Private Equity Firm to Acquire Non-Traded REIT for $825 million
Affiliates of Kayne Anderson Real Estate Advisors, the real estate private equity arm of Kayne Anderson Capital Advisors L.P., entered into a definitive merger agreement to acquire Sentio Healthcare Properties. Sentio is a publicly registered, non-traded real estate investment trust backed by KKR & Co. (NYSE: KKR).
Completion of the transaction is subject to the approval of the Sentio stockholders and satisfaction of various closing conditions. The transaction is currently expected to close in the third quarter of 2017.
Under the terms of the agreement, which was unanimously approved by the Sentio board, Kayne Anderson Advisors will acquire all of the outstanding shares of Sentio in an all-cash transaction valued at $825 million.
Sentio stockholders will receive no less than $14.37 per share in cash at the closing of the merger; up to an additional $0.55 per share in cash at the closing of the merger based upon final pricing calculations; and one contingent value right for each share of common stock of Sentio held. Shares of the non-traded REIT were originally sold for $10.00 each.
The contingent value right represents a proportionate interest in up to an additional $8.76 million that could be released in three years. Should the maximum amount of funds in the escrow be released to the stockholders, the result would be up to an additional $0.29 per share in cash.
The resulting range of total cash consideration to the stockholders is between $14.37 and $15.21 per share. Sentio’s current estimate payable per share of common stock at closing is $14.65 per share. The amount to be received at the closing of the merger will be set by Kayne and Sentio two business days prior to the special stockholder meeting called to approve the proposed merger transaction.
“This exceptional outcome for our stockholders would not have been possible without our operating partners delivering outstanding resident and patient care each day in our communities. We have always viewed that as the key to strong results in this industry,” said John Mark Ramsey, CEO of the REIT. “This transaction validates the board’s goal of optimizing stockholder value by establishing a unique partnership between our operating partners, Sentio Investments, and KKR, an industry leading global investment firm. KKR’s partnership, along with their industry and capital markets expertise, has been a valuable asset to the company and its stockholders.”
Pending the closing of the merger, Sentio board approved the suspension of the distribution reinvestment plan, effective May 13, 2017. The company expects to continue to declare and pay customary common and preferred stock dividends and distributions through the actual closing date of the merger.
Citigroup Global Markets Inc. and Holliday Fenoglio Fowler, L.P. acted as financial advisors to Kayne Anderson, and Hogan Lovells US LLP acted as corporate legal advisor and Greenberg Traurig, LLP acted as real estate legal advisor.
Robert A. Stanger & Co., Inc. and UBS Investment Bank acted as financial advisors to Sentio. Latham & Watkins LLP, Foley & Lardner LLP and DLA Piper acted as legal advisors to Sentio. Simpson Thacher & Bartlett LLP acted as legal advisor to KKR.
Sentio Healthcare Properties invests in healthcare-related real estate. The offering was declared effective in June 2008 and closed in April 2011 after raising $132 million in investor equity, according to Summit Investment Research. As of December 31, 2016, the company owned 35 properties with a purchase price of $537 million.
Kayne Anderson Real Estate Advisors is a real estate private equity investor in off-campus student housing, senior housing and medical office buildings. The company is part of Kayne Anderson Capital Advisors, a $26 billion alternative investment management firm.
