Health Care REIT Buys UK Seniors Portfolio for $257M
- Aug 15, 2014
Toledo, Ohio—Health Care REIT has acquired a portfolio of 11 seniors housing properties in the UK for £153 million (about $257 million) in cash from Gracewell Healthcare. Sunrise Senior Living, the management company in which Health Care REIT owns a 24 percent interest, will separately purchase Gracewell’s management company and manage the portfolio going forward.
The portfolio is concentrated in southern England and comprised of private-pay properties with a total of 767 units. A majority of the portfolio was built since 2012 and is still in lease-up.
Upon stabilization of the properties, Health Care REIT says it expects to achieve about an 8 percent NOI yield. The company owns the portfolio under the RIDEA structure, created by the REIT Investment Diversification and Empowerment Act of 2007, which allows REITs to share in the risk of a property or property portfolio, while also letting them share in the profits from operations.
Also, Ohio-based HealthCare REIT and Sunrise have entered into a development agreement with Gracewell’s founders, Tim Street and Daniel Kay, who will continue to be financed by Patron Capital (DevCo), a pan-European institutional investor focused on property-backed investments. DevCo will own and operate a separate company that will develop seniors housing, which HealthCare REIT expects to buy upon completion of construction and have managed by Sunrise.
The agreement includes the redevelopment of one property in the portfolio and a near-term development pipeline of 11 additional properties with 812 units primarily in greater London and elsewhere Southern England. The near-term pipeline is expected to be completed over the next two years, representing an acquisition pipeline of £160 million (about $269 million).
With completion of the near-term pipeline, Health Care REIT expects DevCo to develop as many as five more seniors properties each year. These communities will also be sold to Health Care REIT upon completion.