In its existing RIDEA joint venture with Revera, Inc., Health Care REIT purchased Regal Lifestyle Communities, a Toronto-based operator of 23 independent living communities with more than 3,600 units. The joint venture, with HCN owning 75% and Revera 25%, will pay CAD$12.00 per share (a 27.1% premium), or approximately US$623 million ($173,100 per unit), for the portfolio, assuming CAD$359 million (US$ 291.9 million) of debt with a weighted average interest rate of 3.8% and an average maturity of four years. The initial cash yield is expected to be 6.1%, with HCN investing US$248.8 million in the transaction.
The communities, located in Ontario (13), Quebec (7) and one each in British Columbia, Saskatchewan and Newfoundland, derived about 83% of their NOI from four large metro markets. Based on Q1 2015 financials annualized, the estimated cap rate is about 5.4%, but that includes the very cheap debt. Brookfield Financial and BMO Capital Markets are financial advisors to HCN and Revera, while CIBC is representing Regal in the transaction, which is expected to close later this year. This is the second expansion just this year of the joint venture, first announced in 2013, with HCN acquiring a 75% stake from Revera in 23 independent living communities (with approximately 2,900 units) in Alberta, British Columbia, Manitoba and Ontario in April. The investment now includes 93 communities across Canada.