Invesque Inc (TSX: IVQ) has agreed to acquire Commonwealth Senior Living LLC, a Charlottesville, Virginia-based developer, owner and operator of senior living communities.
The deal, which includes 20 communities comprising 1,440 units with 1,716 beds, reflects a purchase price of US$340.4 million ($458 million). It is expected to close in Q3 2019.
Commonwealth was founded in 2002 by Richard Brewer and Municipal Capital Appreciation Partners (MCAP), a U.S. real estate private equity firm.
Following the deal, Invesque, a Toronto-based healthcare real estate company formerly known as Main Street Health Investments, said it will have more than US$1.8 billion of asset value with 122 properties.
Invesque to Acquire Commonwealth Senior Living and 20 of its Communities for US$340.4 Million, Creating a Leading Healthcare Platform Positioned for Future Growth
Invesque will have more than $1.8 billion of asset value including 122 properties
Transformational acquisition repositions Company with majority private pay revenue portfolio and vertically integrated seniors housing platform
Transaction expected to be immediately accretive to adjusted FFO (“AFFO”) per share
TORONTO, May 22, 2019 /CNW/ – Invesque Inc. (TSX: IVQ) (“Invesque” or the “Company”) today announced that it has entered into a definitive agreement (the “Transaction Agreement”) to acquire 20 private pay senior living communities comprising 1,440 units with 1,716 beds (the “Portfolio”) and Commonwealth Senior Living, LLC (“Commonwealth”) for a purchase price of US$340.4 million (the “Transaction”). The Transaction, which is subject to customary closing conditions, is expected to close in the third quarter of 2019.
Highlights of the Transaction
Strategic Portfolio Acquisition: The Portfolio is strategically clustered in attractive and growing markets across Virginia and Pennsylvania with an average effective age of approximately 10 years. Invesque will obtain an exclusive right of first offer on three additional communities that are currently, and will continue to be, managed by Commonwealth post-closing. The Portfolio is expected to complement Invesque’s existing platform and expand its presence in both Virginia and Pennsylvania.
Increases Exposure to Private Pay Seniors Housing: The Portfolio comprises 1,440 private pay independent living, assisted living and memory care units with an aggregate resident capacity of 1,716 beds. The Transaction meaningfully increases Invesque’s exposure to private pay seniors housing, which is expected to represent approximately 52% of the Company’s consolidated net operating income (“NOI”) post-closing.
Enhanced Scale and Investment Platform: Upon the closing of the Transaction, Invesque will have over US$1.8 billion of asset value with 122 properties and 10,844 beds strategically located in growing markets across 20 U.S. states and two Canadian provinces.
Improved Portfolio Diversification: The Transaction further enhances Invesque’s stable, industry-leading portfolio of healthcare facilities diversified across the spectrum of care with multiple best-in-class operating partners.
Acquisition of Operating Platform: Together with the Portfolio, the Company will acquire the Commonwealth management team. These long-tenured and highly respected seniors housing operators will serve as the foundation for Invesque to build a vertically integrated, regional operating and management model within its existing seniors housing portfolio. Invesque may leverage this operating platform for the management of additional Invesque properties in the future, which would generate additional synergies and earnings growth to Invesque. Following the Transaction, Invesque’s operating property portfolio will contribute 33% of the Company’s NOI.
Validation of Embedded Value and Addition of New Investors: Upon closing, the Invesque acquisition vehicle that is acquiring the Portfolio will issue US$67.2 million of preferred interests (the “Preferred Interests”) to Commonwealth’s existing investors. The Preferred Interests will be exchangeable by holders into common shares of Invesque at US$9.75 per share and have an expected initial dividend rate of 6.50% per annum.
Immediately Accretive Transaction to AFFO per share. The Transaction is expected to be immediately accretive to Invesque’s AFFO per share.
