Health Care REIT Inc. (HCN) has completed the acquisition of HealthLease Properties REIT for a purchase price that denotes a 7% initial cash yield. The acquisition enriches the company’s portfolio with high-quality seniors housing, post-acute care and long-term care communities. However, the company’s shares fell 1.2% during yesterday’s regular trading session on broader market concerns.
Further, HCN has formed a partnership with Mainstreet Property Group. This includes a deal under which HCN would shell out around $369 million, reflecting a 7.5% initial cash yield, for acquiring 17 communities under the Next Generation brand. The purchase is expected to close in phases after construction is accomplished, starting in fourth quarter of the current year through the first quarter of 2016.
In addition, HCN struck a deal with Mainstreet to offer mezzanine financing at favorable mid-teen interest rates and gain purchase option rights for another 45 Next Generation development projects, upon accomplishment of each project. This represents an acquisition pipeline worth $1.0 billion, expected to be delivered in phases from 2016 through first-quarter 2017.
Managed under long-term triple-net lease agreements by reputed operators, the portfolio acquisition is expected to facilitate a steady source of rental income in the long term, thus providing HCN with a competitive edge.
As such, demand for healthcare facilities and senior housing have been on the rise, with an increase in the elderly population and consequent proliferation of healthcare expenses as well as rise in new insured individuals due to the Affordable Care Act. Strong players in the market have announced acquisitions to capitalize on this trend.
In September, Sabra Health Care REIT Inc. (SBRA) announced the acquisition of 21 100% private-pay independent living facilities from affiliates of Holiday Acquisition Holdings Corp., in a sale/leaseback deal of $550.0 million in cash. In October too, the company acquired transitional care portfolio for $41.0 million and 8 senior housing facilities for $59.1 million.
In August, Ventas Inc. (VTR) completed the acquisition of 29 Canadian independent living communities from Holiday Retirement for $957 million Canadian dollars. Management of these communities has been assumed by Atria.
Ventas is also slated to acquire American Realty Capital Healthcare Trust Inc. in a stock and cash deal worth $2.9 billion. The deal is expected to close by this year-end. Earlier, NorthStar Realty Finance Corp. (NRF) announced a deal to acquire Griffin-American Healthcare REIT II in a $4 billion transaction.
HCN currently has a Zacks Rank #3 (Hold).
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