Welltower Exits Benchmark Portfolio for $1.8 Billion, Strengthens Other Operator Ties

Real estate investment trust Welltower (NYSE: WELL) disposed of its interest in Benchmark Senior Living for a gross sale price of $1.8 billion — one of several senior housing deals that the Toledo, Ohio-based real estate investment trust (REIT) announced Wednesday, in conjunction with second quarter 2019 earnings.

The Benchmark portfolio consists of 48 senior living communities across Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont; previously, Welltower owned the properties in partnership with Waltham, Massachusetts-based Benchmark, which operated them.

Going forward, Benchmark will continue as operator under a new management agreement. The portfolio will be owned by private institutional capital. Welltower did not publicly disclose further information about the identity of the buyer, and Benchmark declined to identify the buyer to Senior Housing News.

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“The recapitalization of our Benchmark portfolio speaks to the strong institutional demand by high quality buyers for seniors housing assets,” said Shankh Mitra, Welltower’s Chief Investment Officer, in a press release. “We are very pleased with this recap of the Benchmark portfolio that will drive significant capital investment into the assets.”

Welltower has the potential to receive up to $50 million in earnout proceedings subject to future performance. The recapitalization closed in early July.

“We are proud of and grateful for our eight-year relationship with Welltower and are extremely pleased with this transaction,” said Benchmark founder, Chairman and CEO Tom Grape, in the press release. “It allows us to invest in capital expenditures to continue to provide truly life changing experiences for residents through genuine and purposeful human connection.”

Investments in Discovery, Sunrise, Balfour

Also on Wednesday, Welltower announced transactions that deepen its ties to other senior housing operators.

The REIT is expanding its relationship with Bonita Springs, Florida-based Discovery Senior Living through the off-market acquisition of three senior housing campuses, in the Dallas-Forth Worth and San Antonio markets. The properties were developed by South Bay, and will be placed in new joint venture between Welltower and Discovery.

One of the communities, in the Alliance Town Center development in Dallas-Fort Worth, will open in the fourth quarter of 2019. Including those units, the total acquisition price rings in at $237 million, or $237,000 per unit. In-place occupancy for the rest of the portfolio was 72% upon acquisition, and Welltower anticipates acceleration in lease-up.

The communities are all high-end and offer the full continuum of care. Discovery will manage the locations.

Welltower also has inked a $1 billion exclusive development agreement with Discovery. The two companies are currently reviewing two new projects, and the REIT is under contract to fund three newly opened Florida locations for $92.7 million.

“All of these assets, including those that are under contract, are steel and concrete construction and represent a significant discount to Discovery transactions we have seen in the marketplace recently,” Welltower’s Mitra said, in a press release.

Discovery has struck deals with other REITs in 2019, as well, including HCP (NYSE: HCP) and NHI (NYSE: NHI). Discovery’s relationship with Welltower dates back to 2016.

“Discovery Senior Living is extremely excited to continue to expand our strategic relationship with Welltower,” said Discovery CEO Richard Hutchinson. “The most recent joint venture acquisitions as well as our mutual multi-year commitment to co-develop an innovative portfolio of senior living communities will keep both companies at the forefront of providing differentiated resident centric experiences that we believe current and future customers of senior living will demand.”

In further senior housing moves, Welltower has struck a new RIDEA relationship with Denver-based Balfour Senior Living. Balfour’s six-property portfolio was acquired for a pro rata investment amount of $293 million, and Welltower has an option to acquire a 34.9% interest in the operating company. The REIT also has exclusivity on Balfour’s future acquisitions and developments pipeline.

Another new joint venture for Welltower is with Buffalo, New York-based Clover Management. For a pro rata investment of $343 million, Welltower acquired 32 communities across the Northeast and Midwest, including four under development.

Finally, Welltower purchased the remaining 66% interest in a five-property portfolio of Sunrise Senior Living communities for $218 million. Under an ongoing development venture with McLean, Virginia-based Sunrise, Welltower previously funded 34% of the development costs for the communities, located in San Francisco, San Diego and Washington, D.C.