Shankh Mitra headshot
Welltower CEO Shankh Mitra

Toledo, OH-based real estate investment trust Welltower will move 147 skilled nursing facilities currently operated by Toledo-based ProMedica Senior Care into a joint venture between Welltower and Integra Health, the REIT announced Monday.

“The communities have enjoyed a strong rebound in occupancy over the last six months but have been impacted by the elevated use of agency labor,” Welltower CEO and Chief Investment Officer Shankh Mitra said in a statement.

In a separate announcement, ProMedica said it would transfer the real estate and management of all of the SNFs that are part of the joint venture and master lease, respectively, between ProMedica and Welltower by Dec. 19.

ProMedica Senior Care will continue to operate 58 private-pay senior living communities under a lease backed by the existing guaranty, Welltower said. ProMedica said that the facilities all are Arden Courts memory care communities within its real estate joint venture with Welltower.

“We are excited to announce this partnership with Integra, as Integra’s focused asset management and vast network of strong regional providers will allow the new joint venture to build on ProMedica’s positive performance momentum, invest in the communities and hire talent,” Mitra said. “We believe the transactions announced today will benefit all of Welltower’s stakeholders and ensure first-rate resident care continues long into the future. The increase in skilled nursing rent, even under challenging operating and financial market conditions, validates our fundamental investment thesis: favorable basis and staying power are what drives real estate returns over time.”

Integra Health CEO David Gefner said in a statement that his company is “excited” about the joint venture.

“These communities are in extraordinary locations and comprise an important segment of the healthcare continuum,” he said. “We aim to bring them back to their previous glory through focused asset management and a regional operator strategy with a primary focus on quality of care. We believe there is significant value to be created here for all stakeholders, most importantly the facility residents and staff.”

As part of an agreement between Welltower and ProMedica, ProMedica will surrender its 15% interest in the skilled nursing assets currently held within the existing 85/15 Welltower/ProMedica joint venture and “provide significant working capital support for the new operators to ensure a smooth transition of patient care and operations.”

Welltower released ProMedica from its skilled nursing lease obligation for these considerations, which it said totaled almost $500 million.

ProMedica CEO retired Nov. 1

The news of the transaction comes on the heels of the announcement of the Nov. 1 retirement of ProMedica CEO Randy Oostra after a 25-year career with the organization. His successor is Arturo Polizzi, who began his career with ProMedica in 1998.

ProMedica said Monday that the transaction will resolve the organization’s ongoing operating losses within its senior care division and that it represents a “cornerstone element” of the company’s ongoing financial performance improvement plan.

“By engaging in this transaction, we will be able to increase focus and resources on the other areas of our health system as we continue to provide high-quality, compassionate care and invest in our communities and dedicated caregivers,” Polizzi said in a statement. “This was a complex transaction, and I would like to personally thank Welltower’s executive team — particularly Shankh Mitra, CEO — for their efforts.”

Welltower, ProMedica JV announced in 2018

It was April 2018 when it was announced that Welltower and ProMedica Health System had formed a joint venture to facilitate the acquisition of HCR ManorCare and Arden Courts real estate assets from their then-landlord, Quality Care Properties, in a series of related moves.

First, ProMedica acquired ManorCare for approximately $1.35 billion in cash and also assumed net liabilities. Next, Welltower acquired QCP on the condition that ProMedica completed its acquisition of ManorCare. Then, the joint venture between Welltower and ProMedica leased the HCR ManorCare and Arden Courts real estate to ProMedica for 15 years. ProMedica also acquired the operations of ManorCare and Arden Courts.

At the time, the REIT said that the partnership “creates new avenues for growth between ProMedica and Welltower across multiple property types and geographies.” Welltower said the deal was 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.

The agreements announced Monday do not include ProMedica’s non-Welltower leased senior care centers in Adrian and Monroe, MI, the skilled nursing and memory care facilities on the ProMedica Flower Hospital campus in Sylvania, OH, and ProMedica’s home health and hospice agencies.