News Article

US-based REIT Welltower has invested a total of £6.4bn in UK senior care homes operated by HC-One and Barchester Healthcare. Candesic supported Welltower in part of this process looking at select assets.

The largest component of the transaction is the acquisition of a real estate portfolio of Barchester-operated communities for £5.2 billion. As part of the transaction, Welltower has formed an exclusive long-term partnership with Barchester.

The portfolio is comprised of 111 communities managed by Barchester, 152 triple-net leased communities, and 21 ongoing developments.

In a statement released to coincide with the deal, Welltower said: “We believe each component of the transaction …has significant long-term growth potential that is expected to accrue to Welltower shareholders. The operating portfolio, comprised of both stabilised and lease up properties, is positioned for significant future growth with current blended portfolio occupancy in the high 70%’s.

“Moreover, the triple-net lease is structured with 3.5% annual escalators and a coverage-based rent reset every five years at Welltower’s election. Overall, the acquisition is underwritten to achieve an unlevered IRR in the low-double-digit range.”

Additionally, Welltower purchased 100% of the HC-One-operated portfolio for £1.2 billion. Welltower funded a portion of the purchase price through the repayment of a £660 million loan it originated at the height of the COVID-19 pandemic and Brexit uncertainties, significantly increasing the investment’s duration through ownership of the underlying communities.

Welltower CEO Shankh Mitra said: “We are excited to expand our presence in the UK and continue to partner with the highest quality operators as evidenced by the Care Quality Commission in the UK (CQC) having rated 86% of our communities as good or outstanding, well above the national average of 72%, with none of our properties having been rated as inadequate.”

He added: “The HC-One loan was originally structured with embedded warrants and an equity stake and was intentionally designed to provide Welltower with both downside protection and meaningful upside participation. These structural features enabled us to play a lead role in the borrower’s recapitalisation process, ultimately transforming a finite-maturity loan into a long-term ownership position aligned with Welltower’s growth strategy.

“The result is an enhanced cash flow profile characterised by both duration and embedded growth – consistent with our strategy of leveraging creative capital deployment to create long-term per share value for existing owners.”

Beyond the realisation of value from Welltower’s participating senior credit note to HC-One, additional loan repayments, and cash on hand, Welltower expects to fund the remaining acquisition consideration through the sale of outpatient medical assets.