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In order to recapitalize the Sunrise Senior Living management company, Health Care REIT Inc. (HCN - Analyst Report) penned a definitive deal following which the company will own 24% interest in Sunrise Senior Living while Revera will hold the rest. Currently, Health Care REIT has about 20% stake in Sunrise Senior Living.

The transaction, which involves the acquisition of interest from the affiliates of Kohlberg Kravis Roberts & Co. (KKR - Snapshot Report), Beecken Petty O'Keefe & Company and Coastwood Senior Housing Partners LLC., is slated to close in second-quarter 2014, upon fulfillment of regulatory approvals. After the completion of deal, Sunrise Senior Living and Revera will continue to operate as separate companies

As a matter of fact, Health Care REIT has partnered with Revera in the first half of 2013 and the joint venture owns 47 high-quality seniors housing communities that are positioned in key metropolitan markets in Canada.

The interest acquisition deal is a strategic fit for Healthcare REIT and promises decent upside potential amid the highly-fragmented senior housing sector with limited new supply and positive growth indicators. According to the U.S. Census Bureau, the elderly population (aged 65 and older) is expected to jump 36% from 2010 to 2020 to 54.8 million. Additionally, the company’s strengthening relationship with Sunrise and Revera paves the way for further expansions on the private pay seniors housing front.

Healthcare REIT is scheduled to release its fourth-quarter 2013 results on Feb 19, before the opening bell. The Zacks Consensus Estimate for 2013 funds from operations (FFO) per share is currently pegged at 97 cents.

The company’s Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at -3.09%. This along with the Zacks Rank #3 (Hold) makes us skeptical about an earnings surprise.

However, better-ranked REITs include Ventas, Inc. (VTR - Analyst Report) and Sabra Health Care REIT, Inc. (SBRA - Snapshot Report). Both stocks carry a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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