June 9, 2021, Ben Swett, The SeniorCare Investor - Welltower came out with a flurry of announcements yesterday, all significant and all seemingly good news. To start, John Burkart was appointed Executive Vice President, Chief Operating Officer and will start on July 19. Already ensconced in the REIT world, Mr. Burkart comes from the multifamily sector, having spent 25 years at Essex Property Trust where he rose to Senior Executive Vice President and Chief Operating Officer.
At Welltower, he will assume responsibilities for platform-wide operations, asset and portfolio management, data analytics, research and joint venture partnerships, utilizing a data-driven approach to drive platform efficiencies, capital allocation decisions and technological innovation at the company.
Welltower also acquired 22 seniors housing properties in partnership with Pathway to Living for a purchase price of $97 million. Newmark handled the sale, which was valued at a significant discount to replacement cost. The deal nearly doubles Pathway’s seniors housing portfolio, which previously counted 29 communities. More details to follow.
On top of that acquisition, and another approximately $50 million deal set to close in Q3, Welltower also improved its liquidity by closing a $4.0 billion unsecured revolving line of credit to replace its existing $3.0 billion line of credit. The new credit facility was supported by 31 incumbent and new financial institutions and was heavily oversubscribed.
It consists of a $1.0 billion tranche that matures on June 3, 2023 and a $3.0 billion tranche that is set to mature on June 4, 2025. Both tranches may be extended for two successive terms of six months at the Company’s option.
The new facility also bears interest at LIBOR plus 77.5 basis points, which represents a five-basis point improvement from the previous unsecured revolving line of credit. There is also a potential rate reduction if certain greenhouse gas emissions levels are met. Welltower still has two existing facilities outstanding that both mature on July 19, 2023: a $500 million term loan and a CAD$250 million term loan ($206.6 million as of June 2).
The REIT has the ability to upsize the new facility and $500 million term loan by up to an additional $1.25 billion, in aggregate, and the other term loan by an additional CAD$250 million. If those incremental facilities are funded, then all told, Welltower will have over $6 billion in total available credit. Maybe we’ll see some of that directed towards M&A?
The REIT has already deployed around $2.2 billion in capital since the fourth quarter of 2020, with an initial yield of more than 7% and year-three yield expected to exceed 9%. That is from 29 transactions, including pro rata gross investments across both acquisitions and loans.
And across the 6,007 seniors housing units acquired, Welltower picked up those properties on average below replacement cost, averaging $161,000 per unit in last dollar basis across U.S. transactions. The company’s debt investments also offer equity upside in the form of warrants and/or bargain purchase options.