Brookdale Senior Living Completes Acquisition of Horizon Bay; Obtains Option and Right of First Offer on Chartwell Communities

NASHVILLE, Tenn., Sept. 1, 2011 /PRNewswire/ -- Brookdale Senior Living Inc. (NYSE: BKD) (the "Company") today announced that it has completed its previously announced acquisition of Horizon Bay Realty, L.L.C. ("Horizon Bay"), the ninth largest operator of senior living communities in the United States with 91 communities containing over 16,400 units in 19 states.  

In conjunction with the acquisition, the Company entered into an agreement to restructure the management agreements with Chartwell Seniors Housing Real Estate Investment Trust (TSX - CSH.UN) ("Chartwell") relating to 45 communities (with a total of 6,420 units) managed by Horizon Bay.  As part of the restructuring of the management agreements, Chartwell granted Brookdale an option through 2013 to acquire a 20% interest in Chartwell's U.S. real estate assets managed by Brookdale.  Brookdale will also have a right of first offer to acquire any of Chartwell's assets managed by Brookdale.

Additionally, the Company restructured Horizon Bay's existing relationship with HCP, Inc. (NYSE: HCP) relating to 33 communities that Horizon Bay leased from HCP.  First, the Company formed a joint venture with HCP to own and operate 21 of the communities (with a total of 5,070 units) utilizing a RIDEA structure.  Brookdale acquired a 10% interest in the joint venture and will manage the communities under a ten-year management agreement with 4 five-year renewal options.  The annualized second quarter revenues for the portfolio were $143.2 million.

Second, Brookdale entered into long term, triple net leases with HCP relating to 12 communities with a total of 1,547 units.  The annualized second quarter revenues for this portfolio were $68.1 million.  

Brookdale will also provide management services to the remaining 58 Horizon Bay communities, which contain approximately 9,817 units.  Annualized second quarter revenues for managed communities were approximately $318.9 million.  Eleven of the 58 communities are in lease up, under development or represent new management relationships.  The management contracts are generally long-term agreements with base management fees and potential incentive fees.  

With respect to virtually all of the Horizon Bay communities, the Company retains the economic benefit of ancillary services opportunities.  Approximately 70% of the 16,400 units are within the geographic boundaries of the Company's current outpatient therapy and/or home health agency service area. The Company expects to roll out its ancillary services programs to these communities over the next two years and ultimately achieve an operating profit per occupied unit target of approximately $75 per month.

In total, the Company expects to invest approximately $47 million in the first year of operation, including acquisition consideration, capital contributions to the HCP joint venture, integration costs, transaction expenses and capital expenditures related to the rollout of our ancillary services programs.  This amount does not include any estimate of costs associated with the future exercise of the Chartwell purchase option or right of first offer.

"The acquisition of Horizon Bay demonstrates the scalability of our platform.  The integration efforts are underway and due to the hard work and professionalism of all those involved – Brookdale, Horizon Bay, HCP, Chartwell, AEW and others – is progressing well.  The addition of the Horizon Bay communities not only fits with our strategy of continuum networks, but also brings a talented group of people who we are pleased to welcome into Brookdale," said Bill Sheriff, Brookdale's Chief Executive Officer.

"We are also pleased that we have been able to secure the opportunity to acquire an interest in the real estate associated with the Chartwell managed communities.  These are very good assets, and, with our ability to bring enhanced economics to the bottom line, we are excited about the prospects of sharing in that value creation," Mr. Sheriff continued.

"Brookdale's cash flow will benefit from increased management fees, ancillary services contribution and the leasehold cash flow.  We expect return on invested capital to average approximately 35% to 40% per year over the first three years.  These transactions will be slightly accretive to our 2011 Cash From Facility Operations, excluding integration and transactions costs, and are expected to add approximately $0.09 to $0.11 per share to 2012 CFFO and approximately $0.15 to $0.17 per share to 2013 CFFO," commented Mark Ohlendorf, Co-President and Chief Financial Officer of Brookdale.

Certain elements of the Chartwell management arrangement restructuring are subject to lender and other third party approvals.  Until such approvals are received, Brookdale will operate Chartwell's properties under the existing management contracts.

Horizon Bay Portfolio Statistics

About Brookdale Senior Living

Brookdale Senior Living Inc. is a leading owner and operator of senior living communities throughout the United States.  The Company is committed to providing an exceptional living experience through properties that are designed, purpose-built and operated to provide the highest-quality service, care and living accommodations for residents.  Currently the Company owns and operates independent living, assisted living, and dementia-care communities and continuing care retirement centers, with 648 communities in 36 states and the ability to serve over 67,000 residents.  

Safe Harbor

Statements contained in this press release and statements made by or on behalf of the Company relating hereto may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, all statements relating to the completion of the restructuring of the Chartwell management arrangements, our expectations concerning the future performance of the new communities and the effects of the transactions on our financial results (including our expectations with respect to our return on invested equity), our expectations regarding the opportunity to acquire an interest in the Chartwell assets through the possible future exercise of the purchase option and/or right of first offer, and our expectations regarding occupancy, revenue, cash flow, expenses, capital expenditures, Program Max opportunities, cost savings and CFFO.  Words such as "expect(s)" and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements. We can give no assurance that our expectations will be attained. Factors that could cause actual results to differ materially from our expectations include, but are not limited to, the risk that the parties may not be able to satisfy the conditions (including obtaining necessary third party consents to the amended management arrangements) and successfully complete the restructuring of the Chartwell management arrangements; the risk that we may not be able to successfully integrate the new communities into our operations; the risk associated with the current global economic crisis and its impact upon capital markets and liquidity; our inability to extend (or refinance) debt (including our credit and letter of credit facilities) as it matures; the risk that we may not be able to satisfy the conditions precedent to exercising the extension options associated with certain of our debt agreements; events which adversely affect the ability of seniors to afford our monthly resident fees or entrance fees; the conditions of housing markets in certain geographic areas; our ability to generate sufficient cash flow to cover required interest and long-term operating lease payments; the effect of our indebtedness and long-term operating leases on our liquidity; the risk of loss of property pursuant to our mortgage debt and long-term lease obligations; the possibilities that changes in the capital markets, including changes in interest rates and/or credit spreads, or other factors could make financing more expensive or unavailable to us; changes in governmental reimbursement programs; our ability to effectively manage our growth; our ability to maintain consistent quality control; delays in obtaining regulatory approvals; our ability to complete acquisitions and integrate them into our operations; competition for the acquisition of assets; our ability to obtain additional capital on terms acceptable to us; a decrease in the overall demand for senior housing; our vulnerability to economic downturns; acts of nature in certain geographic areas; terminations of our resident agreements and vacancies in the living spaces we lease; increased competition for skilled personnel; increased union activity; departure of our key officers; increases in market interest rates; environmental contamination at any of our facilities; failure to comply with existing environmental laws; an adverse determination or resolution of complaints filed against us; the cost and difficulty of complying with increasing and evolving regulation; and other risks detailed from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Such forward-looking statements speak only as of the date of this press release. We expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

SOURCE Brookdale Senior Living Inc.