Welltower Chairman and CEO Tom DeRosa

Welltower’s $2.6 billion in completed gross investments made the second quarter “one of our busiest ever for investments,” Chief Financial Officer John Goodey said Thursday during the real estate investment trust’s latest earnings call.

But “the quarter was not driven by a bunch of deals,” Welltower Chairman and CEO Tom DeRosa said, adding that “ ‘deals’ … has become a pejorative around here.”

“Welltower is a value-added platform that can efficiently and effectively address the capital needed to move health and wellness care delivery forward, particularly in view of the aging of the population,” he said. “This is generating exciting investment opportunities like the ones we’ve already announced year to date.”

Welltower’s senior living-related transactions since the last earnings call in May:

  • $1.8 billion sale of Benchmark Senior Living portfolio.

Welltower ended its eight-year relationship with Benchmark Senior Living in July with the sale of its 48-property portfolio for gross price of $1.8 billion.

Welltower Chief Investment Officer Shankh Mitra said the REIT planned to sell 11 properties but received a “double-digit number of bids,” and three of them sought to purchase the entire portfolio. “We got a great price that we couldn’t refuse, so we sold the portfolio,” he said. 

Welltower has the potential to receive an additional $50 million in earnout proceeds from the transaction.

Benchmark’s recapitalization closed in early July. Under a new management agreement with the new capital partner, the company will continue to manage the 4,137-unit portfolio of assisted living properties in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.

  • Acquisition of a $308 million Balfour Senior Living portfolio.

In a $308 million partnership with Balfour Senior Living, Welltower acquired a portfolio of six independent, assisted living and memory care communities in the Denver and Boulder, CO, metropolitan statistical areas, including Balfour’s downtown Denver flagship community, Riverfront Park, and the recently developed Lavender Farms, which opened in April. As part of the purchase, Welltower obtained exclusive rights to Balfour’s future acquisition and development pipeline, as well as an option to acquire up to a 34.9% interest in Balfour’s management company. Several development initiatives are underway in high-barrier-to entry East Coast markets, according to the REIT.

  • The $285 million purchase of five Sunrise Senior Living communities.

Welltower acquired the remaining 66% interest in five private-pay senior housing properties recently developed and managed by Sunrise Senior Living in the Washington, D.C., San Francisco and San Diego metropolitan areas. The REIT previously funded 34% of the development cost for the communities through its joint venture and ownership of Sunrise. The five communities opened in 2017 and 2018 and on acquisition had an occupancy level of 67%. Sunrise will continue to manage the communities. The operator’s relationship with the REIT now exceeds 180 communities in the United States, Canada and the United Kingdom.

  • The acquisition of a $216 million Discovery Senior Living portfolio.

Welltower has expanded its relationship with Discovery Senior Living through an off-market acquisition of three infill senior living and care campuses located in the Dallas-Fort Worth and San Antonio metropolitan statistical areas. The portfolio, recently developed by South Bay, was acquired for $216 million ($280,000 per unit) through a newly formed joint venture between Discovery and Welltower. Discovery will manage the portfolio.

The last phase of the Alliance Town Center development in Dallas-Fort Worth will open in the fourth quarter. On completion, the total cost of the portfolio will be $237 million ($273,000 per unit). In-place occupancy throughout the recently built portfolio (excluding the last phase of the Alliance Town Center) was 72% on acquisition, Welltower said. The REIT expects lease-up to accelerate.

As part of the transaction, Welltower signed a $1 billion exclusive development agreement with Discovery, under which Welltower and Discovery are currently reviewing two new projects. In addition, Welltower is under contract to fund three newly opened Discovery properties in Florida for $92.7 million ($255,000 per unit). These three buildings received certificates of occupancy in the second quarter.

  • Acquisition of $343 million in Clover Management properties.

Welltower and Clover Management have formed a joint venture partnership to acquire 32 senior living communities, including four properties under development, for a pro rata investment of $343 million.

  • Moved 20 Silverado properties to Frontier Management.

At the end of the quarter, Welltower transitioned 20 Silverado properties to a newly formed joint venture with Frontier Management; the communities are 67% leased, Mitra said. The REIT now has 26 properties with Frontier.

Welltower also transitioned 11 Silverado communities in California from a RIDEA structure to a triple-net lease with Silverado; the initial term is 10 years.

“Silverado is a fine operator, a really great operator in their markets in California,” Mitra said. “We moved the non-California assets to Frontier, which we think will be able to create significant upside to the cash flow and, more importantly, resident experience in these buildings.”

Looking ahead

Overall, looking ahead, Mitra said, “Our senior housing pipeline is very strong. We’re very bullish on the business. If you think about how we grow in that business, we grow with our existing operators and we also grow our family of operators. We have significant opportunity for growth or development as well as acquisitions.”