Health Care REIT Buys Gracewell Assets, Extends Sunrise Ties


Health Care REIT, Inc. (HCN) is on an acquisition spree. Recently, the pan-European institutional investor – Patron Capital Partners – shed its Gracewell Health Care business for £153 million (about $257 million). Health Care REIT, Inc. (HCN) acquired the 11 premium seniors housing communities of Gracewell Healthcare concentrated in Southern England, while Sunrise Senior Living, LLC, which is a management company where Health Care REIT owns 24% stake, purchased Gracewell’s management company.

The latest purchase follows the company’s last-week announcement regarding a deal to acquire HealthLease Properties REIT in a cash transaction valued at around $950 million.

Health Care REIT estimates realizing around an 8% NOI yield from this RIDEA structure-owned portfolio which comprises purpose-built, premium private-pay communities with 767 units. Going forward, Sunrise would manage this portfolio.

In addition, a development agreement has been inked under which Patron will carry on as a partner with Health Care REIT, Sunrise Senior Living and Gracewell’s founders – Tim Street and Daniel Kay.

This collaboration is aimed at redevelopment of 1 community in the above mentioned portfolio as well as a near-term development pipeline of 11 additional communities, with 812 units positioned mainly in Greater London and Southern England. Following its development over the next two years, the near-term pipeline is expected to be purchased by Health Care REIT (at a fixed price) and managed by Sunrise.

This represents an acquisition pipeline of £160 million (around $269 million). Health Care REIT expects to reap high-single to low-double-digit NOI yields from these developments upon stabilization. Following this near-term pipeline, this partnership is also expected to develop at least five communities per annum, which would be acquired by Health Care REIT.

Going forward, we believe that such strategic acquisitions would serve as growth drivers for Health Care REIT. The Gracewell Healthcare properties acquisition, in particular, would help the company to capitalize on the attractive demographics of Greater London and Southern England markets, along with enhancing its private pay seniors housing portfolio base. While a predicted rise in interest rate is a concern, aging population and increased healthcare spending for senior citizens promise strong prospects.

Health Care REIT currently carries a Zacks Rank #3 (Hold). Investors interested in the REIT industry may also consider stocks like DCT Industrial Trust Inc. (DCT), Extra Space Storage Inc. (EXR) and Omega Healthcare Investors Inc. (OHI). All these stocks hold a Zacks Rank #2 (Buy).

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