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NASHVILLE, TENN. — Brookdale Senior Living Inc. (NYSE: BKD) has entered into a definitive agreement to add to its portfolio more than 90 senior living communities totaling 16,000 units in 19 states through acquisition of 100 percent equity interest in Horizon Bay Realty, L.L.C.

The transaction includes a restructuring of Horizon Bay’s relationship with HCP, Inc. (NYSE: HCP), which affects 33 of the 90 properties included in Horizon Bay’s portfolio. Under the new agreement, Brookdale will own and operate 21 communities through a new joint venture with HCP and triple net lease the remaining 12 properties from HCP.

The 21-community portfolio as part of the joint venture totals 5,070 units (approximately 4,252 independent living, 736 assisted living, and 82 Alzheimer's/dementia care), primarily located in Florida, Texas, Illinois and Rhode Island. The 12 leased communities are primarily located in Texas and Rhode Island, totaling 1,547 units (approximately 588 independent living, 578 assisted living, 225 Alzheimer's/dementia care and 156 skilled nursing units).

The remaining 57 communities comprise approximately 9,548 units consisting of 5,445 independent living units, 3,011 assisted living units, 567 Alzheimer's/dementia care units and 525 skilled nursing beds in 15 states, to which Horizon Bay provides management services. Horizon Bay's primary third party management relationships are with Chartwell Seniors Housing Real Estate Investment Trust (45 communities, 6,420 units) and AEW Capital Management (three communities and 1,690 units, excluding two additional communities transitioning to Horizon Bay in the near term). As part of the transactions, Brookdale and Chartwell expect to simplify and restructure Horizon Bay's existing management relationships with Chartwell.

Bill Sheriff, Brookdale's chief executive officer, said that this acquisition provides a significant opportunity for Brookdale to further build scale, operating platform and market concentrations. Consistent with its long-term strategy, Sheriff said that the transaction may also ultimately provide an opportunity to own an interest in the real estate associated with certain managed communities.

On the investment side, Mark Ohlendorf, co-president and chief financial officer of Brookdale, explained that the company expects to invest approximately $47 million in the first year of operation, including acquisition consideration, capital contributions to the HCP joint venture, integration costs, transaction expenses and capital expenditures related to the rollout of ancillary services programs. Brookdale estimates return on invested capital to average approximately 35 percent to 40 percent per year over the first three years.

Thilo Best, Horizon Bay's chairman and chief executive officer, will be joining Brookdale as executive vice president and chief investment officer and will serve as a member of its senior management executive committee.

Each of the transactions is subject to the closing conditions and contingencies, and they are expected to close on August 1.

— Dan Marcec

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