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Health Care REIT To Acquire Sunrise Senior Living

Health Care REIT, Inc. (NYSE:HCN) announced today that it has entered into a definitive agreement to acquire all of the outstanding common stock of Sunrise Senior Living, Inc. (NYSE:SRZ) for $14.50 per share in an all cash transaction. The acquisition positions Health Care REIT among the largest owners of seniors housing in the world with over 58,000 units located in the U.S., Canada, and the United Kingdom.

As part of the transaction, Health Care REIT will acquire Sunrise’s 20 wholly owned seniors housing communities and Sunrise’s interest in joint ventures that own 105 seniors housing communities. The 20 wholly owned communities are located in the U.S. (17) and Canada (3), while the joint venture communities are located in the U.S. (78) and the United Kingdom (27). The purchase price reflects a real estate value of approximately $1.9 billion, of which approximately $950 million will be paid in cash and the balance through the assumption of debt at an average interest rate of approximately 4.9%.

“This acquisition powerfully advances our strategic vision: own the highest quality, private pay seniors housing communities in strong, growing, affluent markets and align with experienced, dynamic management teams,” said George L. Chapman, Health Care REIT's Chairman and Chief Executive Officer. “Sunrise has been a leader in the transformation of seniors housing. This transaction positions us to build on our collaborative, relationship based investment philosophy and benefit from the ongoing transformation of the sector. There are few opportunities to acquire assets of this quality in a transaction of this scale.”

“Sunrise has been at the forefront for more than 30 years in creating best-in-class, high-end senior living communities,” said Mark Ordan, Sunrise’s Chief Executive Officer. “The entire Sunrise management team is pleased to be entering into this transaction with Health Care REIT.”

Strategic Highlights
  • Institutional Quality Properties in High Barrier to Entry Markets. The communities have a median age of eight years, and 90% of the communities are Sunrise’s “mansion” prototype. The portfolio is concentrated in New York, Los Angeles, San Francisco, Washington, D.C., Philadelphia, Boston, Chicago, and London. Approximately 50% of the properties are located in top 5 MSAs and approximately 85% of the properties are located in top 20 MSAs within their respective countries.
  • Embedded Investment Pipeline In Excess of Two Billion Dollars. The acquisition includes a real estate pipeline of more than $2 billion that could be realized over time by purchasing additional interests from existing Sunrise joint venture partners. At the time of acquisition, Health Care REIT expects to own on average an approximately 28% interest in the 105 joint venture communities. Of the 105 joint venture communities, 37 have purchase options that are exercisable in 2013, 13 have purchase options that are exercisable in 2014, and 21 are subject to open buy/sell rights that could result in Health Care REIT acquiring a 100% ownership interest.
  • Acquisition Structured to Capture Strong NOI Growth. Health Care REIT intends to structure ownership and operation of the wholly owned communities and any joint venture communities, if and when acquired, under RIDEA. Health Care REIT expects property-level net operating income to increase 4% to 5% per year on average over the long term, assuming economic conditions consistent with the current market.
  • Future Value Creation. Health Care REIT expects to create additional value for shareholders when joint venture interests are acquired, existing debt is refinanced, and operational and structural efficiencies are achieved.
  • Enhanced Diversification and Private Pay Component. The transaction is expected to increase Health Care REIT’s private pay percentage from 74% to 77%. Sunrise will become Health Care REIT’s second largest operator at approximately 11% of the portfolio based on investment balance.

Timing and Advisors

The closing of the transaction is subject to approval by the shareholders of Sunrise. The transaction is expected to close in the first half of 2013.

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