Health Care REIT (NYSE: HCN) announced Thursday has completed an 11-property senior housing portfolio acquisition in Southern England from Gracewell Healthcare for £153 million (USD$257 million) in cash.
Separately, Sunrise Senior Living, in which HCN owns a 24% interest, has acquired Gracewell’s management company and will manage the portfolio. The companies are also partnering on a pipeline of future development that will be owned by HCN and spans another 11 properties in the near term.
The private-pay senior living portfolio being acquired includes 767 units in total, with a majority of the communities having been built since 2012 and still in lease up. The portfolio is expected to achieve an 8% NOI yield once stabilized and is owned by Health care REIT under a RIDEA structure.
The development partnership includes working with Gracewell founders Tim Street and Daniel Kay, currently financed by institutional investor Patron Capital. Financing will continue under the existing agreement, with the development company owning and operating a separate company that will develop properties expected to be owned by HCN and managed by Sunrise upon their completion. The development pipeline stands about 11 properties strong in the near term and will be acquired by HCN at a fixed price, representing an acquisition pipeline of around $269 million.
Health Care REIT is already active in the United Kingdom and noted in a recent earnings call that there were a “handful” of operators the company would like to partner with in the U.K. Gracewell has received several awards for its care and asset quality, the company noted in its announcement of the deal.
“HCN has built a strategic position in the UK as the leading partner to the premium, private pay seniors housing industry,” said Tom DeRosa, HCN’s CEO. “This latest acquisition brings together the operating expertise of Sunrise, the development expertise of Gracewell and the strategic capital of HCN. We are pleased to expand our relationship with our largest operating partner by building on our leading position in the highly attractive Greater London and Southern England markets. We’re highly confident in the Sunrise management team and their ability to deliver a premium product to their residents in the US, Canada and the UK.”
Sunrise currently manages 27 properties for HCN in the UK and will continue to do so in addition to the partnership with HCN and Gracewell.
“Through our best-in-class platform and capital partnership with HCN, Sunrise is strongly positioned to grow,” said Chris Winkle, CEO of Sunrise. “We’ve been operating premium seniors housing communities in the UK for more than a decade and have a tremendous local operating platform through our exceptional portfolio of 27 communities, which are concentrated in Greater London and Southern England, that we manage for HCN.”
HCN recently recapitalized its ownership stake in Sunrise’s management company, increasing its ownership to a 24% stake. Canadian company Revera owns the majority 76% of the management company.
In July 2013, HCN completed the final phase of its acquisition of Sunrise Senior Living, a transaction that had an initial purchase price of $1.9 blllion and was valued at an aggregate $4.3 billion at the time of closing. The acquisition spanned 120 wholly-owned properties and five additional properties owned in third-party joint ventures.
The day prior to the announcement of the partnership, HCN announced it was acquiring HealthLease REIT for $950 million and had teamed with Mainstreet Property Group in a transaction that represents a combined potential $2.3 billion investment.
Written by Elizabeth Ecker