Blackstone Closes Sunwest, Merrill Gardens Deals
August 5, 2010
August 5, 2010
This has been a big week in seniors housing. At long last, Blackstone Real Estate Advisors closed late today on its acquisition of the Sunwest Management portfolio. Of the 149 properties that were in the contract, 144 remained at closing. Of those, 132 actually transferred today and the remaining 12 will close later. Emeritus Senior Living, which has partnered with Blackstone, has had plenty of time to gear up to take over management, and we hear that all is quiet on the western front and that they have been all over the properties for a while anyway. In addition, the employees at the facility level are glad to have a financially strong owner at the helm, and a manager that is not in turmoil and that will focus on growth and improvements.
In the other big news,
Health Care REIT announced that it has formed a joint venture with Merrill Gardens involving 13 retirement communities owned by the REIT and leased to Merrill Gardens and an additional 25 communities owned by Merrill Gardens that will be put into the joint venture. The total value of the new entity is approximately $817 million, with Health Care REIT owning 80% and the Merrill family owning 20%. The transaction value comes to about $186,200 per unit, with an implied cap rate of 7.5% on 2011 estimated EBITDA. This will be a long-term partnership that will grow over the years as Merrill Gardens grows and its development pipeline gets built out. Although a bit on the aggressive side from a cap rate perspective in today's market, this provides ample opportunity for the REIT to enhance its returns with its ownership structure and taking 80% of the net operating income as opposed to lease payments. It also enables the Merrill family to participate in the growth of Merrill Gardens and its profits. A full analysis of the deal will appear in our next issue of The SeniorCare Investor. This may trigger another similar deal by the end of the year.