continuum of care that includes assisted living and/or memory care.

The communities are primarily located in Toronto, Vancouver, and Calgary. The portfolio’s current occupancy rate of 89% has upside as 14 of the communities are in lease-up. 

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After the deal is completed, Revera will continue to manage the communities under an incentive-based management contract. The transaction is expected to close in the second quarter of 2013.

“This acquisition solidifies Health Care REIT as a leading capital provider to the private pay seniors housing industry across Canada,” said George L. Chapman, Chairman and CEO of Health Care REIT, in a statement. “We are excited to partner with Revera, a premier seniors housing provider, whose portfolio complements our existing Canadian seniors housing portfolio. In partnership with the two leading operators in Canada, we now own more than 13,000 units of private pay seniors housing in Canada, with a concentration in infill locations in major metropolitan markets.”

Revera is the second-largest senior housing and long-term care operator in Canada and has more than 20,000 units under management. 

“We are excited to enter into this partnership with Health Care REIT, a well-capitalized healthcare real estate investor that specializes in partnership-based investing,”  said Jeff Lozon, President and Chief Executive Officer of Revera. “Moving forward, Health Care REIT will be our strategic capital partner in private pay seniors housing and will help us expand our position as a leader in major Canadian markets.”

HCN projects that its first-year unlevered net operating income yield, after payment of management fees, will be 7.0%. The Toledo, Ohio-based REIT expects that the partnership’s NOI will grow in excess of 5% in the near-term, with longer term 4%-5% growth. 

Revera has already invested about $150 million of capex into the portfolio since 2009 and has agreed to invest the first $50 million of capex into the portfolio after closing, to be spent in the next three years in order to position the portfolio for long-term growth. 

Also on Wednesday, HCN announced its intention to offer 18 million shares of its common stock, with a 30-day option for underwrites to purchase up to an additional 2.7 million shares.

Health Care REIT intends to use the net proceeds from this offering to repay advances under its unsecured lines of credit, repay other outstanding indebtedness, and for general corporate purposes including investing in healthcare real estate and senior housing properties.

UBS Investment Bank, Deutsche Bank Securities, and Wells Fargo Securities will act as joint book-running managers for the offering.

Written by Alyssa Gerace

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