Toledo, OH-based real estate investment trust Welltower will spend $725 million in four off-market seniors housing transactions, the REIT announced Tuesday, one of several pieces of news shared on its Investor Day in New York City, where Welltower maintains an office. The company also revealed a $300 million investment from an affiliate of the Qatar Investment Authority, two new board members, and a lawsuit related to its merger with Quality Care Properties.
Welltower did not provide details about the seniors housing acquisitions other than that three of the deals involve operators with which it already has relationships.
The investment is part of a total of approximately $1 billion in off-market transactions that Welltower announced Tuesday. The balance of the transactions, totaling $280 million, are seven deals related to medical office buildings, including acquiring a 75% ownership interest in two buildings under development in Charlotte, NC, that are 100% master-leased to Atrium Health for 15 years. As part of this transaction, Welltower said it will form a joint venture with Southeast developer Pappas Properties and will explore additional opportunities to expand in the region together.
$300 million from an affiliate of Qatar Investment Authority
The REIT also announced that an affiliate of the Qatar Investment Authority, Qatar’s sovereign wealth fund, has invested $300 million in Welltower common stock and has an option to acquire an interest in a development pipeline of urban senior living communities.
The moves represent the initial investments in a long-term partnership, the REIT said.
“QIA contacted us many months ago,” Welltower CEO Tom DeRosa told Investor Day attendees. “They, we believed, were looking at the healthcare real estate sector and trying to figure out a strategy to invest in the sector. So we spent an awful lot of time with them, and I believe they also did their homework, and they looked more broadly across healthcare real estate and looked for options, how they might best be able to invest in the sector.”
Of QIA’s resulting decision to invest in Welltower, DeRosa said: “I think it validates — I hope it validates — a lot of the things we’ve been saying about the company and the way we’re trying to differentiate ourselves. I believe they, through their work, saw a differentiated platform.”
That platform, DeRosa said in the announcement of the investment, centers on “owning, managing and developing modern and efficient healthcare real estate” with a vision of “the importance of this asset class in improving outcomes and lowering the costs of healthcare delivery.”
QIA is also an investor in Empire State Realty Trust, the CEO said, adding that he sits on the trust’s board.
Two new board members
Welltower also announced that Karen DeSalvo, M.D., and Johnese Spisso, MPA, were joining the board of directors.
DeSalvo is a professor in the departments of internal medicine and population health at the University of Texas at Austin Dell Medical School. She is the former acting assistant secretary for health at the U.S. Department of Health and Human Services and the national coordinator for health information technology as well as a former health commissioner for New Orleans.
Spisso is president of UCLA Health, CEO of the UCLA Hospital System and associate vice chancellor of UCLA Health Sciences. She is a former chief health system officer for the University of Washington School of Medicine as well as the vice president for medical affairs for UW.
“These two national healthcare leaders join a highly experienced group of business leaders that comprise the Welltower board, and I’m proud to say, a board that women and minorities account for 55% of all independent directors,” DeRosa said during his Investor Day remarks. “That would put us in the very top — likely single digits — of all S&P 500 companies for that percentage of minorities and women.”
The compensation rate for non-employee board members in 2017 was $85,000 in cash for four meetings, as well as stock, according to Welltower, with additional cash compensation if more meetings are held. The board chair and committee chairpersons receive additional compensation, as do some committee members whose committee meet more than four times a year. The board approved a $10,000 increase in base cash compensation on Nov. 30.
Class action lawsuit
In a Securities and Exchange Commission filing Tuesday, Welltower also discussed a putative class action lawsuit that had been filed against the Quality Care Properties board on July 19, a week before a vote in the REIT’s merger with QCP.
“The complaint alleges that the members of QCP’s Board of Directors breached their fiduciary duties in connection with the merger,” Welltower said. In part, the lawsuit seeks an order to prevent QCP from enforcing part of the company’s bylaws that specifies particular courts as the “sole and exclusive forum” for breach-of-duty claims against QCP directors, officers and employees.
Welltower said it maintains that the claims are without merit, but said “to minimize the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing,” it will have QCP enforce the provision “only to the extent that it designates the Maryland Circuit Courts, or, if those courts do not have jurisdiction, the U.S. District Court for the District of Maryland, Baltimore Division, as the sole and exclusive forum for actions subject to the [provision] and not to the extent that it requires covered actions to be filed in the Circuit Court for Baltimore City, Maryland.”
In return, the plaintiffs will drop their complaint. Welltower will pay the plaintiffs’ attorneys’ fees and other expenses.
Before the merger vote, QCP reached agreements to resolve two other class action lawsuits related to the merger.