Welltower (NYSE: WELL) and an investment group led by real estate and private equity investor Safanad have announced plans to recapitalize HC-One, the largest care home operator in the UK.
The two companies will de-leverage HC-One, extend its debt maturity by five years and provide the company with new equity to invest in its communities and operations. HC-One owns 282 care homes and leases 45 others in the United Kingdom. Safanad is its majority owner.
Welltower is providing a £540 million, or $750 million, in a senior secured loan that is backed by HC-One’s real estate, certain assets and a £55 million, or $76 million, equity investment. The loan may be expanded by £30 million, according to the Toledo, Ohio-based real estate investment trust (REIT).
Welltower is funding the loan through its more than $2 billion of cash and cash equivalents as of March 31.
HC-One will use the loan to refinance existing debt, simplify its capital structure and become more flexible with its finances, according to Welltower. The REIT is also providing a “delayed draw” cap-ex facility for HC-One to redevelop its care homes.
“We are particularly pleased to support HC-One’s strategy to invest in its communities and staff who have performed their role admirably throughout the Covid-19 pandemic,” said Welltower CEO Shankh Mitra in a press release. “After a challenging period for the UK seniors housing sector, we look forward to participating in a period of recovery and growth in the years ahead.”
HC-One’s financial future was in recent years uncertain, with rumors of a sale 2018. And in 2020, the company’s CEO, Justin Hutchens, stepped down to take a position with Chicago-based Ventas (NYSE: VTR).
With Welltower’s capital infusion, HC-One plans to refurbish and modernize more than 200 of its care homes. The company also announced a pay increase of at least 3% for its workers.
“We are pleased that Welltower, with its expertise and commitment to the sector, is supporting HC-One,” said CEO James Tugendhat. “We are confident we can improve and develop HC-One to be true to our purpose of serving at the heart of each of our communities and being the first choice for families, colleagues and commissioners.”
Welltower also provided an update on its senior housing portfolio Wednesday.
Occupancy for the company’s senior housing operating (SHO) portfolio in the U.S. and UK gained approximately 40 and 90 basis points, respectively, between April 1 and April 23. The company’s senior housing holdings in Canada, however, shed about 20 basis points during that time. As of April 23, occupancy for the portfolio sat at about 73.8%.
Since starting vaccination clinics, Welltower has seen a sharp decline in the number of Covid-19 cases in its communities, as case counts have declined by 98% since mid-January across the REIT’s SHO portfolio. As a result, many communities of its “have returned to pre-Covid conditions in terms of lead generation and resumption of in-person tours, indoor visitation, communal dining, and social activities,” the company noted in its first-quarter 2021 earnings release Wednesday.