Healthcare and seniors living real estate investor Invesque will spend US$340.4 million to acquire Commonwealth Senior Living LLC and 20 of its private-pay communities in two U.S. states, the company said Wednesday morning.

Invesque (IVQ-U-T), which is based in Canada although most of its operations are in the U.S., says the properties in the portfolio have an average age of about 10 years. Nineteen of the communities are in Virginia, the other in Pennsylvania, and they expand Invesque’s presence in both states. They comprise 1,440 units and 1,716 beds.

The transaction is expected to close in Q3 2019, subject to standard conditions and approvals.

When the sale closes, Invesque’s portfolio will expand to 122 properties comprising 10,844 beds, with a value of $1.8 billion. The company owns assets in 20 U.S. states and two Canadian provinces.

“We are thrilled to partner with Commonwealth and acquire this attractive portfolio of seniors housing properties,” said Scott White, chairman and CEO of Invesque, in a release. “We have long believed alignment is the key to a successful partnership and the Commonwealth acquisition allows us to vertically integrate with a leading regional operator.

“Furthermore, this transaction positions our portfolio well as we continue our focus on creating a diversified healthcare real estate company. Following this acquisition, we will have a larger and stronger platform to finance growth and take advantage of market fragmentation in the healthcare industry.”

Invesque increases private-pay portfolio

The acquisition also includes exclusive first rights of refusal on three other properties which will continue to be managed by Commonwealth following the close of the acquisition.

The transaction increases Invesque’s exposure to private-pay seniors housing, which is expected to represent approximately 52 per cent of Invesque’s net operating income post-closing.

The 1,716 beds include independent living, assisted living and memory care units.

Together with the portfolio, Invesque will acquire the Commonwealth management team, which will continue to manage and operate the portfolio. The group is expected to serve as the foundation for Invesque to build a vertically integrated, regional operating and management unit and could assume management of any future purchases in the regions.

“The Invesque transaction is a win-win for our investors and our team and will allow us to continue to grow and provide high-quality services for years to come,” said Richard Brewer, CEO of Commonwealth, in the release.

Commonwealth’s history

Founded in 2002 by Brewer and Municipal Capital Appreciation Partners, Commonwealth and affiliates own and operate a clustered portfolio of 24 private-pay communities in growing Mid-Atlantic markets. The majority are concentrated in Virginia, with locations in Connecticut and Pennsylvania.

Commonwealth has its headquarters in Charlottesville, Va.

As part of the transaction, Invesque will also issue US$67.2 million of preferred interests to Commonwealth’s existing investors. The preferred interests will be exchangeable into common shares of Invesque at US$9.75 per share and have an expected initial annual dividend rate of 6.50 per cent.

Invesque will capitalize the transaction with approximately US$220 million of property-level mortgages. The remainder of the purchase price will be funded with a draw on Invesque’s revolving credit facility and cash on hand.

So far this year, Invesque has acquired or signed deals to acquire a total of 24 U.S. seniors facilities for about US$400 million. Earlier in 2019, it bought a memory care facility in Allen, Texas, for US$8.1 million, and three assets previously operated by Symcare for US$52 million.

BMO Capital Markets is serving as financial advisor to Invesque. Barack Ferrazzano Kirschbaum & Nagelberg LLP is serving as Invesque’s primary legal counsel with assistance from Goodmans LLP and other law firms.

Houlihan Lokey Capital, Inc. is serving as financial advisor to Commonwealth. Burr & Forman LLP is serving as Commonwealth’s legal counsel.

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