TOLEDO, Ohio — Welltower (NYSE: WELL) today announced that it has essentially ended its operating relationship with Genesis HealthCare, terminating the 51 leases for Genesis-operated skilled nursing facilities.
Concurrent with the lease cancelation, Welltower has agreed to sell 42 traditional skilled nursing facilities for $680 million to a joint venture with Aurora Health Network, in which Welltower will retain a participating preferred equity position.
Welltower will also contribute its nine former PowerBack facilities, which provide higher acuity, short-stay rehabilitation and care, into its 80/20 joint venture with ProMedica at a total value of $292 million. At the same time, the Welltower/ProMedica joint venture will sell 25 of its skilled nursing facilities for $265 million.
Welltower will provide Genesis a lease termination fee of $86 million upon the successful transition of all properties, which will be used to immediately repay indebtedness to Welltower. The real estate of the combined communities is valued at $880 million.
Meanwhile, Welltower plans to reduce Genesis’ debt by $170 million in exchange for equity ownership in the operator upon achievement of restructuring milestones. After an infusion of capital from Aurora Health Network into Genesis, Welltower’s total ownership in Genesis will be 15 percent, “allowing for participation in expected post-COVID recovery in fundamentals,” according to a business update from Welltower.
Genesis has paid all contractual rent due to Welltower through February 2021.
“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,” says Shankh Mitra, Welltower’s CEO. “I am also pleased that Welltower will expand its highly successful relationship with ProMedica. The contribution of nine former PowerBack facilities into our existing joint venture will be substantially funded through the disposition of non-strategic joint venture assets.”
To view Welltower’s business update related to these transactions, click here. Based in Toledo, Welltower is the largest seniors housing REIT in the United States by both market cap and portfolio size.