U.S. Markets closed

Welltower (Well) to Acquire 29 MOBs for $787M From Hammes

Zacks Equity Research

Welltower Inc. WELL recently entered into a definitive agreement to acquire a portfolio of Class-A medical office buildings (MOBs) from Hammes Partners, in line with its efforts to strengthen the company’s outpatient medical platforms. The firm will shell out $787 million for the transaction, scheduled to close in fourth-quarter 2019.

The acquisition is for 29 properties spanning 1.5 million square feet of space. These properties are concentrated in the New York and Boston MSAs, and other densely-populated areas in California, Massachusetts, Texas and Maryland.

Further, the portfolio, with an average age of 10 years, is affiliated with well-known health systems and multi-specialty physician groups like Baylor Scott & White, Providence St. Joseph, Trinity Health, Medstar. An economic occupancy of 97% and portfolio-weighted average lease term of 12 years makes the acquisition a strategic fit. Additionally, with average rent escalators of 2.2%, the company will likely enjoy revenue and cash-flow growth.

Separately, the company has announced additional gross investment volume of $885 million, relating to four outpatient medical transactions for 30 properties, covering 2 million square feet of space. These transactions are currently under contract, with a blended year one cash cap rate of 5.4%. The company will also receive exclusive development rights through these transactions. This will offer significant value-creation opportunities.

Notably, in its third-quarter earnings release, the company announced year-to-date pro rata acquisition volume of $3 billion. Post the recently-reported quarter, the company has announced three acquisitions worth $594 million. This includes a portfolio of six Class-A senior living communities in Oakmont, two senior living communities in the Frontier region, and an off-market transaction for the purchase of 18 properties. This apart, Welltower has additional outpatient medical acquisitions worth $885 million under contract.

With these transactions, the company has announced $3.5 billion of outpatient medical acquisitions and pro rata total investment activity of $5.2 billion in the year so far.

The MOB acquisitions will add 450 properties, spanning 8 million square feet, to the company’s asset portfolio. Moreover, per management, the Hammes transaction highlights the company’s ability to fund and execute high-quality buyouts from best-in-class developers and operators.

Over the past six months, shares of this Zacks Rank #3 (Hold) company have gained 6.9%, as compared with the industry’s rally of 3.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Cousins Properties Incorporated CUZ currently carries a Zacks Rank of 2 (Buy). The Zacks Consensus Estimate for the ongoing year’s funds from operations (FFO) per share climbed 1.4% to $2.94 in a month’s time.

Healthcare Realty Trust Incorporated HR carries a Zacks Rank of 2, at present. The company’s FFO per share estimate for 2019 moved 1.2% north to $1.6 over the past week.

EastGroup Properties, Inc. EGP also carries a Zacks Rank of 2, currently. The company’s FFO per share estimate for this year moved up to $4.94 over the past month.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
EastGroup Properties, Inc. (EGP) : Free Stock Analysis Report
Cousins Properties Incorporated (CUZ) : Free Stock Analysis Report
Healthcare Realty Trust Incorporated (HR) : Free Stock Analysis Report
Welltower Inc. (WELL) : Free Stock Analysis Report
To read this article on Zacks.com click here.