Welltower, ProMedica Form Joint Venture, Will Acquire Quality Care Properties for $2B

by Camren Skelton

TOLEDO, OHIO — Toledo-based healthcare REIT Welltower Inc. (NYSE: WELL) has entered into an 80/20 joint venture with ProMedica Health System to acquire Quality Care Properties (NYSE: QCP) for nearly $2 billion in cash.

The joint venture will acquire the real estate of QCP’s principal tenant, HCR ManorCare, the nation’s second-largest nursing home chain.

Toledo-based HCR ManorCare filed for Chapter 11 bankruptcy in March after struggling to pay rent to QCP, which owns nearly all of the facilities in which HCR ManorCare operates. QCP won a court approval earlier this month to acquire HCR ManorCare out of bankruptcy.

QCP itself is a spin-off of healthcare REIT HCP (NYSE: HCP), which created the company in 2016 specifically to remove HCR ManorCare’s 320 properties from its portfolio.

As part of the transaction, ProMedica has agreed to buy the operations of HCR ManorCare, making the nonprofit healthcare organization a national U.S. healthcare provider.

“This acquisition will enable ProMedica to expand their service offering beyond acute care hospitals to include home health, post-acute care and residential memory care,” says Tom DeRosa, CEO of Welltower.

The HCR ManorCare chain has more than 50,000 employees providing services in 450 assisted living facilities, skilled nursing and rehabilitation centers, memory care communities, outpatient rehabilitation clinics, and hospice and home health agencies operating under the names of Heartland, ManorCare Health Services and Arden Courts.

Through this transaction, ProMedica, which operates in six states, will expand its footprint into 30 states, employing approximately 70,000 people with projected annual revenues of $7 billion.

“ProMedica and Welltower together are redefining the settings where healthcare will be delivered, and ProMedica is committed to the investment necessary to enhance the HCR ManorCare platform,” says Mark Ordan, CEO of QCP. “QCP is happy to have played a part in facilitating this exciting next chapter for HCR ManorCare.”

Goldman, Sachs & Co. LLC and Lazard acted as financial advisors to QCP in the transaction, and Wachtell, Lipton, Rosen & Katz acted as legal advisor. Barclays acted as financial advisor to Welltower, and Gibson, Dunn & Crutcher LLP acted as legal advisor. Shumaker, Loop & Kendrick, LLP acted as legal advisor to ProMedica.

ProMedica is a nonprofit healthcare organization with operations in Ohio, Michigan, Indiana, Kentucky and West Virginia. To date, the organization offers acute and ambulatory care, an insurance company and post-acute and academic business lines.

Welltower owns interests in properties concentrated in major, high-growth markets in the United States, Canada and the United Kingdom, consisting of seniors housing, post-acute care communities and outpatient medical properties.

Welltower’s stock price closed at $50.44 per share on Wednesday, April 25, down from $71.83 per share a year prior.

QCP’s stock price closed at $22.71 per share on Wednesday, April 25, up from $18.46 a year prior.

— Camren Skelton

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