Welltower Execs Discuss REIT’s $1.2B Nursing Home Investments, Detail Aspire Health Deal
Welltower Inc.’s (NYSE: WELL) $1.2 billion in skilled nursing investments in the first financial quarter served as a “credit business,” executives of the real estate investment trust (REIT) said Tuesday while discussing details of its investment in Aspire Healthcare.
Welltower Co-President and Chief Investment Officer Nikhil Chaudhri described skilled nursing as a credit business, in that investments were approached with a focus on the borrower’s ability to repay, he said, whether structured as debt or triple net leases.
The scope of the investment caught the attention of financial analysts during the REIT’s quarterly earnings call, given Welltower’s high-dollar investment in the previous quarter as well.
Welltower’s largest skilled nursing transaction for the quarter – the majority of the $1.2 billion in investments – involved Florida-based Aspire Healthcare as the new operator. Welltower began working with Aspire Healthcare in 2023 with a turnaround portfolio.
The REIT acquired 48 skilled nursing facilities in February for a total purchase price of $990.9 million, which included $750.8 million of cash consideration and $240 million of common stock consideration, according to a 10-Q filing. The properties were leased to Aspire under a long-term triple-net master lease.
Chaudhri called it a “broken transaction,” one that previously fell through but which allowed Welltower to negotiate a significant price reduction, he added.
“The large transaction this quarter has a lot of things that we’re really excited about. It was a broken transaction – there was some softness in the market and the deal fell apart,” said Chaudhri. “Welltower was able to come in with a dual path solution.”
The deal was missing an operator, which Welltower brought into the picture. The REIT also brought with it a “certainty to close.” Aspire was a good fit, considering its strength and a track record of performance. The portfolio currently has enough cash flow to cover one year’s rent, said Chaudhri, and has occupancy in the mid-60%.
“We leveraged the fact that it was a broken deal to get a favorable price adjustment to the tune of a couple $100 million bucks in our favor,” said Chaudhri. “You’ve got quality assets: check. Quality operator: check. Cash flow with room to the upside: check. Additional credit protection: check. That’s the setup here.”
Overall, Welltower completed $2.8 billion of pro rata gross investments, including $2.7 billion in acquisitions and loan funding, and $142 million in development funding, the REIT reported. Analysts with BMO Capital Markets said Welltower beat funds from operations per share consensus estimates of $1.15, in posting first quarter earnings of $1.20. Skilled nursing same store net operating income (SSNOI) grew 2.8% year over year while coverage declined 2 bps quarter over quarter to 1.56 times, BMO said.
Welltower shares closed Tuesday at $151.48, a $2.43 increase, or 1.63% rise, according to Yahoo Finance.
