Emeritus Buys Out $310M Portfolio

June 2, 2011
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user Patrick Doheny

It didn’t take long. Just under 30 days ago, Emeritus Corp. announced that it would acquire the interest of its joint venture partner, a group of Blackstone Real Estate Advisors affiliates, in 24 assisted living facilities valued at an aggregate $310 million, and now the deal has closed. For $99 million in cash and assumed debt, Emeritus bought Blackstone’s 81 percent stake and became the sole owner of the portfolio totaling 1,867 units.

Emeritus financed the purchase of Blackstone’s share with $40 million in cash and a $59 million increase in mortgage debt responsibility from $161 million to $220 million.

As per terms of the previous joint venture arrangement with Blackstone, Emeritus had possessed a 19 percent interest in the portfolio, and under a management contract, pocketed 5 percent of collected revenues in exchange for operating the assisted living communities, a service Emeritus has provided for the properties since late 2006.

“We have operated these communities under a management agreement that incentivized us to improve operations–that incentive represents a significant portion of the equity required to complete this purchase transaction,” Dan Baty, chairman of Emeritus, said early last month. He added that the joint venture endeavor with Blackstone had been quite successful and both parties, “look forward to delivering similar results on the much larger Sunwest portfolio of 144 communities.”

Early in 2010, Emeritus entered into a joint venture agreement with a Blackstone affiliate and Columbia Pacific Advisors to snap up 144 seniors housing properties from Stayton SW Living L.L.C., formerly known as Sunwest Management. In August of last year, the partners closed the $1.2 billion acquisition of the 11,769-unit portfolio, the majority of which Emeritus operates under a management agreement that provides the company with 5 percent of the portfolio’s revenues.