Brookdale, HCP Acquire Seniors Housing Portfolio for $849M

by Jeff Shaw

BRENTWOOD, TENN. AND IRVINE, CALIF. — Brookdale Senior Living Inc. (NYSE: BKD) and HCP Inc. (NYSE: HCP) have entered into a definitive agreement to purchase a portfolio of 35 private-pay seniors housing communities from Canadian real estate investment trust Chartwell Retirement Residences for $849 million.

Located in eight states including Florida, Texas and Colorado, the portfolio consists of 5,025 units and is comprised of 33 senior housing properties representing 4,792 units, with a mix of 46 percent assisted living, 45 percent independent living, 5 percent memory care and 4 percent skilled nursing.

The portfolio also includes leasehold interests in two communities, which are wholly owned by HCP, representing 233 units that include purchase-option rights exercisable in 2017.

“This portfolio acquisition provides attractive risk-adjusted returns for our shareholders, and also creates value for our operating partner through a real estate-driven transaction,” says Lauralee Martin, president and CEO of Irvine, Calif.-based HCP.

“Brookdale’s familiarity with this portfolio will be a tremendous asset as we avoid any transition issues and immediately implement capital investment plans to generate future growth above traditional triple-net rent escalators,” she adds.

The portfolio will be acquired using a RIDEA (REIT Investment Diversification and Empowerment Act) joint-venture structure, with HCP and Brookdale owning 90 percent and 10 percent of the properties, respectively.

Brentdale, Tenn.-based Brookdale has operated the communities since 2011 following its acquisition of Horizon Bay, and will continue to manage the communities after the purchase is finalized under a long-term management agreement.

The portfolio is currently 89 percent occupied with an average monthly rate of $3,425. It is projected to generate a first-year cash yield of approximately 6.6 percent.

Chartwell cited a favorable currency exchange (78 cents U.S. to $1 Canadian) and strong U.S. seniors housing market, as well as a desire to focus on the company’s Canadian portfolio, as the reason for selling.

Closing of the acquisition is expected in the third quarter of 2015, and is subject to regulatory approvals and other customary closing conditions.

Brookdale Senior Living operates independent living, assisted living, dementia care and continuing care retirement centers throughout the United States, with approximately 1,150 communities in 46 states. HCP is a fully integrated REIT that invests primarily in real estate serving the healthcare industry in the United States.

Chartwell Retirement Residences is a Mississauga, Ontario-based REIT founded in 2003 that operates seniors housing properties in Canada and the United States.

Brookdale’s stock price closed at $38.20 per share on Monday, March 16, up from $32.59 per share a year ago.

HCP’s stock price closed at $40.56 per share on Monday, March 16, up from $37.16 per share a year ago.

— Scott Reid

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