Welltower Largely Splits With Genesis, Bolsters ProMedica JV in Deals Valued at $880M

Welltower (NYSE:WELL) announced Tuesday it has substantially exited its operating relationship with nursing home giant Genesis HealthCare (NYSE: GEN), with joint-venture health system partner ProMedica picking up some of the operator’s buildings. 

In a separate transaction, Toledo, Ohio-based Welltower is divesting 25 properties that it acquired through its 2018 JV with ProMedica.

The series of real estate deals total $880 million in value, or $144,000 per bed, according to Welltower.

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Genesis had run into fierce headwinds as a result of the Covid-19 pandemic. Last August, the company warned its future as a going concern was in “substantial doubt” as a result of its financial and operational challenges.

The divestment with Genesis includes 51 properties, 35 of which are marked for sale to a joint venture composed of Welltower, Aurora Health Network, and Peace Capital, with Welltower holding a preferred equity position in the arrangement.

The real estate investment trust (REIT) also will transition seven properties sub-leased to Genesis into a new lease agreement with a regional operator, with plans to buy the properties with Aurora for $182 million in 2023.

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Welltower will pay Genesis an $86 million lease termination fee under the transactions, which the skilled nursing operator will immediately pay back to reduce its debt. And when Genesis hits “certain restructuring milestones,” the REIT will knock another $170 million off its loans in exchange for a 15% equity stake in the operator.

In addition to sales, Welltower also plans to move nine PowerBack-branded Genesis rehabilitation facilities valued at $292 million under its existing 80-20 joint venture relationship with ProMedica. The facilities will be rebranded as ProMedica Senior Care, and Welltower expects Genesis will transition operations on them in the coming months.

ProMedica Senior Care is the new brand, unveiled in Oct. 2020, for the portfolio of former HCR ManorCare skilled nursing facilities and Arden Courts memory care communities that Welltower and ProMedica jointly acquired in 2018.

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Welltower framed the PowerBack transitions as a way to enhance ProMedica’s post-acute offerings by helping the health system better work with referral sources and provide needed care.

In a separate transaction, Welltower and ProMedica under their joint venture will divest 25 “non-strategic” skilled nursing properties valued at $265 million that were acquired in 2018. The facilities are located in eight states and carry an average age of 41 years.

“The changing health care environment requires innovative partnerships, such as the one established between ProMedica and Welltower,” said Welltower CEO Shankh Mitra in a press release about the deal. “We are looking forward to the opportunities these transactions will generate as we continue to demonstrate how we’re challenging the traditional care models.”

Welltower also shared an operating update Tuesday as part of its monthly Covid-19 disclosures. As of Feb. 26, occupancy for the REIT’s senior housing operating (SHO) portfolio was 74%, representing an 80 basis point drop from Jan. 31. But the company’s rate of decline is slowing, with just 6.5 basis points of occupancy shed between Feb. 19 and 26.

The REIT also has seen an 87% decline in Covid-19 cases since the peak in mid-January. As of Feb. 26, 95% of the REIT’s SHO communities were accepting new residents, with many communities having resumed limited dining service and some having resumed limited in-person visitations.

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