The US real estate investment trust has completed the acquisition of Barchester Healthcare and HC-One assets for £6.4 billion.
US-based real estate investment trust Walltower has completed the acquisition of Barchester Healthcare and HC-One assets, in a £6.4 billion deal that sees the firm lean into the aged care sector.
The firm’s net operating income derived from the seniors housing business is expected to increase to the mid-80% range.
The firm says that the deal is projected to be accretive to the company’s normalised funds from operations (FFO) per share next year, with what it calls “significant embedded future earnings growth potential” anticipated in subsequent years, and it will be funded primarily via the sale of outpatient medical assets.
“We believe that re-doubling our efforts in the seniors housing business represents the surest and fastest path to achieving our mission of elevating both the resident and site-level employee experience, while also enhancing our opportunity to deliver long-term compounding of per share growth for our existing investors,” said chief executive Shankh Mitra.
The largest component of the incremental seniors housing transactions is the acquisition of a real estate portfolio of Barchester-operated communities in the UK for £5.2 billion.
The portfolio is comprised of 111 communities managed by Barchester via an aligned RIDEA contract, which is a partnership structure between a real estate investment trust and a property operator, 152 triple-net leased communities, and 21 ongoing developments, which will also be managed in a RIDEA structure following development conversion.
The operating portfolio, comprised of both stabilised and lease-up properties, is positioned for significant future growth with current blended portfolio occupancy in the high 70%’s. Moreover, the triple-net lease is structured with 3.5% annual escalators and a coverage-based rent reset every five years at Welltower’s election. Overall, the acquisition is underwritten to achieve what Walltower calls an unlevered IRR in “the low-double-digit range”.
Welltower also purchased the HC-One-operated portfolio for £1.2 billion. It funded a portion of the purchase price through the repayment of a £660 million loan it originated at the height of the COVID-19 pandemic and Brexit uncertainties.
