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Welltower Expands Relationship with Discovery Senior Living With $1B Transaction

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Welltower Inc. has expanded its relationship with Discovery Senior Living through an off-market acquisition of three infill seniors housing campuses. Located in the Dallas-Fort Worth and San Antonio metropolitan statistical areas, the communities offer the full continuum of care in large, high-end residential settings.

The portfolio, recently developed by South Bay, a well-respected developer, was acquired for $216 million ($280,000 per unit) through a newly formed joint venture between Discovery Senior Living and Welltower. The last phase of the Alliance Town Center development in Dallas-Fort Worth will open in the fourth quarter of 2019.

Upon completion, the total cost of the portfolio will be $237 million ($273,000 per unit). In-place occupancy throughout the recently built portfolio (excluding the last phase of the Alliance Town Center) was 72% upon acquisition, with acceleration in lease-up anticipated. Units are equipped with high-end condo style finishes and offer access to a variety of lifestyle options including multiple dining areas, swimming pools, outdoor patios, along with fully equipped fitness centers and banquet rooms.

As part of this transaction, Discovery agreed to manage the acquisition portfolio and its existing portfolio with Welltower, which Welltower acquired in 2016, under Welltower’s next generation management contract. Further, as part of the transaction, Welltower signed a $1 billion exclusive development agreement with Discovery, under which Welltower and Discovery are currently reviewing two new projects. In addition, Welltower is under contract to fund three newly opened assets located within Discovery’s core footprint in Florida for $92.7 million ($255,000 per unit). These three buildings achieved certificates of occupancy in the second quarter of 2019.

“We are excited by the opportunity to expand a key operator relationship,” said Welltower’s Chief Investment Officer Shankh Mitra. “The communities have superior locations in their respective markets, such as Southlake in Dallas-Fort Worth. They are high end and purpose built and offer the full continuum of care.” Mr. Mitra continued, “All of these assets, including those that are under contract, are steel and concrete construction and represent a significant discount to Discovery transactions we have seen in the marketplace recently. We are delighted to partner with Discovery, who is a best-in-class operator of large seniors housing campuses throughout the Southeast, on this transaction and into the future.”

“Discovery Senior Living is extremely excited to continue to expand our strategic relationship with Welltower,” said Richard Hutchinson, Discovery Senior Living’s Chief Executive Officer. “The most recent joint venture acquisitions as well as our mutual multi-year commitment to co-develop an innovative portfolio of senior living communities will keep both companies at the forefront of providing differentiated resident centric experiences that we believe current and future customers of senior living will demand.”