HCN to Buy Out Merrill Gardens Joint Venture for $173 Million

Health Care REIT (NYSE:HCN) announced on Thursday an agreement to buy out Merrill Gardens’ equity interest in a 38-property portfolio of senior housing communities for $173 million.

The REIT already owns 80% of the equity interest in the properties through a joint venture with Merrill Gardens and has now agreed to acquire the remaining 20%. HCN also agreed to enter a triple net lease with Emeritus Senior Living (NYSE:ESC) to manage the portfolio, which has approximately 4,400 units of independent living, assisted living, and memory care concentrated in Washington and California.

“Expanding in the independent living arena complements our well-established assisted living, memory care and home healthcare services,” said Granger Cobb, president and CEO of Emeritus.  “It enables us to better meet the evolving needs of the growing senior population.  This accretive transaction also represents an opportunity to consolidate community operations in what continues to be a fragmented market, while expanding our relationship with Health Care REIT.”


As part of the lease agreement, Emeritus will pay Merrill Gardens a $10 million management contract termination fee.

“This transaction reflects the flexibility of our business model and the power of our relationship investing platform,” said George Chapman, Chairman and CEO of Health Care REIT, in a statement. “We are excited to grow our long-time relationship with Emeritus. Their strong existing footprint in the markets where this portfolio is located will allow for a seamless transition and value creation over the long-term. Merrill Gardens has made the decision to concentrate its efforts on new development projects. Merrill Gardens will continue to be a strategic partner for Health Care REIT.”

HCN and Merrill Garden will remain joint venture partners for 10 other senior living communities totaling 1,428 units concentrated in markets including Seattle, San Jose and San Diego. Merrill Gardens will continue to manage these communities, which will serve as a platform for their development projects.


Additionally, HCN announced it will have the right of first opportunity on all future Merrill Gardens acquisitions and development projects.

“We are focused on our development strategy and continuing our nearly 20-year partnership with Health Care REIT,” said Bill Pettit, CEO of Merrill Gardens.

The transaction is expected to close in the third quarter.

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Written by Alyssa Gerace

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