Blackstone Bid For Sunwest Management Approved
March 29, 2010
Very seldom does competitive bidding lower a price, but it usually results in a higher price when there are motivated buyers involved. Such was the case last week when Blackstone Real Estate Advisors and AEW Capital Management sat down with
Judge Hogan to sharpen their proverbial pencils and craft their best offer to become the stalking horse for the Sunwest Management portfolio. Last September, Blackstone, together with its bidding partners Columbia Pacific Advisors and Emeritus Corporation, offered about $1.245 billion for 148 Sunwest properties, which was reduced to $1.153 billion for 134 properties after due diligence. Apparently, the AEW bid was willing to include the original 148 properties plus one, so the Blackstone group was forced to match it to stay in the game. The new deal, for 149 properties, includes $285 million of cash and about $1.07 billion of assumed debt, or about $110,000 per unit. What most likely sold the judge was that the higher bid will allow more of the original TIC investors to participate (up to 49%) in any upside in value. Emeritus will still keep its 5% of revenues management fee income from the transaction assuming it goes through. Other interested bidders will have about six weeks to take a look, with the final auction occurring on or about May 17. Although it is still possible that AEW will bid after reflecting on the situation, or find some joint venture partners of its own, it is not considered to be likely. We also think it is unlikely that another bidder will emerge to offer more than the usual 5% overbid to derail the stalking horse bid, but we have been surprised before. More details will be in the April issue.