The US investment group Welltower’s £5.2bn acquisition of Barchester Healthcare and related company, Limecay, looked set to be the biggest-ever transaction in the marketplace to date.

And this morning the company has unveiled a significant investment plan, worth £23 billion.

Driving the transaction activity are $14bn of acquisitions, primarily comprised of high-quality seniors housing communities in the US and UK. 

The acquisitions are expected to be fully funded through proceeds received from $9bn of asset sales and loan repayments, as well as cash on hand.

Despite the near-term impact of dispositions, loan repayments, and the acquisition of newly-developed or lease-up seniors housing communities, the announced transactions are projected to be accretive to the company’s normalised funds from operations (FFO) per share in 2026, with significant embedded future earnings growth potential anticipated in subsequent years.

Following the completion of these transactions, the company’s percentage of in-place net operating income (NOI) derived from the seniors housing business is expected to increase to the mid-80% range as it enters the next era of its journey: Welltower 3.0.

This phase involves an ‘all-in’ commitment by the company to drive operational and technological transformation across its seniors housing portfolio in co-ordination with the company’s operating partners to meaningfully improve the experience of residents and their families, as well as that of site-level employees.

Shankh Mitra, Welltower’s chief executive, said: “These announcements mark a watershed moment in Welltower’s history as we continue to evolve: intensifying the company’s focus on seniors housing and accelerating the operational and technological modernisation of the business through the Welltower Business System.

“All capital allocation decisions made at Welltower are viewed through an opportunity cost prism: evaluating the value forgone by pursuing a specific course of action while also forcing us to consider all implications of those decisions, well into the future.

“We believe that redoubling our efforts in the seniors housing business represents the surest and fastest path to achieving our mission of elevating both the resident and site-level employee experience, while also enhancing our opportunity to deliver long-term compounding of per share growth for our existing investors.”

The largest component of the incremental seniors housing transactions is the acquisition of a real estate portfolio of Barchester-operated communities in the UK for £5.2bn, as announced on HealthInvestor UK yesterday.

As part of the transaction, brokered by Knight Frank, Welltower has formed an exclusive long-term partnership with Barchester, which is considered to be among the best-performing operators in the UK.

The portfolio is comprised of 111 communities managed by Barchester via an aligned RIDEA contract, 152 triple-net leased communities, and 21 ongoing developments, which will also be managed in a RIDEA structure following development conversion.

Welltower said each component of the transaction, including the RIDEA and triple-net portfolios, has significant long-term growth potential that is expected to accrue to shareholders.

The operating portfolio, comprised of both stabilised and lease-up properties, is positioned for significant future growth with current blended portfolio occupancy in the high 70%s.

Moreover, the triple-net lease is structured with 3.5% annual escalators and a coverage-based rent reset every five years at Welltower’s election.

Overall, the acquisition is underwritten to achieve an unlevered IRR in the low-double-digit range.

Dr Pete Calveley, Barchester chief executive, said: “Through our strategic partnership with Welltower and its significant and ongoing investment into its operating platform, we expect to continue to meaningfully enhance the lives of thousands of older adults by delivering, not only exceptional care, but also fostering environments rich in social and cognitive engagement.

“By prioritising safety, connection, and activity, we’re supporting better long-term health outcomes and consistently-high resident satisfaction – hallmarks of a superior living experience.

“This partnership underscores our unwavering commitment to elevating the quality of care for aging seniors.”

Additionally, Welltower recently purchased 100% of the HC-One-operated portfolio for £1.2 billion, with commercial due diligence provided by Connell Consulting.

Welltower funded a portion of the purchase price through the repayment of a £660 million loan it originated at the height of the Covid-19 pandemic and Brexit uncertainties, significantly increasing the investment’s duration through ownership of the underlying communities.

Mitra said: “The HC-One loan was originally structured with embedded warrants and an equity stake and was intentionally designed to provide Welltower with both downside protection and meaningful upside participation.

“These structural features enabled us to play a lead role in the borrower’s recapitalisation process, ultimately transforming a finite-maturity loan into a long-term ownership position aligned with Welltower’s growth strategy.

“The result is an enhanced cash flow profile characterised by both duration and embedded growth – consistent with our strategy of leveraging creative capital deployment to create long-term per share value for existing owners.

“We are excited to expand our presence in the UK and continue to partner with the highest-quality operators as evidenced by the Care Quality Commission in the UK having rated 86% of our communities as good or outstanding, well above the national average of 72%, with none of our properties having been rated as inadequate.”

The substantial UK investments were aided by working closely with the Office for Investment.

Lord Stockwood, UK minister for investment, said: “This significant investment into the care sector, will create new capacity, and new jobs, the vast majority of which will be outside of London.

“High-quality care for our aging population is one of the most-important challenges the government faces and I am glad to see a long-term and highly-respected investor like Welltower continuing to bring its expertise, commitment, and technology to the UK.”

Additionally, Welltower is under contract, or has closed, an additional $4 billion of seniors housing acquisitions spanning nearly 40 transactions across over 150 communities and over 12,000 units.

This encompasses trophy senior housing communities along the East Coast of the US, including those within Boston and Westchester County, New York.

These acquisitions complete the company’s New England portfolio repositioning that started with the pre-Covid disposition of $1.75bn of seniors housing communities.