At the same time it released first quarter earnings results, Welltower announced a major recapitalization of HC-One, the largest UK-based seniors housing platform, where it previously had a mezzanine loan investment with one of the owners. Formation Capital has been a 50-50 owner in HC-One, along with partner Safanad. Formation rolled most of its capital into the recapped company.
Welltower has provided a $750 million secured loan and a $76 million equity investment into HC-One. The loan will refinance existing debt and will help to simplify the company’s capital structure. It has a five-year term and is fully collateralized by HC-One’s real estate. There is also a $42 million delayed draw capital expenditure facility which will allow HC-One to spruce up its facilities. It owns 282 care homes across the UK and leases another 45 homes.
Welltower also received warrants to purchase additional equity interests as part of its efforts to recapitalize the company. Terms of the warrants were not disclosed.
HC-One suffered from the pandemic just like its cousins across the pond. But occupancy started trending up during last summer, reaching 77.9%. Then it plummeted to 72.1% in February this year. March posted a 90-basis point increase to 73.0%, which combined with its U.S. SHOP portfolio in March, is giving Welltower’s management some reason to be optimistic about the future.
Welltower expects these investments to provide low-to-mid teens IRR over their respective lives.
During the first quarter Welltower also invested in the U.S. seniors housing market. Included were a $132 million acquisition of eight seniors housing properties located in the southeast operated by Harbor Retirement Associates under a new triple-net lease. In addition, WELL acquired two seniors housing communities for $50 million, and one will be leased to StoryPoint Senior Living and the other to Chelsea Senior Living.
