Welltower Announces Closing of $1.035 Billion of Exchangeable Senior Notes

Rhea-AI Summary

Welltower has announced the successful closing of its $1.035 billion offering of 3.125% exchangeable senior notes due 2029. The offering, aimed at qualified institutional buyers, saw full exercise of the initial purchasers' option for additional notes. The notes are senior unsecured obligations, paying semi-annual interest and maturing in July 2029. They can be exchanged for cash or Welltower common stock based on a specific exchange rate. Welltower plans to use the proceeds for general purposes, including debt repayment and investing in healthcare and senior housing properties.

Positive

• Welltower successfully raised $1.035 billion through the offering.
• Full exercise of the initial purchasers' option for additional notes.
• Notes have a favorable fixed interest rate of 3.125%.
• Proceeds will be used for strategic investments and debt repayment.

Negative

• The notes are not registered under the Securities Act.
• Potential dilution of existing shares if notes are exchanged for equity.

Financial Analyst

Welltower's $1.035 billion offering of exchangeable senior notes at a 3.125% interest rate and due in 2029 provides several key takeaways. Firstly, the choice of exchangeable notes indicates a strong confidence in the company's stock price growth, given the 22.5% premium based on the recent closing price. The semi-annual interest payments, beginning in January 2025, make this an attractive instrument for income-focused institutional investors. The ability to exchange the notes for common stock or cash provides flexibility for both Welltower and the noteholders.

The use of proceeds for general corporate purposes, including potential repayment of the 4.000% Notes due in 2025, highlights Welltower's strategy to manage its debt profile efficiently. This could lead to future cost savings, as the new notes carry a lower interest rate compared to the 2025 Notes. Additionally, investing in healthcare, wellness and senior housing properties aligns with the company's core business, potentially driving long-term growth and stability.

From an investor perspective, while the issuance of these notes adds some debt to Welltower's balance sheet, the terms and planned use of proceeds suggest a strategic move to leverage current market conditions while preparing for future opportunities. Risk factors include the company's ability to maintain strong financial performance to meet its obligations and the economic conditions impacting the healthcare real estate sector.

Market Research Analyst

The market implications of Welltower's note offering are multifaceted. The notes, exchangeable into common stock, reflect investor confidence in Welltower's long-term value, especially given the substantial 22.5% exchange premium. Such premium indicates positive market sentiment and expectations of continued growth in the healthcare and senior living real estate market.

It's important to consider the broader real estate market trends here. The healthcare and senior housing sectors are poised for significant growth due to aging populations and increasing demand for specialized care facilities. Welltower's strategic investments in these areas align with macroeconomic trends, potentially enhancing its competitive positioning and market share.

However, investors should remain aware of potential market risks, such as regulatory changes in healthcare, shifts in demographic trends and macroeconomic factors impacting the real estate market. Overall, the notes offering could positively affect Welltower's stock performance by signaling strong future growth prospects and financial stability.

Legal Expert

From a legal standpoint, the terms of Welltower's exchangeable senior notes are standard yet noteworthy. The notes' exchangeable nature provides both protection and options for investors. The specified conditions under which the notes can be exchanged or redeemed ensure investors have clear guidelines on their investment's liquidity and potential returns.

Moreover, the stipulation regarding repurchase in the event of a fundamental change adds an additional layer of security for noteholders. This means that if there are significant corporate events, like mergers or acquisitions, investors have a guaranteed exit strategy at 100% of the principal amount plus accrued interest. These protective measures are important in maintaining investor trust and confidence, especially in turbulent market conditions.

Legal terminology such as the 'fundamental change' provision and various exchange conditions should be clearly understood by investors to fully appreciate their rights and protections under this offering. This ensures transparency and avoids potential legal disputes in the future.

TOLEDO, Ohio, July 11, 2024 /PRNewswire/ -- Welltower® Inc. (NYSE: WELL) ("Welltower" or the "Company") announced today that its operating company, Welltower OP LLC ("Welltower OP"), has closed the previously announced offering (the "Offering") of $1.035 billion aggregate principal amount of 3.125% exchangeable senior notes due 2029 in a private placement to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act").  The aggregate principal amount of notes issued reflects the exercise in full of the initial purchasers' option to purchase additional notes.

The notes are Welltower OP's senior unsecured obligations and will pay interest semi-annually in arrears on January 15 and July 15 of each year, beginning on January 15, 2025, at a rate of 3.125% per year.  The notes will mature on July 15, 2029 (the "Maturity Date"), unless earlier exchanged, purchased or redeemed.  The Company has fully and unconditionally guaranteed the notes on a senior unsecured basis.

