Housing for Elderly Targeted After Record Premium

The takeover of Sunrise Senior Living Inc. at the biggest premium ever paid for an operator of homes for the elderly is turning companies from Brookdale Senior Living Inc. to Emeritus Corp. into the next targets.

Brookdale, the industry’s largest company with a market value of $2.7 billion, has the group’s lowest valuation relative to cash flow, and its operating margin is projected to reach a record high next quarter, according to data compiled by Bloomberg. Emeritus, the second- biggest, fell last month to the cheapest price since 2005 versus the cash it generates.

Occupancy rates at senior communities are rising, and real estate investment trusts are vying for deals because the properties are undervalued, Stifel Financial Corp. said. Health Care REIT Inc. agreed in August to pay an 87 percent premium for Sunrise, the highest ever for a retirement or senior-care center, data compiled by Bloomberg show. Royal Bank of Canada said suitors may now evaluate Brookdale, while JMP Group Inc. sees Emeritus and Capital Senior Living Corp. as likely targets.

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