Welltower and ProMedica Health System have formed a joint venture to facilitate the acquisition of HCR ManorCare and Arden Courts real estate assets from their landlord, Quality Care Properties, the real estate investment trust and regional not-for-profit healthcare system announced as Wednesday turned into Thursday.
The news confirmed rumors that were first reported by Reuters less than 12 hours earlier. Welltower, ProMedica and ManorCare all are based in Toledo, OH.
The joint venture, according to Welltower, will be the culmination of a series of related moves.
First, ProMedica will acquire ManorCare for approximately $1.35 billion in cash and also will assume net liabilities.
Next, Welltower will acquire QCP for $20.75 per share in cash, on the condition that ProMedica completes its acquisition of ManorCare. The boards of Welltower and QCP unanimously approved the stock transaction, Welltower said.
“We are thrilled to have a successful outcome for our shareholders, HCR ManorCare employees and provide continuity and stability for the more than 200,000 of HCR ManorCare patients and residents,” QCP CEO Mark Ordan said in a statement.
QCP, following the approval of a prepackaged Chapter 11 bankruptcy for ManorCare earlier this month, was in the process of converting ManorCare from tenant to wholly owned indirect subsidiary.
The 80/20 joint venture between Welltower and ProMedica will lease the real estate of QCP’s main tenants, HCR ManorCare and Arden Courts (memory care), to ProMedica for 15 years. ProMerica also is acquiring the operations of ManorCare and Arden Courts.
Welltower also will wholly own 28 non-ManorCare assets under existing leases.
The actions will make ProMedica a top 15 U.S. health system, with more than $7 billion in revenues and 70,000 employees across 700 locations in 30 states, Welltower said; 50,000 of those employees and 450 of those locations currently are with ManorCare.
ProMedica will invest approximately $400 million in capital expenditures over the next 5 years at the joint venture properties, Welltower said.
The REIT also said the partnership “creates new avenues for growth between ProMedica and Welltower across multiple property types and geographies.”
“We want to take down the wall between traditional hospital and post-acute care services in an effort to enhance the health and well-being of our aging population,” ProMedica President and CEO Randy Oostra said in a statement. “The lines are blurring between where healthcare begins and stops. This acquisition provides us the platform to think differently about health and aging.”
Welltower said the deal is the first of its kind between a REIT and a health system, spanning wellness, post-acute care, assisted living, memory care, hospice and home health.
“This is an exciting opportunity for Welltower and singularly validates our strategy of partnering with major health systems to drive healthcare delivery to lower-cost settings while improving health outcomes,” Welltower CEO Tom DeRosa said.