Welltower Attracting Interest from Hospital Systems for New Skilled Nursing Partnerships

The ink isn’t quite dry on Welltower Inc.’s (NYSE: WELL) major skilled nursing play, but the real estate investment trust (REIT) is already attracting interest from hospital systems that want to join in its new post-acute care plans.

That’s at least according to CEO Tom DeRosa, who hinted on his company’s Friday morning quarterly earnings call that hospitals were champing at the bit to collaborate with its new skilled nursing partner, ProMedica Health Systems.

“Have we gotten a lot of inbounds? Yes we have,” DeRosa said. “Many health systems are now calling us because they’ve seen the ProMedica announcement. They understand the power that ProMedica will now have with HCR ManorCare, having both a post-acute care as well as an assisted living focused on memory care business. These are challenges for health systems.”


The Toledo, Ohio-based REIT closed on its $4.4 billion megadeal to acquire the real estate of Quality Care Properties (NYSE: QCP) late Thursday in an 80-20 joint venture with ProMedica, the erstwhile regional non-profit hospital system. As part of the same transaction, ProMedica acquired troubled skilled nursing provider HCR ManorCare, QCP’s primary tenant.

Like Welltower, both ProMedica and ManorCare are based in Toledo.

When the deal was announced back in April, DeRosa and Welltower faced questions about how ProMedica would be able to adapt to the rapid growth. Previously a 13-hospital chain with about 17,900 employees across Ohio and Michigan, ProMedica now has a staff of 70,000 in 30 states — with a network of skilled nursing facilities that do not share markets with its existing hospital infrastructure.


At the time, ProMedica CEO Randy Oostra told Skilled Nursing News that he was interested in exploring partnerships with other health providers in areas where ProMedica and ManorCare’s footprints did not overlap, including in Florida and the Northeast. Speaking Friday, DeRosa said a major Northeast-based health system with assisted and independent living assets had just met with Welltower executives about future collaborations.

“They are able to direct patient flow between the hospital and these assets, and actually share staffing,” DeRosa said of the unnamed provider. “So it’s a very efficient way of managing health care delivery.”

Health systems have also expressed interest in ProMedica’s Paramount health insurance plan, which offers both managed Medicare and Medicaid products.

“They also have noted that ProMedica has a very successful insurance business, which also is something many health systems, if they’re not already in that business, are looking to figure out how they are able to offer Medicare Advantage and managed Medicaid programs,” DeRosa said of the potential health system suitors.

Tale of the tape

Under the final terms of the deal, the newly formed Welltower-ProMedica joint venture will own 218 properties — 160 skilled nursing facilities and 58 assisted living buildings — which the operator will lease under 15-year, triple-net agreements. Welltower also picked up 61 former QCP properties outside of the JV; those buildings are currently held for sale, with the REIT expecting to collect $400 million in proceeds. Furthermore, Welltower anticipates an additional $107 million in proceeds from the disposition of other “non-core” QCP facilities.

That works out to a blended per-bed price of $93,700 for the entire deal, and just $57,000 per bed for the SNFs, according to Welltower senior vice president for investments Shankh Mitra.

“We believe this is close to a fourth of replacement cost and salvage values of these properties,” Mitra said on the call.

Those 58 assisted living properties, operated under the Arden Court brand name, represent a “hidden gem” in the transaction in DeRosa’s assessment; the CEO predicted that under the shared ProMedica-Welltower leadership, the post-acute facilities in the portfolio will help drive census to the assisted living properties, part of the companies’ overall play to create a one-stop shop for continuing care.

Written by Alex Spanko

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