Yahoo Finance Welltower (WELL) Closes First Tranche of JV With Integra
As part of its efforts to transition the 147-property skilled nursing portfolio, Welltower Inc. WELL announced that Integra Health entered a master lease with Welltower for the entirety of the nursing portfolio. Integra will take responsibility for the financial aspect of all assets, including assets wherein it has not yet acquired an ownership stake.
Reflecting positive sentiments, shares of Welltower witnessed marginal gains on Dec 23 normal trading session on the NYSE.
ProMedica surrendered its 15% interest in the 85/15 joint venture (JV) that owned the nursing portfolio earlier. ProMedica has been released of all its lease obligations for the entire 147-property portfolio.
Simultaneously, Welltower sold 15% interest in 54 skilled nursing assets to Integra for around $73 million. This represents the initial tranche of the earlier announced 85/15 JV between the two entities.
Welltower is anticipated to carry out the sale of the 15% ownership interest in the remaining 93 assets to Integra over the next 12 months. The timing of the same will be largely driven by regulatory processes and the evaluation of strategic asset sales to third parties.
Integra is likely to complete its ownership interest in an additional one-third of the portfolio in January 2023. The remainder will take place in 2023 as licensure transfers are completed.
Integra intends to execute a business plan, which involves entering sub-leases with 15 regional operators with proven records in their respective fields. Given the extensive skilled nursing sector experience of Integra and its affiliates, Welltower’s latest move seems prudent.
The cash rent for the first year of the Welltower/Integra JV will be $167 million, of which the former will realize 85% of the allocated rent on the 54 assets and 100% of the allocated rent on assets, wherein Integra has not yet taken an ownership stake.
Upon the completion of Integra’s planned acquisition of a 15% interest in the entire 147-property portfolio, the pro rata share of cash rent for Welltower will stand at $142 million.
Relative to the total current contractual rent from the prior ProMedica JV, Welltower's combined cash rent will increase to more than 4% as a result of a master lease agreement between Welltower and Integra.
Further, Welltower’s cash flow, leverage and earnings are anticipated to be neutral to slightly accretive from these transactions.
Welltower’s restructuring initiatives have enabled it to attract top-class operators, while dispositions have improved the quality of its cash flows. Also, these efforts add to its balance-sheet strength, poising it well to capitalize on growth opportunities.
Shares of this Zacks Rank #3 (Hold) company have gained 1.2% in the quarter-to-date period compared with the industry's growth of 2.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties VICI, Lamar Advertising LAMR and Equity Commonwealth EQC.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92. VICI currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Lamar Advertising’s 2022 FFO per share is pegged at $7.34. LAMR has a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for Equity Commonwealth’s ongoing year’s FFO per share is pegged at 33 cents. EQC presently sports a Zacks Rank #1.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Lamar Advertising Company (LAMR) : Free Stock Analysis Report
Equity Commonwealth (EQC) : Free Stock Analysis Report
Welltower Inc. (WELL) : Free Stock Analysis Report
VICI Properties Inc. (VICI) : Free Stock Analysis Report
