What has Upside, REIT’s, JV’s, a $144,000 per Bed Price Tag and Depends Upon Vulnerable Human Capital? Read On…

Published: 5.7.21 at 4:07pm

Dear Reader:

When a change in ownership within some of the largest players in the nursing home industry is described in the news as a “blockbuster move”; and when an earnings call to investors raises the specter of “even further upside potential” without any mention of superior care, quality of life, increased standards, greater accountability and better medicine, it is not nursing care. It is a different animal altogether, the savage world of publicly traded horse-trading.

It is worth noting here, that some of the parties cited in the article below are owners and operators of some of the worst rated nursing and rehabilitation facilities throughout the United States. Thus, shareholders to whom this article was addressed, are to some extent investing in substandard care. That’s just one part of the human tragedy. Another part of the human tragedy, cited in an earlier article below, tacitly admits that one methodology for adding shareholder value is manipulating the more lucrative sides of benefits from acute care patients “who also come with more lucrative Medicare and private insurance coverage than the typical long-term nursing home resident on Medicaid.” Statements like that should upend the comfort of Medicare and private insurance carriers.

Nursing home care should not be quantified by “earnings potential” and “purchase options.” Failing nursing homes should not be simply “shed from a portfolio” to assist with shareholders’ earnings. The life of the elderly should not be quantifiable as a “range of high quality opportunities.” There is something altogether unpalatable in placing a price tag on human life and the brazenness with which this is advertised speaks to a compromised healthcare system. Worst still when the article in question comes out in a paper entitled “Skilled Nursing News” we should all be shaking our collective heads. Indeed, we should be terrified to grow old in the United States, or anywhere that places a “tradeable” shareholder value on human life. Is there really any difference between this and human trafficking?

Companies, investors, “real estate investment trusts” or REIT’s that get into the business of skilled nursing homes should be compelled to be in the business of improving the quality of life of each and every patient in those homes. There should be a “first do not harm” mentality, a level of menschkeit that surpasses profitability. When the homes are not profitable, owners and operators should not be permitted to “shed” them from a portfolio in order to increase the bottom line. The “upside” should come from improving the quality of life for people growing old and confined to nursing care. There should be no such thing as “shareholders” in the nursing home context. Rather, the owners and operators should be stewards of human life and compassionate care. And if they cannot pull that off, they should be financially charged with contributing their “earnings” to funds and trusts designed to provide better care for the elderly.

Welltower Sees ‘Even Further Upside’ from Genesis Exit as the Nursing Home Giant Restructures

Welltower Inc. (NYSE: WELL) on Thursday again touted the benefits of a blockbuster move to largely end its relationship with troubled nursing home giant Genesis HealthCare, hinting at an even greater return for the real estate investment trust (REIT) than previously disclosed.

Welltower CEO Shankh Mitra pointed to the $144,000-per-bed price tag on the transaction, which saw the REIT offload 51 Genesis-operated nursing homes to several buyers, and the 8.5% unlevered return achieved over the life of Welltower’s partnership with Genesis.

That rate will rise to 9% after Genesis repays its outstanding debt, Mitra said during the REIT’s first quarter 2021 earnings call, indicating “even further upside potential” for the deal.

“We believe that this represents a very favorable outcome for Welltower shareholders, particularly in light of the challenging environment that we have faced in the post-acute sector — and then COVID-related, pandemic-induced downside we have seen,” Mitra said. “While the transactions will result in some near-term earnings dilution for Welltower, we expect to create significant value for our shareholders following the deployment of the $745 million of anticipated proceeds over a range of high-quality opportunities.”

Under the terms of the complex deal, announced in March, Welltower sold 35 Genesis properties to a joint venture consisting of the REIT, Peace Capital, and Aurora Health Network for $500 million, with Welltower retaining a preferred equity stake in the JV. Those facilities will be transitioned to regional operators, according to Welltower.

Skilled Nursing News continue reading here.

ADDITIONAL READING:

Welltower to Largely End Relationship with Genesis, Bolster ProMedica Joint Venture in $880M Deal

Welltower Inc. (NYSE: WELL) late Tuesday announced that it will largely end its relationship with troubled nursing home giant Genesis HealthCare (NYSE: GEN), with its joint venture health system partner ProMedica picking up some of the buildings — while also divesting 25 properties acquired through its 2018 ProMedica JV.

The Genesis exodus spans 51 assets, according to the Toledo, Ohio-based real estate investment trust (REIT) — 35 of which will be sold to a joint venture consisting of Welltower, Aurora Health Network, and Peace Capital for a total of $500 million. That group will transition the operations of the facilities to “leading regional operators,” according to the REIT; Welltower will have a preferred equity position in the JV arrangement.

Seven additional assets, which Welltower currently leases and sublets to Genesis, will transition to a regional operator; the REIT will eventually buy those properties in conjunction with the Aurora joint venture — when a purchase option becomes available in April 2023 — for a total price of $182 million.

Skilled Nursing News, continue reading here.

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