Health Care REIT Invests $386 Million in California Senior Housing Joint Venture

Health Care REIT (NYSE:HCN) is looking to build upon the record growth of its senior housing portfolio with a near-$400 million joint venture investment with a California senior housing operator.

During the first quarter ended March 31, 2014, Health Care REIT made $542 million of investments, of which the company invested $386 million to acquire a 47% joint venture interest in a West Coast senior housing portfolio operated by Senior Resource Group.

The 10-property portfolio is concentrated in Southern California but also includes properties in Portland, Phoenix and Tucson. The majority of the units are independent living, but many properties also offer assisted living and/or memory care services.


“Our network of partners in the U.S., Canada and the UK continues to give us a competitive advantage in the marketplace and we remain laser-focused on delivering superior long-term shareholder returns,” said Health Care REIT CEO Thomas DeRosa.

Partners in the joint venture include SRG’s management team and the Public Sector Pension Investment Board, one of Canada’s largest pension investment managers and stakeholder in Sunrise management company owner Revera.

REITs have recently begun again to ramp up joint venture partnerships with senior living providers—the most recent of which involving a $1.2 billion joint venture agreement between HCP, Inc. (NYSE:HCP) and Brookdale Senior Living (NYSE:BKD).


The investment demonstrates Health Care REIT’s ability to form new strategic relationships that are complementary to the company’s existing partnerships, company executives said during an earnings call Thursday morning.

“Our platform is firing on all cylinders, delivering consistent, predictable internal and external growth,” said DeRosa.

The REIT earned a record-high quarter normalized funds from operations (FFO) of $1.00 per share during the first quarter of 2014, a 10% increase when compared to the same period a year ago.

This double-digit growth was primarily driven by the $542 million of first quarter investments, as well as an 8.1% increase in the company’s senior housing operating portfolio, DeRosa noted during the earnings call.

“These factors drove double-digit percentage growth in FFO and FAD per share for the quarter and an increase in our earnings guidance for the year,” he said. “It is a tremendous opportunity to lead this organization and work with HCN’s outstanding management team to continue delivering outstanding results and total shareholder returns.”

Other investments during the quarter included $57 million in acquisitions, $64 million in development funding, $29 million in loan advances and $6 million in capital improvements.

Looking ahead, the company increased its 2014 guidance and now expects to generate normalized FFO in a range of $4.03 to $4.13 per diluted share, now representing a 6%-8% increase from 2013.

Written by Jason Oliva

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