Welltower Inc. announced that it has expanded its relationship with leading institutional real estate investors through the sale of three portfolios with a combined valuation of $1.3 billion.
In mid-September, the Company closed on the sale of a prominent Seniors Housing Operating portfolio for $702 million, representing a 5.1% cap rate on March TTM NOI (with average portfolio occupancy during that time of 96%) and 3.6% on August annualized NOI or, $466,000 per unit. The sales price reflects a decline of approximately 5% from levels at which the portfolio was expected to trade prior to the COVID-19 pandemic, as described in the Company’s earnings release dated February 12, 2020. This transaction further underscores Welltower’s exceptional execution capability against a very challenging market backdrop. The portfolio was held in a joint venture in which Welltower owned 80% and a third-party owner-operator owned 20% and managed the portfolio under a legacy RIDEA contract. The 11 properties, which are located in California, Washington and Nevada, carry an average age of 12 years and average monthly revenue per occupied room of approximately $5,200.
Separately, Welltower also announced a $402 million joint venture partnership with Invesco Real Estate, a global real estate investment manager, building on the existing partnership between the two organizations. The joint venture comprises a portfolio of 20 outpatient medical buildings previously wholly-owned by Welltower, which spans 1.0 million square feet across five states. The average age of the properties is 16 years, with roughly half of the portfolio affiliated with health systems. Through the partnership, Welltower will retain a 15% economic interest in the portfolio along with leasing and property management responsibilities. In addition to the joint venture portfolio, rights of first refusal (“ROFR”) were exercised for two additional properties at a sales price of $25 million. The transactions will close in two tranches, with the first tranche consisting of 13 properties having closed in late-September for $260 million and the remaining seven properties along with the two ROFR properties expected to close in the fourth quarter of 2020 for $167 million.
Additionally, the Company is also under contract to sell a Seniors Housing Operating portfolio for $200 million, representing a 4.9% cap rate on March TTM NOI (with average portfolio occupancy during that time of 88%) or, $395,000 per unit. The six-property portfolio, located in Massachusetts, has an average age of 19 years and comprises 507 units. The portfolio was previously held in a RIDEA structure in which Welltower owned 95% and the third-party seller-operator owned a 5% interest. Following the sale, Welltower will maintain a 20% interest in the portfolio with the remaining 80% owned by a fund co-managed by Taurus Investment Holdings and Northbridge Asset Management. The properties will continue to be managed by Northbridge Senior Housing. The general partners of the fund will have the option to purchase Welltower’s 20% interest over the next 12 months at a fixed price based on the sale price of the portfolio.
“We are delighted to announce the expansion of our relationship with preeminent real estate investors with the acumen to underwrite quality healthcare assets looking through the cycle,” said Shankh Mitra, Welltower’s Chief Executive Officer and Chief Investment Officer. He added, “As we’ve demonstrated through a series of transactions in recent months, our ability to execute large-scale dispositions at compelling prices during an unprecedented period is a testament to the desirability of Welltower’s high-quality assets, the strength of our partnerships, and our execution capabilities. We look forward to completing additional transactions in the near-term to further bolster our already outstanding liquidity position. Additionally, we remain extremely active in deploying capital on a wide-range of deep-value opportunities. We believe that these opportunities offer Welltower the ability to deliver once-in-a-generation value creation to our shareholders.”