Key Takeaways
- • Welltower (NYSE: WELL) has agreed to sell a prominent seniors housing portfolio across California, Nevada, and Washington for more than $740 million, announced in the REIT's Q4 2019 earnings release on February 12, 2020.
- • The portfolio comprises assisted living properties with 97% occupancy and generated $36.7 million in net operating income (NOI) during 2019, demonstrating strong operational performance at the time of disposition.
- • The transaction represents Welltower's continued portfolio optimization strategy, following the $1.8 billion sale of its Benchmark portfolio (48 properties across six northeastern states) to KKR in summer 2019.
- • Despite the disposition, Welltower expanded its senior housing operating partnerships in 2019, establishing new RIDEA relationships with Balfour Senior Living, Frontier Management, and LCB Senior Living, plus joint ventures with Clover Management and a capital partnership with Related Cos./Atria Senior Living.
- • Fourth-quarter 2019 same-store revenue-per-occupied-room (REVPOR) growth for Welltower's senior housing operating portfolio reached 3.5%, indicating underlying operational strength across the remaining portfolio.
Summary
Welltower, the Toledo, Ohio-based real estate investment trust, announced a definitive agreement to divest a significant West Coast seniors housing portfolio for gross proceeds exceeding $740 million. The transaction was disclosed in the company's fourth-quarter and full-year 2019 earnings announcement on February 12, 2020. The portfolio consists of assisted living properties located across three western states—California, Nevada, and Washington—representing what the company characterized as a "prominent" operating asset base.
The portfolio demonstrates strong underlying fundamentals. At the time of the announced disposition, the properties maintained a 97% occupancy rate and generated $36.7 million in net operating income during the full year 2019, reflecting solid operational execution and market positioning in competitive West Coast markets. The identities of the operating company managing the portfolio and the acquirer were not disclosed in the earnings announcement, with Welltower declining to provide additional details beyond the transaction basics.
This disposition aligns with Welltower's broader capital redeployment strategy. In summer 2019, the REIT completed the sale of its 48-property Benchmark portfolio spanning six northeastern states (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont) to private equity firm KKR for $1.8 billion in gross proceeds, with potential earnout consideration of up to $50 million tied to future portfolio sales performance. These two major exits suggest a strategic recalibration of Welltower's operating portfolio footprint.
Concurrently, Welltower has actively expanded its network of senior housing operating partnerships rather than divesting its entire operating presence. Throughout 2019, the REIT established new RIDEA (Rental Income Doing Business As) relationships with Denver-based Balfour Senior Living, Portland, Oregon-based Frontier Management, and Norwood, Massachusetts-based LCB Senior Living. Additionally, Welltower entered into a joint venture with Buffalo, New York-based Clover Management and secured a long-term capital partnership role in the joint venture between Related Cos. and Atria Senior Living focused on upscale urban senior housing developments. This combination of portfolio dispositions and partnership expansions reflects a shift toward more selective operator relationships and capital-light business models.
The company's operational metrics for remaining assets remained positive through the fourth quarter of 2019, with same-store revenue-per-occupied-room (REVPOR) growth of 3.5% for the senior housing operating portfolio, underscoring continued underlying market demand and pricing power in core markets.
The portfolio demonstrates strong underlying fundamentals. At the time of the announced disposition, the properties maintained a 97% occupancy rate and generated $36.7 million in net operating income during the full year 2019, reflecting solid operational execution and market positioning in competitive West Coast markets. The identities of the operating company managing the portfolio and the acquirer were not disclosed in the earnings announcement, with Welltower declining to provide additional details beyond the transaction basics.
This disposition aligns with Welltower's broader capital redeployment strategy. In summer 2019, the REIT completed the sale of its 48-property Benchmark portfolio spanning six northeastern states (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont) to private equity firm KKR for $1.8 billion in gross proceeds, with potential earnout consideration of up to $50 million tied to future portfolio sales performance. These two major exits suggest a strategic recalibration of Welltower's operating portfolio footprint.
Concurrently, Welltower has actively expanded its network of senior housing operating partnerships rather than divesting its entire operating presence. Throughout 2019, the REIT established new RIDEA (Rental Income Doing Business As) relationships with Denver-based Balfour Senior Living, Portland, Oregon-based Frontier Management, and Norwood, Massachusetts-based LCB Senior Living. Additionally, Welltower entered into a joint venture with Buffalo, New York-based Clover Management and secured a long-term capital partnership role in the joint venture between Related Cos. and Atria Senior Living focused on upscale urban senior housing developments. This combination of portfolio dispositions and partnership expansions reflects a shift toward more selective operator relationships and capital-light business models.
The company's operational metrics for remaining assets remained positive through the fourth quarter of 2019, with same-store revenue-per-occupied-room (REVPOR) growth of 3.5% for the senior housing operating portfolio, underscoring continued underlying market demand and pricing power in core markets.
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