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Welltower Completes Initial Closing of Integra JV Involving 15 Regional Operators

Welltower (NYSE: WELL) has announced the “initial” closing of its previously announced joint venture with Integra Health involving the transition of 147 skilled nursing facilities previously operated by ProMedica to 15 regional operators.

ProMedica surrendered to Welltower its 15% interest in the 147-property portfolio, Welltower announced Friday.

ProMedica will be absolved from its lease obligations and Integra Health will enter into a master lease for the entire portfolio.

Welltower sold to Integra a 15% interest in 54 skilled nursing assets for approximately $73 million. Sale of 15% ownership interest in the remaining 93 assets to Integra expected to occur in stages over the next 12 months with timing largely driven by regulatory processes and evaluation of strategic assets for sale.

“Integra and Welltower are evaluating opportunistic asset sales following strong interest from potential buyers,” a presentation from Welltower stated.

According to Welltower, 15 regional operators will enter into “customary management operator transition agreements” to facilitate a seamless transition of operations until regulatory approvals for change of license ownership are received. Some of the regional operators were identified in the presentation: Allure Healthcare Services, EmpireCare Centers, Legacy Healthcare, Marquis LLC, Pearl Healthcare, Hill Valley Healthcare, Optalis Health & Rehabilitation and Genesis.

Welltower has been taking some heat over this deal. Earlier this month, Welltower’s stock plunged 8% in premarket trading when a Hindenburg report circulated, which called into question Integra’s ability to handle such a large portfolio, noting the company is a recently formed entity, with a 29-year-old CEO.

Yet during the company’s Q3 2022 earnings call, Welltower CEO Shankh Mitra referred to Integra’s “parent” entity as an organization familiar to the REIT – while stressing that Integra will not run the former ProMedica nursing homes but will sub-lease them to regional operators.

Welltower’s share price has ticked back up, and some analysts have come to the company’s defense. In the presentation released Friday, Welltower again described Integra’s principals and affiliates, detailing their involvement in the industry and previous involvement with Welltower, while still not naming them.

“Principals own skilled nursing facilities and several other healthcare operating businesses across the United States,” the presentation states. “Principals also specialize in healthcare services investments, many of which are complementary to broader platform’s skilled nursing investments, including pharmaceutical cost management solutions and managed care plans.”

The 147-property skilled nursing portfolio appears to be improving in performance; as of November, the monthly revenue (not counting HHS funds) for the portfolio is ~1% above pre-COVID levels despite occupancy being approximately 780 bps lower. And the 147 skilled nursing properties continue to improve EBITDARM, driven by a 50% reduction in monthly agency labor usage relative to the high point earlier in 2022, and improving occupancy trends.

“We expect further improvements in EBITDARM performance following the transition of operations to select regional operators through rate maximization, further staffing rationalization, and continued occupancy improvement,” Welltower stated.

The post Welltower Completes Initial Closing of Integra JV Involving 15 Regional Operators appeared first on Senior Housing News.

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