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National Health Investors expects to drop its lawsuit against Welltower in April after 16 Holiday Retirement communities are moved to new owners, the Murfreesboro, TN-based real estate investment trust announced Monday.

Additionally, one Holiday property will be sold, and Toledo, OH-based Welltower will pay millions to NHI.

NHI announced its lawsuit against Welltower and some of its subsidiaries in December, asserting that the latter REIT “failed repeatedly to honor their legal obligations to NHI” and owed more than $14.1 million in back rent related to Holiday properties. NHI claimed that the defendants acquired assets from Holiday that included leases to NHI senior living communities and then “fraudulently induced NHI to consent to the assignment of the leases, and then immediately failed to pay rent or provide a promised security agreement that was intended to secure against their default, all as part of an effort to pressure NHI to agree to new conditions outside the assignment agreement or force a sale of the properties to the Welltower Entities.”

As of late January, NHI said that total unpaid rent exceeded $16 million as it sought to “expeditiously” move the legacy Holiday properties to new owners. Just last week, NHI announced that it was working toward a potential out-of-court settlement to resolve the lawsuit.

NHI and Welltower will operate under a memorandum of understanding until a final settlement is reached, NHI said Monday. Under the terms of the MOU:

  • 16 legacy Holiday properties will transition to new tenants, and Welltower will “use commercially reasonable efforts” to complete those transitions by April 1.
  • NHI will sell one legacy Holiday property, and Welltower will “use commercially reasonable efforts” to facilitate the sale’s closing;
  • Welltower will pay NHI approximately $6.9 million, which will be held in escrow until the final settlement agreement is executed after the 16 communities move to new operators;
  • NHI is entitled to a security deposit of approximately $8.8 million, which can be liquidated at the company’s discretion. NHI previously said that it planned to apply the funds to past-due rent.
  • After the 16 Holiday communities move to new operators and the final settlement agreement is executed, NHI will file to dismiss the lawsuit within three days.

Welltower is the largest owner of senior living communities in the United States, according to the 2021 ASHA 50 list compiled by the American Seniors Housing Association. NHI is No. 7 on the same list.

Additional Welltower news:

Welltower announced additional news Sunday and Monday:

  • Welltower will implement a holding company reorganization to structure Welltower as an umbrella partnership real estate investment trust, or UPREIT. In the reorganization, a new holding company will become the publicly traded parent company and will inherit the name Welltower Inc. The current REIT will exist as a wholly owned subsidiary of UPREIT, initially called Welltower OP Inc.
  • The joint venture between Related Companies and Atria Senior Living, in conjunction with Welltower, will develop upscale senior living communities in Santa Clara, CA, and Cupertino, CA, as part of a larger strategic partnership among the three companies. The developments will be the third and fourth locations for the joint venture’s new series of communities in major metropolitan areas after the newly opened Coterie Cathedral Hill in San Francisco and Coterie Hudson Yards in New York City, which will open later this year.
  • The REIT is expanding its relationship with Brighton, MI-based StoryPoint Senior Living, purchasing three distinct senior living portfolios for $548 million. The portfolios total 2,787 units across 33 communities throughout Michigan, Ohio and Tennessee.

McKnight’s Senior Living is following these developments and will publish additional information.

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