TOLEDO, Ohio, June 21, 2021 /PRNewswire/ --
- Transaction is expected to be immediately accretive to
Welltower's next twelve months normalized funds from operations by
approximately $0.10 per diluted
share; Welltower expects an unlevered IRR in the low double-digit
range
- Portfolio is valued at $152,000
per unit, representing a discount to estimated replacement cost in
excess of 30%
- Initial cash cap rate of 6.2% with current near-trough
occupancy of approximately 76%
- Significant future cash flow growth to be realized through
post-COVID recovery in seniors housing fundamentals
- Meaningful value creation opportunities through portfolio
reinvestment
- Unique opportunity to achieve value-add total return with core
plus current return
- Atria Senior Living to acquire
Holiday Retirement; Atria to retain Holiday senior management and
staff, de-risking overall transaction
- Year-to-date, Welltower has efficiently issued approximately
$1.36 billion of equity through
at-the-market program on a forward basis at an average share price
of $77.80 and recently announced an
expanded $4.7 billion unsecured
credit facility
Welltower® Inc. (the "Company") today announced that it has
entered into a definitive agreement to acquire a portfolio of 86
seniors housing properties, including 80 nearly identical
independent living ("IL") and six combination independent
living/assisted living ("IL/AL") properties, currently owned by
Holiday Retirement ("Holiday"). Additionally, as announced on
June 21, 2021, upon the closing date
of this transaction, which is expected to be in the third quarter
2021, Atria Senior Living ("Atria")
will assume operations of the properties and retain Holiday's
in-place senior management and staff.
Through this landmark transaction, the 86-property portfolio
will be acquired by Welltower for $1.58
billion, or $152,000 per unit,
representing a discount to estimated replacement cost in excess of
30%. The transaction is expected to be approximately $0.10 per diluted share accretive to Welltower's
normalized funds from operations during the first twelve months
post-closing. The portfolio is expected to deliver substantial net
operating income growth in future quarters and in coming years as
occupancy growth accelerates from near-trough levels of 76.3% as of
June 20, 2021. Portfolio occupancy
has already increased over 2.7% since bottoming in March 2021. Additionally, the anticipated
recovery in occupancy and Atria's operational and technological
expertise is expected to maximize community level performance and
to generate meaningful expansion in operating margins going
forward.
Welltower and Atria have agreed to a highly incentivized and
strongly aligned enhanced RIDEA 3.0 management contract based on
both top and bottom-line financial metrics. The contract will also
include substantial promote opportunities to Atria upon achievement
of certain long-term financial metrics. The achievement of such
hurdles would imply significant growth in underlying property level
performance, resulting in a nominal yield in excess of 9% to
Welltower and a net economic yield in excess of 8% to Welltower
after capital expenditures and payment of the promote.
Atria expects to integrate Holiday's corporate staff and retain
its experienced and reputed management team, thereby de-risking the
overall transaction. Atria has significant experience with Holiday
properties, having successfully assumed operations in recent years
of two portfolios previously managed by Holiday: a 29-property
portfolio across Canada in 2014
and, in April 2021, a 21-property
portfolio owned by New Senior Investment Group Inc.
The portfolio is expected to benefit from Atria's operating
model and technology platform, which includes its proprietary
Glennis software for staffing optimization, digital marketing, and
CRM. Atria's digital marketing capabilities and front of house
technology suite are also expected to reduce dependency on referral
sources and increase organic lead generation. Holiday's management
team expects that this significant investment in its platform and
technology infrastructure will significantly enhance their ability
to serve residents going forward.
"The Holiday team is focused on continuing the highest level of
service and care to our residents and their families," said Holiday
Retirement CEO Lilly Donohue. "We
are excited to partner with Atria and Welltower as this transaction
is squarely in line with Holiday's long-term strategy. We believe
the significant investment into Holiday's platform, technology
infrastructure and importantly, our communities, will enhance our
collective ability to deliver quality services to the dynamic needs
of our customers and to create a bright future for our
employees."