Prior to the close of business on the business day immediately preceding January 15, 2029, the notes are exchangeable at the option of holders only upon certain circumstances and during certain periods.  On or after January 15, 2029, the notes will be exchangeable at the option of the holders at any time prior to the close of business on the second scheduled trading day preceding the Maturity Date.  Welltower OP will settle exchanges of the notes by delivering cash up to the principal amount of the notes exchanged and, in respect of the remainder of the exchange value, if any, in excess thereof, cash or shares of common stock, par value $1.00 per share, of the Company (the "Common Stock"), or a combination thereof, at the election of Welltower OP.  The exchange rate initially equals 7.8177 shares of Common Stock per $1,000 principal amount of notes (equivalent to an exchange price of approximately $127.91 per share of Common Stock and an exchange premium of approximately 22.5% based on the closing price of $104.42 per share of Common Stock on July 8, 2024).  The exchange rate is subject to adjustment upon the occurrence of certain events, but will not be adjusted for any accrued and unpaid interest.

If a fundamental change (as defined in the indenture that governs the notes) occurs, subject to certain conditions, holders of the notes may require Welltower OP to repurchase for cash all or any portion of their notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date (as defined in the indenture that will govern the notes). In addition, if certain fundamental changes occur, Welltower OP may be required, in certain circumstances, to increase the exchange rate for any notes in connection with such fundamental changes by a specified number of shares of its common stock.

Welltower OP may redeem the notes, at its option, in whole or in part, on any business day on or after July 20, 2027, if the last reported sale price of the Common Stock has been at least 130% of the exchange price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which Welltower OP provides notice of redemption.  The redemption price will be equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Welltower OP intends to use the net proceeds from the Offering for general corporate purposes, which may include the repayment or redemption of debt (which may include the 4.000% Notes due June 1, 2025) and investment in health care, wellness and seniors housing properties.  Pending such use, the net proceeds may be invested in short-term, investment grade, interest-bearing securities, certificates of deposit or indirect or guaranteed obligations of the United States.

Neither the notes nor the shares of Common Stock issuable upon exchange of the notes have been registered under the Securities Act or any state securities laws, and unless so registered, may not be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws.  Accordingly, the notes have been offered and sold only to persons reasonably believed to be qualified institutional buyers (as defined in Rule 144A under the Securities Act).

This press release does not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any offer or sale of, the notes in any jurisdiction in which the offer, solicitation or sale of the notes would be unlawful prior to the registration or qualification thereof under the securities laws of any such state or jurisdiction.

Forward-Looking Statement

This press release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995.  When Welltower uses words such as "may," "will," "intend," "believe," "expect," "project," "estimate" or similar expressions that do not relate solely to historical matters, Welltower is making forward-looking statements.  Forward-looking statements, including statements related to the Offering, are not guarantees of future performance and involve risks and uncertainties that may cause Welltower's actual results to differ materially from Welltower's expectations discussed in the forward-looking statements.  This may be a result of various factors, including, but not limited to those factors discussed in Welltower's reports filed from time to time with the Securities and Exchange Commission.  Welltower undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, or to update the reasons why actual results could differ from those projected in any forward-looking statements.

About Welltower

Welltower Inc. (NYSE:WELL), a real estate investment trust ("REIT") and S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. Welltower invests with leading seniors housing operators, post-acute providers and health systems to fund the real estate infrastructure needed to scale innovative care delivery models and improve people's wellness and overall health care experience. Welltower owns interests in properties concentrated in major, high-growth markets in the United States, Canada and the United Kingdom, consisting of seniors housing and post-acute communities and outpatient medical properties.

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SOURCE Welltower Inc.

FAQ

What is the amount raised by Welltower through the recent offering?

Welltower raised $1.035 billion through its offering of exchangeable senior notes.

What is the interest rate on Welltower's newly issued notes?

The exchangeable senior notes have an interest rate of 3.125% per year.

When will Welltower's exchangeable senior notes mature?

The notes will mature on July 15, 2029.

Can Welltower's new notes be exchanged for cash or common stock?

Yes, the notes can be exchanged for cash or Welltower common stock at a specified rate.

How will Welltower use the proceeds from the $1.035 billion offering?

The proceeds will be used for general corporate purposes, including debt repayment and investments in healthcare and senior housing properties.