Welltower Inc. and CNL Healthcare Properties have entered into a definitive agreement under which Welltower will acquire a Class A medical office and outpatient facilities portfolio comprised of 55 buildings from CNL Healthcare Properties for $1.25 billion. The sale is expected to close during the first half of 2019, subject to customary closing conditions, governmental and other third-party consents.
Welltower will be acquiring 55 assets out of the 63 properties (medical office buildings, post-acute care facilities and specialty hospitals) initially marketed by CNL Healthcare Properties through its strategic financial advisors. The 55 properties have a current occupancy of 94 percent and average annual rent increases of 2.4 percent. The properties are strategically located and 92 percent are affiliated with some of the nation’s premier health systems including Novant Health, Memorial Hermann and Cleveland Clinic.
With 3.3 million rentable square feet in major metropolitan markets across 16 states, the acquisition portfolio will have significant overlap with Welltower’s existing outpatient medical footprint. Welltower’s proprietary data science and analytics platform has identified this Class A portfolio to have above-average market potential defined by opportunity metrics such as market prioritization rank, predictive annual gross rent, insurance/payor mix and physician net need score. At the same time, the portfolio is affiliated with strong hospitals and health systems, none of which are “at risk” hospitals based on Welltower’s proprietary hospital risk analysis.
“Through the strategic acquisition of 55 high-quality medical office buildings from CNL Healthcare Properties, we continue to accretively expand our outpatient medical and health system portfolio,” said Shankh Mitra, Welltower’s chief investment officer. “Welltower was able to act quickly and definitively when the opportunity presented itself, leveraging our proprietary data science platform and deep local presence through our real estate services platform to come to an agreement with CNL as a high-quality and reputable sponsor. With market potential metrics and low risk factors, along with a healthy initial cash yield, good escalators and low capital expenditure requirements, this investment will provide an excellent total return for our shareholders.”