Emeritus put up $7 million for a 19% stake in the investment and a management contract that will pay the company 5% of the revenue. The deal also gives Emeritus certain rights to purchase the properties and performance incentives.
Emeritus currently operates 182 communities representing capacity for approximately 18,400 residents in 35 states. Financing for the Blackstone JV is being provided by GE Healthcare Financial.
The names and locations of the communities and their occupancy were not announced along with the acquisition agreement. Emeritus did not immediately respond to a request for comment and Blackstone declined comment.
Emeritus CEO Dan Baty says in a prepared statement that the company sees "tremendous upside potential in this portfolio." In a recent SEC filing, the company states that the health of the assisted living industry is currently improving and that opportunities are developing to improve occupancy and to increase rates.
"The assisted living industry is experiencing increased regulation (varying by state), increased insurance costs, and limited availability of capital for smaller local and regional operators," states the company in the filing. "In this type of environment, we believe that we will continue to witness consolidation of smaller local and regional operators into the larger national operators."
Due to the current environment, the company says it has been able to complete several acquisitions or leases in the last two years that has allowed the company to shift from being a manager to a company that owns and leases facilities.
From the end of 2000 to the end of 2005, the communities Emeritus managed decreased from 69 to 14 and the owned and leased communities increased from 61 to 170. By the end of the second quarter of 2006, managed communities had decreased to 12 and owned and leased communities remained at 170.
Shares of Emeritus stood at $24.30 in afternoon trading, up $0.40 on the day. The company's 52-week range is $16.47-$25.24. The high occurred in February 2006, the low in August 2006.
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