Welltower to acquire 29 MOBs for $787m from Hammes

Welltower (WELL) recently entered into a definitive agreement to acquire a portfolio of class-A medical office buildings (MOBs) from Hammes Partners, in line with its efforts to strengthen the company’s outpatient medical platforms. The firm will pay $787 million for the transaction, scheduled to close in the fourth quarter 2019.

The acquisition is for 29 properties spanning 1.5 million square feet of space. These properties are concentrated in the New York and Boston metropolitan statistical areas, and other densely-populated areas in California, Massachusetts, Texas and Maryland.

Further, the portfolio, with an average age of 10 years, is affiliated with well-known health systems and multi-specialty physician groups like Baylor Scott & White, Providence St. Joseph, Trinity Health, Medstar. An economic occupancy of 97 percent and portfolio-weighted average lease term of 12 years makes the acquisition a strategic fit. Additionally, with average rent escalators of 2.2 percent, the company will likely enjoy revenue and cash-flow growth.

Separately, the company has announced additional gross investment volume of $885 million, relating to four outpatient medical transactions for 30 properties, covering 2 million square feet of space. These transactions are currently under contract.

Notably, in its third-quarter earnings release, the company announced year-to-date pro rata acquisition volume of $3 billion. Post the recently-reported quarter, the company has announced three acquisitions worth $594 million. This includes a portfolio of six Class-A senior living communities in Oakmont, two senior living communities in the Frontier region, and an off-market transaction for the purchase of 18 properties. This apart, Welltower has additional outpatient medical acquisitions worth $885 million under contract.

With these transactions, the company has announced $3.5 billion of outpatient medical acquisitions and pro rata total investment activity of $5.2 billion in the year so far.

The MOB acquisitions will add 450 properties, spanning 8 million square feet, to the company’s asset portfolio. Moreover, per management, the Hammes transaction highlights the company’s ability to fund and execute high-quality buyouts from best-in-class developers and operators.