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Welltower Establishes Private Funds Management Business
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Welltower, Inc. (WELL - Free Report) recently announced the establishment of its private funds management business. This new business will manage third party capital and look for opportunities to invest across the capital structure in the wellness and healthcare real estate sectors.
A wholly owned subsidiary of the Abu Dhabi Investment Authority will act as an anchor limited partner for the first fund managed by the new business, contributing 20% of the capital, totaling $400 million. An equivalent amount, is also being contributed by Welltower and Welltower's management.
The first fund will use Welltower's industry-leading data science platform to identify and acquire seniors housing portfolios in the United States. It will focus on properties that are either stable or have a near-term path to stabilization, with the ability to improve the cash flow profile through Welltower's operating platform and the industry's secular tailwinds.
The new business' initial investments will involve acquiring a portfolio of six high-quality senior housing communities for a total price of $240 million in a privately negotiated off-market transaction. The portfolio, which has an average age of eight years, consists of 778 units located in attractive micro-markets where Welltower maintains strong regional density and where communities are anticipated to transition to existing Welltower operators. The current portfolio occupancy and NOI margin stand at 92% and 31%, respectively.
Welltower has created an expanded network of industry relationships through which opportunities for new business are expected to be sourced. The new business will benefit from Welltower's strong relationships with many of the country’s most astute senior housing operators. Given the vast opportunity set, Welltower will keep adding unstabilized assets to its balance sheet, as seen in its strategy over the past few years.
WELL’s Management Commentary
Per Shankh Mitra, CEO of Welltower, "We have been patiently awaiting the optimal environment to launch this platform as the right fund vintage is a key component to driving success of the business. Not only do we believe we are in the early stages of a protracted period of compounding cash flow growth for the seniors housing sector, but also expect our near and long-term capital deployment opportunities to expand meaningfully. Importantly, we expect that Welltower's operating platform and proprietary data science capabilities will serve as a critical resource and competitive advantage for the private funds management business."
Mr. Mitra added, "Our funds management business is intended to result in significant revenue generation opportunities, including asset management fees and potential carried interest upon achieving certain performance hurdles. The new business is also intended to provide a secure source of capital during varying economic cycles to capitalize on potential capital allocation opportunities."
Conclusion
Welltower’s operating platform and its data science capabilities will play a crucial role in driving success for this new private funds management business. The company’s shareholders will also benefit from the establishment of this new business.
Welltower is poised to benefit from its diversified portfolio of healthcare real estate assets in the key markets of the United States, Canada and the United Kingdom. An aging population and an expected rise in senior citizens’ healthcare expenditure are likely to aid the senior housing operating portfolio’s growth. The outpatient medical segment is expected to benefit from favorable outpatient visit trends.
Over the past six months, shares of this Zacks Rank #2 (Buy) company have gained 21.5%, outperforming the industry’s decline of 3.7%.
The Zacks Consensus Estimate for CareTrust’s 2024 FFO per share is pinned at $1.50, which suggests year-over-year growth of 6.4%.
The Zacks Consensus Estimate for Sabra’s 2024 FFO per share stands at $1.42, which indicates an increase of 6.8% from the year-ago period.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Welltower Establishes Private Funds Management Business
Welltower, Inc. (WELL - Free Report) recently announced the establishment of its private funds management business. This new business will manage third party capital and look for opportunities to invest across the capital structure in the wellness and healthcare real estate sectors.
A wholly owned subsidiary of the Abu Dhabi Investment Authority will act as an anchor limited partner for the first fund managed by the new business, contributing 20% of the capital, totaling $400 million. An equivalent amount, is also being contributed by Welltower and Welltower's management.
The first fund will use Welltower's industry-leading data science platform to identify and acquire seniors housing portfolios in the United States. It will focus on properties that are either stable or have a near-term path to stabilization, with the ability to improve the cash flow profile through Welltower's operating platform and the industry's secular tailwinds.
The new business' initial investments will involve acquiring a portfolio of six high-quality senior housing communities for a total price of $240 million in a privately negotiated off-market transaction. The portfolio, which has an average age of eight years, consists of 778 units located in attractive micro-markets where Welltower maintains strong regional density and where communities are anticipated to transition to existing Welltower operators. The current portfolio occupancy and NOI margin stand at 92% and 31%, respectively.
Welltower has created an expanded network of industry relationships through which opportunities for new business are expected to be sourced. The new business will benefit from Welltower's strong relationships with many of the country’s most astute senior housing operators. Given the vast opportunity set, Welltower will keep adding unstabilized assets to its balance sheet, as seen in its strategy over the past few years.
WELL’s Management Commentary
Per Shankh Mitra, CEO of Welltower, "We have been patiently awaiting the optimal environment to launch this platform as the right fund vintage is a key component to driving success of the business. Not only do we believe we are in the early stages of a protracted period of compounding cash flow growth for the seniors housing sector, but also expect our near and long-term capital deployment opportunities to expand meaningfully. Importantly, we expect that Welltower's operating platform and proprietary data science capabilities will serve as a critical resource and competitive advantage for the private funds management business."
Mr. Mitra added, "Our funds management business is intended to result in significant revenue generation opportunities, including asset management fees and potential carried interest upon achieving certain performance hurdles. The new business is also intended to provide a secure source of capital during varying economic cycles to capitalize on potential capital allocation opportunities."
Conclusion
Welltower’s operating platform and its data science capabilities will play a crucial role in driving success for this new private funds management business. The company’s shareholders will also benefit from the establishment of this new business.
Welltower is poised to benefit from its diversified portfolio of healthcare real estate assets in the key markets of the United States, Canada and the United Kingdom. An aging population and an expected rise in senior citizens’ healthcare expenditure are likely to aid the senior housing operating portfolio’s growth. The outpatient medical segment is expected to benefit from favorable outpatient visit trends.
Over the past six months, shares of this Zacks Rank #2 (Buy) company have gained 21.5%, outperforming the industry’s decline of 3.7%.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked stocks from the healthcare REIT sector are CareTrust REIT (CTRE - Free Report) and Sabra Healthcare REIT (SBRA - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for CareTrust’s 2024 FFO per share is pinned at $1.50, which suggests year-over-year growth of 6.4%.
The Zacks Consensus Estimate for Sabra’s 2024 FFO per share stands at $1.42, which indicates an increase of 6.8% from the year-ago period.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.