In addition to the enhanced operating plan described above,
Welltower and Atria anticipate implementing comprehensive value add
investment initiatives that include, but are not limited to:
- Capital expenditure plan of $1.5
to $2.0 million per community which
is expected to drive higher revenue and operating margins in future
years
- Larger scale refurbishments and redevelopments with ten
properties that have been designated for expansion opportunities
including highly popular new cottages. The capital improvements are
expected to result in a meaningful improvement in property level
performance while maintaining Welltower's all-in basis
(approximately $165,000-$170,000 per unit), at a substantial discount to
replacement cost
- Five properties have been identified as higher and better use
candidates
- Atria's renowned expertise in operating assisted living
communities allow for additional cash flow growth opportunities in
the portfolio's six IL/AL combination communities
"We're excited to announce this ground-breaking transaction with
Welltower," stated John Moore,
Atria Senior Living Chairman and
CEO. "It has been a pleasure to work with Shankh and the Welltower
team and we look forward to thoughtfully investing in this
portfolio to best position it to deliver quality and value to
residents. Our shared commitment to enhancing the customer
experience makes this a perfect combination. By joining forces with
Lilly Donohue and the great team at
Holiday Retirement, this transaction also enables Atria to continue
on our path to create a thoughtful variety of choice as an
unprecedented number of seniors seek new residential options in the
decade ahead. We are eager to work with the Holiday team as
we together build the best pure-play management services business
in senior living and create value for Welltower and the other
owners of the properties we manage."
"Welltower is thrilled to expand its strong partnership with
Atria through the acquisition of this unique platform of assets,"
said Shankh Mitra, Welltower CEO and CIO. "John and the Atria
team share our vision for the significant, multi-year growth
opportunity in the seniors housing sector and we are excited to
embark on this journey together. Through a highly incentivized and
aligned management contract, we have created tremendous upside
opportunity for stakeholders of both Welltower and Atria. This
privately negotiated, operator driven transaction strategy is the
key to our unique ability to navigate through complex situations
and provide counterparties certainty of execution at unmatched
speed due to our data analytics platform and our best in class
team's ability to structure win-win transactions. We are deeply
familiar with the Holiday assets having looked at them multiple
times in the past and have the utmost respect and admiration for
Lilly and her team. We are delighted that we could finally align
the interest of all parties, with strategic and value creation
opportunity for Welltower's shareholders." Mr. Mitra continued,
"Additionally, we are extremely pleased to have funded this
transaction through efficiently priced permanent capital to create
significant near and long-term per share value for our
shareholders. Our pipeline of attractive opportunities across the
health and wellness continuum remains robust going forward."
The Holiday portfolio is 100% private pay at an affordable price
point and maintains attractive physical characteristics,
including large rooms, high ceilings and kitchenettes. Most of the
acquired properties lease space to third-party home health
agencies, which enables residents to age in place by purchasing
a-la-carte care as needed. The average resident age is 81 years old
with an average length of stay of approximately 32 months,
resulting in low recurring capital expenditures and higher
operating margins.
Welltower's acquisition of the real estate portfolio, which is
subject to customary closing conditions, is scheduled to close
during the third quarter of 2021.
Forward-Looking Statements
This press release may
contain "forward-looking" statements as defined in the Private
Securities Litigation Reform Act of 1995.
When Welltower uses words such as "may," "will,"
"intend," "should," "believe," "expect," "anticipate," "project,"
"estimate" or similar expressions that do not relate solely to
historical matters, it is making 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 a result of various
factors, including, but not limited to, those factors discussed
in Welltower's reports filed from time to time with
the SEC. Welltower undertakes no obligation to
update or revise publicly any forward-looking statements, whether
because of new information, future events or otherwise, or to
update the reasons why actual results could differ from those
projected in any forward-looking statements.
Supplemental Measures
We believe that net income and
net income attributable to common stockholders ("NICS"), as defined
by U.S. generally accepted accounting principles ("U.S. GAAP"), are
the most appropriate earnings measurements. However, we consider
funds from operations ("FFO") and normalized FFO to be useful
supplemental measures of our operating performance. These
supplemental measures are disclosed on our pro rata ownership
basis. Pro rata amounts are derived by reducing consolidated
amounts for minority partners' noncontrolling ownership interests
and adding our minority ownership share of unconsolidated amounts.
