Welltower to form long-term strategic partnership with Affinity

Welltower announced that it plans to form a long-term strategic partnership with Affinity Living Communities, a vertically integrated developer and operator of age-restricted and age-targeted Wellness Housing. Welltower is under contract to acquire a portfolio of 25 purpose-built active adult communities for $969M through a privately negotiated, off-market transaction and also expects to enter into a long-term programmatic development agreement with Affinity. The portfolio encompasses nearly 3,900 units predominately concentrated in the Pacific Northwest. The acquisition will enable Welltower to strategically scale the geographic reach of its Wellness Housing portfolio into markets with a projected 5-year 55+ population growth more than 2.5 times higher than the U.S. average. Post-closing, the portfolio will continue to be managed by Affinity subject to a terminable and aligned management contract. The acquisition is expected to be funded through cash on hand and the assumption of $523M of below-market rate debt with an average interest rate of 3.8% and a nine-year weighted average maturity. The implied purchase price of approximately $249,000 per unit, which doesn’t allocate any value to the below-market debt, represents a significant discount to replacement cost for a highly amenitized portfolio with an average age of less than eight years. The transaction is expected to close in tranches over the next several months with timing dependent on property-level loan assumption approvals.