After buying a portfolio of assisted-living properties at a bankruptcy auction in 2010, a joint venture led by The Blackstone Group has sold the bulk of the portfolio to a healthcare REIT for $1.73 billion. Blackstone's joint venture partner has purchased the remainder for $60 million.
Sources familiar with the matter told PERE that the New York-based private equity and real estate giant and Seattle-based senior living housing operator Emeritus Corp., have agreed to sell 133 of the 142 assets to Long Beach, California-based HCP. As part of the deal, Emeritus will purchase 9 of the assets and continue to operate the entire portfolio.
The venture initially purchased the properties, which previously had been owned by Sunwest Management, through a bankruptcy auction in 2010 for $1.2 billion. Blackstone bought its stake in the properties on behalf of Blackstone Real Estate Partners VI.
When the partners initially bought the portfolio, Blackstone and Emeritus offered the original stakeholders in the assets either cash or the opportunity to roll into the joint venture. Of Sunwest’s original 1,200 investors, 500 opted to forego cash and join the venture. As a result of this recent sale, all of these investors will get their original investment back.
The venture invested approximately $47 million in capital improvements for the properties before selling them. These renovations helped increase occupancy from 80 percent to 88 percent.
An announcement from HCP stated that the portfolio encompasses 10,350 units located in 29 states, representing a care mix of 61 percent assisted living, 25 percent independent living, 13 percent memory care and 1 percent skilled nursing. Concurrent with HCP’s acquisition, Emeritus will purchase nine remaining properties from the Blackstone venture, for which HCP has agreed to provide secured debt financing of $52 million.
Sunwest Management has a rather sordid history. Once considered one of the largest assisted-living firms in the US, the firm collapsed during the global financial crisis of 2008. Last month, a federal grand jury indicted Sunwest chief executive officer Jon Harder on 56 counts of fraud and money laundering. The indictment alleges that Harder operated a Ponzi scheme through the firm, defrauding investors. Harder pleaded not guilty to charges in September, and his trial is scheduled for 30 November.
The transaction with HCP is expected to close by the end of the year.