Invesque Inc. Closes on Previously Announced Acquisition of Commonwealth Senior Living and 17 of its Communities
Toronto, Ontario, August 1, 2019 – Invesque Inc. (TSX: IVQ.U) (“Invesque” or the “Company”) announced the closing of the previously announced acquisition of Commonwealth Senior Living, LLC (“Commonwealth”) and 17 private pay senior living communities comprising 1,205 units with 1,469 beds (together the “Initial Tranche”).
The aggregate purchase price for the Initial Tranche was approximately US$285.4 million. The consideration was funded through a combination of the incurrence of new debt of US$176.0 million, the assumption of existing debt of approximately US$9.5 million, the issuance of approximately US$53.6 million of preferred interests (the “Preferred Interests”) in the Invesque acquisition vehicle acquiring the Initial Tranche (“Foxhound LLC”), and cash. The acquisition of the remaining three properties (“Second Tranche”) from the transaction announced on May 22, 2019 is expected to close in the next 90 days, subject to the approval of certain lenders of secured debt underlying the Second Tranche properties. The Second Tranche is expected to be funded through a combination of the assumption of debt, the issuance of approximately US$11.8 million of Preferred Interests, and cash.
The Preferred Interests will be initially exchangeable by holders into common shares of the Company at a fixed exchange price of US$9.75 per Invesque common share. The Preferred Interests have an initial dividend rate of 6.50% per annum and have a liquidation value equal to their unreturned initial capital contribution and any accrued and unpaid dividends. Additionally, under certain circumstances, Foxhound LLC will have the right to redeem the Preferred Interests at its discretion for an amount specified in its operating agreement.
“The initial closing of the Commonwealth transaction is a pivotal moment for Invesque,” stated Scott White, Chairman and Chief Executive Officer of Invesque. “We are thrilled to have Richard Brewer and the Commonwealth team join the Invesque family. The portfolio and operating platform that Richard and his team have built over the last 17 years is nothing short of remarkable. This transaction expands our capabilities by transforming Invesque into a vertically integrated owner of seniors housing with a team that is committed to providing resident-centered care.”
Richard Brewer, CEO of Commonwealth, stated, “We’ve executed a fantastic deal for the shareholders of both companies. We are excited to forge a new partnership with Invesque, and we look forward to expanding the Commonwealth brand to more communities in Virginia and beyond.”
- Improved Portfolio Diversification: The closing of the acquisition further diversifies the Company’s revenue sources into private pay seniors housing, which will represent more than 50% of net operating income (“NOI”) of the Company after closing of the Initial Tranche and the Second Tranche.
- Acquisition of Operating Platform:As part of the Initial Tranche, the Company acquired the Commonwealth management company. The management team of Commonwealth, led by Richard Brewer, will serve as Invesque’s captive, vertically integrated seniors housing operating platform.
- Alignment of Shareholder Value: The issuance of the Preferred Interests provides for alignment of all stakeholders and further validates the embedded value of the combined platform under the Invesque umbrella.
- Immediately Accretive Transaction: The acquisition is expected to be immediately accretive to the Company’s Funds from Operations (“FFO”) and the Company’s Adjusted Funds from Operations (“AFFO”) per diluted share.
The closing of the Initial Tranche expanded the Company’s portfolio to 118 buildings with over 10,500 beds and approximately 578,00 rentable square feet of medical office space.
Invesque is a healthcare real estate company with an investment thesis centered around the opportunity created by the global aging demographic trend. Invesque currently capitalizes on this opportunity by investing in a highly diversified portfolio of income generating health care properties located across the United States and Canada through long-term absolute net leases, joint ventures, and development capital. For more information, visit www.invesque.com.
NON-IFRS FINANCIAL MEASURES
FFO, AFFO and NOI are not measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. Such measures are presented in this news release because management of the Company believes that such measures are relevant in interpreting the purchase price metrics and performance of acquisitions. Such measures, as computed by the Company, may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable to the measures reported by such other organizations. Please see the Company’s most recent management’s discussion and analysis, which is available on SEDAR at www.sedar.com, for how the Company reconciles FFO, AFFO and NOI to the nearest IFRS measure.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This press release contains forward-looking information that reflects the current expectations of management about the future results and opportunities for the Company. Forward-looking statements generally can be identified by words such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans”, “project”, or “continue” or similar expressions suggesting future outcomes or events. More particularly and without limitation, this press release contains forward looking statements and information concerning the acquisition being accretive to FFO and AFFO and with respect to closing of the Second Tranche. Such forward-looking statements reflect the Company’s current beliefs and are based on information currently available to management. Although the Company believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because the Company can give no assurance that they will prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed, including risks in connection with the integration of Commonwealth, risks that the closing of the Second Tranche may not occur as a result of the closing conditions not being satisfied or waived, and risks of the Commonwealth portfolio not performing as expected. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date hereof and to not use such forward-looking information for anything other than its intended purpose. The Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.
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