Welltower Inc. has recently entered into a definitive agreement under which Welltower will acquire a 29-property class-A medical office building portfolio from Hammes Partners for $787 million.
Separately, Welltower announced an additional gross investment volume of $885 million across four separate outpatient medical transactions which are currently under contract at a blended year one cash cap rate of 5.4%.
With these announcements, Welltower has closed or announced over $3.5 billion of outpatient medical acquisitions this year at a blended year one cash cap rate of 5.6%. These acquisitions will contribute 450 properties and over 8 million square feet to the Company’s platform, as it continues to expand through accretive off-market acquisitions.
This acquisition announcement exemplifies the firm’s unique ability to source and execute on high quality growth opportunities from best-in-class developers and operators, explained Thomas J. DeRosa, Welltower’s Chairman and CEO, in a prepared release. “These transactions establish Welltower as the largest commercial owner of medical office real estate in the country, with a platform approaching 30 million square feet. We continue to upgrade the quality of our portfolio and align ourselves strategically with leading not-for-profit health systems”
The transaction with Hammes follows the $391 million purchase that Welltower closed in December of 2018. This 1.5 million square foot Class-A portfolio has an average age of 10 years, with 12 years of weighted average lease term and 2.2% average annual rent increases. The transaction is scheduled to close in the fourth quarter of 2019.
The portfolio’s assets are concentrated in the New York and Boston MSAs along with other dense population centers in Massachusetts, California, Texas and Maryland. With an economic occupancy of 97%, the portfolio is affiliated with Baylor Scott & White, Providence St. Joseph, Trinity Health, Medstar and other not-for-profit health systems and multi-specialty physician groups. A significant portion of the portfolio has absolute net recoveries and, in combination with the long lease term, will generate significant after capex cash flow growth for Welltower shareholders.
In its third quarter earnings release, Welltower revealed $3 billion in closed year-to-date pro rata acquisition volume and post-quarter gross acquisition activity of $594 million(1) across three transactions. With today’s announcement of the Hammes portfolio acquisition for $787 million and the additional $885 million of outpatient medical acquisitions under contract, the Company is pleased to have closed or announced year to date pro rata total investment activity of $5.2 billion at a yield of 5.5%.