Welltower Announces Upsized Pricing of $900 Million of Exchangeable Senior Notes

Rhea-AI Summary

Welltower announced the pricing and upsizing of its offering of $900 million in 3.125% exchangeable senior notes due 2029. The offering was upsized from the previously announced amount and will close on July 11, 2024, subject to conditions. The notes, to be sold to institutional buyers, will accrue interest at 3.125% annually and mature on July 15, 2029, unless exchanged or redeemed earlier. Welltower OP has also granted initial purchasers an option to buy an additional $135 million in notes. Proceeds estimated at $882.3 million will be used for corporate purposes, including debt repayment and investments in healthcare properties. Notes will be exchangeable for cash or Welltower common stock and may be redeemed under specific conditions. The exchange rate is initially set at 7.8177 shares per $1,000 principal, with a 22.5% premium on the share price of $104.42 as of July 8, 2024.

Positive

• Successful upsizing of the offering to $900 million from the previously announced amount.
• Estimated net proceeds of $882.3 million, with potential to increase to $1,015.0 million if additional notes are purchased.
• Proceeds to be used for corporate purposes such as debt repayment and investments in healthcare properties.

Negative

• The notes are not registered under the Securities Act or state laws, limiting their marketability.

Financial Analyst

Welltower's upsized offering of $900 million in exchangeable senior notes is a significant event that warrants a deeper look at its financial implications. These notes come with a 3.125% annual interest rate, payable semi-annually and are due in 2029. The offering's upsize and pricing suggest strong investor demand, which is a positive indicator of market sentiment towards Welltower.

This move will bring in approximately $882.3 million in net proceeds and potentially $1,015.0 million if additional options are exercised. Welltower plans to use these funds for general corporate purposes, such as repaying or redeeming existing debt and investing in health care and senior living properties. This could improve their balance sheet by reducing higher interest-bearing debt, like the 4.000% notes due in 2025.

From a financial perspective, this issuance helps Welltower extend its debt maturity profile while locking in relatively low-interest rates, which is beneficial given the current interest rate environment. Exchangeable notes also offer flexibility for investors, with provisions to convert into common stock under certain conditions, providing a cushion if the company's stock price performs well.

Rating: 1.

Market Research Analyst

This strategic move by Welltower to price and upsize its offering of $900 million exchangeable senior notes can be seen as a vote of confidence by institutional investors. The notes allow for conversion into common stock at a premium of 22.5% above the prevailing market price, which indicates that investors are optimistic about the company's future growth prospects and stock valuation.

The health care and senior housing sectors are poised for growth due to demographic trends such as an aging population. Welltower's intent to use the proceeds for investing in these sectors underscores its commitment to expanding its portfolio and capitalizing on these trends. This positions the company well in both the short-term and long-term, as it can leverage these funds for strategic acquisitions and developments, thereby potentially increasing its revenue streams.

However, the success of this plan hinges on Welltower's ability to effectively deploy the capital into high-yielding investments and manage its existing debt load. Failure to do so could adversely impact its financial health and investor sentiment.

Rating: 1.

Legal Expert

The legal structuring of Welltower's exchangeable senior notes involves several important considerations. These notes are being offered under Rule 144A, targeting qualified institutional buyers, which means they are not registered under the Securities Act and therefore are not available for general retail investors. This reduces administrative burdens and speeds up the capital-raising process while still providing robust protections for institutional investors.

Moreover, the option for noteholders to convert their notes into common stock under specific conditions provides an additional layer of security and potential upside, aligning the interests of the noteholders with the future performance of Welltower's stock. The indenture governing these notes includes provisions for repurchase in the event of a fundamental change, adding another protective layer for investors.

However, it's important to note that these instruments also carry specific risks, as they are unsecured obligations of Welltower OP, meaning they rank behind any secured debt in the event of liquidation. Investors need to be aware of these risks when considering the overall risk profile of their investment in these notes.

Rating: 1.

TOLEDO, Ohio, July 9, 2024 /PRNewswire/ -- Welltower® Inc. (NYSE: WELL) ("Welltower" or the "Company") announced today that on July 8, 2024 its operating company, Welltower OP LLC ("Welltower OP"), priced and upsized the previously announced offering (the "Offering") of $900 million 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").  Welltower OP also granted the initial purchasers of the notes an option to purchase up to an additional $135 million aggregate principal amount of notes.  The Offering is expected to close on July 11, 2024, subject to customary closing conditions.

The notes will be Welltower OP's senior unsecured obligations and will accrue interest payable 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 will fully and unconditionally guarantee the notes on a senior unsecured basis.

Prior to the close of business on the business day immediately preceding January 15, 2029, the notes will be 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 scheduled trading day immediately preceding the Maturity Date.  Welltower OP will settle exchanges of 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 will initially equal 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 will be 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 will govern the convertible notes), 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 convertible notes). In addition, if certain fundamental changes occur, Welltower OP may be required, in certain circumstances, to increase the exchange rate for any notes converted 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 estimates that the net proceeds from the offering will be approximately $882.3 million (or approximately $1,015.0 million if the initial purchasers exercise their option to purchase additional notes in full), after deducting the initial purchasers' discount and estimated offering expenses payable by the Company and Welltower OP.  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 are being 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, Welltower's ability to complete the Offering and 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 of the upsized Welltower offering?

Welltower upsized the offering to $900 million in aggregate principal amount of 3.125% exchangeable senior notes.

When is the Welltower notes offering expected to close?

The offering is expected to close on July 11, 2024, subject to customary closing conditions.

What is the interest rate on Welltower's exchangeable senior notes?

The notes will accrue interest at a rate of 3.125% per annum, payable semi-annually.

What will Welltower use the proceeds from the offering for?

Welltower intends to use the proceeds for general corporate purposes, including debt repayment and investments in healthcare properties.

Can the Welltower notes be exchanged for stock?

Yes, the notes can be exchanged for cash or Welltower common stock at an initial exchange rate of 7.8177 shares per $1,000 principal.