Health Care REIT Inc. is buying the most of the assets of rehabilitation and nursing facility operator Genesis HealthCare for $2.4 billion in the second major health care real estate deal announced Monday.
The Toledo, Ohio, company said it will buy all of Genesis' real estate assets, which include 147 post-acute care, rehabilitation, assisted living and long-term care services in 11 states across the Northeast and Mid-Atlantic regions. It will have an option to buy a 9.9-percent stake in Genesis for $47 million. Genesis of Kennett Square, Pa., will continue to run the facilities.
Genesis' facilities are located in metropolitan markets and are set to continue their strong growth, said Health Care REIT chairman, president and CEO George Chapman.
"This portfolio would be virtually impossible to replicate," Chapman said. He added that Genesis' properties fit well with Health Care REIT's other assets, as recovering patients can be moved from its hospitals into nearby nursing and rehabilitation centers run by Genesis.
Health Care REIT is buying the assets from JER Partners and Formation Capital LLC. The boards of Health Care REIT and Genesis have both approved the deal. The company said it expects the sale to close during the second quarter assuming regulators approve.
The company said it plans to sell 25 million shares of stock and $625 million in convertible preferred stock to finance the deal. The underwriters of that offering will have an option to buy as much as 3.8 million common shares and $93.8 million in preferred stock to cover any over allotments. Health Care REIT also obtained a commitment for a bridge loan worth as much as $2.4 billion.
Health Care REIT said it expects $198 million in rent in the first year after closing. The deal is expected to increase its annual funds from operations by 39 cents per share. Funds from operations, which adds in such items as amortization and depreciation, is considered key to measuring the financial performance of real estate investment trusts.
Genesis said its biggest markets include Massachusetts, Maryland, New Jersey, Pennsylvania and West Virginia. About 95 percent of its capacity is in post-acute and skilled nursing facilities, with assisted living facilities making up the rest. The deal would give Health Care REIT 880 properties with a total value of $13 billion. The company said it will have about 120 clinical specialty units.
Earlier Monday, health care REIT Ventas Inc. agreed to buy Nationwide Health Properties Inc. in an all-stock deal worth $5.8 billion. The deal would give Ventas more than 1,300 assets. The Chicago company's properties are located in 47 states, the District of Columbia, and two Canadian provinces.
Shares of Health Care REIT rose $1.36, or 2.7 percent, to $52.22 Monday. In aftermarket trading the stock lost 42 cents to $51.80.
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