Portfolio consists of 3,900 units primarily concentrated in the Pacific Northwest and carries an average age of less than eight years.
Welltower Inc. today announced that it plans to form a long-term strategic partnership with Affinity Living Communities ("Affinity"), a vertically integrated developer and operator of age-restricted and age-targeted Wellness Housing. Welltower is under contract to acquire a portfolio of 25 purpose-built active adult communities for $969 million through a privately negotiated, off-market transaction and also expects to enter into a long-term programmatic development agreement with Affinity.
The portfolio encompasses nearly 3,900 units predominately concentrated in the Pacific Northwest. The acquisition will enable Welltower to strategically scale the geographic reach of its Wellness Housing portfolio into markets with a projected 5-year 55+ population growth more than 2.5 times higher than the U.S. average. Post-closing, the portfolio will continue to be managed by Affinity subject to a terminable and aligned management contract.
The acquisition is expected to be funded through cash on hand and the assumption of $523 million of below-market rate debt with an average interest rate of 3.8% and a nine-year weighted average maturity. The implied purchase price of approximately $249,000 per unit, which doesn't allocate any value to the below-market debt, represents a significant discount to replacement cost for a highly amenitized portfolio with an average age of less than eight years. The transaction is expected to close in tranches over the next several months with timing dependent on property-level loan assumption approvals.
Darin Davidson, Affinity's President, commented, "This transaction and partnership with Welltower mark a milestone in our company's history. I am incredibly proud of what we have built and the lives we have touched through our Affinity communities. In Welltower, we found a partner with shared values and forward thinking. The Welltower partnership will enable us to enhance and extend our ability to execute our mission of creating thriving communities in which our engaged residents live full and happy lives."
This transaction will result in the expansion of Welltower's in-place and under development Wellness Housing portfolio of age-targeted and age-restricted communities to nearly 25,000 units. Shankh Mitra, Welltower's CEO, commented, "Our Wellness Housing portfolio helps address the significant and growing unmet demand for wellness focused rental housing for seniors. These communities provide thoughtful amenities and targeted social programming for empty nesters and active adults at moderate price points. I am thrilled to work with Darin and his team at Affinity. In the time we have gotten to know Darin over the last few years, he has shown to be a man of great integrity and thoughtfulness, with a true compass on the future direction of how older Americans want to live."
Affinity communities typically feature over 30,000 square feet of amenity space, significantly more than the industry average, and have a shared sense of community created through extensive resident-led programming. The purpose-built communities have an average monthly rent of $2,100 and an average length of stay of nearly four years, resulting in near-60% operating margins and a lower capital expenditure burden.