Welltower Launches New Private Funds Management Initiative to Boost Healthcare Investments

Welltower Expands Its Investment Horizon with Private Funds Management Business



Welltower Inc., the largest owner of healthcare and wellness infrastructure globally, has recently unveiled its new private funds management venture. This initiative aims at managing third-party capital by tapping into healthcare and wellness real estate investments, leveraging Welltower's vast experience in the industry and its cutting-edge data science capabilities.

As an integral part of this launch, Welltower has secured an anchor commitment from a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA), which is investing 20%, equivalent to $400 million, in the first fund managed by this new business. Notably, Welltower's own management will mirror this commitment, further emphasizing their belief in the initiative's potential.

The primary goal of the inaugural fund is to identify and acquire seniors housing portfolios in the U.S. The focus remains on properties with a stable profile or those nearing stabilization, capitalizing on Welltower's operating platform and favorable industry trends. With nearly $20 billion invested in seniors housing since late 2020, Welltower boasts a robust network poised to fuel sourcing opportunities for this new venture.

Shankh Mitra, Welltower's CEO, expressed enthusiasm about the timing of this project, emphasizing that they have been strategically positioning themselves to maximize outcomes during an optimal market phase. He also highlighted the company's anticipated growth trajectory within the seniors housing sector, bolstered by the unique data science platform that delineates Welltower's competitive edge.

The private fund is set to kick off with significant initial investments, including six high-quality seniors housing communities acquired through a private negotiation, totaling $240 million. This impressive portfolio comprises 778 units, already achieving 92% occupancy with solid NOI margins. Additionally, Welltower is in the process of acquiring NorthStar Healthcare Income, Inc., which consists of 40 senior housing communities valued at around $900 million.

Backing from influential stakeholders like ADIA underscores the confidence in Welltower's operational prowess within the healthcare real estate sector. Mohamed Al Qubaisi, an executive director at ADIA, acknowledged Welltower's established reputation built on operational expertise and a solid partnership network, further asserting that the data-centric approach will significantly aid in achieving the fund's objectives.

Mitra elaborated on the potential benefits this new business might bring, not only through potential revenue from asset management fees but also through strategic partnerships that could secure funding during varying economic cycles. The intent is to foster a sustainable growth environment throughout the organization.

Investing not just in properties but also in talent, Welltower aims to leverage this new business to enhance its leadership development programs. Notably, any carried interest earned will directly go toward fostering emerging leaders in the company, further emphasizing their commitment to career growth and talent retention.

As the private funds management business takes shape, Welltower anticipates significant prospects in the acquisition sector, particularly given the current fragmentation in ownership within the seniors housing market. With numerous motivated sellers emerging due to high interest rates and other capital market pressures, Welltower seems poised to capitalize on these developments.

The data science component of this initiative is particularly intriguing, as Welltower plans to utilize insights gained from the managed properties to refine its network effects and solidify its market position. The firm has pioneered a data science platform that harnesses machine learning and AI technologies, establishing it as a formidable player in utilizing data for optimizing investment decisions.

In summary, the launch of Welltower's private funds management business marks a significant milestone in the company's strategy to enhance cash flow growth in the healthcare real estate niche. With robust frameworks in place for acquiring properties and developing talent, Welltower's future looks promising in navigating the complexities of the healthcare market while delivering value to its stakeholders.

Topics Financial Services & Investing)

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