Welltower (NYSE: WELL) ended 2018 with $1 billion in off-market acquisitions and a $300 million influx of Qatari capital. Two days into the new year, the Toledo, Ohio-based real estate investment trust (REIT) announced it has another blockbuster deal in the works. Welltower is to acquire a portfolio of 55 medical buildings from CNL Healthcare Properties, a non-traded REIT based in Orlando, Florida, for $1.25 billion.
The 3.3 million square-foot portfolio consists of medical office buildings, post-acute care facilities and specialty hospitals in major markets across 16 states, and are 94% occupied. Ninety-two percent of the portfolio is affiliated with premier national health systems such as Cleveland Clinic, Novant and Memorial Hermann, all of which possess A ratings from Moody’s. The company’s total portfolio includes 72 senior housing communities in 34 states. CNL Healthcare Properties is sponsored by private investment management firm CNL Financial Group.
CNL’s board of directors appointed a special committee last June to entertain strategic alternatives to improve shareholder liquidity, including a sale of the company. It also closed a equity offering for CNL Healthcare Properties II on Oct. 1.
Welltower has been in active acquisition mode across the entire health care sector in recent months. It acquired Quality Care properties (NYSE: QCP) last April in a $1.95 billion joint venture with nonprofit health system ProMedica, and has affiliated its health and medical system portfolio with strong hospitals and health systems. The REIT is also a proponent of “payviders” intended to tighten the relationships between post-acute care settings and health systems.
After analyzing the portfolio and market fundamentals, the deal is ultimately low risk and high yield, Welltower Chief Investment Officer Shankh Mitra said in a statement.
“Welltower was able to act quickly and definitively when the opportunity presented itself, leveraging our proprietary data science platform and deep local presence through our real estate services platform to come to an agreement with CNL as a high quality and reputable sponsor,” Mitra said in the statement.
CNL intends to use proceeds from the sale to repay debt, pay closing costs and other related expenses. Pending board approval, the company may also use proceeds to rebalance corporate borrowings, and make a special distribution to shareholders.