Healthcare: JER Sells Genesis HealthCare Assets for $2B

By Erika Morphy for GlobeSt

MCLEAN, VA-JER Partners and its partner, Formation Capital LLC, have signed a definitive agreement to sell most of the real estate assets of Genesis HealthCare to Health Care REIT for $2.4 billion. Genesis will continue to operate the facilities under a long-term triple net master lease.

JER and Formation acquired the 21,800-bed portfolio in 2007 when they bought the Kennett Square, PA-based company in a public to private transaction. The portfolio is comprised of 180 owned and lease facilities. JER was unable to return to by deadline.

After the acquisition, JER launched a capital improvement program, prompting the portfolio to generate 9% annual average revenue growth and 14% average annual EBITDAR growth. JER Partners further enhanced its healthcare portfolio at the end of 2010 when it acquired six additional skilled nursing facilities in the Washington, DC area that are also operated by Genesis.

The transaction, which has been approved by HCN’s Board of Directors, is expected to close in the second quarter of 2011. The transaction marks a turnaround for the company, headed by Barden Gale, which almost defaulted on a $70.4-million bond and a $7-million repurchase agreement with J.P. Morgan last year.

It is also emblematic of the activity in the healthcare real estate space. Typically characterized by small, independent portfolios and discrete operators, the space is rapidly consolidating. Ventas, for example, just announced that a $7.4-billion purchase of Nationwide Health Properties has been approved by the Boards of Directors of both companies. The transaction will create the largest healthcare REIT, with a pro-forma equity value of about $17 billion. The combined company will have more than 1,300 total assets in 47 states, Washington, DC and two Canadian provinces.

Also, American Realty Capital Healthcare Trust, a non-traded REIT launched last year by American Realty Capital, announced last week that it is commencing an initial public offering of $1.5 billion in common stock with the goal of buying high-quality commercial real estate, including medical office buildings and healthcare-related facilities “at a discount to replacement cost and with significant potential for appreciation.”

Healthcare REIT has also been on an acquisition tear; this portfolio is only the latest example. The REIT recently inked partnerships with four healthcare companies, including an $890-million deal with Benchmark Senior Living.


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