Welltower Announces Substantial Exit from Genesis HealthCare Operating Relationship
TOLEDO, Ohio, March 2, 2021 / PRNewswire / – Welltower (“Company”) announced today that it has substantially terminated its operating relationship with Genesis HealthCare (“GEN”). Through a series of transactions, Welltower has successfully proven the strength of the value of its underlying assets despite a difficult operating environment and difficult rental coverage. While the transactions will result in short-term earnings dilution, Welltower expects to create significant shareholder value as a result of the deployment of $ 745 million of product expected across a range of better quality opportunities. It is important to note that the transactions will also serve to significantly reduce the risks of Welltower’s portfolio.
“We are pleased to announce today’s transactions which will benefit all Welltower stakeholders. The quality of the company’s portfolio and the prospects for long-term growth will be significantly improved following the transition of assets to regional operators and through the future roll-out of the products received through these transactions ”, said Shankh Mitra, CEO of Welltower . “I am also delighted that Welltower is extending its very successful relationship with ProMedica. The contribution of nine legacy PowerBack facilities to our existing joint venture will be substantially funded through the divestiture of non-core joint venture assets, as announced today. Although we are a small part of the Aurora Health Network joint venture, our structured investment allows us to capture additional value creation as we come out of COVID. As a result of these transactions, we are confident that Welltower is even better positioned today to create meaningful long-term value for our shareholders. ”
Welltower has entered into definitive agreements to sell 42 traditional skilled nursing facilities for $ 680 million to a joint venture in which Welltower will retain a preferred equity interest. Welltower will also bring its nine former, predominantly purpose-built PowerBack facilities, which provide greater acuity, rehabilitation and acute care, into its 80/20 joint venture with ProMedica for a total value of $ 292 million. Genesis is expected to transfer its activities in the coming months to ProMedica, at which point the old PowerBack facilities will be brought into the joint venture.
To transition the 51 assets, Welltower will provide Genesis with a lease termination fee of $ 86 million after the successful transition of all properties, which will be used to immediately pay off the debt to Welltower. the $ 880 million the value of the real estate is net of $ 86 million Termination Fee.
After the deployment of the products received as part of the transactions, Welltower is expected to incur approximately $ 0.05 per share negative impact on normalized operating funds (FFO) on an annualized basis. Before product reinvestment, transactions should be around $ 0.16 dilutive per share versus normalized FFOs on an annualized basis.
Genesis has paid all contractual rents owed to Welltower through February 2021.
Aurora Healthcare Joint Venture
Welltower has finalized agreements to sell 35 traditional skilled nursing facilities for approximately $ 500 million to a joint venture made up of Welltower, Aurora Health Network and Peace Capital. The operations of these facilities will be transferred to major regional operators in the coming months after approval by state regulators. It is important to note that Welltower will retain a preferred equity interest in the joint venture, which will allow the Company to benefit from future growth.
Sub-lease portfolio of seven properties
Welltower currently leases seven qualified nursing facilities, which it subleases to Genesis, and has entered into an agreement to turn the operations of those properties into a new lease with a regional operator. Welltower holds a bargain purchase option on the portfolio which can be executed in April 2023. The Company has entered into a forward sale contract for the seven properties, valued at. $ 182 million, with the Aurora Health Network joint venture, which is slated to close concurrently with the exercise of Welltower’s bargain purchase option. These seven properties represent the only sublet assets in the Welltower portfolio.
Genesis loans and equity investment
As a result of a series of loan loss charges recognized by Welltower in previous years, the current book value of loans receivable to Genesis is $ 137 million. In exchange for the lease termination fee of $ 86 million to Genesis, Genesis will repay an equivalent amount of debt to Welltower, which currently has a book value of zero dollars. In addition, once certain restructuring milestones have been reached, Welltower will reduce Genesis’ indebtedness by an additional amount. $ 170 million in exchange for a stake in Genesis, making it possible to participate in the expected recovery of post-COVID fundamentals. Following a capital injection into Genesis by Aurora, Welltower will retain a 15% stake in Genesis. Upon completion of the aforementioned loan transactions, Genesis will have $ 167 million debt to Welltower which will have a due date of January 1, 2024.
Tim McHugh, Welltower’s CFO, said: “Today’s transactions represent the culmination of Welltower’s 10-year operating partnership with Genesis. We are pleased to have reached a mutually beneficial resolution for both companies, having generated substantial proceeds for Welltower while simultaneously reducing the risks to the company. We remain extremely confident in our ability to deploy the capital received through these transactions which will create significant shareholder value in the future. ”
This press release may contain forward-looking statements. When Welltower uses words such as “may”, “will”, “intend”, “should”, “believe”, “expect”, “anticipate”, “plan”, “estimate” or similar phrases that do not relate solely to historical matters, he makes forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause Welltower’s actual results to differ materially from Welltower’s expectations discussed in the forward-looking statements. This may be the result of various factors including, but not limited to, the success of transactions and the factors discussed in Welltower’s reports filed from time to time with the Securities and Exchange Commission. Welltower assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, or to update the reasons why actual results may differ from those projected in forward-looking statements.
About the well tower
Welltower Inc. (NYSE: WELL), an S&P 500 company headquartered in Toledo, Ohio, is leading the transformation of healthcare infrastructure. The company invests with leading operators of senior housing, post-acute care providers and healthcare systems to fund the real estate infrastructure needed to scale up innovative healthcare delivery models and improve welfare. being people and the whole experience of health care. Welltower ™, a real estate investment trust (REIT), holds interests in properties concentrated in key high growth markets in the United States, Canada and the United Kingdom, including senior housing and care communities post-acute and ambulatory medical properties. More information is available at http://welltower.com/.
SOURCE Welltower Inc.