Welltower and Brookdale Senior Living Enter Into Broad Collaborative Relationship Restructuring
Specifically, the restructuring of the Brookdale portfolio includes the following:
- A total of 63 assets to be transitioned as part of this restructuring:
- 37 properties will be managed by Pegasus, a newly formed management group led by industry veterans
Steven Vick andChris Hollister , the senior housing industry's most well-respected turnaround specialists with an unmatched track record. - 12 properties will be managed by Cogir, a leading and innovative operator headquartered in
Canada led byMathieu Duguay . Cogir will invest$68.2 million for a 15% joint venture interest in the properties at a 5.75% cap rate - 11 properties will be allocated amongst 6 existing
Welltower operators with a combination of proven specific individual market, acuity and operating model expertise. - The remaining 3 non-core properties in tertiary markets will be sold.
- Brookdale will pay
Welltower a$58.0 million termination fee and will continue to operate these properties until they are able to be transitioned to replacement operators. Welltower will acquire Brookdale's 20% interest in the current RIDEA joint venture for a gross value of$74.2 million , which represents a 7.20% cap rate and a per unit value of$189k .- Post-closing
Welltower and Brookdale will have a mechanism to further improve the quality of the remaining portfolio through an asset sale agreement. This disposition agreement will allow Brookdale to identify communities with up to$5.0 million in base rent for sale at a pre-determined 6.25% rent credit. ForWelltower this will equate to up to$80.0 million in disposition proceeds at a 6.25% cap rate and improved asset quality in the remaining Brookdale lease pool. Welltower's estimated Year 1 income loss will be approximately$5 million related to restructured leases, mainly due to operator transitions that we expect to recoup and grow by Year 3. Current occupancy of the restructured portfolio is 83.6% and provides excellent opportunity for cash flow growth.
Combined, these transactions are expected to reduce
"This collaborative transaction is a positive for both Brookdale and
Pegasus Senior Living, which will be headquartered in
Cogir, which is headquartered in
Biographical information on the principals of Pegasus and Cogir can be found below.
About Welltower
Supplemental Reporting Measures
Forward-Looking Statements and Risk Factors
This press release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. When we use words such as "may," "will," "intend," "should," "believe," "expect," "anticipate," "project," "pro forma," "estimate" or similar expressions that do not relate solely to historical matters, we are making forward-looking statements. In particular, these forward-looking statements include, but are not limited to, those relating to our ability to complete the Brookdale restructuring on expected terms and within the expected timeframe; opportunities to acquire, develop or sell properties; our ability to close anticipated acquisitions, investments or dispositions on currently anticipated terms, or within currently anticipated timeframes; the expected performance of our operators/tenants and properties; our expected occupancy rates; our ability to declare and to make distributions to shareholders; our investment and financing opportunities and plans; our continued qualification as a REIT; our ability to access capital markets or other sources of funds; and our ability to meet our earnings guidance. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause our actual results to differ materially from our expectations discussed in the forward-looking statements. This may be a result of various factors, including, but not limited to: the status of the economy; the status of capital markets, including availability and cost of capital; issues facing the health care industry, including compliance with, and changes to, regulations and payment policies, responding to government investigations and punitive settlements and operators'/tenants' difficulty in cost-effectively obtaining and maintaining adequate liability and other insurance; changes in financing terms; competition within the health care and seniors housing industries; negative developments in the operating results or financial condition of operators/tenants, including, but not limited to, their ability to pay rent and repay loans; our ability to transition or sell properties with profitable results; the failure to make new investments or acquisitions as and when anticipated; natural disasters and other acts of God affecting our properties; our ability to re-lease space at similar rates as vacancies occur; our ability to timely reinvest sale proceeds at similar rates to assets sold; operator/tenant or joint venture partner bankruptcies or insolvencies; the cooperation of joint venture partners; government regulations affecting Medicare and Medicaid reimbursement rates and operational requirements; liability or contract claims by or against operators/tenants; unanticipated difficulties and/or expenditures relating to future investments or acquisitions; environmental laws affecting our properties; changes in rules or practices governing our financial reporting; the movement of
Pro Forma In-Place Net Operating Income (IPNOI) Reconciliation |
Exhibit 1 |
|||||||||
(In thousands at |
||||||||||
1Q18 Actual(1) |
Adjustments(2) |
Pro Forma |
||||||||
Annualized IPNOI: |
||||||||||
Brookdale seniors housing triple-net |
$ |
131,684 |
$ |
(75,445) |
$ |
56,239 |
||||
Brookdale seniors housing operating |
18,570 |
(18,570) |
- |
|||||||
Total Brookdale |
150,254 |
(94,015) |
56,239 |
|||||||
All other |
1,815,342 |
88,101 |
1,903,443 |
|||||||
Total annualized IPNOI |
$ |
1,965,596 |
$ |
(5,914) |
$ |
1,959,682 |
||||
Total quarterly IPNOI |
491,399 |
|||||||||
IPNOI adjustments(3) |
39,438 |
|||||||||
Pro rata NOI |
530,837 |
|||||||||
Pro rata NOI adjustments(4) |
9,663 |
|||||||||
Consolidated NOI(5) |
$ |
540,500 |
||||||||
% of annualized IPNOI: |
||||||||||
Brookdale % of IPNOI |
7.6% |
-4.8% |
2.9% |
|||||||
Notes: |
||||||||||
(1) Please refer to Earnings Release and Supplemental Information reports issued |
||||||||||
(2) Represents adjustments to reflect estimated operator and segment transitions described in this press release. |
||||||||||
(3) Includes interest income, other income, non-cash NOI, NOI for assets sold/held for sale and timing adjustments related to current quarter acquisitions, development conversions and segment transitions. |
||||||||||
(4) Represents NOI amounts attributable to joint venture partners, both majority and minority, net. |
||||||||||
(5) Represents total revenues less property operating expenses. |
||||||||||
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