“We are thrilled to partner with Commonwealth and acquire this attractive portfolio of seniors housing properties” said Scott White, Chairman of the Board of Directors and CEO of the Company. “We have long believed alignment is the key to a successful partnership, and the Commonwealth acquisition allows us to vertically integrate with a leading regional operator. Furthermore, this transaction positions our portfolio well as we continue our focus on creating a diversified healthcare real estate company. Following this acquisition, we will have a larger and stronger platform to finance growth and take advantage of market fragmentation in the healthcare industry to create value for our shareholders.”
Commonwealth Senior Living Overview
Commonwealth, collectively with its affiliates, is a leading high-quality developer, owner, and operator of senior living communities led by a highly experienced team focused on both operations and steady growth through acquisition, expansion, and redevelopment opportunities. Commonwealth and affiliates own and operate a well-clustered portfolio of 24 high quality private pay communities strategically located in attractive and growing Mid-Atlantic markets with a concentration in Virginia and locations in Connecticut and Pennsylvania.
Founded in 2002 by Richard J. Brewer and Municipal Capital Appreciation Partners (“MCAP”), Commonwealth has an established reputation as a high-quality senior living operator with industry-wide recognition for differentiated and innovative care programming, best practices in talent acquisition and development, and an award-winning dedication to providing exceptional quality resident care.
As part of the Transaction, the Company will be acquiring 20 of the 24 Commonwealth assets with an exclusive right of first offer on three additional assets that are currently, and will continue to be, managed by Commonwealth. Commonwealth’s revenue is generated from private pay funding sources, and the Portfolio does not have direct exposure to Medicare, Medicaid or other government funding sources.
Following completion of the Transaction, Commonwealth’s experienced senior management team will continue to manage and operate the Portfolio.
“We are excited to partner with Invesque as we continue to execute on delivering outstanding support to our associates and exceptional care to our residents” said Richard Brewer, CEO of Commonwealth. “The Invesque transaction is a win-win for our investors and our team and will allow us to continue to grow and provide high quality services for years to come.”
Invesque Pro Forma Portfolio
The Transaction represents a significant expansion of the Company’s portfolio, increasing the number of properties from 102 to 122, and the number of beds from 9,128 to 10,844 across 20 U.S. states and two Canadian provinces. The Transaction significantly enhances the Company’s operator, geographic and property-type diversification. The tables below provide a more detailed breakdown of the Company’s pro forma portfolio.
The consideration to be paid to Commonwealth’s existing investors at closing of the Transaction will include approximately US$67.2 million of Preferred Interests in the Invesque acquisition vehicle acquiring the Portfolio. The Preferred Interests will be exchangeable by holders into common shares of Invesque at a fixed exchange price of US$9.75 per Invesque common share. The Preferred Interests have a fixed liquidation value and an expected initial dividend rate of 6.50% per annum. Additionally, Invesque will have the right to redeem the Preferred Interests at par value in increments of up to 40% of the originally issued amount every twelve months beginning 24 months after closing.
The acquisition of the Portfolio will be capitalized with approximately US$220 million of property-level mortgage financing. The remainder of the purchase price will be funded with a draw on the Company’s revolving credit facility and cash on hand.
The proposed transaction is subject to obtaining certain regulatory approvals, including Toronto Stock Exchange (“TSX”) approval, Invesque shareholder approval (which is expected to be obtained by way of a written consent) and other customary closing conditions.
BMO Capital Markets is serving as financial advisor to Invesque. Barack Ferrazzano Kirschbaum & Nagelberg LLP is serving as Invesque’s primary legal counsel with assistance from Goodmans LLP and other law firms. Houlihan Lokey Capital, Inc. is serving as financial advisor to Commonwealth. Burr & Forman LLP is serving as Commonwealth’s legal counsel.
Invesque is a healthcare real estate company with an investment thesis centered around the opportunity created by the global aging demographic trend. Invesque currently capitalizes on this opportunity by investing in a highly diversified portfolio of income generating health care properties located across the United States and Canada through long-term absolute net leases, joint ventures, and development capital. For more information, visit www.invesque.com.
For further information: Vineet Bedi, 1-317-643-6778, email@example.com