Health Care REIT, a real estate investment trust specializing in healthcare properties, has signed a definitive agreement to acquire the real estate assets of national rehab care provider Genesis HealthCare in a $2.4 billion deal.
Health Care REIT will acquire 147 post-acute skilled nursing and assisted living facilities in 11 states in the Northeast and Mid-Atlantic. Genesis’ largest markets include Massachusetts, Maryland, New Jersey, Pennsylvania and West Virginia.
Health Care REIT’s portfolio of healthcare real estate currently consists of 683 properties in 41 states.
According to George L. Chapman, Health Care REIT’s CEO, the Genesis portfolio has “geographic density in attractive metropolitan markets with high barriers to entry, significant hospital system referral source admission efficiencies and high replacement costs.”
Chapman said the current management team at Kennett Square, Pa.-based Genesis would continue to operate the firm’s 200 facilities across 13 states, pursuant to a long-term triple-net master lease.
The deal will also offer Health Care REIT the option to acquire a 9.9 percent ownership interest in Genesis for a fixed price equal to $47 million throughout the initial lease term.
"We expect Health Care REIT’s acquisition and leaseback of Genesis HealthCare’s assets will be highly accretive to HCN’s earnings,” said Chapman in a release announcing the deal. “The investment provides embedded opportunities for both organic and external growth. Genesis is positioned to grow its quality payer mix and optimize occupancy as it continues to meet the needs of an increasing post-acute, short-stay patient population.”
Chapman said Genesis has built a “robust pipeline of potential acquisition and development opportunities” as it has expanded its footprint along the eastern seaboard.
Part of the deal’s appeal to Health Care REIT was that Genesis facilities are positioned generally as the lowest-cost, post-acute inpatient setting in its markets. Chapman noted that, with $405 million in investments in facility improvements and clinical programs, Genesis’ quality payer mix has increased from 47 percent in 2006 to a projected 55 percent in 2011 and is positioned for significant growth as the short-term post-acute patient census accelerates.
Genesis has generated 9 percent annual average revenue growth and a consistent average occupancy of 91 percent over the last five years.
Health Care REIT expects the acquisition to close during the 2nd quarter of 2011.