Discovery Village atDominion

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TOLEDO, OHIO—Healthcare REIT Welltower has signed a $1 billiondevelopment agreement with Discovery Senior Living, as well asacquired a handful of facilities from the company along with a6-building, 270,000 square foot medical office campus for $140million from Summit Medical Group.

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The exclusive development agreement focuses on two new projectsthat the companies are currently reviewing. That, however, is justone piece of a number of agreements struck by the two companies,which have a pre-existing relationship. “We are excited by theopportunity to expand a key operator relationship,” saidWelltower's Chief Investment Officer Shankh Mitra, in preparedremarks.

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Among its agreements, Welltower has:

  • Sold its stake in the Benchmark Senior Living portfolio for$1.8 billion. Benchmark has recapitalized the portfolio withprivate institutional capital. The 4,137-unit seniors housingportfolio consists of 48 assisted living properties located inConnecticut, Maine, Massachusetts, New Hampshire, Rhode Island andVermont, and had $24 million of secured debt that was extinguishedat closing.
  • Made an off-market acquisition of three infill seniors housingcampuses that are located in the Dallas-Fort Worth and San Antoniometro areas. The portfolio, recently developed by South Bay wasacquired for $216 million, or $280,000 per unit, through a newlyformed joint venture between Discovery and Welltower. Once the lastphase of the Alliance Town Center development in Dallas-Fort Worthopens in the fourth quarter of 2019, the total cost of theportfolio will be $237 million, or $273,000 per unit. In-placeoccupancy throughout the recently built portfolio (excluding thelast phase of the Alliance Town Center) was 72% uponacquisition.
  • Gone under contract to fund three newly opened assets locatedwithin Discovery's core footprint in Florida for $92.7 million, or$255,000 per unit. These three buildings achieved certificates ofoccupancy in the second quarter of 2019. “All of these assets,including those that are under contract, are steel and concreteconstruction and represent a significant discount to Discoverytransactions we have seen in the marketplace recently,” Mitrasays.
  • Entered into a definitive purchase agreement to purchase a43-acre, 6-building, 270,000 square foot medical office campus inBerkeley Heights, NJ for $140 million. The campus will be masterleased by Summit Medical Group, an independent multispecialtymedical practice, under a new 20-year, absolute net lease. Thiscampus is the largest and most comprehensive of five “hubs” inSummit's 80-location hub-and-spoke model, and will bringWelltower's total Summit-leased footprint to over 500,000 squarefeet. The sale is expected to close in the third quarter of 2019,subject to customary closing conditions. The sale of the medicaloffice campus is conditioned upon Summit's recently announcedintended merger with CityMD.
  • Acquired a six-community portfolio located in the Denver andBoulder metro areas from Colorado-based Balfour Senior Living for$308 million. The portfolio includes Balfour's downtown Denverflagship community, Riverfront Park, and the recently developedLavender Farms, which opened in April. As part of the portfoliopurchase, Welltower has received exclusivity on Balfour's futureacquisition and development pipeline, as well as an option toacquire up to a 34.9% interest in Balfour's management company.Several development initiatives are currently underway in EastCoast markets, rapidly expanding the existing relationship betweenWelltower and Balfour.

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Erika Morphy

Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.