We do not control unconsolidated investments. While we consider pro
rata disclosures useful, they may not accurately depict the legal
and economic implications of our joint venture arrangements and
should be used with caution. Historical cost accounting for real
estate assets in accordance with U.S. GAAP implicitly assumes that
the value of real estate assets diminishes predictably over time as
evidenced by the provision for depreciation. However, since real
estate values have historically risen or fallen with market
conditions, many industry investors and analysts have considered
presentations of operating results for real estate companies that
use historical cost accounting to be insufficient. In response, the
National Association of Real Estate Investment Trusts ("NAREIT")
created FFO as a supplemental measure of operating performance for
REITs that excludes historical cost depreciation from net income.
FFO attributable to common stockholders, as defined by NAREIT,
means net income attributable to common stockholders, computed in
accordance with U.S. GAAP, excluding gains (or losses) from sales
of real estate and impairments of depreciable assets, plus real
estate depreciation and amortization, and after adjustments for
unconsolidated entities and noncontrolling interests. Normalized
FFO attributable to common stockholders represents FFO attributable
to common stockholders adjusted for certain items detailed in our
quarterly earnings releases. We believe that normalized FFO
attributable to common stockholders is a useful supplemental
measure of operating performance because investors and equity
analysts may use this measure to compare the operating performance
of the Company between periods or as compared to other REITs or
other companies on a consistent basis without having to account for
differences caused by unanticipated and/or incalculable items.
No reconciliation of forecasted normalized FFO attributable to
common stockholders per diluted share accretion or estimate of
forecasted impact on net income attributable to common stockholders
per diluted share is provided herein because we are unable to
quantify certain amounts that would be required to be included in
the comparable GAAP financial measures without unreasonable efforts
primarily due to the anticipated timing of receipt of draft
third-party real estate appraisals and valuations. We believe such
reconciliation would imply a degree of precision that could be
confusing or misleading to investors.
Our supplemental reporting measures and similarly entitled
financial measures are widely used by investors, equity and debt
analysts and ratings agencies in the valuation, comparison, rating
and investment recommendations of companies. Our management uses
these financial measures to facilitate internal and external
comparisons to historical operating results and in making operating
decisions. Additionally, they are utilized by the Board of
Directors to evaluate management. The supplemental reporting
measures do not represent net income or cash flow provided from
operating activities as determined in accordance with U.S. GAAP and
should not be considered as alternative measures of profitability
or liquidity. Finally, the supplemental reporting measures, as
defined by us, may not be comparable to similarly entitled items
reported by other real estate investment trusts or other
companies.
About Welltower
Welltower® Inc. (NYSE:WELL),
an S&P 500 company headquartered
in Toledo, Ohio, is driving the transformation of health
care infrastructure. The Company invests with leading seniors
housing operators, post-acute providers and health systems to fund
the real estate infrastructure needed to scale innovative care
delivery models and improve people's wellness and overall health
care experience. Welltower, a real estate investment trust
(REIT), owns interests in properties concentrated in major, high
growth markets in the United States, Canada and
the United Kingdom, consisting of seniors housing, post-acute
communities and outpatient medical properties. For more
information, visit www.welltower.com.
About Atria Senior
Living
Atria Senior
Living is a leading operator of independent living, assisted
living, supportive living and memory care communities in more
than 200 locations in 28 states and seven
Canadian provinces. We are the residence of choice for more
than 20,000 seniors, and the workplace of choice for more
than 12,000 employees. We create vibrant communities
where older adults can thrive and participate, know that their
contributions are valued, and enjoy access to opportunities
and support that help them keep making a positive difference in our
world. Glennis Solutions, a subsidiary of Atria Senior Living, is the only fully
integrated cloud-based software suite specifically designed to
serve the senior housing industry. For more information about
Atria, visit AtriaSeniorLiving.com or follow them on
Facebook or Twitter. For career opportunities and more information
about working for Atria, visit AtriaCareers.com. For more
information on Glennis Solutions,
visit GlennisSolutions.com.
About Holiday Retirement
Holiday Retirement is in the
business of helping older people live better. Pioneering the
concept of independent senior living in 1971, Holiday Retirement
has grown to help more than 25,000 residents in 43 states live
better. Holiday Retirement is also recognized as a Great Place to
Work®. For more information about Holiday Retirement
visit www.holidayseniorliving.com.
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SOURCE Welltower Inc.