With an eye to growth, Welltower sees health systems as vital partners
Partnerships with health systems underpinned much of real estate investment trust Welltower's growth in 2018, including some involving big names like Providence St. Joseph Health, Ascension and Johns Hopkins Medicine.
The Toledo, Ohio-based company's executives said during their earnings call Tuesday that they have $3 billion in development currently under construction, and plan to announce more deals similar to recently announced partnerships with health systems. Welltower and not-for-profit health system ProMedica in July closed on the purchase of the real estate of fellow REIT Quality Care Properties.
"You should assume a big percentage is more of that," Welltower CEO Tom DeRosa said on the call.
Welltower will hold a 75% stake in two medical office buildings under development that will house Charlotte, N.C.-based Atrium Health's cardiac and vascular practices, among other specialties, for 15 years. The project is part of a 5.5-acre mixed-use development next to Atrium's flagship Carolinas Medical Center campus.
Welltower's profit reached nearly $830 million in fiscal 2018, up 53% from $540.6 million in the previous year. Revenue totaled $4.7 billion in fiscal 2018, up nearly 9% from $4.3 billion in 2017. Expenses grew 6.5% to $4.3 billion in the same period.
Executives said they're optimistic that the overarching trend of healthcare moving away from acute-care services in favor of ambulatory sites will work in their favor, as the REIT is well positioned to be a partner on outpatient projects.
"When they look at capital going forward, many of them are now seeing that a partnership with Welltower helps them accelerate the transition that they need to undertake," DeRosa said.
And while some health systems are strengthening their balance sheets, many will still run into challenges when it comes to funding clinical growth, said Mark Shaver, Welltower's senior vice president of strategy.
"That's a great opportunity for us," he said.
Shaver said Welltower is also prepared to capitalize on the trend toward vertical integration in healthcare, a big example being its major deal last year with ProMedica.
Welltower also paid $79 million for its 100% interest in an outpatient medical building on the campus of Johns Hopkins' Howard General Hospital in Columbia, Md. Welltower said the property is 100% leased with Johns Hopkins being the principal tenet.
Welltower paid $391 million for its 100% interest in a 23-property medical office portfolio that includes nearly 980,000 square feet across 12 major metropolitan markets. The properties are 94% occupied and 96% of its occupants are affiliated with health systems, including prominent names like Providence St. Joseph, Northwell Health, UNC Health Care and Ascension, according to Welltower.
The company also has a joint venture with Providence St. Joseph's Mission Hospital on a 100,000 square foot medical office building that will house an ambulatory surgery center, radiology, imaging and linear accelerators, among other services. The facility is set to open in June.
Welltower's leaders did not share much detail on the integration of the skilled-nursing assets acquired under the deal with ProMedica. In the fourth quarter, the company said it made $264 million by selling 41 properties acquired in that deal.
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