Welltower To Acquire Northstar Healthcare, 40-community Portfolio For $900m

An affiliate of Welltower (NYSE: WELL) is acquiring NorthStar Healthcare Income in a $900 million transaction, the company announced Wednesday.

The Toledo, Ohio-based real estate investment trust (REIT) is acquiring NorthStar and its 40 senior housing communities. The purchase price totals about $3.03 per share and Welltower expects it will close in the first half of 2025, subject to closing conditions.

Welltower on Wednesday also announced the launch of a new private funds management business. The business will manage third-party capital and focus “on properties that are either stable or have a near-term path to stabilization with an ability to enhance the cash flow profile through Welltower’s operating platform and the secular tailwinds of the industry.”

Already, the business has made investments such as a portfolio of six senior housing communities purchased for $240 million in a privately negotiated, off-market transaction.

Welltower Co-President and Chief Investment Officer Nikhil Chaudhri said the REIT “anticipates [the NorthStar portfolio] will be allocated to an entity affiliated with its recently announced funds management business.”

The NorthStar portfolio totals 4,886 units “and has been significantly renovated in recent years,” according to the REIT.

“We expect that this portfolio will serve to further enhance our regional densification strategy through our existing geographic footprint and network of exceptional seniors housing operators,” Chaudhri added.

NorthStar was also in the news last September when it sold its 24% minority interest in Trilogy Holdings to American Healthcare REIT (NYSE: AHR).

‘Expanded’ capital deployment opportunities, ‘fragmented’ ownership

Welltower’s announcements Wednesday were underscored by the fact that the company sees the senior living acquisition market as attractive, “with capital deployment opportunities having expanded further in recent quarters.”

“Despite the sharp improvement in seniors housing fundamentals following the COVID pandemic, challenging capital markets conditions – characterized by substantially higher interest rates and a dearth of debt availability – continue to persist, resulting in a further rise in motivated sellers with a need to address upcoming debt maturities and other capital structure issues,” the company noted in its announcement. “Additionally, ownership of seniors housing remains fragmented, which Welltower believes provides significant longer-term acquisition opportunities.”

Welltower CEO Shankh Mitra noted the company was “patiently awaiting the optimal environment to launch this platform.”

“Not only do we believe we are in the early stages of a protracted period of compounding cash flow growth for the seniors housing sector, but also expect our near and long-term capital deployment opportunities to expand meaningfully,” he said. “Importantly, we expect that Welltower’s operating platform and proprietary data science capabilities will serve as a critical resource and competitive advantage for the private funds management business.”

Mitra also said that the new business would play a “critical role” in the career ladders of Welltower and its operating partners.

“At Welltower, following years of training, mentorship and development of our team members, we have created a deep leadership bench, which is instrumental to driving our growth. But this effort has not gone unnoticed as we’ve fostered the most sought-after talent in the real estate space,” he said. “In our commitment to retaining the next generation of leadership at the company, management’s portion of any carried interest earned from the fund will be fully allocated to our next generation of emerging leaders.”

And by accumulating data from the properties acquired under the fund, Welltower will widen and deepen its “moat” by enhancing its existing data science platform.

The funds business represents Welltower’s “first foray into creating a capital light monetization of our data science platform,” Mitra added.

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