Welltower executives believe its $880 million agreement with Genesis HealthCare will work out favorably for both companies in their efforts toward post-COVID recovery.
The real estate investment trust and Pennsylvania-based operator in early March announced its massive $880 million deal to terminate its master lease covering 51 facilities. The deal was a part of a three-pronged restructuring plan for Genesis that also involved the company delisting itself from the New York Stock Exchange and an agreement with ReGen Healthcare LLC for a capital infusion of $50 million.
The transaction allows Welltower to substantially exit its real estate relationship with the beleaguered provider after about 10 years and “meaningfully de-risks our cash flow stream going forward,” explained Chief Executive and Investment Officer Shankh Mitra.
“Effectuating this nearly $900 million transaction wasn’t easy. It involved a skilled nursing operator deeply impacted by the COVID-19 pandemic,” Mitra said during a first-quarter earnings call Thursday.
“Ultimately, we have executed a mutually beneficial transaction for Genesis and Welltower shareholders. For Genesis, the transaction resulted in a meaningful deleveraging of its balance sheet, which will help it to reposition the company post COVID-19,” he added.
For Welltower, it earned a $144,000 per-bed value through the deal and generated an 8.5% unlevered return over the full term of its Genesis relationship, Mitra explained. He added the deal also creates an opportunity for the REIT to strongly position itself in the post-COVID market.
Mitra’s comments came days after New Jersey-based operator CareOne questioned the process the companies used to reach the agreement. The operator was also a one-time suitor of the Genesis properties involved in the deal.
“Since our announcement last month, Genesis has received an infusion of equity capital and named a turnaround specialist in Harry Wilson as CEO,” he said. “We wish the team of Genesis much success in the future as we have substantially exited a challenging legacy structure with Genesis. I hope our shareholders appreciate the favorable ultimate outcome.”