Welltower cuts ties with troubled nursing home operator
Mar. 3—Toledo-based Welltower Inc., a real estate investment trust (REIT), said it is largely severing its relationship with financially troubled Genesis HealthCare, an operator of rehabilitation facilities, nursing homes, and assisted-living complexes in the Northeast and Mid-Atlantic states, which Welltower has been connected to for 10 years.
In April, 2011, when it was named Health Care REIT Inc., Welltower paid $2.4 billion for 147 healthcare facilities owned by Genesis.
Welltower said late Tuesday it will terminate leases with 51 Genesis-owned properties and has agreed to pay an $86 million termination fee.
Welltower will sell 42 traditional skilled nursing facilities for a combined price of $682 million. Thirty-five will be sold for $500 million to a joint venture of Welltower, Aurora Health Network, and Peace Capital, and the group gradually will transfer the operations of those facilities to "leading regional operators."
The remaining seven facilities, which Welltower currently leases and sublets to Genesis, will be transferred to a regional operator and Welltower eventually will buy those properties in conjunction with an Aurora joint venture in April 2023 for $182 million.
Lastly, Welltower will transfer nine short-stay rehabilitation and care facilities, valued at $292 million and operated under Genesis' "PowerBack" brand, to its 80/20 joint venture with ProMedica. They will be leased to ProMedica, which will place them under the ProMedica Senior Care brand it launched in October.
After all the transactions are completed, Welltower is expected to incur a 5 cents per share negative impact to its funds from operations on an annualized basis.
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Genesis, of Kennett Square, Pa., shocked the healthcare industry last summer by disclosing doubts about its ability to continue as a going concern due to financial stress caused by the coronavirus pandemic. Welltower's moves are the first major steps by a REIT to sever ties with the nursing home operator.
"Today's transactions represent the culmination of Welltower's 10-year operating partnership with Genesis," Welltower CFO Tim McHugh said in a statement Tuesday. "We are pleased to have attained a mutually beneficial resolution for both companies, having generated substantial proceeds to Welltower while simultaneously de-risking the company."
Welltower said although it will take a short-term hit from the sales, they should yield proceeds of $745 million, which it plans to reinvest.
"The quality of the company's portfolio and long-term growth prospects will be significantly enhanced following the transition of assets to regional operators and through the future deployment of proceeds received through these transactions," Shankh Mitra, Welltower CEO, said. "I am also pleased that Welltower will expand its highly successful relationship with ProMedica," he added.
