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Tuesday, July 03, 2012 11:03:44 AM

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Sunrise Senior Living Completes Agreement to Transfer Seven Sunrise Communities to New Joint Venture

MCLEAN, Va., July 3, 2012 /PRNewswire/ -- Sunrise Senior Living, Inc. (NYSE: SRZ) announced today that on June 29, 2012, it closed on an agreement with CHT Partners, LP, a subsidiary of CNL Healthcare Trust, Inc. ("CHT"), forming a new joint venture to which Sunrise contributed seven consolidated communities containing 687 units and CHT contributed approximately $57 million. The new joint venture is owned approximately 55 percent by CHT and approximately 45 percent by Sunrise Senior Living Investments, Inc., a subsidiary of Sunrise Senior Living, Inc., with a gross valuation of approximately $226 million.
In connection with the transaction, approximately $50 million of CHT's contribution was used to pay down existing financing on certain of the communities transferred to the new joint venture. Sunrise received approximately $5 million in cash at the closing of the transaction.

Sunrise CEO Mark Ordan commented: "We are pleased once again to partner with CNL, and to complete this transaction, which gives us approximately $5 million in cash, and further strengthens our balance sheet and Sunrise overall."
See below for key transaction terms and statistics relating to the new joint venture portfolio.

Transaction Benefits

•Two core stabilized Sunrise mansions with additional upside from five communities transitioning from lease up to stabilized: Average unit occupancy for the seven communities was 84.3% for the three months ended March 31, 2012. Average unit occupancy was up 1170 basis points for the first-quarter 2012 over the first-quarter 2011 and net operating income for the first quarter of 2012 increased 41 percent over the first quarter of 2011.

•Exceptional financing execution: the Company secured excellent financing with favorable debt and equity terms. The new debt refinanced two pools of existing debt on five of the communities. The first pool was under a forbearance agreement that was scheduled to mature in January 2013, and the second pool was scheduled to mature in October 2012. The Company was obligated to the prior lender on an operating deficit guarantee with respect to the second pool, but as a result of the refinancing, Sunrise has been released from such obligation.

•Long-term management contract: the Company secured a long-term management agreement with a 6 percent management fee and the unlimited ability to cure any performance shortfalls in the NOI threshold test that starts in 2014.

•Future asset control: the joint venture agreement provides certain purchase options and buyout rights, which if exercised in the future, will allow the Company to control the assets outright.

Key Joint Venture Terms
Portfolio Valuation:
Approximately $226M

Sunrise Equity Value:
Approximately $46M (45%)

CHT Equity Value:
Approximately $57M (55%)

CHT Preference on Net Cash Flow:
11.0% annual return on equity (year 1-7)Pro-rata (year 8+)

SRZ Buyout Option:
Sunrise can buy out CHT interest during years 4 through 7 for a price equating to a 13% IRR to CHT

Buy/Sell Rights:
Either party can initiate traditional buy/sell rights beginning in year 8

Key Financing Terms
Principal Balances:
$55M and $70M

Loan Maturities:
$55M (March 2019), $70M (June 2019)

Interest Rate:
$55M (4.66%), $70M (5.25%)

Standard non-recourse carve-outs only, made by Sunrise and CHT

First lien mortgages and equity pledges on all 7 properties in cross-collateralized pool

Prepayment Option:
Subject to yield maintenance

Key Management Terms
Management Length:
30 year term

Management Fee:
6% of Revenue

Performance Termination:
NOI-based termination right begins 2014; Sunrise has unlimited cure rights

Key Property Characteristics
Number of Properties

Unit Capacity

Average Age
< 5 years

SRZ purpose built mansions:
7 out of 7

Washington DC, Santa Monica, Baton Rouge, New Orleans, Phoenix, Louisville, Chicago

Unit Mix Breakout:
AL (54.4%) / ALZ (26.8%) / IL (18.8%)

Key Financial Statistics
Avg Unit Occ% (Q1 2012)

Total Avg Daily Rate (Q1 2012)

Total Revenue ('000s)*

6% Management Fee ('000s)

NOI w/ 6% MF ('000s)*

NOI Margin

*March 2012 YTD Annualized by dividing by 91 and multiplying by 366.

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