TOLEDO, OHIO, AND TORONTO — Health Care REIT Inc. (NYSE: HCN) and Revera Inc. (Revera) have entered into a definitive agreement to acquire Regal Lifestyle Communities Inc. (Regal) (TSX: RLC) through an existing 75/25 joint venture for a total value of approximately CA$766 million, or US$623 million.
Toronto-based Regal is a publicly traded corporation that owns and operates 23 seniors housing communities with over 3,600 units. The private-pay portfolio includes 13 communities in Ontario, seven in Quebec, and one each in British Columbia, Saskatchewan and Newfoundland.
Approximately 83 percent of the portfolio’s net operating income is derived from properties in Toronto, Montreal, Ottawa and Vancouver.
HCN will have a 75 percent stake in the portfolio and Revera will own 25 percent.
“Together with our partner, Revera, we continue to deliver compelling housing and care settings for Canada’s growing senior population,” says Tom DeRosa, CEO of Toledo-based HCN.
“The acquisition of Regal is a rare opportunity to add a large, high-quality, private-pay portfolio concentrated in Canada’s largest metropolitan markets, where there is strong underlying demand.”
The acquisition price represents a per-share cost of CA$12. The initial cash yield is expected to be 6.1 percent and to be immediately accretive to funds from operations and funds available from distribution per share. All currency references are based upon an exchange rate of CA$1.23 to US$1.
HCN and Revera formed the joint venture in May 2013 when HCN acquired 47 seniors housing communities from Revera for CA$1.34 billion.
Including the acquisition of Regal, the joint venture will comprise 94 communities with gross investments of CA$2.8 billion. Upon completion of the transaction, HCN will own an interest in over 21,500 seniors housing units, representing approximately 10 percent of the Canadian seniors housing supply and 15 percent of the supply in the five largest Canadian markets.
Additionally, Revera and HCN jointly own the Sunrise Senior Living management company, with Revera owning a 76 percent interest and HCN owning a 24 percent interest.
The transaction is expected to close in the second half of 2015. The purchase also includes existing debt of CA$359 million. HCN’s cash requirement is $306 million and the weighted average interest rate is 3.8 percent.
Brookfield Financial and BMO Capital Markets are acting as financial advisors to HCN and Revera. Goodmans LLP is acting as HCN and Revera’s legal advisor. CIBC is acting as financial advisor to Regal. Stikeman Elliot LLP is acting as legal counsel to Regal.
HCN is a real estate investment trust that invests across the full spectrum of seniors housing and health care real estate. The company also provides an array of property management and development services. As of March 2015, the company’s portfolio consisted of 1,384 properties in 46 U.S. states, the United Kingdom and Canada.
Revera owns or operates more than 500 properties across Canada, the United States and the United Kingdom, serving more than 45,000 people. The company offers senior apartments, independent living, assisted living, memory care, long-term care and skilled nursing.
HCN’s stock price closed at $68.23 per share on Wednesday, June 17, up from $62.12 per share a year ago.
RLC’s stock price closed at CA$9.44 per share on Wednesday, June 17, up from $7.98 per share a year ago.
— Scott Reid