Continuing its aggressive investment in senior housing, Welltower (NYSE: WELL) on Thursday announced agreements to acquire four portfolios for $1.3 billion, including the $580 million acquisition of 14 properties managed by Watermark Retirement.
“Since pivoting to offense 13 months ago, Welltower is pleased to have executed on its value-driven investment thesis, largely through granular and off-market transactions completed at a significant discount to estimated replacement cost,” CEO Shankh Mitra stated in the company’s press release.
The newly announced acquisitions include:
— $580 million acquisition of eight rental and six entrance fee communities managed by Watermark, located in diverse markets such as Washington, California and Virginia
— $475 million acquisition of nine senior apartment communities, to be operated by an existing Welltower partner
— $172 million acquisition of five recently developed Class-A properties in the Mid-Atlantic and Southeast
— $119 million acquisition of three senior housing properties in the Midwest, to be operated by New Perspective
These deals bring Welltower’s total pro rata gross investments to $5.6 billion since Oct. 2020 — and further deals could be coming.
“… We have recently observed a meaningful uptick in potential investment opportunities as the level of motivation from various sellers has risen, coinciding with further industry disruption due to the Delta variant and challenging labor environment,” Mitra stated. “With $5.3 billion of current near-term liquidity, including $1.0 billion of efficiently raised unsettled equity proceeds, we are well positioned to capitalize on the robust near-term capital deployment pipeline and continue to create significant per share value for our shareholders.”
Among the slew of senior housing investments that Welltower has made since the start of the pandemic, the real estate investment trust’s $1.6 billion acquisition of 86 Holiday Retirement communities is particularly noteworthy in its scale, and in the alignment between Welltower and Atria Senior Living, which acquired Holiday’s management company.
Mitra has been actively involved in driving the REIT’s pandemic dealmaking activity, which has created a “Covid class” of operating and development partners. The dealmaking has been informed by Welltower’s sophisticated market analytics and driven by favorable pricing caused by several factors, including the “double negative cycle” created when pandemic pressures were “superimposed” on oversupply issues, Mitra told SHN in July 2021.
“We are fundamentally capital allocators, we’re investors — not a deal shop — and there’s a significant difference between the two,” he said. “And so, we are very much driven by price.”
In the latest round of acquisitions, the Watermark portfolio rang in at a 40% discount to replacement cost, according to Welltower’s press release.
In Watermark, Welltower is aligning with an operator pursuing a “precision wellness” model, drawing on the expertise of a former Canyon Ranch leader.
Development partnership with Kisco
Also on Thursday, Welltower announced a long-term strategic partnership with Carlsbad, California-based Kisco Senior Living.
Previously, Kisco and Welltower collaborated on The Cardinal at North Hills, a continuing care retirement community in Raleigh, North Carolina. The Cardinal has maintained 95%-plus occupancy over the last five years, and returned to 100% occupancy in Sept. 2021, according to Welltower.
Kisco operates 20 senior living communities in six states. Going forward, Welltower’s data and analytics teams will work with Kisco to identify prime markets for creating more Kisco communities, as part of an exlusive development partnership.
Recently, the partnership broke ground on two projects. The Carnegie at Washingtonian Center is located in Gaithersburg, Maryland, and will feature seven stories of independent living, assisted living and memory care. And Phase 2 of The Cardinal also recently broke ground; this project involves an 18-story tower with 191 residences.
The total investment amount in the two projects will exceed $325 million, according to Welltower’s announcement.
Kisco has pursued an innovative, wellness-focused operating model with a strong technology component. The provider has gone big on voice-activated smart home tech; worked with Forbes Travel Guide on hospitality training; and used a pooled testing approach to help ease Covid-19 restrictions.
“Our discipline [in growth] and size is one advantage. We’ve also been family-owned since day one,” Kisco CEO Andy Kohlberg told SHN in 2020. “This gives us an advantage versus larger corporate companies, as we understand how locally driven this business can be.”
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