Active adult’s meteoric rise has been a sight to see, and Welltower seems to have its eyes trained on the sector too. In a business update, the REIT revealed a major acquisition of 25 active adult communities, including 18 open and stabilized communities, two in lease up and five under construction, for a total of $502 million, or $172,000 per unit. The communities cater to the middle market, with rents averaging $1,300 a month, and the properties are in secondary and tertiary markets. Given what Welltower paid for the communities, and what the portfolio could be earning based on full occupancy, it seems they got a good deal, but we wonder exactly how much of a rent increase their current and potential residents will tolerate. In this inflationary environment, who knows though.
This deal brings Welltower’s ownership of “moderately priced senior apartments” to nearly 10,000 units, after launching its Wellness Housing Platform only in 2019. And by bringing in the seller Calamar to operate the 25 communities going forward, the REIT gains yet another partner in its stable of active adult operators that includes Treplus Communities, Sparrow Partners and Clover Management, among others.
As owners grapple with high labor costs, and the demands of finding and retaining qualified staff, Welltower’s active adult strategy makes sense as a more stable branch of business. In addition, active adult communities have longer lengths of stay compared with other seniors housing assets and compared with multifamily assets, making them even more attractive to investors in both industries. Welltower is clearly making an early bet on the sector, but the competition (and valuations) is bound to soar, soon.
