There has been a lot of noise over the past year about the debt markets being “closed,” or partially so, spreads widening, terms tightening and lenders not wanting to venture into loans with new borrowers. And, we have to mention, Treasury rates have risen significantly, with the 10-year rate actually tripling from its low in 2020.
With that as background, we were glad to see that Welltower was able to sell $750 million in unsecured 10-year notes at an interest rate of 2.8%. That represents a spread of just 120 basis points over the 10-year Treasury rate. If not a record, that is close to a record low spread for a healthcare REIT raising funds on an unsecured basis. And it was around the time that Fitch Ratings withdrew its rating on Welltower’s debt, stating that the rating outlook was negative. It looks like investors didn’t care.
The new debt will be paying off two outstanding note issues with higher interest rates, totaling $675 million. In the aggregate, the interest expense savings will be close to $5 million annually (maybe enough for Shankh’s annual bonus), and Welltower will have an extra $75 million of new cash to play with after refinancing the other two note issues. Not a bad trade at all. Maybe some new seniors housing acquisitions?
J.P. Morgan, Barclays and MUFG Securities placed the debt.
