Health Care REIT Terminates Deal

October 31, 2008

October 31, 2008

 In a move that probably surprised very few, Health Care REIT announced today that after its two-week due diligence extension it decided to pull the plug on its acquisition of Arcapita's 90% interest in 29 assisted living communities managed

by Sunrise Senior Living. Although the reason given was the changed conditions in the capital markets, we believe it really came down to the price, which was high to begin with and became even more unreasonable as a result of the new market conditions. Health Care REIT had already raised the funds it needed with an equity offering in early September, so the capital markets certainly would not have impacted its ability to close the deal. It just didn't make financial sense any more, and we assume the REIT tried to renegotiate the price downward, apparently without any success. This was the right decision for Health Care REIT, and we applaud them for it; for Sunrise, it was very bad news because the company really needs the $50 to $60 million of cash it was going to receive at closing because of its 10% interest. Investors seemed to understand this problem, sending Sunrise shares down 40% to a new low of $2.57 per share, more than wiping out yesterday's gain. We will have more on this in the upcoming November issue.


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