Health Care REIT Dealing Sunrise Senior Living to KKR, Others

KKR, Beecken Petty O’Keefe & Co. and Coastwood Senior Housing Partners are going to acquire Sunrise Senior Living for about $130 million from Health Care REIT, the listed, Ohio-based real estate investment trust. Health Care REIT will invest $26 million for a 20% interest in the new entity.

PRESS RELEASE:

TOLEDO, Ohio– Health Care REIT, Inc. (NYSE:HCN) announced today that in connection with its previously announced acquisition of Sunrise Senior Living, Inc. (NYSE:SRZ), affiliates of Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, “KKR”), affiliates of Beecken Petty O’Keefe & Company (“BPOC”) and Coastwood Senior Housing Partners LLC have entered into a definitive agreement to acquire the management company business of Sunrise Senior Living for approximately $130 million. Health Care REIT will invest approximately $26 million for a 20% interest in the new entity. Under the agreement, the sale will close immediately prior to Health Care REIT’s previously announced acquisition of Sunrise Senior Living.
“The acquisition of the management business by a partnership with substantial expertise in both health care and real estate, that includes KKR, BPOC and Coastwood, powerfully endorses the Sunrise value proposition,” said George L. Chapman, Health Care REIT’s Chairman and Chief Executive Officer. “The backing of Sunrise management ensures a stable and growing management platform that aligns perfectly with our long-term value creation expectations.”
The management business being sold will include existing Sunrise management contracts covering 282 communities, which includes the 125 communities to be acquired by Health Care REIT, leasehold interests in 15 communities and 12 development parcels. In addition, a subsidiary of the Sunrise management partnership will employ all employees of Sunrise Senior Living and operate under the “Sunrise” name and brand. Immediately following the completion of the sale of the management company, Health Care REIT will proceed with the acquisition of Sunrise Senior Living, including its interest in 125 senior living communities.
The Sunrise management partnership has agreed that the management company entity will reduce the base management fees charged on the originally announced 20 wholly owned communities to 5.0% of revenues, which will be adjusted upwards or downwards depending on achievement of net operating income performance hurdles. The Sunrise management partnership further agreed that the management company entity will reduce the base management fees on the originally announced 105 joint venture communities, as joint venture partners are bought out and the properties become wholly owned, to the lesser of the current management fee or 5.5% of revenues, which will be adjusted upwards or downwards depending on achievement of net operating income performance hurdles.
This transaction has been agreed within the framework of the previously announced merger agreement between Health Care REIT and Sunrise Senior Living, pursuant to which Health Care REIT will acquire all of the outstanding common stock of Sunrise Senior Living for $14.50 per share in an all-cash transaction, and which contemplated a sale or other disposition of Sunrise Senior Living’s management business to take effect immediately prior to the consummation of the closing of the acquisition of Sunrise Senior Living. Although not a condition to close the acquisition of Sunrise Senior Living, Health Care REIT expects to use the proceeds from the sale of the management business to partially fund its acquisition of Sunrise Senior Living.
About Health Care REIT, Inc.
Health Care REIT, Inc., an S&P 500 company with headquarters in Toledo, Ohio, is a real estate investment trust that invests across the full spectrum of seniors housing and health care real estate. The company also provides an extensive array of property management and development services. As of June 30, 2012, the company’s broadly diversified portfolio consisted of 1,010 properties in 46 states and Canada.
About Kohlberg Kravis Roberts & Co.
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $61.5 billion in assets under management as of June 30, 2012. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with investors through its client relationships and capital markets platform. KKR is publicly traded on the New York Stock Exchange (NYSE:KKR).
About Beecken Petty O’Keefe & Company.
Beecken Petty O’Keefe & Company is a Chicago-based private equity management firm founded in 1996 to invest in middle-market buy-out transactions, recapitalizations, and growth platforms in the health care industry. BPOC evaluates, structures, and manages investments on behalf of institutional and individual investors. Since inception, BPOC has raised in the aggregate over $1 billion to invest in private transactions from its three committed private equity funds and third party co-investors. The firm is headquartered in Chicago, Illinois.
About Coastwood Senior Housing Partners, LLC
Coastwood Senior Housing Partners, LLC is an investment firm led by Daniel A. Decker that specializes in seniors housing and related services.
About Sunrise Senior Living, Inc.
Sunrise Senior Living, a McLean, Va.-based company, employs approximately 31,600 people. As of June 30, 2012, Sunrise Senior Living operated 307 communities located in the United States, Canada and the United Kingdom, with a unit capacity of approximately 29,800 units. Sunrise Senior Living offers a full range of personalized senior living services, including independent living, assisted living, care for individuals with Alzheimer’s and other forms of memory loss, as well as nursing and rehabilitative services. Sunrise Senior Living’s senior living services are delivered by staff trained to encourage the independence, preserve the dignity, enable freedom of choice and protect the privacy of residents.