Welltower Completes Sale Of 28 Long-term/Post-acute Care Facilities To Cindat/Union Life Joint Venture
TOLEDO, OH–Welltower Inc. (NYSE:HCN) announced today that it has completed its previously announced sale of 28 long-term/post-acute care facilities, master leased to Genesis Healthcare, Inc. (NYSE:GEN) (“Genesis”), to a joint venture (“Joint Venture”) among Welltower, Cindat Capital Management (“Cindat”) and Union Life Insurance Co. Ltd (“Union Life”). Upon completion of the sale, Cindat and Union Life will own a 75% interest, with Welltower retaining a 25% stake. Welltower expects to close on the previously announced sale of 11 Brookdale seniors housing properties to the Joint Venture in the first quarter of 2017. Welltower estimates the aggregate value of the Joint Venture, after completion of the Brookdale sale, to be $930 million.
Genesis continues to operate the 28 long-term/post-acute care facilities pursuant to a new lease with the Joint Venture. Under the terms of the sale, Genesis has issued $23.7 million of notes payable to Welltower in exchange for reduced rent and lower lease escalators in the new lease between Genesis and the Joint Venture, as previously disclosed.
Restructuring of Genesis Real Estate Loans
Welltower also announced today that it has completed a restructuring of its two existing real estate loans to Genesis. These loans currently have an outstanding principal balance of $317.0 million (60% of the original $531.1 million balance) and were scheduled to mature in 2017 and 2018. Genesis has repaid $214.1 million of these loans since the two loans were closed in 2015 and 2016. Under the restructuring, the two existing loans were split into four separate loans. Each loan has a 5-year term, bears interest at 10% cash pay with 25 basis point annual escalators. All loans are cross defaulted to one another as well as to the original Welltower master lease and are guaranteed in full by Genesis.
Genesis is seeking to pay off two of the four separate loans, totaling $74.8 million, through potential proceeds from HUD refinancing and asset sales. The remaining two loans, totaling $242.2 million, consist of a $103.6 million loan covering 13 facilities in Texas (the “Texas Loan”), and a $138.6 million loan covering 18 facilities (the “Non-Texas Loan”).
Welltower anticipates recording a non-cash GAAP reserve in the amount of approximately $7 million in the fourth quarter of 2016 associated with the restructuring of these loans, primarily as a result of the decrease in interest rates on the loans.