Welltower Inc. (NYSE: WELL), a publicly-traded real estate investment trust, has agreed to purchase a portfolio of 55 Class A medical office and outpatient facilities from CNL Healthcare Properties for $1.25 billion. The sale is expected to close during the first half of 2019.
Welltower will be acquiring 55 assets out of the 63 properties (medical office buildings, post-acute care facilities and specialty hospitals) initially marketed for sale by CNL Healthcare Properties. Over the summer, the non-traded REIT appointed a special committee of its independent directors to evaluate strategic alternatives to provide liquidity to shareholders.
The portfolio includes 3.3 million rentable square feet in major metropolitan markets across 16 states and has a current occupancy of 94 percent and average annual rent increases of 2.4 percent. Additionally, 92 percent of the properties are affiliated with some of the nation’s premier health systems including Novant (Moody’s: A1), Memorial Hermann (Moody’s: A1) and Cleveland Clinic (Moody’s: Aa2).
CNL Healthcare Properties plans to use the proceeds from the sale to repay debt, pay closing costs and other related expenses. The company, with approval from its board of directors, may use proceeds to rebalance corporate borrowings to further bolster its balance sheet as it pursues additional liquidity alternatives.
Post-closing, the company expects to make a special distribution to shareholders, also subject to approval of its board of directors.
CNL Healthcare Properties will continue to own and manage a private-pay, seniors housing centric portfolio of 87 communities located in 31 states.
“The sale of our Class A medical office assets to Welltower underscores both the high quality of these properties and our focused work to drive investment performance and value for our investors,” said Stephen H. Mauldin, president and CEO of CNL Healthcare Properties. “While we are in the early phases of our strategic liquidity process for the fund, we are confident that this transaction is a strong first step to begin returning capital to our shareholders.”
In June 2018, CNL Healthcare Properties engaged the real estate investment banking groups of HFF Securities L.P. and KeyBanc Capital Markets Inc. to act as strategic financial advisors in exploring and executing potential liquidity alternatives.
CNL Healthcare Properties focuses on acquiring properties in the seniors housing and healthcare sectors, including stabilized, value-add and development assets, as well as other income-producing properties, real-estate related securities and loans. The company closed its offering in September 2015 after raising more than $1.7 billion in investor equity, according to Summit Investment Research.