BRENTWOOD, TENN. — Brookdale Senior Living (NYSE: BKD), an owner-operator based in the Nashville area, has entered into agreements to acquire three triple-net-leased seniors housing portfolios totaling 41 properties and 2,789 units. The combined purchase price is $610 million.
Brookdale currently leases and operates the properties on triple-net bases. In explaining the move, company officials noted that by taking ownership of these communities, Brookdale will gain portfolio management flexibility that is not present in a leased structure, providing additional opportunities to further enhance shareholder value.
“The immediate and long-term benefits of these real estate transactions are wide-ranging,” says Cindy Baier, Brookdale’s president and CEO. “They include future portfolio flexibility that comes through asset ownership, the opportunity to fully realize the long-term benefits of the powerful senior housing outlook and, following closing, the expected immediate improvement in adjusted free cash flow from a lower-cost capital structure.”
In the first transaction, Brookdale agreed to buy 11 properties totaling 1,228 units from a joint venture led by Ohio-based REIT Welltower Inc. (NYSE: WELL) for $300 million. The properties are largely concentrated in West Coast markets, and the portfolio comprises 470 independent living units, 723 assisted living units and 36 memory care units with a collective occupancy rate of about 80 percent. Under the terms of the deal, Brookdale will assume $195 million in agency debt that is attached to the properties. The debt carries a 4.92 percent fixed interest rate and matures in March 2027.
In the second deal, Brookdale consented to acquire five assets totaling 686 units for $175 million. Welltower was the sole seller in that transaction, and the properties are located in Tennessee, Kansas and Colorado. The portfolio consists of 270 independent living apartments, 170 assisted living residences, 152 memory care units and 94 skilled nursing units with a weighted average portfolio occupancy rate exceeding 90 percent.
In the third sale, the company entered into agreements to purchase 25 communities totaling 875 units from Massachusetts-based REIT Diversified Healthcare Trust (NASDAQ: DHC) for $135 million. The properties in this portfolio are scattered around the country and range in size from 19 to 92 units. More specifically, the portfolio includes a total of 556 assisted living units and 319 memory care units with a weighted average portfolio occupancy of approximately 80 percent.
Brookdale is financing the acquisitions through a range of structures: assumption of sellers’ existing below-market rate debt; deployment of net proceeds from the sale of a newly issued series of convertible senior notes; utilization of proceeds from nonrecourse mortgage financing on certain assets; and use of cash on hand.
The three portfolio acquisitions are expected to close by the end of the year.
As of June 1, Brookdale Senior Living ranked at the third largest U.S. seniors housing owner by total number of units with 29,824 units spread across 336 properties, according to the American Seniors Housing Association. Brookdale also ranked as the largest operator with 53,812 units and 641 properties. The company’s stock price opened at $6.72 per share on Monday, Sept. 30, the day this acquisition was announced, up from $4 per share a year ago.
— Taylor Williams